The Court of Appeal have upheld Roth J's first instance decision that mediation position statements made during a successful mediation in one of the parties' confidential position papers were admissible in evidence; upholding an order directing that statements made "without prejudice" ("WP") in mediation were disclosable and could be referred to in the Defence.

Link to judgment:http://www.bailii.org/ew/cases/EWCA/Civ/2021/551.html

The Court of Appeal has decided that material, otherwise inadmissible, could be put forward by a party seeking to uphold the settlement where the other party sought to invalidate it, alleging that it was not aware of certain payments at the time. WP information could be pleaded in a Defence to rebut the claimants' contention of ignorance until much later as "misplaced and wrong" [20].

The background facts

The claimants, Berkeley Square Holdings Ltd and others ('the owners'), were offshore companies mainly beneficially owned by H.E. Sheikh Khalifa bin Zayed Al Nahyan, the Emir of Abu Dhabi and the President of the United Arab Emirates, who owned a portfolio of properties in London worth around £5 billion. Lancer Property Asset Management Ltd ("Lancer") managed the portfolio of properties between 2004 and 2017. They dealt with and were instructed by H.E. Sheikh Khalifa's agent and appointed representative, Dr Mubarak Al Ahbabi under powers of attorney granted to him by the owners.

Under a side letter to the management agreement, enhanced fees were payable to Lancer if the values of managed properties increased above a set amount because of Lancer's management. By a deed of variation, the agent was permitted to authorise Lancer to make payments to third parties.

A dispute arose over the first defendant's entitlement to management fees. This dispute was settled shortly after a mediation held on 24 September 2012.

In September 2018, the claimants commenced proceedings against the defendants for their role in an alleged fraud, where it was alleged that the defendants had conspired with the claimants' appointed representative to increase payments made to the defendants, and passed substantial payments to a company controlled by the claimants' appointed representative. The claimants contended that they had not known about these payments until as late as 2017.

The defendants asserted in their Defence to this claim that the claimants had known and approved of the payments since at least 2012.

The defendants wished to rely upon passages from the position statement in the mediation six years earlier, which referred to the payments being made as part of the factual background to the dispute. In doing so, the defendants argued that the admissibility of the statement fell within three of the established exceptions to the WP rule, and applied to amend their Defence. The claimants opposed the application and sought to strike out parts of the Defence as an abuse of process.

The crucial question to be determined was whether the defendants were precluded from relying on these passages from their position statement or whether the circumstances came within an exception to the WP rule.

The first instance judgment

At first instance, Roth J decided that the mediation statements could be referred to in the proceedings under two of the exceptions to 'without prejudice' privilege:

  • to set aside an agreement vitiated by a misrepresentation ("exception 2"), and
  • under the rule in Muller v Linsley & Mortimer (a firm) [1994] EWCA Civ 39, enabling 'without prejudice' information to be used to determine if losses had been reasonably mitigated in prior proceedings ("exception 6")

The exception numbers come from the judgment of Robert Walker LJ in the case of Unilever plc v The Proctor & Gamble Co [2000] 1 WLR 2436. Roth J gave permission to appeal.

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