James Wilson discusses the risk to a p
arty of losing the protection of Mediation Privilege where there is “Unambiguous Impropriety

Ferster v. Ferster [2016] EWCA Civ 717

This recent decision of the English Court of Appeal sounds a warning to parties who adopt a tactic of issuing inappropriate threats as part of their negotiating strategy in mediation.

In this case, the Court of Appeal allowed one party to adduce evidence of the content of an email communication from the other party in the mediation (which would otherwise have been excluded on the basis of mediation privilege) because the content of the email was adjudged to be “unambiguously improper”.

The Facts

On the facts of this case, the respondent wished to rely upon the threatening content of the email as evidence that the affairs of the family company were being conducted by his two brothers in a manner unfairly prejudicial to his interests

The relevant email, which was actually sent by the mediator (passing on messages from the appellant brothers’ solicitors), contained a revised offer to settle from the appellants at a higher price. The justification for that revised offer was stated to be that the appellants had discovered “wrongdoing” by the respondent, namely the alleged existence of overseas bank accounts held by the respondent, which the respondent had allegedly failed to disclose as part of the asset disclosures made by the respondent in the context of a freezing injunction granted against him. The email went on to make a number of threats: (a) that unless the respondent accepted the revised offer, his “wrongdoing” would be disclosed within 48 hours; (b) that the respondent was likely to face criminal action and was likely to be imprisoned; (c) that unless the respondent accepted the revised offer, his livelihood would be destroyed; and (d) threats directed against the respondent’s life partner, including that he too might be investigated and/or charged.

Background Law

In Unilever plc v The Procter & Gamble Co. [2000] 1 WLR 2436 , Walker LJ at page 2444 identified a number of discrete exceptions to the rule of ‘without prejudice’ protection. One was:

“… One party may be allowed to give evidence of what the other said or wrote in without prejudice negotiations if the exclusion of the evidence would act as a cloak for perjury, blackmail or other “unambiguous impropriety” (the expression used by Hoffman LJ in Forster v Friedland (unreported) 10 November 1992”

Conclusions in This Case

Whilst the judge at first instance found that the email was an attempt at blackmail, the Court of Appeal concluded that it did not need to reach a finding on that specifically because the conduct of the two brothers in threatening to use the company to bring committal proceedings clearly amounted to ‘unambiguous impropriety.

The Court of Appeal clarified that the critical question in determining whether the exception applied was whether the privileged occasion was itself abused.  Here, the email unambiguously exceeded what was permissible in the settlement of litigation: it went far beyond what was reasonable by threatening criminal action; the purpose was to obtain financial advantage; and there was no attempt to make any connection between the alleged wrong and the increased demand.

There was no evidence adduced in this case as to what communications may have occurred between the mediator and the appellant brothers or their lawyers prior to the email being sent to the respondent by the mediator.  The court did not therefore comment at all on the role played by the mediator in this case.  Mediators in other cases may however wish to have this case in mind, not least when reality checking with a party what the impact might be of communicating in threatening terms whilst negotiating during a mediation.

If you would like to read the full judgement it can be found at:

http://www.bailii.org/ew/cases/EWCA/Civ/2016/717.html

James Wilson
Mediator
SeaMediation Chambers

www.seamediation.com