The Principle of Confidentiality in Relation to Mediation - Dissertation Example

Part A Qn A) With reference to recent case law, in what circumstances is it likely that a court will set aside the principle of confidentiality in relation to mediation? Introduction Confidentiality is an important feature of mediation. proceedings. For a successful mediation, parties to mediation have to freely exchange their views without the risk of sensitive matters adverse to a party being disclosed to the party’s detriment. The mediator whose objective is to bring out a positive outcome has to be naturally taken into confidence by the parties to the dispute. Unless there is an assurance that confidentiality of matters relating to the dispute will not be compromised, parties will not come to the mediation forum... However, there are exceptions to this rule for public policy reasons. The question here is whether court can set aside the principle of confidentiality if circumstances so require. Discussion of the recent case law Recently in Farm Assist limited (in liquidation) v The Secretary of State for the Environment, Food and Rural Affairs1, the mediator was summoned by one of the parties to give evidence of what transpired in the mediation proceedings that took place some five years ago as the mediator’s evidence was necessary to decide on the issue concerning the allegation that settlement had been obtained under economic duress. This was against the confidentiality agreed upon by the mediator at the time of mediation. Confidentiality is an implied duty on the part of the parties to the dispute as well as the person who acted as the mediator. While this be so, the Farm Assist decision was quite significant in compelling the mediator to give evidence, the reason being, the disputing parties to the agreement to protect whose interest themselves waived their right of confidentiality.2 Generally, parties have the right of confidentiality for deliberations including statements written or oral, made during the course of mediation as held in Rush & Tompkins v GLC. 3 While this right which is an extension of without prejudice rule is available for disputing parties, a mediator can be compelled to give evidence if the disputing parties require the mediator to do so and some mediators acting on behalf of institutions such ACAS have a statutory immunity and hence cannot be compelled.4 In Re D (Minors) it was held that any official or unofficial, professional or lay receiving confidential information as a mediator during the course of mediation proceedings cannot be compelled by the court to give evidence unless the disputing parties agree.5 Parties generally incorporate confidentiality clause in the mediation agreement binding the mediator. and this has been upheld by the courts in U.K as held in Bezant vs Ushers Brewers (Bristol country court) 6 and Instance v Denny Bros Printing Ltd.7 Confidentiality on the part of the mediator should however have some limits. Mediation communications and parties’ conduct are two separate features of confidentiality. While communications should be kept confidential, parties conduct can be subjected to court scrutiny. Although mediator confidentiality is central to mediation and its outcome, it is not an inviolable principle in that it can be encroached upon where the society’s interest outweighs the interest in confidentiality.8 Legal professionals representing the disputants also cannot claim the confidentiality privilege if any communication is in furtherance of an illegal purpose as had been held in R v Cox 9 Professional privilege to lawyer also does not apply if he comes to know that a fraud or crime is being committed. The mediator is an independent third party beyond the lawyer/client relationship and the statutory exception to the rule of “without prejudice” can be extended to mediator confidentiality if it is public interest. The mediator has a duty to report certain communications involving threats and blackmail. In Re D (minors), it was observed that statements to the mediator should not be disclosed unless the maker of the statement has caused or likely to cause harm to the child.10 The Proceeds of Crime Act 2002 (POCA) provides that a person is deemed to commit an offence to be involved or in the knowledge of things that result in acquisition, retention, use or control of criminal property by another person for himself or for anyone’s behalf.11 This is applicable to lawyer or a non-lawyer mediator. Th avoid this, a mediator should make an authorised disclosure to the authority concerned unless he has reasonable excuse not to do so. However confidentiality requirement is not a reasonable excuse.12 There are severe penalties and punishment for contravention of this rule. Even more serious is the contravention of section 330 of POCA for lawyer-mediators, which provides that if a person comes to know that another is involved in money laundering. The Money Laundering Regulations 2003 does not cover mediation sector but legal services sector is covered. Therefore, lawyer mediator is attracted by this provision. He should withdraw from the mediation proceedings without disclosing the reasons as otherwise he will be deemed to make “tipping off” the parties as per section 333 and 334 of POCA.13 .In insolvency proceedings, courts have the power to halt settlement agreements if it is convinced that a particular creditor or contractor is likely to get unfair treatment. It struck out a mediation settlement in Re C E King14, where administrator acted as the mediator. Parties may claim that mediation was reached due to duress, fraud or misrepresentation. The misrepresentation is discovered only later. In such cases, mediator’s confidentiality requirement can be breached as happened in the case law under discussion. Smiths Group and anor v Weiss & ors 15 has provided the test for overriding the mediator confidentiality. The recent case law is discussed hereunder with the observation of the Justice Ramsey therein. As already said, this case involved a mediator applying to set aside the witness summons issued to her. The summons required her testify before the court on the mediation proceeding that occurred in June 2003 nearly after five years. The mediator claimed that she could not recall her memory as to what really transpired even if she could retrieve the case file from the records of the law firm Clyde &Co. LLP. who deputed her as the mediator. The court held that in view of the claim of one of the parties that mediation was obtained under economic duress, the mediator could not claim the confidentiality privilege or restriction imposed by the mediation agreement as the parties themselves had waived their privilege over confidentiality of communication and statements of the proceedings. The judge held that the claim of poor memory or no memory also cannot be sustained as once the evidence is produced before her, she should be able to recall what actually transpired. Justice Ramsey quotes the general position taken by Toulson and Phipps 16 that confidentiality is not a bar in litigation as regards disclosure of documents or information if court deems it necessary for fair disposal of the case as held in British Steel Corporation v Granada Television17. This case has only dealt with the confidentiality privilege of the mediator. The obligation of the confidentiality rises not only between the parties but also between the parties and the mediator. Justice Ramey says that English law affirms undoubtedly the implied duty of confidentiality on both the above relationships in Arbitration. The Justice quotes the authors Toulson and Phipps as saying that the same logic should apply to mediation also. It is necessary because in the in the case of mediation failing either party could make known matters that passed between themselves or between either of them and the mediator for reaching mediation. The duty of confidentiality was not considered absolute under the proceedings of Children Act 1989, court made exceptions in the decision relating to Re D (Minors) 18 Sir Thomas Bingham MR had expressed in that judgement that trail judge should exercise discretion whether or not to admit evidence. He should do so only if the matter involved public interest involving protection of child’s rights that outweighed the interest of protection of confidentiality of attempted conciliation. It has clearly demarcated the boundary that it involved a party’s right to prevent statement or document being produced in court as regards the child and not in any other public interest considerations and that for any such matters arising in future, it should be separately considered. Justice Ramsey took this observation of that judge as sufficient ground for justifying the overriding of the principle of confidentiality to decide whether the communications or information should be disclosed or not. Conclusion Justice Ramsey considered that it would be in the interest of fair justice to the aggrieved party that the court could interfere in the confidentiality privilege of the mediator especially when the mediation was claimed to have been arrived through economic duress. Although in this case parties have waived their privilege, if the court feels that it would be in the interest of justice to interfere, it can order overriding confidentiality privilege even if the parties do not waive their privilege. Thus confidentiality privilege is two fold, one as regards the parties and two as regards the mediator. Part B Qn B Advantages and disadvantages of Arbitration and Adjudication Introduction This paper is intended to serve as a short training guide on Arbitration and Adjudication which are the forms of private dispute settlement mechanisms instead of litigation in a court of law. As litigation is too formal and time consuming which are not conducive to smooth functioning of commerce, other forms of settlement in private for quicker decisions have been developed with a seal of authenticity of the national governments. In Northern RHA v Derek Crouch19, Sir John Donaldson opined that arbitration was no more or no less than litigation. Different forms of alternative dispute settlement explained here are arbitration and adjudication which have their own advantages and disadvantages. These two forms are both voluntary as well as mandatory depending on the nature and the sector the disputes are coming under. Arbitration can be domestic as well as international. While international arbitration is government by respective rules of the various forums of the international institutions, domestic arbitration mostly for commercial contract disputes is governed by national legislation. In U.K, there is Arbitration Act of 1996.20 Arbitration In commercial contracts, the parties must agree to submit themselves to arbitration in case of disputes.21 Once a dispute has arisen, either of the parties to the dispute should take the initiative to invoke the arbitration clause for appointment of arbitrators as envisaged in the arbitration clause. It may have a predetermined authority to act as the arbitrator or provide for each party nominating its own arbitrator and a chief arbitrator being appointed by the court. Advantages Arbitration provides for definitive means of resolving disputes with certainty of outcome by an award which is enforceable through the court of law of the country concerned. Parties have the option to appoint arbitrator of their choice who will examine the evidence and decide on the dispute. If the arbitrator appointed is well versed in the subject matter, the parties are relieved of appointing experts to adduce expert evidence. However, the arbitrator cannot give evidence himself though he can use his knowledge to interpret the evidence of the parties. Arbitration may be formal or informal as may be required by the parties. However, certain formalities envisaged must be complied in order to ensure that the award is enforceable. This facilitates arbitration procedures being kept as simple as possible with just rules of natural justice and simple requirement of the Arbitration Act are complied with. There is no necessity for the parties to engage advocates. If there is an agreement for arbitration, it is binding on the parties to submit themselves to arbitration.22 .It is subject to strict interpretation of the arbitration clause which decides the jurisdiction of an arbitrator. The dispute that has arisen should fall within the ambit of the arbitration agreement. Thus a clause saying that “all disputes under the contract shall be arbitrated” is narrower than a clause reading “ all or any disputes as to any matter or thing of whatsoever nature arising in connection with the contract” and hence cannot attract claims for rectification, misrepresentation or a collateral contract 23 as held in Ashville Investments v Elmer Contractors 24 Thus, an arbitration award is also final and binding on the parties unless the parties have agreed otherwise.25 However, the act provides that appeal is only possible on the grounds of law and not on facts. An arbitration award can be appealed against on arbitration procedural grounds. In Metropolitan Property Realizations Limited v Atmore Investment Limited26, the High Court remitted back the arbitration award for “serious irregularity”. resulting in substantial injustice. Section 69 of the Act provides that parties may agree that arbitrator’s award is final as regards points of law also.27 In construction contracts, there is no statutory requirement for a clause on arbitration procedures and hence it is purely a private process adopted by an agreement between parties through express terms and conditions in writing.28 Douglas Stephenson 29 has identified six advantages and four disadvantages to arbitration. Advantages are freedom to choose the arbitrator, flexibility, economy, expedition, privacy and finality. The disadvantages are costs of the arbitrator and court facilities, unavailability of legal aid, joinder difficulties and incompetent arbitrators.30. Adjudication This is a form of alternative dispute settlement that precedes Arbitration in certain types of contracts or matters. Usually these are called court annexed ADRs. Thus adjudication is a mandatory requirement before the parties to the dispute can go for arbitration. Adjudication also refers to the court adjudication of a dispute after it is appealed from an arbitration award or directly litigated in a court of law bypassing the above said forms of ADRs including arbitration. Advantages of adjudication by the court are that that a dispute is decided by the court of law directly unless otherwise statutorily provided. This avoids delay in going though mediation, arbitration though litigation has its own delays. Disadvantages are that privacy is compromised thus matters of commercial expediency of the parties concerned is publicly known. Besides, there is no scope for compromise as it may be possible in mediation or arbitration. And the litigation is subject to strict rules of procedure and rules of evidence which in the forum of mediation or arbitration are not insisted upon. The judges are not of the parties’ choice and are randomly assigned and there is no guarantee that the judge is well versed in the subject matter resulting in bringing in expert evidence in the proceedings which can be expensive. Representation by an advocate becomes necessary as the litigating parties are not well versed with the rules of civil procedural and evidence.31 The relative advantages of Court adjudication and Arbitration are listed hereunder.32 Court Litigation Arbitration Public forum Privacy Neutrals are accountable Parties control forum Already institutionalised Expertise Rules of evidence Parties select neutrals Announces and applies public forums Written procedures Precedent Expeditious Deterrence Choice of applicable norms Uniformity Tailors remedy to situation Independence Enforceability Decision appealable Relatively inexpensive Binding/closure Enforceability Publicly funded Adjudication in construction contracts Apart from the above court adjudication, there is a private adjudication process prescribed for Construction contracts. It can be called statutory adjudication. As in arbitration, adjudication is also conducted by an adjudicator neutral to both the parties. This adjudication process is for the purpose of giving temporary relief to the parties in construction contracts which is quite lengthy and stoppage of payment or work will result in heavy loss. The adjudication can also be final and binding depending on the stage at which performance of the contract stands. In certain types of contract, adjudication is a pre-step before a final process can be commenced. In Engineering /Engineering constructions, adjudication has been a mandatory first step. As the adjudication is a contractual provision, failure to comply with adjudication order will amount to breach of contract.33 It was only after the investigation by Sir Michel Latham, it was decided that there must be a temporary resolution of a dispute so as to prevent indefinite withholding of monies due by one party to another. Thus, Part II of the Housing Grants, Construction and Regeneration Act 1996 was introduced providing for adjudication as a temporary measure subject to appeal in arbitration if the aggrieved party chooses to do so.34 The adjudicator has to be a natural person though the act does not stipulate as such. Even though he may be an employee of a firm, the firm will not be responsible or accountable for the adjudicator’s decision. The special feature of this form is that adjudication must be completed within a specified period mentioned in the act. The adjudicator is expected to act impartially. His decision is binding in that party ordered must comply with it though he can go on appeal after compliance. Adjudicator is not liable for any thing done during the course of appointment unless he has done any thing in bad faith.35 The party referring to adjudication should get the adjudicator appointed within seven days. And the adjudicator must decide within 28 days but he can obtain extra 14 days from the referring party if necessary. If some more time is required in view of serious difficulties, he can take more time with the consent of both the parties.36 Conclusion Arbitration and Court Adjudication have both advantages as well as disadvantages. Parties must weigh advantages against disadvantages in choosing the apt forum at the time of entering into the contract. However, adjudication in construction contracts is unavoidable before a party can choose arbitration or court litigation. Experience shows that the ADRs have only helped speedier decisions and greatly reduced the burden of backlog of cases on the judiciary. It an excellent means of case management by exception. . Bibliography Books Derek Simmonds, 2003, Statutory Adjudication: A practical guide, Wiley Blackwell John W Cooley and Steven Lubet, 2003, Arbitration Advocacy, National Institute for Trial Advocacy, ed 2 Peter D’Ambrumenil, 1997, Mediation and Arbitration, Routledge. R.G. Toulson and C.M. Phipps Confidentiality (2006) 2nd edition, Sweet & Maxwell Roderick Pettigrew, 2005, Payment under construction contracts legislation, Thomas Telford. Stephenson, D. Arbitration Practice in Construction Contracts, Blackwell, London 1998, 4th edn, pp 5-11. Cases Ashville Investments v Elmer Contractors [1989] QB 488, CA. Bezant vs Ushers Brewers (Bristol country court) [1997] unreported British Steel Corporation v Granada Television [1981] AC 1096 Farm Assist limited (in liquidation) v The Secretary of State for the Environment, Food and Rural Affairs [2009] EWHC 1102 (TCC) Instance v Denny Bros Printing Ltd. [2000] 05 LS Gaz R 35 Metropolitan Property Realizations Limited v Atmore Investment Limited [2008] EWHC 2925 Northern RHA v Derek Crouch [1984] QB 644 at 670 R v Cox [1884] 14 QBD 153 Re C E King [2000] BCLC 297 at 302 Re D (Minors) [1993] 2 AII ER 693 Rush & Tompkins v GLC. [1988] 3 AII ER 737 Smiths Group and anor v Weiss & ors [2002] LTL 22/3/2002, 20 Journals Adam Constable, 2003, A Practical Guide to Arbitration, New Law Journal September 153 NLJ 1413 Others Richard Burnley and Greg Lascelles, Mediator Confidentiality-Conduct and communications Arbitration Act 1996 CHAPTER 23, retrieved on 29 April 2010 from Read More