Brown v Rice & Anor

Communications made during mediation may be admitted to determine whether they resulted in a concluded settlement. Mediation does not create a separate status that excludes the recognised exception to the without prejudice rule for proving settlement. A mediation agreement requiring a settlement to be written and signed remains effective, unless varied, waived, displaced by estoppel or otherwise inapplicable. An offer must also be sufficiently complete and certain, including as to the manner of disposing of the litigation. An acceptance after the formal mediation hearing may still be made in the mediation where the offer remained open for reflection.

The applicant, trustee in bankruptcy of Jane Elizabeth Rice, pursued proceedings concerning an alleged transaction at an undervalue. Shortly before trial, the applicant and Mrs Patel mediated. The applicant alleged that an offer made during the mediation was accepted by solicitors the following morning. Mrs Patel denied that there was a binding offer or settlement and relied on the mediation agreement, which required any settlement to be reduced to writing and signed by or on behalf of all parties.

The court tried the preliminary issue whether the Northampton County Court proceedings had been settled on 17 February 2006. The issues were whether a valid offer had been made, whether it had been withdrawn, and whether it had been validly accepted.

1. Admissibility. The communications were admissible for the purpose of deciding whether a concluded settlement had been reached. The without prejudice rule contains a recognised exception for that issue. The fact that the communications occurred during mediation did not alter their status or make them inadmissible. The confidentiality provisions in the mediation agreement did not exclude the exception.
2. Objective offer. Applying the objective test of agreement, the words and conduct at the late-evening meeting objectively amounted to an offer by Mrs Patel to pay £55,000 within 28 days, despite Mr Patel’s subjective belief that he was only considering such an offer.
3. Completeness and clause 1.4. The offer was incomplete because it did not specify how the litigation was to be finally disposed of, in particular whether by judgment or a Tomlin order. In addition, clause 1.4 of the mediation agreement made any settlement reached in the mediation subject to reduction to writing and signature by or on behalf of all parties. The clause had not been varied or waived. The proposed acceptance therefore could not create a concluded settlement.
4. Alternative issues. The court would have found that the alleged offer was not sufficiently clearly withdrawn during the telephone conversation on 17 February. An acceptance after the formal mediation hearing would nevertheless have been made in the mediation for the purposes of clause 1.4 if the offer had been valid. An offer made in without prejudice negotiations remains protected unless the party makes clear that it is open.
5. Disposition. The Northampton County Court proceedings were not settled on 17 February 2006.