CONFIDENTIALITY AND CONTRACTUAL CONSIDERATION IN MEDIATION

by Maggie Kennedy, Solicitor and Consultant Mediator with Consensus Mediation.

Two 50% shareholders and directors of a company fell out, badly. Amongst many grievances each raised, one complained that the other had a habit of sacking employees, who were promptly reinstated by the first director. Neither director had a legal representative at the mediation, though they were available at the end of a telephone. Instead, each brought a Companion - one director brought his sister, who knew something about the business, and the other brought an employee (or ex-exployee if one accepted he had been sacked by the first director).

The issue here was this: how could the employee Companion be prevented from using information gathered at the mediation in personal proceedings (for all manner of complaints, not just in employment law) against the director who sacked him? And what indeed would there be to prevent him from calling the mediator to give evidence? What happens when a Companion has their own agenda that is likely to end up in litigation?

Most Agreements to Mediate clearly set out the usual clauses about confidentiality, the without prejudice nature of the proceedings, and not calling for the mediator's notes or testimony etc, and we have become comfortable that the parties are bound by this. But, that agreement is contractual in nature, so non-contracting parties are not bound by it. 

Some mediators ask the parties to sign an agreement to mediate in advance of the mediation, others ask the participants to sign the agreement to mediate on the day, and both are usually acceptable, but problems can still arise. In particular, what if the drafting is restricted to protecting the confidentiality of information relating to issues between the parties, or forgets the importance of contractual consideration?

It is easy enough to draft a contract that expands confidentiality to include all matters arising at the mediation, whether related to the issues between the parties or not, but the question of consideration is trickier. The consideration between the parties and the mediator is money, simply enough. The consideration between the parties themselves is their payment to the mediator, and perhaps also the temporary cessation of litigation, or the fact of each of them physically attending the mediation. Work colleagues are generally bound as a party because they may be defined as a Representative. But those who attend as a Companion are usually there simply to support their friend, with no apparent interest in the outcome other than their friend's satisfaction. It often has no relevance, but exactly what valid consideration flows to bind the Companion to the rules of the mediation if they have a reason to break them? Now there are of course myriad ways of arguing the point, but equally one can see how (unnecessarily) complicated it could become.

Consensus Mediation addresses it like this: the parties sign the Agreement to Mediate, including a confidentiality agreement AND a clause requiring them to procure the signature of any Companion to a separate Confidentiality Agreement, failing which the Companion may take no part at all in the mediation process. On the day, the Confidentiality Agreement is signed by every individual present each acknowledging that the consideration for the agreement is their consent to the presence and participation of every other individual at the mediation. Is that valuable consideration? Well, if anyone wants to use the information for their own purposes then it must be valuable by definition, and if not, the problem does not arise.

Having two contracts in an informal process is maybe not ideal. But it is hardly a complicated contractual matrix, and it works. 

Learning points:

  • check that the agreement to mediate binds and protects the parties and the mediator, and
  • check that any non-party attendees are also bound by an enforceable confidentiality agreement.

P.S. The mediation settled the dispute between the directors, of course. We also think it helped the (ex-) employee Companion and his bete noir director to see things a little differently too, but that's a tale for another day.