25 www.nzdrc.co.nz
• to show that an agreement apparently reached during the negotiations should be set aside for misrepresentation, fraud or undue influence (the “fraud exception”);
• to show that a statement made during the negotiations gives rise to an estoppel (the “estoppel exception”); or
• under an exception of rather uncertain ambit established in Muller v Linsley and Mortimer [1996] PNLR 74, in which WP negotiations were admitted to show that a party had acted reasonably to mitigate its loss in reaching a settlement of proceedings with a third party (the “Muller exception”).
Fraud exception
Roth J noted that, although the fraud exception had not been applied in any reported English case to date, the description of it in Unilever had repeatedly been approved by the appellate courts and neither party suggested the exception did not exist.
Whilst the fraud exception, as expressed in Unilever, allows a party to rely on WP material to show that an agreement should be set aside on the ground of misrepresentation, fraud or undue influence, in this case the Defendants were trying to rely on WP statements to uphold the relevant agreement, and to rebut the allegations of fraud.
Roth J noted that, if Lancer had misled the Claimants by misrepresentation in the mediation, the fraud exception would have allowed the Claimants to rely on the WP statements. It would, he said, be contrary to principle to find that, where Lancer was truthful in the mediation, its statement could not be admitted to rebut a case of fraud.
Roth J therefore held that the WP statements were admissible either under the fraud exception, properly interpreted, or “by reason of a small and principled extension of it to serve the interests of justice”.
On the basis of this exception alone, the judge dismissed the Claimants’ application to strike out the parts of the Defendants’ defence which relied on the relevant WP material. However, Roth J went on to consider the other two exceptions relied on.
Estoppel exception
Roth J considered that the Defendants would not have been able to rely on the estoppel exception. Here the Defendants were not seeking to rely on any representations made by the Claimants during the earlier mediation in order to found an estoppel. They sought instead to rely on the Claimants’ silence in the face of the Defendants’ own statements in the WP position paper. That was very different from the situation envisaged under the estoppel exception.
Muller exception
IIn considering the application of the Muller exception, Roth J referred to the analysis set out in two recent cases, with which he agreed: EMW Law v Halborg [2017] EWHC 1014 (Ch) and Briggs v Clay [2019] EWHC 102 (Ch) (which are summarised in previous blog posts here and here). According to that analysis, the rationale for the Muller exception is that a party cannot raise an issue to be tried but, at the same time, rely on the WP rule to prevent the court seeing the evidence needed to determine that issue.
Roth J held that the Muller exception could also have been applied because the Claimants’ claim would
ReSolution | Dec 2020
Case in Brief Continued