Crummer v. Benchmark Building Supplies Ltd, (2000) 2 ERNZ 22.


Crummer v. Benchmark Building Supplies Ltd




Judgment Of The Full Court (reserved):


In September 1998 the applicant, Mr Erueti Crummer (under his former surname of Kaiwai), referred a personal grievance to the Employment Tribunal for settlement. In his statement of claim he alleged that the respondent, Benchmark Building Supplies Ltd, had on 19 June 1998 unjustifiably dismissed him from his employment as a sales representative, a position in which he enjoyed a status equal to managers reporting to the branch manager. In his statement of claim the applicant complained that his dismissal was procedurally unfair. He sought remedies consisting of lost wages for a short time, compensation for loss of benefits including a car and company superannuation to which the employer contributed, and compensation for hurt, humiliation, and stress in the sum of $50,000.

Mr Crummer's employment contract was evidently subject to the standard statutory personal grievance procedure. In terms of that procedure there had been an exchange of statements between the parties as required by cls 4 and 5 of the First Schedule to the Employment Contracts Act 1991.

In its response, the respondent indicated that the dismissal was based on the threat of violence against another employee and, while this was described as "a basis”, the letter strongly implied that it was the only basis notwithstanding the respondent's knowledge of "a variety of performance matters”.

25Statements of claim and defence were filed. Of these pleadings, two paragraphs are especially relevant to this decision. Paragraph 11 of the statement of the claim alleges:

"The Inquiry was procedurally unfair as the Respondent;

"• took into consideration previous performance issues that had been settled;

"• refused to allow the Applicant access to the written complaint and staff statements, despite being requested to do so.”

By contrast, para 11 of the statement of defence says:

"It denies paragraph 11 and says Mr Crummer's employment was terminated solely on the events of 19 June 1998. It says further that the Regional Manager referred to written statements of other staff members during the meeting and that neither Mr Crummer nor his lawyer asked to read those statements.”

The matters of justification relied on are also advanced in support of a reduction of remedies if liability is established.

It is plain that both parties were amenable to mediation of the grievance and the Tribunal offered them mediation assistance. The parties thus voluntarily appeared at the Employment Tribunal in Wellington on 17 February 1999. It seems to be common ground that agreement was reached between those present that the mediation would be conducted on a without prejudice and in confidence basis. This is the usual basis on which, as we are satisfied, mediations generally take place in the Employment Tribunal. However, in this case it was so pursuant to an express arrangement to that effect.

After this agreement was reached, the respondent presented a written statement explaining its position and was later to claim that it had done so in reliance on its understanding that the mediation would be held on a without prejudice basis. As part of the agreement to proceed without prejudice and in confidence it was apparently expressly agreed that any documents distributed during the mediation would be returned to their source. Accordingly, at the conclusion of the mediation (which was not successful in settling the grievance), the respondent's position paper was returned to Mr Ron Aylan-Parker, the respondent's national human resources manager and its representative at the mediation.

Mr Crummer next desired to proceed to an adjudication of his grievance as is contemplated by cl 7 of the First Schedule to the Employment Contracts Act 1991.

A fixture was obtained for 1 June 1999 but, because of the complications that we are about to mention, it was vacated.

By May 1999 Mr Cressey had been instructed for the applicant and he asked for disclosure by the respondent of nine classes of documents. He wrote again a few days later seeking disclosure of one specific document and any documents relating to the applicant's terms and conditions of employment. The specific document sought was the statement of the respondent's position/view of the facts as read out by Mr Aylan-Parker at the mediation hearing. The respondent's solicitors replied in a largely non-controversial way to the request for the main body of documents in Mr Cressey's first letter and to the request in his second letter for documents evidencing the applicant's terms and conditions of employment. However, they said that the respondent "absolutely” rejected the request for Mr Aylan-Parker's 26document which, it asserted, was prepared for the purposes of mediation only. Elsewhere in its reply, the respondent (through its solicitors) stated that it objected to the applicant using statements made at mediation to support his request for discovery of documents. The respondent's solicitors' letter concluded:


It is a breach of that agreement, which is fundamental to the mediation process, for the applicant to refer to matters raised at mediation in this or in any other context outside the mediation.


The respondent will object to any further attempt by the applicant to refer to matters raised at mediation in the course of this proceeding.”

Upon receiving this response, the applicant, without delay, applied to the Employment Tribunal for the following orders:


An order ordering that the mediation statement be discovered;


A determination that the mediation statement is admissible as evidence in the adjudication hearing;


An order ordering that the documents in categories (b) to (e) be discovered; and


An order ordering the respondent to swear or affirm an affidavit stating when it parted with the document(s) in category (f), and what has become of it/them.”

The documents described in para (c) above as being in categories (b) to (e) arose out of statements made during the mediation and that is what is behind the respondent's solicitors' statement that the respondent objects to statements made in mediation being used as a basis for discovery.

The application was supported by an affidavit from the applicant. Mr Cressey, in his memorandum to the Tribunal in support of the application, acknowledged that the mediation had occurred on a without prejudice basis, stated that it was necessary to traverse what occurred at mediation and, for that reason, invited the Tribunal to deal with the matter by way of voir dire. This meant that a Tribunal member other than the adjudicator likely to hear the case would, of necessity, have to rule on the application.

In his memorandum, Mr Cressey advanced the following propositions:

That the mediation statement was not privileged because it was not aimed at settling a pre-existing dispute between the parties;

That it was not privileged because it constituted an ingredient of a cause of action;

That, if it was privileged, then that privilege should be waived because of overriding public policy considerations;

Alternatively, it should be waived because equity and good conscience favoured its production; and

It was in any event discoverable because its liability to be discovered did not depend on admissibility.

In his memorandum, Mr Cressey developed each of these grounds with ample citation of authority. It is worth mentioning that, in the course of discussing relevance, Mr Cressey indicated that the applicant intends to amend the statement of claim before the hearing once disclosure is complete.

An affidavit in support and one in opposition were filed.

27Having read the application, Mr Aylan-Parker expresses concern and surprise to see Mr Crummer's reference to the mediation and the exhibited note of the mediator's agenda as recorded by Mr Cressey. He goes on to say that his recollection of what took place at the mediation is different to Mr Crummer's and that, if his affidavit is to be admitted in full and read, he would wish to reply to paras 6 to 20 in substance. As will appear, that was subsequently waived but, in the Tribunal, there was a formal application on behalf of the respondent, filed on 10 June, that paras 6 to 20 in Mr Crummer's affidavit and the exhibits to the affidavit not be read on the grounds:


the deponent purports to give evidence as to discussions that took place at mediation;


the deponent agreed at the outset of the mediation that the discussions at mediation would be without prejudice and confidential;


the affidavit is in breach of that agreement;


it would not be in the public interest for the disputed parts of [the] affidavit to be admitted in evidence;


it would not be in the interests of justice for the disputed parts of the affidavit to be admitted in evidence."

There followed what the Tribunal described in its decision as "largely common applications by both parties to have the hearing of an application for an order for disclosure and other orders removed from the Tribunal to the Employment Court”. In the event the Tribunal ordered the removal of the entire proceedings to the Court.

The Chief Judge directed that the Court should sit as a full Court for the limited purpose of hearing the applicant's application for an order for disclosure of documents as made to the Employment Tribunal. In a minute dated 3 August 1999 he indicated it to be his intention so to limit the full Court's role with a view to later ordering, pursuant to s 94(5) of the Employment Contracts Act 1991, that the Tribunal adjudicate on the rest of the case at first instance. We agree that this is the only proper course, for the reasons stated in the minute. In a further minute dated 16 August the Chief Judge defined the questions to be answered by this full Court as:


Whether statements made in mediation, if reduced to writing, are discoverable in subsequent adjudication proceedings?


Whether such statements are admissible in evidence?


If the answer is "no”, whether any exceptions exist?


If they do, in what circumstances would exceptions be made?"

At the same time he granted an application by the Employment Tribunal for leave to appear and be heard in relation to this question:

"Whether the usual rules and exceptions relating to without prejudice communications between parties apply to statements made in mediation before the Employment Tribunal, or whether the privilege or admissibility issue is more absolute than that (and if so, the nature and extent of that privilege or admissibility issue), and in relation as well to public policy considerations.”

Mr Dumbleton, the Chief of the Employment Tribunal, has filed an affidavit in the Court.

28Unfortunately, because of other pressures, it has not been possible to complete this judgment earlier. In the event, it may not have the far-reaching consequences apprehended by the parties because the recently introduced Employment Relations Bill deals expressly with confidentiality of mediation proceedings and, if enacted in its present form or to similar effect, will govern the situation and dispose of most of the concerns expressed. It is not appropriate to refer in any greater detail to a matter that is still under consideration by Parliament but because it may become the law we do not find it necessary to enter into as extensive a discussion of the principles as might otherwise have been warranted.

The evidence

There is little dispute about the facts relating to the present application. To begin with Mr Crummer's evidence, he told the Court that on 17 February 1999 he attended mediation in the Employment Tribunal to try and settle his personal grievance. Mr D Hurley was the mediator. Also present was his solicitor, Mr Cressey, the pastor of his church, Mr Aylan-Parker, a Mr Stuart Matthew (the respondent's southern regional manager), and a Mr Peter Small (the Waikanae branch manager of the respondent). Mr Crummer acknowledged that at the outset Mr Hurley explained the mediation process and sought the agreement of the parties to the proposition that the mediation should be on a without prejudice and confidential basis, and that any document tabled in the course of the mediation would be returned to the person who tabled it, at the end. Mr Crummer admits that the parties agreed to this. He goes on to say that he was then given an uninterrupted opportunity to present his case and the respondent was given a similar opportunity to do the same.

It was Mr Aylan-Parker who took advantage of that opportunity and, in doing so, he handed Mr Cressey and Mr Hurley a typewritten statement that he had prepared that set out the respondent's view of the facts and why it believed that Mr Crummer's dismissal was justified. Mr Crummer said that the statement contained no admissions or offers of compromise but merely expanded on the employer's written response of 28 July 1998. Mr Crummer says that the statement made a number of allegations about him to the general effect that he was abrasive and had difficulty in getting along with other staff members. Reference was made to letters of complaint written by the applicant who said that there were other allegations as well but he cannot recall what they were. He did, however, recall that the respondent went on in the statement to say that it had taken account of these matters in deciding to dismiss him. Mr Hurley was later to call these matters "background tensions”.

When Mr Aylan-Parker had finished, Mr Hurley set an agenda of topics for further discussion. Mr Crummer exhibited the note of this agenda as made by Mr Cressey; the first item on it is "Background tensions — took into a/c — new for Eru”. Mr Crummer went on to say that the background tensions or difficulties were never raised with him at his dismissal meeting or at any other time and it came as a complete surprise to him that the company, in deciding to dismiss him, had taken them into account. He says that he refuted these allegations and continues to do so, and that learning of them for the first time at mediation had added to his sense of personal grievance.

Mr Crummer went on to say that he had sought disclosure of the documents so that he could properly prepare his case for the adjudication hearing. He accepts 29that he is aware that the respondent is refusing to provide the documents on the grounds that they are irrelevant and that the parties had agreed that the mediation should be conducted on a without prejudice and confidential basis. To this Mr Crummer says that, when he gave his agreement to these conditions, he did not know that the respondent had dismissed him for reasons other than those disclosed to him at his dismissal meeting and in the written response of 28 July 1998. He says that he further understands from his solicitor that the respondent's counsel told another Employment Tribunal member during a case management conference that the documents the applicant had requested were irrelevant because the respondent intended to rely solely on the events that occurred on the day of the dismissal as justification for it.

Mr Crummer accuses his former employer of duplicity and says that the documents were treated as highly relevant at the mediation, with discussion of the background tensions/difficulties occupying a considerable amount of time. Although we do not understand this to be still in dispute, it is as well to mention that Mr Crummer concludes his affidavit by referring to a written warning issued to another employee (whom he named) concerning his verbal abuse and physical assault on the applicant. Mr Crummer says that the documents relating to the disciplinary action taken on this occasion are relevant because they show disparity of treatment, predetermination, and bias, and that the other employee was issued with a warning for an actual assault whereas Mr Crummer says that he was dismissed for an alleged threatened assault which he continues to deny.

Mr Aylan-Parker has sworn an affidavit in which he admits that the respondent dismissed the applicant for serious misconduct on 19 June 1998. He goes on to say that Mr Crummer lodged a personal grievance which was not resolved between the parties, whereupon Mr Crummer referred it to the Employment Tribunal. The parties then agreed to attend mediation in the first instance. Prior to the mediation, Mr Aylan-Parker says he prepared a mediation statement which he says was prepared solely for the purposes of mediation.

The respondent had no legal representation at the mediation. Mr Aylan-Parker said that in large part this was because he had attended mediations in the past and was aware that they were conducted on the basis that all discussions were confidential and without prejudice. He confirms Mr Crummer's evidence of an express agreement to that effect. He goes on to say that the mediation took place over a number of sessions but ultimately was unsuccessful. Subsequently, Mr Cressey made a number of requests for documents; the respondent objected to producing the documents and also objected to the applicant referring to matters raised at mediation. Having read the application for disclosure and Mr Crummer's supporting affidavit, Mr Aylan-Parker expresses surprise and concern at the references to the mediation and the exhibit attached to the affidavit as Mr Aylan-Parker saw the process as confidential and without prejudice. Without compounding what he saw as a sin, Mr Aylan-Parker contented himself by saying that Mr Crummer's recollection of what took place at the mediation does not accord with his own. He says that, if the affidavit is received, he would wish to reply in substance to Mr Crummer's narrative.

We record that originally the respondent had formally objected to the Tribunal reading Mr Crummer's affidavit but, when the matter was before the Court, that objection was withdrawn, as is recorded in one of the Chief Judge's minutes 30(16 August). Moreover, the respondent made the mediation statement in question available to the Court for its perusal to enable the Court to rule upon the issue of its admissibility.

Mr Dumbleton has deposed that, since his appointment as a member of the Tribunal on 19 August 1991 when it commenced its work under the Employment Contracts Act 1991, he has concurrently held a warrant of both a mediator and an adjudicator member of the Tribunal. It was on his responsibility that an application was made to the Court to enable the Tribunal to appear and be heard. The question is one of considerable importance to the Tribunal as it significantly affects mediation in the Tribunal and the Tribunal members who conduct that form of dispute resolution.

Mr Dumbleton referred to statements in the decision removing the case to the Court that, in mediation, the parties' agreement is invariably sought by Tribunal members without reference to any limits or qualifications to the without prejudice status. Also, it is common for mediator members to explain the effects of such an agreement as meaning that what is raised and discussed in the mediation conference cannot be used in any subsequent legal proceedings. Mr Dumbleton noted that the adjudicator described the purpose of this aspect of mediation as being to create an atmosphere in which parties were free to speak constructively and feel able to acknowledge the strengths and weaknesses of their respective positions, as well as the possible risks to them in the outcome of any future litigation.

However, Mr Dumbleton goes on to say that these observations fully accord with his own knowledge and understanding of the practice of the Employment Tribunal mediators generally and his own practice since 1991, which is quite considerable as, by way of example, Mr Dumbleton was able to point out that in the year ended 3 August 1999, he had been the mediator in 122 cases. Also he has had informal discussions with the 11 other mediators who, like him, are based in the Tribunal rooms at Auckland, and more generally from training sessions involving no doubt mediators from other centres as well.

Mr Dumbleton expresses the view that the occasion in which mediation conferences are held is one that is implicitly without prejudice and subject to privilege but, in order that this should be clear to parties and so that they can participate in the process with confidence, he invariably makes a statement to them about it. He said that it is an issue of such importance that his statement is made soon after the mediation conference begins. At that time the parties, including the advocates and supporters, would be present before him.

Mr Dumbleton's practice is to say to them that the mediation conference is being held because both parties have agreed to that course. He then tells them that the purpose of the meeting is for the parties to discuss their differences with a view to resolving the dispute between them. He emphasises to them that his role is to help them in their efforts to settle their dispute, but that the ultimate decision as to whether matters should be settled and exactly how that may be done must be the decision of the parties themselves. He further stresses that his role is not that of an adjudicator presiding over a trial, and that it is not for him to rule or declare who is right and who is wrong in either fact or law about any of the contentious matters between them. Parties will also be advised that by law, as the assigned mediator, he 31is precluded from being the adjudicator in their dispute should it later require adjudication.

Mr Dumbleton proceeds to say to the parties that it is in the spirit of the mediation and its objectives that they should regard the mediation as being conducted on a without prejudice basis. He tells them that they must feel free to speak frankly about the issues between them without fear that anything said by anyone present may be repeated on a later occasion such as an adjudication hearing. In saying this, Mr Dumbleton hopes to reassure the parties that the ability to call evidence of what happens in mediation is effectively nil. He usually concludes this part of his introduction of the conference to the parties by stating "what we say here, stays here”. He has told the Court that, in his 8 years of experience, he has found that parties appear to fully understand and accept what he has said to them and there is rarely any request for clarification or even discussion about the matter. He has not found it necessary to have the parties signify in writing their consent or agreement to the meeting being conducted on a without prejudice and confidential basis. It is usually obvious from the reaction of the parties that this is something that is tacitly accepted by them. After discussing this aspect of the conference, Mr Dumbleton then moves on to describe other parts of the process.

Mr Dumbleton expresses the conviction that it is "greatly conducive” to the mediation process and its objective for parties to be confident that whatever information they give, whether fact or opinion, will not become the subject of evidence at any adjudication hearing in the event that settlement is not reached. Confidentiality, in his view, underpins and enhances the effectiveness of the mediation process in the Tribunal.

He goes on to say that mediation does not need to be conducted under the shadow of adjudication and questions of liability at law may become quite subordinate to the immediate interests of the parties in wishing to settle the dispute. For this reason a party may often wish to make a statement about a fact or alleged fact in a "confessionary or admissionary way”. Such statements are often made with the apparent intention of drawing or encouraging from the opposing party similar acknowledgements as to particular conduct of that party within the employment relationship.

By way of example, Mr Dumbleton told the Court that it is not unusual for an employer to concede, as a matter of opinion, that it acted without justification in dismissing the employee but this is often done with an express or implied invitation to the employee to accept fault in relation to some aspect of his or her conduct. The proposals and counter-proposals for settlement will usually reflect these admissions or acknowledgements made between the parties. Mr Dumbleton said that the key to a successful mediation will usually be the preparedness of a party to candidly acknowledge conduct which may well be relevant and even adverse to that party's position in any adjudication hearing, should the dispute proceed that far. Any undue observation or scrutiny of this process would have a stifling effect on it, he said.

Mr Dumbleton added that there have been occasions in mediation when one party has disclosed to him orally certain facts which, if established in evidence, would have relevance to the issue of liability or quantum in an adjudication hearing. He said that this occurs within a dialogue that mediators endeavour to 32establish and maintain between themselves and each party, so as to be an effective intermediary. As a mediator hearing these disclosures in caucus he is bound not to pass on this information to the other party who is not present.

The parties' perception and experience of the neutrality of the Tribunal and its members is, in Mr Dumbleton's view, a highly significant factor in the promotion and attainment of settlement between the parties. It is his view that the confidence parties now have in the Employment Tribunal and in mediation would be much lessened by any undue litigation exposure of the process as it may have been applied in any particular case. Any loss of trust in the process would be counter-productive to the objectives of the Tribunal and would detract from the effectiveness of mediation.

Mr Dumbleton says he would be most concerned if there was any way that mediators could become compellable witnesses in relation to statements and disclosures made to them during the mediation. Even when the statements are made in the presence of both parties, he would also be concerned if it were possible in law to compel a Tribunal mediator to give evidence where there was an issue as to what exactly had been stated or disclosed. His concern is that the more it is possible for the conduct of Tribunal mediation to become the subject of evidence, the more rigid the occasions will become; parties would lose sight of their immediate interests in seeking settlement and would act more guardedly, with one eye on the conduct of possible adjudication in the future. There would also be a risk that statements made in mediation might have a self-serving element about them for that reason.

Mr Dumbleton told the Court that records kept by the Tribunal show that the popularity of mediation as a form of dispute resolution had increased considerably. Since 1991 the proportion of cases disposed of by mediation had climbed from around 60 percent to over 80 percent annually. The process was therefore an efficient and economical use of the Tribunal's resources and of that of the parties. He considers that any widening of the exceptions as developed by the Courts and applied in other jurisdictions would, in his view, have adverse consequences to mediation in the Tribunal.

The arguments

The Court had the benefit of able and scholarly arguments from Mr Cressey, counsel for the applicant, Ms Holden, counsel for the respondent, and Mr Banks, counsel for the Employment Tribunal.

At the forefront of Mr Cressey's submissions, he placed the proposition that the respondent was saying one thing in a without prejudice confidential mediation and the opposite for the purposes of the open adjudication. This gave rise to the applicant's concern "that the respondent appears to have decided on a course of dishonesty”. Mr Cressey submitted that the Court was entitled and should look at the mediation statement to determine for itself whether the applicant's recollection is correct. He relied on the judgment of the Court of Appeal in Cedenco Foods Ltd v State Insurance Ltd (1996) 10 PRNZ 142 (CA). We agree with Henry J at p 143 that it is appropriate to examine a document, this being a common incident of a hearing which creates no undue difficulty. This is especially so in the light of our view that we should not hear the substantive personal grievance

33Mr Cressey stressed that the mediation statement did not contain any settlement offers or concessions but only set out the respondent's position. He accepted that the questions for determination were as set out in the Chief Judge's minute of 16 August 1999. In relation to these questions he submitted the following case on the applicant's behalf:


As a general rule, such statements are not admissible in evidence.


Exceptions to this general rule do exist.


The exceptions are set out in Cedenco Foods Ltd v State Insurance Ltd [1996] 3 NZLR 215 (HC). The ‘without prejudice' privilege status of a statement is a consequence of public policy that encourages parties to settle disputes without resort to litigation.

"Public policy will be subject to the legislative intent of, in this case, the Employment Contracts Act 1991 ('the ECA').

"The 'without prejudice' privilege will also be subject to the 'interests of justice'. More particularly it cannot be used to mislead or deceive the Tribunal on an issue that it is required to determine.


Parties are entitled to discovery of all documents that relate to matters in issue irrespective of their admissibility.”

Mr Cressey relied on the statement of the common law principles in the High Court in the Cedenco Foods Ltd case. He then went on to deal with confidentiality at common law which was generally based on agreement. In relation to statements made in mediation he submitted that, as there was no without prejudice privilege for mediation under the Employment Contracts Act 1991, the common law applied; that at common law without prejudice statements are generally inadmissible but that the without prejudice privilege did not extend to facts independent of the settlement negotiations capable of being proved later by independent means and further that the without prejudice privilege is not absolute.

Mr Cressey conceded that there are opposing views as to whether the without prejudice privilege at mediation is absolute. He submitted that at common law the without prejudice privilege is not absolute. He tended to pour cold water on the suggestion that the quality of mediation would suffer in the absence of a blanket cover. He went on to submit that the Court will override the without prejudice privilege if the interests of justice require it, and the privilege will not be allowed to be used to mislead the Court, or to defeat the policy of legislation.

Mr Cressey submitted that, on the authorities, the parties are entitled to call for and tender in evidence in a subsequent trial all relevant objective facts, the existence of which may have been revealed or confirmed by what was said in mediation. He argued further that the privilege will be overridden if reliance on it will mislead the Court because to do so would be contrary to the interests of justice. Mr Cressey further pointed to authority for the proposition that the right to discovery and production of documents does not depend on their admissibility in evidence.

For the respondent Ms Holden submitted that mediation statements are not discoverable and are privileged from becoming admissible in subsequent adjudication proceedings. She argued that the privilege was based on public policy in avoiding unnecessary litigation and also on express or implied agreements that mediation is conducted on a without prejudice basis. She submitted that the 34without prejudice privilege in the context of mediation under the Employment Contracts Act 1991 is "almost absolute” and would only be lifted where there had been an abuse of the mediation process such as one party issuing threats to the other party under cover of mediation or one party disclosing facts which are totally divorced from the dispute at hand in order to avail itself wrongfully of the privilege.

Ms Holden contended however that, because of the objective and efficacy of the mediation process, the exceptions to the privilege must be strictly construed by the Courts, protecting the mediation process as far as possible. She submitted that the protection was being invoked by the respondent to withhold a mediation statement which was prepared solely for the mediation and which had no other purpose than settling the dispute between the parties. Therefore, the general rule applied and no exception could or should be made. She relied on the rules that communications genuinely aimed at settlement cannot be put in evidence without the consent of both parties if the negotiations are unsuccessful. Ms Holden referred to the express agreement and the reassurance probably given by the mediator to the parties that anything that they shared could not be used later against them. She submitted that the effect of removing the absoluteness of the privilege would undermine the effectiveness of the mediation process by removing the security the parties should have to candidly acknowledge relevant conduct, even potentially admissory conduct, with a view to settlement. If such statements were potentially discoverable and admissible, the Tribunal would, in counsel's submission, be obliged to inform parties prior to the mediation and this would have a chilling effect on the willingness of the parties to speak freely and frankly. Ms Holden also submitted that there was no need for the Court to inspect the document because there was no issue as to its nature and no special circumstances requiring the document to be viewed. She argued that, while the Court may require examination, it should do so only as a last resort for the purpose of removing residual doubt.

Turning to the question whether statements made in mediation, if reduced to writing, are discoverable documents in subsequent adjudication proceedings, Ms Holden agreed that the right to discovery does not depend on the admissibility of the documents but contended for a broad exception to the rule to the effect that, if documents come into being under an express or tacit agreement that they should not be used to the prejudice of either party, an order for production will not be made. She cited the English case of Rabin v Mendoza & Co [1954] 1 WLR 271; [1954] 1 All ER 247 as authority for this proposition, and in particular Romer LJ's dictum that it would be "monstrous” to allow such a document to be used. She attached particular weight to the agreement not only that the document would not be used, but also that it would be returned to the respondent at the conclusion of the mediation.

Ms Holden argued that in the present case, once the parties had agreed to a confidential basis, no exceptions were envisaged. Thus it is that the privilege was virtually absolute, with the result that the Court ought to use extreme caution before lifting the privilege. The prior agreement as to confidentiality, in counsel's submission, distinguished mediations from other situations where without prejudice communications might be sent or entered into without any agreement as to the rules that were to apply. Counsel also relied on public policy reasons of promoting mediation as a means of resolving disputes. Counsel pointed out that all the exceptions to the without prejudice privilege in the cases relate to the use of the 35privilege for purposes other than protecting communications made during an attempt to settle disputes between parties. In relation to the deception ground, Ms Holden referred to Forbes v BNZ (1992) 6 PRNZ 193 to support an argument that the Court should have very strong grounds before it lifted the privilege. She pointed to the danger of undermining security of negotiations by opening the door to the possibility that if serious enough allegations were made against a party to the mediation, the Court would involve itself in revisiting what was said on a without prejudice basis. Ms Holden conceded that the case law showed that other examples exist of the Court lifting the without prejudice privilege to prevent an abuse of the privilege, but submitted that it would be an unprecedented extension of the exception to lift the privilege from the mediation statements in the present circumstances. She categorised the cases in which the privilege had been put to one side as including the following:


Where facts were disclosed during negotiations which would defeat the policy of the controlling legislation.


Where the privilege is claimed to shield evidence of a threat made during without prejudice communications from being put before the Court.


For the purpose of rectifying or enforcing settlement agreements.


In the interests of justice.

In conclusion, Ms Holden submitted that in the present case the mediation statement was created for the sole purpose of introducing discussions between the parties at a mediation conference convened to attempt a settlement of the dispute between them, and that for this reason the privilege attaching to it should not be lifted. Moreover, the parties had agreed expressly that what was said in mediation should not be used outside that forum and in this case no exceptions to that were agreed to. Thirdly, the public policy interests in achieving out of Court resolutions enshrined in the Employment Contracts Act 1991 could only be served by protecting what was said in settlement discussions from later rebounding to the prejudice of parties involved. She submitted that the answers to the questions should be:






Effectively no.


Not applicable.

Finally, the Court heard submissions from Mr Banks on behalf of the Employment Tribunal. He began by saying that the Court's conclusions could have very significant implications for the Employment Tribunal's jurisdiction and for that reason the Chief of the Tribunal had made his affidavit for the assistance of the Court. Mr Banks pointed out that the real issue is not the nature and extent of the protection to be given to Employment Tribunal mediations, but rather whether there are any exceptions to that protection and, if so, the nature and extent of those exceptions. Mr Banks explained that his submissions related specifically only to mediation in the Employment Tribunal and that therefore the judicial authorities, while broadly relevant, were not directly in point. There was no case on all fours with the situation now before the Court.

Mr Banks submitted that a fine detailed analysis of rules governing without prejudice communications and confidentiality in other contexts would not provide the answers to the issues now being addressed by the Court, although they might 36be useful by way of guidance. He then referred to the accent in the Employment Contracts Act 1991, particularly s 76, of a resolution of differences under employment contracts by the parties who "should be assisted to do so themselves”. He pointed out that mediation was more than merely an occasional or permissive option but, rather, as the primary and most likely larger part of the Employment Tribunal function. Mr Banks told the Court that the Tribunal had carried out its mediation function on the basis of full protection of the without prejudice nature of mediations.

Turning to the question whether there should be any exceptions to the broad principle of protection and to the nature of any exceptions that should exist, Mr Banks accepted that, in other contexts at any rate, exceptions may or do exist in the following categories:


The statement is made in circumstances that cannot be regarded as part of the negotiations for settlement or reasonably incidental to them.


The statements are part of the settlement negotiations but are unqualified admissions concerning objective or independent facts or are an ingredient of a cause of action itself.


The statement is not concerned with the same subject-matter as the settlement negotiations.


There is a specific statutory provision addressing the statement or conduct.


The communications constitute an offer and acceptance and are admissible to prove that.


The communications have to be disclosed to prevent the Court from being misled, or they constitute criminal misconduct.

Mr Banks in oral submissions described the second and third categories as most troublesome. He went on to argue that these exceptions are derived from judicial authority that has nothing to do with the Employment Contracts Act 1991 and, in that context, the need for simplicity, practicality, and workability arises through three interrelated reasons:


First, the prospects of success in mediation before the Employment Tribunal must be maximised because of the public interest involved in the resolution of employment differences. He pointed out that parties to mediation are frequently represented by advocates without formal legal training and it would be unfair to the litigants in these circumstances if the candour that has applied in mediation until now can no longer exist. If the common law were to be applied, this would prove quite unworkable and Employment Tribunal mediation could not then be expected to operate in the informal way that has been so successful until now.


The second reason advanced by Mr Banks was that, if statements in mediation were capable of being referred to in subsequent litigation, Employment Tribunal mediation members could become compellable witnesses. The integrity and neutrality of Tribunal members would not be eroded by such a development but the parties' perceptions would be affected and their confidence in the neutrality of Tribunal members could be lessened.


The third reason put forward is that sophisticated jurisprudence would be needed as to the scope of the exceptions and that it would be unnecessary and unhelpful for a low level, speedy, informal Tribunal to have to draw


the fine distinctions in assessing what can and cannot be adduced in evidence before the Employment Tribunal in a subsequent adjudication. This would, counsel submitted, be an unwelcome and unnecessary addition to the Tribunal's jurisdiction. Acknowledging that the Tribunal could handle such matters by referral to the Court, he submitted that those facilities are for exceptional cases and such a course was generally undesirable as, he contended, the present case illustrates. The Employment Tribunal ought not to have to address such complexities. Counsel submitted that the protection to be accorded to Tribunal mediations, in line with the practice referred to by Mr Dumbleton, should be either absolute or near absolute. If any exception is to be permitted, it should only be on the grounds that, without such an exception, the Tribunal would be deceived. Mr Banks submitted that this would not require prior disclosure or discovery of any communication in mediation, oral or written, nor any other prior preparation of evidence. It would be a true exception applicable only when evidence alleged to be deceptive to the Tribunal had been given. Only at that point should the Tribunal even contemplate that communications in mediation might be discovered and (the separate question) that they might be the subject of evidence. Mr Banks concluded by submitting that the Tribunal or Court would need to be satisfied to a very high standard before any piercing of the protection of mediation communications could be warranted.

Decision of the case

A. The principles — admissibility

As is evident, there is little doubt about the principles that would be applicable if the case concerned negotiations entered into without prejudice by the parties themselves without the assistance of a statutory mediator under the Employment Contracts Act 1991. On the footing that the protective cloak that the law casts over negotiations cannot be weaker when a mediator under the Employment Contracts Act 1991 is involved, than when one is not involved, it is as well to set down what these principles are because they are the minimum protection available. These are:


Statements made in the course of negotiations expressly or impliedly entered into "without prejudice” are not admissible in subsequent proceedings if no settlement results. They are, of course, admissible to prove that a settlement had resulted if a dispute later arises concerning that question.


Notwithstanding that negotiations take place without prejudice pursuant to an express or implied agreement that they should take place under the cloak of the protection just described, there do exist at common law exceptions to the protection.


The privilege seemingly applies only where an attempt is made to settle a dispute between the parties and not otherwise. This principle, however, must be approached with some caution as in general the parties would not be talking but for the fact that there was an intention to settle. They might well come to the negotiation intending to take a strong line and to deny liability but they may do so with an open mind and be persuaded, at least, to contemplate settlement. It is therefore dangerous to take isolated statements as signifying that the entire negotiation was some kind of a sham. It is quite


clear, however, that evidence of extraneous statements — for example, when the discussion is over, the negotiation having failed, and one or other of the parties makes a damaging admission afterwards — may become admissible. That is not the situation in this case.


Facts may be disclosed which, when a negotiation founders, can then be proved independently of calling evidence of what passed in the negotiations. They may be proved by direct evidence of the fact in question as opposed to evidence of an admission having been made during the mediation. There is no objection to such direct independent evidence of the fact, notwithstanding that its existence may have been revealed only during the negotiation. It is one of the risks of negotiating that statements made may give a lead which can later be followed up independently.


The privilege may not be used to conceal the fact that, during the negotiation, one party made a threat against the other. As an example see Van Der Sluis v Health Waikato Ltd [1995] 1 ERNZ 478.


The privilege cannot be relied upon if the interests of justice require it to be overridden. Such cases will arise essentially only where it is necessary to remove the cloak of the privilege in order to prevent a party from committing perjury and so misleading the Tribunal or the Court.

It is necessary to pause at this stage and consider the rationale for the principal rule and the exceptions to it. The rationale is that it is in the public interest to encourage settlement of litigation because of the costs to the State and to the parties if cases have to be tried and possibly pursued through appeal processes.

Is the law any different where a mediator is involved — different in the sense of the protection being any stronger or more absolute? In one sense it could be said that there is no particular magic arising from the fact that the parties have been assisted in their negotiations by a mediator. In any definition of mediation that we have seen, the accent — and it is a strong accent — is always placed upon the resulting settlement that is the object of the negotiation being the act of the parties and not of the mediator. Nevertheless, the Court of Appeal in Vaucluse Holdings Ltd v Lindsay (1997) 10 PRNZ 557, 559 (CA) felt able to say:

"Mediation agreements such as this one are confidential; any matters arising in the course of mediation are not usually to be put in issue in any subsequent litigation or arbitration. In this spirit, we do not think that statements in the documents prepared for the assistance of the mediator should be relied on in subsequent litigation. The whole point of mediation is to remove the process from litigation or arbitration and to ensure that anything said or done in a mediation does not later redound to the detriment of any party, should the mediation fail to achieve a settlement.”

The phrase "not usually” in the second clause of the first sentence attracts attention and implies the existence of exceptions. Nevertheless, the value of mediations is that their acceptance as a dispute resolution mechanism reduces the pressure of work to which Courts and Tribunals would otherwise be subject. Therefore, the Court leans towards the process of mediation and wishes, whenever possible, to protect its integrity and the conditions under which mediation was resorted to. It seems in the words of Romer LJ cited previously that it would indeed be monstrous to allow one party to make use of a document that was entitled to protection. We conclude therefore that the Court will scrutinise with particular jealously any suggestion that a document produced for the purposes of 39a mediation — which, by definition, is an exercise in attempting to settle the dispute — should later be used in evidence against the party proffering it.

Turning now to mediations under the Employment Contracts Act 1991, it seems to us that they have a number of features that are of importance. In the first place, they are voluntary. In the second, they proceed almost invariably, and did so in this case, under an agreement of confidentiality. This seems to us to be a critical consideration. If the matter does not settle, the mediator cannot be an adjudicator. Therefore, there is an implied parliamentary intention that the adjudicator should not be or become aware of any admissions made during attempts at settlement. Such an arrangement is designed to encourage full disclosure during the mediation and to create an environment in which neither party will be inhibited from frankness in approaching settlement proposals.

Other statutory features of the Employment Contracts Act 1991 lead us to the conclusion that exceptions to the cloak of privilege will be rare and will be recognised only in the most compelling cases. We say so because the statutory language in s 76(a) encourages resolution by the parties themselves with assistance from mediators. The general scheme of the Act is to like effect. Section 26(c) provides that the application of a personal grievance procedure is not able to be frustrated by deliberate lack of cooperation on the part of any person. Section 38 requires employers to give reasons for a dismissal in writing on request which, of course, must be the true reasons and a comprehensive statement of all reasons: see Ashton v Shoreline Hotel [1994] 1 ERNZ 421. Section 96, read together with s 126, enables the Tribunal to accept, admit, and call for such evidence as in equity and good conscience it thinks fit, whether strictly legal evidence or not. The First Schedule to the Employment Contracts Act 1991, which requirements would be present in most employment contracts, requires that there should be an exchange of statements between the parties as to their positions in relation to the grievance.

In our judgment, these provisions do not detract from the encouragement of dispute resolution and we find there is a much stronger case for protection of statements made during mediation than there is for protecting agreements between parties that their discussions should be without prejudice. In the case of statements made during mediation there are additional policy reasons for excluding such evidence in the generality of cases. There would be a risk of mediators being called as witnesses. Parties might wish to give evidence about what the mediator had said or about what other persons present had said. We consider it is undesirable for the mediator to be caught up in such attempts or to have to consider the potential of being called as a witness. This could interfere with the mediator's role to the detriment of the settlement process.

We formulate therefore a general rule as follows. Relevant statements or admissions made in the course of mediations conducted for the purpose of settling employment differences within the meaning of s 78(1) of the Employment Contracts Act 1991 are not admissible in evidence where no settlement has resulted, unless on other grounds of public policy there is good reason to admit the evidence. Examples of such grounds are:


Where there is a strong risk that the Tribunal in its adjudication jurisdiction would be deceived by the exclusion of the evidence;


The exclusion would defeat the legislative intent; or


Where the statement or admission gives rise to a new cause of action.

40 However, there is a high threshold of conviction before these exceptions can be held to be met.

B. The principles — discovery

We accept that the obligation to disclose relevant documents does not turn on whether they are admissible in evidence. Indeed, their admissibility may have little or nothing to do with the question whether they are liable to be disclosed. The only principles that govern the situation can be said to be as follows:


Is the document relevant in the sense of relevance as understood by persons engaged in litigation? and


If so, is there any exception to the rule that relevant documents must be disclosed?

In this case, the only exception that could possibly be available is that it would be contrary to the public interest to require disclosure. That public interest in this case is said to reside in the disadvantage of the truth not coming out and the detriment to the legal system and to public confidence in it if a party is able to assert the existence of a certain state of affairs or admit it for the purposes of mediation, yet deny it for the purposes of litigation. This gives rise to two possible different situations. One is that in the concessionary spirit of mediation a party may be prepared, merely for the sake of moving on towards agreement, to admit something that that party considers to be untrue but the other party asserts. On the other hand, the same stance could denote an express or implied threat to commit perjury at the adjudication hearing unless the case is settled on that party's terms.

In the first situation the document being created as a result of inter partes communications would be discoverable and able to be inspected but would not generally be admissible because it would defeat the underlying purpose of the rule of public policy protecting statements made in genuine settlement negotiations and which "protect a litigant from being embarrassed by any admission made purely in an attempt to achieve a settlement” (Rush & Tompkins Ltd v Greater London Council [1988] 3 All ER 737; [1988] 3 WLR 939, at p 740; p 943). Admissibility in the second situation would not be constrained by the public interest in promoting settlement for it may be outweighed by the desirability of preventing the Tribunal of fact from being misled by perjured evidence. That is a matter which goes to admissibility and not discoverability. As we have observed, even if the document is discoverable and able to be inspected, as is the case with communications inter partes that are expressed to be without prejudice, it does not follow that such communications will be admissible at the hearing.

C. Application of principles to fact

The document which the applicant wishes to be discovered and available for use at the Tribunal hearing is the written statement of the respondent which was produced in the course of mediation. This contained a statement that the respondent took into account the applicant's "established history of conflict” and the "totality of the employment records of the two protagonists” when deciding to dismiss the applicant.

As we have observed, the respondent says in its statement of defence that the applicant's employment was terminated solely on the events of 19 June and it 41denies allegations that it took into consideration previous performance issues that had already been settled.

The mediation brief is certainly a statement which is relevant to the issues in the case. It was prepared for the purpose of a settlement which did not eventuate. Although it is discoverable that does not conclude the question of whether it is able to be used at an adjudication.

The central issue is whether the document may be admitted into evidence at the adjudication hearing on any of the three grounds already discussed. Of these the third ground is not relevant to this case. The other two grounds are:

(1) Is there a strong risk that the Tribunal would be deceived by the exclusion of the evidence?

In our view if the respondent maintains the position it expressed in para 11 of the statement of defence then this would amount to deception. The mediation statement clearly discloses that the respondent considered more than the events of the day in question when making its decision to dismiss the applicant. If it attempted to deny this at the Tribunal hearing and maintained its position that it only turned its mind to the events of the day, then the Tribunal could be deceived. This would be averted if it were open to the applicant to rely on the mediation statement to challenge that assertion.

(2) Would the admission of the statement result in a defeat of legislative intent?

We accept that an important intention behind the Employment Contracts Act 1991 is the settlement of employment disputes. The Act has provisions for settlement by the parties themselves rapidly and near to the point of origin (cl 3(i) of the First Schedule to the Act); by mediation; and by adjudication.

We conclude that in the circumstances of this case this legislative intent would not be defeated. The mediation process is protected by the high threshold which must be met before any admission made in mediation can be used in evidence before the Tribunal.

On the contrary, the integrity of the adjudication process stands to be impugned if a party is able improperly to shelter behind the confidentiality of the mediation process.


The line is very fine and we will not be at all surprised if Parliament opts for the sanctity of the mediation process. However, we conceive it to be our duty to uphold the integrity of the legal process and therefore conclude that a document that contains an admission may be produced when there is evidence from the pleadings that the party who made the admission intends to resile from it for the purposes of the adjudication and thus potentially mislead the Tribunal.

The document in this case which plainly contains relevant material in the form of an admission (otherwise the parties would not be arguing about the matter) must be discovered. This, however, does not mean that the document is admissible as part of the applicant's evidence. It can only be used if the respondent in fact gives evidence that is contrary to the admission made. In that event, the witnesses who give such evidence can be cross-examined as to whether they have made any prior 42inconsistent statements. The document can be produced only if the witness denies the making of such statements.

We now answer the questions posed as follows:


Statements made in mediation, if reduced to writing, are discoverable and may be inspected in subsequent adjudication proceedings unless they fall within the umbrella of legal professional privilege or a recognised head of public policy.


Such statements are not normally admissible in evidence at the subsequent hearing because of the public policy of "encouraging litigants to settle their differences rather than litigate them to a finish” (Rush & Tompkins Ltd, per Lord Griffiths, p 739).


Exceptions to the public policy rule exist for the purposes of the Employment Contracts Act 1991 where, as a matter of public policy, there is good reason to admit the evidence, such examples being:


Where there is a strong risk that the Tribunal in its adjudication jurisdiction would be deceived by the exclusion of the evidence;


The exclusion would defeat the legislative intent; or


Where the statement or admission gives rise to a new cause of action.

These answers are also sufficient to answer the question posed by the Employment Tribunal. As indicated earlier in this judgment, there will be an order pursuant to s 94(5) of the Employment Contracts Act 1991 that the Tribunal should now adjudicate on the substantive personal grievance at first instance, applying to the evidence in question the principles and conclusions set out in this judgment.

Costs are reserved.

Referring Principles
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