Just Hotel Ltd. v James Jesudhass [2007] NZCA 582


CA249/06 [2007] NZCA 582


Hearing: 28 November 2007

Court: Glazebrook, Arnold and Wilson JJ

Counsel: M A F Gilkison for Appellant / B A Corkill QC and A Cressey for Respondent

Judgment: 14 December 2007 at 11.30 am


A: Appeal allowed. 

B: No order as to costs.


(Given by Wilson J)


[1] This appeal turns on the construction and application of s 148(1) of the Employment Relations Act 2000, which provides that any communication made “for the purpose of mediation” must be kept confidential. At issue is the extent, if any, to which communications between the parties in mediation over an employment dispute may subsequently be relied on in the determination of a personal grievance.

[2] Mr Jesudhass (the respondent) and Just Hotels Ltd (the appellant) entered into a mediation over a personal grievance of the respondent in which he alleged that he had been unjustifiably disadvantaged in his management of the appellant’s hotel business. The respondent claims that the appellant indicated to him during the mediation that he would not be permitted to return to work and that he would be dismissed immediately after the end of the mediation. The appellant denies this, and says Mr Jesudhass was dismissed by a facsimile sent two days after the mediation.

[3] After lodging a Statement of Problem with the Employment Relations Authority on 30 May 2005, Mr Jesudhass applied to the Authority to have the matter removed to the Employment Court. That application was granted on the ground that an important question of law was likely to arise. In the Employment Court it was held that the scope of the confidentiality conferred by s 148 should be construed narrowly. The Full Court held that evidence of conduct at the mediation could be adduced, so long as it did not relate to communications made in an attempt to resolve the employment relationship problem.

[4] Having obtained the leave of this Court to do so, Just Hotels appeals against that decision.

The section

[5]  Section 148(1) reads:

Except with the consent of the parties or the relevant party, a person who—


provides mediation services; or


is a person to whom mediation services are provided; or


is a person employed or engaged by the Department [responsible]; or


is a person who assists either a person who provides mediation services or a person to whom mediation services are provided — must keep confidential any statement, admission, or document created or made for the purposes of the mediation and any information that, for the purposes of the mediation, is disclosed orally in the course of the mediation.

The decision of the Employment Court


[6] The Employment Court approached the issue of the meaning and effect of s 148(1) of the Employment Relations Act by first providing a background analysis under four headings. The Court undertook a comparison of s 148 with confidentiality provisions in other legislation, followed by a review of the case law preceding the enactment of s 148. It then addressed the legislative history of the section, and finally surveyed the recent interpretation and application of the section.

[7] The Court identified a series of statutes that contain comparable confidentiality provisions. It focused in particular on s 18 of the Family Proceedings Act 1980 as a provision that has been the subject of judicial scrutiny. Section 18 prevents any communication made “in the course of a mediation conference” from being admissible in any judicial proceedings. The Court referred to the dictum of Holland J in Parsons v Mathieson [1991] NZFLR 262 at 265 that, although s 18 was absolute in its terms, there may be a distinction between information received by a counsellor in exercise of his or her functions under the Family Proceedings Act and information received by the counsellor otherwise.

[8] As to the case law preceding s 148, the Court referred to Crummer v Benchmark Supplies Ltd [2002] 2 ERNZ 22, and the common law jurisprudence regarding the admissibility of communications described as “without prejudice”. Crummer was decided under the Employment Contracts Act 1991, which did not prescribe the mediation process in the same way as the current legislation. The parties in Crummer had explicitly agreed that the mediation would be conducted on a “without prejudice” and “in confidence” basis. The employer produced a statement of position during the mediation, which the employee subsequently requested on discovery.

[9] The Court in Crummer held that the law recognised exceptions to the principle that statements made in the course of negotiations to settle are not admissible in subsequent proceedings. The privilege would not apply to communications that were not made in an attempt to settle the dispute. The Court formulated the following general rule (at 39):

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.

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

[10] The Employment Court then considered the legislative history of the Employment Relations Act 2000, emphasising that Crummer was in Parliament’s mind when the new s 148 was drafted. The report of the Employment and Accident Insurance Legislation Committee (1 August 2000) said at 35:

Clause 160 [which was to become s 148] is intended to prevail over the “Crummer” case, ensuring that mediation is always held on a without prejudice basis. However, we agree that the confidentiality should only attach to things said and created for the purposes of the mediation and not to pre-existing evidence.

[11] The clause was redrafted prior to the final reading. Whereas the provision had originally read “no evidence is admissible in any court, or before any person acting judicially, of any information, statement, admission, or document disclosed or made to or buy any person in the course of the provision of mediation services,” it was modified to exclude “any statement, admission, or document created or made for the purposes of the mediation and any information that, for the purposes of the mediation, is disclosed orally in the course of the mediation.”

[12] Finally, the Court turned to consider two cases in which it had applied s 148. In Lowe v New Zealand Post Ltd [2003] 2 ERNZ 172 (EC) and Shepherd v Glenview Electrical Services Ltd [2004] 2 ERNZ 118 (EC) the section was applied strictly. In Shepherd the Court said:

[46] [T]he combined effects of s 148(1) and (3) are clear, absolute and draconian. They would even appear to make inadmissible evidence of the commission of criminal offences by persons in mediation...

[13] The judgment in Shepherd went on to express concern that about the absolute bar in the legislation, but accepted that it must nevertheless apply strictly. In view of the disquiet expressed in Shepherd, the Employment Court considered that the present case was an appropriate one in which to review this strict interpretation of s 148.


[14] Having reached this point, the Employment Court embarked on a fresh look at s 148. It commenced by considering the scheme of the Act, in particular the scheme of Part 9 (Personal grievances, disputes, and enforcement) and Part 10 (Institutions). It emphasised the focus in the Act on resolving employment relationship problems (ss 101 and 144(2)(d)) and on mediation as a means of facilitating that resolution (ss 143 and 144).

[15] Turning to the problem of what was meant by the Select Committee when it said that the new s 148 “was intended to prevail over Crummer”, the Court concluded that the Committee must have been referring to the primary finding in that case that mediation would not be held on a “without prejudice” basis unless the parties specifically agreed it would be. The intention was to ensure that all mediations were conducted “without prejudice”. However, the Court thought that Parliament also intended to recognise that it was necessary to achieve a balance between the predominant privilege on the one hand and circumstances where common sense and the interests of justice will warrant disclosure and admissibility on the other. This, in the Court’s view, was achieved by the inclusion of the words “for the purposes of mediation.”

[16] The Court went on to conclude that Parliament’s intention was to enshrine in the Act the relevant common law principles of “without prejudice” communications. It considered that this conclusion was reinforced by both express and implied expectations of good faith between the parties, and by the absurdity of supposing that Parliament would have legislated to exclude evidence of criminal activity occurring during a mediation. The strict stance adopted in Shepherd could not be correct.

[17] The Court concluded that the confidentiality and inadmissibility contemplated by s 148 could not be absolute. It held that:

[56] [T]he phrase “for the purposes of the mediation” reflects the common law requirement that such communications must be genuinely for the purpose of settling litigation or potential litigation and the protections (including inadmissibility) are lost where such communications are for other purposes.

[18] The Court went on to state that:

[60] If information is provided that is not for the legitimate purposes of the mediation, then it is not entitled to the protections of confidentiality and inadmissibility.

[19] The Court found that a party’s conduct in mediation going to subsequent events, including dismissal or disadvantage in employment that are alleged to be unjustified, but which were not for the legitimate purposes of the mediation, are not subject to confidentiality and inadmissibility.

Alternative grounds

[20] The Employment Court addressed two alternative grounds advanced by Mr Jesudhass. First, it accepted the argument that dismissal was a matter of contract and existed independently of mediation; therefore a dismissal of an employee at mediation would fall beyond the legislative protection of s 148. Secondly, it rejected the contention that the s 148 confidentiality should be subject to the statutory duty of the Employment Relations Authority or the Employment Court to investigate and determine a personal grievance based on an unjustifiable dismissal or an unjustified action.


[21] The Court concluded that Mr Jesudhass was entitled to adduce evidence to establish that communications between the parties at mediation, other than those made in an attempt to resolve his employment relationship problem, should be admissible at the hearing of his personal grievance. Whether or not the communications adduced were “for the purposes of the mediation” was a matter for the trial Judge to determine, and the onus would be on the plaintiff to satisfy the Judge that the evidence should be admitted.

Appellant’s submissions

[22] Mr Gilkinson submitted that the Employment Court misinterpreted the intention of Parliament in enacting in s 148 of the Employment Relations Act. Counsel contended that the words of the section mean what they say, and that the legislative intention was to remove, rather than preserve, the limited exceptions to the principle of confidentiality in mediation created by Crummer.

[23] Counsel submitted that the words of the section are clear and unambiguous but, even if there were ambiguity in s 148(1), it could for two reasons readily be resolved in favour of the interpretation contended for by the appellant.

[24] First, s 148(6)(a) provides that nothing in the section prevents the discovery or affects the admissibility of evidence which “existed independently of the mediation process”, thereby making clear that all evidence provided as part of that process is inadmissible.

[25] Secondly, the report of the Department of Labour to the Select Committee which considered the legislation stated, in reference to the clause which became s 148, that it:

... is intended to prevail over the finding in the Crummer case, ensuring that mediation is always held on a without prejudice basis. However, officials agree that the confidentiality should only attach to things said and created for the purposes of the mediation and not to pre-existing evidence.

[26] Finally, Mr Gilkinson addressed the alternative ground for the decision of the Employment Court (the proposition that an employee being dismissed during a meditation would, on the approach for which he was contending, be unable to establish the dismissal). The practical answer, counsel submitted, was that evidence would be available from outside the mediation to prove that the employee had been dismissed.

Respondent’s submissions

[27] For the respondent, Mr Corkill QC submitted that the Employment Court’s interpretation was correct. To promote the purposes of the Act as a whole and for reasons of public policy, s 148(1) should be construed as protecting only communications for the “proper” purposes of a mediation. Because it is not proper to act illegally, any evidence of illegal conduct (whether criminal or otherwise) is outside the scope of s 148 and therefore not protected by it.

[28] Mr Corkill emphasised that on his argument the threshold which had to be reached before the section did not apply was a high one, requiring clear evidence of illegality of purpose.

[29] Counsel submitted that the interpretation for which he was contending was consistent with the recognised exception of “unambiguous impropriety” to the rule which protects communications expressed to be on a “without prejudice” basis.

[30] Finally, Mr Corkill took issue with the proposition that evidence of dismissal during a mediation would always be available from sources extraneous to the mediation. This might not be possible, for example, where a statement by an employer in the course of a mediation was relied on to found a claim for constructive dismissal.


[31] We do not see any ambiguity in the words of s 148(1). All communications “for the purposes of the mediation” attract the statutory confidentiality, except possibly (as we discuss later in this Judgment at [41] to [43]) where public policy dictates otherwise.

[32] In accordance with the ordinary meaning of the word “purpose”, that of the intended object of an activity, a communication (written or oral) is protected unless it is created or made independently of the mediation.

[33] Documents which are prepared for use in or in connection with a mediation therefore come within the ambit of s 148(1). So do statements and submissions made orally at the mediation, or a record thereof. Only documents which come into existence independently of the mediation are excluded.

[34] There is nothing surprising in this conclusion. To the contrary, it reflects the desirability of encouraging the parties to a mediation to speak freely and frankly, safe in the knowledge that their words cannot be used against them in subsequent litigation if the dispute does not prove capable of resolution at mediation.

[35] As this Court said in Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343 at 349, “the very nature of a mediation requires that, in principle, it be conducted on a confidential basis, with the parties encouraged to ‘lay bare their souls’ for the purpose of facilitating a conciliation and resolution of the dispute”.

[36] If we had concluded that there was an ambiguity in the words of s 148(1), we would have reached the same conclusion as to their meaning. As submitted by Mr Gilkison (and noted at [24] and [25] above) both s 148(6)(a) and the Department of Labour Report to the Select Committee confirm that the section is intended to apply to all but pre-existing evidence.

[37] Section 148(6)(a) provides that nothing in s 148 prevents the discovery or affects the admissibility of evidence which exists “independently of the mediation process”. This wording strongly supports the interpretation of s 148(1) which we are adopting. The obvious implication of s 148(6)(a) is that communications at a mediation which do not exist independently of it will not be discoverable or admissible. There is no reason why such evidence should not be discoverable or admissible unless it attracts the confidentiality conferred by subs(1). All evidence which does not exist independently of the mediation process is therefore evidence created or made “for the purposes of the mediation”.

[38] As we noted at [17] and [18], the Employment Court held that s 148(1) only protected communications that were “genuinely” for the purposes of settling an employment dispute (at [56]), or for the “legitimate” purposes of the mediation (at [59]). In defending that position, Mr Corkill submitted that the section should be read as referring to the “proper” purposes of the mediation and argued that this imposed a high threshold for scrutiny. We disagree. Such concepts could be applied only after a detailed examination of what occurred at a mediation. Such a retrospective examination, based on a mere allegation of illegitimate or improper purpose or of non-genuine use, would effectively defeat the protection that s 148(1) seeks to provide.

[39] The resolution of disputed accounts of what occurred at a mediation would be particularly difficult because s 148(2) would prevent the only independent witness, the mediator, from being called to give evidence.

[40] We do not discount the difficulty, identified by Mr Corkill, of establishing constructive dismissal by a statement made at a mediation. We think, however, that in practice the skill and experience of mediators appointed to conduct mediations under the Employment Relations Act should ensure that such a situation does not arise.

[41] We now return to the question of public policy considerations. As the Employment Court stated, it may be that such considerations require s 148 be interpreted so as to permit evidence of serious criminal conduct during a mediation to be called, including evidence from the mediator.

[42] An example given by Sinclair J in Milner v Police (1987) 4 NZFLR 424 (HC) at 427 (an authority to which Mr Corkill referred in the course of his argument) provides a good illustration of why there should possibly be an exception for criminal conduct. The Judge said:

For example, if a counsellor has before him [or her] a husband and wife and in the course of the counselling session one party physically attacks another and causes either serious injury or death to the other party then surely it would be necessary to have the counsellor available to give evidence as to what actually occurred.

[43] It is not, however, necessary for us to decide on this appeal whether there should be such an exception.


[44] For the reasons we have given, s 148(1) should be construed as applying to all documents prepared for use in or in connection with a mediation and to all statements or submissions made at a mediation (or a record thereof), unless they have come into existence independently of the mediation.

[45] The appeal is therefore allowed. [46] Because the respondent is on legal aid, we make no order as to costs.

Solicitors: Mackay and Gilkison, Wellington for Appellant A Cressey, Wellington for Respondent

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