Misled during mediation? Will 'without prejudice' privilege protect those misrepresentations?

Key Points: The common law "without prejudice" privilege rule is not absolute and will not protect all communications made during settlement negotiations.

Settlement discussions during mediation are generally protected by "without prejudice" privilege as well as through standard confidentiality terms in most mediation agreements. However, Justice Lander's recent decision in Pihiga Pty Ltd v Roche [2011] FCA 240 highlights that the protection of "without prejudice" communications is not absolute.

In that decision, Justice Lander considered the extent to which communications made during the course of mediation was protected by "without prejudice" privilege. As well as finding that two of the exceptions to the statutory rule protecting "without prejudice" communications in section 131 of the Evidence Act 1995 (Cth) applied, he found that:

there are a number of exceptions to the common law "without prejudice" rule, including where there are allegations of misleading and deceptive conduct; and contractual terms in mediation agreements can give no more protection than that given by the common law. Having said that, it is important to note that this case was not a Court-ordered mediation. As such, the mediation was not subject to section 53B of the Federal Court of Australia Act 1976 (Cth) which provides absolute protection to anything said or admissions made during mediations from being admissible as evidence in any Court. Presently, the construction of section 53B (along with corresponding State legislation) and their interaction with the common law "without...