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Solicitors' duty of care: Binding mediation agreement

David Frost v Wake Smith & Tofields
19 June 2013
Court of Appeal

In this decision involving solicitors' duty of care, the Court of Appeal held that a solicitor had not been negligent in failing to obtain a binding agreement at a first mediation meeting, though it would normally be part of a solicitor's duty to advise his client of the nature of the mediation process and of the status of any agreement reached. Alexia Drew comments on the case.

Facts

For around 20 years the Claimant, David Frost, and his brother, Ron Frost, had owned a number of joint business and property interests.

However, by 2003, the brothers‟ relationship had broken down. Having engaged in acrimonious correspondence and been unable to agree an effective division of their interests, the brothers each instructed solicitors to act on their behalf. The Claimant instructed Mr Serby, a partner of the Defendant firm, to act on his behalf in relation to the dispute.

A mediation subsequently took place at the Defendant’s office, during which a resolution was reached. The brothers signed a written agreement reflecting the terms of that resolution.

There did, however, remain a number of issues upon which further clarification and agreement was required, including the identification of certain assets, the treatment of tax consequences and the treatment of various third party interests.

It subsequently emerged that the Claimant’s brother did not consider himself to be bound by the agreement. Mr Serby therefore instructed Counsel to provide an opinion as to whether it might be possible to obtain an order for specific performance of the mediation agreement. Counsel advised that it would not be possible to do so.

However, having threatened to proceed with an application for specific performance (despite Counsel’s advice to the contrary), it was agreed that a second mediation would take place. At that second mediation a much more detailed agreement was drawn up and signed by the brothers (although even this did encounter some difficulties and certain tax consequences still remained outstanding).

The Claimant subsequently alleged that the Defendant had acted negligently when drafting the first mediation agreement. The High Court held that the Defendant was not negligent. The Claimant appealed to the Court of Appeal.

Court of Appeal findings

The Court of Appeal dismissed the Claimant’s appeal and held that the Defendant had not been negligent. The Court considered that the Defendant could not have recorded the terms of the agreement at the first mediation in a manner which would have rendered it enforceable, since the terms were not sufficiently defined or certain to be capable of being legally binding. There needed therefore to be further detailed terms which may or may not have been agreed by the brothers.

The Court further concluded that the Defendant was not under a duty to obtain all of the necessary factual and legal information, prior to mediation, to enable such an enforceable agreement to be reached.

However, the Court emphasised that it would, of course, still be part of a solicitor’s duty to advise a client as to the nature of the process and of the status of any agreement reached as a result, at mediation. However, in this instance, the Claimant did not allege that the Defendant had failed in his duty to properly advise his client as to the unenforceable nature of the outcome of the first mediation.

Comment

This decision will provide some comfort to the legal profession when representing clients at mediation. It also provides a reminder that mediation ultimately aims to assist the parties to reach a pragmatic solution but that failure to reach a binding or enforceable agreement does not necessarily mean that the mediation was unsuccessful.

Notably, the Court considered that mediation has proved to be a flexible and immensely valuable process of dispute resolution. The Court also noted that it would be regrettable if any decision of the Court would “cause practitioners to approach the process of mediation with anything other than maximum flexibility”.

However, the Court’s decision did also indicate that it may have considered the issue differently if there had been a breach of the solicitor’s duty to advise a client as to the nature of the process and of the status of any agreement reached at the mediation. This provides a reminder to legal practitioners as to the importance of clearly advising their clients as to the mediation process and the possibility that any agreement may need further clarification and detail before it can become enforceable.

For further information please contact Alexia Drew, DWF Fishburns on 0117 301 7395 or at alexia.drew@dwffishburns.co.uk

By Alexia Drew

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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