BEVAN BRUSE and COMMISSIONER OF TAXATION
[2010] AATA 404
•1 June 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 404
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/6088
TAXATION APPEALS DIVISION ) Re BEVAN BRUSE Applicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Senior Member K Bean Date1 June 2010
PlaceAdelaide
Decision The Tribunal directs that:
(a) the applicant is given leave to and is directed to uplift his Statement of Facts, Issues and Contentions filed on 17 February 2010 and the witness statement of the applicant, Mr Bevan Bruse, also filed on 17 February 2010 from the Tribunal’s file;
(b) the applicant is directed to file by way of substitution for those documents a Statement of Facts, Issues and Contentions and a witness statement from Mr Bruse from which any reference to the respondent’s letter of 17 August 2009 is deleted, by 11 June 2010; and
(c) the copy of the respondent’s letter dated 17 August 2009 which has been provided to the Tribunal for the purpose of resolution of the dispute determined by this decision is to be returned to the respondent...............................................
K BEAN
(Senior Member)
CATCHWORDS
PRACTICE AND PROCEDURE – Without prejudice privilege – whether letter relating to settlement negotiations between parties privileged from production to Tribunal – whether without prejudice privilege applies to Tribunal proceedings – without prejudice privilege does apply to Tribunal decisions – privilege is a joint privilege which has not been waived by both parties – letter protected by privilege and should not be disclosed to Tribunal
Evidence Act 1995
Administrative Appeals Tribunal Act 1975 ss 34(c), 37(1), 37(3)
Field v Commissioner for Railways for NSW (1957) 99 CLR 285
Bennett v Chief Executive Officer of the Australian Customs Service (2004) 80 ALD 247 Ashfield Municipal Council v ITA [2004] NSWSC 917
Osland v Secretary, Department of Justice (2008) 234 CLR 275
Unilever Plc v The Proctor & Gamble Company [2000] 1 WRLR 2436Cutts v Head [1984] Ch 290
Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512Re Feben and Repatriation Commission (1998) 50 ALD 600
Re The Mining Holding Company and Commissioner of Taxation [2006] AATA 491
Re Caspersz and Secretary, Department of Employment and Workplace Relations (2006) 42 AAR 329
Farnaby v MR&CC (2007) 97 ALD 788Yokogawa Australia Pty Ltd and Others v Alston Power Ltd [2009] SASC 377
Walker v Willsher (1989) 23 QBD 335
Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd and others [2003] WASCA 11REASONS FOR DECISION
1 June 2010 Senior Member K Bean 1. This matter has yet to proceed to a final hearing in relation to the substantive issues in dispute between the parties, which concern whether the applicant is entitled to certain tax deductions and whether he has substantiated particular expenses. However, in the course of the parties’ preparations for a final hearing, a preliminary issue has arisen requiring adjudication in advance of the final hearing.
2. In the applicant’s Statement of Facts, Issues and Contentions and in his witness statement, reference is made to a letter from the respondent to the applicant dated 17 August 2009, which the respondent claims (and the applicant acknowledges) was a “without prejudice” communication. The respondent contends that this letter is privileged from production before the Tribunal and that the applicant should not be permitted to refer to it in material tendered at the hearing or which is likely to come to the attention of the member or members hearing the substantive matter. The applicant argues that, in the particular circumstances which have arisen, he is entitled to refer to this letter in material filed with the Tribunal.
issue
3. The issue currently before the Tribunal therefore is whether the respondent’s letter dated 17 August 2009 is protected by privilege and if so, what if any directions should be made in relation to that letter.
the factual background
4. On 17 August 2009, the respondent sent a letter to the applicant’s solicitor, Mr Nicholas Birdseye, marked “without prejudice”. The letter (a copy of which has been provided to me for the purpose of resolving the dispute in relation to it), referred to various discussions, made certain observations about the issues in dispute, and proceeded to make some offers to resolve aspects of those issues.
5. The applicant’s Statement of Facts, Issues and Contentions was filed on 17 February 2010 and made reference to the “without prejudice” letter in support of a contention that certain matters were not in dispute between the parties. In his witness statement also filed on 17 February 2010, Mr Bruse also made reference to the “without prejudice” letter and relied upon it to assert that particular matters were not disputed by the respondent.
6. On 5 March 2010, the respondent forwarded a letter to the applicant’s solicitor, copied to the Tribunal, demanding that the applicant withdraw paragraph 24 of his Statement of Facts, Issues and Contentions and uplift paragraph 19 of the witness statement immediately. In relation to the letter dated 17 August 2009, the respondent stated:
“This letter contained a without prejudice offer which was presented to the Applicant for the purposes of resolving the dispute without the need to proceed to a hearing before the Administrative Appeals Tribunal. It is a privileged document and the Applicant is not entitled to refer to it in his SFIC and/or witness statement.”
7. On 17 March 2010, the respondent also filed a Statement of Facts, Issues and Contentions which contained the following statements (at [48]-[51]):
“On 17 February 2010, the Applicant’s Statement of Facts, Issues and Contentions and an unsigned Witness Statement of Bevan Bruse were served on the Respondent.
At paragraph 24 of the Applicant’s Statement of Facts, Issues and Contentions and paragraph 19 of the Witness Statement, the Applicant refers to a letter dated 17 August 2009 authored by the Respondent.
This letter is a without prejudice communication and is subject to the privilege in aid of settlement. The Applicant is not entitled to rely on it before the Tribunal.
Paragraph 24 of the Applicant’s Statement of Facts, Issues and Contentions should be struck out, and paragraph 19 of the unsigned draft Witness Statement of Bevan Bruse should not be admitted.”
8. At the request of the respondent, the issue came before me in the context of a directions hearing on 7 April 2010, followed by a more lengthy directions hearing on 15 April 2010.
9. Whilst issues of admissibility of evidence at the hearing are of course to be dealt with by the Tribunal constituted to hear the matter, I have formed the view that it is nevertheless appropriate for me to make a ruling on the present issue in advance of the hearing. This may avoid the possibility of the Tribunal constituted to hear the substantive matter needing to have regard to material which is subject to without prejudice privilege and should not come to the attention of that Tribunal.
contentions
10. The respondent relies upon the High Court’s decision in Field v Commissioner for Railways for NSW (1957) 99 CLR 285 and says that the Commissioner’s letter of 17 August 2009 was a “without prejudice” communication in the course of settlement negotiations and was therefore privileged from production to the Tribunal. The respondent also referred the Tribunal by way of analogy to certain provisions of the Evidence Act 1995 and s 34(c) of the Administrative Appeals Tribunal Act 1975 (the AAT Act).
11. Mr Birdseye for the applicant directed the Tribunal’s attention to the respondent’s supplementary T documents, and in particular to a letter contained without those documents dated 14 October 2009, being a letter from the respondent to the applicant. That letter reads in part as follows:
“We refer to the Conference held on 30 September 2009 and wish to advise you of the issues that we consider will proceed to hearing.
Mrs Jillian Bruse’s wages and car expenses in respect of the Mazda
For the purposes of settling this matter, we had been prepared to allow the applicant deductions for Mrs Jillian Bruse’s wages and car expenses to the extent contained in his letter dated 17 August 2009. However, this proposed without prejudice offer of settlement was not accepted by your client.
At present and on the evidence available, we do not accept that Mrs Jillian Bruse was an employee of the applicant during the relevant income year. Hence, the deductibility of Mrs Jillian Bruse’s wages and car expenses in respect of the Mazda will be issues to be determined by the Tribunal.”
12. Mr Birdseye contended that, by referring to the letter of 17 August 2009 in his subsequent letter of 14 October 2009, and including the letter of 14 October 2009 in the supplementary T documents filed with the Tribunal, the respondent had waived any privilege attaching to his letter of 17 August 2009.
13. Mr Birdseye also submitted that in order to understand the Commissioner’s letter of 14 October 2009, it was necessary to have regard to the letter of 17 August 2009, and that it would be of benefit to the Tribunal to fully understand the history of the dispute between the parties.
14. In reply to these submissions, the respondent relied upon a number of authorities including Bennett v Chief Executive Officer of the Australian Customs Service (2004) 80 ALD 247, Ashfield Municipal Council v ITA [2004] NSWSC 917 and Osland v Secretary, Department of Justice (2008) 224 CLR 275 and contended that the inclusion of its letter of 14 October 2009 in the supplementary T documents was not inconsistent with the maintenance of privilege in the letter and did not amount to a waiver of the privilege. The respondent further contended that the letter of 14 October 2009 did not disclose the content of the letter of 17 August 2009 and, in any event, it was not necessary for the Tribunal to have before it the earlier letter, for the purposes of making sense of the letter of 14 October 2009 or for any other reason. The respondent claimed that the letter of 17 August 2009 was simply irrelevant as it had been superseded by subsequent communications and no longer reflected the respondent’s position.
consideration
15. The issue which has arisen between the parties gives rise to a number of relatively complex questions. I propose to address these by considering each of the following issues in the order indicated:
(a) the nature of without prejudice privilege:
(b) the application of the privilege to proceedings in the Tribunal;
(c)the circumstances in which the privilege may be waived and whether it has been waived here; and
(d)the potential relevance of s 37(3) of the AAT Act.
Without Prejudice Privilege
16. What is known as “without prejudice” privilege is well established in Australia and protects from production to a Court the content of communications between the parties to litigation directed at resolving the dispute. The privilege was described by Robert Walker LJ in Unilever Plc v The Proctor & Gamble Company [2000] 1 WRLR 2436 at 2448 as follows:
“Whatever difficulties there are in a complete reconciliation of those cases, they make clear that the without prejudice rule is founded partly in public policy and partly in the agreement of the parties. They show that the protection of admissions against interest is the most important practical effect of the rule. But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties, in the words of Lord Griffiths in the Rush & Tompkins case [1988] UKHL 7; [1989] A.C. 1280, 1300: 'to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts.' Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers or patent agents sitting at their shoulders as minders.”
The rationale of the privilege was described by Oliver LJ in Cutts v Head [1984] Ch 290 [44] in a passage cited by Gleeson CJ in Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 as follows:
“That the rule rests, at least in part, upon public policy is clear from many authorities, and a convenient starting point of the inquiry is the nature of the underlying policy. It is that the parties should be encouraged as far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations … may be used to their prejudice in the course of the proceedings. They should be … encouraged fully and frankly to put their cards on the table … the public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability.”
The application of without prejudice to proceedings in the Tribunal
17. That this privilege also applies in proceedings in the Tribunal has been accepted in a number of decisions, including the decisions of Deputy President McDonald in Re Feben and Repatriation Commission (1998) 50 ALD 600, Deputy President Block in Re The Mining Holding Company and Commissioner of Taxation [2006] AATA 491 and Member Fice in Re Caspersz and Secretary, Department of Employment and Workplace Relations (2006) 42 AAR 329. The proposition that the privilege applies in the Tribunal is also consistent with the decision of the President, Justice Downes and Deputy President Groom in Re Farnaby and MR&CC (2007) 97 ALD 788, where they concluded that legal professional privilege or “litigation privilege” is applicable to Tribunal proceedings. Neither party contended to the contrary and I have little hesitation in concluding that without prejudice privilege does apply to proceedings in the Tribunal.
Waiver of without prejudice privilege
18. It is also well established that without prejudice privilege is a joint privilege which may only be waived with the consent of all parties to whom it belongs. In a statement cited by the Supreme Court of South Australia in Yokogawa Australia Pty Ltd and Others v Alston Power Ltd [2009] SASC 377, Lord Esher MR said in Walker v Willsher (1989) 23 QBD 335:
“It is, I think, a good rule to say that nothing which is written or said without prejudice should be looked at without the consent of both parties, otherwise the whole object of the limitations would be destroyed.”
19. The authorities suggest there can be implied waiver by one party in subsequent proceedings involving one of the parties and a third party, however that situation is not relevant here.
20. McClure J also observed in Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd and Others [2003] WASCA 11, at [94]-[95]:
“The authorities establish that the without prejudice rule is not absolute and resort may be had to without prejudice material for a variety of reasons when the justice of the case requires it: Rush and Tomkins Ltd v Greater London Council [1989] AC 1280 per Lord Griffiths at 1300.
Thus, without prejudice negotiations may be ‘pleaded into evidence’ in such a way that the privilege is no longer available, by analogy with the rule concerning legal professional privilege: Western Australia v Southern Equities Corporation Ltd (In Liq) (1996) 142 ALR 597 at 601-602.”
21. As outlined above however, the starting point in relation to without prejudice communications is that they will not generally be disclosed in the litigation to which the negotiations relate, without the consent of both parties.
22. Clearly the respondent does not consent to its without prejudice letter being disclosed to the Tribunal constituted to hear this matter. Further, I am not satisfied that there are any surrounding circumstances which render it just or appropriate that the respondent’s letter should be disclosed to that Tribunal. The respondent is not seeking to rely upon the content of the letter or the negotiations in order to advance any contention in the proceedings before the Tribunal and the respondent’s letter dated 14 October 2009, which has been included in the supplementary T documents, is easily comprehensible without reference to the without prejudice letter of 17 August 2009. Even if it were not, that would not be sufficient in my view to outweigh the public interest in the content of settlement negotiations being protected from production in subsequent litigation.
23. It follows that, in my view, the without prejudice privilege subsisting in the respondent’s letter of 17 August 2009 has not been waived by any conduct of the respondent and that letter remains protected from disclosure to the Tribunal.
Potential relevance of s 37(3) of the AAT Act
24. If the respondent’s letter dated 17 August 2009 had been a document falling within the scope of those required to be provided to the Tribunal pursuant to s 37(1) of the AAT Act, s 37(3) would potentially have had relevance since it provides as follows:
“This section has effect notwithstanding any rule of law relating to privilege or the public interest in relation to the production of documents.”
25. However, the application for review was filed on 22 December 2008 and the T documents were filed on 9 February 2009, the decision under review having been made on 20 February 2008. Whilst the respondent has filed a further bundle of documents described as “Respondent’s Supplementary Documents” of which the respondent’s letter of 14 October 2009 is one, I do not consider that the letter of 17 August 2009 was a document which the respondent was obliged to provide to the Tribunal pursuant to s 37(1). Therefore, in my view, s 37(3) does not operate to abrogate any privilege which otherwise applies to that letter.
conclusion
26. I have concluded that the respondent’s letter to the applicant dated 17 August 2009 is protected by without prejudice privilege and should not be placed before the Tribunal constituted for the final hearing in this matter.
decision
27. I therefore make the following directions:
(a) The applicant is given leave to and is directed to uplift his Statement of Facts, Issues and Contentions filed on 17 February 2010 and the witness statement of the applicant, Mr Bevan Bruse, also filed on 17 February 2010 from the Tribunal’s file.
(b) The applicant is directed to file by way of substitution for those documents a Statement of Facts, Issues and Contentions and a witness statement from Mr Bruse from which any reference to the respondent’s letter of 17 August 2009 is deleted, by 11 June 2010.
(c) The copy of the respondent’s letter dated 17 August 2009 which has been provided to the Tribunal for the purpose of resolution of the dispute determined by this decision is to be returned to the respondent.
I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member K Bean
Signed: .....................................................................................
AssociateDates of Hearing 7 and 15 April 2010
Date of Decision 1 June 2010Advocate for the Applicant Mr N Birdseye
N Birdseye & Associates
Advocate for the Respondent Ms C Basilicata
ATO Legal Services Branch
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