Bloss Holdings Pty Ltd v Brackley Industries Pty Ltd

[2005] NSWSC 756

CITATION:	Bloss Holdings Pty Ltd v Brackley Industries Pty Ltd [2005] NSWSC 756 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	26 July 2005
JUDGMENT DATE :	26 July 2005
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	"Without prejudice" material rejected as not falling within the exception in s 131(2)(g) of the Evidence Act 1995.

CATCHWORDS:	EVIDENCE [83] - Facts excluded from proof - On grounds of privilege - Other cases - Settlement negotiations - Where Court likely to be misled if evidence not adduced.
LEGISLATION CITED:	Evidence Act 1995 ss 131(1), 131(2)(g)
CASES CITED:	Brown v Commissioner of Taxation (2001) 187 ALR 714 Pitts v Adney (1961) 78 WN (NSW) 886
PARTIES:	Bloss Holdings Pty Limited (P) Brackley Industries Pty Limited (D1) Lamajon Pty Limited (D2)
FILE NUMBER(S):	SC 3558/03
COUNSEL:	G J Drake (P) M A Ashhurst (Ds)
SOLICITORS:	Mark Phillip Symonds (P) Kemp Strang (Ds)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

TUESDAY, 26 JULY 2005

3558/03 BLOSS HOLDINGS PTY LIMITED v BRACKLEY INDUSTRIES PTY LIMITED & ANOR

JUDGMENT

1 HIS HONOUR: I have deferred ruling on a number of tenders of evidence that essentially arise out of or revolve around the same matter. That matter is encapsulated in a handwritten document that is the last annexure to the plaintiff's first affidavit. It is apparent from the terms of the document that it was made during a meeting between Mrs Vermunt and Mr Gary Abrams which took place on 3 February 2003. The document is said to have been dictated by Gary Abrams to Maria Pates (Vermunt). It is apparent from something written next to her signature at the foot of the document that the document is indeed in her handwriting. It would seem that the offer which the document constitutes had to be accepted by Maria Pates by 9am on the following day, 4 February 2003 (see par 14). What is written against Mrs Vermunt’s signature at the foot of the document is “understand and under consideration”. All these features, as I say, confirm that the document constitutes an offer by Mr Abrams to Mrs Vermunt to settle the differences between them and between their respective companies relating to her employment and relating to contractual relations between them generally.

2 It is put to me that, although the contents of this document clearly attract the privilege under s 131(1) of the Evidence Act 1995, they are admissible by virtue of the provisions of s 131(2)(g). The exception provided by s 131(2)(g) operates if:

“Evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the Court unless evidence of the communication or document is adduced to contradict or to qualify that evidence ...”

3 The evidence which Mr Drake, of counsel for the plaintiff, tells me is the evidence, or founds the inference, which, in his submission, it is necessary to contradict or qualify is as follows:

(1) That Mr Abrams was so unhappy with Mrs Vermunt by November 2001 that he resolved to place their relationship on an employer/employee footing only, to end her share entitlement and, from January 2002 onwards, to deal with her as an employee only.
(2) That by February 2003 Mr Abrams was so unhappy with Mrs Vermunt as an employee that he was in the process of terminating her employment.

4 Mr Ashhurst, of counsel for the defendants, has drawn to my attention as important in the circumstances what was said about s 131(2)(g) in the Federal Court by Emmett J in Brown v Commissioner of Taxation (2001) 187 ALR 714. His Honour said at [184] and [185]:

“[184] I consider that s 131(2)(g) is designed to deal with the sort of circumstances that arose in Pitts v Adney (1961) 78 WN (NSW) 886. Evidence of a ‘without prejudice’ communication was admitted in that case in order to prove the fact of and the nature of the communication. It was not tendered in order to contradict evidence as to the matters in issue, or as an admission.

[185] It is not appropriate to attempt an exhaustive exposition of the effect of s 131(2)(g). However, I consider that it will not be attracted simply because evidence to which s 131(1) applies contradicts or qualifies evidence that has already been adduced. Section 131(2)(g) will apply where the court would be likely to be misled as to the existence or contents of an excluded communication or document, where those matters are in issue in the proceeding. The fact of, or the contents of, the communications, of which the commissioner now seeks to adduce evidence are not directly relevant in the proceeding before me. I do not consider that s 131(2)(g) is applicable in relation to the objected material.”

In my view those paragraphs are pertinent to the present situation.

5 The evidence shows that there was an agreement in January 2002, the contest as to the effect of which is at the centre of this case. It is the defendants’ case that, upon its true construction, that agreement removed any entitlement of the plaintiff to shares in the first defendant or a share of its profits, whereas the plaintiff contends that those entitlements were not affected by that agreement. There is evidence that shows that Mrs Vermunt was, during 2002 and in January 2003, demanding the plaintiff’s entitlements. Then, on 3 February 2003, comes the document in question, which certainly shows the first defendant and Mr Abrams making an offer as part of an overall determination of the employment relationship and any other contractual relations between the relevant parties. The document gives effect to an entitlement to receive shares and profit and regulates how that might be carried into effect and how the shareholding might be brought to an end. It also provides for Mrs Vermunt’s retirement from her position as sales manager with the first defendant in what might be described as a gracious fashion.

6 The first difficulty with the plaintiff’s submission is that I cannot see in the document, which clearly commences with the words “without prejudice”, that there is any acknowledgement of the existence of the entitlements on behalf of Mr Abrams, rather than the making of an offer, without admission, to honour the entitlements as part of an overall settlement. This means, in my view, that the evidence sought to be tendered does not even qualify evidence that has already been adduced or inferences that might arise from it.

7 Even if it did have that quality, Emmett J emphasises in the passage quoted above that it is not enough that the evidence sought to be tendered simply contradicts or qualifies evidence that has been already adduced. There has to be established the special circumstance that there is a risk that the Court would be likely to be misled as to the existence or contents of an excluded communication or document, where those matters are in issue in the proceeding.

8 This is not the sort of case that is illustrated by Walsh J’s decision in Pitts v Adney (1961) 78 WN (NSW) 886. There, exclusion of a without prejudice letter would lead to the conclusion that an earlier communication had not been answered at all, that being a fact of significance in those proceedings.

9 The ambit of s 131(2)(g) is not yet very clear. But I think that it is clear enough that the material sought to be tendered in these proceedings through its gateway is not within the ambit of the provision. The relevant material will therefore be rejected.

10 In the paragraphs of Mrs Vermunt’s affidavit that deal with the circumstances in which the document I have referred to was created, there is one statement that could arguably be admissible on a basis different from that already set out in this judgment. That is contained in par 22 of her affidavit of 31 July 2003. However, it is not in a form at the moment in which it could conceivably be admissible, so that it will at this stage fall with the other material that I have rejected.

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03/03/2006 - Clerical error in section number - Paragraph(s) 4