Commonwealth Development Bank of Australia Pty Limited v Claude George Rene Cassegrain; Gerald Cassegrain and Co Pty Limited v Commonwealth Development Bank of Australia Pty Limited

[2002] NSWSC 940

CITATION:	Commonwealth Development Bank of Australia Pty Limited & Anor v Claude George Rene Cassegrain; Gerald Cassegrain & Co Pty Limited & Ors v Commonwealth Development Bank of Australia Pty Limited & Ors; [2002] NSWSC 940
FILE NUMBER(S):	SC 50062/00; 50072/00
HEARING DATE(S):	09/10/02
JUDGMENT DATE:	9 October 2002
PARTIES :	Commonwealth Development Bank of Australia Pty Limited (Plaintiff (50062/00) Defendant (50072/00) Claude George Rene Cassegrain (Defendant 50062/00) Gerald Cassegrain & Co. Pty Limited (Plaintiff) (50072/00) Murray Smith and Scott Kershaw (3rd Defendants (50072/00)
JUDGMENT OF:	Einstein J

COUNSEL :	RW Cameron, ARR Vincent (Defendant 50062/00, Plaintiff 50072/00) AG Bell, DA McLure (Plaintiff 50062/00, Defendant 50072/00) DL Williams (Murray Smith & Scott Kershaw, 3rd Defendants 50072/00)
SOLICITORS:	MC Griffith & Co (Defendant 50062/00, Plaintiff 50072/00) L E Taylor Solicitor (Plaintiff 50062/00, Defendant 50072/00) Corrs Chambers Westgarth (3rd Defendants 50072/00)
CATCHWORDS:	Evidence - Admissibility of evidence - Both parties seeking to adduce evidence of events occuring during mediation - Allegations of serious misconduct - Whether s 15 of Farm Debt Mediation Act 1994 (NSW) prevents admissibility of evidence - Whether s 15 of Act can be read down so as to permit adducing of evidence - Arguable consensual waiver
LEGISLATION CITED:	Farm Debt Mediation Act 1994 (NSW) Rural Assistance Act 1989
CASES CITED:	Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252
DECISION:	Evidence held admissible

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Wednesday 9 October 2002 ex tempore
Revised 10 October 2002

50062/00 COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LIMITED & ANOR v CLAUDE GEORGE RENE CASSEGRAIN & CO PTY LIMITED & ORS

50072/00 GERALD CASSEGRAIN & CO PTY LIMITED & ORS v COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LIMITED & ORS

JUDGMENT

The Proceedings

1 There are before the court two sets of proceedings, 50072 of 2000 ["the Cassegrain proceedings"] and 50062 of 2000 ["the Banks proceedings"] being heard together.

2 Both sets of proceedings have their genesis in loan transactions between:

· the Commonwealth Development Bank of Australia Limited ["CDBA" or "CDB"] as lender and Gerald Cassegrain and Co Pty Ltd ["the holding company" or "GCC"] as borrower.

· the Commonwealth Bank of Australia Limited ["CBA"] as lender and the holding company as borrower.

3 The banks sue on loan agreements and ancillary securities given by the Cassegrain parties.

Mediation

4 An additional parameter concerns a mediation held on 12 November 1998, as a result of which the parties entered into Heads of Agreement. The Banks rely upon the Heads of Agreement and sue upon them.

5 In answer to the banks case relying upon the Heads of Agreement entered into following a mediation held under the provisions of the Farm Debt Mediation Act 1994 (“the Act”), the Cassegrain parties have pleaded that the mediation and the Heads of Agreement were obtained by unconscionable conduct on the part of the banks representatives. The precise particulars are put in the following terms in paragraph 6 (b) of the cross defendants defences to cross claim in proceedings 50072 to 2000:

“(b) alternatively, the execution of cross defendants by Claude Cassegrain at the said mediation of the said Heads of Agreement was obtained by unconscionable conduct on the part of the cross-claimants’ representatives as follows:-


(i) at the time of the mediation the cross-claimants had not been able to prepare the various statutory notice of demand they were required as mortgagees to prepare and serve;

(ii) the cross-claimants needed more time within which to prepare and serve the notices;

(iii) the extension of time given in the Heads of Agreement was given to suit the convenience of the cross-claimants and gave an illusory indulgence only to the cross-defendants;

(iv) the mediation was stated by the cross-claimants to be only a formality;
Particulars
Mr S Walsh so stated to Claude Cassegrain on about 7 July 2000.


(v) Heads of Agreement offered no compromise by the cross-claimants to the cross-defendants;

(vi) the cross-claimants had resolved upon the outcome before the mediation and had prepared the document before the mediation;

(vii) Claude Cassegrain was under great emotional strain and disturbance and the cross-claimants were aware of that disadvantage;

(viii) the cross-claimants offered the cross-defendants only the choice of executing the document or suffering the appointment of receivers on the following day;

(ix) the cross-claimants ignored the cross-defendants protests by Claude Cassegrain and insisted he execute the agreement which he did;

6 The matter has been raised in the course of the reading of the affidavit of Mr Cassegrain of 5 February 2001 in the course of which he seeks to depose to matters which occurred during the course of the mediation. An example is to be found in paragraph 15 where he deposes that the mediator expressed concern that they were rushing into the mediation and that in the absence of the mediator, a bank officer said that the choice was simple and added: "Either complete the mediation or you know what will happen tomorrow".

7 Both parties seek to adduce evidence as to what occurred during the course of the mediation and neither opposes the admission into evidence of such material. They have however drawn the courts attention to the provisions of section 15 of the Act which is in the following terms:

“(1) Evidence of anything said or admitted during a mediation session and a document prepared for the purposes of, in the course of or pursuant to, a mediation session are not admissible in any proceedings in a court or before a person or body authorised to hear and receive evidence.
(2) In this section, mediation session includes any steps taken in the course of making arrangements for a mediation session or in the course of the follow-up of a mediation session.”

8 The Court has been referred in relation to this question to Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252 suggested as being the only authority touching the matter.

9 The Court there dealt with an application for judicial review of the decision of the Rural Assistance Authority to issue a certificate under section 11 of the Act. The examination by the Court of the admissibility of a "Summary of Mediation" which had been signed by the mediator resulted in a holding that this document was inadmissible under the provisions of section 15 of the Act hence precluding judicial review based thereon.

10 Gleeson CJ put the matter as follows:

"For reasons that will appear, I consider that it was reasonable of the Authority, in those circumstances, to decide that a satisfactory mediation had taken place. However, whether or not that be correct, the attempt by the appellants to demonstrate that no reasonable administrator in the position of the Authority could have concluded that a satisfactory mediation had taken place depended upon proving what had occurred before the mediator. The argument about the reasonableness of the Authority's opinion that a satisfactory mediation had taken place could not have been seriously advanced, or determined, without evidence of what was said and done during the mediation session. Evidence of that kind, however, is rendered inadmissible by s 15. The reason for such legislative provision is obvious. It is the policy of the legislation that parties should be encouraged to discuss their differences without the risk that things they say might later be used against them, in court, if the mediation does not result in settlement. The circumstance that s 15 renders inadmissible the evidence essential to their case is sufficient to dispose of the present appeal adversely to the appellants.”

11 Cole JA put the matter as follows:

"In construing the provisions in the Farm Debt Mediation Act which Badgery- Parker J and Simpson J found indicative of a legislative intention to exclude judicial review, it is important to determine whether the provisions exclude the capacity to challenge the relevant decision by judicial review on all of these bases, for if there remain available bases of challenge not excluded, it must be concluded that there was no intention in the legislature to exclude the process of judicial review. That is so even if, in practice, statutory provisions found in the Act render the conduct of such a challenge difficult if not impossible.

Badgery-Parker J in State Bank of New South Wales v Freeman (at 17) expressed the view that it was clear:

... that s 15 would prevent a court from embarking in any practical way upon an examination of what took place in the course of a mediation session; and if that be precluded, any attempt to review the Authority's decision that it was satisfied that a satisfactory mediation had taken place would be hamstrung to the point of impossibility.

There is much force in this view in relation to any aspect of a challenge which requires a consideration of anything said during a mediation session or any document prepared for the purpose of, in the course of or pursuant to a mediation session because the legislature has, in explicit terms, rendered that material not admissible in any proceedings in a court. However not all challenges to a decision to issue a certificate would necessarily involve a consideration of the material denied to a court by s 15. To take an extreme and theoretical example, were an arrangement to be made between the certifying authority and a financial institution that, irrespective of what occurred in any future mediations involving debtors of that financial institution, the certifying authority would issue an appropriate certificate, such an arrangement would be a fraud infecting the exercise of power which could be challenged by judicial review: see generally, Aronson and Dyer, Judicial Review of Administrative Action (at 322, 331). Oral evidence of any such arrangement, or any document effecting it, would not fall within the provisions of s 15. The breadth of power inherent in the courts' jurisdiction to conduct judicial review of an administrative action leaves open the possibility of judicial review in circumstances not requiring reference to documents excluded from the court's purview by s 15. Further, although it is unnecessary to express a concluded view concerning the construction of s 16, there would be a significant argument available that the effect of s 16(b) or s 16(e) permit the disclosure of material "obtained in a mediation session" where such disclosure was necessary for the purposes or reasons referred to in s 16(b) or s 16(e). It is unnecessary to explore in this appeal the detailed relationship between s 15 and s 16. It is sufficient to say that those sections do not negate or render impossible all challenges by way of judicial review of a decision of the Authority to issue a certificate under s 11. That necessarily means, in my view, that there has not been shown a clear legislative intent to deprive a farmer of the right to judicial review of the decision to issue, or the issue of, such a certificate. That having been said, however, the effect of s 15 is to severely restrict any such capacity to mount successfully a challenge by way of judicial review because it excludes the tendering on such a challenge of the material referred to in s 15. “

12 Sheppard AJA dealt with the matter as follows:

"Two questions of substance arise for decision. They are whether the decision of the Authority, defined in s 4 of the Farm Debt Mediation Act 1994 to mean the Rural Assistance Authority constituted by the Rural Assistance Act 1989, to issue a certificate under s 11 of that Act is, in the circumstances of this case, reviewable, and, whether, if it is, the issue of the certificate was unlawful.

The problem which confronts the appellants in relation to the first question is not whether or not in absolute terms the decision is reviewable under any circumstances. Rather the difficulty for them is an evidentiary one. In order to raise the second question, the appellants need to rely on evidence of what occurred before the mediator, or at least on a document entitled "Summary of Mediation" which the mediator himself has signed. On its face, s 15 of the Act appears to operate to render those matters inadmissible in these proceedings for it provides, so far as relevant, that evidence of anything said or admitted during a mediation session and of a document prepared for the purposes of, in the course of or pursuant to, a mediation session are not admissible in any proceedings in a court or before a person or body authorised to hear and receive evidence.

The question is whether there is any basis upon which these words should be read down. One could have understood the legislature making the proceedings before the mediator and documents issued in the course of or as a consequence of it inadmissible in proceedings for the enforcement of a mortgagee's security (1997) 42 NSWLR 252 at 266 or in an action on the personal covenant contained therein. But the difficulty for the appellants is the width of the language which s 15 uses. I have reached the conclusion that, in the circumstances of this case, the clear and unambiguous language which is employed operates to make inadmissible the material on which the appellants need to rely in order to raise the question of substance which they wish the Court to consider.

That said, I wish to say that I ought not to be taken as deciding that there are no cases in which proceedings before a mediator and documents issued in the course of or as a consequence of a mediation may be admissible. I have in mind cases where either the mediator or the other party has engaged in fraud or perhaps where an analysis of what occurred before the mediator demonstrates that there has been no mediation at all . I instance cases in which there may have been no real attempt by the mediator to discharge the functions conferred upon mediators by s 13 of the Act.

This is not a case of fraud and it is not a case where there has been a substantial failure by the mediator to discharge his functions. For that reason I express no concluded view in relation to the cases I have supposed. I have done no more than sound a note of caution. If a case of the kind I have mentioned arises, it will need to be considered in the light of its own facts and circumstances and the submissions which are then made about them.

Notwithstanding that my conclusion so far must lead to the dismissal of the appeal, I should also deal briefly with the point of substance which the appellants would have wished to rely on had they been able to overcome their evidentiary problems.”
[Emphasis added]

Dealing with the issue

13 In my view of the manner in which the Cassegrain parties have pleaded the issue is sufficiently close to an allegation of very serious misconduct in terms of what is alleged to have occurred during the mediation and/or to an allegation that there was in truth no mediation at all, to render the evidence sought to be adduced admissible, notwithstanding the width of section 15 of the Act. To take a further example one may posit a circumstance where one party to a mediation threatens violence to another unless the party agrees to a particular settlement. This form of duress, as with any relevant fraud, must surely permit of evidence notwithstanding the width of the section. In like fashion a case seeking to put, as here, unconscionable conduct in terms of suggested emotional strain of one party to the mediation, to the knowledge of the other, clearly falls within this category.

14 It should be emphasised that only cases which raise questions of similar ilk would likely involve reading the section down to this extent. However the Court will never attempt to exhaustively categorise the circumstances in which fraud or unconscionable conduct may be shown to have existed. Likewise in this context as Sheppard AJA made plain in Gain, each case requires to be considered in the light of its own facts and circumstances.

15 Arguably, the section may be read down in terms of a consensual waiver of the protection of the section. In the circumstances, it is unnecessary to further consider this possibility.

16 Ultimately neither party contends that the material should not be admitted.

17 For those reasons and in the absence of any objection, the relevant paragraphs will be allowed.

I certify that paragraphs 1 - 17
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on Wednesday 9 October 2002
ex tempore and revised 10 October 2002

___________________
Susan Piggott
Associate

10 October 2002

Last Modified: 10/31/2002