DM Drainage & Constructions Pty Ltd ATF the DM Unit Trust T/A DM Civil v Lavan - [2023] WASC 451

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   DM DRAINAGE & CONSTRUCTIONS PTY LTD ATF THE DM UNIT TRUST T/A DM CIVIL -v- LAVAN [2023] WASC 451
CORAM:   HOWARD J
HEARD:   30 OCTOBER 2023
DELIVERED          :   23 NOVEMBER 2023
FILE NO/S:   CIV 1376 of 2023
BETWEEN:   DM DRAINAGE & CONSTRUCTIONS PTY LTD ATF THE DM UNIT TRUST T/A DM CIVIL
Plaintiff
AND
LAVAN
Defendant

Catchwords:

Practice - Pleadings - Striking out - Whether an abuse of process - Whether privilege is limited to admissions made in negotiations - Whether a settlement offer from previous proceedings is admissible in case against former solicitors - Strike out application dismissed

Legislation:

Construction Contracts Act 2004 (WA)
Rules of the Supreme Court 1971 (WA)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr K De Kerloy
Defendant	:	Mr G D Cobby SC

Solicitors:

Plaintiff	:	Hale Legal
Defendant	:	Popperwell & Co

Case(s) referred to in decision(s):

ACCC v New South Wales Ports Operations Hold Co Pty Ltd [2020] FCA 1232
Atwells v Jackson Lallic Lawyers (2016) 259 CLR 1
Berkeley Square Holdings v Lancer Property Asset Management Ltd [2021] EWCA Civ 551
Briggs v Clay [2019] EWHC 102 (Ch)
Commonwealth Director of Public Prosecutions v Citigroup Global Markets Australia (No. 3 - privilege claims) [2021] FCA 1208
Cutts v Head [1984] Ch 290
Dowling v Ultraseuticals Pty Ltd (2016) 93 NSWLR 155
Field v Commissioner for Railways for NSW (1957) 99 CLR 285
Glengallan Investments v Arthur Andersen [2002] 1 Qd R 233
Harrington v Lowe (1996) 190 CLR 311
Hong Kong Bank of Australia v Murphy (1992) 28 NSWLR 512
Kendirjian v Lepore (2017) 259 CLR 275
Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560
Mercantile Mutual Custodians v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd R 276
Muller v Linsley & Mortimer (A Firm) [1996] 1 PNLR 74
NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2020] WASCA 107
Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2011] 1 AC 662
Ofulue v Bossert [2009] 1 AC 990
Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11
Rodgers v Rodgers (1964) 114 CLR 608
Rush & Tompkins Ltd v Greater London Council [1989] AC 1280
Samnakay v Schofield [2013] WASCA 138
Unilever Plc v The Procter & Gamble Co [2000] 1 WLR 2436
Yokogawa Australia Pty Ltd v Alstom Power Ltd [2009] SASC 377; (2009) 262 ALR 738

HOWARD J:

The background disputes between DM Civil and KML

The plaintiff (DM Civil) and another (KML) were parties to a contract for the installation of an operations water package for an iron ore project in this State's mid-west.[1]
[1] Statement of claim [3].
Disputes arose between DM Civil and KML.[2] Five rapid adjudication applications were made by DM Civil under the Construction Contracts Act 2004 (WA)[3] and then it commenced proceedings in this Court on 23 October 2012: CIV 2410 of 2012 (CIV 2410).[4]
[2] Statement of claim [7].
[3] Statement of claim [12] - [14].
[4] Statement of claim [15].
In CIV 2410:
(1)DM Civil was represented by the solicitors Lavan.
(2)DM Civil filed a re‑amended substituted statement of claim in May 2014;[5] and
(3)in June 2014 KML filed its defence to the re‑amended substituted statement of claim and made counterclaims.[6]
[5] Statement of claim [16].
[6] Statement of claim [17].
DM Civil alleges, in this proceeding, that KML made an Offer dated 29 August 2014 to fully and finally settle CIV 2410.[7]
[7] Statement of claim [19].
In this proceeding, DM Civil claims that Lavan, its former solicitors, breached duties owed to it by not providing it with advice or recommendations about the Offer.

Lavan's application to strike out

By chamber summons dated 15 August 2023, Lavan applies pursuant to O 20 r 19 Rules of the Supreme Court 1971 (WA) for DM Civil's statement of claim to be struck out on the basis that essentially DM Civil's claim as formulated is an abuse of process.
Lavan readily conceded that even if its strike out application were successful then DM Civil should be granted leave to re‑plead.
Lavan's application relies on the following propositions (the first three are not disputed):
1.the making of the Offer is central to DM Civil's pleaded case;
2.the Offer is properly the subject of without prejudice privilege which is 'held' jointly by DM Civil and KML;
3.KML has not consented to the disclosure of the Offer or its terms;
4.relevantly, without prejudice communications cannot be adduced into evidence; and
5.it is an abuse of process to plead a matter which cannot be proved by admissible evidence.
Lavan has not applied for its complaint to be determined as a preliminary point. The differences between seeking a trial of a preliminary issue and seeking the striking out or summary judgment on the pleadings were discussed in passing in NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2020] WASCA 107 [127] (Beech and Vaughan JJA).
If Lavan is correct in its application, the result would seem counter‑intuitive. As much as anything, that is because it would create an island in the law of negligence between a client and their solicitor which is not informed by the law of advocates' immunity.

The underlying policy for the privilege

Even a cursory review of the recent authorities indicates that while there is general agreement as to the policy considerations underpinning without prejudice privilege, the application of the rule needs to be considered in the facts before the particular court.
As will be seen, the High Court authorities considering the privilege are two-party cases - that is, where the question of the privilege has arisen in proceedings between the parties to the privileged communications.
On my review of the authorities, two-party cases have been the starting point of the without prejudice privilege.
The privilege is more easily applied in a 'two-party' case. In such a case, the court does not have to consider any 'extension' of the privilege to a case involving a party who was not in the (original) without prejudice negotiations.
Its application appears less straightforward in a 'three‑party' or 'multi‑party' case; that is, where the question of the privilege arises in (subsequent) proceedings to which only some (or none) of the parties to the communications are or is involved.
As may be inferred already, it appears to me that a three or multi‑party case involves an 'extension' of the without prejudice privilege where it has had its underlying, founding policy identified in two‑party cases.
Many cases were cited to me but none, factually, is completely on point. Not all cases were of equal assistance in the resolution of this application. In these reasons I have not sought to exhaustively deal with each case cited.
I have endeavoured to decide no more than that which needs to be decided in this case, rather than attempting to discern and apply some all‑embracing principle or criterion: Gageler J (as he then was) said in Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 [76]. Consequently, I have not sought to synthesise all of the authorities into an overarching statement of applicable principles (assuming that was capable of being done).
A common starting position as to the policy underlying without prejudice privilege is Field v Commissioner for Railways for NSW (1957) 99 CLR 285, 291 where Dixon CJ, Webb, Kitto and Taylor JJ said:
The law relating to communications without prejudice is of course familiar. As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct … It is not concerned with objective facts which may be ascertained during the course of negotiations … But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission.
Field was a two-party case. In that cases the question arose at a trial between the plaintiff (appellant) and defendant (respondent). It concerned whether a statement made by the plaintiff to a medical specialist retained by the defendant was admissible in the trial. The plaintiff had attended the specialist as part of settlement negotiations between the plaintiff and defendant.
The purpose of the policy identified in Field was recited with approval by the plurality in Harrington v Lowe (1996) 190 CLR 311, 323 (Brennan CJ, Dawson, Toohey, Gaudron, McHugh, Gummow JJ). That passage also cited the Court's decision in Rodgers v Rodgers (1964) 114 CLR 608, 614. Both Rodgers and Harrington v Lowe were Family Court matters where the question as to the privilege arose in litigation between the spouses who 'held' the privilege together; that is, they were both two‑party cases.
Writing for the NSW Court of Appeal in Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512, 522, Gleeson CJ cited Oliver LJ in Cutts v Head [1984] Ch 290, 306 to the effect that the underlying policy:
… is that parties should be encouraged so 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.
As will be seen, although the facts in Hong Kong Bank are quite different from the present, the approach adopted by Gleeson CJ (for the Court) is, in my view, of some significance to the resolution of this application.
Rodgers was cited by McLure J (as she then was) in Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 [91], where her Honour said for the Court:
Statements made without prejudice in an attempt to settle a dispute or action are privileged. Without prejudice privilege is a joint privilege and thus cannot be waived without the consent of the negotiating parties … The test is whether the communication was part of a genuine attempt to settle a dispute … If so, the whole course of the negotiations is privileged. (citations omitted)
McLure J went on to say, and this is, perhaps, the start of where this matter is to be determined:
[94]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 & Tompkins Ltd v Greater London Council [1989] AC 1280 per Lord Griffiths at 1300.
Again, it is to be noted that Old Papa's Franchise involved communications between the actors who were then parties to the proceedings in which the question of the without prejudice privilege arose; ie, it was a two-party case.
In Samnakay v Schofield [2013] WASCA 138 (Newnes & Murphy JJA) referred to the passage from Field as being the 'classic and oft‑cited description of this category of privilege': [43].
Samnakay was a two-party case where the communication in question was held to be a proposal to resolve the dispute between the litigants who were then the parties in the proceedings which led to the Court of Appeal judgment.
The Court then stated, significantly for this case, that the rule was not confined to admissions:
but extends to all bona fide statements, made for the purpose of attempting to compromise a dispute, which touch upon the strengths or weaknesses of the parties' cases or place a valuation on a party's rights. [44] (citations omitted)

Rush & Tompkins Ltd v Greater London Council [1989] AC 1280

Rush & Tompkins[8] is a significant decision in that it is a three‑party case where the 'extension' (from two‑party cases) of the without prejudice privilege was (apparently first) considered. The House of Lords considered whether to make that extension by reference to what it stated to be the underlying policy of the rule.
[8] Rush & Tompkins Ltd v Greater London Council [1989] AC 1280.
Rush & Tompkins (R & T) was a party to a building contract with the Greater London Council (GLC), and it (R & T) had subcontracted a part of those works.
The subcontractor made claims on R & T, which then claimed it was entitled to be reimbursed for those claims by the GLC.
R & T then sued GLC as the first defendant and the subcontractor as the second defendant.
Before trial, R & T entered into an agreement with the GLC which compromised all claims between them, including, but not limited to, those made by the subcontractor. The proceeding continued against the second defendant subcontractor and the question arose as to whether the documents passing between R & T and GLC in their settlement were discoverable between R & T and the subcontractor in the extant litigation.
So, the question of the privilege arose between parties who did not jointly 'hold' the privilege - the privilege being held by R & T and GLC - albeit in the same litigation.
Lord Griffiths (for the House) said that the question was to be:
… resolved by balancing two different public interests namely the public interest in promoting settlements and the public interest in full discovery between parties to the litigation.
… the rule is not absolute and resort may be had to the 'without prejudice' material for a variety of reasons when the justice of the case requires it. It is unnecessary to make any deep examination of these authorities to resolve the present appeal but they all illustrate the underlying purpose of the rule which is to protect a litigant from being embarrassed by any admission made purely in an attempt to achieve a settlement. 1300A – D.
His Lordship further said:
I would therefore hold that as a general rule the 'without prejudice' rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement. It of course goes without saying that admissions made to reach settlement with a different party within the same litigation are also inadmissible whether or not settlement was reached with that party. 1310C – D.
…
The only issue that now survives in the present litigation is the subcontractors' counterclaim. For the reason I have given the contents of the 'without prejudice' correspondence between the main contractor and the GLC will not be admissible to establish any admission relating to the subcontractors' claim. 1302F.
The subcontractor had also argued that even if the without prejudice communications were not admissible, they were discoverable. Lord Griffiths held that the general public policy that applied to protect negotiations from being admissible in evidence should also be extended to protect them from being discoverable:1305D – E.
Although Rush & Tompkins is a three‑party case, the question arose in the same litigation in which the privileged communications occurred. That has been identified as significant to the 'extension': Hong Kong Bank of Australia v Murphy p. 523C - D (Gleeson CJ) and Glengallan Investments v Arthur Andersen [2002] 1 Qd R 233 [34] (Williams JA for the Court).[9]
[9] On this point, this (later) Queensland Court of Appeal decision in Glengallan [34] doubted the way that an earlier Queensland Court of Appeal judgment (of Pincus JA) in Village/Nine Network had dealt with that question.
That is, at least those Australian cases had understood that the privilege was being extended only to a three-party case which occurred within the one set of proceedings, as had occurred in Rush & Tompkins.
As will be seen, however, the privilege in England has not been limited in that way subsequently.

The Muller 'line' of cases in England

Factually, the case which is closest, but by no means the same, to this case is Muller v Linsley & Mortimer (A Firm) [1996] 1 PNLR 74 (UKCA). I say that because it was an action against former solicitors by a client where the communications in dispute arose in separate proceedings to which the defendant solicitors were not a party. That is, it was a three‑party case.
In that case, the plaintiff took advice from his solicitors, and in the context of an anticipated dispute, submitted a transfer of shares with an undertaking to have it stamped. The recipient company rejected the transfer. The plaintiff then sued the other shareholders of the company and the company, in part because of the rejected transfer. He eventually received a settlement payment. He then sued his solicitors who had given him the advice and alleged they had been negligent in submitting the unstamped transfer. The plaintiff claimed that as a result he had (notwithstanding the other settlement) suffered a substantial loss.
Against his former solicitors, the plaintiff that he had brought the earlier proceedings against the company and other shareholders and had compromised them in a reasonable attempt to mitigate the damage caused by his former solicitors.
The defendant solicitors sought production of the documents and other communications involved in that settlement. Hoffmann LJ (as he then was) (and with whom Leggatt and Swinton Thomas LJJ agreed on this point) held that there were two justifications for the without prejudice privilege:
1.the public policy of encouraging parties to negotiate and settle their disputes; and
2.an implied agreement arising out of what is commonly understood to be the consequences of offering or agreeing to negotiate without prejudice.[10]
[10] Muller v Linsley & Mortimer (A Firm) [1996] 1 PNLR 74, 77.
His Lordship held that where the party against whom the privilege is claimed is not a party to the negotiation (ie, a three‑party case) then the privilege rested purely on the grounds of public policy without any element of implied agreement.[11]
[11] Muller v Linsley & Mortimer (A Firm), 77E.
Hoffmann LJ said:
The public policy basis of the rule is therefore to prevent anything said in without prejudice negotiations being relied upon as an admission …
… The public policy aspect of the rule is not in my judgment concerned with the admissibility of statements which are relevant otherwise than as admissions, ie independently of the truth of the facts alleged to have been admitted …
Thus, when the issue is whether without prejudice letters have resulted in an agreed settlement, the correspondence is admissible because the relevance of the letters has nothing to do with the truth of any facts which the writers may have expressly or impliedly admitted. They are relevant because they contain the offer and acceptance forming a contract which has replaced the cause of action previously in dispute.[12]
[12] Muller v Linsley & Mortimer (A Firm), 79A - E.
As well as agreeing with Hoffmann LJ, Leggatt and Swinton Thomas LJJ would also have decided the case on the basis of a waiver by the plaintiff.
The decision of Hoffmann LJ was referred to with approval by Robert Walker LJ (as he then was) in Unilever Plc v The Procter & Gamble Co [2000] 1 WLR 2436, 2445.
Robert Walker LJ referred to the speech of Lord Griffiths in Rush & Tompkins and then cited Hoffmann LJ's judgment in Muller: 2442F, and then said:
… there are numerous occasions on which, despite the existence of without prejudice negotiations, the without prejudice rule does not prevent the admission into evidence of what one or both of the parties said or wrote. 2444C‑D
His Lordship then identified eight such exceptions, including exception (6) at 2445A, where his Lordship referred to Muller and said:
Hoffman LJ treated that issue as one unconnected with the truth or falsity of anything stated in the negotiations, and as therefore falling outside the principle of public policy protecting without prejudice communications.

In turn, that approval by Robert Walker LJ of Muller was approved by the UK Supreme Court in Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2011] 1 AC 662 [31] - [32] (Lord Clarke, with whom the Court agreed).
Briggs v Clay [2019] EWHC 102 (Ch) considered the Muller exception (6) but did not apply it and maintained the non‑disclosure of the privileged documents. The reasoning of Fancourt J in Briggs v Clay was disparaged by the Court of Appeal in Berkeley Square: [83]. However, Fancourt J's observation [51] that:
The decision in the Muller case has given rise to considerable comment in later cases and still generates controversy today
is indisputable.
Lavan placed particular reliance on the UK Court of Appeal decision in Berkeley Square Holdings Limited v Lancer Property Asset ManagementLtd [2021] EWCA Civ 551 where David Richards LJ, again, approved of the exceptions stated by Robert Walker LJ in Unilever [27], including exception (6) (from Muller's case).
In Berkeley Square, the trial judge had held that exception (6) was applicable: [29]. While David Richards LJ said that exception (6) was 'troublesome' because the bases on which the Court of Appeal had reached its decision in Muller could not now stand;[13] he said:
… the decision in Muller, as opposed to its reasoning, has not been overruled and has been treated as correct. [59]
[13] Berkeley Square Holdings v Lancer Property Asset Management Ltd [2021] EWCA Civ 551 [58]. David Richards LJ said ' … the exclusion of without prejudice communications is restricted to admissions against interest, was rejected by the House of Lords in Ofulue v Bossert [2009] 1 AC 990. Reliance on waiver was misplaced because the privilege belongs to both (or all) parties to the communications and, in Muller, only the claimant could be said to have waived the privilege.' [58]
David Richards LJ noted that Berkeley Squarewas a 'two‑party case' not a 'three‑party case': [68], and held that Muller was therefore inapplicable on the facts of Berkeley Square: [83].
In any event, the Court of Appeal did not decide Berkeley Square on the basis of Muller or exception (6) because it decided the case fitted within exception (2) set out by Robert Walker LJ in Unilever: [90].[14]
[14] Exception (2) from Unilever was that evidence of negotiations was admissible to show that an agreement apparently concluded should be set aside on the ground of misrepresentation, fraud or undue influence: Unilever 2444E.
To my reading, the real significance of Berkeley Square to this application, is that any extension of the privilege - whether by Muller exception (6) or otherwise - was stated to require a principled basis and not a broad extension: see [82] - [90]. That is, the Court of Appeal approached it on the basis that any extension to the application of the without prejudice privilege had to be justified.
Lavan contended that the exception (6) from Muller did not apply because this was not a waiver case. I accept that there is no element of waiver here in the sense it may have been used in Muller, but do not accept that Muller can be properly confined and dismissed as a waiver case given that Leggatt and Swinton Thomas LJJ expressly agreed with the approach taken by Hoffman LJ.
David Richards LJ in Berkeley Square [78] also treated Muller solely as a case of waiver. At [82], David Richards LJ said:
Muller [exception (6)] proceeds on the basis that there has been a waiver of privilege. In the case of a two-party case, no further issue arises. The other party can elect whether to treat the privilege as wavied. This cannot apply in a three-party case.
It must also be remembered that in Muller it was the plaintiff (former) client who had pleaded the negotiations (from the earlier, separate proceedings) against his former solicitors. And it was that plaintiff (former) client who nonetheless sought to resist disclosure on the basis of the without prejudice privilege.
It is only in that sense (where the party who had raised the negotiations then seeks to protect against the disclosure of the negotiations by invoking the privilege) that Muller can be said to be a case of waiver. As identified in the judgment of David Richards LJ, it cannot be a waiver (as more generally understood) where only one party to the previous negotiations has 'raised' the joint privilege.
From the above English authority,[15] I understand that the position in England now is that Lord Griffiths' 'extension' of the privilege beyond two‑party cases has not been confined to where the negotiations occurred in the same litigation (cf, Gleeson CJ in Hong Kong Bank and Williams JA in Glengallan, as recited above - but both decided before some of the English cases I have set out).
[15] Especially Ofulue v Bossert [2009] 1 AC 990.
In my view, the Offer, in this case, is a fact which, as Hoffmann LJ said in Muller, has nothing to do with the truth of any facts which [KML] may have expressly or impliedly admitted.[16] That is, as I understand it, it is at least arguable (and, in my view, is the better view is) that the Offer would fall within exception (6) identified by Robert Walker LJ in Unilever from Muller.

Other Australian cases

[16] Muller v Linsley & Mortimer (A Firm), 79E.

The Queensland Court of Appeal considered the privilege in Mercantile Mutual Custodians v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd R 276 and Glengallan Investments v Arthur Andersen [2002] 1 Qd R 233. In both of those cases, the communications sought to be brought within the privilege had arisen in previous matters; ie, they were three‑party cases.
In Village/Nine Network, there was an agreement between Mercantile Mutual and Village/Nine Network to lease a property. Mercantile Mutual purported to rescind the agreement on the basis of Village/Nine Network's prior repudiation. Mercantile Mutual claimed to be entitled to 'differential costs of construction' being extra building costs it said it incurred as a result of Village/Nine Network's breach. Mercantile Mutual had contracted with another party, Concrete Constructions, to do that work on the property.
Mercantile Mutual and Concrete Constructions had mediated their own dispute and Village/Nine Network sought the discovery of the documents from the mediation between Mercantile Mutual and Concrete Constructions.
The facts, then, were not completely dissimilar from those in Rush & Tompkins, albeit that Concrete Constructions had never been a party to the same litigation as between Mercantile Mutual and Village/Nine Network.
The plurality in Village/Nine Network (Pincus JA, with McMurdo P agreeing) proceeded on the basis that in that case factually it was not necessary to decide whether the privilege went further than protecting (only) admissions: [15] - [16]. Their Honours identified the question as being:
… whether the privilege protects negotiators against disclosure of their negotiations, in an action between one of the negotiators and a person who is neither involved in negotiations nor party to the dispute which gave rise to them. [17]
Their Honours drew from Harrington v Love (at 323) that the purpose of the privilege was to:
… encourage compromises by sparing the parties the embarrassment which might be caused to them if the negotiations fail and later their communications are liable to be put into evidence. [18]
Their Honours went on to say:
[18]The embarrassment is not necessarily less if the suit in which the communications go into evidence is one in which the disputes and disputants are different from those involved in the negotiations. It is true that one generally thinks of the privilege as being directed against disclosure of the negotiations by a party to them; but that is so because it will but seldom occur that the content of negotiations will become known to a person who, although not a party to them, happens to be able to make good use of their content, in relation to another dispute altogether.
…
[20]There is no sound basis for holding that the basic purpose of protecting negotiations is sufficiently served if one allows the negotiators to be exposed to the risk that what they privately say, to settle their dispute, may be broadcast to the world at the instance of any person who can make use of it in litigation, unless that person is a party to the dispute being negotiated.
Byrne J said to similar effect:
The recognition of such a privilege depends on the conviction, necessarily essentially intuitive, that the effectiveness of compromise negotiations will commonly be jeopardised if the participants apprehend that strangers might, through compulsory process in later litigation, gain access to the confidences exchanged and use them to the participants' disadvantage… in the view of Lord Griffiths [in Rush & Tompkins] 'damage… would be done to the conduct of settlement negotiations if … what was said and written between' participants were to 'become common currency available' to strangers. [34]
Features of Village/Nine Network which are, potentially, distinguishable from the present case is the apparent significance of admissions being the subject of the privileged communications and the privilege being asserted in a matter which had a clear relationship with the proceedings in which the communications occurred (albeit, as noted, in separate proceedings rather than in the same proceedings). Further, the confidentiality of the communications or negotiations appears to have been significant to the Court. (Of course, in this case, at no time was the Offer confidential to KML vis-à-vis Lavan or DM Civil. Neither party contended differently.)
Glengallan was a three-party case which I have touched on above.
After citing Field and Rush & Tompkins, Williams JA stated the two essential prerequisites for the operation of the rule to be:
1.a genuine attempt to reach a settlement of a dispute the subject of litigation or which will become so if the dispute is not resolved; and
2.the making of an express or implied admission in so doing.
The rule then operates to prevent the use of such admissions from subsequent litigation.[17]
[17] Glengallan Investments v Arthur Andersen [2002] 1 Qd R 233 [28].
The Court of Appeal decided that case on the basis that the material did not satisfy the first 'essential' prerequisite: [38] - [39].
Commonwealth Director of Public Prosecutions v Citigroup Global Markets Australia Pty Ltd (No. 3 - privilege claims) [2021] FCA 1208 was a multi-party case: the parties asserting the privilege were not parties to the subsequent proceedings in which the privilege was being asserted.
The two parties seeking to assert privilege (namely ASIC and JP Morgan) were not parties to the proceeding before Wigney J, which was between the ACCC and a number of defendants. The defendants before Wigney J had sought the production of the ASIC/JP Morgan documents on subpoena and ASIC and JP Morgan had asserted the without prejudice privilege to prevent the disclosure of those documents in the subsequent proceedings.
Wigney J made an extensive survey of the authorities;[18] which I have considered but not reproduced here.
[18] Wigney J had also reviewed the common law principles concerning without prejudice privilege in ACCC v New South Wales Ports Operations Hold Co Pty Ltd [2020] FCA 1232 [51] - [54].
His Honour said [145]:
It is at least questionable whether the communications recorded in or evidenced by the redacted portions of the WPP documents are protected by without prejudice privilege in circumstances where they could not be said to constitute or amount to express or implied admissions by either ASIC or J P Morgan.
Wigney J said that the 'privilege should not be extended any more than it needs to be' [157] and invoked Lord Griffiths' observation as to the balancing of the 'two different public interests' as quoted from Rush & Tompkins above.
Wigney J said:
It would now appear to be broadly accepted … that the so-called 'extension' of the privilege in Rush & Tompkins may also apply to preclude production of documents evidencing settlement negotiations to parties involved in different litigation, but only in circumstances where the litigation … has a sufficient connection with the litigation in which the negotiations occurred. [152]
…
It is difficult to accept that the policy or rationale underlying the privilege justifies extending its reach to preclude the production of documents evidencing negotiations in any subsequent proceedings, even if there is no connection between those proceedings and the proceedings in which the negotiations occurred. It may be accepted that the parties to a dispute would likely be inhibited from making admissions or statements in the course of settlement negotiations if they believed that documents recording those admissions or statements may subsequently be required to be produced, and may ultimately be able to be used against them, in related or connected proceedings. It is, however, highly doubtful that the negotiating parties would feel so inhibited on the basis that documents recording any such admissions or statements may be required to be produced in entirely unrelated or unconnected proceedings, in which they are not parties, in circumstances where there could be no question of the admissions or statements being used against them in those proceedings. [158]
Wigney J approached the question by considering whether there was a connection between the initial dispute which was the subject of the settlement negotiations and the subsequent litigation; if 'yes', then, was there a sufficient connection such that the privilege arose: [150].
That followed the approach taken by the South Australian Full Court in Yokogawa Australia Pty Ltd v Alstom Power Ltd [2009] SASC 377; (2009) 262 ALR 738 [83] (Duggan J for the Court). That was a three-party case.
Wigney J accepted in Citigroup [No 3] that there was 'to some extent' an underlying factual connection between ASIC's investigation into J P Morgan and the defendants on the one hand, and the proceedings before him on the other: [161]. He set out four reasons [162] - [165] as features which 'point to a lack of any sufficient connection between them': [161].
The fourth consideration was that there was nothing in the (claimed) privileged documents which could be said to be an admission and his Honour thought that was in many respects the most significant consideration in deciding whether there was any relevant connection: [166].
I think that, as set out below, I am bound to hold that the privilege (in this Court at least) extends beyond admissions. Nonetheless, whether the communication over which privilege is asserted contains an admission may be relevant, in the way that Wigney J approached the matter, as to whether there is a sufficient connection. That was part of the way his Honour sought to balance the two different public interests as identified by Lord Griffiths in Rush & Tompkins and quoted above.
Wigney J was sceptical as to whether the question of the 'extension' of the privilege in a three or multi-party case was assisted by considering whether the parties to the without prejudice communications had a 'legitimate expectation' that the material would not be subsequently disclosed: [160].[19] Nonetheless, Wigney J considered that if there was not a sufficient connection between the two sets of proceedings then it was unlikely that the other party to the without prejudice communication would expect that it might not be subsequently disclosed in another proceeding.
[19] In this sense, Wigney J was not minded to adopt in all respects the test adopted in Dowling v Ultraseuticals Pty Ltd (2016) 93 NSWLR 155 [37] where Hammerschlag J said that a 'court must assess whether the party resisting disclosure would have had a legitimate expectation that the material … would not be used against it in the later dispute'.
While there may be a superficial attraction in the proposition put by Lavan that there is a common underlying factual basis here which means there is a relevant connection between CIV 2410 and the present proceedings, I would not accept that characterisation. In my view, there is a clear distinction between what was in issue in CIV 2410 and what will be in issue in this proceeding. As I have said, I consider that the offer is really a foundational fact which (as identified in the Muller line of authorities) has nothing to do with the truth of any facts in the Offer.

The privilege is not limited to admissions

DM Civil contended that the privilege is not applicable here as 'there is no possibility of the settlement offer being brought before the court of trial as admissions on the question of liability'.[20]
[20] DM Civil's written submissions [17].
I do not accept DM Civil's submission that the privilege is limited to admissions. That question has sometimes been said to arise from Lord Griffiths' speech in Rush & Tompkins.
By reason of the statements made in the Court of Appeal in Old Papa's Franchise and Samnakay as stated above, I consider that I ought to proceed on the basis that the privilege is not limited to admissions made in negotiations, I consider I am bound to.
Not that it changes that position, but the privilege has more recently been held not to be limited in that way in England: see, for example, Ofolue v Bossert [2009] 1 AC 990; Berkeley Square [58].
Further, necessarily, I would not follow statements in other Australian cases which have appeared to limit the privilege to admissions.[21] If that is the position in Queensland, that is not a universal position in all other Australian jurisdictions: see, for example, Yokogawa Australia v Alstom Power [97] - [100] (Duggan J for the Court).
[21] Cf, for example, Mercantile Mutual Custodians v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd R 276.

Further consideration and disposition

As identified above, I consider that there has been some reluctance to extend the privilege from two-party cases to three or multi‑party cases.
Correspondingly, I do not accept Lavan's broad submission that the privilege applies and it is for DM Civil to bring itself within an exception. Rather, I consider that Lavan needs to justify the extension of the privilege to the present case.
From the above review of the cases I further draw the following:
1.the extension of the without prejudice privilege from two-party cases to three or multi-party cases has proceeded incrementally;
2.there are two competing public considerations as identified by Lord Griffiths and expressed more pithily by McLure J;
3.without prejudice privilege does not apply where the fact of the communication is in issue and sought to be proved, rather than its truth or falsity, or it being used as an admission;
4.where there is a sufficient connection (in a three or multi-party case) between the proceedings in which the communications over which privilege are asserted and the later proceedings, then the privilege may be upheld;
5.something more than broad, common underlying facts have been required to demonstrate (in a two or multi-party case) that there is a sufficient connection; and
6.whether there is a sufficient connection between the two proceedings may be influenced by whether the communication over which privilege is asserted contains an admission.
In my view, it is at least arguable (and I would find it to be the better view) that the Offer is not inadmissible in the current proceeding.
I consider that not extending the privilege to the Offer strikes the appropriate balance between the two competing public considerations identified (first) by Lord Griffiths and subsequently adopted in Australia.
I am not persuaded that, for the purposes of this application, the privilege extends to making the Offer inadmissible. Allowing the pleading of the Offer would leave this case closer to the decided cases reviewed.

In my view, DM Civil is using or pleading the offer within the Muller (6) exception in this, a three-party case. That is, it is relied on as a foundational fact for the claim.
Further, in my view, there is not a sufficient (relevant) connection between CIV 2410 and this proceeding to extend the privilege over the Offer into this proceeding. I consider this case is much closer to Citigroup [No 3] than to Rush & Tompkins.
This conclusion on the application avoids the counter‑intuitive result which I identified above.
Further, any extension such as contended for by Lavan would, in effect, extend by a side-wind the immunity provided by advocates' immunity which has a separate public policy justification.
The extension for which Lavan contends would 'protect' it where advocates' immunity would not. In both Atwells v Jackson Lallic Lawyers (2016) 259 CLR 1 and Kendirjian v Lepore (2017) 259 CLR 275 the High Court held the plaintiff client could (broadly) proceed against their legal practitioners and claim losses alleged to arise out of settlements or settlement offers. In the absence of binding authority, I would be most reluctant to uphold Lavan's application where it would produce a result quite at odds with that in those two comparatively recent High Court cases.
For the above reasons, I would dismiss Lavan's application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JC
Associate to the Honourable Justice Howard
23 NOVEMBER 2023