Greenway v Teoh
[2014] ACTSC 224
•4 September 2014
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Greenway v Teoh |
Citation: | [2014] ACTSC 224 |
Hearing Date(s): | 25 July 2014 |
DecisionDate: | 4 September 2014 |
Before: | Mossop M |
Decision: | See [39] |
Category: | Interlocutory application |
Catchwords: | LIMITATION OF ACTIONS – personal injury – motor vehicle accident – whether paragraphs of an affidavit containing references to settlement offers should be admitted into evidence – scope of s 131(2)(i) Evidence Act 2011 (ACT) |
Legislation Cited: | Court Procedures Rules2006 (ACT) r 1147 Evidence Act 2011 (ACT) s 131 |
Cases Cited: | Askiak v Australian Secured and Managed Mortgages (2008) 66 ACSR 298 Casey v Alcock (2009) 3 ACTLR 1 Duncan v Mendes (unreported, NSW Court of Appeal, 29 May 1998) Galafassi v Kelly [2014] NSWCA 190 Glass v Demarco [1999] FCA 482 Hoefler v Tomlinson & Ors (1995) 60 FCR 452 Lubovsky vSnelling [1944] KB 44 Liu v Fairfax Media Publications Pty Ltd (2012) 84 NSWLR 547 Marks v Roads and Traffic Authority of New South Wales (2004) Aust Torts Reports 81-732 Pihiga Pty Ltd v Roche (2011) 278 ALR 209 Ryder v Frolich [2006] NSWSC 1324 |
Texts Cited: | Attorney-General’s Department, Proposals for the Reform and Modernization of the Law of Limitation in the Australian Capital Territory (Working Paper, Canberra, 1984) Australian Law Reform Commission, Evidence, ALRC 26 (1984) Explanatory Statement, Limitation Ordinance 1985 (ACT) Cross on Evidence (Australian Edition) (Looseleaf Service, LexisNexis) Parliament of New South Wales, First Report on Limitation of Actions (LRC 3) (October 1967) RJ Desiatnik, Without Prejudice Privilege in Australia (LexisNexis Butterworths, 2010) |
Parties: | Caroline Greenway ( Plaintiff) Kim Hin Teoh ( Defendant) |
Representation: | Counsel: A R Muller ( Plaintiff) R L Crowe SC ( Defendant) |
| Solicitors: Pappas, J - Attorney ( Plaintiff) DLA Piper ( Defendant) | |
File Number(s): | SC 483 of 2013 |
Introduction
The plaintiff, Caroline Greenway, commenced proceedings on 11 December 2013 seeking damages arising out of a motor vehicle accident that occurred on 18 February 2008. The defendant to the claim is Kim Hin Teoh, the driver of the motor vehicle. Liability was admitted on 18 December 2008. The defence that was filed asserted that the proceedings were statute barred by s 16B of the Limitation Act 1985 (ACT) (ACT Limitation Act). The defence accepted that NRMA Insurance had, on behalf of the defendant, made a number of payments to or on behalf of the plaintiff in relation to out-of-pocket expenses that she incurred as a result of her alleged injuries and disabilities and that those payments may constitute confirmation of the plaintiff’s cause of action under s 32 of the ACT Limitation Act. However, the defence also asserted that the most recent payment made by NRMA Insurance was to the Canberra Physiotherapy Centre on 15 June 2010.
Section 16B of the ACT Limitation Act provides, in effect, that personal injury claims must be commenced within three years from the date of the injury or three years from the date when the person injured first knows that he or she has suffered an injury that includes a disease or disorder and that injury is related to somebody else’s act or omission. Therefore, for the purposes of the defence, the three year period would have expired at the end of 15 June 2013 – three years after the date of the last payment made by NRMA Insurance and almost six months prior to the commencement of these proceedings.
The reference to confirmation of a cause of action in the defence picks up the operation of s 32 of the ACT Limitation Act, which currently provides:
32Confirmation
(1)If, after a limitation period fixed by or under this Act for a cause of action begins to run but before the end of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation.
(2)For this section—
(a)a person confirms a cause of action if, but only if, he or she—
(i) acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made; or
(ii) makes, to a person having (either solely or with other persons) the cause of action, a payment in relation to the right or title of the person to whom the payment is made; and
...
(4)An acknowledgment for this section shall be in writing and signed by the maker.
...
The defendant has sought summary judgment in its favour pursuant to r 1147 of the Court Procedures Rules2006 (ACT).
The determinative issue
In answer to the defendant’s application, the plaintiff sought to read parts of an affidavit affirmed by her solicitor which contained references to settlement offers made by the defendant on 23 February 2009, 12 February 2010, 28 June 2011 and offers made by the plaintiff on 25 May 2011 and 12 June 2012. Those portions of the affidavit were objected to on the ground that the communications were subject to privilege under s 131 of the Evidence Act 2011 (ACT) (Evidence Act). However, senior counsel for the defendant said that if the paragraphs were admitted then he accepted that the making of the offer would amount to a confirmation of the cause of action with the consequence that the proceedings were not out of time. That must have been on the basis that the email of 28 June 2011 amounted to a confirmation of the cause of action because even if the earlier offers amounted to a confirmation they were more than three years prior to the commencement of the proceedings and hence would not assist the plaintiff.
Assuming the defendant’s concession to be correct, the determinative issue for the purposes of this application is whether or not the evidence of the defendant’s settlement offers is admissible. If the evidence is admissible then the limitation period has not expired. If the evidence is not admissible then there is no evidence of a confirmation of the cause of action after the last payment on 15 June 2010 and the limitation period expired on 15 June 2013, approximately six months prior to the commencement of these proceedings. It would therefore be appropriate to grant summary judgment to the defendant.
Is the defendant’s concession correct?
As it is significant to the outcome of this case I will consider whether the concession made by senior counsel for the defendant, that the evidence, if admitted, would amount to a confirmation for the purposes of s 32 of the ACT Limitation Act, is correct.
In order to assess this concession it is necessary to have regard to the history and purpose of s 32. The section is in similar terms to s 54 of the Limitation Act 1967 (NSW) (NSW Limitation Act). Section 54 was introduced as a result of a New South Wales Law Reform Commission report on limitation of actions. In its First Report on Limitation of Actions (LRC 3) (October 1967), the Commission said:
249. A large part of the law relating to acknowledgments and part payments is concerned with actions for liquidated sums for which the Imperial Limitation Act, 1623, provides a limitation period of six years. Apart from the Imperial Statute of Frauds Amendment Act, 1828, the law on this subject is judge-made. The only kind of cause of action to which the Act of 1623 applies and upon which acknowledgment or part payment has any effect .is a cause of action in contract for debt or other liquidated sum. Causes of action for damages for breach of contract and causes of actions for damages for tort stand outside the rules about acknowledgment and part payment. The development of the law is considered in Spencer v. Hemmerde ([1922] 2 A.C. 507). The position is still the same under section 23 of the Imperial Act of 1939.
250. We think that every limitation period which the Bill would fix ought to be susceptible of enlargement by acknowledgment or part payment. Many odd contrasts can be imagined under the law as it stands. If a man steals a motor car he may be candid in making written acknowledgments of his liability to the owner without risk that the statute of limitations will stop running in his favour. There may indeed by an exception in favour of the owner if the thief sells the car, for then the owner may sue to recover the proceeds of sale in an action of assumpsit, in which a promise to pay over the proceeds of sale would be imputed to the thief and such a promise would presumably be within the rules about acknowledgment and part payment. Compare the text to the footnote (g) on page 221 of Halsbury's Laws of England, 3rd Edition, Volume 24 (1958), but the authorities cited do not support the text. If, however, the car is sold by the owner and the price is not paid, there is from the outset a debt within the rules about acknowledgment and part payment. If, to put a further case, a man has an insurance policy covering him against liability for personal injury to third parties and a third party is injured so as to give the insured a claim under the policy, the insurance company may admit liability both to its own insured and, as agent of the insured, to the injured third party: the admission, if in writing, will enlarge the limitation period as between the insurance company and the insured but will have no effect as against the insured in favour of the injured third party (The Sauria [1957] 1 Ll. Rep. 396) unless indeed the evidence shows a contract not to plead the statute: Lubovsky v. Snelling ([1944] K.B. 44).
251. Lubovsky v. Snelling (above) is a case of some interest. There, an insurer dealing with a claim under the Imperial Fatal Accidents Acts admitted liability to the plaintiff and negotiated on the measure of damages. While the negotiations were going on the limitation period ran out and, an action being brought, the defendant, on the instructions of the insurer, pleaded the statutory bar. The Court of Appeal, incensed at the conduct of the insurer, found on slender evidence an agreement not to rely on the expiry of the limitation period and held that the defence failed. It is hard to see why the plaintiff's action was not one for the breach of a contract not to rely on the expiry of the limitation period. However that may be, the case may be regarded as a step towards the development of a common law doctrine of acknowledgment of claims to unliquidated damages analogous to the common law doctrine of acknowledgment of debts. If so, the case is an episode which supports the view that the legislature ought to make the statutory doctrine of acknowledgments apply as well to claims for unliquidated damages as to debts.
252. Instances can be multiplied, but it is enough for us to say that, in our view, considerations both of fairness and of simplicity justify extending to all the causes of action for which the Bill would fix periods of limitation the rules as to acknowledgment and part payment. As we see it, the arguments against this extension are two. First, the facts relating to a claim for unliquidated damages, either in contract or in tort, are likely to be more complicated and less the subject of written record than are claims for debts or other liquidated sums. Second, the decision whether a writing amounts to an acknowledgment, at present difficult enough in the case of a liquidated claim, would present undue difficulties in the case of claims for unliquidated damages.
253. On the first point, while it has a foundation in ordinary experience, we think that an acknowledgment, likely as it must be to encourage the claimant to defer taking proceedings, will in general not be given carelessly and, if given carelessly, should be the occasion of loss to the person giving the acknowledgment rather than to the claimant.
254. On the second point, while it is indeed frequently a matter of difficulty to say whether, under the present law, a writing is or is not an acknowledgment, this difficulty has been significantly reduced by section 23 of the Imperial Act of 1939. In this respect the wording of section 53 of the Bill follows the substance of section 23 of the Imperial Act.
The recommendations of the report were then given effect in s 54 of the NSW Limitation Act. That section was effective to put an end to the distinction for limitation purposes between claims for liquidated and unliquidated damages: Marks v Roads and Traffic Authority of New South Wales (2004) Aust Torts Reports 81-732 at [38]. In cases where the claim is one for unliquidated damages (or cases analogous thereto) it is not necessary in order to be an effective confirmation of a cause of action that there be admission or confirmation of any particular quantum: Duncan v Mendes (unreported, NSW Court of Appeal, 29 May 1998); Marks at [38].
In 1984, the Commonwealth Attorney General’s Department prepared a working paper entitled “Proposals for the Reform and Modernisation of the Laws of Limitation in the Australian Capital Territory”. In that report the authors referred to the operation of s 54 as follows:
188. Secondly, every cause of action may be confirmed under s. 54 of the New South Wales Act, including claims for unliquidated damages, whether founded in tort or on contract, whereas under the English, Victorian, Queensland and Tasmanian Acts only actions to recover land or to foreclose a mortgage (whether of realty or personalty) or to recover any debt or other liquidated pecuniary claims or any claim to the personal estate of a deceased person may be acknowledged or part payment may be made in respect thereof, whereupon the right is deemed to have accrued on and not before the date of the acknowledgement or the last payment: see L.R.C. 3 paras 250 – 254; Limitation Act 1939 (Eng.), s. 23, and see now Limitation Act 1980 (Eng.), s. 29; Limitation of Actions Act 1958 (Vic.), s. 24; Limitation of Actions Act 1974 – 1981 (Qld.), s. 35: Limitation Act 1974 (Tas.), s.29.
...
194. The above-described changes adopted by s. 54 of the New South Wales Act seem to be sensible and arguably constitute an improvement upon the corresponding provisions in the English and the other Australian Acts. Indeed, s. 54 of the New South Wales Act has been described by the Ontario Law Reform Commission as being ‘commendable’ for its simplicity: see Ontario Report, p. 123. Moreover, s. 54 of the New South Wales Act was substantially adopted by s. 41 of the Limitation Act 1981 (N.T.).
195. It is therefore recommended that a provision corresponding to s. 54 be adopted by the Limitation Ordinance.
...
The Explanatory Statement for the ACT Limitation Act, then known as the Limitation Ordinance 1985 (ACT) (ACT Ordinance), provided:
The Ordinance contains many provisions which are based on the New South Wales Limitation Act 1969. It differs, however, from the NSW Act in some respects.
...
Section 32 provides that when a person against whom a cause of action lies confirms the cause of action, either by acknowledging the right or title of the person having the cause of action or by making a payment to that person, the period before the confirmation is not counted in reckoning the limitation period.
An acknowledgment for the purposes of this section must be in writing and signed by the maker.
A person only has the benefit of a confirmation if the confirmation is made to him or to a person through whom he claims.
It is clear, having regard to the working paper which preceded the ACT Ordinance that the provisions of s 32 were intended to have the same effect as s 54 of the NSW Limitation Act: see Casey v Alcock (2009) 3 ACTLR 1 at [90]. Thus the provision clearly extended to encompass unliquidated claims such as claims for damages in tort arising out of motor vehicle accidents. In particular, having regard to the terms of the New South Wales Law Reform Commission report, the enactment of a general provision dealing with confirmation of causes of action was designed to avoid the technicalities that had previously been involved in this area of the law and had led to cases such as Lubovsky vSnelling [1944] KB 44 - a case remarkably similar to the present one - which the Commission clearly considered to be an inadequate response to those technicalities.
In Duncan v Mendes a letter accepting liability and a further letter making an offer of settlement were both found by the New South Wales Court of Appeal to amount to a confirmation of a cause of action for personal injury.
In Marks, the New South Wales Court of Appeal held that a letter which admitted breach of duty of care and said that the amount payable “will be assessed under the Motor Accidents Act in respect of the recovery amount” and another letter which made an offer of a specified, modest, amount were both sufficient to constitute a confirmation of a cause of action: Marks at [18], [36].
In the light of the terms of s 32 and its antecedents I am satisfied that the concession by senior counsel for the defendant was correct and that the making of an offer to settle proceedings in circumstances where liability has been admitted amounts to a confirmation of the cause of action.
Section 131
Section 131 of the Evidence Act provides:
131Exclusion of evidence of settlement negotiations
(1)Evidence must not be presented of—
(a)a communication that is made between people in dispute, or between 1 or more people in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or
(b)a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.
(2)Subsection (1) does not apply if—
...
(i)making the communication, or preparing the document, affects a right of a person; or
...
The critical provision for present purposes is s 131(2)(i)‑“making the communication, or preparing the document, affects a right of a person”.
The issue is whether or not the making of a settlement offer in a case where liability has been admitted affects a right of a person because it constitutes a confirmation of the person’s cause of action.
Authorities on s 131(2)(i)
Hoefler v Tomlinson & Ors (1995) 60 FCR 452 was a decision of a Full Court of the Federal Court dealing with a motion to dismiss an appeal for want of prosecution. Although it did not relate specifically to s 131(2)(i), the defendant relied upon it as a statement of the importance of the without prejudice privilege. Justice Spender, with whom the other judges of the Court agreed, addressed the substance of the appeal very briefly. His Honour then dealt with the fact that the moving party had annexed a without prejudice letter to an affidavit for the purposes of demonstrating that the appellant was aware that the motion to dismiss the appeal for want of prosecution was going to be heard on the day that it was. While his Honour accepted that it was necessary to demonstrate that proposition, he thought it was inappropriate to annex the letter because it contained privileged material. His Honour referred to the terms of s 131(1) and the existence of the exceptions in s 131(2) and continued:
The rationale of the rule excluding evidence of settlement negotiations is the public policy of encouraging out-of-court settlements and the principle promoting the individual's right to enter into such negotiations openly and without interference.
I acknowledge that the common law admits of a possible exception where delay is an issue, as in proceedings involving alleged want of prosecution or laches. In such proceedings it is clear enough that the fact of without prejudice communication between the parties may be a relevant matter. It may explain delay, for instance. Another reason for the exception may be that in such cases the communication is not genuinely intended to be an attempt at settlement and therefore does not come within the general rule. Or it may be that the reason for its disclosure, namely to assess whether there has been unreasonable delay, does not offend the policy behind the general rule. Phipson on Evidence, in the 14th Edition, at Chapter 20, paragraph 65, said:
It is certainly the case that without prejudice communications are admissible for the purpose of showing that they have been made. It is long established that they may be adduced in evidence as explaining delay. Though there is little authority on this topic, in practice without prejudice correspondence is regularly exhibited to affidavits without objection from the Court or counsel on interlocutory applications, for example, to strike out for want of prosecution or for discovery. In some cases this is because the correspondence, though headed without prejudice, is in reality nothing of the sort. In others, however, it genuinely falls within the protection accorded to without prejudice correspondence, but is admissible because the purpose for which it is tendered does not infringe the policy of the rules.
In Simaan General Contracting Co v Pilkington Glass Ltd [1987] 1 All ER 345, Judge John Newey QC at 347, dealing with the question of without prejudice communication, said:
It is public policy to encourage litigants to settle their differences and, since they are most unlikely to negotiate satisfactorily if every word which they utter and every offer which they make can be quoted against them later, the general rule has long been that nothing which is written or said 'without prejudice' can be referred to in Court subsequently without the consent of all parties concerned.
To the general rule there are exceptions. In Walker v Wilsher (1889) 23 QBD 335 at 338 Lindley LJ referred to letters written without prejudice being considered in a case in which a question of laches was raised and, at least in my experience, they are referred to freely without protest on applications to strike out for want of prosecution.
In Walker v Wilsher, Lindley LJ said, at 338:
No doubt there are cases where letters written without prejudice may be taken into consideration, as was done the other day in a case in which a question of laches was raised. The fact that such letters have been written and the dates at which they were written may be regarded, and in so doing the rule to which I have adverted would not be infringed. The facts may, I think, be given in evidence, but the offer made and the mode in which that offer is dealt with - the material matters, that is to say, of the letters - must not be looked at without consent.
In McNicol's Law of Privilege (1992), under the rubric "Fact that letters were written and their dates" at p. 481, the learned author says:
It is sometimes claimed that without prejudice privilege 'casts a veil, not over the date on which the letter was written or over the fact that it was written, but over the whole of the contents of the letter'. In Walker v Wilsher Lindley LJ states that the fact that without prejudice letters have been written and the dates at which they were written may be taken into consideration in cases where the question of laches is raised. The admission of such fact and dates does not, however, affect the inviolability of the contents of the negotiations. Vaver argues that this exception in relation to the fact that letters were written and their dates should extend beyond mere cases of laches to any case where inferences of delay or undue passage of time might otherwise be drawn. A much wider extension was suggested in the case of Simaan General Contracting Co v Pilkington Glass Ltd, ...
In Glass v Demarco [1999] FCA 482 Emmett J gave an ex-tempore decision as to the operation of s 131(2)(i) in relation to the admissibility of a document containing an offer of settlement made in other proceedings to which the debtor was a party which the debtor claimed it was still open for him to accept. His Honour said:
10.Alternatively, the debtor relied on s131(2)(i). The contention, as I understand it, is that a right of the debtor is affected by the offer because the debtor, by reason of the offer, has a right to accept it and thereby create a contract of compromise. I consider that the reference to a right in s131(2)(i) is to an existing right and it is not satisfied by reason of a right coming into existence upon the making of an offer. If it were given such a construction, paragraph (i) would constitute a most significant exception to the operation of section 131(1). I do not consider that s131(2)(i) affords the debtor any assistance in this case.
11.It may be that section 131 has an operation in the present circumstances which it was not intended to have. The general rationale for a provision such as section 131 and the similar principle which applied under the general law was that there should be no adverse consequences for a party who makes a communication intended to result in compromise of a proceeding. To that end, a party ought not to be exposed to tender against it of a communication that might constitute an admission if the communication was genuinely intended to result in settlement or compromise of a dispute. In the present circumstance, the use intended to be made by the debtor is simply to demonstrate his possible ability to pay his debts.
12.Nevertheless, one of the issues which would arise on the hearing of the petition, if the debtor is given leave to raise further grounds, is whether or not the debtor is in fact in a position to meet his debts. Until such time as the offer is accepted, it would be impossible to form any view as to whether or not the making of the offer gives rise to a possible asset on the part of the debtor without in fact treating the offer as an admission that there is some sum of money owing.
13.In the circumstances, it seems to me that the paragraph is made inadmissible by the operation of section 131(1) and it is probably evidence which should not be admitted even under the general law. I reject the first two sentences of paragraph 7 of the affidavit and I allow the last sentence of paragraph 7. I make it clear that by rejecting the first two sentences of paragraph 7, I also reject the annexure.
In Ryder v Frolich [2006] NSWSC 1324 Brereton J was dealing with an objection to the admission of a letter written by the plaintiffs to the defendants. His Honour addressed a submission that s 131(2)(i) applied as follows:
7 Next, it was submitted that the communication fell within various of the exceptions referred to in s 131(2). The first to which reference was made was s 131(2)(i); namely, “that making the communication .... affects a right of a person”. In my opinion, that provision is directed to communications which, of themselves, have legal consequences for the rights of parties, such as transactional communications; they may well also involve, as Mr McHugh suggested, communications which are defamatory because the publication of a defamatory communication, even “without prejudice”, might create a right in a party.
8 I do not see how this communication creates or affects the rights of a person. It contains a proposal, but goes no further.
In Askiak v Australian Secured and Managed Mortgages (2008) 66 ACSR 298 Justice Goldberg was dealing with an objection to evidence being given as to what occurred at a conciliation conference held in the Family Court. His Honour did not have evidence as to the circumstances under which the conciliation conference was conducted and hence could not reach a conclusion as to whether particular provisions of the Family Law Act 1975 (Cth) applied so as to preclude admission of the evidence. His Honour did not need to deal with that issue because he was satisfied that s 131(1) of the Evidence Act 1995 (Cth) applied. His Honour dealt with a number of paragraphs in s 131(2), saying in relation to paragraph (i):
32.I do not consider that subpar (i) of s 131(2) applies. The plaintiff submitted that the communication in question was designed to affect the plaintiff’s rights as a director because the agreement that was entered into, and the orders made in consequence of that agreement, provided for him to transfer his shares in the defendants and resign as a director of the defendants. However, the communications in respect of which the plaintiff wishes to adduce evidence related to financial matters pertaining to the defendants. The making of the communications did not affect any right of the plaintiff; rather, they provided him with information which he could take into account in making a decision as to how to resolve his outstanding disputes with his wife.
33.In Glass v Demarco [1999] FCA 482, a bankruptcy petition was before the court. The debtor filed an affidavit in which he gave evidence about an offer of compromise in another court proceeding. Objection was taken by the petitioning creditor to the admissibility of that evidence who relied on s 131(1) of the Evidence Act. The debtor relied on s 131(2)(i) of the Evidence Act. At par [10] Emmett J said:
“… The contention, as I understand it, is that a right of the debtor is affected by the offer because the debtor, by reason of the offer, has a right to accept it and thereby create a contract of compromise. I consider that the reference to a right in s131(2)(i) is to an existing right and it is not satisfied by reason of a right coming into existence upon the making of an offer.”
Although it might be said that the plaintiff had at the date of the conciliation conference rights by virtue of his position as a director of the defendants, that right was not affected by the making of the communications in respect of which the plaintiff wishes to adduce evidence.
34.In Talbot v NRMA Limited [2000] NSWSC 602, Hodgson CJ in Eq said at par [3]:
“Mr Shand has referred me to s 121(3) of the Evidence Act, which states that privilege would not prevent the producing of evidence of a communication or document which affects the rights of a person. In my opinion, that cannot mean a communication or document that is relevant to a right of a person because that would virtually eliminate the legal professional privilege as a ground for non‑admission of evidence. In my opinion, that must mean a communication or document that affects in some fairly direct way what are the actual rights and perhaps also duties of a person.”
I consider that these observations apply equally to the communications in respect of which the plaintiff wishes to adduce evidence. They do not affect in any direct way the actual rights of the plaintiff.
In Pihiga Pty Ltd v Roche (2011) 278 ALR 209 Lander J was dealing with the admissibility of certain documents identified in a notice of motion. They related to the conduct of a mediation at which it was alleged certain misrepresentations were made that induced the settlement that resulted. Having set out in terms of the section and dealt with the application of various other paragraphs of s 131(2), his Honour said:
126.The applicants also asserted that they were entitled to rely upon the exception in s 131(2)(i) because the communication which was made in an attempt to negotiate a settlement and the document which had been prepared affects the applicants’ rights. The applicants contended that they had a right, whilst engaged in negotiations with the respondents, not to have representations made to them which were false which would amount to misleading and deceptive conduct and, as a result, cause them damage by entering into the settlement deed. The applicants on the other hand contended that paragraph (i) only applied to an existing right at the time of the communication or preparation of the document: Glass v Demarco [1999] FCA 482.
127.In my opinion, the applicants’ contention is to be preferred. Paragraph (i) of subsection (2) does not in its terms refer to an existing right but is engaged if the communication at the time of the negotiations or the document which is prepared in an attempt to negotiate a settlement affects a right of a person. In my opinion, that would include the type of right to which the applicant refers. I think that paragraph applies and that is a further reason why s 131(1) does not apply.
Liu v Fairfax Media Publications Pty Ltd (2012) 84 NSWLR 547 involved an appeal from Harrison AsJ. One of the issues before her Honour had been whether or not certain communications between the plaintiff and ASIC were not subject to privilege by reason of s 131(2)(i). Harrison AsJ had found that they should be produced because they affected, in an evidentiary sense, the rights of Fairfax to defend the claim of defamation. On appeal Beech-Jones J said at [123]-[128]:
123.In my view, there is a clear distinction reflected in s 131(2)(i) between communications which, according to Brereton J, "of themselves have legal consequences for the rights of parties", and communications which only constitute evidence which are relevant to the establishment or denial of the rights of the parties. In broad terms, the former potentially fall within the exception created by s 131(2)(i), whereas the latter do not.
124.In Talbot v NRMA Ltd [2000] NSWSC 602 at [3], Hodgson CJ in Eq rejected a submission that the exception in s 121(3) of the Evidence Act was satisfied, stating:
"Mr Shand has referred me to s121(3) of the Evidence Act, which states that privilege would not prevent the producing of evidence of a communication or document which affects the rights of a person. In my opinion, that cannot mean a communication or document that is relevant to a right of a person because that would virtually eliminate the legal professional privilege as a ground for non-admission of evidence. In my opinion, that must mean a communication or document that affects in some fairly direct way what are the actual rights and perhaps also duties of a person."
125.Section 121(3) provides that Div 1 of Pt 3.10 of the Evidence Act, which concerns client legal privilege, "does not prevent the adducing of evidence of a communication or document that affects a right of a person". If anything, the exception provided for in s 131(2)(i) is even more restrictive in that it only concerns the circumstance where the "making the communication" or "preparing the document" affects a right of a person (cf Green v AMP Life Ltd [2005] NSWSC 95 at [29] per Campbell J). These words can be readily adapted to give effect to the statement made in ALRC 26 at [891] concerning acts of bankruptcy, defamatory statements, illegal threats, etc. For example, in the case of a defamatory statement, the making of such a communication affects a right of a person, namely the right of the person defamed to the enjoyment of their reputation. In contrast, communications passing between parties who are conducting settlement negotiations which only provide valuable evidence to vindicate or disprove the existence of a person's rights do not "affect" any of their rights in the sense that they do not alter, vary or interfere with them.
126.The context in which any consideration of s 131 arises is that the material that is sought to be adduced (or produced) must be first relevant in some sense to the determination of the rights of parties to litigation. Thus in a wide sense the material "affects" the parties' rights. However, as stated by Hodgson CJ in Talbot in the context of s 121(3), if the only link between the relevant communication or document and the rights of a person is evidentiary, then the exception created by s 131(2)(i) would swallow the rule created by s 131(1).
127.In [56] to [57] of her Honour's judgment, her Honour saw no distinction between the exclusion of a defamatory statement by the operation of s 131(2)(i) and the attempt by Mr Liu to invoke the protection of s 131(1) "to prevent the production of material which directly affects the defendant's right to defend that claim". Her Honour interpreted the "affects" in s 31(2)(i) as including evidentiary impacts. Mr Liu is said to be preventing the "production of material" which would assist, in an evidentiary sense, Fairfax's defence to his claim. This misstates the form of affectation that is being considered by s 131(2)(i) and the form of "right" that is being adverted to in s 131(2)(i). It is not referring to procedural rights, but is instead referring to substantive rights such as the right to enjoyment of a reputation or not to be subjected to tortious statements etc.
128.Accordingly, I do not consider that s 131(2)(i) operated to preclude Mr Liu from claiming privilege over the correspondence with ASIC. I uphold ground five of Mr Liu's appeal.
Finally, in Galafassi v Kelly [2014] NSWCA 190 Gleeson JA (with whom Bathurst CJ and Ward JA agreed) was dealing with a disastrous residential property transaction in which one of the issues was whether or not certain letters sent by the appellants were privileged under s 131. In addressing that issue his Honour said:
Section 131(2)(i)
144.Section 131(2)(i) applies where making the communication or preparing the document affects the right of a person. There is conflicting authority concerning whether the relevant "right" is limited to existing rights at the time of the communication or preparation of the document: Glass v Demarco [1999] FCA 482 at [10] (Emmett J), or extends to a right coming into existence upon the making of the communication or document itself: Pihiga Pty Ltd v Roche [2011] FCA 240; 278 ALR 209 at [126]-[127] (Lander J).
145.In J D Heydon, Cross on Evidence (Online Australian edition, LexisNexis) at [25,395] the learned author expresses the view that s 131(2)(i) refers to the equivalent doctrine at common law pursuant to which "without prejudice" communications can be referred to if they reveal, for example, an act of bankruptcy or the exercise of an option: see for example Tenstat Pty Ltd Permanent Trustee Australia Ltd (1992) 28 NSWLR 625 at 633 where McLelland J (as his Honour then was) held that without prejudice privilege did not extend to preclude the proof of communications or statements relied on as an objective act having legal consequences, such as a notice of exercise of option. Although this decision was prior to the Evidence Act, the principle underlying it is applicable to s 131(2)(i). A communication relating to the exercise of an option may be properly viewed as affecting the right of the grantee of the option.
146.Here the disputed communications relate to the Vendor's contractual right to terminate for repudiatory conduct after the institution of the proceedings. Counsel for the Vendor put the matter shortly - one cannot repudiate "without prejudice". I agree. A communication or document evincing an intention no longer to be bound by a contract affects the right of the promisee to elect between accepting the repudiation and terminating the contract (strictly, its further obligations to perform) or affirming the contract and insisting on further performance.
147.Ultimately this was accepted by counsel for the Purchasers who in oral argument (AT, 11 March 2014, p 31, lines 3-10) placed great emphasis on the two emails as demonstrating not merely a continuation of the Vendor's claim for specific performance, but an enlargement of the basis of that claim, in support of the Purchasers' argument that the Vendor further affirmed the Contract by electing to rely upon the communications in those two emails when filing and serving her statement of claim.
148.If it were necessary to decide the question, in my view, the communications in the two emails were admissible by virtue of s 131(2)(i) of the Evidence Act.
The history of the consideration by the Australian Law Reform Commission of the issue of privilege relating to settlement negotiations is set out in some detail in Liu at [70]-[78]. The most significant part of the relevant report (ALRC Report 26) for present purposes is at [891] where the Commission stated:
891. General Proposals. In view of the desirability of encouraging settlements, it is proposed that evidence may not be given of the content of communications made in an attempt to settle a civil dispute (including where a party’s agent or a mediator is involved in the negotiations). Proposals are advanced, however, to meet deficiencies in the law. The general rule of exclusion extends to materials produced for the negotiations. The proposal in terms prevents evidence being ‘given’. This formula is to be preferred to other options—eg not admissible. The rationale requires non-disclosure by the parties to the negotiations unless all of them consent. The embargo will not apply to communications which are of a criminal or tortious nature, or are capable of affecting rights and liabilities (such as acts of bankruptcy, defamatory statements, illegal threats, the election of alternative courses of action); and open offers of settlement. (emphasis added)
In Cross on Evidence (Australian Edition) at [25395] the author says of s 131(2)(i):
...it refers to the equivalent doctrine of the common law pursuant to with without-prejudice communications can be referred to if they reveal, for example, an act of bankruptcy or the exercise of an option: see [25385]. See also Pihaga Pty Ltd v Roche (2011) 278 ALR 209 at [126]-[127]. While communications which of themselves have legal consequences for the rights of parties fall within s 131(2)(i) communications which only constitute evidence relevant to the establishment or denial of the parties’ rights do not: Liu v Fairfax Media Publications Pty Ltd (2012) 84 NSWLR 547. (footnotes incorporated as text)
In Without Prejudice Privilege in Australia (LexisNexis Butterworths, 2010) RJ Desiatnik refers to s 131(2)(i) at 163 as a provision unknown to the common law which is:
[m]ore like a riddle than a clear exposition of the law, its potential to weaken the very structure of the privilege is breathtaking. It would be hard to imagine a settlement negotiation which does not centre around the right of one party or the other; the capacity of a document or communication to “affect” is virtually limitless, depending on whether the effect called for is direct or indirect and the extent of the effect; and the right so affected can be the right of any person. Interpreted in a number of ways, the provision could almost always be used to prevent without prejudice privilege from applying.
He ultimately submitted that a number of common law exceptions, namely, the welfare of the child exception, the estoppel exception and the laches exception found no place in s 131(2) and that s 131(2)(i) could be construed to have been intended by the legislature to respond to such exceptions at common law. He concluded at 164:
... it is submitted that this is indeed how the provision should be interpreted, thereby saving such exceptions, not undermining without prejudice privilege to any greater extent than is the case at common law, and making sense of an otherwise very odd provision.
As will be apparent, the opinions expressed by the author are contrary to the other authorities referred to above.
Consideration
For the purposes of s 131(2)(i) it is necessary that the affect on rights be a direct one. That is made clear by the ALRC report which gives as examples, communications which are criminal or tortious in nature, acts of bankruptcy, defamatory statements, illegal threats or elections between alternative courses of action. Galafassi gives the further examples of the exercise of an option and repudiatory conduct which gives rise to an entitlement to elect.
The communication itself must be the thing which has legal consequences: Ryder v Frolich at [7]. If the link between the communication and the rights is merely evidentiary then that is not enough to trigger the operation of s 131(2)(i): Liu at [126]. Any other interpretation would “swallow the rule created by s 131(1)”: Liu at [126].
While the decisions in Askiak and Pihiga might be seen as conflicting, that probably arises from the different submissions that were put in those cases, the applicants in Pihiga emphasising their statutory right not to have misleading statements made to them during the course of negotiations.
I would respectfully differ from the explanation of the operation of the provision in Glass. In that case Emmett J said that the paragraph was not satisfied by a right coming into existence by the making of the settlement offer. In my view, which is consistent with the approach taken by Lander J in Pihiga, the provision clearly covers the situation where the communication itself creates rights, as the examples given by the ALRC report made clear. The result in Glass can be supported because in that case the making of an offer did not of itself affect the debtor’s rights. His rights might subsequently have been affected if he accepted the offer that had been made to him and created a binding contract but that had not occurred by reason of the communication which was sought to be put into evidence.
Applied in the present circumstances, s 131(2)(i) permits the admission of the settlement offers if the making of those offers directly affects the rights of the plaintiff. Because the offers amount to a confirmation of the plaintiff’s cause of action, they do affect the rights of the plaintiff. That is because the offers by themselves have the effect of extending the limitation period and hence the period in which the plaintiff may commence proceedings in relation to the cause of action for which the defendant has admitted liability.
While the defendant submitted that the provision should be read down so as to protect the significant public policy behind the ability to make settlement offers I do not consider that, in the light of the text of the section and the authorities referred to, it is possible, in a case where liability has been admitted, to read s 131(2)(i) in a manner that prevents the admission of the evidence. The confirmation of the cause of action affects the rights of the plaintiff and hence is within the scope of the exception.
Therefore, I will permit the admission of the evidence of the settlement offers and, as a consequence, dismiss the application.
Orders
My conclusion is that it is appropriate to admit those paragraphs of the affidavit of the plaintiff’s solicitor dated 21 July 2014 that refer to the offers made by the defendant. Therefore paragraphs 6, 8 and 13 (last sentence) of the affidavit will be admitted. Paragraphs 7, 9 (“and ... Northam”) relate to offers by the plaintiff which are not within s 131(2)(i) and will not be admitted. Paragraph 14 is commentary and will not be admitted. MFI A contained the documents communicating the defendant’s offers and the counter offers by the plaintiff. The offers made by the defendant are admissible. The letter of 12 February 2010 and email of 28 June 2011 will become Exhibit 1. MFI B contained communications between the parties relating to a possible settlement conference in mid-2013. In the light of my conclusions it is not necessary to consider whether these communications could amount to a confirmation of the cause of action. They will not be admitted.
The orders of the Court are:
1. In relation to the affidavit of Nigel Gabbedy dated 21 July 2014:
(a)paragraphs 6, 8 and 13 (last sentence) of the affidavit are admitted.
(b)paragraphs 7, 9 (“and ... Northam”), and 14 are not admitted.
(c)the letter of 12 February 2010 and email of 28 June 2011 are admitted as Exhibit 1.
(d)the balance of MFI A and MFI B are not admitted.
2. The defendant’s application in proceedings dated 29 April 2014 as amended on 25 July 2014 is dismissed with costs.
3. The proceedings are listed for directions on 12 September 2014 at 10am at which time the parties should provide the Court with an agreed or competing timetables for the preparation of the matter for hearing.
| I certify that the preceding thirty-nine [39] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Master Mossop. Associate: Nikolas Willing Date: 4 September 2014 |
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