Lexcray Pty Limited v Northern Territory of Australia - [2015] NTSC 11

Lexcray Pty Limited v Northern Territory of Australia [2015] NTSC 11
PARTIES:LEXCRAY PTY LIMITED

v
NORTHERN TERRITORY OF AUSTRALIA

TITLE OF COURT:  SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:  SUPREME COURT OF THE NORTHERN TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:33 of 1993 (9303729)
DELIVERED:  16 FEBRUARY 2015
HEARING DATES:  2 FEBRUARY 2015
JUDGMENT OF:  KELLY J
CATCHWORDS:

EVIDENCE – Admissibility – Privilege – Evidence (National Uniform Legislation) Act 2011 s 131(5) – Disputes as to the quantum of costs are disputes within the meaning of s 131(5) – Documents privileged
EVIDENCE – Admissibility – Privilege – Evidence (National Uniform Legislation) Act 2011 s 131(2)(h) – Whether documents relate to liability for costs – Difference between quantum of costs and liability for costs – Documents relating to quantum of costs fall outside s 131(2)(h) to the extent they do not affect liability for costs – Section 131(2)(h) privilege exception does not apply to render documents admissible
EVIDENCE – Admissibility – Privilege – Evidence (National Uniform Legislation) Act 2011 s 131(2)(i) – Whether documents affect the rights of a person – Documents lack legal consequences for the rights of the parties – Section 131(2)(i) not applicable to determining whether privilege exception applies to render documents admissible
EVIDENCE – Admissibility – Privilege – Evidence (National Uniform Legislation) Act 2011 s 131(2)(g) – Whether parts of documents are likely to mislead the Court unless privileged documents admitted – Documents likely to mislead unless qualified by privileged documents – Section 131(2)(g) privilege exception applies to render documents admissible
EVIDENCE – Admissibility – Privilege – Evidence (National Uniform Legislation) Act 2011 ss 131(2)(b) and 131(2)(c) – Whether the substance of the privileged documents have been disclosed with the express or implied consent of the parties – Whether the substance of the privileged documents have been partly disclosed with the express or implied consent of the parties and full disclosure is reasonably necessary to enable a proper understanding of other evidence – Not necessary to determine whether ss 131(2)(b) or 131(2)(c) privilege exceptions apply to render documents admissible
EVIDENCE – Admissibility – Privilege – Evidence (National Uniform Legislation) Act 2011 s 131(2)(a) – Whether the parties consented to the privileged documents being adduced – Not necessary to determine whether s 131(2)(a) privilege exception applies to render documents admissible
Evidence (National Uniform Legislation) Act 2011 ss 122(1), 131(1), 131(2)(a), 131(2)(b), 131(2)(c), 131(2)(g), 131(2)(h), 131(2)(i), 131(5)
Supreme Court Act s 9
Supreme Court Rules rr 63.36, 63.34(3), 63.34(4), 63.34(7)
DSE (Holdings) Pty Ltd v Intertain Inc (2003) 127 FCR 499; Goldberg v Ng (1995) 185 CLR 83; Liquorland (Australia) Pty Ltd & Anor v Anghie & Anor and Anghie & Ors v Liquorland (Australia) Pty Ltd & Anor (2003) 7 VR 27; Mann v Carnell (1999) 201 CLR 1; Savage & Ors v Modern Mustering Pty Ltd & Ors [2014] NTCA 06; Telstra Corporation Ltd & Anor v BT Australasia Pty Ltd & Anor (1998) 156 ALR 634, referred to.
Smith v Gould [2012] VSC 210, distinguished.

REPRESENTATION:
Counsel:
Plaintiff:B Ilkovski
Defendant:A Young
Solicitors:
Plaintiff:Clayton Utz
Defendant:Solicitor for the Northern Territory
Judgment category classification:    B
Judgment ID Number:  Kel15004
Number of pages:  28

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
Lexcray Pty Limited v Northern Territory of Australia [2015] NTSC 11

No. 33 of 1993 (9303729)
BETWEEN:

LEXCRAY PTY LIMITED

Plaintiff

AND:

NORTHERN TERRITORY OF AUSTRALIA

Defendant

CORAM: KELLY J
REASONS FOR JUDGMENT
(Delivered 16 February 2015)
Introduction

The proceeding presently before the Court is an application by the plaintiff, Lexcray Pty Limited (“Lexcray”), to stay certain summonses for taxation of costs filed by the defendant, the Northern Territory of Australia (“the Territory”), on the ground that Lexcray has been prejudiced by the Territory’s delay in prosecuting its claim for costs.
The original litigation, which involved aspects of the BTEC Scheme, was begun in 1993 and finished in 2004. It resulted in a number of costs orders in favour of the Territory.
There has been admitted delay by the Territory in enforcing those costs orders. That delay forms the basis of Lexcray’s application for a stay.
The Territory wishes to tender certain correspondence passing between the Solicitor for the Northern Territory and Lexcray and its legal advisors between 22 June 2004 and 3 March 2014. The purpose of the tender is said to be an explanation or partial explanation for that delay.
Lexcray has objected to the tender of this correspondence on the basis that it is privileged under s 131(1) of the Evidence (National Uniform Legislation) Act 2011 (“the UEA”).
The Territory submits that:
(a)the correspondence does not fall within the provisions of s 131(1);
(b)if it does, then the exceptions in any or all of s 131(2)(h), (i), (g), (b), (c) and (a)[1] apply to render those documents admissible;
(c)there has been an implied waiver of any privilege by Lexcray as a result of references to that correspondence in an affidavit of Roderick Glen MacArthur Dunbar filed on behalf of Lexcray in this proceeding.[2]
Do the documents fall within UEA s 131?
UEA s 131 provides (so far as is relevant):
Exclusion of evidence of settlement negotiations
(1)Evidence is not to be adduced of:
(a)a communication that is made between persons in dispute, or between one or more persons 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:
(a)the persons in dispute consent to the evidence being adduced in the proceeding concerned or, if any of those persons has tendered the communication or document in evidence in another Australian or overseas proceeding, all the other persons so consent; or
(b)the substance of the evidence has been disclosed with the express or implied consent of all the persons in dispute; or
(c)the substance of the evidence has been partly disclosed with the express or implied consent of the persons in dispute, and full disclosure of the evidence is reasonably necessary to enable a proper understanding of the other evidence that has already been adduced; or
…
(g)evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence; or
(h)the communication or document is relevant to determining liability for costs; or
(i)making the communication, or preparing the document, affects a right of a person; or
…
(5)In this section:
(a)a reference to a dispute is a reference to a dispute of a kind in respect of which relief may be given in an Australian or overseas proceeding;
…
The Territory submits that the entirety of the correspondence falls outside s 131: it does not concern a dispute because there was nothing left to dispute about. At the time the correspondence was exchanged, the primary litigation had concluded. Lexcray had already been ordered to pay the Territory’s costs under a number of court orders and all that remained was to fix the amount of those costs either by agreement or on taxation. The Territory submits that even the amount of those costs had been agreed and points to a letter dated 27 July 2006 (but actually apparently sent in December 2006) from Lexcray to the Territory in which Lexcray wrote in the following terms:
I refer specifically to the offer made by your Government to settle the costs issue with my family for an amount of $800,000.00. I confirm that I have agreed to accept that offer as I have no real alternative.
In those circumstances, counsel for the Territory submits that this case is exactly analogous to the case of Smith v Gould.[3]That case concerned letters to a bank written by a customer’s legal advisors and marked “without prejudice”. The letters were not offering any concession; rather they sought to persuade the bank to accept a lesser sum to discharge the customer’s debt because the customer lacked the financial means to repay. There was no evidence that the customer disputed the quantum of the debt or the bank’s entitlement to recover it. In those circumstances the court held that the letters had been mislabelled. They did not attract negotiation privilege and did not fall within the provisions of s 131(1).
Counsel for Lexcray contends that the dispute to which the letters relate concerns the quantum of costs payable by Lexcray to the Territory. Counsel points to the fact that the Territory did not issue new proceedings to enforce the supposed agreement as to the quantum of costs but filed summonses for taxation. He characterises the correspondence as comprising part of an on-going, but ultimately unsuccessful, attempt to negotiate a settlement of the quantum of the Territory’s costs. Having read the correspondence for the purposes of this voir dire, I consider that characterisation to be correct.[4] In the correspondence the Territory offered to accept $800,000 in full settlement of the costs orders, but that offer was conditional upon an agreement being reached as to repayment terms, interest rates and provision of security. Those matters were never agreed.
Counsel for the Territory submits that, in any event, since the letters concern costs orders which had been made in the principal proceeding in favour of the Territory, s 131(1) did not apply. The Territory contends that a dispute in relation to costs is not a dispute within the meaning of s 131(5) which provides:
(5) In this section:
(a)a reference to a dispute is a reference to a dispute of a kind in respect of which relief may be given in an Australian or overseas proceeding; and
…
The Territory contends that a taxation of costs is not “a dispute of a kind in respect of which relief may be given in an Australian … proceeding”.
I reject that contention. Although there is no definition of “proceeding” in the UEA, the definition of “proceeding” in s 9 of the Supreme Court Act is very wide indeed.
Proceeding means a proceeding in the court whether between parties or not, and includes:
(a)     a cause, action, suit or matter;
(b)an incidental proceeding in the course of, or in connection with, a cause, action, suit or matter;
(c)     a criminal proceeding, where the context so permits; and
(d)     an appeal.
At the very least a taxation of costs would be “an incidental proceeding in the course of, or in connection with” an action.
Returning to the definition of “dispute” in s 131(5), it seems to me that a dispute in relation to the quantum of costs payable under a court order for the payment of another party’s costs is a dispute within the meaning of that sub-section. When such a dispute arises, the party entitled to payment pursuant to the order of the court may seek relief in the form of an order of the Taxing Master fixing the sum to be paid following taxation of those costs. It seems to me that falls squarely within the definition of a dispute in s 131(5), namely “a dispute of a kind in respect of which relief may be given in an Australian … proceeding” whether that proceeding be characterised as the original proceeding under which the costs were ordered or a separate proceeding commenced by a summons for taxation filed pursuant to rule 63.36 of the Supreme Court Rules.
It seems to me also that the letters are communications between the persons in dispute in connection with an attempt to negotiate a settlement of that dispute. In the correspondence in question, the Territory offered to accept $800,000 in settlement of its entitlement to costs and sought a proposal from Lexcray in relation to terms of repayment. It repeatedly advised Lexcray that, failing agreement, the Solicitor for the Northern Territory would recommend to Cabinet that an application for taxation be made or reinstated to recover the full amount of costs owed to the Territory which it claimed would be substantially more than $800,000.
Accordingly, I find that the documents do fall within s 131(1) and that the documents may not be tendered in evidence unless one or more of the exceptions in s 131(2) apply, or Lexcray has impliedly waived any negotiation privilege by its conduct in referring to those documents in the affidavit of Mr Dunbar.
Section 131(2)(h)
Section 131(2)(h) provides that the exclusionary rule in s 131(1) does not apply if the communication or document is relevant to determining liability for costs.
Mr Young for the Territory submitted that this exclusion would apply since this entire proceeding is about determining Lexcray’s liability for costs. He submitted that there is nothing on the face of this paragraph to suggest that the phrase “relevant to determining liability for costs” should be given a narrow interpretation or construed to mean anything other than what it says.
Mr Ilkovski for Lexcray submitted that at the time the correspondence was exchanged, there was in fact no dispute in relation to Lexcray’s liability for costs. The court has already determined that Lexcray is liable to pay the Territory’s costs of the substantive proceeding (and appeals). The correspondence in question concerns the attempted resolution of the issue of the quantum of those costs. Hence those documents cannot be relevant to a determination of the liability for costs, unlike, for example, without prejudice correspondence between parties attempting to negotiate a settlement of the principal proceeding before judgment has been given, arguably the classic case for which exception in s 131(2)(h) was designed.
As Mr Ilkovski pointed out, this correspondence may well become relevant in the future in determining the liability for costs of the taxation should this matter proceed so far. Sub-rule 63.34(3) provides for parties to serve offers of compromise in respect of the amount of the costs to be taxed after service of a summons for taxation, and sub-rule 63.34(7) provides that the Taxing Master may have regard to offers of compromise on making any order for the costs of a taxation under sub-rule 63.34(4).
I agree with the analysis of this exception offered by counsel for Lexcray unless a stay of the Territory’s summons for taxation could be said to alter Lexcray’s liability for the Territory’s costs. This present proceeding is an application by Lexcray for a stay of the Territory’s taxation summonses. If, as the Territory asserts, the documents are relevant to the issue of whether or not a stay should be granted, does that mean that they are relevant to determining Lexcray’s liability for costs? In my view the answer must be no. A stay would not affect Lexcray’s liability to pay the Territory’s costs under the court orders already made. It would simply prevent the Territory from enforcing those costs orders by means of a taxation of those costs, for the duration of the stay.
In summary, in my view, the exception in s 131(2)(h) does not apply to render these documents admissible. Read in the context of the entire section, it seems to me that the exclusion in s 131(2)(h) will normally be limited to documents relevant to determining liability for costs of the dispute in relation to which the negotiation privilege relates, that is to say, the dispute which the correspondence is attempting to settle. The dispute that these letters attempted to settle was the quantum of costs payable by Lexcray under a number of court orders: the letters are not (yet) relevant to determining liability for the costs of that dispute.
Section 131(2)(i)
Section 131(2)(i) provides that the exclusionary rule in sub-section (1) does not apply if making the communication, or preparing the document, affects the right of a person.
In my view this exception does not apply. The exception in s 131(2)(i) is “directed to communications which, of themselves, have legal consequences for the rights of parties”.[5] An example would be a letter communicating acceptance of an offer to compromise. None of the letters in question is of this nature.[6]
Section 131(2)(g)
Section 131(2)(g) provides that the exclusionary rule in s 131(1) does not apply if evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence.
The Territory contends that certain parts of an affidavit of Roderick Glen MacArthur Dunbar sworn on 17 November 2014 pursuant to directions made for the filing and service of evidence to be relied on by the parties in this proceeding, is likely to mislead the court unless evidence of these documents is adduced to contradict or qualify that evidence.
Mr Dunbar refers to the correspondence in question in paragraphs 26 to 36 of his affidavit. He does not refer to the contents of any of the letters. Rather he sets out the timing of his receipt of some of the correspondence and, in relation to a letter said to have been sent to him from the Solicitor for the Northern Territory in 2007, deposes to the fact that he has no recollection of receiving that letter.[7]
In paragraph 37 Mr Dunbar says this:
In these circumstances, by 2009, I had concluded that the Northern Territory had decided not to press Lexcray for payment of any of its legal costs which might have been payable under the cost orders in its favour. I did not hear anything further from the Northern Territory or the SFNT until August 2012 when I received a letter from the SFNT dated 16 August 2012 which was also sent on a without prejudice basis (2012 letter).
In paragraph 43 of his affidavit Mr Dunbar says this:
I responded to all of the correspondence which was sent to Lexcray from the Northern Territory over the past 21 years and have not been responsible for any of this delay.
It is true, as contended by counsel for Lexcray, that the affidavit of Mr Dunbar has not yet been adduced in evidence in this proceeding. However, I am determining this particular issue [namely whether the documents are admissible in evidence under the exception in s 131(2)(g)] on the basis that that affidavit will be read and relied on at the hearing of Lexcray’s stay application. Indeed, those paragraphs appear to set out the basis for Lexcray’s stay application. (If Lexcray does not rely on that affidavit, or adduce evidence to the same or similar effect, then, presumably, Lexcray’s objection to the tender of the documents on this basis can be renewed.)
With the agreement of both parties I read the correspondence at issue for the purpose of making an assessment as to whether paragraphs 37 and 43 of Mr Dunbar’s affidavit is likely to mislead the court unless the contents of the letters is admitted into evidence to contradict or qualify the evidence of Mr Dunbar in those two paragraphs. In my opinion those two paragraphs would be likely to mislead the court if the letters are not admitted.
At paragraph 43 Mr Dunbar deposes that he responded to all of the correspondence which was sent to Lexcray from the Territory over the past 21 years and that he has not been responsible for any of the delay which has occurred. (The delay he refers to is set out in paragraph 41 of his affidavit, namely that it has been 21 years since Lexcray commenced the original claim in this court, 16 years since the trial finished, 14 years since the appeal finished and over 12 years since the summonses for taxation were filed.)

The assertion by Mr Dunbar that he has not been responsible for any of the delay, occurring as it does in the same sentence as his assertion that he responded to all of the correspondence sent to Lexcray from the Territory, is apt to give the impression that his responses were prompt and genuine responses to issues which were raised in correspondence by the Territory. Having read the correspondence it seems to me that this impression is likely to be misleading.
In paragraph 26 of his affidavit, Mr Dunbar deposes to his recollection that after the High Court refused special leave to appeal in May 2004 Lexcray did not receive any correspondence from the Territory in relation to the litigation until sometime in 2006. That appears to be borne out by the correspondence which is sought to be tendered by the Territory. The first letter in the bundle is a letter from Lexcray to the Territory dated 22 June 2004 asking the Territory not to enforce the costs orders made against Lexcray. The response to that letter, advising that Cabinet had issued instructions to seek recovery from Lexcray of what was referred to as a discounted amount of $800,000, was not sent until March 2006.
In paragraph 27 of his affidavit, Mr Dunbar says he does not recall receiving a letter from the Solicitor for the Northern Territory in 2006 and refers throughout that paragraph to “the 2006 letter”. In fact the documents which the Territory seeks to tender show that the Solicitor for the Northern Territory wrote to the solicitors for Lexcray on 3 March 2006 communicating the offer referred to above. On 25 July 2006 the Solicitor for the Northern Territory again wrote to the solicitors for Lexcray. That letter begins as follows:
I refer to the above matter and in particular my letter of 3 March 2006 proposing a settlement of the various costs orders in favour of the Northern Territory. I note that to date we have received no response to that letter.
The letter ends:
In the event we do not have your client’s response by 3 August 2006 there will be little option other than for me to report to Cabinet that the offer has been rejected and that the matter will need to be resolved through a formal taxation process.
The next contact appears to be a telephone conversation between Mr Dunbar and someone from the Solicitor for the Northern Territory. (The document at issue is a file note of that telephone conversation.)
The next communication is another letter from the Solicitor for the Northern Territory, this time to Mr Dunbar directly. That letter is dated 22 November 2006, and begins:
I refer to the above matter and in particular my letter to your solicitors dated 3 March 2006 in respect of recovery of the Territory’s costs in the above matter.
It has now been some months since you called to advise that Cridlands no longer represent Lexcray Pty Limited and that you would shortly be in touch with me with a proposal for securing or payment of the discounted amount of $800,000 sought in respect of recovery, being the amount the Territory Cabinet determined it would accept in satisfaction of the Territory’s costs.
The letter contains a similar warning to the letter of 25 July 2006:
Unless I hear from you with a proposal for payment by 15 December 2006 I will have little option but to refer the matter back to Cabinet with a recommendation that we reinstate the application for taxation of the Territory’s costs for the trial and appeal at first instance. Those costs alone are in the order of $1.5 million.
Sometime in December 2006 Mr Dunbar sent a letter to the Solicitor for the Northern Territory on behalf of Lexcray. That letter was wrongly dated 27 July 2006. It begins:
I acknowledge receipt of your letter of 22nd November 2006. I must apologise for my very slow response in this matter.
That letter refers to hardships being suffered by Mr Dunbar’s family. It contains the following paragraph:
I understand that the terms of repayment are yet to be negotiated and that some form of appropriate security needs to be agreed. I also understand that any repayment schedule is not to impede upon the viability of the family business. I confirm that I will negotiate in good faith with you on these issues.
However the letter contains no proposal for the terms of repayment or “appropriate security”.
On 14 September 2007 the Solicitor for the Northern Territory wrote to Mr Dunbar as director of Lexcray in the following terms:
I refer to the above matter and in particular my letter of 22 November 2006, and your response to this office in December 2006.
You confirmed at that time that you would advise of your proposed method of payment or the provision of security for the debt. To date, this has not occurred. I advise that I am now required to report to Cabinet with an update and I ask that you provide that information to this office immediately.
If I do not receive a response from you within 14 days of the date of this letter, I will have no choice but to report to Cabinet, as outlined to you in my letter of 22 November 2006, with recommendations that the application for taxation be re-instated to recover the full amount owed in costs to the Territory.
I can be contacted on (08) 8935 7846. I look forward to hearing from you.
Mr Dunbar has deposed that he did not receive that letter. On 14 May 2008 the Solicitor for the Northern Territory again wrote to Lexcray. That letter begins:
I refer to the above matter and in particular my letter of 22 November 2006 and 14 September 2007 and your response to this office in December 2006.
and contains the following:
In previous correspondence we have provided you with the opportunity to put forward a proposal as to how you intend to pay the costs. To date, despite your advice that you would do so, you have failed to provide us with any indication whatsoever as to how you intend to deal with payment of our costs.
The letter goes on to outline a proposal for repayment of $100,000 per annum with interest on the outstanding amount at the 180 day bank bill swap rate. That letter again contains the following warning:
In the event that we do not receive a response by 30 June 2008 I intend to report to Cabinet, without further recourse to you, that the offer of compromise has been rejected by Lexcray and the matter will need to be referred for taxation.
In response to this letter, by letter dated 29 June 2008, Mr Dunbar wrote to the Solicitor for the Northern Territory. That letter advises that Mr Dunbar did not receive the letter of 14 September 2007 and requests a copy. It goes on:
As I have not received your communication of 14^th September last, I have no idea what opportunity you provided for me to propose how to pay the $800,000.00. As I have had no communication from you since 2006, I had reached the conclusion that the Crown, in its Northern Territory form, had decided to release my family from having to pay the costs order which we think would be fair and just and equitable considering the circumstances in this matter.
The letter goes on to complain that interest ought not to be charged on the outstanding debt and to propose repayment “when and if the real property of Nutwood Downs is sold out of the Dunbar family at some future date”. It continues for many pages mostly setting out Mr Dunbar’s opinions about why Lexcray ought to have been successful in the original litigation.
The Solicitor for the Northern Territory responded to this letter by email in the following terms:
I confirm receipt of your email and attachments, sent on 29 June 2008. I will seek instructions from my client and provide a response as soon as possible.
The next letter is dated 16 August 2012, a little over four years later, from the Solicitor for the Northern Territory to Mr Dunbar. There follows a letter from Mr Dunbar to the Solicitor for the Northern Territory and two further letters from the Solicitor for the Northern Territory to Mr Dunbar.
The letters from the Solicitor for the Northern Territory to Lexcray’s solicitors dated 3 March 2006 and 25 July 2006 and the letter from the Solicitor for the Northern Territory to Mr Dunbar dated 22 November 2006 contradict Mr Dunbar’s assertion in paragraph 43 of his affidavit that he responded to all of the correspondence which was sent to Lexcray from the Territory over the past 21 years. Without the letters that assertion would certainly be misleading – as, in my view, would his reference in paragraph 27 to “the 2006 letter”: the Solicitor for the Northern Territory wrote three letters to Mr Dunbar or his solicitors in 2006 before receiving a response from Mr Dunbar approximately nine months after the first such letter.
Further, if the Court were invited to draw an inference from what Mr Dunbar says in paragraph 43 of his affidavit that he had responded meaningfully to all communications from the Territory (or determined to draw such an inference), it seems to me that that too is likely to be misleading unless qualified by reference to the contents of the correspondence. For example, the letter from the Solicitor for the Northern Territory to Mr Dunbar dated 22 November 2006 invites Mr Dunbar to put a proposal for repayment by 15 December 2006, failing which the writer will recommend reinstating the application for taxation of the Territory’s costs. Mr Dunbar responded in December 2006 (in a letter dated 27 July 2006) with a simple acknowledgement that the terms of repayment are yet to be negotiated and not with a proposal of any kind.
Further, all of these matters together, it seems to me, are a necessary qualification to Mr Dunbar’s assertion that he has not been responsible for any of the delay and without this correspondence, that statement is likely to be misleading. Accordingly, in my view, if the affidavit of Mr Dunbar is adduced in evidence (or evidence to similar effect is adduced in the plaintiff’s case) the correspondence sought to be tendered by the Territory is admissible under the exception to the exclusionary rule in s 131(1) set out in s 131(2)(g).
Having come to that conclusion it is not necessary for me to consider the other arguments in relation to admissibility. However, I will deal with those for completeness.
Section 131(2)(b) and (c)
Section 131(2)(b) provides that the exclusionary rule in s 131(1) does not apply if the substance of the evidence has been disclosed with the express or implied consent of all the persons in dispute. Section 131(2)(c) provides that the exclusionary rule does not apply if the substance of the evidence has been partly disclosed with the express or implied consent of the persons in dispute and full disclosure of the evidence as reasonably necessary to enable a proper understanding of the other evidence that has already been adduced.
The Territory contends that by referring to the correspondence in his affidavit, Mr Dunbar, on behalf of Lexcray, has either disclosed or partly disclosed the substance of the evidence. The Territory also submits, essentially for the same reasons advanced in relation to the exclusion in s 131(2)(g), that full disclosure of the correspondence is reasonably necessary to enable a proper understanding of the other evidence that has already been adduced.[8]
Counsel for Lexcray submits that there is a big difference between disclosing the fact or the existence of correspondence and disclosing the substance or content of the correspondence. In his affidavit, Mr Dunbar refrained (in his counsel’s submission, carefully refrained) from alluding at all to any of the content of the correspondence and so cannot be said to have even partially disclosed the substance of the evidence which the Territory seeks to adduce by tendering those letters. If it were necessary for me to decide, I would be inclined to conclude that, the content of the documents not having been disclosed, even in part, the exceptions in s 131(2)(b) and (c) would not apply to render the contents of the correspondence admissible.
Section 131(2)(a): Implied consent/ waiver of privilege
The Territory further contends that the exception in s 131(2)(a) would apply. Section 131(2)(a) provides that the exclusion in s 131(1) does not apply where (inter alia) the persons in dispute consent to the evidence being adduced in the proceeding concerned. The Territory contends that Lexcray’s consent to the correspondence being adduced in evidence should be implied from its conduct in referring to the correspondence in paragraphs 26 to 36 of Mr Dunbar’s affidavit, and (importantly) Mr Dunbar’s asserted reliance on it to draw conclusions about whether the Territory would be pursuing costs in paragraph 37:
In these circumstances, by 2009, I had concluded that the Northern Territory had decided not to press Lexcray for payment of any of its legal costs which might have been payable under the cost orders in its favour.
Counsel for the Territory submitted that Mr Dunbar’s state of mind, said in the affidavit to have been formed in response to the correspondence (or the timing of the correspondence), is a key fact relied upon by Lexcray in its application for a stay of the summonses for taxation, and that this issue is incapable of fair resolution without reference to the content of the correspondence.
In making this submission, counsel for the Territory relied on common law principles on the waiver of legal professional privilege. A person impliedly waives legal professional privilege where the conduct of the person is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect, such inconsistency being informed, where necessary, by considerations of fairness in all the circumstances of the particular case, but not some overriding principle of fairness operating at large.[9] Disclosure of legal advice for the purpose of explaining or justifying the client’s actions, will waive privilege if such disclosure is inconsistent with the confidentiality which the privilege serves to protect.[10] Legal professional privilege may also be waived where a plaintiff, by its pleading, puts its state of mind in issue, and where that state of mind is, or may have been, informed or affected by legal advice.[11]
Care needs to be taken in attempting to apply cases on waiver of legal professional privilege to situations, such as the present, involving negotiation privilege. The two kinds of privilege serve to protect different public interests[12] and are governed by different provisions of the UEA. The provisions relating to legal professional privilege are contained in UEA Part 3.10 Division 1 (ss 117 to 126). Crucially s 122(2) provides that that Division does not prevent the adducing of evidence if the party concerned has acted in a way that is inconsistent with that party’s objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in s 118, 119 or 120 (in other words, if the party has acted in a way inconsistent with the maintenance of the confidentiality protected by the Division).
The provisions relating to negotiation privilege are found in s 131. While s 122(1) contains a provision which is equivalent to s 131(2)(a), providing that the exclusionary rule does not prevent the adducing of evidence by consent, there is no equivalent in s 131 to the exception to the exclusionary rule in relation to legal professional privilege contained in s 122(2). That means that statements of principle enunciated in cases on legal professional privilege are not necessarily applicable in their entirety to cases concerning whether there has been a loss of negotiation privilege.
Counsel for Lexcray submitted that there had been no implied consent by Lexcray to adducing the documents in evidence. He submitted that Mr Dunbar had been careful not to refer to the contents of the correspondence in his evidence showing that he was mindful of the privilege now existing by virtue of s 131(1). He also submitted that the conclusion drawn in paragraph 37 of Mr Dunbar’s affidavit (set out at [54] above) does not follow from the contents of the correspondence, but from the course of negotiations and their stop start nature. He submitted that that is what Mr Dunbar was referring to in saying that “in these circumstances” he had concluded that the Territory had decided not to press Lexcray for payment of any of its legal costs.
If the principles in Mann v Carnell are applicable, in my view their application would lead to a conclusion that there had been an implied waiver of the privilege in the documents in question. It seems to me that by his reference to the correspondence and his assertion that “in these circumstances” by 2009 he had concluded that the Territory had decided not to press Lexcray for payment of any of its legal costs, Mr Dunbar is impliedly inviting the Court to infer that there is something about the correspondence that led him to reach that conclusion, or at the very least that there was nothing in the correspondence which did or should have alerted him to the fact that the Territory was not waiving payment of its costs. That, it seems to me would be inconsistent with the maintenance of confidentiality in the documents.
The focus in Mann v Carnell is on conduct which is inconsistent with the maintenance of confidentiality – words apt to describe the exception to the exclusionary rule set out in s 122(2) which is not present in s 131. Counsel for the Territory relied on Telstra Corporation Ltd and Another v BT Australasia Pty Ltd and Another[13] (which preceded Mann v Carnell) for the proposition that the same principles apply to a consideration of the exception in s 131(2)(a).
Telstra v BT Australasia concerned an application for inspection of documents over which the respondents claimed legal professional privilege. After holding that common law principles relating to the waiver of legal professional privilege continue to apply as the UEA provisions apply only to the adducing of evidence, the Full Federal Court went on to consider the scope of s 122(1) which, like s 131(2)(a), allows otherwise privileged material to be adduced in evidence by consent. The majority[14] held that that exception was not limited to express consent but extended to consent that could be imputed to a party as a result of that party’s conduct[15] – in Telstra v BT Australasia putting in issue in its pleading its state of mind when that state of mind had been materially contributed to by otherwise privileged legal advice. If not identical, such a test would have considerable overlap with the principles enunciated in Mann v Carnell.[16]
If the exception to the exclusionary rule in s 131(2)(a) is to be given a similarly wide construction, it seems to me that s 131(2)(a) would apply in the circumstances to render the correspondence admissible, essentially for the same reasons set out at [59] above. Lexcray’s consent to the documents being adduced in evidence would be imputed from the reference to the course of the correspondence in Mr Dunbar’s affidavit and his assertion that “in these circumstances” by 2009 he had concluded that the Territory had decided not to press Lexcray for payment of any of its legal costs. This invites the Court to infer that there is something about the correspondence that led Mr Dunbar to reach that conclusion, or at the very least that there was nothing in the correspondence which alerted him to the fact that the conclusion was not warranted. However, it is not necessary for me to decide whether s 131(2)(a) should be construed in this fashion as I have already found that, although the documents fall within the general exclusionary rule in s 131(1), they are rendered admissible by the exception to that rule in s 131(2)(g).

[1] These are set out in the order in which they were argued, rather that the order in which they appear.

[2] This overlaps with the Territory’s contention based on s 131(2)(a).

[3] [2012] VSC 210

[4] Some of the correspondence from Lexcray (notably the first letter written in 2004) is akin to the correspondence at issue in Smith v Gould, in that it is seeking a concession – waiver of all costs orders – rather than seeking to negotiate a compromise. However, it is convenient to treat the correspondence as an ongoing exchange – and to examine the purpose and effect of the whole sequence. The Territory did not seek to have individual letters (such as the first Lexcray letter) admitted as falling outside s 131(1), but was content for the whole bundle to be admitted or excluded together.

[5] Ryder v Frohlich [2006] NSWSC 1324 at [7]

[6] Despite the fact that the Territory submitted that the quantum of costs had been agreed, putting forward the letter wrongly dated 27 July 2006 as containing such agreement, as explained above it is not contended by either party that there was a concluded agreement in relation to the quantum of costs and the Territory is not seeking to enforce in this proceeding any such concluded agreement.

[7] He says as much in his letter to the Solicitor for the Northern Territory dated 29 June 2006 and apparently sent in December 2006 in which he asks for a copy of the 2007 letter which had been referred to in the letter from the Solicitor for the Northern Territory sent to him in May 2008.

[8] No evidence has as yet been adduced. As outlined above I am determining the admissibility of these documents on the basis that the affidavit of Mr Dunbar – or evidence to similar effect - will be read and relied on by the plaintiff.

[9] Mann v Carnell (1999) 201 CLR 1 at 13 (per Gleeson CJ, Gaudron, Gummow and Callinan JJ); Goldberg v Ng (1995) 185 CLR 83 at 96 (per Deane, Dawson and Gaudron JJ)

[10] Mann v Carnell (1999) 201 CLR 1 at 15 (per Gleeson CJ, Gaudron, Gummow and Callinan JJ)

[11] Liquorland (Australia) Pty Ltd & Anor v Anghie & Anor and Anghie & Ors v Liquorland (Australia) Pty Ltd & Anor (2003) 7 VR 27 and DSE (Holdings) Pty Ltd v Intertain Inc (2003) 127 FCR 499; Savage & Ors v Modern Mustering Pty Ltd & Ors [2014] NTCA 06

[12] In the case of negotiation privilege the public interest is in encouraging settlement of disputes.

[13](1998) 156 ALR 634

[14]Branson and Lehane JJ

[15]at p 648 - 649

[16] It seems to me that, depending on the facts of the individual case, there is also likely to be considerable overlap between the principles enunciated in Mann v Carnell and matters relevant to determining whether the exception in s 131(2)(g) applies.