Mercantile Mutual Custodians Pty Ltd v Village Nine Network Restaurants & Bars Pty Ltd

[1998] QSC 183

IN THE SUPREME COURT

OF QUEENSLAND  No. 1823 of 1996

Brisbane

[Mercantile Mutual Custodians Pty Ltd v Village Nine Network Restaurants & Bars Pty Ltd & Ors]

BETWEEN:

MERCANTILE MUTUAL CUSTODIANS PTY LTD
  (A.C.N. 008 508 496)
  Plaintiff

AND:
  VILLAGE NINE NETWORK RESTAURANTS & BARS PTY LTD
  (A.C.N. 061 400 799)
  First Defendant

AND:
  VILLAGE ROADSHOW LIMITED
  (A.C.N. 010 672 054)
  Second Defendant

AND:
  PUBLISHING AND BROADCASTING LIMITED (formerly
  NINE NETWORK AUSTRALIA LIMITED)
  (A.C.N. 009 071 167)
  Third Defendant

CATCHWORDS:     PRACTICE - Surrejoinder - Whether plaintiff should deliver a surrejoinder - Order 27 rule 2 - "without prejudice" privilege - whether documents prepared for a mediation can be disclosed to a non-party to the mediation

Counsel:  Mr D. Jackson QC, with him Mr P. Freeburn, for the Plaintiff.

Mr J. Middleton QC, with him Mr S.M. Anderson, for the Defendants.

Solicitors:  R.W.T. Mann & Partners for the Plaintiff.

Lees Marshall Warnick for the Defendants.

Hearing Dates:  23 October, 1997

REASONS FOR JUDGMENT - MOYNIHAN J.

Judgment delivered 11 September, 1998

1  The defendants raised three issues for determination in these applications.  The first is whether the plaintiff should be required to deliver a surrejoinder, secondly whether documents in respect of a mediation between the plaintiff and Concrete Constructions (Group) Limited (Concrete Constructions) are privileged and thirdly whether certain documents are the subject of legal professional privilege.

2  The plaintiff sues the defendants for breach of an agreement for lease in which it was the lessor and the defendants the lessees.  Essentially the plaintiff's complaint is that the defendants failed to proceed expeditiously in planning, obtaining necessary approvals and effecting alterations in fitting-out the premises to be occupied by the plaintiff.  Concrete Constructions (Group) Limited was the head contractor in respect of works to effect the agreement for lease.

3  The case is not one in which the plaintiff should be required to deliver a surrejoinder, this was virtually accepted by the defendant's counsel. Order 27 Rule 2 provides to the effect that there should be no pleading subsequent to a reply other than a joinder of issue and that any pleading should be by leave and on such terms as the court or a judge thinks fit.  Surrejoinders are among the pleadings which have vanished from practice.[1]  Norris v. Beasley[2] indicates that leave to deliver a rejoinder or subsequent pleading will not be granted unless it is necessary in order to raise matters which must be specifically pleaded.  In the present case it is true that the rejoinder raises issue estoppel, but the allegations are deemed to be denied by the operation of Order 31 Rule 12 (2) and will have to be proved by the plaintiff.

[1] Ryan, Weld & Lee Queensland Supreme Court Practice Volume 1, 4873; White Practice (1998) 266; Williams Civil Procedure in Victoria 2955; Harry v. Davey (1876) 34 LT 842.

[2]Norris v. Beasley (1877) 35 LT 845.

4  It is true that meetings and documents are pleaded as particulars but a party is not required to plead to particulars.[3]   In any event it is clear that these meetings are contentious matters.

[3] Pinson v. Lloyds and National Provincial Foreign Bank Ltd (1941) 2KB 72 at 75.

5   There is little prospect that a surrejoinder would provide any useful admissions.  In the circumstances delivery of a surrejoinder would not appear to serve any useful purpose and cannot be said to be required in the sense in which that word is used in the authorities.

6  The second issue arises out of a direction made by consent that the plaintiff:-

"Make further disclosure by filing and serving an affidavit or affidavits verifying according to the fact that documents with respect to a mediation that occurred between the plaintiff and Concrete Constructions Group Limited ("CC") in respect of the Lessors Works conducted by CC on the QAB (Queen Adelaide Building) are privileged, stating the basis for that privilege and identifying the categories or classes of documents in respect of which the claims are made."

7  An officer of the plaintiff swears that the plaintiff has in its possession or control 13 categories of  documents relating to a mediation between the plaintiff and Concrete Constructions in respect of the lessor's works carried out by Concrete Constructions on the Queen Adelaide Building (the subject of the agreement to lease).  The plaintiff objects to the production of any documents which may be directly relevant to the categories or classes.  This is on the basis that the documents are privileged as being "without prejudice" being for the purpose of a mediation designed to seek to resolve the dispute between the plaintiff and Concrete Constructions.  The defendants were not parties to the mediation but have now obtained, by third party discovery, documents indicating that the mediation led to a compromise between the plaintiff and Concrete Constructions involving a payment by the plaintiff and agreement by Concrete Constructions to rectify defects or to pay the reasonable costs of that rectification.    

8  The relevance of the documents in question is assumed for the purpose of determining whether the privilege protects the plaintiff from disclosure to the defendants who were not party to the settlement endeavours reflected in the mediation or the subsequent compromise.

9  Without prejudice privilege was originally a rule governing the admissibility of evidence on the basis of protecting admissions made in the course of genuine negotiation from being received in evidence to the detriment of the party making them.  The basis of the privilege stated in the joint judgment of Dixon CJ, Webb, Kitto and Taylor JJ in Field v. Commissioner for Railways (NSW)[4]:-

"As a matter of policy the law has long excluded from evidence admissions by word 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 on 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 expresser implied admissions.  It covers admissions by words or conduct.  For example, neither party can use the readiness of the other to negotiate as an implied admission.  It is not concerned with objective facts which may be ascertained during the course of negotiations.  These may be proved by direct evidence.  But it is concerned with the use of the negotiations or what might be said in the course of them as evidence by way of admission.  For some centuries almost it has been recognised that parties may properly give definition to the occasions when they are communicating in this manner by the use of the words "without prejudice" and to some extent the area of protection may be enlarged by the tacit acceptance by one side of the use by the other side of those words...the question, however, does not depend altogether upon the expectations of the parties.  It depends on what formed part of the negotiations for the settlement of the action and what was reasonably incidental thereto".

[4](1957) 99 CLR 285 at 291.

10                   In Rush & Tomkins Ltd[5] without prejudice communications between the plaintiffs and the first defendant in the action resulted in them reaching a compromise as a consequence of which the plaintiffs discontinued the action against the first defendant.  The terms of the settlement were disclosed to the second defendant but they did not show what valuation had been put on the second defendant's claim.  The second defendant sought disclosure by the plaintiff of the without prejudice correspondence which the plaintiff conceded might be relevant to the issues between it and the second defendants, but which it refused to discover on the ground that it was privileged.  The House of Lords held that the general public policy protecting admissions made in the course of genuine negotiations protected disclosure to third parties.

[5]Rush & Tomkins Ltd (1989) 1 A.C. 1280.

11                   Lord Griffiths, with whose speech the other members agreed, was at pains to point out that the purpose of the rule, the public policy justification for which was to promote settlements, was to protect a litigant from being embarrassed by an admission made purely in an attempt to achieve settlement.  He rejected a proposition that the privilege ceased with the settlement but pointed out that the protection was from the consequence of admissions against interest.  Thus without prejudice material could nevertheless be resorted to to determine whether, for example, negotiations had resulted in an agreement, to establish an act of bankruptcy or to establish by admission "an independent fact" in no way connected with the merits of the case.[6]  After an examination of the English and Canadian authorities, Lord Griffiths said:-

"I have come to the conclusion that the wiser course is to protect "without prejudice" communications between parties to litigation from production to other parties in the same litigation.  In multi-party litigation it is not an infrequent experience that one party takes up an unreasonably ... attitude that makes it extremely difficult to settle them.  In some circumstances it would, I think, place a serious fetter on negotiations between other parties if they knew that everything that passed between them would ultimately have to be revealed to the one obdurate litigant...In my view the general public policy that applies to protect genuine negotiations from being admissible in evidence should also be extended to protect those negotiations from being discoverable to the third parties".

[6]See 1300 and 1301.

12                   In Quad v. Bleakley[7]  Hill J. of the Federal Court dealt with a subpoena by an applicant not a party to without prejudice negotiations for the production of notes of the negotiations.  He held to the effect that the documents were protected to the extent to which they contained admissions connected with the subject matter of the negotiation, but that the protection did not apply to unrelated matters.  Thus discovery was ordered of the notes with those parts which "truly concerned the offer to settle" deleted.

[7]Quad Consulting Pty Limited v. David R. Bleakley & Associates Pty Limited (1991) 27 FCR 86.

13                   Similarly in AustoTel v. Jamieson[8] the respondent to an action sought an order for discovery by the applicants of all documents relating to any agreement by which the applicant's claim against a former respondent had been compromised.  The respondents argued that the applicants were obliged to mitigate their loss and that if they discontinued their claim or had received compensation, their claim against the continuing respondents who sought disclosure must be affected.  An order was made that the terms of the compromise be disclosed but reflecting that correspondence "within the true scope of the negotiations" was privileged.

[8]AustoTel Management Pty Limited & Another v. Jamieson & Others (1995) 57 FCR 411.

14                   While it is true that privilege on what is conveniently referred to as a without prejudice basis was originally a rule governing inadmissibility of evidence; Rush⁵, Quad⁷ & AustoTel⁸ are all cases where a party to the action not participating in negotiations sought access, for the purpose of trial preparation, to material generated in compromise negotiations but was refused.  This is consistent with the policy of protecting a party from what would otherwise be the consequences of an admission and so encouraging negotiation, whether facilitated by a mediator or not, and compromise.

1. Cases cited by the defendants involving the disclosure of commercially sensitive confidential material to a commercial rival seem to me to involve different consideration to those involving the fostering of negotiated resolutions of cases by precluding the use of admissions.  Mobil Oil Australia v.Guina Developments[9] and Mackay Sugar v. CSR Ltd[10] are cases in the former category.  The balance there is between the destruction of  the purpose of confidentiality once information is known to a trade rival and the need for the rival to have access to information to advance its case or meet that against it.  Even in cases where confidential information goes "to the heart of the case" in appropriate circumstances disclosure can be restricted to counsel, solicitors and nominated experts as Mobil Oil illustrates.  Such considerations are hardly to the point when the issue is precluding, in the public interest to facilitate the resolution of disputes, resort to what might otherwise be regarded as admissions contrary to a party's interest.  Similarly the arbitration cases such as Dolling-Baker v. Merrett & Anor[11] and Esso Australia v. Plowman[12] do not seem to me to be in point.  They are considered with the implication of confidentially flowing from an agreement to arbitrate and the consequences attaching to documents produced compulsorily pursuant to the direction of an arbitrator.  The considerations which arise in the present circumstances are different.

   [9] Mobil Oil Australia Pty Ltd v. Guina Developments Pty Ltd & Another (1996) 2 VR 34.

   [10]Mackay Sugar Co-operative Association Ltd & Ors. v. CSR Ltd (1996) 137 ALR 183.

   [11]  Dolling-Baker v. Merrett & Anor (1990) WLR 1205.

   [12] Esso Australia Resources Ltd & Others v. Plowman (Minister for Energy & Minerals) & Others (1995) 128 ALR 391.

   16                  It remains to note that as Quad⁷ and AustoTel⁸ illustrate the privilege under consideration here is limited to admissions which are truly concerned with negotiation and settlement.  As I understand it I am not concerned with the application of that restriction to the documents the subject of the claim.

   17                   The objection on the basis of without prejudice privilege, so far as I am presently required to determine it, is in my view well taken.

   18                  I have reviewed the documents identified in the affidavit of Ralph Thomas Mann the plaintiff's solicitor of 18 June, 1997 which remain the subject of a claim of legal professional privilege and am satisfied that they are properly the subject of such a privilege.

   19                   The defendants' summons is dismissed.