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

[1999] QCA 276

IN THE COURT OF APPEAL	99.276
SUPREME COURT OF QUEENSLAND

Appeal No. 9315 of 1998

Brisbane

[Village/Nine Network & Ors v Mercantile Mutual]

BETWEEN:

MERCANTILE MUTUAL CUSTODIANS

PTY LTD (ACN 008 508 496)

(Plaintiff) Respondent

AND:

VILLAGE/NINE NETWORK RESTAURANTS

& BARS PTY LTD (ACN 061 400 799)

(First Defendant) First Appellant

AND:

VILLAGE ROADSHOW LIMITED

(ACN 010 672 054)

(Second Defendant) Second Appellant

AND:

PUBLISHING AND BROADCASTING LIMITED
(formerly NINE NETWORK AUSTRALIA LIMITED)

(ACN 009 071 167)

(Third Defendant)	Third Appellant
McMurdo P Pincus JA Byrne J

Judgment delivered 12 October 1999

Separate reasons for judgment of each member of the Court, each concurring as to the order made

APPEAL DISMISSED WITH COSTS

CATCHWORDS:	PRACTICE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - PRODUCTION AND INSPECTION - GROUNDS FOR RESISTING PRODUCTION - OTHER GROUNDS - without prejudice privilege - application by A against B
for disclosure of documents in mediation between B and C - whether documents protected against disclosure by without prejudice privilege - scope of privilege - validity of distinction between admissions and assertions - whether privilege available against third party - whether documents sought relevant to issues raised in suit between A and B
Barden v Barden (1921) 21 SR(NSW) 588 Compagnie Financiere du Pacifique v Peruvian Guano Co (1882)

11 QBD 55

Field v Commissioner for Railways (NSW) (1957) 99 CLR 285
Harrington v Lowe (1996) 190 CLR 311
Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512

Permanent Finance Corporation Limited v Europacific (Plant

Hire) Pty Ltd (No 2) [1971] Qd R 302

Rabin v Mendoza & Co [1954] 1 WLR 271
Rush & Tompkins Ltd v Greater London Council [1989] AC 1280

Tenstat Pty Ltd v Permanent Trustee Aust Ltd (1992) 28 NSWLR

625

Waldridge v Kennison (1794) 1 Esp 143; 170 ER 306

Supreme Court Rules, O 35, r 4(1)(b)

Uniform Civil Procedure Rules, rr 5 and 211(1)(b)

Counsel:	Mr S K Wilson QC and Miss C F McMillan for the first, second and third appellants Mr D J S Jackson QC and Mr P Freeburn for the respondent
Solicitors:	Herbert Geer & Rundle for the first, second and third appellants R W T Mann & Partners for the respondent
Hearing Date:	2 August 1999

1. McMURDO P: I have read the reasons for judgment of Pincus JA and agree that the

   appeal should be dismissed with costs for the reasons he has given.

2. I have also read the reasons for judgment of Byrne J and wish to note my general agreement

   with those reasons.

3. PINCUS JA: This is an appeal from an order made by Moynihan J dismissing an

   application for disclosure of documents. The documents of which disclosure was sought were

   generated for the purposes of a mediation conducted by Mr K Hinds which resulted in settlement

   of a dispute between the respondent which is the plaintiff in this action ("Mercantile Mutual") and

   a company called Concrete Constructions Group Pty Ltd; the mediation produced a settlement of

   the dispute. The issues raised before this Court were the extent to which the documents I have

   mentioned were protected on the basis that they came into existence for the purpose of "without

   prejudice" discussions to settle a dispute and, secondly, whether the documents sought are relevant

   to the issues raised in this suit.

4. In 1994 Mercantile Mutual made an agreement with the first defendant in the suit, now the

   first appellant ("Village/Nine Network") under which Village/Nine Network was to take a lease of

   part of the Queen Adelaide Building in central Brisbane. Under the agreement work was to be

   done on that building for Mercantile Mutual, and Village/Nine Network was ultimately to take a

   lease of a substantial part of the building from Mercantile Mutual. On 16 February 1996 Mercantile

   Mutual purported to rescind the agreement and shortly after that brought the action in which this

   question of disclosure is raised. It sued Village/Nine Network and also sued the second and third

   appellants, as guarantors. Mercantile Mutual's case is that it was entitled to rescind the agreement

   because of a prior repudiation by Village/Nine Network and it has pleaded that as a result of that

   repudiation it suffered loss, flowing from the failure of Village/Nine Network to take a lease as the

   agreement contemplated. It appears that that alleged loss consists principally in the difference

   between the rental Mercantile Mutual would have received under the lease to Village/Nine Network and the rental it has received and will receive from substitute tenants. Further, the plaintiff says it

   is entitled under the agreement to "differential costs of construction", being extra building costs

   incurred by Mercantile Mutual as a result of the failure of Village/Nine Network to carry out the

   agreement. Concrete Constructions Group Pty Ltd had contracted with Mercantile Mutual to do

   work on the Queen Adelaide Building being that contemplated by Mercantile Mutual's contract with

   Village/Nine Network.

5. The mediation to which I have referred had to do with payment for that work and dealt,

   according to an affidavit of Mr R W T Mann dated 21 July 1999, with issues set out in certain

   documents identified in that affidavit. It was suggested in argument on behalf of the appellants that

   perhaps there are documents in existence identifying the mediation issues, other than those

   mentioned in Mr Mann's affidavit, but the deponent swears in para 6 of that affidavit that the

   documents referred to in it describe the issues the subject of the mediation. There being no reason

   advanced to reject what Mr Mann says, the appeal must be decided on the basis that all the

   documents describing the issues in the mediation are set out in Mr Mann's affidavit and more

   particularly in Exhibit RWTM 4 to that affidavit. That exhibit consists of copies of the relevant

   documents.

6. As I have explained, there were two questions argued before us, one being relevance and

   the other the "without prejudice" point. The matter was argued below on the foundation that only

   the "without prejudice" point would be decided, the question of relevance being left to be decided,

   if necessary, later. But before us Mr D J S Jackson QC, who led Mr Freeburn for the respondent,

   made submissions on the question of relevance and they were answered in the reply of Mr S K

   Wilson QC, who led Ms McMillan, for the appellants. It was contended for the appellants that further discovery might well bring to light documents other than those identified by Mr Mann's

   affidavit, evidencing the scope of the mediation. However, the affidavit is sufficient answer to that

   contention. Mr Wilson also argued that there might be other documents, among those used in the

   mediation process, which would assist the Village/Nine Network case.

7. At the time of the hearing below the scope of disclosure was governed, so far as relevance

   is concerned, by O 35 r 4(1)(b) of the Supreme Court Rules which restricted disclosure to

   documents "directly relevant to an allegation in issue in the cause"; that was so because the writ was

   issued after 1 May 1994. Rule 211(1)(b) of the Uniform Civil Procedure Rules 1999 makes

   provision to the same effect as O 35 r 4(1)(b). The law in this State differs from that laid down by

   Brett LJ in Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55, in

   that if a document is not "directly relevant" to an allegation in issue it need not be disclosed. It is not

   enough, to justify an order for disclosure, to hold the opinion that "it is reasonable to suppose [that

   the document] contains information which may - not which must - either directly or indirectly

   enable the party requiring the affidavit either to advance his own case or to damage the case of his

   adversary". Nor, if a document sought is not directly relevant to an allegation in issue, does it matter

   whether or not it "is a document which may fairly lead [the party requiring discovery] to a train of

   inquiry, which may have either of these two consequences": see per Brett LJ at 63.

8. No doubt this deliberate narrowing of the obligation to provide disclosure makes it all the

   more important that practitioners and their clients earnestly fulfill their obligations under the rules

   relating to the topic; but drawing attention, as Mr Wilson does, to a chance that a particular

   category of undisclosed documents may help one side's case will not necessarily provide a basis for

   an order for further disclosure.

9. Mr Wilson argued that the undisclosed mediation documents might reveal how the amount

   agreed to be paid by Mercantile Mutual under the settlement, $1.8M, was arrived at. He said that

   by this means the appellants could be placed in a position to raise valid arguments about the

   damages claimed, either to show that the sums claimed in this suit include amounts which have, by

   a set-off, already been recovered by Mercantile Mutual, or to assist the appellant's case with

   respect to mitigation of loss. As to the former point, it would not accord with the practice of the

   Court to make an order for further disclosure merely because of the possibility that the disclosure

   already made is insufficient. As to the latter, it is pointed out on behalf of the respondent that the

   particulars delivered by the appellants relating to failure to mitigate loss include no allegation that the

   respondent was at fault in respect of its dealings with Concrete Constructions.

10. Mr Wilson argued further, more generally, that the mediation process might well have

    produced documents containing assertions of fact which could assist the cause of the appellants.

    No doubt that is so; a mediation document could possibly record that the respondent put forward

    a proposition inconsistent with, or difficult to reconcile with, one advanced by it in the present

    action. But this suggestion is not enough, in my view, to show relevance. The former inflexible

    approach to applications for further discovery (see Permanent Finance Corporation Limited v

    Europacific (Plant Hire) Pty Ltd (No 2) [1971] Qd R 302 at 315) is no longer necessarily

    appropriate, under the current disclosure system, and because of the notions expressed in r 5 of the

    Uniform Civil Procedure Rules. If it appeared, for example, that an order for further disclosure

    would be likely to "facilitate the just and expeditious resolution of the real issues", that would enable

    and perhaps require the making of such an order. But there must, at least in the ordinary case, be

    something more than mere suspicion, to justify granting relief to a party complaining of incomplete
    disclosure.

11. On the arguments presented to us, then, it does not appear that the appellant could succeed

    on the issue of relevance - i.e. on the issue whether there was ground for thinking that disclosable

    documents, privileged or not, had not been disclosed. Despite the course which matters took at

    the hearing before us, however, I am of opinion that it might be unfair to the appellants to dispose

    of their appeal on that ground. The case was argued below on the assumption that, subject to the

    question of privilege, there were documents which would require disclosure, the correctness of that

    assumption being left for later determination; if the appeal were to be dismissed solely on the

    ground that there was no reason to think that there are undisclosed relevant documents, the

    appellants might well think themselves to have been ill used. However, the question of relevance

    is related to that of privilege, for reasons I shall try to explain.

    Privilege

12. I turn to the question whether the respondent's claim of privilege, upheld below, should have

    the same fate here. Mr Wilson, for the appellants, urged upon us the view that none of the

    documents relating to the mediation were privileged, because the relevant sort of privilege - "without

    prejudice" privilege - is not available other than against a party to the dispute which led to the

    "without prejudice" communications. Mr Wilson said that if that was rejected, he relied on the

    narrower argument that only documents constituting admissions should be held subject to privilege.

13. As the law has developed, "without prejudice" privilege is not absolute, but subject to

    exceptions. The basic principle is that negotiations to settle disputes are "without prejudice" and

    therefore protected from disclosure; documents forming part of the negotiations need not be

    disclosed, nor may evidence be led about them. The main reason for this rule is to encourage compromises: Field v Commissioner for Railways (NSW) (1957) 99 CLR 285 at 291,

    Harrington v Lowe (1996) 190 CLR 311 at 323. It has I think been said that privilege is a

    sensitive bird which when abused takes flight; but the exceptions to the rule go further than the

    metaphor implies. Various suggestions are to be found in the cases as to the fundamental basis of

    the exceptions, the most prominent being that statements that are relevant simply because made,

    irrespective of their truth, are not protected: Muller and Muller v Linsley and Mortimer, as partly

    reported in D Foskett "The Law and Practice of Compromise", 4th ed, Sweet & Maxwell, 1996

    at pp 157 and 158; see also the reference to "an objective act having legal consequences" in

    Tenstat Pty Ltd v Permanent Trustee Aust Ltd (1992) 28 NSWLR 625 at 633. Secondly, there

    is the distinction between admissions and assertions, on which the appellants rely.

14. Authority exists which supports the latter proposition, the chief of which is Field v

    Commissioner for Railways (NSW) (above) at 291-292:

    "This form of privilege, however, is directed against the admission in evidence of

    express or 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 is said in the course of them

    as evidence by way of admission".

15. This tends to give plausibility to the appellants' contention that the privilege is confined

    absolutely to documents which constitute admissions, but the passage should not necessarily be

    given that effect. It was held in Field that evidence could be adduced against a plaintiff, in a claim for damages for personal injuries, of a statement made to a doctor as to how the plaintiff suffered

    his injury. Perhaps surprisingly, the court took the view that such a statement, made in the course

    of a medical examination for the purpose of "without prejudice" negotiations, was not "fairly

    incidental to the purpose of the negotiations". (293) The case has, as to its outcome, some broad

    resemblance to Waldridge v Kennison (1794) 1 Esp 143; 170 ER 306, a warning against the

    extension of which was given in Rush & Tompkins Ltd v Greater London Council [1989] AC

    1280 at 1300. A better case than Field for use of the Waldridge v Kennison doctrine was

    Barden v Barden (1921) 21 SR(NSW) 588, where the admission made in the course of

    negotiations had no relevance to the subject matter of the dispute. If the scope of protection of

    negotiations from disclosure is confined to admissions, and the protection of admissions has such

    a narrow scope as the result of Field's case suggests, then negotiators are at greater risk of having

    these communications disclosed than is usually assumed to be the case. But it is not in my opinion

    necessary, in the present case, to determine whether there is any scope for the protection as

    privileged of statements which are not admissions.

16. The appellants ask for an order to be made excepting from the scope of the privilege all

    material containing such statements. But if it is not an admission express or implied - i.e. a statement

    of fact, express or implied, which can be used against the respondent - then the statement need not

    be disclosed, because it must be irrelevant. This is not a case in which the appellants assert that any

    of the statements made in the course of negotiations are likely to be relevant other than as

    admissions, for example as relevant simply because made, irrespective of their truth, as discussed

    above.

17 The remaining and broadest point taken is that, so it is said, there is no privilege whatever,
since the appellants were not parties to the dispute to resolve which the negotiations took place.

The only reasonably clear authority on the point to which we were referred is a statement made in

the New South Wales Court of Appeal in Hong Kong Bank of Australia Ltd v Murphy (1992)

28 NSWLR 512 at 523. Gleeson CJ, with whom the other members of the Court of Appeal

agreed, quoted from Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 at 305,

a passage including the following:

"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 . . . [i]n 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 third parties".

His Honour remarked:

"The last sentence in the passage from the speech of Lord Griffiths quoted above is to be read in the light of the first sentence in the same passage. The issue . . . was the matter of multi-party litigation. It was in that context that his Lordship referred to the matter of discoverability to third parties".

I respectfully agree. But from the proposition that negotiations between A and B, to settle their part

of a dispute involving A, B and C, are not discoverable at the instance of C, it does not follow that

C is entitled to have discovery of the negotiations if they relate only to a dispute between A and B.

All that had to be solved in Rush & Tompkins Ltd was the former problem; the latter did not arise

in that case, nor did it in Hong Kong Bank of Australia v Murphy. There the issue was whether

in an examination of persons connected with a corporation, to be made under s 597 of the

Corporations Law, questions could be objected to on the ground of "without prejudice" privilege.

In support of claims to privilege attention was directed to the expression "discoverable to third

parties" in the second sentence quoted from Rush & Tompkins Ltd. The view expressed in Hong

Kong Bank of Australia v Murphy does not provide an answer in the present case, where the issue is not whether material has to be disclosed in a statutory examination under the Corporations

Law, but the very different question whether the privilege protects negotiators against disclosure of

their negotiations, in an action between one of the negotiators and a person who was neither

involved in negotiations nor party to the dispute which gave rise to them.

1. One looks to the purpose of the privilege, which is as mentioned above to encourage

   compromises - or, more fully:

   " . . . to encourage compromises by sparing the parties the embarrassment which might be caused to them if the negotiations fail and later their communications are liable to be put in evidence". (Harrington v Lowe (1996) 190 CLR 311 at 323)

   The embarrassment is not necessarily less if the suit in which the communications go into evidence

   is one in which the disputes and disputants are different from those involved in the negotiations. It

   is true that one generally thinks of the privilege as being directed against disclosure of the

   negotiations by a party to them; but that is so because it will but seldom occur that the content of

   negotiations will become known to a person who, although not a party to them, happens to be able

   to make good use of their content, in relation to another dispute altogether.

1. There are two English cases from about a century ago, confining the privilege to instances

   in which disclosure is sought by a party to the negotiations; but these cases are dealt with in Rush

   & Tompkins Ltd (at 1301-1302) in such a way as not to encourage one to treat them as

   authoritative.

2. One can understand rational arguments being advanced, as a matter of policy, against too

   great an extension of the privilege, one being that it can be a cloak for dishonesty. But that can be

   so whether or not the person damaged by application of the privilege is a party to the negotiated

   dispute. There is no sound basis for holding that the basic purpose of protecting negotiations is sufficiently served if one allows the negotiators to be exposed to the risk that what they privately

   say, to settle their dispute, may be broadcast to the world at the instance of any person who can

   make use of it in litigation, unless that person is a party to the dispute being negotiated.

3. It follows that the appeal must be dismissed with costs.

4. BYRNE J: The respondent submitted to an order to make disclosure of documents Awith

   respect to@ its mediation with Concrete Constructions. Thirteen classes were identified. These

   included Asubmissions@ by the respondent and by Concrete Constructions, correspondence

   between solicitors, conference minutes written by the mediator, notes and calculations used in

   producing the submissions, and internal memoranda. The order required the respondent to state the

   basis of any privilege. The affidavit contended for Awithout prejudice@ privilege, founding the claim

   on an assertion that the documents had Acome into existence for the purposes of@ the mediation.

5. The judge=s order resulted from an arrangement which, unusually, required disclosure of

   documents related to the mediation even if they did not matter. Usually, the duty to disclose is

   restricted to documents that are both within the possession or control of the party and Adirectly

   relevant to an allegation in issue@[1]. Here the parties concluded an understanding whereby, if the

   privilege claim fails, arguments about relevance remain to be decided under a procedure yet to be

   determined. Nonetheless, some of the arguments touch upon relevance. The appellants contend that

   statements by the respondent about its claims against Concrete Constructions contained in its

   submissions, and in its responses to cross-claims, could bear upon the damages. However, in view

   of the way the parties have approached the contest, the decisive issue now is the correctness of the

   conclusion that no part of the documents is susceptible of an order compelling production.

   [1]             RSC O 35 r 4(1), which, as the interlocutory decision appealed from was made before 1 July

6. The appellants= main contention is that the documents are not privileged2 for the reason that

   the appellants did not participate in the mediation. An alternative proposition is that communications

   contained in the documents can only be privileged to the extent to which they constitute admissions;

   that is, statements on behalf of the respondent which are detrimental to its interests in the action.

   1999, is the material rule: see UCPR 765(2).

   2              at common law, as no statute or subordinate legislation is presently germane.

7. The general law affords a measure of protection against compulsory disclosure of

   information imparted in confidence. Curial procedures, for example, can be adapted to ensure that

   trade secrets are not revealed more widely than is necessary to determine the dispute;[3] disclosure

   of a journalist=s source Awill not be required unless ... necessary in the interests of justice@[4]; and

   some other confidences (e.g. between priest and penitent) usually will not be overridden unless

   Athere is held to be a stronger public interest in disclosure@.[5] Judicial discretion often serves to

   respect reasonable expectations of privacy. But the law is reluctant to shield confidences

   completely; for costs are associated with absolute protection from disclosure, prominent among them the risk posed to accuracy in fact-finding.[6] Some communications, however, are protected by

   privilege.

   [3]             Magellan Petroleum Australia Limited v Sagasco Amadeus Pty Ltd [1994] 2 Qd R 37, 38-41.

   [4]             John Fairfax & Sons Ltd v Cojuangco (1988) 165 CLR 346, 354; cf Hodder v Queensland Newspapers Pty Ltd [1994] 1 Qd R 49, 56; Hancock v Lynch [1988] VR 173, 177-178.

   [5]             W v Egdell [1990] Ch 359, 419 per Bingham LJ; cf R v Secord [1992] 3 NZLR 570, 572.

   [6]             Carter v The Managing Partner Northmore Hale Davey & Leake (1995) 183 CLR 121, 128, 133-4; Jaffee v Redmond 135 L ed 2d 337, 344, 350 (1996); A M v Ryan [1997] 1 SCR 157, 170- 171; R v Young [1999] NSW CCA 166, paras 72-76.

8. Communications in confidence between lawyer and client made for the purpose of giving

   or receiving advice are shielded by privilege, as, in general, are communications between lawyer and

   client or either of them and a third party made for use in existing or anticipated litigation. Both these

   limbs of legal professional privilege are Amore than an aspect of civil and criminal procedure and

   more than a rule of evidence@[7]. They function as substantive rules of law barring [8] Acompulsory

   process for the obtaining of evidence@, such as search warrant, subpoena, interrogatories, or an

   order to testify, Arather than as a rule of inadmissibility@.[9] No weighing of competing public

   interests is involved in their application, and no discretions intrude. The privileges are themselves

   Athe product of a balancing exercise between competing public interests@.[10] Necessity explains

   their recognition. Attaching privilege to confidential communications for legal advice encourages

   Atrust and candour in the relationship between lawyer and client@ and is based on A... the need of

   laymen for professional assistance in the protection, enforcement or creation of their legal rights@.[11]

   Litigation privilege finds its primary justification in the ramifications of adversarial procedures.[12]Necessity also supplies the rationale for the protection accorded to communications in negotiating

   towards the compromise of an existing dispute.

   [7]             Commissioner of Australian Federal Police v Propend Finance Pty Limited (1997) 188 CLR 501, 564 per Gummow J.

   [8]             Absent a sufficiently clear, contrary statutory provision or valid subordinate legislation.

   [9]             Propend at 566 per Gummow J.

   [10]            Propend at 583 per Kirby J; cf Paragon Finance PLC v Freshfields [1999] 1 WLR 1183, 1193A- B.

   [11]            Attorney-General (NT) v Maurice (1986) 161 CLR 475, 487, per Mason and Brennan JJ; see also ADevelopments in the Law - Privileged Communications@, (1985) 98 Harvard Law Review 1450, 1501-1509.

   [12]            G Watson & F Anu, ASolicitor-Client Privilege and Litigation Privilege in Civil Litigation@, (1998) 77 Canadian Bar Review 315, 326-330; Trade Practices Commission v Ampol Petroleum (Victoria) Pty Ltd (1994) 53 FCR 578, 582-585; United States v Nobles 422 US 225, 238-239 (1975). This head is under stress: Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 1) [1999] 1 Qd R 141.

9. Although Aas a means of resolution of civil contention litigation is certainly preferable to

   personal violence ... it is not intrinsically a desirable activity@.[13] Compromise fosters substantial

   public and private benefits: the disputants avoid the uncertainties, trouble and expense of trials; they,

   their witnesses and the wider community are spared the opportunity costs of the diversion of human

   and other resources from more useful activities into litigation; public funding for courts is reduced;

   and, less tangibly, social harmony is promoted. It is in the public interest that civil disputes be settled

   without resort to judicial decision.[14]

   [13]            The Ampthill Peerage [1977] AC 547, 575E per Lord Simon of Glaisdale.

   [14]            Ventouris v Mountain [1991] 1 WLR 607, 611.

10. In recognition of the significance of candid discussion about facts, as well as about interests

    and concerns, to the chances of resolving the dispute, compromise negotiations are typically

    conducted against the background of a shared expectation that communications incidental to the

    process will not be disclosed without consent. Occasionally the participants stipulate for this:

    sometimes the cloak of confidentiality is tacitly accepted. If, however, the participants were left to

    anticipate that their negotiations might afterwards be used to their detriment, many would Afeel

    constrained to conduct themselves in a cautious, tight-lipped, non-committal manner more suitable

    to poker players in a high-stakes game than adversaries attempting to arrive at a just resolution of

    a civil dispute@.[15] And such an approach would often diminish the prospects of concluding a

    compromise, especially in complex disputes.

    [15]            Lake Utopia Paper Ltd v Connelly Containers Inc 608 F 2d 928, 930 (CA2 1979). Generally as to the importance of confidentiality to mediations, see L Boulle, Mediation Principles Process Practice, (1996) pp 281, 290-291; J W Hamilton, AProtecting Confidentiality in Mandatory Mediation: Lessons from Ontario and Saskatchewan@, (1999) 24 Queen=s Law Journal 561, 567-572; and A Kirtley, AThe Mediation Privilege=s Transition from Theory to Implementation: Designing a Mediation Privilege to Protect Mediation Participants, the Process and the Public Interest@, (1995) Journal of Dispute Resolution 1, 8-10, 16-18.

11. The plainest risk of detriment consequent upon a breach of the confidentiality of compromise

    negotiations is that statements adverse to the interests of a participant made to facilitate a

    compromise might, if the negotiations proved inconclusive, be put into evidence by the recipient of

    the information. This eventuality is so inimical to the chances of concluding compromises that there

    has for years been a rule that Awithout prejudice@ communications - as a matter of right, not

    discretion - are not admissible to prove an admission. Such communications, if Amade in the course

    of genuine negotiations with intent to compromise an existing dispute@,[16] are protected by an

    Aevidentiary privilege@.[17] The privilege is Aconcerned with the admissibility of evidence at trial after

    the failure of negotiations@.[18] It exists Ato encourage compromises by sparing the parties the

    embarrassment which might be caused to them if the negotiations fail and later their communications

    are liable to be put in evidence@.[19]

    [16]            Harrington v Lowe (1996) 190 CLR 311, 323 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ; cf In Re D (Minors) [1993] Fam 231, 237G.

    [17]            Harrington at 325.

    [18]            Harrington at 325-326.

    [19]            Harrington at 323.

12. But if the law were to accord no greater protection than this against compulsory disclosure

    of communications incidental to compromise negotiations, the considerations that sustain the

    privilege would be in some jeopardy. Such a limitation would mean that the information could be

    revealed to non-participants through, for example, interrogatories, and then used in litigation.[20] And

    if the privilege operated only to deny the admissibility of admissions in litigation between negotiants, its limited effect would scarcely conduce to an atmosphere calculated to encourage candid

    exchanges, appropriate concessions, and the creative exploration of options in the negotiations. As

    it is, the Awithout prejudice@ evidentiary privilege Adoes not provide a legal norm which is absolute

    in nature@.[21] Exceptions abound,[22] and compromise discussions must either be conducted with

    regard to the problems they present or else under the umbrella of broader statutory protections.[23]

    [20]            Risk of other detrimental use is reduced by the implied undertaking not to use information obtained pursuant to compulsory process for collateral purposes (Hamersley Iron Pty Ltd v Lovell (1998) 19 WAR 316, 321; Welfare v Birdon Sands Pty Ltd (1997) 79 FCR 220, 232-233), and by the equitable jurisdiction to restrain breaches of confidence.

    [21]            Harrington at 326.

    [22]            Harrington at 326; cf at 339; see also Rush & Tompkins Ltd v Greater London Council [1989] AC 1280, 1300.

    [23] Such as those created by ss 36(4), (5) Dispute Resolution Centres Act 1990, and s 114 Supreme Court of Queensland Act 1991; cf s 131 Evidence Act 1995 (Cth).

13. As with all other confidential communications, except those relating to lawyer and client, the

    general law might have confined the available protection to the recognition of a judicial discretion

    not to require disclosure in the absence of a more compelling public interest. But that is not how the

    Awithout prejudice@ rule operates evidentially. So it is not surprising that there is authority

    acknowledging the existence of a privilege against compulsory disclosure of information incidental
    to compromise negotiations.

14. Rabin v Mendoza & Co[24] concerned an attempt to compel production of a report brought

    [24] [1954] 1 WLR 271.

    into existence during an interval in discussions about a dispute alleging negligence against surveyors.

    Privilege from production was claimed: the document was said to have been made pursuant to

    Awithout prejudice@ discussions. No mere Aevidentiary privilege@ could stand in the way of an

    order for production; for, as Denning LJ said,[25] it is an Aundoubted proposition that production can

    be ordered of documents even though they may not be admissible in evidence@. Nevertheless,

    production was refused. Denning LJ based his decision on a Aprinciple@ that production should not

    be ordered of documents brought into existence under a tacit agreement Athat they should not be

    used to the prejudice of either party@[26], apparently treating the obstacle to production as

    discretionary. Romer LJ considered that the Adiscretion@[27] should be exercised against ordering

    production, holding that because the sole object for which the report was created was to advance

    the negotiations, it would be Amonstrous@to allow the use of the document, Awhich is entitled to the protection of <without prejudice= status@[28], for the altogether different, seemingly unanticipated,

    purpose of subsequent litigation.

    [25]            at 273.

    [26]            at 273.

    [27]            at 274.

    [28]            Ibid.

15. Although the Rabin judgments are couched in terms of a discretion to withhold production,

    not explicitly acknowledging a litigious privilege against compulsion, the case has since been

    regarded in the House of Lords as deciding Athat even as between the parties to <without

    prejudice= correspondence they are not entitled to discovery against one another@: Rush &

    Tompkins Ltd v Greater London Council.[29] By this, Lord Griffiths[30] means, it seems, that the

    general rule is that production cannot, rather than may not, be compelled. His Lordship also

    considered that the privilege impacted upon persons who were not participants in the negotiations,

    saying:[31]

    AThe 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 third parties.@

    [29]            at 1304A-B.

    [30]            With whom Lords Bridge of Harwich, Brandon of Oakbrook, Oliver of Aylmerton and Goff of Chieveley agreed.

    [31]            at 1305E.

16. The recognition of such a privilege depends on a conviction, necessarily essentially intuitive,

    that the effectiveness of compromise negotiations will commonly be jeopardized if the participants

    apprehend that strangers might, through compulsory process in later litigation, gain access to the

    confidences exchanged and use them to the participants= disadvantage. Otherwise there would be

    no justification for contributing to the Apossibility of distorting the truth determination process@[32]

    [32]            The New Wigmore A Treatise on Evidence, (1996), '3.7.1, at 3.65.

    through denial to tribunals of knowledge of material information. In the view of Lord Griffiths,[33]

    [33]            Rush at 1305D-E.

    Adamage ... would be done to the conduct of settlement negotiations if ... what was said and written

    between@ participants were to Abecome common currency available@ to strangers. This perception

    is shared by Wigmore=s editor,[34] as well as by me. And the inhibitions which rejection of such a

    [34]

    h o m

    s h o u l d

    b e

    d e t e r r e d

    f r o m

    e n t e r i n g

    i n t o

    d i s c u s s i o n s .

    privilege would likely engender assume special importance when the great popularity of compromise

    is recalled.35

17. There is a privilege protecting against production through a civil court=s compulsory process

    of communications made for the purpose of compromise negotiations (including, of course, those

    facilitated by a mediator); and it affects strangers to the negotiations. There are, it is true, passages

    in the speech of Lord Griffiths which refer to protection against disclosure to other parties to extant

    litigation.36 These should be understood in context: viz that a party to the litigation had sought access

    to the documents. This is the impression of the British Columbia Court of Appeal, which treats the

    speech as showing that communications in settlement negotiations are, in general, Aprivileged@

    Aboth from production to other parties to the negotiations and [email protected] The same view has

    been taken in England: Hobhouse J considered that the House of Lords decided that the privilege

    Aaffects not only the party who received the communication but also any other party@ to

    subsequent litigation.38 This must be correct. The policy that underpins the privilege is not served

    only where access is sought by another party to pending litigation in which the negotiators happen

    to be parties. To restrict its reach to parties to litigation would be to render the privilege capricious

    35           cf S R Gross & K D Syverud, AGetting to No: A Study of Settlement Negotiations and the Selection of Cases for Trial@, (1991) 90 Michigan Law Review 319, 320, who say of the American experience: AA trial is a failure. Although we celebrate it as the centrepiece of our system of justice, we know the trial is not only an uncommon method of resolving disputes, but a disfavoured one. With some notable exceptions, lawyers, judges and commentators agree that pre-trial settlement is almost always cheaper, faster, and better than trial. Much of our civil procedure is justified by the desire to promote settlement and avoid trial.@

    36             at 1305B.

    37             Middelkamp v Fraser Valley Real Estate Board (1992) 96 DLR (4th) 227, 232-233.

    38          Prudential Assurance Co. Ltd v Fountain Page Ltd [1991] 1 WLR 756, 771A-E; see also

    in operation. Its availability would then depend upon such inconsequential variables as whether

    proceedings were already on foot and the identity of the particular parties who had been joined

    when the negotiations took place.

Heron & Wood Pty Ltd v Ampol Petroleum (Vic) Pty Ltd [1999] VSC 83.

1. The appellants= alternative case is that the privilege cannot justify declining to compel

   production of communications incidental to the mediation except those capable of being used against

   the respondent at the trial as an admission.[39]

   [39]            It is otherwise unnecessary to try to define the boundaries of the privilege, as to which see J W Hamilton, supra , pp 583 et seq; and National Conference of Commissioners on Uniform State Laws Discussion Draft Uniform Mediation Act, American Bar Association, Section of Dispute Resolution, June 1, 1999, Incidentally, it was not suggested that notes recording proceedings at the mediation and the respondent=s Ainternal memoranda@ are not privileged Acommunications@.

1. The documents might contain information that is Adirectly relevant@ although not an

   admission - principally material suggesting strengths in the respondent=s case. Probably this kind

   of information could not be adduced in evidence in chief during presentation of the respondent=s

   case. At this stage, however, the question is not one of admissibility; it concerns the extent to which

   production can be compelled pre-trial. And, generally speaking, Adirectly relevant@, unprivileged

   documents must be produced for inspection even if they relate solely to that party=s own case and
   

   [40] s 14(2) Evidence Act 1977.

   in no way tend to impeach that case or to support the case of an opposing party.[40]

2. The notion that the ambit of the privilege should be confined to communications which might

   be put into evidence as an admission has some attraction.[41] Such a limitation would be consonant

   with the rationale supporting the Awithout prejudice@ evidentiary privilege and its scope. But what

   good would it do? Occasionally, access to information which did not amount to admissions could

   supply a preview of the adversary=s assessments of the strengths of its case,[42] or identify previously

   unknown potential witnesses, or expose adventitious lines of enquiry. Such opportunities are

   sometimes presented to parties who try to resolve civil disputation amicably; and the Awithout

   prejudice@ evidentiary privilege presents no obstacle to taking advantage of them.[43] Yet though

   there could be gains in restricting the privilege to communications capable of being adduced in

   evidence as admissions, there would be costs too.

   [41]            S McNicol, Law of Privilege, (1992), p 471 fn 240, calls it a Asensible approach@.

   [42]            cf Lord Griffiths in Rush, at 1305C: AIf the party who obtains discovery of the <without prejudice= correspondence can make no use of it at trial it can be of only very limited value to him. It may give some insight into his opponent=s general approach to the issues in the case but in most cases this is likely to be of marginal significance and will probably be revealed to him in direct negotiations in any event@.

   [43]            Field v Commissioner for Railways for New South Wales (1957) 99 CLR 285, 291. This is not the time to consider whether equity will restrain such a use of information if it were imparted on a common understanding that it was to be used only for the negotiation; nor whether there is a discretion to decline to admit evidence derived from such revelations. (Practical problems are canvassed in Williamson v Schmidt [1998] 2 Qd R 317, 335-336.)

3. Apart from discouraging productive negotiations, and the bother of contests about whether

   a particular communication is or is not an admission,[44] other costs potentially inhere in the proposed

   restriction. The privilege will be shared by at least one other negotiant who, as in this case, might

   not be party to the litigation. Skirmishes about access to negotiation documents clearly could prejudice the joint[45] negotiation privilege, and might therefore involve a stranger to the litigation in

   inconvenience or expense that usually will not be fully recompensed through costs orders.

   [44]            in Unilever v The Procter & Gamble Company, [1999] 1 WLR 1630, 1640 (para 30) in the Awithout prejudice@ privilege context, Laddie J discusses problems in distinguishing admissions from assertions.

   [45]            Re Turf Enterprises Pty Ltd [1975] Qd R 266, 267G.

4. The economic and social burdens that would attend acceptance of the suggested

   qualification far outweigh the limited benefits of admitting it.

5. The appeal should be dismissed with costs.

Professor Leonard, in The New Wigmore '3.7.1, at 3:67, makes the point that compromise takes
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