State of Western Australia v Southern Equities Corporation Ltd (in liquidation)

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DISCOVERY - inspection - documents produced under suppression orders to Royal Commission - availability to State under overriding legislation - availability for use in civil

litigation - whether subject to production order - without prejudice negotiations - relevance

to issues in case - production of such documents - admissibility separate question.

Royal Commisswns Act 1968 (WA)

Royal Commiwion (Custody of Records) Act 1992

Royal CommIj.swn (Custody of Recorh) Amendment Act 1992

Cutts v.

(1984) 1 Ch 290

v. Tomkins (1989) 1 AC 1280

Biala Ptv Ltd v. Mallima Holdings Pty Ltd (1990) WAR 174

Thomason v. The Council of the Municipalit, of Campbelltown (1939) SR(NSW) 347

Data Access Corporation v. Powerflex Services Ptv Ltd (1994) AIPC 91-112

STATE OF WESTERN AUSTRALIA v. SOUTHERN EQURIES CORPORATION

LIMlTED (IN LIQUIDATION) AND OTHERS

WAG 115. 116 and 118 of 1990

FRENCH J.

PERTH

30 AUGUST 1996

IN THE FEDERAL COURT

)

OF AUSTRALIA

)

WESTERN AUSTRALIA

DISTRICT REGISTRY

GENERAL DMSION

)	No. WAG 115, 116 and 118 of 1990

B E T W E E N :

STATE OF WESTERN AUSTRALIA

Applicant

and

SOUTHERN EQUlTIES

CORPORATION LIMITED

(In Liquidation)

First Respondent

AND OTHERS

AND CROSS CLAIMANTS

MINUTE OF ORDER

JUDGE MAKING ORDER:	FRENCH J.
DATE OF ORDER.	30 August 1996
WHERE MADE:	PERTH
THE COURT ORDERS THAT:

1. Parties to provide a minute of proposed orders to give effect

to these reasons within 14 days.

2. If agreement is unable to be reached between the parties as to

the form of the orders the Second and Fourth Respondents

are to lodge a minute of proposed orders.

3. The Applicant to pay the Second and Fourth Respondents costs of

the motion.

NOTE: Settlement and entry of Orders is dealt with in Order 36 of the

Federal Court Rules.

IN THE FEDERAL COURT

)

OF AUSTRALIA

)

WESTERN AUSTRALIA

DISTRICT REGISTRY

)

GENERAL DMSION

1	No. WAG 115, 116 and 118 of 1990

B E T W E E N :

STATE OF WESTERN AUSTRALIA

Applicant

and

SOUTHERN EQUITIES

CORPORATION L l h a E D

(In Liquidation)

First Respondent

AND OTHERS

AND CROSS CLAIMANTS

CORAM: French J.

30 August 1996

Perth

REASONS FOR JUDGMENT ON SECOND AND FOURTH RESPONDENTS'

MOTION DATED 13 MARCH 1996 FOR INSPECTION

OF DISCOVERED DOCUMENTS

These reasons for judgment relate to a motion filed on 13 March 1996 by

the Second and Fourth Respondents (Wardleys) seeking production of certain documents

of which the Applicant (the State) has given discovery but for which it claims privilege

from production.

Paragraph 1 of the Motion seeks an extension of the time limited by earlier

directions for seeking these orders. Having regard to the fact that the State filed its

Further Modified and Supplementary List of Documents and the absence of objection, time

is extended to enable the matter to be dealt with out of time.

The first category of documents for which the State claims privilege and

which is challenged by the motion comprises:

"Transcript and exhibits tendered during testimony given in camera before the Royal Commission into Commercial Activities of Government and Other matters".

The documents so desmied are identified as Items 309 and 3 10 in Part 2 of Schedule 1 at

p.66 .of the State's Further Modified and Supplementary List of Documents dated 13

October 1994. The State asserts that, in the course of its inquiries, the Royal Commission

made orders under s.19B of the Royal Commisswns Act 1968 (WA) that certain evidence be heard in camera or that the publication of certain evidence be suppressed.

Notwithstanding those orders, the terms of which are not before me, the State says that in

camera transcript and exhibits are available to it for the purposes of the conduct of this litigation by virtue of s.11(2)@) of the Royal Commisswn (Custody of Records) Act 1992. That section, it is submitted, does not however operate to modify the m camera and

suppression orders made by the Royal Commission so that the documents can be produced

to other parties in these proceedings.

The Royal Commhswns Act 1968 provides, in s.19B:

"19B(1) A Commission may direct that any evidence given before it, or the contents of any documents, books or writings prcduced at the inquiry shall not be published.

(2) A person who, without the permission of the

Governor, makes any publication in contravention of any direction under sub-section (1) may be dealt with on the motion of the Attorney-General as if he were in contempt of the Supreme Court and the Supreme Court has jurisdiction accordingly."

The Royal Commisswn (Custody of Records) Act FA) 1992 is described in

its long title as an act relating to the manner in which the records and materials held by

the Royal Commission appointed by the Governor on 8 January 1991 are to be dealt with

after the Commission has completed its inquiries and reports and for related purposes.

The Act has effect notwithstanding the Royal Commisswm Act 1968 (s.3(l)(a)).

It was

assented to in October 1992 and an amending Act, The Royal Commission (Custody of

Records) Amendment Act 1992 was assented to in December 1992.

Section 5 of the Act provides that after the Royal Commission has delivered

its report under its tern of reference the Director of Public Prosecutions has custody of

all the records of the Royal Commission. That is subject to s.6 which allowed the Royal Commission to exclude from the operation of s.5 records in respect of which an assurance

of confidentiality had been given by or on behalf of the Royal Commission. This class of

records is defined as "confidential records" in s.4 and is not relevant for present purposes.

Section 11 of the Act provides as follows:

"1 l(1) This section applies only to records in the custody

of the DPP under section 5.

Transcript records and prescribed exhibits are available to the State for the purposes of -

(2)

(a)

the investigation and prosecution of offences; and

the conduct of civil litigation involving the

State.

and a transcript record that is not the subject of a direction by the RoyaI Commission prohibiting its publication is available to the State for distribution to the public by sale or otherwise.

(3)	Records other than transcript, records and

prescribed exhibits are available to the State for the purposes of the prosecution of offences and, subject to subsections (4) and (S), are not available for any other purpose."

Sub-sections (4), (5) and (6) are not relevant for present purposes.

The term "transcript record" is defined in the Act to mean a record of

evidence taken by the Royal Commission whether taken in private or not. The term "prescribed exhibit" refers to exhibits received by the Royal Commission in the course of hearings reIated to certain specified tenus of reference.

It appears to be common ground that the transcript and exhibits for which

the State claims exemption from production were the subject of orders made by the Commission against publication under s.19B. It is not suggested that they were

confidential records within the meaning of the Act. Such records were able to be dealt

with under s.6 by transfer to persons other than the DPP or to the Library Board as a State

archive. Records so dealt with would not be affected by s.11 of the Act because they

would not be records in the custody of the DPP.

Section 11 has the effect that notwithstanding an order under s.19B of the

Royal Commissions Act 1968 restricting publication of evidence or the contents of any

documents, books or writings they are "available to the State for the pur$oses of the conduct of civil litigation involving the State". A question arises whether the purposes for which the records or exhibits are available are limited so as to preclude the State from putting the records into evidence if they be admissible. There is nothing in the language

of s.11 to so limit the purposes for which they can be used. Nor is there any apparent policy consideration which would support an implication that would prevent the State from

tendering such material as evidence. This conclusion is strengthened by the language of para.ii(2)(a) which provides for the availability of the transcript and records in the "investigation and prosecution of offences" (emphasis added).

The use of such material in evidence in civil litigation involving the State

would not necessarily result in general publication for, if the proper grounds were to be shown, confidentiality orders could be made by this Court relating to the publication of such material.

The materials are available to the State for all purposes related to the

litigation.

That does not of itself mean that the State has or will use the materials in any

way. Nor does it mean that they are available to the other parties to the litigation. However, the availability of these records to the State puts them within the power of the

State for the purposes of these proceedings and, subject to relevance which is not in issue, the materials are discoverable.

The State submits that s.11(2)@) does not operate to modify the in camera

and suppression orders made by the Royal Commission and that the State is bound not to

permit inspection of the documents through the discovery process. In my opinion,

however, s.11(2)@) does modify the operation of such orders as it authorises the State to use the documents in litigation. I have considered whether the issue of production of the documents for inspection should arise if, and only i,f the State elects to use them in some

way. Such considerations, however, do not form a proper basis for an inspection order. It is to my mind inconceivable that the State would have failed to consider the utility of the

documents for the purposes of this litigation. It has made a judgment of their possible

relevance by including them in its discovery list.

In my opinion, s.11(2)@) was not intended to preclude the operation of the normal requirements of natural justice in the trial process. Once available to the State for the purposes of civil litigation and considered by the State to be potentially relevant to the proceedings and "put into play" as it were through the discovery process, the documents

are amenable to production for the purpose of inspection by other parties.

On this basis I am prepared to make the orders sought in paral(l)(a) to the

motion subject to a direction that for the time being the transcript and exhibits shall be

produced for inspection by counsel and instructing solicitors for the parties only until

further order. A minute of the appropriate order can be agreed and filed.

The second part of the motion refers to documents described in para.2(h) of

the State's Further Modified and Supplementary List of Documents which picks up a

reference to various numbered documents in the State List and claims privilege for them

as follows:

"(h) as to documents 259, 261 to 266, 268, 554, 1094,

1104, 1109, 1122, 1124 to 1126, 1130, 1139 to 1142, 1146

to 1148, 1151 to 1157, 1159, 1160, 1162, 1163, 1165 to

1167, 1170, 121 1 and 1212, on the ground that they are, or record the substance of, "without prejudice" communications between the Applicant, NAB (National

Australia Bank) and Rothwells' liquidators. The intent of

the communications was the negotiation of a settlement of the disputes between the Applicant, NAB and Rothwells' liquidators, and the communications occurred on the basis that they would not be used to the prejudice of the parties to the disputes in the event of the litigation of those disputes;"

The documents numbered 554 and 1212 are also the subject of a claim of

legal professional privilege set out in p&(%)

of the State's List.

Documents 1151, 1152

and 1153 are the subject of a claim of legal professional privilege set out in p m . 2(q) of

the State's List.

The question for consideration in relation to all of the documents set out in

para. 201) of the State's List is whether the claim for privilege based on their being "without prejudice" is good. In the event that it is not, then the claim for legal professional privilege would remain to be dealt with in respect of the documents

separately enumerated.

The general rule which protects "without prejudice" negotiations from

disclosure rests upon the policy that pames are encouraged to settle their disputes without

resort to litigation. They should not be discouraged by the belief that anything said in the course of such negotiations may be used to their prejudice in the course of proceedings - Cutts v. Head (1984) 1 Ch. 290 at 306 approved in Rush v. Tompkins (1989) 1 AC 1280. In the latter case, Lord Griffiths made clear that the rule against admissibility is a general

rule but the question has to be looked at broadly and resolved by balancing two different public interests, namely the public interest in promoting settlements and the public interest

in full discovery between parties to litigation.

He said at 1300:

"Nearly all the cases in which the scope of the "without prejudice" rule has been considered concern the admissibility of evidence at trial after negotiations have failed. In such circumstances no question of discovery arises because the parties are well aware of what passed between them in the negotiations. These cases show that the rule is not absolute and resort may be had to the "without prejudice" material for a variety of reasons when the justice of the case requires it."

Such cases obviously include using the material to see whether or not negotiations resulted

in an agreed settlement.

At 1301 Lord Griffiths went on to consider the admissibility of "without

prejudice" material in litigation other than that which was the subject of negotiation. He considered this in the context of a party making concessions to settle a modest claim which would never be made in the face of another far larger claim. His Lordship said:

"It seems to me that if those admissions made to achieve settlement of a piece of minor litigation could be held against him in a subsequent major litigation it would actively discourage settlement of the minor litigation and

run counter to the whole underlying purpose of the "without prejudice" rule. I would therefore hold that as a general rule the "without prejudice" rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement It of course goes without saying that admissions made to reach settlement with a different party within the same litigation are also inadmissible whether or not settlement was reached with that party."

I accept that the privilege attaching to "without prejudice" negotiations does

not disappear merely because a concluded agreement is reached although the public policy reasons for according privilege to the negotiations do not apply to the agreement itself - Biala Pty Ltd v. Mallima Holdings Ptv Ltd (1990) WAR 174 at 180.

The formation of the settlement agreement which was the subject of the negotiations in question in this case is pleaded by the State as founding its damages claim on the basis, inter alia, that:

" 7 4 0 A bona fide settlement of any claims between the provisional liquidators and NAB and between the NAB and the State, if reached promptly, had the potential to mitigate losses in the event that the State might finally be found liable;

74(i) The State concluded that it was advantageous to compromise and settle the disputes between itself and NAB and between NAB and the provisional liquidators on the terms referred to in the succeeding paragraph which it considered to be fair and reasonable in the circumstances."

The authorities support the proposition that without prejudice negotiations

can be "pleaded into relevance" in such a way that the privilege is no longer available.

10.

The principal cases on the point relate to legal professional privilege but analogical

argument applies to the exemption based on the status of material as an element of "without prejudice" negotiations. In Thomason v. The Council of the Municipalitv of Campbelltown (1939) SRVSW) 347, legal professional privilege was held to have been waived when the content of the advice became an issue raised by the plaintiff. In that case, Jordan CJ observed at 358:

"Hence, in effect, one of the issues in the case was what advice if any the plaintiff had received from her legal advisers as to her alternative legal rights. In these circumstances, since the fact and nature of the advice is an issue in the case, I am of opinion that privilege cannot be raised to prevent the proof of the advice."

In Data Access Corporation v. Powerflex Services Ptv Ltd (1994) ADC 91-1 12, Heerey J

dealt with a claim for legal professional privilege in an action for breach of copyright in

relation to computer programs. In that case the applicant submitted that the alleged infringing acts had been done "flagrantly and with knowledge of the applicant's

copyright". The respondents on the other hand asserted that the documents in question had passed between them and their solicitors for the purpose of obtaining and giving legal

advice in relation to the proceedings and were privileged from production. Heerey J ordered that the documents be produced on the basis that the issue of flagrancy made the advice relevant. At 38,715 his Honour said:

"An issue raised on the pleadings may have the effect that documents which would otherwise be subject to legal professional privilege loose that privilege because they have been, as the saying goes, pleaded into relevance.

Thornason's case shows that such a situation is not

confined to the case where the party seeking to assert

privilege raises a positive case."

In my opinion the State has, on its pleadings, raised the issue of the

reasonableness of its settlement. The documents generated in the lead up to that settlement may have some relevance to that question. There is no suggestion that the National Australia Bank would be affected or prejudiced m any way by the production of these documents for inspection. It is not a party to the proceedings. Nor is there any basis upon which it has been suggested that the production of the documents would affect

the rights of the State and the National Australia Bank inter se. The documents may support a line of inquiry concerning the causal connection between the alleged conduct of which the State complains and the ultimate formation of the settlement agreement which is the basis of its loss. The production of the documents does not mean that mat& in them constituting an "admission" against interest could be used for that purpose against the State or any other party. That is not a matter on which it is necessary for me to rule at this time.

In my opinion there is a sufficient basis to produce the documents for

inspection. The question of their admissibility, the effect of s.131 of the Commonwealth

Evidence Act 1995, the need for the consent of the National Australia Bank to their admissibility and the basis upon which they may be admitted in the event that there is an attempt to tender them in evidence can be debated at a later time. I propose therefore to require the production of the documents in question for inspection subject to the exclusion of those which are the subject of a claim for legal professional privilege. In this, as in the

other category of documents, I will require the parties to lodge an agreed minute.

I will

12.

hear the parties as to the confidentiality of the production.

I certify that this and the preceding eleven (1 1)

pages are a true copy of the Reasons for Judgment of

His Honour Justice French.

.-.

Associate:	i \;Lfi,.b~,\ i !..b.-
Date:

Counsel for the Applicant: Mr A. Sefton

Solicitors for the Applicant: Crown Solicitor's Office

Counsel for the Second and Fourth Respondents: Mr JA. Chaney

Solicitors for the Second and Fourth Respondents: Minter Ellison Northmore Hale

Counsel for the Fifth Respondent Mr Douglas

Solicitors for the Fifth Respondent Blake Dawson Waldron

Counsel for the Sixth Respondent: Mr G.R Dean

Solicitors for the Sixth Respondent Bennett & Co.

Counsel for the Cross Respondents: Mr S. Penglis

Solicitors for the Cross Respondents: Freehill Hollingdale & Page

Date of Hearing: 6 June 1996

Date of Judgment30 August 1996

[1996] FCA 1166

30 Aug 1996