Teoh v Greenway
[2015] ACTSC 133
•11 June 2015
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Teoh v Greenway |
Citation: | [2015] ACTSC 133 |
Hearing Date: | 6 March 2015 |
DecisionDate: | 11 June 2015 |
Before: | Burns J |
Decision: | The appeal is upheld and the decision of the Master is set aside. Summary judgment is entered for the defendant / appellant. The respondent is to pay the appellant’s costs of the appeal. |
Category: | Interlocutory application |
Catchwords: | TORTS – Negligence – personal injury – motor vehicle accident. EVIDENCE – Confessions and Admissions – whether evidence of a settlement offer is admissible as an acknowledgment of the plaintiff’s cause of action such that the limitation period would commence at the date of the settlement offer – scope of s 131 (2) (i) of the Evidence Act 2011 (ACT) – whether the making of a settlement offer affected the right of a party pursuant to s 131 (2) (i) of the Evidence Act 2011 (ACT). APPEAL – Appeals from an interlocutory decision the Master of the Supreme Court – whether the Master erred in his interpretation of s 131 (2) (i) of the Evidence Act 2011 (ACT) – whether the Master erred in finding that the making of a settlement offer by the appellant relevantly affected a right of the respondent under s 131 (2) (i) of the Evidence Act 2011 (ACT) – appeal upheld and decision of the Master set aside. |
Legislation Cited: | Corporations Act 2001 (Cth) s 198F Court Procedures Rules 2006 (ACT) r 1147 |
Cases Cited: | Asciak v Australian Secured and Managed Mortgages Pty Ltd (2008) 66 ACSR 298 Commonwealth v Mewett (1997) 191 CLR 471 Galafassi v Kelly (2014) 87 NSWLR 119 Glass v Demarco [1999] FCA 482 Hoefler v Tomlinson & Ors (1995) 133 ALR 625 |
Texts Cited: | Covell, Lipton and Fordes, Principles of Remedies (LexisNexis Butterworths, 2012). LexisNexis Butterworths Australia, Cross on Evidence, vol 1 (at 25 May 2015) 7 Statements Made without Prejudice – Privilege, ‘13 Privilege’. |
Parties: | Kim Hin Teoh (Appellant) Caroline Greenway (Respondent) |
Representation: | Counsel Mr R L Crowe SC (Appellant) Mr A Muller (Respondent) |
| Solicitors DLA Piper (Appellant) Pappas, J – Attorney (Respondent) | |
File Number: | SC 483 of 2013 |
Decision under appeal: | Court: Supreme Court Before: Master Mossop Date of Decision: 4 September 2014 Case Title: Greenway v Teoh Citation: [2014] ACTSC 224 |
Burns J:
Background
On 18 February 2008, the respondent was injured in a motor vehicle accident. On 18 December 2008, the appellant, by his insurer, admitted liability for the accident. Thereafter the appellant’s insurer paid medical treatment accounts on behalf of the respondent until 15 June 2010. The lawyers for both parties engaged in negotiation with a view to settling any claim by the respondent for damages arising from the accident, culminating in the appellant’s lawyer making a written offer to the respondent on 28 June 2011. It appears that this offer was not accepted.
On 11 December 2013, the respondent commenced proceedings in this Court claiming damages for personal injury arising out of the accident. The appellant filed a defence asserting that the proceedings were statute barred by virtue of s 16B of the Limitation Act 1985 (ACT) (the Limitation Act), which, in effect, provides that personal injury claims must be commenced within three years of the date of the injury.
The period of three years from the date on which the respondent was injured expired on 17 February 2011. The appellant, however, accepted that the payment of medical treatment expenses on behalf of the respondent constituted a confirmation or acknowledgment of the respondent’s cause of action so that, by virtue of s 30 of the Limitation Act, the commencement date of the three year limitation period did not commence until the date of the last medical treatment expense paid by the appellant, being 15 June 2010. If this were correct, the three year limitation period expired on 15 June 2013, almost six months before the respondent commenced proceedings in this Court.
The appellant sought summary judgment in her favour pursuant to r 1147 of the Court Procedures Rules 2006 (ACT). In answer to this application, the respondent sought to lead evidence before Master Mossop (as was his Honour’s title at the time of these proceedings) of settlement offers made to him by the appellant including evidence of the final offer of 28 June 2011. The appellant objected to the reception of this evidence on the grounds that the communications were subject to privilege under s 131 of the Evidence Act 2011 (ACT) (the ACT Evidence Act). It was conceded by the appellant before Master Mossop, and Master Mossop determined that it was rightly conceded, that, if evidence of the settlement offer of 28 June 2011 was admissible, the offer would constitute a confirmation of the respondent’s cause of action such that the limitation period did not expire until 27 June 2014, more than six months after the commencement of proceedings in this Court.
On 4 September 2014, Master Mossop ruled that the evidence of the offer of settlement of 28 June 2011 was admissible and accordingly dismissed the appellant’s application for summary judgment. The appellant appeals from this decision on the following grounds:
(a)that the Master erred in his interpretation of s 131 (2) (i) of the ACT Evidence Act; and
(b)that the Master erred in finding that the making of a settlement offer by the appellant relevantly affected a right of the respondent under s 131 (2) (i) of the ACT Evidence Act.
I am satisfied that the appeal should be upheld, that the order of the Master admitting evidence of the settlement offer made by the appellant and dismissing the application for summary judgment should be set aside, and that summary judgment for the appellant should be entered on the action.
Relevant law
The relevant provisions of s 131 of the ACT Evidence Act are:
131Exclusion of evidence of settlement negotiations
(1)Evidence must not be presented of –
(a)a communication that is made between people in dispute, or between 1 or more people in a dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or
(b)a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.
(2)Subsection (1) does not apply if –
...
(i)making the communication, or preparing the document, affects a right of a person; or
...
The critical conclusion by the Master is found at [35] – [36] of his reasons:
Applied in the present circumstances, s 131(2)(i) permits the admission of the settlement offers if the making of those offers directly affects the rights of the plaintiff. Because the offers amount to a confirmation of the plaintiff’s cause of action, they do affect the rights of the plaintiff. That is because the offers by themselves have the effect of extending the limitation period and hence the period in which the plaintiff may commence proceedings in relation to the cause of action for which the defendant has admitted liability.
While the defendant submitted that the provision should be read down so as to protect the significant public policy behind the ability to make settlement offers I do not consider that, in the light of the text of the section and the authorities referred to, it is possible, in a case where liability has been admitted, to read s 131(2)(i) in a manner that prevents the admission of the evidence. The confirmation of the cause of action affects the rights of the plaintiff and hence is within the scope of the exception.
The common law
Whilst the present appeal is concerned with the interpretation of a statutory provision, some guidance may be obtained from the common law principles which govern the exclusion of evidence of the contents of without prejudice communications or communications in connection with an attempt to settle a dispute. In Field v Commissioner for Railways (1957) 99 CLR 285, the majority of the High Court (Dixon CJ, Webb, Kitto and Taylor JJ) said at 291-2:
The law relating to communications without prejudice is of course familiar. As a matter of policy the law has long excluded from evidence admissions by words 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 upon 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 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.
Later decisions have emphasised that this rule of exclusion is based partly on public policy, but also partly on the express or implied agreement of the parties that their negotiations should not be admissible in evidence: see Pihiga Pty Ltd v Roche (2011) 278 ALR 209 at [82] – [83]; Unilever v The Proctor & Gamble Co [2001] 1 All ER 783 at 789–90.
There are, nevertheless, well recognised (if not well defined) exceptions to the rule. A number of the “more important” exceptions were stated by Robert Walker LJ in Unilever at 791–3, and quoted by Lander J in Pihiga at [88]:
However, the rule is not absolute and admits of exceptions (sic). Lord Justice Robert Walker identified those exceptions in Unilever where he said (at AC 2444-45; All ER 791-3):
(1)...when the issue is whether without prejudice communications have resulted in a concluded compromise agreement, those communications are admissible...
(2)Evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence. Underwood v Cox (1912) 4 DLR 66, a decision from Ontario, is a striking illustration of this.
(3)Even if there is no concluded compromise, a clear statement which is made by one party to negotiations, and On (sic) which the other party is intended to act and does in fact act, may be admissible as giving rise to an estoppel. That was the view of Neuberger J in Hodgkinson & Corby Ltd v Wards Mobility Services Ltd [1997] FSR 178 at 191, and his view on that point was not disapproved by this court on appeal ([1998] FSR 530).
(4)Apart from any concluded contract or estoppel, one party may be allowed to give evidence of what the other said or wrote in without prejudice negotiation if the exclusion of the evidence would act as a cloak for perjury, blackmail or other “unambiguous impropriety” ... But this court has, in [Forster v Freidland [1992] CA Transcript 1052 and Fazil-Alizadeh v Nikbin (1993) Times, 19 March, (sic) warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion.
(5)Evidence of negotiations may be given (for instance, on an application to strike out proceedings for want of prosecution) in order to explain delay or apparent acquiescence. Lindley LJ in Walker v Wilsher (1889) 23 QBD 335 at 338, noted this exception but regarded it as limited to “the fact that such letters have been written and the dates at which they were written”. But occasionally fuller evidence is needed in order to give the court a fair picture of the rights and wrongs of the delay.
(6)In Muller’s case (which was a decision on discovery, not admissibility) one of the issues between the claimant and the defendants, his former solicitors, was whether the claimant had acted reasonably to mitigate his loss in his conduct and conclusion of negotiations for the compromise of proceedings brought by him against a software company and its other shareholders. Hoffman LJ treated that issue as one unconnected with the truth or falsity of anything stated in the negotiations, and as therefore falling outside the principle of public policy protecting without prejudice communications. The other members of the court agreed but would also have based their decision on waiver.
(7)The exception (or apparent exception) for an offer expressly made “without prejudice except as to costs” was clearly recognised by this court in Cutts v Head, and by the House of Lords in the Rush v Tompkins case, as based on an express or implied agreement between the parties. It stands apart from the principle of public policy (a point emphasised by the importance which the new Civil Procedure Rules, Pt 44.3(4), attach to the conduct of the parties in deciding the question of costs). There seems to be no reason in principle why parties to without prejudice negotiations should not expressly or impliedly agree to vary the application of the public policy rule in other respects, either by extending or by limiting its reach. In Cutts v Head Fox LJ said:
“... what meaning is given to the words ‘without prejudice’ is a matter of interpretation which is capable of variation according to usage in the profession. It seems to me that, no issue of public policy being involved, it would be wrong to say that the words were given a meaning in 1889 which is immutable ever after... (See [1984] Ch 290 at 316; [1984] 1 All ER 597 at 613.)”
(8)In matrimonial cases there has developed what is now a distinct privilege extending to communications received in confidence with a view to matrimonial conciliation...
The learned authors of Cross on Evidence (JD Heydon, Australian Edition, LexisNexis Butterworths) at [25380] broadly divide these exceptions into two categories headed “contracts and vitiating factors” and “objective facts having legal consequences”. With respect to the latter category, it is stated at [25385]:
The fact that without prejudice letters were written and the dates borne by them may sometimes be taken into account by the court as where there is an allegation of laches. However, “occasionally, fuller evidence is needed in order to give the court a fair picture of the rights and wrongs of the delay”. A statement made by a party to negotiations on which the other party is intended to act and does act may be admissible as establishing an estoppel. It has likewise been held that a statement in a letter headed “without prejudice” to the effect that the writer was unable to pay his debts as they fell due could be proved as an act of bankruptcy in bankruptcy proceedings or otherwise relied upon as an objective fact having legal consequences. Many of the limits to the privilege arise where the relevance of the communication does not lie in any fact which it asserts or admits, but simply in the fact that it was made, eg an alleged offer and acceptance, a statement amounting to an act of bankruptcy, the dates of letters relied upon to explain delay, the conduct of negotiations on an issue or whether reasonable attempts to mitigate have been made.
(Citations omitted)
Examples of circumstances where “objective facts having legal consequences” have justified departure from the exclusionary rule include the exercise of an option (Tenstat Pty Ltd v Permanent Trustees Australia Ltd (1992) 28 NSWLR 625), severance of a joint tenancy (McDowell v Hirschfield Lipson & Rumney [1992] 2 FLR 126) and where the negotiations revealed a trigger for a rent review clause (Ofulue v Bossert [2009] 1 AC 990). It is difficult to distil from the cases cited in Cross on Evidence any underlying principle or common feature governing the exception from the exclusionary rule. In some of the cases cited it is difficult to understand how the communication in issue could have attracted negotiation privilege at all. For example, in Nicholson v Southern Star Fire Insurance Co Ltd (1928) 28 SR (NSW) 124, a letter headed “without prejudice” from the insurer to the insured was not connected with any attempt to negotiate a settlement of a dispute, but was simply a refusal to accept liability. In other cases it has been accepted that the “objective act having legal consequences” exception depends on the justice of the particular case. In Austotel Management Pty Ltd v Jamieson & Ors 57 FCR 411, Burchett J said at 415 – 416:
It will be noted that the High Court, in Field v Commissioner for Railways, restricted the scope of the privilege by reference to the policy of the law of protecting the parties against express or implied admissions implicit in or arising out of the process of negotiation, and then restricted it further by the consideration of what was involved in or reasonably incidental to the negotiations actually pursued. In Pitts v Adney (1961) 78 WN (NSW) 886 at 889, Walsh J. added a further restriction:
"It is of importance that the rule protecting from disclosure, discussions taking place in an endeavour to put an end to pending litigation should, in general, be applied. But it is, after all, a rule based upon public policy. It cannot be permitted to put a party into the position of being able to cause a Court to be deceived as to the facts, by shutting out evidence which would rebut inferences upon which that party seeks to rely."
This principle was reaffirmed by the Court of Appeal of New South Wales in Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 97,014.
Where a document does fairly fall within the protection of the privilege, that protection is by no means absolute. Not only may the document nevertheless become admissible upon the principle of Pitts v Adney; it will also become admissible, in the normal course, if a question arises as to whether the without prejudice negotiations resulted in an agreement: Phipson on Evidence (14th ed, of Evidence in Canada (1992), pp 730-731; J Stone, Evidence, Its History and Policies, revised by W A N Wells (1991), p 345; Walker v Wilsher (1889) 23 QBD 335 at 337; Bentley v Nelson [1963] WAR 89; Tomlin v Standard Telephones and Cables Ltd [1969] 1 WLR 1,378 at 1,382, per Danckwerts LJ, and at 1,386, per Sir Gordon Willmer. The last case is an interesting one, because there the majority of the Court of Appeal considered the negotiations, entered into without prejudice, had resulted in a concluded agreement to settle the issue of liability on the basis of a verdict for the plaintiff for 50 per cent of his damages, although no agreement was reached as to the amount of the damages. I am unable to understand the criticism of this decision made in S B McNicol, The Law of Privilege (1992), p 464, which seems to overlook the fact that the majority of the Court of Appeal, like the judge below, had held an actual agreement was concluded, though not in settlement of all issues, so that the question was not merely whether some admission was admissible in evidence, but whether the correspondence could be admitted in proof of the agreement.
It is not, of course, only an agreement which may come into effect as something done, quite apart from any admission made in or by the negotiations, of which the law should take cognizance, and which may be outside the ambit of the protection thrown over any such admissions by the privilege. As Hill J held in Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd (1990) 27 FCR 86 at 93, a negotiating party may engage in conduct which is misleading or deceptive or otherwise contrary to s. 52 of the Trade Practices Act 1974. The privilege will not prevent proof of the contravention of the statute. Citing this and other cases, McLelland J said in Tenstat Pty Ltd v Permanent Trustee Aust Ltd (1992) 28 NSWLR 625 at 633 that the privilege does not "extend to preclude the proof of communications or statements relied on, not as an express or implied admission, but as an objective act having legal consequences". He instanced the exercise of an option as such an act. As Lord Griffiths (with whom the other members of the House agreed) said in Rush & Tompkins Ltd v Greater London Council [1989] 1 AC 1,280 at 1,300, "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".
In Ofulue v Bossert, the House of Lords, by a majority, rejected the proposition that without prejudice communications could be used as an acknowledgment of title for the purposes of determining the expiration of a limitation period under s 15 (1) of the Limitation Act 1980 (UK), which provided that “no action shall be brought... to recover any land after the expiration of 12 years from the date on which the right of action accrued...”. In that case, more than 12 years had passed since the respondent entered into adverse possession of the appellant’s land, although less than 12 years had passed since the respondent had offered to buy the land from the appellants as part of a proposal to settle legal proceedings then on foot (but which were later struck out for want of prosecution). In his speech, Lord Neuberger of Abbotsbury said that both public policy and contractual principles supported the exclusionary rule and, after expressing doubt that using the confidential offer to purchase as an acknowledgment was not using it as an admission, said at [97]:
To invoke a statement in without prejudice negotiations as an acknowledgment seems to me to be as inconsistent with the protection afforded to such negotiations, and the policy behind it, as invoking such a statement as an admission of the truth of what is stated.
Lord Walker of Gestingthorpe also addressed this issue at [51]:
To my mind there is no great difference between the natural meaning of “admission” and the natural meaning of “acknowledgment”. The former expression naturally conveys accepting the truth of something which is or may be detrimental to the interest of the person making the communication, whereas the latter expression is (in this context) concerned with recognising the rights or status of the party addressed. But if the two parties are debtor and creditor, or tenant and landlord, that may be a distinction without much of a difference.
Lord Rodger of Earlsferry considered that, while the commonest purpose recognised for the rule relating to without prejudice communications was preventing the use of anything said in negotiations being used as an admission, its rationale was wider:
... it is that parties and their representatives who are trying to settle a dispute should be able to negotiate openly, without having to worry that what they say may be used against them subsequently, whether in their current dispute or in some different situation. If that is right, then there is no obvious justification for drawing a line between admissions and acknowledgments.
The courts which have considered the ambit of the common law rule excluding evidence of without prejudice communications have emphasised the necessity for the rule to be given wide effect based upon considerations of public policy and, to a lesser extent, the expectation of the parties conducting negotiations. If the present appeal fell to be determined on common law principles, I would unhesitatingly find that the respondent was not entitled to adduce evidence of the settlement offer of 28 June 2011 on the basis that it was inadmissible as an acknowledgement of her cause of action.
The Uniform Evidence Acts
In the Australian Capital Territory, the ACT Evidence Act superseded, and is in the same form as, the Evidence Act 1995 (Cth) (the Commonwealth Evidence Act). The Explanatory Statement to the Evidence Bill 2011 (ACT) (the Evidence Bill) set out the history of the Uniform Evidence Acts:
This Bill will implement model uniform evidence law into the Territory. Model uniform evidence law arose out of a comprehensive review of evidence laws by the Australian Law Reform Commission (ALRC) in the 1980s. The ALRC produced a model Bill (the Model Bill) to provide a modernised, structured and reasoned approach to the laws of evidence. The purpose of the Model Bill was to promote and maintain uniformity and harmonisation of evidence laws across Australian jurisdictions. The Model Bill clarified evidence laws by partially codifying complex common law rules and re-writing statutory rules of evidence in a clear and concise manner.
Legislation based on the Model Bill was enacted by the Commonwealth and New South Wales in 1995. The two statutes are largely uniform but do have some differing provisions. Together these Acts are referred to as the Uniform Evidence Acts (the UEAs). Tasmania enacted legislation in 2001, largely mirroring the UEAs, but with some departures, followed by Norfolk Island legislation commencing in 2004.
In the early days of self-government, the ACT agreed that the Commonwealth would legislate the Territory’s evidence law. Accordingly, the provisions of the Commonwealth Evidence Act 1995 (the Commonwealth Act) directly apply to the ACT, resulting in the Commonwealth, New South Wales, the ACT and Tasmania as the model uniform evidence jurisdictions.
The operation of the UEAs was subject to another inquiry, this time a joint effort of the ALRC, the New South Wales Law Reform Commission (NSWLRC) and the Victorian Law Reform Commission (VLRC) (the Commissions). In the course of the review, the Commissions conducted consultations in every State and Territory, and submissions were received from 130 individuals and organisations.
The Final Report, entitled Uniform Evidence Law: Report, was produced in December 2005 (the 2005 LRCs’ Report). It found that the UEAs were generally working well, but required some fine-tuning. As a result, a range of recommendations were contained in the 2005 LRCs’ Report which was tabled in Parliament in February 2006.
The recommendations have been largely implemented by proposed amendments to the UEAs and take the form of an amended model uniform 3 Authorised by the ACT Parliamentary Counsel—also accessible at evidence bill (the Model Uniform Evidence Bill) which was endorsed by the Standing Committee of Attorneys-General in July 2007. Before they were endorsed an expert reference group, consisting of practitioners, academics and judicial officers and chaired by former New South Wales Supreme Court Justice, the Honourable James Wood, reviewed the draft model amendments.
New South Wales and Commonwealth legislation to implement the Model Uniform Evidence Bill (the NSW Evidence Amendment Act 2007 and the Commonwealth Evidence Amendment Act 2008) commenced on 1 January 2009. Victoria has now joined the uniform evidence scheme with the Evidence Act 2008 commencing operation on 1 January 2010. Tasmanian legislation to implement the amendments is currently proceeding through Parliament. The amended Commonwealth Act, incorporating the Model Uniform Evidence Bill, is the existing law in the ACT.
This Bill implements the Model Uniform Evidence Bill in the ACT, ceasing the application of Commonwealth evidence law in the Territory, and as a consequence resulting in the ACT independently joining the uniform evidence scheme.
The Act is in most respects uniform with the Commonwealth Evidence Act 1995 and the New South Wales Evidence Act 1995. The Acts are drafted in identical terms except so far as differences are identified by appropriate annotations to the texts, and except so far as minor drafting variations are required to accord with the drafting style of each jurisdiction.
Where the text of this Bill varies from the Commonwealth and New South Wales Evidence Acts it has only been done to accord with the drafting style of the ACT and is not intended to change the meaning of provisions in the Bill.
By virtue of s 141 of the Legislation Act2001 (ACT) (the Legislation Act) in working out the meaning of an Act, material not forming part of the Act itself may be considered. In this context “working out the meaning of an Act” includes resolving an ambiguous or obscure provision of the Act, or confirming or displacing the apparent meaning of the Act: s 138 of the Legislation Act. An Explanatory Statement for a bill that became an Act may be taken into account in working out the meaning of the Act: s 142 of the Legislation Act. This leaves open the question of whether, in working out the meaning of s 131 (2) (i) of the ACT Evidence Act, I can take into account the ALRC reports which preceded the Commonwealth Evidence Act, because the reports are not expressly quoted or incorporated into the Explanatory Statement to the Evidence Bill. In my opinion, I can. It would be absurd to suggest that the ALRC reports had to be reprinted in the Explanatory Statement to the Evidence Bill before a court could take into account the contents of the ALRC reports in working out the intended meaning of a provision of the resultant ACT Evidence Act. The Explanatory Statement makes it clear that the provisions of the ACT Evidence Act are intended to have the same meaning as the corresponding provisions in the Commonwealth Evidence Act. By referring to the ALRC processes which preceded the Commonwealth Evidence Act in the Explanatory Statement, it was intended that the contents of those reports would become part of the Statement.
The ALRC produced an Interim Report (ALRC Report 26) in 1985 and a Final Report (ALRC Report 38) in 1987. The Interim Report noted that the “major justification for protecting the contents of negotiation from disclosure is the public interest in encouraging the settlement of disputes”, before making recommendations:
891. General Proposals. In view of the desirability of encouraging settlements, it is proposed that evidence may not be given of the content of communications made in an attempt to settle a civil dispute (including where a party’s agent or a mediator is involved in the negotiations). Proposals are advanced, however, to meet deficiencies in the law. The general rule of exclusion extends to materials produced for the negotiations. The proposal in terms prevents evidence being ‘given’. This formula is to be preferred to other options – eg not admissible. The rationale requires non-disclosure by the parties to the negotiations unless all of them consent. The embargo will not apply to communications which are of a criminal or tortious nature, or are capable of affecting rights and liabilities (such as acts of bankruptcy, defamatory statements, illegal threats, the election of alternative courses of action); and open offers of settlement.
(Emphasis added)
The Final Report notes that the recommendations in the Interim Report were accepted in principle, but subject to presently irrelevant modifications.
Nothing in the 2005 ALRC Report assists in working out the meaning of s 131 (2) (i).
The decided cases – s 131
In Silver Fox Co Pty Ltd (as Trustee for the Baker Family Trust) & Ors v Lenard’s Pty Ltd & Ors (No 3) (2005) 214 ALR 621, Mansfield J referred to the rationale behind s 131 of the Commonwealth Evidence Act at 624:
Section 131(1), subject to its exceptions, gives effect to the policy of ensuring the course of negotiations – whether private or by mediation – are not adduced into evidence for the purpose of influencing the outcome on the primary matters in issue. Clearly, it is in the public interest that negotiations to explore resolution of proceedings should not be inhibited by the risk of such negotiations influencing the outcome on those primary issues. It is equally in the public interest that negotiations should be conducted genuinely and realistically.
In Hoefler v Tomlinson & Ors (1995) 133 ALR 625, the respondents moved to strike out an appeal for want of prosecution, in support of which the solicitor for the respondents filed an affidavit annexing a “without prejudice” letter containing an offer of settlement. The purpose of annexing the letter was to prove that the appellant was aware of the application to strike out the appeal. Whilst this purpose did not infringe the public policy basis of the common law exclusionary rule, Spender J, which whom Sackville and Kiefel JJ agreed, criticised the inclusion of the annexure as contrary to s 131 (1) of the Commonwealth Evidence Act, and not justified by reason of any of the exceptions in s 131 (2). In determining that the annexure of the correspondence infringed the prohibition in s 131 (1), Spender J said at 626:
The rationale of the rule excluding evidence of settlement negotiations is the public policy of encouraging out-of-court settlements and the principle promoting the individual’s right to enter into such negotiations openly and without interference.
It is of some significance that the Court itself took objection to the annexure and took upon itself the task of considering whether any of the exceptions found in s 131 (2) operated to permit its reception. It is clear that, by implication, they did not accept that the exception in s 131 (2) (i) applied. The circumstances in Hoefler differed somewhat from the present in that, in Hoefler, the issue was whether an appeal should be struck out for want of prosecution, thus extinguishing whatever “rights” the appellant may have by virtue of the institution of the appeal. It is possible, however, to approach the question from a different perspective, and argue that the making of the communication affected the respondent’s “rights” under Order 52 r 38 (1) of the Federal Court Rules 1997 (Cth) (the Federal Court Rules) to move for the appeal to be struck out. Order 52 r 38 (2) of the Federal Court Rules provides that “[a] respondent may move on notice for an order [striking out the appeal]...”. In one sense, this grants the respondent a right, being a right to move for the appeal to be struck out. Many procedural provisions may be said to grant rights to parties, and if the term is given a broad meaning in s 131 (2) (i), the provision would have a very wide effect. Much may turn upon the interpretation of the term “right” in s 131 (2) (i). I will return to this issue later in these reasons.
In Glass v Demarco [1999] FCA 482, the debtor in a hearing for a bankruptcy petition sought leave to refer to an offer of compromise made to him in other proceedings which was still open for acceptance, with a view to establishing that he was able to pay his debts. The petitioning creditor objected to this evidence on the ground that it contravened s 131 (1) of the Commonwealth Evidence Act. The debtor argued that it fell within the exception in s 131 (2) (i), regarding which Emmett J said at [10]:
The contention, as I understand it, is that a right of the debtor is affected by the offer because the debtor, by reason of the offer, has a right to accept it and thereby create a contract of compromise. I consider that the reference to a right in s131(2)(i) is to an existing right and is not satisfied by reason of a right coming into existence upon the making of an offer. If it were given such a construction, paragraph (i8) would constitute a most significant exception to the operation of section 131(1). I do not consider that s131(2)(i) affords the debtor any assistance in this case.
At [11], Emmett J said in rejecting the evidence:
The general rationale for a provision such as section 131 and the similar principle which applied under the general law was that there should be no adverse consequences for a party who makes a communication intended to result in compromise of a proceeding.
In Ryder v Frolich [2006] NSWSC 1324, the defendants sought a Mareva order against the plaintiffs, in support of which the defendants sought to tender a without prejudice letter from the plaintiffs’ solicitors. The plaintiffs objected on the ground that the tender was prohibited by s 131 (1) of the Commonwealth Evidence Act. The defendants’ solicitor submitted that the exception in s 131 (2) (i) applied. In rejecting that submission, Brereton J said, in an ex tempore judgment at [7]:
In my opinion, that provision is directed to communications which, of themselves, have legal consequences for the rights of the parties, such as transactional communications; they may well also involve, as Mr McHugh suggested, communications which are defamatory because the publication of a defamatory communication, even “without prejudice”, might create a right in a party.
In Asciak v Australian Secured and Managed Mortgages Pty Ltd (2008) 66 ACSR 298, the plaintiff was the director and shareholder of four companies involved in a mortgage origination and management business. Both the plaintiff and his wife were involved in the business. After their marriage broke down, the plaintiff’s wife applied to the Family Court for dissolution of the marriage. The plaintiff and his wife jointly appointed an accountant and valuer for the purposes of the Family Court proceedings. After the experts prepared valuations of their respective interests in the business and their residential, commercial and investment properties, a conciliation conference was held at the Family Court, at which all financial matters were resolved. Consent orders were then made, including orders that the plaintiff do all things necessary to transfer to his wife his shareholdings and any beneficial interest in, and resign or be removed as director of, the companies. The plaintiff subsequently proposed to commence proceedings in the Family Court to set aside the consent orders on the basis that his consent had been procured on the basis of a misrepresentation as to the true value of his interest in the companies. For the purpose of commencing those proceedings, he brought an application pursuant to s 198F (2) of the Corporations Act 2001 (Cth) for orders permitting him to inspect and take copies of the books of the companies. The defendants objected to the plaintiff giving evidence of what occurred at the conciliation conference in support of his application on the grounds, inter alia, that the proposed evidence was contrary to s 131 of the Commonwealth Evidence Act. In response, the plaintiff argued that the proposed evidence fell within the exception in s 131 (2) (i). In rejecting that argument, Goldberg J said at [32] – [34]:
I do not consider that subpar (i) of s 131(2) applies. The plaintiff submitted that the communication in question was designed to affect the plaintiff’s rights as a director because the agreement that was entered into, and the orders made in consequence of that agreement, provided for him to transfer his shares in the defendants and resign as a director of the defendants. However, the communications in respect of which the plaintiff wishes to adduce evidence related to financial matters pertaining to the defendants. The making of the communications did not affect any right of the plaintiff; rather, they provided him with information which he could take into account in making a decision as to how to resolve his outstanding disputes with his wife.
In Glass v Demarco [1999] FCA 482, a bankruptcy petition was before the court. The debtor filed an affidavit in which he gave evidence about an offer of compromise in another court proceeding. Objection was taken by the petitioning creditor to the admissibility of that evidence who relied on s 131(1) of the Evidence Act. The debtor relied on s 131(2)(i) of the Evidence Act. At par [10] Emmett J said:
“… The contention, as I understand it, is that a right of the debtor is affected by the offer because the debtor, by reason of the offer, has a right to accept it and thereby create a contract of compromise. I consider that the reference to a right in s131(2)(i) is to an existing right and it is not satisfied by reason of a right coming into existence upon the making of an offer.”
Although it might be said that the plaintiff had at the date of the conciliation conference rights by virtue of his position as a director of the defendants, that right was not affected by the making of the communications in respect of which the plaintiff wishes to adduce evidence.
In Talbot v NRMA Limited [2000] NSWSC 602, Hodgson CJ in Eq said at par [3]:
“Mr Shand has referred me to s 121(3) of the Evidence Act, which states that privilege would not prevent the producing of evidence of a communication or document which affects the rights of a person. In my opinion, that cannot mean a communication or document that is relevant to a right of a person because that would virtually eliminate the legal professional privilege as a ground for non‑admission of evidence. In my opinion, that must mean a communication or document that affects in some fairly direct way what are the actual rights and perhaps also duties of a person.”
I consider that these observations apply equally to the communications in respect of which the plaintiff wishes to adduce evidence. They do not affect in any direct way the actual rights of the plaintiff.
In the subsequent case of Pihiga Pty Ltd v Roche, the parties entered into a settlement deed following a mediation of their dispute. In subsequent proceedings, the plaintiff sought an order declaring the deed to be void ab initio and an order setting aside or rescinding the deed on the grounds of misleading and deceptive conduct. Prior to the hearing of the application, the respondents sought orders that the applicants be restrained from introducing as evidence the events which occurred at the mediation on the ground, inter alia, that the admission of the evidence would be contrary to s 131 of the Commonwealth Evidence Act. After considering the common law principles governing the admission of without prejudice communication, Lander J concluded that the common law principle recognised an exception to the exclusionary rule where it was claimed that agreement was reached in circumstances where a party was misled. Lander J then considered the application of s 131, and particularly whether the exceptions found in s 131 (2) (f), (i) and (j) applied to make the proposed evidence admissible. With regard to s 131 (2) (i), Lander J said at [126] – [127]:
The applicants also asserted that they were entitled to rely upon the exception in s 131(2)(i) because the communication which was made in an attempt to negotiate a settlement and the document which had been prepared affects the applicants’ rights. The applicants contended that they had a right, while engaged in negotiations with the respondents, not to have representations made to them which were false which would amount to misleading and deceptive conduct and, as a result, cause them damage by entering into the settlement deed. The respondents on the other hand contended that para (i) only applied to an existing right at the time of the communication or preparation of the document: Glass v Demarco [1999] FCA 482.
In my opinion, the applicants’ contention is to be preferred. Paragraph (i) of subs (2) does not in its terms refer to an existing right but is engaged if the communication at the time of the negotiations or the document which is prepared in an attempt to negotiate a settlement affects a right of a person. In my opinion, that would include the type of right to which the applicant refers. I think that paragraph applies and that is a further reason why s 131(1) does not apply.
At first blush, there may appear to be inconsistency between the decisions in Asciak and Pihiga, as different outcomes emerged from similar allegations that a party to a negotiated agreement had been misled. The different outcomes, however, are explicable on the basis of the application of the provisions of s 131 (2) to the differing factual circumstances of each case. In Asciak, the applicant claimed to have been misled by material prepared by jointly appointed experts. As Goldberg J observed, the communication from the experts to both parties merely provided information for the parties to use in deciding how to resolve their dispute. This may be contrasted with the circumstances in Pihiga, where it was alleged that one of the parties to the negotiated settlement had engaged in misleading and deceptive conduct. To my mind, it is doubtful whether the circumstances in Asciak would have justified departure from the exclusionary rule at common law, whereas it is clear that the circumstances in Pihiga fall within one of the well recognised common law exceptions to the exclusionary rule: see Unilever at 791–3.
In Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 1352, the plaintiff commenced defamation proceedings against the defendant, alleging that he had been defamed in a newspaper article imputing that he was the subject of criminal charges brought against him by the Australian Securities and Investment Commission (ASIC) and that he had behaved in a way warranting the filing of those, and other, charges. The defendant pleaded the defences of justification and contextual truth. The plaintiff provided a list of documents for the purposes of the proceedings which included a class of documents containing communications with ASIC, over which he claimed “without prejudice privilege”. The defendant was successful at first instance in obtaining an order for access to those documents, and the plaintiff appealed, citing s 131 (1) of the Evidence Act 1995 (NSW) (the NSW Evidence Act). In response, the defendant sought to rely, inter alia, on the provisions of s 131 (2) (i). After referring to the ALRC reports referred to above, Beech-Jones J said at [123]:
In my view, there is a clear distinction reflected in s 131(2)(i) between communications which, according to Brereton J, "of themselves have legal consequences for the rights of parties", and communications which only constitute evidence which are relevant to the establishment or denial of the rights of the parties. In broad terms, the former potentially fall within the exception created by s 131(2)(i), whereas the latter do not.
Later, at [125], he said:
For example, in the case of a defamatory statement, the making of such a communication affects a right of a person, namely the right of the person defamed to the enjoyment of their reputation. In contrast, communications passing between parties who are conducting settlement negotiations which only provide valuable evidence to vindicate or disprove the existence of a person's rights do not "affect" any of their rights in the sense that they do not alter, vary or interfere with them.
Finally, in the recent case of Galafassi v Kelly (2014) 87 NSWLR 119, Gleeson JA (with whom Bathurst CJ and Ward JA agreed) considered the application of s 131 (2) (i) of the NSW Evidence Act to emails sent by purchasers of a property to the vendor indicating that the purchasers could not complete the purchase. The vendor relied upon the contents of the emails as repudiating the contract by factual inability to perform. Whilst Gleeson J considered the emails were not subject to the exclusionary rule in s 131 (1) because they were not prepared or made “in connection with an attempt to negotiate a settlement of” the dispute between the parties, he nevertheless went on to consider the operation of s 131 (2) (i) at 148 - 149:
Section 131(2)(i) applies where making the communication or preparing the document affects the right of a person. There is conflicting authority concerning whether the relevant "right" is limited to existing rights at the time of the communication or preparation of the document: Glass v Demarco [1999] FCA 482 at [10] (Emmett J), or extends to a right coming into existence upon the making of the communication or document itself: Pihiga Pty Ltd v Roche [2011] FCA 240; 278 ALR 209 at [126]-[127] (Lander J).
In J D Heydon, Cross on Evidence (Online Australian edition, LexisNexis) at [25,395] the learned author expresses the view that s 131(2)(i) refers to the equivalent doctrine at common law pursuant to which "without prejudice" communications can be referred to if they reveal, for example, an act of bankruptcy or the exercise of an option: see for example Tenstat Pty Ltd Permanent Trustee Australia Ltd (1992) 28 NSWLR 625 at 633 where McLelland J (as his Honour then was) held that without prejudice privilege did not extend to preclude the proof of communications or statements relied on as an objective act having legal consequences, such as a notice of exercise of option. Although this decision was prior to the Evidence Act, the principle underlying it is applicable to s 131(2)(i). A communication relating to the exercise of an option may be properly viewed as affecting the right of the grantee of the option.
Here the disputed communications relate to the Vendor's contractual right to terminate for repudiatory conduct after the institution of the proceedings. Counsel for the Vendor put the matter shortly - one cannot repudiate "without prejudice". I agree. A communication or document evincing an intention no longer to be bound by a contract affects the right of the promisee to elect between accepting the repudiation and terminating the contract (strictly, its further obligations to perform) or affirming the contract and insisting on further performance.
The effect of s 16B of the Limitation Act 1985 (ACT)
As stated earlier, s 16B provides that a cause of action for damages for personal injury “is not maintainable” if brought three or more years after, in this case, the date of injury. The effect of s 16B is not to extinguish the cause of action at the expiration of the limitation period, but to bar the remedy: see Commonwealth v Mewett (1997) 191 CLR 471. Applying this principle to the present case, the expiration of the limitation period found in s 16B did not extinguish the respondent’s cause of action, but operated so as to bar any remedy.
Consideration
The decision of the Master to admit evidence of the settlement offer of 28 June 2011 as an acknowledgment of the respondent’s cause of action was based on the proposition that the offer “affected a right” of the respondent and was accordingly exempted from the exclusionary rule found in s 131 (1) by virtue of the exception in s 131 (2) (i). In his reasons, the Master does not clearly identify the right or rights of the respondent affected by the settlement offer, except to the extent that he says that the offer “has the effect of extending the limitation period and hence the period in which the plaintiff may commence proceedings in relation to the cause of action for which the defendant has admitted liability.” Whatever rights the respondent possessed by virtue of possession of her cause of action against the appellant, she still possesses, although it must be accepted that they are of less value to her if her right to a remedy is statute-barred. It appears that the Master considered that the right of the respondent affected by the offer of settlement, operating as an acknowledgment of the respondent’s cause of action, was a right to maintain the cause of action, that is, to obtain a remedy. This focuses attention on the ambit of the term “affects a right” in s 131 (2) (i), and whether it is intended to extend to affecting a “right” to a remedy for a cause of action. As the learned authors of Principles of Remedies (Covell, Lipton and Fordes, LexisNexis Butterworths, 2012) observe at 1.2 – 1.3, a distinction which is not entirely logical is often drawn between rights and remedies:
The jurisprudential problem with the dichotomy between rights and remedies is that remedies are simply another species of rights. This was recognised by the philosopher John Austin in the nineteenth century, when he drew a distinction between primary and secondary rights:
Those which I call primary do not arise from injuries, or from violations of other rights and duties. Those which I call secondary... arise from violations of other rights and duties, or from injuries, delicts [torts], or offences.
In terms of Austin’s scheme, primary rights correspond with causes of action, and secondary rights correspond with remedies. Austin acknowledged that the distinction is illogical, because ‘a primary right or duty is not of itself a right or duty, without the secondary right or duty by which it is sustained; and e converso’. In this sense, there is truth in the old maxim ubi jus ibi remedium (‘where there is a right there is a remedy’). So, why draw the distinction between rights and remedies? Austin’s answer:
The reason for describing the primary right and duty apart; for describing the injury apart; and for describing the remedy or punishment apart, is the clearness and compactness which results from the separation. The cause of the greater compactness is that the same remedial process is often applicable, not merely to this particular right, but to a great variety of classes of rights; and, therefore, if it be separated from the rights to which it is applicable, it may be disposed of at once, otherwise it must be frequently repeated.
(Citations omitted)
It may be accepted that, without doing violence to the language, it is possible to speak of a right to a remedy. But is this the type of right contemplated by s 131 (2) (i)? It is clear from the cases to which I have referred that the common law exceptions to the exclusion of evidence of negotiations do not extend to the admission of material that only affects a right to a remedy: see Ofulue v Bossert. To interpret s 131 (2) (i) in the manner accepted by the Master would involve a significant extension of the exceptions to the exclusionary rule recognised by the common law. If the exception found in s 131 (2) (i) is expansively interpreted as extending beyond those exceptions generally recognised at common law, the exception would potentially swallow the rule and the very important policy considerations underlying s 131 (1) would be largely negated. Any admission made in settlement negotiations may be said to affect a right of a party if the meaning of the term “right” is given an expansive interpretation inclusive of the right to a remedy or a remedy of a particular type or quantum. Furthermore, if an admission in negotiations is available to be used as an acknowledgment of a cause of action for the purpose of a “secondary right”, then, a fortiori, it must be available for the purposes of establishing or vindicating a “primary right”, for example by way of proving the plaintiff’s cause of action. I respectfully agree with the majority of the House of Lords in Ofulue v Bossert that no meaningful distinction can, for this purpose, be drawn between an admission and an acknowledgment. In my opinion, the fact that the appellant had previously admitted liability for the accident does not materially alter this analysis. This is not a case where the justice of the case requires that evidence of the offer made by the appellant be admitted. The commencement of proceedings was always the responsibility of the respondent, and it has not been suggested that there was any impediment to the respondent commencing proceedings within the limitation period. There is no suggestion that the appellant represented to the respondent that he would not plead the limitation period if the respondent did not commence proceedings in time, or that the appellant conducted himself in such a way that he should not now be allowed to plead the expiration of the limitation period.
In my opinion, the exception in s 131 (2) (i) is to be interpreted as extending no further than the common law exceptions to the exclusionary rule. My reasons for reaching this conclusion are:
(a)this approach accords with the very significant and well-recognised policy considerations underlying the common law exclusionary rule and s 131 (1);
(b)this approach is consistent with the ALRC reports and their recommendations which preceded the Uniform Evidence Laws; and
(c)it is consistent with previous authorities to which I have referred concerning the ambit of s 131 (2) (i).
It is not possible to authoritatively catalogue the circumstances in which the exception in s 131 (2) (i) will operate, any more than it is possible to catalogue the circumstances in which the common law will recognise an exception to the general prohibition on adducing evidence of negotiations. Circumstances relevant to determining whether the exception in s 131 (2) (i) is engaged will include the extent to which the common law would, in like circumstances, recognise an exception to the prohibition, the extent to which engaging the exception erodes the policy rationale behind s 131 (1) and the demands of justice in the particular case. In the present case, to interpret s 131 (2) (i) as extending to allowing the admission of the offer of settlement as evidence of acknowledgment or confirmation of the respondent’s cause of action would significantly erode the policy considerations underlying s 131 (1). It would also extend beyond the exception recognised by the common law. Finally, there is no compelling reason why the interests of justice requires the provisions of s 131 (2) (i) to be interpreted so as to allow the admission of the evidence.
Conclusion
On a proper interpretation of s 131 (2) (i), evidence of the offer of settlement made by the appellant on 28 June 2011 was not admissible as an acknowledgment of the respondent’s cause of action because it did not create, alter, vary or interfere with any relevant right of the respondent. To admit evidence of the offer of settlement would also be contrary to the policy considerations underlying the exclusionary principle in s 131 (1).
It is common ground that, if the offer of settlement is not available to be used as an acknowledgment of the respondent’s cause of action, her action is statute barred. It is therefore appropriate to grant summary judgment to the defendant.
Orders
The appeal is upheld and the decision of the Master is set aside. In substitution, summary judgment will be entered for the defendant (the appellant in these proceedings) with costs.
The appropriate costs order for the appeal is that the respondent pay the appellant’s costs of the appeal.
| I certify that the preceding forty-three [43] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Burns. Associate: Date: 11 June 2015 |
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