Village-Nine Network v Mercantile Mutual Custodians

[2000] HCATrans 291

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B68 of 1999

B e t w e e n -

VILLAGE/NINE NETWORK RESTAURANTS AND BARS PTY LTD, VILLAGE ROADSHOW LIMITED, PUBLISHING AND BROADCASTING LIMITED (FORMERLY NINE NETWORK AUSTRALIA LIMITED)

Applicants

and

MERCANTILE MUTUAL CUSTODIANS PTY LTD

Respondent

Application for special leave to appeal

GLEESON CJ
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 21 JUNE 2000, AT 3.04 PM

Copyright in the High Court of Australia

MR S.K. WILSON, QC:   If the Court pleases, I appear with my learned friend, MS K.A. McMILLAN, for the applicant.  (instructed by Herbert Geer & Rundle)

MR D.J.S. JACKSON, QC:   May it please the Court, I appear with my learned friend, MR P.A. FREEBURN, for the respondent.  (instructed by R.W.T. Mann & Partners)

GLEESON CJ:   Yes, Mr Wilson.

MR WILSON:   If your Honours please, the point raised by this application is a short one, yet we would respectfully submit that it may have far‑reaching ramifications in the context of this Court’s opportunity to review the scope of the law in respect of “without prejudice” negotiations between parties in the light of the modern emphasis in mediation.

We say that the Court of Appeal in this State erred in both of the judgments delivered by Mr Justice Pincus and Mr Justice Byrne in this fundamental respect, that is, that they confused the issue of the privilege attaching to admissions by parties in “without prejudice” negotiations as between those parties and the use of other material, if you like, called assertions other than admissions or other incidental material which, although not admissions in those negotiations, may well be or could be admissions in subsequent litigation between one of those parties and a non‑party to the mediation process.

At page 23 of the application book, the first of the matters is dealt with, where at the top of the page his Honour Mr Justice Pincus said:

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.

The appellants ask for an order to be made excepting from the scope of the privilege all material containing such statements -

that is, statements which would have been constituted as admissions between the parties to the original mediation process:

But if it is not an admission express or implied – ie 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.

We say in that passage his Honour confuses the traditional protection of admissions in the context of the mediation parties and their subsequent use in litigation between those parties with statements that are made which are not admissions in the original mediation but which may be used as admissions in subsequent litigation between one of those parties and a non‑party.

GLEESON CJ:   Do you say that a different principle would apply, for example, to what goes on in a mediation as against what goes on in an exchange of correspondence between parties to litigations seeking to settle the litigation?

MR WILSON:   Essentially not, but it is possible that the scope of the protection may be governed by contractual implications, for instance, in a mediation where the parties may contract on a basis which purports to limit the use of the material beyond the use by one or other of them against the other.

That may arise but it is interesting to note, your Honours, that in that case at page 22 his Honour Mr Justice Pincus had referred to the case of Barden v Barden, one of the older New South Wales cases.  Your Honours may recall that was the case where the partners were being sued for moneys and in the course of a mediation that took place with the solicitor for the plaintiff as between themselves, the partners made a statement which was quite irrelevant to the issues in the mediation that as between themselves they were jointly entitled to a particular crop.  Later on when the partners fell out, they sued each other and the statement was found to be admissible and it could only have been admissible as an admission against interest in the subsequent litigation and it was not protected.

His Honour having referred to that case then, in our respectful submission, as it were, twisted the principle by translating the context of admission from an admission in the original mediation process to what we would use it as in the context of our litigation against one of the parties to that mediation process.  So that our submission in short is that if there is a statement of assertion, allegation perhaps, that does not in itself constitute an admission in the mediation or “without prejudice” negotiations between the parties to it, then we as a non‑party to that mediation or “without prejudice” negotiations, are entitled to, if it be in a document, discovery of that document and it would not be entitled to the “without prejudice” protection.

GLEESON CJ:   Is this your proposition, that if there is an exchange of “without prejudice” letters between the solicitors for two parties to a current court case, and one of those “without prejudice” letters contains an assertion of fact which is put forward as a proposition reflecting strength of the case of the party for whom that solicitor is acting, in other words, not treated as having the quality of an admission or a concession of some kind, the consequence of that is that some third party can use that “without prejudice” correspondence and give evidence of it in a case where the fact that that assertion has been made is relevant and is an admission against interest in the context of that second case?

MR WILSON:   In principle, yes, although I think I would have to concede that even on Field’s Case you would have to say that it is a question of how reasonably incidental to the “without prejudice” negotiations the statement or assertion was.

GLEESON CJ:   What is the strongest case you have to support that proposition?

KIRBY J:   It seems to be a proposition that would inhibit candid, frank exchanges in “without prejudice” communications in trying to settle a mediation.

MR WILSON:   The strongest case in terms of the case most factually relevant would be something like Barden v Barden but the problem is and the reason we put it this way to your Honours is that - and in a moment if I may I will take your Honours to the way it was dealt with by Mr Justice Byrne who dealt with it slightly differently.  Mr Justice Pincus said it does not matter because whatever you get out of the other case you are going to use as an admission in this case, whatever its status was and, therefore, as the law protects against admissions you cannot use it.

GLEESON CJ:   I am looking at the statement of principle from the decision in Harrington v Lowe referred to on the bottom of page 24 in paragraph 18.

MR WILSON:   Yes.

GLEESON CJ:   That talks about their communications being put in evidence, not those parts of their communications which had the quality of admissions or concessions in the context in which they were made.

MR WILSON:   It does, but in Harrington v Lowe which, your Honour, I am sure is aware was basically a family law case, this Court had the opportunity to review the principles that were looked at in the context of the English decision in Rush v Tompkins and it approved, at a number of pages, I think, in Harrington v Lowe (1996) 190 CLR 311 and I think I can refer your Honours particularly to pages 323, 326 and 339 of the judgment in that case, at 323 was the exposition of the purpose of the rule.

KIRBY J:   This would be a rule of the Family Court?

MR WILSON:   No.  The rule in terms of ‑ ‑ ‑

KIRBY J:   You are talking of the rule of law?

MR WILSON:   Yes, of “without prejudice” protection.  About the middle of the page, your Honours will see:

Counsel also referred to the principle that, even where the words “without prejudice” are not used, privilege will attach to communications which are made in the course of genuine negotiations with intent to compromise an existing dispute.  The purpose is 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.

Field is referred to.

GLEESON CJ:   The principle is usually expressed in terms of protecting communications, is it not?

MR WILSON:   Yes.

GLEESON CJ:   Not protecting admissions.

MR WILSON:   Yes, but in Field’s Case which is cited there as authority, if one goes back to Field’s Case one sees that, in fact, in this Court it was, in fact, discussed in terms of admissions.

GLEESON CJ:   Have you compared the principle for which you contend with the provision that is made in the Commonwealth Evidence Act and the New South Wales Evidence Act?  I realise that is not of direct concern in Queensland but ‑ ‑ ‑

MR WILSON:   No, I have to say I have not, your Honour.

GLEESON CJ:   I notice that section 131 of that Evidence Act prohibits adducing evidence of a communication that is made between persons in dispute in connection with an attempt to negotiate a settlement of the dispute.

MR WILSON:   Yes.

GLEESON CJ:   So the principle in Queensland, as established by the Court of Appeal in this case, appears to be substantially the same as the principle established by legislation in the Commonwealth area and in New South Wales.

MR WILSON:   Yes.

KIRBY J:   Is that a desirable principle from the point of view of legal ‑ ‑ ‑

MR WILSON:   With respect, your Honours, we would have thought that that is a matter that this Court ought to decide because the Queensland court has ‑ ‑ ‑

KIRBY J:   Why should we if we think that the Court of Appeal got it right?  I mean, there are so many reasons of policy why one would uphold that principle and why strangers can invade the mediation and, therefore, anybody who is engaging them will do it within the inhibition that they may have the invasion later.

MR WILSON:   The courts have always held that there are exceptions to the rule and we would respectfully submit that, even extending the principle to protecting communications generally still would not obviate the need to be conscious of the rule or exceptions to the rule as were referred to in cases such as Pitts v Adney where a court cannot be deceived as to the true facts or people cannot use the “without prejudice” protection to avoid evidence of an objective fact being determined and so forth or to allow it to cloak misleading or deceptive conduct.  One of the other cases, I think, dealt with that.

GLEESON CJ:   There must be a very strong policy of the law, particularly at the moment, to encourage resolution of disputes by mediation.

MR WILSON:   Yes, and what we say here is that both the judges providing the judgments in this case recognised the exceptions that might apply and it was very much our case, if I might say.  The emphasis in the argument in the Court of Appeal was that we accepted the probability that we would be hard pressed to persuade the court that the rule ought not to extend to parties, at least parties who were directly related to the facts in issue or in some way connected and also that we may have difficulty in persuading the court that anything other than matters that were not constituted as admissions ought to be protected.

Now, what the court did was recognise the fact that there are exceptions but then, if we may say so, muddled the issue by saying, “We don’t need to worry about whether or not in this case it’s an assertion or an admission because if Mr Wilson’s client wants to use it in the present litigation, it must be used in admission and that’s what the law protects.”  We say that is not the point.

If I might just briefly take your Honours to the decision of Mr Justice Byrne who basically, we say, made the same mistake but then decided the point on a slightly different basis.  Mr Justice Pincus decided it on the question, in a sense, of relevance, having, we say, confused the point.  Mr Justice Byrne at page 26 of the application book at line 14 said:

The appellants’ main contention is that the documents are not privileged for the reason that the appellants did not participate in the mediation.

If I may, I want to come back to that point:

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.

Now, there was no action between Concrete Constructions, the builder, and Mercantile Mutual.  They settled their differences in an arranged mediation.  He must be referring there to this action and, again, the slide has been made, we say erroneously, to talking about the issue of admissions.

We were prepared to concede, assuming it is proper to extend the protection to the parties to the mediation as against non‑parties, that the protection ought to be extended to matters that were limited to admissions or matters reasonably incidental to offers of settlement and so forth but that other matters ought to be discovered.  What his Honour there is, of course, doing is translating again the context of admissions into this action, not looking at them in the context of their protection in the original mediation process.

Later on, at page 33, we say he in fact – and, if I may say so, our learned friends have picked this up in their written argument and we say stated it erroneously but no doubt relying on this passage:

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.

We say that was not our case at all and, indeed, if your Honours were to look at the amended grounds of appeal, the whole point of the amended grounds of appeal was to allow us to argue the case along the lines of the two decisions in Quad Consulting v Bleakley and Austotel v Jamison where, in each of those cases, the court, relying heavily on this Court’s ruling in Field’s Case at page 291 was prepared to say but not everything in a mediation is protected and one must look at the division.  I think in one of those cases the learned judge actually having made his ruling got the documents and he went through the process, perhaps in the same way as a judge might in a case of argument over legal professional privilege, and he went through the documents and actually did the blacking out and then produced the documents and said he was prepared to order that they be provided in that way.

In the other case, orders were made which were not dissimilar, I think, to the form of order that we sought in our amended notice of appeal in this case, and so the whole purpose of our seeking to amend the appeal before the Court of Appeal and to bring it on in the way in which we did was to say, “Yes, all right, even if you are prepared to extend this protection to non‑parties, we then must accept that the protection still must be in its essence as declared by this Court in Field’s Case but we should be able to get at least incidental matters”.

One of the things that promoted us in that, so that your Honours understand the background of that submission, was that by the time the matter came on before the judge at first instance, we had a position where the actual settlement document had been produced, that is between the parties, but it was very vague in its terminology.  It simply talked about disputes and differences between the parties being settled and a sum of money being paid by one to the other.

One of our concerns was that what if, for instance - and we have to put it on this basis because, of course, we have never seen the documents - Mercantile Mutual claimed against its builder damages for the loss of us as the major tenant because of the delays in the building and if that was part of the negotiations and it was settled, in theory, of course, it might mean they have no claim in this proceeding against us for damages because their damages may have merged in the other settlement.

There are other issues and I will not trouble the Court with them now but there are other matters which could be, theoretically, directly relevant but we have to speak in terms of theory because we have not seen the documents and, as your Honours would have seen, the matter progressed from day one on the basis that the issue of “without prejudice” privilege was to be argued on the assumption that the documents were relevant.

Another one of the confusing features of the Court of Appeal’s handling of the matter was that it was, in a sense, sprung upon us during running, that they wanted to try and obviate any future problem with relevance and try and deal with that at the same time and, of course, one was then forced to speak in terms of what may or might happen and they went, “Ah”, but if you speak in terms of what may or might happen that is not good enough under our rule in Queensland for direct relevance.  But one is left in an impossible position and we say this Court in assessing the merits of this application ought to totally disregard confusing issues of relevance because the matter ought to have proceeded on the basis which the parties clearly agreed and is apparent from the judgment at first instance of Mr Justice Moynihan which is in the appeal book.

KIRBY J:   On the second point, does not the fact that the rule in Queensland is peculiar and is not replicated elsewhere argue against the grant of special leave?

MR WILSON:   No, we would say not, because we would say that would destroy the basis on which the parties proceeded with the argument in the first place and it is not possible to judge it.  How does one judge the relevance of documents one has not yet had properly and fully discovered?  Again, that raises the whole overlap of the issue in this case of the original rule of the traditional rule of “without prejudice” privilege being a rule against admissibility.  Now of course, with the evolution of the English cases, it has translated into either collaterally or as an addition as a rule against production as well and, again, this honourable Court has not ruled on that issue.

Finally, on the issue of the question of how far do you extend it, much of the argument in the Court of Appeal did proceed on the assumption that you have started with the basis that you could have a third party protection or a non‑party protection but that involved the Court of Appeal extending the decision, we say, in Rush v Tompkins, a decision which even your Honour the Chief Justice when Chief Justice of New South Wales in Hong Kong Bank v Murphy had reason to make the point it should be read in accordance with its specific facts, which was that the third party in that case was not a non‑party but, in fact, another party in the same action.

GLEESON CJ:   Thank you, Mr Wilson.

MR WILSON:   If your Honours please.

GLEESON CJ:   We do not need to hear you, Mr Jackson. 

The Court is of the view that there are insufficient prospects of success of an appeal to warrant a grant of special leave in this case and the application is refused with costs.

MR WILSON:   If the Court pleases.

GLEESON CJ:   We will adjourn for a few moments to reconstitute.

AT 3.26 PM THE MATTER WAS CONCLUDED