Rabobank New Zealand Ltd v Phillips
[2022] NZHC 3390
•10 December 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-001818
[2021] NZHC 3390
UNDER the Defamation Act 1992 BETWEEN
GRAHAME CHRISTIAN
Plaintiff
AND
NZME PUBLISHING LIMITED
First Defendant
MICHAEL VALINTINE
Second DefendantMURRAY IAN BAIN
Third Defendant
Hearing: 3 December 2021 Appearances:
C Patterson for the Plaintiff
W Akel and J Dickson for the Third Defendant
Judgment:
10 December 2021
JUDGMENT OF WALKER J
[Redacted]
This judgment was delivered by me on 10 December 2021 at 4 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
CHRISTIAN v BAIN [2021] NZHC 3390 [10 December 2021]
Introduction
[1] In what circumstances does settlement with one joint tortfeasor not release another joint tortfeasor? That is the issue before the Court in this defamation proceeding. Mr Christian alleges he has been defamed in articles published by NZME Publishing Limited. He alleges that Mr Bain was the source of the articles. He sues Mr Bain as a joint tortfeasor. That is, he claims that Mr Bain is jointly responsible for the published articles rather than claiming in respect of any statements Mr Bain may have made to the journalist who authored the articles.
[2]A three week trial is scheduled to commence on 8 February 2022.
[3] Mr Christian has settled his claims against the first and second defendants. That settlement included a published retraction. Mr Bain applies to strike out the claim against him on the basis that the settlement between those parties also released Mr Bain from any liability by operation of law. He invokes the “release rule”, the effect of which is that a release in favour of one joint tortfeasor operates in favour of all.1 Mr Christian contends in response that he was entitled to settle with one or more joint tortfeasors without releasing any other joint tortfeasor and did so settle on the expressly negotiated basis that the settlement would not release Mr Bain. In other words, that he reserved rights to continue the proceeding against Mr Bain. If Mr Bain is entitled to rely on the release rule, the proceeding will be at an end.
Preliminary application to set aside settlement privilege
[4] As a prelude to the strike-out application, Mr Christian sought a direction setting aside the settlement privilege protecting the correspondence exchanged in negotiations with the first and second defendants. He claimed that correspondence would support his argument that the settlement agreement was never intended to release Mr Bain from liability. If set aside, the correspondence would then be produced in opposition to the strike-out application provided it is relevant in accordance with the fundamental principle that relevant evidence is admissible save for the exceptions in s 7 of the Evidence Act 2006 (the Act). Mr Christian waived
1 Moodie v Strachan HC Wellington, CIV-2007-485-002212, 26 August 2010 at [12].
privilege in the correspondence, to the extent that he was able, but properly recognised that the privilege belongs to both he and the first and second defendants as parties to the negotiations.2 While those parties were content to abide the decision of the Court, they did not waive any privilege.
[5] The parties agreed that it was appropriate to dispose of the issue of the without prejudice material first, before hearing the substantive application to strike out. At first blush, that appeared both sensible and necessary. If settlement privilege was set aside the third defendant would have been entitled to have an opportunity to consider that material before the substantive application to strike out.3
[6] However, this two-step approach in fact introduced complexity about where the edges of that determination lay because of the manner in which the submissions evolved. There is an inherent interconnectedness between the issues and a degree of circularity in the arguments. Nonetheless, I was content to rule on that preliminary matter without finally determining the question of whether there had been a release of Mr Bain by operation of law. I issued my results judgment on 30 November 2021 declining to set aside the settlement privilege with reasons to follow. I provide those reasons in this judgment in addition to determining the strike-out application.
Background
[7] I gratefully adopt the summary set out in the judgment of Gault J in respect of an earlier interlocutory application:4
[3] … Mr Christian is the founder of a waste disposal and recycling company which, following acquisition, is now Smart Environmental Ltd (Smart). Mr Christian was managing director from incorporation of the predecessor company in 2007 until 2019. He remains a director.
[4] Mr Bain was an employee of Smart until December 2017. In January 2018 Mr Bain founded a commercial waste company, Coastal Bins Ltd, of which he is a director and majority shareholder.
[5] Mr Christian alleges that Mr Bain was the source of information for media articles authored by Mr Valintine and published by NZME Publishing Ltd, the former defendants, on 3 August 2019:
2 Evidence Act 2006, s 65(5).
3 The without prejudice material has been provided to the Court but not to the third defendant.
4 Christian v Bain [2021] NZHC 2834.
(a) an article entitled “Waste ‘rort’ may cost $1m: Claim”; and
(b) an article entitled “Waste firm’s dirty secret”.
[6] Mr Christian claims that the articles are defamatory of him as each means, and has been understood to mean, that he as founder and former managing director of Smart and as its current director either directed or was complicit in Smart’s environmental action.
[8]Materially, in so far as Mr Bain is concerned, it is pleaded that:5
(a)the publications were based materially on statements made by Mr Bain to the journalist and repeated and/or published verbatim as quotations;
(b)Mr Bain intended and/or consented and/or reasonably foresaw the publisher repeating and relying on those statements for the articles; and
(c)Mr Bain intended to damage Mr Christian’s reputation and was motivated by personal malice and anticipated financial benefit as a trade competitor.
[9] Each cause of action is pleaded against all defendants. The prayer for relief for each cause of action seeks declarations, general, aggravated and exemplary damages against all defendants.
[10] Mr Bain denies responsibility for the articles. He contends that he was just one of multiple sources. He denies that the articles are defamatory of Mr Christian but says that if they carry the pleaded meanings, those meanings are expressions of honest opinion. In a third amended statement of defence filed after the preliminary hearing in order to meet the close of pleadings date, and expressly without prejudice to the strike-out application, Mr Bain added two affirmative defences. He now pleads the asserted effect of the settlement and consequent apology by the first and second defendants and the defence of public interest communication in reliance on Durie v Gardiner.6
5 Amended statement of claim dated 29 November 2019.
6 See Durie v Gardiner [2018] NZCA 278, [2018] 3 NZLR 131.
[11] On or around 25 August 2021, Mr Bain was informed that Mr Christian had settled with the first and second defendants. He was provided with a copy of the settlement agreement. Mr Christian applied for leave to discontinue the proceeding against the first and second defendants. Mr Bain consented to discontinuance. In that same application Mr Christian applied to withdraw his previous election for trial by jury.
[12] The notice of discontinuance records that Mr Christian “discontinues this proceeding against the First Defendant, NZME Publishing Limited, and the second defendant, Michael Valintine”.
The arguments
[13] It is common ground that, as the claims are pleaded, Mr Bain is alleged to be a joint tortfeasor as opposed to a concurrent tortfeasor. The difference, simply put, is that joint liability for a tortious wrong arises where there is a coincidence of acts causing the same damage.7 Concurrent liability occurs where there is a coincidence of separate acts, which by their conjoined effect cause damage.8 The conceptual difference between joint and concurrent liability has traditionally led to different consequences, at least in this jurisdiction.
[14] Mr Bain’s application to strike out asserts that the release in clause 5 of the settlement agreement is a release in respect of the very articles which are the subject of the claims against Mr Bain. The settlement is not expressed as a covenant not to sue and there is no express reservation of rights against Mr Bain. Even if an implied reservation of rights could achieve the same result, which is doubted, the test for an implied term is not satisfied. Consequently, the effect of the settlement is to release all joint tortfeasors as any cause of action against Mr Bain has been extinguished.
[15] The grounds of opposition in Mr Christian’s notice of opposition to the application to strike out are:
7 But persons are not joint tortfeasors simply because their separate and independent acts have caused the same damage. See Allison v KPMG Peat Marwick [2000] 1 NZLR 560 (CA) at [111].
8 At [111].
(a)To the extent (which is unclear) the release rule remains law, it has no application where, as here:
(i)The parties to the settlement have expressly agreed that the settlement shall not extend to, nor bar any continued legal claim against, a joint tortfeasor who is not a party; and/or
(ii)The parties to the settlement agreed to [REDACTED] in recognition of the settlement not extending to a joint tortfeasor who is not a party to the settlement.
(b)Alternatively, the release rule is no longer part of the law of New Zealand.
(c)If the settlement has the legal effect that Mr Bain has been released from liability, the settlement was entered into on the basis of mutual mistake as between the settling parties that it would not have such effect, and relief is therefore available pursuant to s 28 of the Contract and Commercial Law Act 2017.
[16] Mr Patterson’s written synopsis approached the issues in a different vein. He advanced the following propositions:
(a)While this Court is bound by appellate authority that the release rule still exists in New Zealand, “all rationale for its continued existence” has fallen away.
(b)It is no longer relevant whether a settlement uses the terminology of a release or covenant not to sue. Rather the key issue is whether the settlement expressly or by implication did not contemplate that all joint tortfeasors are released by the settlement.
(c)The Court of Appeal in Robinson v Tait has expressly rejected a submission that the release rule should apply unless expressly ousted, and instead suggested that there is or should be a presumption, in a
settling plaintiff’s favour, that the release rule is not to apply unless agreed otherwise.9
(d)Following Bathurst Resources Ltd v L & M Coal Holdings Ltd it is unequivocally permissible to have regard to extrinsic evidence, including pre-contractual negotiations, as an aid to contractual interpretation or to imply terms to determine what the parties actually agreed, at least where such extrinsic material evidences a joint understanding, intention and/or agreement between the parties.10
[17] Against that backdrop, Mr Patterson submitted that the provisions of the settlement agreement, read as a whole, make it clear that the parties neither intended nor agreed that Mr Bain would have the benefit of the settlement. Rather, they expressly or by implication reserved Mr Christian’s right to continue the proceedings against Mr Bain. He suggests that it is only if that construction is not clear from the agreement that there can be recourse to the parties’ correspondence evidencing their mutual and common intention.
[18] I have difficulty with any suggestion that pre-contractual negotiations are only relevant where there is ambiguity as to the meaning of the contract. When I tested Mr Patterson on the question of relevance, he reiterated that, if by the terms of the settlement agreement it is clear that the parties’ objective intention was that Mr Bain is not released, then the extrinsic material would not be relevant and his application to set aside the privilege fell by the wayside. But, he submitted that this proposition cuts only one way. As I apprehend his submission, it is that, where the settlement agreement clearly does not release Mr Bain, the correspondence is not relevant; where it clearly does release Mr Bain it is relevant to the issue of rectification; and where the settlement agreement is ambiguous the correspondence is relevant.
[19] I pause to interpolate that this submission was likely influenced by an erroneous reliance on s 57(2B)(b) of the Act. In his memorandum and submissions in support of setting aside the settlement privilege, Mr Patterson relied on s 57(2B)(b)
9 Robinson v Tait [2002] 2 NZLR 30 (CA) at [63].
10 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85 at [76]–[77], [115] and [153].
and/or 57(3)(d) of the Act. During the hearing, Mr Patterson conceded the correctness of Mr Akel’s submission that s 57(2B)(b) does not apply to civil proceedings. Mr Patterson then suggested, albeit faintly, that s 57(3)(a) of the Act is also engaged. This suggestion had not been foreshadowed; it emerged only in reply. Consequently, Mr Akel did not have a proper opportunity to respond. Had it been determinative, I would have allowed Mr Akel further opportunity to be heard. In the end, it was not determinative of the issue and it was unnecessary to seek further submissions from Mr Akel.
[20]Mr Bain’s position is diametrically opposed. Mr Akel submitted:
(a)The without prejudice correspondence is irrelevant and therefore inadmissible under s 7(2) of the Act in any event, because the cause of action against an alleged joint tortfeasor is deemed to be extinguished by operation of law regardless of whether Mr Christian intended to continue to pursue Mr Bain.11 A party cannot reserve rights against something which, by operation of law, no longer exists.
(b)To allow production of without prejudice correspondence would be unfair to Mr Bain who would not know what, if any, other written and verbal communications have taken place.
(c)The settlement agreement should speak for itself, particularly given clause 5 which makes it clear that the terms of settlement are embodied in the one document.
(d)To allow the admission of extrinsic evidence may lead to the first and second defendants being required to give evidence regarding their understanding of the negotiations and the final outcome.
(e)Mr Christian’s contention that the settlement was entered into on the basis of mistake that it would not have the effect of releasing Mr Bain
11 I record that Mr Akel and Ms Dickson’s written submission appeared to focus on Mr Christian’s intention rather than the objectively ascertained intention of the parties recorded in the settlement agreement.
from liability is not supported by evidence and should be disregarded by the Court.
(f)Nothing short of an express reservation of rights against a joint tortfeasor suffices to avoid the release rule.
Issues
[21] The issue arising on the strike-out application is whether Mr Bain has been released by virtue of the settlement agreement between Mr Christian and the first and second defendants. This raises a number of sub-issues as to the proper construction of the settlement agreement.
[22] In my assessment, the issues relating to setting aside the settlement privilege are:
(a)whether the negotiation correspondence is relevant and therefore admissible subject to setting aside settlement privilege;
(b)whether, in the interests of justice, the need for the without prejudice correspondence outweighs the need for the privilege (s 57(3)(d) of the Act);
(c)whether ascertaining the meaning of a contract falls within the exception in s 57(3)(a) concerning “the terms of an agreement settling the dispute”; and
(d)whether the evidence should nonetheless be excluded under s 8 of the Act.
[23] Although setting aside the settlement privilege was argued and disposed of as a preliminary issue, it is more convenient to deal first with the strike-out application before setting out the reasons for declining to set aside the settlement privilege.
Strike-out application
[24] As a starting point, it is useful to trace the application and development of the release rule. Historically, the orthodox view has been that a cause of action against joint tortfeasors is one cause of action and indivisible. From this principle, two rules of English common law developed in tandem: the judgment rule and the release rule.12 The judgment rule provided that judgment against one joint tortfeasor barred any subsequent action against another joint tortfeasor.13 The release rule provided that a release granted to one joint tortfeasor operates as a discharge of all other joint tortfeasors because it extinguished the cause of action.14
[25] In the defamation context, Gatley on Libel and Slander expresses the release rule in these terms:15
Where several persons are jointly liable for the publication of a libel, the basic rule is that release given to one or an accord and satisfaction made with one is a defence to an action against the others, “the reason being that the cause of action, which is one and indivisible, having been released, all persons otherwise liable thereto are consequently released.” … However, even the basis rule about joint tortfeasors is of limited importance because a claimant can agree to release one or more of several defendants jointly liable for a libel and expressly or by implication reserve his right of action against the others. Such a release will be construed as merely a covenant not to sue the particular defendant or defendants with whom the agreement is made.
[26] Mr Akel submitted this passage does not reflect the current state of the law in New Zealand, particularly insofar as it suggests that parties can by implication reserve rights of action against a tortfeasor. He contends that the cardinal rule is that the release rule is operative unless there is an express reservation of rights; the authority cited by Gatley in this passage has been subsequently doubted by the English Court of
12 Brooks v New Zealand Guardian Trust Co Ltd [1994] 2 NZLR 134 (CA) at 138.
13 This is because “[t]he right to enforce the merged judgment replaced the right to sue in tort. As the indivisible right to sue had gone, there was nothing on which to sue other joint tortfeasors.” See Rintoul Group Ltd v Robson [2019] NZHC 21, [2019] NZAR 434 at [32].
14 See Duck v Mayeu [1892] 2 QB 511 (QB) at 513 as cited in Robinson, above n 9, at [35]. A “release” here is to be contrasted with a covenant not to sue—phrasing often adopted by settling parties in an attempt to avoid operation of the release rule. A document was traditionally read as a covenant not to sue rather than a release “if it is worded as such or if, though worded as a release, it expressly reserves the rights against the other parties who are liable”. See Allison, above n 7, at [128]. This distinction was described by Lord Denning as “arid and technical” and “without any merits”. See Bryanston Finance Ltd v de Vries [1975] 1 QB 703 (CA) at 723.
15 Alastair Mullis, Richard Parkes and Godwin Busuttil (eds) Gatley on Libel and Slander (12th ed, Sweet and Maxwell, London, 2013) at [19.28].
Appeal and there is no indication in any of the New Zealand authorities that rights can be impliedly reserved in this context.16
[27] In this case the Court is not concerned with whether a term should be implied into the settlement agreement reserving rights against Mr Bain. It is instead suggested that rights are reserved as a necessary or logical inference from the expressly agreed terms—that is to say, the Court is concerned here with contractual interpretation rather than implication. As the Supreme Court in Bathurst made clear:17
… the issue of implication only arises after the express terms of the contract have been interpreted and found not to provide for the eventuality. This process of interpretation we refer to includes any logical or necessary inferences from the expressly agreed terms.
[28] In any event, the position of the release rule in New Zealand has long been left in a rather unsatisfactory state. The judgment rule is no longer part of the law of New Zealand.18 It was expressly abolished by s 17(1)(a) of the Law Reform Act 1936.19
[29] The Court of Appeal in Brooks v New Zealand Guardian Trust Co Ltd concluded that despite the legislative reform, the release rule still applies in New Zealand.20 A short time later, the High Court of Australia took a different tack.21 In Thompson v Australian Capital Television Pty Ltd, the Full Court unanimously held that the release rule had been impliedly abolished by s 11(2) of the Law Reform (Miscellaneous Provisions) Act 1955 (ACT), the equivalent provision to s 17(1)(a) of the Law Reform Act in New Zealand.22 It determined that the effect of s 11(2), in explicitly abolishing the judgment rule, was that a cause of action against joint tortfeasors is no longer treated as one and indivisible.23 Given that a cause of action is no longer one and indivisible, “there is no conceptual basis for the rule that the
16 The authors of Gatley on Libel and Slander refer to the decision in Ansari v Knowles [2012] EWHC 3137 which was discussed in turn by the Court of Appeal in Gladman Commercial Properties v Fisher Hargreaves Proctor [2013] EWCA Civ 1466.
17 Bathurst, above n 10, at [113].
18 Brooks, above n 12, at 138.
19 The rule was abrogated by statute in England through s 6(1)(a) of the Law Reform (Married Women and Tortfeasors) Act 1935. A nearly identical provision was adopted in New Zealand through s 17(1)(a) of the Law Reform Act 1936.
20 At 140.
21 Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574.22 At 584.
23 At 582.
release of one joint tortfeasor releases the others”.24 The release rule therefore dissolved.25 There was no reference in the High Court of Australia’s judgment to the contrary decision in Brooks.
[30] The release rule next arose for discussion in the New Zealand Court of Appeal’s decision in Allison v KPMG Peat Marwick.26 The Court confirmed the decision in Brooks that s 17(1)(a) of the Law Reform Act had not abolished the release rule in New Zealand.27 It made no reference to the High Court of Australia’s decision in Thompson. The Court refused to extend the scope of the release rule to concurrent tortfeasors as well as joint tortfeasors.28 It said to do so would be to depart from the “long-established, settled and sound principle that a release of one concurrent tortfeasor does not release another concurrent tortfeasor”.29
[31] This decision was followed shortly afterwards by Robinson v Tait.30 The Full Court in Robinson included Thomas, Keith and Tipping JJ, all of whom sat on Allison. Blanchard and McGrath JJ joined the Court. The case concerned s 37(6) of the Securities Act 1978 which imposed joint and several liability on issuers of securities and their directors if certain subscriptions were not repaid within two months. The plaintiffs in Robinson settled with the issuer for a part payment without expressly reserving their rights against the directors. The Court of Appeal unanimously upheld their right to sue the directors. The conclusion was not based on the release rule but rather the particular construction of s 37(6). The release rule was therefore not directly engaged by the appeal. Nor did it form part of the ratio of the decision.
24 At 584.
25 See also the separate judgment of Gummow J, with whom Gaudron J agreed, at 611–614.
26 Allison, above n 7.
27 At [113]. In doing so, the Court affirmed at [114] that the bar does not operate where there is an agreement not to sue: “While a release destroys the cause of action, an agreement not to sue only renders it unenforceable against the tortfeasor with whom the agreement was made”.
28 At [160]. This conclusion was consistent with the Court of Appeal’s earlier finding in Brooks that “[t]he release rule will apply only if the directors and their company were joint tortfeasors.” For a useful summary of the distinction between concurrent and joint tortfeasors, see the judgment of Thomas J at [111] and the judgment of Tipping J at [179]–[180].
29 At [160]. Compare the decision of the House of Lords in Jameson v Central Electricity Generating Board [2000] 1 AC 455 (HL). Thomas J described the analysis and reasoning of the majority in Jameson as “not convincing”.
30 Robinson, above n 9.
[32] However, the three judgments delivered in Robinson nevertheless discuss the release rule in some depth. Thomas J opined forcefully that the release rule, like the judgment rule, should be confined to the annals of history. While accepting the Court of Appeal’s decision in Brooks that Parliament did not intend to abrogate the release rule with s 17(1)(a) of the Law Reform Act, Thomas J argued that it was nevertheless a necessary consequence of enacting the provision because it removed the substratum for the rule.31
[33] Tipping J on the other hand considered that s 17 had not changed “the essence or nature of the cause of action” but simply removed:32
… one consequence of the unitary nature of the cause of action, namely that a judgment, even if unsatisfied, bars further proceedings upon the cause of action by others jointly entitled to it.
[34] The judgment of Keith, Blanchard and McGrath JJ was delivered by Blanchard J. Its discussion of the release rule was equivocal by comparison with Thomas and Tipping JJ. It referred to certain difficulties with the reasoning of the High Court of Australia in Thompson and noted that the High Court had not considered the New Zealand Court of Appeal’s decision in Brooks.33 But, they considered it was unnecessary to decide whether the reasoning in Thompson should apply in New Zealand.
[35] The majority nevertheless commented on a number of policy justifications often advanced in favour of the release rule. In particular, they referred favourably to observations earlier expressed by the Court in Allison:34
… in deciding as between the plaintiff and the defendant who should be responsible for any omission to make it clear whether the release, or accord and satisfaction, is a release of the defendant only or a release of the defendant and other tortfeasors as well, it would seem preferable that the responsibility should fall upon the defendant. It is the defendant who is obtaining a release from liability. … it does not seem inappropriate or unfair to suggest that responsibility for obtaining the protection the defendant desires should rest with the defendant.
31 At [16].
32 At [94].
33 At [60]–[61].
34 Allison, above n 7, at [143].
[36]The majority observed in turn that:35
It is said to be unfair to a defendant that, where the plaintiff does not reserve the right to sue another tortfeasor, the settling defendant should be exposed to the risk of a contribution claim; and that the release rule avoids multiplicity and circuity of actions. Against this view it can be said, and we think with some strength, that any trap for the unwary should not be set for the plaintiff, who has been the victim of wrongdoing; that the law should favour the injured party by placing responsibility on the defendant … Plaintiffs should be permitted to sue successively all those who have jointly caused injury unless they agreed not to do so.
[37] The Court of Appeal has not discussed the release rule in any depth since. While the judgment of Thomas J in Robinson represents a forceful denunciation of the release rule, with which some commentators agree,36 Tipping J advocated just as fervently for the rule’s continued application.
[38] An instance where release of a joint tortfeasor was in issue is Moodie v Strachan.37 Following settlement of a defamation action by two of three joint tortfeasors, the non-settling defendant applied to strike out the claims relying on the release rule. The settlement was recorded in an exchange of letters and was expressed to be in full and final settlement of the causes of action against the first and third defendants (but not the second defendant) in the proceedings. The settlement was expressed in comprehensive terms as a discharge and release from “all liability, losses, disputes, differences, claims, demands, actions, proceedings, costs or expenses and issues of any kind whatsoever … which relate either directly or indirectly or in any other way to the [publications]”.38 The plaintiff also acknowledged and agreed that the agreement may be pleaded and tendered as a complete and absolute bar to any such claims.
[39] Wild J approached the question as one of ordinary contractual interpretation. He held that it was not possible to construe the agreement as a covenant not to sue given the express discharge, release and comprehensive settlement of the causes of action. As to the express exclusion of Ms Strachan from the settlement agreement, the
35 Robinson, above n 9, at [63] (emphasis added).
36 See, for example, Peter Blanchard (ed) Civil Remedies in New Zealand (2nd ed, Brookers, Wellington, 2011) at [15.4.1].
37 See Moodie, above n 1.
38 At [3].
Judge held that related to the several liability of Ms Strachan to the plaintiff rather than her joint liability which did not therefore cut across the release rule. He said:39
I accept Mr Gray’s submission that Mr Moodie, if he wished to pursue Ms Strachan in respect of the “Moodie blues” article, needed to make that clear in the settlement agreement. Mr Moodie has in fact done the opposite: he is party to language which can only be interpreted as ending his rights to pursue any of the three defendants he had alleged were jointly and severally liable to him in respect of the “Moodie blues” article.
[40] Mr Akel referred to a number of English authorities and particularly Gladman v Fisher Hargreaves Proctor.40 This was not a defamation case but a claim for damages for fraudulent or negligent misrepresentation. At issue was whether a settlement with two defendants released the non-settling defendant. In particular, whether a term could be implied from the background matrix of fact reserving a right to sue the non-settling defendant. The settlement agreement itself was a short, simple one page document negotiated between sophisticated lawyers.
[41] At first instance, the Judge found no such implication. The Court of Appeal agreed. Briggs LJ referred to the dictum of Eady J in Ansari v Knowles that the modern approach to such questions is to apply ordinary principles of construction to settlement agreements with one or more of a number of joint tortfeasors.41 He pointed out that it is the imputed common intention, rather than the intention of one or other of them, which matters. He said the search “is not for the subjective intention of the parties, still less the intention of one or other of them”.42 He also referred to what he described as the “cardinal aspect of the contextual background”—being whether the defendants were concurrent or joint tortfeasors.43
[42] Mr Akel sought to persuade me first, that the judgment of Briggs LJ supports his proposition that release of a joint tortfeasor is virtually a presumption in the joint tortfeasor context which can only be dispelled by unequivocally express terms. Secondly, that it casts doubt on the principle set out in Gatley. I respectfully consider that submission overreaches. Briggs LJ was addressing counsel’s submission that the
39 At [35].
40 See Gladman, above n 16.
41 At [31] referring to Ansari, above n 16, at [18].
42 At [31].
43 At [33].
first instance decision was inconsistent in finding that the settlement agreement could mean opposite things, dependent on the technical question of whether the parties were joint or concurrent tortfeasors. Briggs LJ’s statement went no further than pointing out that the established legal consequence of a release of one or more joint tortfeasors is that there is a release of all of them and by contrast, the legal consequence of a release of one or more concurrent tortfeasors is precisely the opposite.44 As to casting doubt on Ansari, Briggs LJ made clear that the claimant’s subjective intention was not relevant in interpreting the settlement agreement. This is entirely consistent with the principles of contractual interpretation.
[43] This area of the law has been beset by judicial efforts to graft exceptions onto the release rule to avoid perceived harshness. First, by characterising settlements as covenants not to sue rather than releases. Secondly, by distinguishing between absolute releases and releases with a reservation of rights to pursue the joint tortfeasors. Neill LJ in Watts v Lord Aldington said of this approach:45
… though the result may be the same, in my opinion it will often be more satisfactory to consider whether the relevant document is an absolute release or a release with a reservation rather to consider whether the document can be fitted into the straitjacket of a covenant or agreement not to sue.
I distil the following principles from my review of the authorities:
(a)None of the majority’s statements in Robinson do away with the release rule.
(b)The Court of Appeal’s decision in Brooks remains binding on this Court.
(c)The approach is one of ordinary contractual interpretation.
(d)Whether the parties expressly refer to a “release” as opposed to a “covenant not to sue” is not itself decisive of whether the agreement constitutes a release of all joint tortfeasors. Lord Denning described
44 At [33].
45 Watts v Lord Aldington [1999] L & TR 578 (CA) at 590.
the distinction between those terms as “arid and technical” and “without any merits”.46 In Allison, Thomas J observed that:47
It is essentially a matter of how the Court construes or regards the compromise agreement, and there is no merit in seeking to distinguish between a release and a covenant not to sue. Indeed, the question is really redundant.
(e)The material question is whether the settlement agreement, construed as a whole, constitutes a release of the joint tortfeasors or whether the parties have expressly or impliedly reserved rights against the non- settling defendant.48
Construction of the settlement agreement
[45] I set out here the material provisions of the settlement agreement between Mr Christian and the first and second defendants.
[46] After referring to the articles and court proceedings, paragraph D of the recitals to the settlement agreement states:
NZME, Mr Grahame Christian and Mr Valintine have reached an agreement to settle the Court Proceedings and all issues arising from the publication of the Articles, the terms of which are set out in this Settlement Agreement.
[47] The court proceedings are earlier defined as the defamation proceedings in the Auckland High Court against NZME, Mr Valintine and Mr Bain under CIV-2019-404- 1818. I accept that the references to “all issues” and the “Court Proceedings” as defined could be understood as an all embracing settlement in respect of the publications. But that is not the end of the story.
46 Bryanston, above n 14, at 723.
47 Allison, above n 7, at [130].
48 Conceptually, these two alternatives are mutually inconsistent as Mr Akel submits. If there has been a release of any joint tortfeasor under the settlement agreement then, by operation of the release rule, the non-settling defendant’s liability is released in turn. In such circumstances, it is doubtful that one can reserve rights (expressly or impliedly) against the non-settling defendant as the cause of action has been extinguished. Note that Mr Christian does not argue for an implied term as such.
[48] Clause 1 refers [REDACTED]. Clause 3 stipulates that NZME agrees to publish the statement appended to the settlement agreement withdrawing any allegations of wrongdoing against Mr Christian contained in the articles.
[49]Clause 4 provides:
[REDACTED]
[50]Clause 5 provides:
[REDACTED], Mr Christian releases the first and second defendants, all companies and entities related to them, and their employees, agents and contractors, from all liability, losses, disputes, differences, claims, demands, actions, proceedings, costs or expenses and issues of any kind whatsoever, whether or not they are known or discoverable or contingent at the date of this document, of whatever nature and however arising, which relate either directly or indirectly or in any other way to the Articles, and acknowledge and agree that this document may be pleaded and tendered as a complete and absolute bar to any such claims.
(emphasis added)
[51]Clause 6 reads:
The discharge and release set out in 5 above is given for the benefit of the first and second defendants, any company or entity related to them, and their employees, agents and contractors, and is intended to be enforceable by any such party in accordance with the provisions of the Contract and Commercial Law Act 2017. The parties agree Mr Bain is neither an employee, contractor nor related to NZME or Mr Valintine.
(emphasis added)
[52] Clause 7 is a confidentiality provision. It states that the settlement may be disclosed to the court in defence of a claim, including should the first and/or second defendants be re-joined or cross-claimed against.
[53]Clause 10 provides:
Mr Christian shall not over the course of the Court Proceedings or any proceedings related to the Articles:
(i)attempt to prove anything as against the first or second defendants, adopt a position that is critical of the first defendant, or obtain any factual or legal findings against the first or second defendants (for the avoidance of doubt, this does not prevent Mr Christian from seeking to establish as a
matter of fact any conduct of the first and second defendant which is reasonably relevant to and necessary for prosecuting the Court Proceedings against the third defendant);
(ii)require either of the first or second defendants to take any steps of any kind in the Court Proceedings or in any proceedings related to the Articles (although this clause shall not prevent Mr Christian from subpoenaing evidence from any employee of NZME and/or from Mr Valintine);
(iii)enforce or seek to enforce any damages or costs award apportioned to the first defendant and/or second defendant as a result of the Court Proceedings or any proceedings related to the Articles (if any).
(emphasis added)
[54] Mr Akel focuses on the preamble and clause 5 which expressly releases the publisher and the author. He submits that there is nothing in the settlement agreement excluding Mr Bain from the benefit of that release; no express reservation of the plaintiff’s rights and nothing suggesting that the agreement should be construed as a covenant not to sue.
[55] In my assessment, read as a harmonious whole, the settlement agreement unequivocally discloses that the settling parties contemplated and intended the continuation of Mr Christian’s claims against Mr Bain. That is a necessary inference from the express terms of the agreement. I set out my reasons.
[56] First, I read the preamble as confirming that the agreement settles all issues arising from the publications as between Mr Christian, NZME and Mr Valintine. It does not suggest that all issues arising from the publication are settled between Mr Christian and Mr Bain. Clause 5’s reference to “releases” is not decisive as to their intentions. Nor is the reference to the document being pleaded and tendered as a complete and absolute bar to “any such claims”. The phrase “any such claims” logically refers back to claims against the first and second defendants, companies and entities related to them and their employees, agents and contractors, in respect of which, by clause 6, Mr Bain is expressly excluded.
[57] This distinguishes the terms of the release from that in Moodie v Strachan, as does the fact that in Moodie there were also separate claims being faced by the joint
tortfeasor.49 The existence of a separate cause of action in that case explained the express reference to excluding the non-settling defendant.50
[58] Secondly, while the primacy of the express words deserves respect, they should not be read in isolation from their immediate and wider context. The agreement is replete with references to ongoing proceedings against Mr Bain. A few examples suffice. The statement in clause 6 would be entirely redundant had the parties intended for Mr Bain to be released from liability under clause 5. Clause 10 provides that nothing would prevent Mr Christian from seeking to establish in the Court Proceedings and in relation to NZME and/or Mr Valintine any facts “reasonably relevant to and necessary for prosecuting the Court Proceedings against the third defendant”. This proviso too is only explicable on the basis that the parties contemplated that the proceedings against Mr Bain would continue. Clause 7 anticipates a potential cross- claim which can sensibly only occur should the proceedings continue against Mr Bain. It can hardly be argued that the first and second defendants would not have known that the settlement may not mark an end of the litigation against them.
[59] Mr Akel’s proposition that a party cannot reserve rights if the cause of action upon which those rights were based has been extinguished is correct. But it begs the question. The cause of action is only extinguished if there is a release. Mr Patterson’s counterpoint is that whether or not there has been a release depends on the intention of the settling parties, objectively ascertained. Or put another way, on the proper construction of the settlement agreement.
[60] I have concluded that the parties’ intentions, objectively assessed, are clear from the settlement agreement itself and there is no release. Consequently, I dismiss the application to strike out.
49 See Moodie, above n 1.
50 At [36].
Application to set aside settlement privilege
[61] I turn now to the reasons for declining to set aside the settlement privilege protecting the correspondence exchanged in negotiations with the first and second defendants.
Relevance of contractual negotiations leading to settlement
[62] Mr Patterson reasoned that if it is clear on the face of the settlement agreement that the parties did not intend for Mr Bain to be released from liability, it is not necessary to refer to extrinsic material.51 This was because, first, the without prejudice correspondence would no longer be relevant, and secondly, it would consequently no longer fall within s 57(3)(d) of the Act.
[63] I do not accept the first reason as a matter of principle. Ambiguity is not a prerequisite to finding pre-contractual negotiation material relevant.52 The Supreme Court in Bathurst observed that while the law surrounding the admissibility of prior negotiations has been unsettled for some time, courts have tended to follow Tipping J’s approach that such evidence is admissible if capable of shedding objective light on the meaning of a contract.53
[64]The Court in Bathurst also said:54
[62] Applying s 7 in the context of contractual interpretation, evidence is prima facie admissible if it has a tendency to prove or disprove anything of consequence to determining the meaning the contractual document would convey to a reasonable person having all the background knowledge reasonably available to the parties in the situation in which they were at the
51 It is also common ground between them that this does not answer the substantive application since Mr Akel contends that intention is not relevant to the ultimate issue.
52 The principles of contractual interpretation are set out by the Supreme Court in Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60]–[63], [77]–[79],
[84] and [88]–[93]. McGrath, Glazebrook and Arnold JJ summarised the approach at [60] as follows: … the proper approach is an objective one, the aim being to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. This objective meaning is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as “background”, it has to be background that a reasonable person would regard as relevant. Accordingly, the context provided by the contract as a whole and any relevant background informs meaning (footnotes omitted).
53 Bathurst, above n 10, at [74] referring to Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [31].
54 Bathurst, above n 10 (footnotes omitted).
time of the contract. We say prima facie as relevant evidence may still be inadmissible in terms of s 8, or in terms of one of the Act’s (or any other Act’s) exclusionary provisions.
[65] If the negotiation correspondence shows a common mutual understanding as to the meaning a contract conveys, it is relevant to the objective search for meaning and, subject to the assessment under s 8 of the Act, admissible.55
[66]Section 8 relevantly provides:
8 General exclusion
(1)In any proceeding, the Judge must exclude evidence if its probative value is outweighed by the risk that the evidence will—
(a)have an unfairly prejudicial effect on the proceeding; or
(b)needlessly prolong the proceeding.
[67]This section has an important role to play. As the Court said in Bathurst:56
… s 8(1)(b) will often be relevant to a court’s task in determining admissibility. This provision addresses the policy concerns that the admission of extrinsic material will involve unnecessary expenditure of time and resources for the parties and the courts. Where the judge’s assessment is that the probative value of the evidence is outweighed by the risk that it will needlessly prolong the proceeding, the evidence will be excluded.
[68] Subject then to s 8 considerations, I find in principle (and without reviewing the material in question) that the without prejudice communications would be relevant to the extent that they show a common mutual understanding.57
[69] But given my conclusions on the settlement agreement, I accept Mr Patterson’s proposition that setting aside the settlement privilege becomes redundant, but not for the reason advanced by Mr Patterson. I find, under s 8 of the Act, that producing this material in respect of the strike-out application would needlessly prolong that application and outweigh its probative value. For these reasons I declined to set aside the settlement privilege.
55 At [76].
56 At [64].
57 Whether each of the documents the plaintiff seeks to produce fall within this description is not determined at this stage.
Section 57 of the Evidence Act
[70] In view of my finding, it is not strictly necessary to determine whether this material falls within one of the exceptions in s 57 of the Act such that settlement privilege should be set aside. Nonetheless, in case I am wrong, I briefly discuss this aspect of the application.
[71]The relevant parts of s 57 read:
57 Privilege for settlement negotiations, mediation, or plea discussions
(1)A person who is a party to, or a mediator in, a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of any communication between that person and any other person who is a party to the dispute if the communication—
(a)was intended to be confidential; and
(b)was made in connection with an attempt to settle or mediate the dispute between the persons.
(2)A person who is a party to a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of a confidential document that the person has prepared, or caused to be prepared, in connection with an attempt to mediate the dispute or to negotiate a settlement of the dispute.
…
(3)This section does not apply to—
(a)the terms of an agreement settling the dispute; or
(b)evidence necessary to prove the existence of such an
agreement in a proceeding in which the conclusion of such an agreement is in issue; or
(c)the use in a proceeding, solely for the purposes of an award of costs, of a written offer that—
(i)is expressly stated to be without prejudice except as to costs; and
(ii)relates to an issue in the proceeding; or
(d)the use in a proceeding of a communication or document made or prepared in connection with any settlement
negotiations or mediation if the court considers that, in the interests of justice, the need for the communication or document to be disclosed in the proceeding outweighs the
need for the privilege, taking into account the particular nature and benefit of the settlement negotiations or mediation.
[72] The legal principles relevant to setting aside settlement privilege were discussed by Fitzgerald J in Smith v Shaw and more recently by Gordon J in Gibbs (as beneficiary of the Ruby Cove Legacy Trust) v Windmeyer (as trustee of the Ruby Cove Legacy Trust).58 In Smith, Fitzgerald J noted that s 57(3)(d) was inserted in the Act on 18 January 2017 against the backdrop of a 2013 Law Commission review of the Act. The Law Commission considered options of directly enacting the common law exceptions to settlement privilege or adopting the approach now reflected in s 57(3)(d), namely a broader test of whether it is in the interests of justice to set aside the privilege.59
[73] The privilege operates in the context of settlement negotiations and mediation to allow parties in dispute to engage in full and frank discussion without fear that what they say might be used against them in future. This is an important public policy objective. The threshold for setting aside that privilege is therefore high.60
[74] Mr Patterson submitted that the rationale for maintaining the privilege falls away when one party holding the privilege seeks to waive it and the other joint holders do not actively oppose its production but are content to abide the decision of the Court. He contended that Mr Bain is not in a position to argue that the privilege should be maintained given that he was never a party to the communications.
[75] Section 57(3)(a) provides that without prejudice material may be used to prove an agreement or show what the terms of the agreement are. In Intelact Ltd v Fonterra TM Ltd, it was held that privileged communications may be introduced into evidence “to the extent that the communications and discussions provide evidence of objective facts necessary to assist the Court to interpret the settlement agreement in accordance with the parties’ true intentions”.61 Such material is also admissible to establish the
58 Smith v Shaw [2020] NZHC 238, [2020] 3 NZLR 661 at [34]–[53]; and Gibbs (as beneficiary of the Ruby Cove Legacy Trust) v Windmeyer (as trustee of the Ruby Cove Legacy Trust) [2021] NZHC 2582 at [73]–[77] and [86]–[89].
59 Law Commission The 2013 Review of the Evidence Act 2006 (NZLC R127, 2013) at [10.34]– [10.57].
60 See Smith v Shaw [2020] NZHC 1229 at [25].
61 Intelact Ltd v Fonterra TM Ltd [2017] NZHC 1086 at [18].
meaning of those terms. The authors of Cross on Evidence opine that “[i]t would be artificial if this use of communications made at mediation or during negotiations for settlement was not regarded as within the spirit of s 57(3).”62 I respectfully agree.
[76] If the intention of the parties to the settlement agreement had not been clear, I consider that the interests of justice would be met by setting aside the privilege because the need to do so would outweigh the need for the privilege. The underlying rationale for the settlement privilege in s 57(3)(d) is to allow full and frank discussion between the settling parties. Mr Bain was not party to the settlement negotiations. The effect of admitting this evidence under s 57(3)(d) would not imperil the rationale for settlement privilege nor affect the legal rights or liabilities of the settling parties.
[77] On the other hand, the consequences of release or no release is one affecting substantive rights. If there is a release then Mr Christian is prevented from pursuing Mr Bain. Unlike in Moodie, there is no separate liability for Mr Christian to fall back on should he wish to pursue Mr Bain in respect of the publications.63 If the parties’ intentions were not apparent in the settlement agreement, but the pre-settlement negotiations disclosed a mutual and common understanding that settlement was not intended to release Mr Bain from liability, then the plaintiff ought to be prevented from potentially falling into the “trap” of releasing Mr Bain unintentionally.64
[78] I therefore declined to set aside the settlement privilege, relying on s 8 of the Act. In my assessment, the intention of the parties that Mr Christian is entitled to pursue his claims against Mr Bain is clear from the terms of the settlement agreement itself. Production of further contextual material is unnecessary and would needlessly prolong the application to strike out on joint tortfeasor/release principles.
[79] Had that not been the case because the parties’ intentions were not apparent from the settlement agreement, I would have set aside the settlement privilege under s 57 of the Act. I consider that Mr Bain’s practical objections as to prejudice could be
62 Mathew Downs (ed) Cross on Evidence (online ed, LexisNexis) at [EVA57.10]. See also Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44, [2011] 1 AC 662 as to the position at common law.
63 Moodie, above n 1, at [36].
64 Robinson, above n 9, at [63].
overcome by a direction that all the without prejudice communications be made available to him, rather than a subset. I do not foresee it as likely that this approach would have led to the need for oral evidence.
Result
[80] I declined in my earlier judgment to set aside settlement privilege for the without prejudice correspondence.
[81]I dismiss the strike-out application.
[82] I reserve the question of costs. If the parties cannot resolve costs by agreement, they may file memoranda of no more than three pages plus schedules within 21 days of this judgment.
............................................................
Walker J
2
0
1