Azzi & Ors v Volvo Car Australia Pty Ltd

(CTH) Family Law Act 1975, s 79A (CTH) Family Law Regulations 1975, reg 96 (CTH) Family Law Rules 1984, O 24 r 1(8) LEGISLATION CITED : (NSW) Civil Procedure Act, ss 5, 25, 26, 27, 28, 29(2), 30, 33, 34, 98(1)(c), Sch 6 (NSW) Evidence Act 1995, s 131(1), 131(2), 135 (NSW) Farm Debt Mediation Act 1994, s15 (NSW) Industrial Relations Act 1996, s 109 (NSW) Supreme Court Act 1970, s 110I(1), s 110P(4)

Borninkhof v Borninkhof (1986) 11 Fam LR 151; FLC 91-752 Burgess v Mount Thorley Operations Pty Limited [2003] NSWIR Comm 22 Calderbank v Calderbank [1975] 3 All ER 333 Crump v Equine Nutrition Systems Pty Ltd trading as Horsepower (No 2) [2007] NSWSC 25 Fish v Solution 6 Holdings Ltd (2006) 225 CLR 180 Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252 Gray v Gray (1986) 11 FLR 548; FLC 91-771 CASES CITED : Gretton v Commonwealth of Australia [2007] NSWSC 149 Harrington v Lowe (1996) 190 CLR 311; FLC 92-668 Johnston v Johnston (1986) 10 Fam LR 700; FLC 91-710 Jones v Bradley (No 2) [2003] NSWCA 258 Leichhardt Municipal Council v Green [2004] NSWCA 341 Rdjski v Tectran Corporation Pty Limited [2003] NSWSC 476 SMEC Testing Services Pty Limited v Campbelltown City Council [2000] NSWCA 323 The Silver Fox Co Pty Limited v Lenard's Pty Limited (No 3) [2004] FCA 1570

50146/03: Tony Azzi (Automobiles) Pty Limited (first plaintiff) Harissa Pty Limited (second plaintiff) Antonio Azzi (third plaintff) Asialink Pty Limited (fourth plantiff) PARTIES : Volvo Car Australia Pty Limited (defendant)

50156/03: Tony Azzi (Automobiles) Pty Limited (first plaintiff) Harissa Pty Limited (second plaintiff) Antonio Azzi (third plaintff) Volvo Car Australia Pty Limited (defendant)

COUNSEL : J L Trew QC w J E O'Sullivan (plaintiffs) A R Moses (defendant)

SOLICITORS : McClellands Lawyers (plaintiffs) Letherbarrow Lawyers (defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50146/03 Tony Azzi (Automobiles) Pty Limited & 3 Ors v Volvo Car Australia Pty Limited

50156/03 Tony Azzi (Automobiles) Pty Limited & 2 Ors v Volvo Car Australia Pty Limited

1 HIS HONOUR: On 5 April 2007 I delivered judgment in these proceedings, consequent on which, in the Commercial Proceedings, I gave judgment for the Defendant with costs, and in the Industrial proceedings, I ordered that the proceedings be dismissed with costs. I granted liberty to the parties to apply by arrangement with my Associate within seven days to set aside or vary the costs orders and for other costs orders in their place. Volvo having indicated that it wished to make such an application, I made directions for the lodgement by the parties of written submissions and any supporting evidence on the question of costs. Volvo lodged a written submission on 11 April, by which it sought an order that the costs payable to it by the Plaintiffs be assessed on the indemnity basis from 23 September 2003 (which was the date of a conciliation conference under (NSW) Industrial Relations Act 1996, s 109) and alternatively, from 11 May 2005 (the date of a mediation before the Hon T R Morling QC, pursuant to an order of Bergin J referring the matter for mediation under (NSW) Civil Procedure Act 2005, s 26. Volvo also sought an order in each proceeding that the Plaintiffs be jointly and severally liable in respect of the costs orders against them, but as this is the effect of the order made in any event, no specific order is required. The Plaintiffs oppose the application for indemnity costs, their primary position being to support the existing provisional costs order, that they pay the Defendant's costs in each proceeding, on the ordinary party-party basis. At the hearing Mr Moses, who appeared for Volvo, did not press the application for costs from 23 September 2003, and pursued the application only from the date of the mediation on 11 May 2005. 2 In support of its application, Volvo tendered the affidavit evidence of its solicitor, Ms Allen, deposing to offers that had been made at the conciliation conference on 23 September 2003, and at the mediation on 11 May 2005. Mr Trew QC, who, with Mr O'Sullivan, appeared for the Plaintiffs, objected to the admissibility of that evidence on various grounds. The formal objections were overcome by an admission made by Mr Trew on the voir dire as follows: The Plaintiffs admit, for the purposes of the voir dire and without prejudice to their objection to its admissibility on the application, that at the mediation on 11 May 2005, the Defendant made an offer of $250,000 inclusive of costs, the Plaintiffs made a counter offer of $6 million inclusive of costs, and the Defendant then made a counter offer of $500,000 inclusive of costs. 3 Mr Moses accepted that that admission accurately reflected the position, and that nothing turned on any other aspect of the context in which the offers were made, so that it is unnecessary to consider the formal objections to Ms Allen's affidavit, and I rely only on the contents of the admission I have recorded. However, as the qualifications on that admission make clear, the question remains whether any evidence of what transpired at the mediation is admissible.

Is evidence of the offers made at mediation admissible? 4 (NSW) Evidence Act 1995, s 131(1), provides that evidence is not to be adduced of a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute. However, sub-section (2), on which Mr Moses principally relies, provides that sub-section (1) does not apply if, inter alia: (h) the communication or document is relevant to determining liability for costs, ... 5 Civil Procedure Act, s 30(4), provides that subject to s 29(2) - which is not presently relevant: (a) Evidence of anything said or of any admission made in a mediation session is not admissible in any proceedings before any court or other body, and (b) A document prepared for the purposes of, or in the course of, or as a result of, a mediation session, or any copy of such a document, is not admissible in evidence in any proceedings before any court or other body. 6 "Mediation session" is defined by s 25 to mean a meeting arranged for the mediation of a matter, and "mediation" is defined to mean a structured negotiation process in which the mediator assists the parties to achieve their own resolution of the dispute. 7 Had Volvo pressed reliance on the conciliation conference under Industrial Relations Act, s 109, it would have been necessary to consider more thoroughly whether the "mediation session" referred to in s 30 is limited to one convened pursuant to Civil Procedure Act, Pt 4, or extends to mediations otherwise than under Pt 4. I am inclined to the view that the operation of s 30 is limited to a mediation under Pt 4. This view is supported by: · the reference in s 27 to "proceedings that have been referred for mediation", which contemplates only proceedings referred under s 26; · s 28, which is plainly directed to a mediation pursuant to a court referral under s 26; · s 33, which relates only to a mediator to whom the Court refers proceedings , and · s 34, which acknowledges there may be mediations which take place otherwise than under Pt 4. 8 However, as Volvo does not press reliance on the s 109 conciliation conference, and concedes, plainly correctly, that the mediation before the Hon Mr Morling was plainly one pursuant to Pt 4 - Bergin J having made an order referring the proceedings for mediation - the application of s 30 to the subject mediation is plainly established. 9 Although I have referred to Civil Procedure Act, Pt 4, and in particular to s 30, it is appropriate to note that at the time of the referral to Mr Morling and of the mediation before him, the Civil Procedure Act had not commenced, and the position was governed by the Supreme Court Act 1970, s 110I(1) - which defined "mediation" in identical terms as appear in the Civil Procedure Act - and s 110P(4), which provided that evidence of anything said or of any admission made in a mediation session is not admissible in any proceedings before any court, tribunal or body. The Civil Procedure Act came into operation on 15 August 2005, after both the s 109 conciliation and the mediation. It is common ground that the effect of the transitional proceeding contained in Civil Procedure Act Sch 6 cl 5(1) is that the Civil Procedure Act applies to proceedings instituted before the Act commenced in the same way as to proceedings instituted after its commencement, and thus that the Civil Procedure Act, rather than the relevant provisions of the Supreme Court Act, are those which govern the application today. However, nothing turns on this, as there is no material difference in the provisions. 10 It is plain that the offers that were made at the mediation could be relevant on the question of liability for costs. Mr Moses submits that as the Court has "jurisdiction", under Civil Procedure Act, s 98(1)(c), to order that costs be awarded on an indemnity basis, and as Civil Procedure Act s 5 provides that nothing in the Act limits the jurisdiction of the Court, the offers made at the mediation are admissible under Evidence Act, s 131(2)(h). He submits that the Civil Procedure Act, and in particular s 30, was not intended to exclude or oust the jurisdiction of the Court to make an indemnity costs order by reference to offers that were made at a mediation. 11 In my opinion, this misconceives the operation of s 131(2), and confuses provisions ousting jurisdiction with rules of evidence. 12 As to the first of these matters, Evidence Act, s 131(2)(h), does not make every offer of settlement that may be relevant to a question of costs admissible; rather, it removes, in the case of such offers, the bar to admissibility otherwise imposed by s 131(1). It is only that bar, and not any other bar, that it removes. In particular, it does not remove the bar imposed by Civil Procedure Act, s 30(4). 13 As to the second aspect, s 30(4) is a rule of evidence, and not a provision affecting the jurisdiction of the Court. It in no way limits the jurisdiction or power of the Court to make a costs order or an indemnity costs order. It simply excludes from admissibility (not only on the question of costs, but at all) evidence of what transpires at a mediation session. That it extends to proceedings in respect of costs is plain enough on its face: the provision says that such evidence is not admissible in any proceedings, any court or other body. 14 Similar provisions have been given wide operation. Previously, (CTH) Family Law Rules 1984, O 24 r 1(8), provided that, subject to subrule (9), evidence of anything said or any admission made in the course of a conference held pursuant to this Rule is not admissible in a court (whether or not exercising Federal jurisdiction) or before a person authorised to hear evidence by consent of parties by or under the Act, the Regulations or these Rules. Subrule (9) provided exceptions for a trial of a person for an offence committed at the conference or a contempt application in relation to anything done at such a conference or on the hearing of an application for costs arising out of the conference [See also (former) (CTH) Family Law Regulations 1975, reg 96(5) and (6)]. 15 In Johnston v Johnston (1986) 10 Fam LR 700; FLC ¶91-710, the Full Court of the Supreme Court of Western Australia held, by majority, that despite O 24 r 1(8), evidence could be given establishing the terms of an agreement reached at a conciliation conference, but that evidence of anything said at the conference and in the course of it which leads to or precedes the making of an agreement was inadmissible and could not be received. Thus an undertaking, allegedly given at the conference by the husband, was something said in the course of the conference which led to the agreement made but was not a term of the agreement, and evidence of it was not admissible. In Borninkhof v Borninkhof (1986) 11 Fam LR 151; FLC ¶91-752, Kay J held that evidence of an agreement reached at a conciliation conference but intended to be embodied in a formal maintenance agreement was not admissible. His Honour declined to follow Johnston and held that there was no room for suggesting that a conference concluded the moment agreement was reached so as to make evidence of the agreement admissible; the reaching of the agreement itself was part of the conference. His Honour held that the specific exceptions in O 24 r 1(9) were intended to cover the field of exceptions to inadmissibility. In Gray v Gray (1986) 11 FLR 548; FLC ¶91-771, Lambert J followed the majority of the Western Australian Full Court in Johnston, holding that where the parties had executed a concluded agreement upon all essential terms at the conclusion of a conciliation conference and it was not a term of the agreement that its terms be incorporated in a formal maintenance agreement, then evidence could be given establishing the terms of the agreement. But in the absence of a memorandum of the alleged agreement, the wife was unable to establish its terms, nature and effect without adducing evidence of things said in the course of the conference, which was prohibited and inadmissible by reason of O 24 r 1(8). These cases establish, at least, that a provision similar to Civil Procedure Act s 30(4) - but which contains some specific exceptions that do not appear in Civil Procedure Act s 30(4) - excludes evidence of what happens at a conciliation conference, even for the purposes of an application to enforce an agreement allegedly made at that conference. 16 In Harrington v Lowe (1996) 190 CLR 311; FLC ¶92-668, the High Court held that O 24 r 1(8) of the Family Law Rules was beyond the rule-making power of the Court, which was limited to making provision for or in relation to practice and procedure and matters incidental or convenient thereto, and did not authorise regulations which varied or departed from and were inconsistent with provisions of the Act, or which went beyond the field of operation marked out by the Act. O 24 r 1(8) and (9) did so, in particular because they denied admissibility in any Court, not merely courts exercising jurisdiction under the (CTH) Family Law Act 1975; and even in relation to the Family Court they stultified the operation of, for example, s 79A(1) - which authorised the setting aside of orders for financial adjustment on grounds of a miscarriage of justice by reason of fraud, duress and other circumstances. In a joint judgment, Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ said: It will be apparent that sub rules (8) and (9) do more than encompass the general law as to the evidentiary privilege in respect of 'without prejudice' communications. Whilst the person enjoying the benefit of the privilege may waive it, these subrules deny in absolute terms, subject to subrule (9) the admission into evidence of anything said or any admission made in the course of the conference. This denial of admissibility extends beyond the exercise of jurisdiction in matters arising under the Act and to proceedings in any Court. 17 Kirby J agreed that the rules exceeded the Family Court's rule making power. His Honour rejected an argument that O 24 r 1(8) should be read in a way which did not exclude evidence of matters relevant to the exercise of jurisdiction under s 79A - such as that a party was under a misapprehension or mistake. His Honour said: These arguments must be rejected. They fail to accord proper weight to the plain language and purpose of the subrule, read in its context. That context includes not only the specificity of the exceptions provided to the application of subr (8) by the terms of O 24 r 1(9). It also includes the long history of the attempts, by regulation as well as rules of Court, to enforce a strict and wide-reaching prohibition on the use of anything said, or admissions made, in the course of a conference. The provision is an attempted reflection of widely worded prohibitions in the Act itself protecting the confidentiality of conferences with marriage counsellors, and with court counsellors or welfare officers. Where the Parliament has enacted the prohibition on the admissibility of evidence, different considerations arise. But in respect of O 24 r 1(8) it is impossible to read down the very wide language used by the rule maker so as to permit exceptions beyond those expressly listed in subr (9) or elsewhere provided for by the Act itself. 18 Mr Moses sought to emphasise the reference in the joint judgment to the circumstance that a provision forbidding the admission of evidence to establish the central facts in issue in an application under s 79A was not one to facilitate the practice and procedures of the Court, but rather to vary or depart from the protective provisions of the Act and to impose an inconsistent regime. Where, as was the case with O 24, the provision was contained in delegated legislation made under the authority of an Act, such a result would necessarily invalidate the Rule. However, no such issue arises where, as here, the provision is contained in an Act of Parliament, and a fortiori where that Act (the Civil Procedure Act) is later in point of time than the Evidence Act. Another way of looking at it is that, while the Evidence Act contains a general provision excluding evidence of settlement negotiations, with an exception to that general exclusion where the negotiations are relevant to costs, Civil Procedure Act s 30(4) is a more specific provision directed specifically to negotiations in a mediation session, excluding evidence of such negotiations, without any corresponding exception. When it applies, the later and more specific provision prevails over the more general one. 19 The view that I take of the relationship between Evidence Act, s 131(2)(h), and Civil Procedure Act, s 30(4), is substantially the same as that expressed by Palmer J in Rajski v Tectran Corporation Pty Limited [2003] NSWSC 476. His Honour identified (at [11]) that the purpose of such provisions included avoiding the circumstance that a mediation, rather than affording a haven for litigation in which parties negotiate frankly and informally towards settlement of their dispute, instead become another area of conflict, generating further proceedings in Court. Then his Honour said, (at [16])]: It seems to me that s 131(1) and (2) of the Evidence Act are concerned with the exclusion from and admission into evidence generally of matter which may otherwise attract the principles of the common law relating to "without prejudice" communications between parties made for the purposes of negotiating settlement; they are not intended to apply to the special process of settlement negotiation provided by a mediation ordered by the Court under the provisions of Pt 7B of the Supreme Court Act . Part 7B contains its own Rules as the evidentiary use which may be made of what is said and done in and for the purpose of settlement negotiations in a mediation under that Part and, in my view, those Rules override the general provisions of s 131 of the Evidence Act . 20 The suggestion that Civil Procedure Act, s 30(4), is somehow an ouster of jurisdiction is also answered by the judgment of the Court of Appeal in Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252. Under the (NSW) Farm Debt Mediation Act 1994, a creditor could not take enforcement action in respect of a farm mortgage unless and until the Rural Assistance Authority had given a Certificate that satisfactory mediation had taken place, or the farmer had declined to mediate, or three months had elapsed from service of an Enforcement Notice. Section 15(1) provided: Evidence of anything said or admitted during a mediation session and a document prepared for the purposes of, in the course of or pursuant to, a mediation session are not admissible in any proceedings in a court or before a person or body authorised to hear and receive evidence. 21 The Authority issued a Certificate; Simpson J refused judicial review; the farmer appealed. The Court of Appeal accepted, overruling Simpson J in this respect, that a decision of the Authority to issue a Certificate was amenable to judicial review, but held that any such review was subject to the evidentiary restrictions imposed by s 15, the consequence of which was to impose very considerable restraints on the scope of any review that could take place. No one thought or suggested that this was an ouster of the jurisdiction of the Court to grant prerogative relief; rather it was a restriction on the evidence which could be adduced on that (or any other) application. As Gleeson CJ pointed out, the policy of the legislation was that parties should be encouraged to discuss their differences without the risk that things they say might later be used against them in Court if the mediation did not result in settlement. 22 The provisions of Family Law Rules O 24 r 1, Farm Debt Mediation Act s 15, and Civil Procedure Act s 30(4) are in absolute terms, and prohibit admissibility of evidence of the conciliation conference or mediation being given at all. They do not recognise any exception for proceedings relating to costs. The policy of facilitating an environment for negotiation and compromise is seen as being advanced by permitting the negotiating parties to say things comfortable in the knowledge that they cannot be used against them in Court in any circumstances, and those circumstances include on an application in respect of costs. 23 Mr Moses invoked the judgment of Mansfield J in The Silver Fox Co Pty Limited v Lenard's Pty Limited (No 3) [2004] FCA 1570, in which his Honour held that, despite considerations of public policy enshrining the need to encourage parties to endeavour to settle disputes without disclosure of communications to that end, and despite the need to preserve the integrity of the parties' mediation agreement which clearly prohibited adducing evidence of the course of the mediation and offers made during it, nonetheless if the terms of those offers were relevant to determining liability for costs, they were admissible pursuant to Evidence Act s 131(2)(h), particularly where the probative value of the content of the negotiations no longer warranted protection. 24 I am inclined respectfully to agree with his Honour that the admissibility of offers is a question of legal principle and not a matter of interparty agreement, and that in the context of a mediation which took place unprotected by any statutory prohibition on admissibility of evidence of its offers made at it are not inadmissible by operation of s 131(1), because of s 131(2)(h), although I think it is a mistake to regard such offers as being admissible pursuant to s 131(2)(h): that provision, as I have said, does not make evidence of negotiations admissible, but simply removes one bar to their admissibility, namely that otherwise imposed by s 131(1). 25 Another decision invoked by Volvo is explicable on the same basis: Burgess v Mount Thorley Operations Pty Limited [2003] NSWIRComm 22, in which Schmidt J held that an offer made at a conciliation conference under Industrial Relations Act, s 109, was admissible under s 131(2)(h). Neither in The Silver Fox nor in Mount Thorley Operations was there any applicable equivalent of Civil Procedure Act, s 30(4). In those circumstances, it may well be that evidence of offers made at the mediation or conciliation conference can be admitted. 26 But that is not this case, in which s 30(4) applies. The evidence that Volvo seeks to adduce of the offers made at the mediation is evidence of something said in a mediation session. The present costs application is a proceeding before a Court. By reason of Civil Procedure Act s 30(4)(a), that evidence is not admissible, and I reject it. 27 As I have concluded that evidence of what transpired at the mediation is not admissible, it is unnecessary for me to consider the Plaintiffs' alternative argument that it should be rejected as a matter of discretion as unduly prejudicial under Evidence Act s 135, save to record that there is much force in that argument, given that the Plaintiffs embarked on the mediation in the belief, encouraged by the mediation agreement to which all parties subscribed, that evidence could not subsequently be given of anything said or done at the mediation. This argument does not appear to have been considered in The Silver Fox or in Mount Thorley Operations.

28 It follows that, as the only matter on which Volvo ultimately relied in support of its indemnity costs order was the offers made at the mediation, there is no material before the Court to support Volvo's application. However, lest I be wrong on the question of admissibility, I will consider whether an indemnity costs order should have been made if evidence of the offers made at the mediation were admissible.

Would the offers at mediation have other justified indemnity costs? 29 First, there was no formal offer of compromise made under the Rules and, accordingly, no presumption in favour of any departure from the ordinary costs position arises; it is necessary to consider all the circumstances to determine whether the Plaintiffs' non-acceptance of the offer was so unreasonable as to justify an indemnity costs order [Jones v Bradley (No 2) [2003] NSWCA 258; Leichhardt Municipal Council v Green [2004] NSWCA 341; Gretton v Commonwealth of Australia [2007] NSWSC 149 [10-17]; Crump v Equine Nutrition Systems Pty Ltd trading as Horsepower (No 2) [2007] NSWSC 25, [35-44]]. In Leichhardt Municipal Council v Green, Santow JA, with the concurrence of the other members of the Court, said [at [57]] that indemnity costs orders should be reserved for the most unreasonable actions by unsuccessful Plaintiffs. Even where there has been a Calderbank offer, the Court considers whether the rejection of the offer was reasonable in the circumstances, the time frame that the offeree had to consider the offer, and whether the offer expressly stated that it was made in Calderbank terms [SMEC Testing Services Pty Limited v Campbelltown City Council [2000] NSWCA 323, [37]). Although the fact that an offer is not in the precise form suggested in Calderbank v Calderbank [1975] 3 All ER 333 does not render it inadmissible or ineffective, some indication that the offer is to be relied on in connection with costs is required, although it can sometimes be inferred [see Crump v Equine Nutrition, [67]]. 30 In this case there is no evidence from which I can infer that the offers made by Volvo at the mediation were intended to operate as Calderbank offers. I am not prepared to draw any such inference because it is, so far as I am aware, exceptional if not unknown for offers made during a mediation to be intended to operate in that way. Conventionally, if a mediation fails, one party will often send to the other a Calderbank letter following completion of the mediation, in which it will restate its last offer at the mediation, and that it will remain open for a certain period of time, and that it will be relied on in connection with costs. That did not happen here. 31 Moreover, given the context of a mediation, the offer was not realistically open for a lengthy period of time. The time constraints under which mediations are conducted are yet another reason why, as a matter of policy, different considerations apply to offers made at them than to Calderbank offers or formal offers of compromise under the Rules. This occasions no hardship to the offeror, who can protect its position by a Calderbank letter following the mediation if it wishes to do so. 32 It is also of some relevance that at the time of the mediation the Plaintiffs' evidence, including expert evidence, which at first sight supported the quantum of the Plaintiffs' offer, had been served and the Defendant's evidence had not been served. 33 Other relevant considerations, though less significant, include that Volvo amended its pleadings very late - at the outset of the trial - to raise for the first time an allegation there was not a binding contract for a replacement five year term (an amendment which was permitted, in order to raise a defence which was arguable, but which ultimately failed), and also to raise for the first time a jurisdictional objection to the claim under Industrial Relations Act, s 106. Although, in the light of the decision of the High Court of Australia in Fish v Solution 6 Holdings Ltd (2006) 225 CLR 180, the issues of jurisdiction and power in relation to the Plaintiffs' s 106 claim now appear clear, that decision was delivered after the trial of these proceedings had been completed and judgment reserved. 34 Volvo also filed and served extensive affidavit material - which the Plaintiffs were required to read and consider and prepare to cross-examine - but which it ultimately did not rely on at the hearing. I do not consider that this should result in any adverse costs order, since parties should not be discouraged from responsible judgments in the course of the conduct of a trial - especially decisions which have the ultimate effect of saving time and money - but when it comes to resisting an indemnity costs application it is not without relevance. 35 Accordingly, I do not think that this is a case in which the Plaintiffs' failure to accept the offer made at the mediation, in a context in which it was not apparent that it could or would be relied on in connection with costs, was so unreasonable as to justify an indemnity costs order.

Conclusion 36 The evidence that Volvo seeks to adduce of the offers made at the mediation is evidence of something said in a mediation session, and the present costs application is a proceeding before a Court. By reason of Civil Procedure Act s 30(4)(a), that evidence is not admissible, and I reject it. In those circumstances it is unnecessary for me to consider the Plaintiffs' alternative argument that it should be rejected as a matter of discretion as unduly prejudicial under Evidence Act s 135, save to record that there is much force in that argument. Furthermore, I do not think that this is a case in which the Plaintiffs' failure to accept the offer made at the mediation, in a context in which it was not apparent that it could or would be relied on in connection with costs, was so unreasonable as to justify an indemnity costs order.

37 I therefore decline to vary the costs order made on 5 April 2007, and the costs that the Plaintiffs must pay the Defendant in each proceeding will be assessable on the ordinary party-party basis. I order that the Defendant pay the Plaintiffs' costs of and incidental to the costs application heard on 17 April 2007.

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