Is Section 131(2)(g) attracted?
41 In support of its reliance on the exclusion contained in s 131(2)(g), the applicants referred to some of the affidavit evidence the respondent had filed and intended to rely upon at trial. In particular, the respondent referred to the Wilson and Rowley affidavits and the accounts given in those affidavits as to the derivation of the respondent's Grange designs.
42 The applicants submitted that Wilson's and Rowley's accounts reveal an alternative story of how the Grange design was created to that given by Mr Dennis and recorded in the disputed evidence. Furthermore, the applicants asserted that there is inconsistency between the account given in the first Rowley affidavit and that in the second Rowley affidavit. The applicants contended that there were now 3 inconsistent accounts given by the respondent of the matters leading to the making of the impugned plans. They contended that it would be misleading for the Court to proceed to a trial without reference to the respondent's account of derivation provided in 2005 by the disputed evidence. The applicants contended that without the capacity to rely on the disputed evidence, they would be precluded from establishing that there was an account given in 2005, then further different accounts given by evidence filed in 2008 and 2009.
43 In those circumstances, the applicants contended that s 131(2)(g) is attracted and that the applicants should be permitted to introduce the disputed evidence, because in the absence of that evidence there is a real risk that the Court would be misled by the evidence of Ms Wilson and Mr Rowley adduced at trial by the respondent.
44 The respondent disputes that there is a material difference between the account of the creation of the Grange design given by Mr Dennis in the disputed evidence and that given in the evidence upon which the respondent intended to rely at trial. For reasons that will become apparent, it is not necessary for me to determine the extent of inconsistency, if any, between Mr Dennis' account and that of Ms Wilson or Mr Rowley. I will proceed on the assumption that the accounts given are materially inconsistent.
45 It is apparent that the applicants seek to use the disputed evidence to show that agents of the respondent have made prior inconsistent statements to those to be relied upon at trial. The applicants contend that without reference to the disputed evidence the Court will likely be misled into accepting the accounts as to the derivation of the Grange designs given by Ms Wilson or Mr Rowley.
46 The difficulty for the applicants is that the construction of s 131(2)(g) contended for by them pays insufficient regard to the context in which the words utilised in s 131(2)(g) are found and fails to properly take into account the origin of the provision and its intended purpose.
47 It is of particular importance in the context of a qualification or exception, such as that contained in s 131(2)(g), to identify the mischief which the provision is concerned to address. Section 131(2)(g) identifies a number of limited qualifications to an exclusionary rule which protects privileged settlement communications from being used at trial. In that context, paragraph (g) should be understood to be dealing with the non-applicability of the privilege or protection provided by s 131(1) because, unless that is done, the court is likely to be mislead. That suggests that paragraph (g) is addressing the need to ensure that reliance upon the privilege or protection is not the source of or reason for the court being misled. In other words, the privilege afforded by s 131(1) is not to be abused by allowing a party that has adduced evidence to use the privilege to hide the truth and mislead the court. That is the mischief to which the paragraph is directed.
48 That contextual analysis is confirmed by the likely origin of the provision in what has been referred to as the principle in Pitts v Adney.
49 In Pitts v Adney (1961) 78 WN (NSW) 886, Walsh J at 889 said:
It is of importance that the rule protecting from disclosure, discussions taking place in an endeavour to put an end to pending litigation should, in general, be applied. But it is, after all, a rule based upon public policy. It cannot be permitted to put a party into the position of being able to cause a Court to be deceived as to the facts, by shutting out evidence which would rebut inferences upon which that party seeks to rely. In McFadden v Snow evidence was given on behalf of one party that no reply had been received to a letter. Thus it was sought to establish an admission by silence as to a relevant fact. Kinsella J admitted a letter headed "without prejudice" tendered in disproof of that evidence. He said "The privilege that may arise from the cloak of "without prejudice' must not be abused for the purpose of misleading the court". With respect, I state my emphatic agreement with that observation. If one applies it to the situation which I have postulated, as that which could have arisen if these proceedings had followed a more formal course, the result would have been that claim of privilege could not have been used to mislead the Court into acting on the erroneous belief that no offer of 5,300 had been made by the lessee, or communicated to the lessor, before the making of the order of 27 July.
50 As is apparent from that passage, the limitation upon the exclusionary privilege at common law is based upon a causal connection between a party's reliance upon the privilege and the court being misled.
51 In Austotel Management v Jamieson (1995) 57 FCR 411, Burchett J at 415-416 referred to the principle in Pitts v Adney and to its affirmation by the Court of Appeal of New South Wales in Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) [1] BPR 97,00014.
52 In Brown v Commissioner of Taxation (2001) 187 ALR 714, Emmett J explained that the source of exceptions to the general law exclusionary principle recognised under the general law are concerned with reprehensible behaviour and impropriety. His Honour observed that it is appropriate to consider the exceptions listed in s 131(2) in the light of the general law: at [183]. Emmett J also acknowledged the link between the principle in Pitts v Adney and s 131(2)(g) in the following passage at [184]-[185]:
I consider that s 131(2)(g) is designed to deal with the sort of circumstances that arose in Pitts v Adney (1961) 78 WN (NSW) 886. Evidence of a "without prejudice" communication was admitted in that case in order to prove the fact of and the nature of the communication. It was not tendered in order to contradict evidence as to the matters in issue, or as an admission.
It is not appropriate to attempt an exhaustive exposition of the effect of s 131(2)(g). However, I consider that it will not be attracted simply because evidence to which s 131(1) applies contradicts or qualifies evidence that has already been adduced. Section 131(2)(g) will apply where the court would be likely to be misled as to the existence or contents of an excluded communication or document, where those matters are in issue in the proceeding.
53 The construction of s 131(2)(g) applied by Emmett J in Brown was adopted by Hamilton J in Bloss Holdings Pty Ltd v Brackley Industries Pty Ltd [2005] NSWSC 756. In Korean Airlines, Jacobson J referred to Brown at [78] without apparent dissent.
54 A number of decisions of courts in New South Wales have adopted a broader construction of s 131(2)(g) than that applied in Brown: Moran v Moran (No 3) [2000] NSWSC 151; DTC No 1 Pty Ltd v Matthew [2009] NSWSC 1280; Kalambaka Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 [2009] NSWLEC 57; and Mulkearns v Chandos Developments (No 4) (2005) 12 BPR 22,993 at [66]-[67]. Other than Mulkearns none of those decisions appear to have considered Brown. Whilst Young J referred to Brown in Mulkearns at [66]-[67], it is not apparent whether and if so why, the construction applied in Brown was not followed.
55 I respectfully agree with the analysis of Emmett J at [185] in Brown and his Honour's conclusion that s 131(2)(g) is not attracted simply because evidence to which s 131(1) applies, contradicts or qualifies evidence that has already been adduced. I would respectively add that s 131(2)(g) is only attracted where the exclusionary rule in s 131(1) would operate to allow a party which has adduced evidence, to use the exclusionary rule as an instrument for misleading the court.
56 That construction serves the policy objectives which s 131 seeks to protect. Nothing could be more calculated to undermine settlement discussions, than the prospect of statements made in the course of those discussions being used to discredit evidence adduced at trial, should settlement negotiations fail. The construction contended for by the applicants, would replace the exclusionary cloke of s 131 with a thin veil behind which little would ever be said or done in pursuit of the amicable settlement of a dispute.
57 There was nothing before me to suggest that, in this case, s 131(1) would operate as an instrument of deception and harbour the mischief that s 131(2)(g) is directed at addressing. This was a case in which the applicant sought to attract s 131(2)(g) simply because evidence to which s 131 applied was said to contradict or qualify evidence which was to be adduced. On the basis of the construction which I have adopted, s 131(2)(g) is not attracted.