CMA ASSETS PTY LTD -v- JOHN HOLLAND PTY LTD [No 2] [2012] WASC 126 (16 April 2012)

3 The plaintiff has also subpoenaed documents from BHP. On 17 November 2011, I directed the defendant to list the documents returned on subpoena to which it claimed privilege. The defendant provided the list dated 25 November 2011, identifying 80 documents for which privilege was claimed. These 80 documents returned on subpoena include those in the discovery of 30 September 2011, as well as other documents for which similar claims of privilege have been made in later affidavits of discovery.

4 The defendant has provided copies of three of those documents, and does not maintain its claim with regard to them.

5 The documents in issue in this application are described in the affidavit of David Victor How, affirmed 3 November 2011, in these terms:

[C]ommunications within the defendant, communications with advisors and communications with BHPBIO which were created in the course of or are incidental to the process of negotiation agreed between BHPBIO and the defendant on 23 November 2007 and which culminated in the settlement deed dated 30 April 2008.

6 The documents are listed (with one exception) in three affidavits of discovery, which I discuss below.

7 The evidence regarding the claims of privilege is otherwise in two affidavits: Mr David Victor How of 3 November 2011, and Mr Francis Patrick Doyle (then Executive General Manager, Major Projects of John Holland Pty Ltd) dated 13 December 2011. In a meeting held on Friday, 23 November 2007, between representatives of John Holland and representatives of BHP, including Mr Doyle, the two parties made an agreement. In a letter dated 27 November 2007 to Mr Lloyd Jones and Mr David Barge of BHP, Mr Doyle set out the substance of what had been agreed: it was agreed that John Holland would resubmit the claims that had been rejected in a revised format to provide further justification with respect to their merits and valuation. The letter specifically referred to the claims being resubmitted on a without prejudice basis. The claims would be assessed on their factual merits, with the mutual objective being to close the gap between the parties and attempt to reach an agreeable settlement. It was further agreed that should the negotiations not result in a settlement, the parties reserved their rights generally and would proceed with dispute settlement in accordance with the contract. There is no evidence in this application about what the dispute settlement process was under the contract.

8 In the letter, Mr Doyle stated that he foresaw claims would be submitted in three separate submissions on 28 November 2007, 5 December 2007 and 12 December 2007. It was further agreed that each submission of claims would be followed by a meeting of representatives from John Holland and the MPD Joint Venture at which the parties would attempt to agree the facts and identify areas of disagreement.

9 On 30 November 2007, Mr Jones, Project Manager for BHP, wrote to John Holland regarding the process. In the course of that letter he commented that the first submissions had been received and were not marked without prejudice. He continued:

BHPBIO are treating these claims and the documents comprising these claims on the basis that they have been provided as part of the agreed process and are without prejudice to all parties. This is consistent with our prior discussions and the negotiation process agreed with you.

If the claimed documents were provided on an open basis rather than a without prejudice one, please let us know and we will then need to formally respond to the claims outside the agreed commercial negotiation process.

10 The defendant makes the general claim that each of the documents comes within the privilege. There is no separate evidence in relation to individual documents.

11 The defendant has given discovery in the affidavits of David Victor How, affirmed on 30 September 2011, 3 November 2011, and 2 December 2011.

12 In his affidavit of 30 September 2011, Mr How lists 18 documents, for all of which claims of without prejudice privilege are made. Each document is identified, and its title and some description of it are given. The plaintiff makes the point that the claim to privilege is made by reference to the '28 November 2007' agreement. The plaintiff says there is no evidence of any such agreement. The evidence is that there was an agreement on 23 November 2007, which was documented in a letter dated 27 November 2007. To the extent the plaintiff claims this mistake vitiates the whole of the claim for privilege, the submission is the kind of formalism that should have been resolved in conferral. I accept that there was a mistake which has now been identified and explained.

13 In his affidavit of 3 November 2011, Mr How includes a list of documents numbered 1 to 158 in Part 1A, with the identifying number, date, and a short description of each; and in Part 1B the numbers of those documents which the defendant objects to producing on a claim of legal professional privilege or without prejudice privilege.

14 A similar although more expansive format is followed in a list attached to the affidavit of 2 December 2011, where the sender and recipient of emails are also stated. The grounds for objection are also more expansively stated. For example, instead of merely stating without prejudice privilege, the list discloses to whom a communication was made, or why it was created. There are 251 documents listed, and privilege is claimed for 53 of them.

15 The existence of and the reason for the privilege are not in doubt. It excludes from evidence admissions by words or by conduct made by parties in the course of negotiations to settle disputes which are the subject of litigation or which will become the subject of litigation if the dispute is not resolved: Field v Commissioner for Railways for New South Wales [1957] HCA 92; (1957) 99 CLR 285, 291 - 292; Shilkin v Taylor [2011] WASCA 255 [61]; Glengallan Investments Pty Ltd v Arthur Andersen [2001] QCA 115; [2002] 1 Qd R 233 [27] - [31].

16 A useful summary of the principles applying to the privilege for without prejudice communications may be found in Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 [91] - [95] (McLure J):

Statements made without prejudice in an attempt to settle a dispute or action are privileged. Without prejudice privilege is a joint privilege and thus cannot be waived without the consent of the negotiating parties. The mere fact that a document is or is not marked 'without prejudice' is not decisive. The test is whether the communication was part of a genuine attempt to settle a dispute: Rodgers v Rodgers [1964] HCA 25; (1964) 114 CLR 608 at 614. If so, the whole course of the negotiations is privileged: South Shropshire District Council v Amos [1987] 1 All ER 340.

A binding contract brought into existence as a result of without prejudice negotiations is not protected by the privilege. Although the resulting contract is not privileged, the negotiations leading to the agreement remain privileged: Biala Pty Ltd v Mallina Holdings Ltd (1990) WAR 174 at 180; Bentley v Nelson [1963] WAR 89 at 93.

However, without prejudice negotiations leading to an agreement can be considered where there is a dispute as to whether or not an agreement to settle was made: Tomlin v Standard Telephones & Cables Ltd [1969] 1 WLR 1378; Unilever Plc v Procter & Gamble Co [1999] EWCA Civ 3027; [2000] 1 WLR 2436 at 2444.

The authorities establish that the without prejudice rule is not absolute and resort may be had to without prejudice material for a variety of reasons when the justice of the case requires it: Rush & Tompkins Ltd v Greater London Council [1988] UKHL 7; [1989] AC 1280 per Lord Griffiths at 1300.

Thus, without prejudice negotiations may be 'pleaded into evidence' in such a way that the privilege is no longer available, by analogy with the rule concerning legal professional privilege: Western Australia v Southern Equities Corporation Ltd (in liq) (1996) 142 ALR 597 at 601602. The principle is not confined to the case where the party seeking to assert privilege raises a positive case: Data Access Corporation v Powerflex Services Pty Ltd (1994) AIPC 91-112.

17 The extent of the privilege is perhaps less certain. In the majority judgment in Field, Dixon CJ, Webb, Kitto and Taylor JJ said (291 292):

As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct ... But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission.

Later their Honours said: 'The question ... depends upon what formed part of the negotiations for the settlement of the action and what was reasonably incidental thereto' (292).

18 While the comments in Field related to the compromise of existing litigation, there is no doubt that the privilege extends to negotiations when litigation has not yet commenced: Rodgers v Rodgers [1964] HCA 25; (1964) 114 CLR 608, 614; Harrington v Lowe [1996] HCA 8; (1996) 190 CLR 311, 323. In the circumstances described in the affidavits of Mr How of 3 November 2011, and Mr Doyle of 13 December 2011, I am satisfied that there were without prejudice negotiations between the defendant and BHP to attempt to settle claims which the defendant had made and BHP had rejected.

19 The privilege extends not only between the parties to the negotiation (that is, preventing the use in evidence by one of the parties to the negotiation of admissions made by the other) but may prevent disclosure to a third party without the agreement of both parties: Glengallan Investments [32] - [37].

20 In Yokogawa Aust Pty Ltd v Alstom Power Ltd [2009] SASC 377; (2009) 262 ALR 738 [104] - [105], the Full Court of the Supreme Court of South Australia held that the privilege is not restricted to actual communications with the other party to the negotiation, but includes internal communications if they fall within the test stated in Field, that is, if they formed part of the negotiations for the settlement of the action or were reasonably incidental thereto. This is consistent with the statement of the rule in the uniform Evidence Acts, which in s 131(1) extend the privilege to:

(a) 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; or

(b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.

There is some question, however, whether this is a statement of the common law rule or an extension of it: see Brown v Commissioner of Taxation [2002] FCA 318; (2002) 119 FCR 269 [99], and CJ Redman Constructions Pty Ltd v Tarnap Pty Ltd [2006] NSWSC 173 [5] [7].

21 At least as a matter of practice, questions of law should usually be determined the same way in decisions of courts of co-ordinate jurisdiction, or as between a court in one judicial hierarchy, and a court at the same or a higher level in another judicial hierarchy: Mustac v Medical Board of Western Australia [2007] WASCA 128 [46]. As a judge at first instance, I should follow the decision in Yokogawa as to the common law.

22 Accordingly, in my opinion, it is open to the defendant to resist production to the plaintiff by a claim of without prejudice privilege for documents, including internal communications, that formed part of the negotiations for the settlement of a dispute which might lead to litigation, or were reasonably incidental to those negotiations. This, for example, would include briefing papers to those engaged in the negotiation. The claims of privilege which have been made, either within the list in each case or in the affidavits of Mr How, sufficiently identify the basis of the claim to privilege by reference to the without prejudice negotiations between the defendant and BHP.

23 The general principle, at least where legal professional privilege is in issue, is that the party claiming the privilege has the onus to establish the facts on which the privilege is based: Grant v Downs [1976] HCA 63; (1976) 135 CLR 674, 689; Mitsubishi Electric Australia Pty Ltd v Victorian WorkCover Authority [2002] VSCA 59; (2002) 4 VR 332 [11]. Mere assertion of the claim is not enough: what is required is exposure of facts from which an informed decision can be made as to whether the claim for privilege is supportable: National Crime Authority v S (1991) 100 ALR 151, 159 - 160.

24 This, however, is subject to O 26 r 12 of the Rules of the Supreme Court 1971 (WA). Where the claim of privilege is made in a list of documents supplied on discovery, the party claiming discovery may traduce the claim by evidence, but in the absence of evidence to that effect the claim shall be sustained. Accordingly, in relation to the discovery the plaintiff bears at least an evidentiary onus to displace the claim to privilege, at least where the claim has been properly formulated in the affidavit of discovery. See CTC Resources NL v Australian Stock Exchange Ltd [2000] WASCA 19; (2000) 22 WAR 48 [33] - [35]; Brambles Holdings Ltd v WMC Engineering Services Pty Ltd (1995) 14 WAR 239, 246 - 247 (Owen J), cf 240 - 241 (Kennedy J) and 243 (Rowland J); Southern Equities Corporation Ltd v West Australian Government Holdings Ltd (1993) 10 WAR 1, 5, 16, 22. That onus may, of course, be satisfied by evidence adduced by the plaintiff.

25 The claim for access to subpoenaed documents overlaps the plaintiff's application for inspection of the defendant's discovered documents. Some of the 80 documents in the list of 25 November 2011 had been discovered by the defendant, with a claim of privilege, in the 18 documents listed in the discovery of 30 September 2011 and in the further discovery of 3 November 2011 (58 claims of without prejudice privilege). In the supplementary affidavit of discovery of Mr How dated 2 December 2011, the defendant lists a further 251 documents and claims without prejudice privilege for 22 of them. The defendant submits that there is only one document in the list of 25 November 2011 for which privilege has not been claimed in this way. The plaintiff has made no submissions directed to that document, but has relied generally on its assertion that the claim of privilege has not been proved.

26 In my opinion, the claim of privilege in discovery is relevant to the exercise of the court's discretion to permit inspection of subpoenaed documents. To the extent that the defendant has claimed privilege over the documents in its list, it would lead to inconsistency if the plaintiff is able, by use of other compulsory process, to avoid that claim.

27 On the evidence before me, I would sustain the claims of privilege to the 18 documents in the list of discovery dated 30 September 2011. The other claims of privilege have not yet been challenged. I would not, in the exercise of my discretion, order inspection of the documents produced on subpoena while properly formulated claims of privilege for the same documents have been made in the process of discovery and not yet been determined.