Hurworth Nominees Pty Limited v ANZ Banking Group Limited [2006] NSWSC 1278 | Case summary

Hurworth Nominees Pty Limited v ANZ Banking Group Limited [2006] NSWSC 1278 | Case summary | Zoe

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1 The plaintiffs, Hurworth Nominees Pty Ltd, Agtion Consultancy Services Pty Ltd (formerly Lillyhill Pty Ltd), and Hiform Feeds Pty Ltd by Notice of Motion filed 27 October 2006 sought leave to file an Amended Summons and a Commercial List Statement. On 17 November 2006 I refused the plaintiffs' applications for the ex tempore reasons delivered that day and granted leave to the plaintiffs to make a further application to amend. On 28 September 2006 I refused the plaintiffs' previous application to amend pursuant to a Notice of Motion filed 4 August 2006. On 17 November 2006 I indicated that in its further application to amend, the plaintiffs could maintain its claim for rectification of a Deed dated 28 March 1996 (the Deed) entered into after a successful mediation under the Farm Debt Mediation Act 1994 (the Act). These reasons relate to that aspect of the matter. Background 2 In 1994 the plaintiffs entered into security deeds and mortgages with the first defendant, Australia & New Zealand Banking Group Limited (ANZ). At least one of those securities was over a farming property. On 26 September 1995 ANZ served on the plaintiffs a Notice under s 8 of the Act advising of its intention to take enforcement action and of the availability of mediation under the Act. On 11 October 1995 the plaintiffs served on ANZ a Notice under s 9 of the Act requesting mediation. The mediation occurred on 14 February 1996. The plaintiffs allege that the mediation was adjourned to be concluded on 28 March 1996. 3 It is alleged that the mediation was adjourned to permit ANZ to consider the plaintiffs' "work out proposal". The work out proposal is pleaded as "an offer to contract" put by the plaintiffs under which: (a) the plaintiffs would sell assets in an orderly fashion under a program for the sale of assets determined by the plaintiffs; (b) the plaintiff companies would continue to trade and generate income pending the sale of their assets at a time or times determined by them; (c) ANZ would give its consent to the sale of assets to permit a timely sale; and (d) all net proceeds of sale of the plaintiffs assets would be paid to ANZ in reduction of Hiform's indebtedness to ANZ. 4 The plaintiffs allege that on 21 March 1996 ANZ formally accepted the plaintiffs' workout proposal, subject to it being executed as a deed by 28 March 1996 with some additional terms relating to the timing of the granting of consent for the sale of the various assets. The plaintiffs allege that at the resumed mediation on 28 March 1996 they accepted ANZ's additional terms "whereupon a binding agreement was made between the parties which the parties mutually intended to record formally in a deed immediately after the mediation" (par 60). 5 The plaintiffs allege that the mediation concluded at 7:15pm on 28 March 1996 and the plaintiffs and ANZ executed the Deed at about 12:40am on 29 March 1996. The plaintiffs seek rectification of the Deed on the basis of common mistake or unilateral mistake. The mistake alleged is that the parties, or in the alternative the plaintiffs, believed the Deed included what has been referred to in a proposed pleading as the "omitted terms" when it did not include those terms. 6 ANZ and the second defendant, John Edward Star, who was appointed by ANZ and acted as receiver and manager of the plaintiffs' assets and undertakings between 14 May 1996 and 25 June 1999, claim that the application for rectification should not be permitted because it would be necessary to rely on evidence of what occurred at the mediation and such evidence is prohibited by s 15 of the Act. Farm Debt Mediation Act 1994 7 In 1996 Young J, as the Chief Judge in Equity then was, referred to the provenance of the Act and to some of its problems including "the way in which it came into being", described as the "peculiar passage" through Parliament: Varga v Commonwealth Bank of Australia (1996) 7 BPR 15,052 at 15,055. In 1997 it was suggested that if a rectification suit were brought in relation to an agreement reached at a mediation under the Act, "confusion may be great": Commonwealth Bank of Australia v McConnell (Rolfe J, unreported, Supreme Court of New South Wales, 24 July 1997; BC970544, at 36). That prediction was made having regard to the apparent lack of clarity in relation to the legislative intent of the Act. The Act has been reviewed in agencies at both State and Commonwealth levels and I will refer to those reviews shortly. Amendments to the Act have been made as a result of those reviews but it does not seem to me that such amendments have avoided Rolfe J's prediction. 8 When the Act commenced in February 1995, its object was expressed to be "to provide for mediation concerning farm debts before a creditor can take possession of property or other enforcement action under a farm mortgage" (s 3). 9 Section 7 of the Act provides: 7 Relationship with other Acts

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(1) Nothing in this Act affects the operation of the Contracts Review Act 1980 or any other Act or law that deals with the granting of relief in respect of harsh, oppressive, unconscionable or unjust contracts or on the grounds of hardship. (2) Nothing in this Act is to be construed as affecting the operation of the Banking Act 1959 of the Commonwealth and, in particular, the duty of the Reserve Bank under Division 2 of Part II of that Act. (3) The requirements of this Act, in so far as they apply to the provision of consumer credit, are in addition to, and do not affect, the requirements of the Credit Act 1984 or any Act or law amending or replacing that Act. (4) Other than as provided in this section, this Act has effect despite any other Act. 10 In its original form, s 15 provided as follows: 15. Confidentiality of mediation sessions 1. 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. 2. In this section, mediation session includes any steps taken in the course of making arrangements for a mediation session or in the course of the follow-up of a mediation session. 11 Section 16 of the Act has always provided: 16. Disclosure of information A person must not disclose any information obtained in a mediation session or in connection with the administration or execution of this Act unless the disclosure is made: (a) with the consent of the person from whom the information was obtained, or (b) in connection with the administration or execution of this Act, or (c) as reasonably required for the purpose of referring any party or parties to mediation to any person, agency, organisation or other body and, with the consent of the parties to the mediation, for the purpose of aiding in the resolution of an issue between those parties; or (d) in accordance with the requirement imposed by or under a law of the State (other than a requirement imposed by a subpoena or other compulsory process) or the Commonwealth, or

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(e) with other lawful excuse. Maximum penalty: 20 penalty units or imprisonment for 6 months, or both. 12 Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252 was a case involving the question of whether the decision of the New South Wales Rural Assistance Authority (the Authority) was amenable to judicial review. The parties had spent some hours in discussion before the mediator but failed to achieve a settlement of their dispute. The Authority issued a certificate under s 11 of the Act certifying that the Act did not apply to the farm mortgage in question because a satisfactory mediation had taken place (s 11(1)(a)). The trial judge held that the decision to issue the certificate was not amenable to judicial review. On appeal, Gleeson CJ said at 256: … the attempt by the appellants to demonstrate that no reasonable administrator in the position of the Authority could have concluded that a satisfactory mediation had taken place depended upon proving what had occurred before the mediator. The argument about the reasonableness of the Authority's opinion that a satisfactory mediation had taken place could not have been seriously advanced, or determined, without evidence of what was said and done during the mediation session. Evidence of that kind, however, is rendered inadmissible by s 15. The reason for such legislative provision is obvious. It is the policy of the legislation that parties should be encouraged to discuss their differences without the risk of things they say might later be used against them, in court, if the mediation does not result in settlement. 13 Cole JA said at 259: Section 15 and s 16 seek to ensure the privacy, the non-disclosure, and the non-use of material or statements provided for or made in the confidential mediation session. 14 Cole JA also said at 262: Badgery-Parker J in State Bank of New South Wales v Freeman (at 17) expressed the view that it was clear: "… that s 15 would prevent a court from embarking in any practical way upon an examination of what took place in the course of a mediation session; and if that be precluded, any attempt to review the Authority's decision that it was satisfied that a satisfactory mediation had taken place would be hamstrung to the point of impossibility."

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The question is whether there is any basis upon which these words should be read down. One could have understood the legislature making the proceedings before the mediator and documents issued in the course of or as a consequence of it inadmissible in proceedings for the enforcement of a mortgagee's security or in an action on the personal covenant contained therein. But the difficulty for the appellants is the width of the language which s 15 uses. I have reached the conclusion that, in the circumstances of this case, that clear and unambiguous language which is employed operates to make inadmissible the material on which the appellants need to rely in order to raise the question of substance which they wish the Court to consider. 16 In McConnell Rolfe J adverted to the difficulties that may be experienced if a party to the mediation seeks rectification of an agreement entered into at or as a result of the mediation. His Honour said at page 29-30: A party may wish to say that the agreement should be rectified, which would almost inevitably require evidence of what was said or written at the mediation, or to rely on vitiating circumstances such as fraud, duress or non est factum, which would require evidence, in all probability, of what occurred at the mediation. If the concluded agreement is admissible, but things said and documents prepared as envisaged by s 15(1) are not, the party wishing to take advantage of the agreement may tender it and object to the material at mediation, which throws doubt upon it. If the party seeking to impugn the agreement knows there will be an objection to such evidence, can that party object to the tender of the concluded agreement and, if so, on what grounds? As I have said to prevent the tender of the agreement would seriously damage the purpose of the Act. But to let in an agreement which does not represent the true consensus of the parties could lead to even greater injustice. 17 In December 2000 the NSW Government Review Group (the Group) produced the Final Report entitled "Review of the Farm Debt Mediation Act 1994" (the Report). The Report was part of the Government's responsibility to review legislation pursuant to Competition Principles Agreement (CPA). It is clear from the Report that the Group was aware of the decision in Gain v Commonwealth Bank of Australia (5.72). The Group had received reports of claims that there had been instances of deeds being drawn up after mediations that did not reflect the agreement reached at the mediations and recommended that the Act should be amended to deal with this problem (5.53 & 5.54). 18 The Act was amended as and from 3 March 2003 by the Farm Debt Mediation Amendment Act 2002 (the Amending Act). Section 3 was replaced with the following: 3 Object The object of this Act is to provide for the efficient and equitable resolution of farm debt disputes. Mediation is required before a creditor can take possession of property or other enforcement action under a farm mortgage.

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19 There were a number of other amendments that introduced a new regime in respect of the manner in which an agreement reached at a mediation session is to be documented. If it appears to the mediator that a farmer and a creditor have agreed, or are about to agree, on an issue between them, the mediator is required to personally prepare a document setting out the main points of agreement on the issue (s 11AA(1)). If the parties are satisfied that the document sets out the main points agreed on by them during the mediation, or within 24 hours of the end of the mediation, they may enter into Heads of Agreement by signing the document prepared by the mediator (s 11AA(2)). There is a cooling off period of 14 days for the Heads of Agreement, which can be extended by agreement between the parties to the Heads of Agreement (s 11A). At the end of the mediation the mediator is required to fill in the form approved by the Authority for setting out a summary of the conduct and results of the mediation, including any Heads of Agreement (s 18A). From the commencement of the Act, the Authority was obliged to establish an accreditation process for mediators (s 12). The Amending Act introduced s 12(3) which obliges the Authority to withdraw the accreditation of mediators who fail, "without reasonable excuse", to comply with s 11AA(1) and/or s 18A. 20 In apparent implementation of the Group's recommendation to amend the Act to deal with the problem of deeds or other instruments not reflecting the true agreement reached at the mediation, s 11C was introduced into the Act. That section provides: 11C Implementing Heads of Agreement (1) A contract, deed, mortgage or other instrument entered into as a result of, or pursuant to, heads of Agreement between a farmer and a creditor must reflect the relevant Heads of Agreement. (2) A creditor who is a party to any contract, deed, mortgage or other instrument which purportedly results from, or is pursuant to, Heads of Agreement between the creditor and a farmer but which fails to reflect the relevant Heads of Agreement is guilty of an offence. Maximum penalty (subsection (2)): 100 penalty units.

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22 In apparent recognition of the decision in Gain v Commonwealth Bank of Australia, the Amending Act provided for review in the Administrative Decisions Tribunal (ADT) of the Authority's decisions to issue or refuse to issue certificates under s 11 of the Act. It also provided for mediators to apply to the ADT for review of the Authority's decision to withdraw their accreditation for failure, without reasonable excuse, to comply with s 11AA(1) and/or s 18A of the Act (Sch 1 [33] inserting s 29A). This amendment appear to have been based on administrative law principles that the accredited mediators may have been adversely affected by the Authority's decision in their ability to earn an income and/or that their "business reputations" may be adversely affected by the Authority's decision: McWilliam v Civil Aviation Safety Authority (2004) 142 FCR 74 at 82, [31]-[32]. Although s 29A of the Act allowed for the review of the Authority's decision in the ADT, there were no amendments to s 7 or s 15 of the Act in recognition of such process. 23 The Act was subject to review by the National Competition Council (NCC) in 2003: Assessment of Governments' progress in implementing the National Competition Policy and Relevant Reforms: Volume 1 - Overview of the National Competition Policy and Related Reforms; Volume 2 - Legislation Review and Reform (AusInfo Canberra) 2003. Clause 5 of the CPA required the New South Wales Government to review and, where appropriate, reform all existing legislation at June 1996 that restricted competition. The NCC concluded that New South Wales had not met its obligations under clause 5 of the CPA in respect of the Act. Its report (Vol 2, p 1.127) included the following: In relation to the principle restriction - mandatory mediation - the Council understands that the Government has a social objective of the fair resolution of farm debt disputes. However, the review did not adequately establish its case that the restriction improves fairness. It did not show that, without mandatory mediation, lenders would act unconscionably towards farmers to a significant extent. Nor did it show why the community might regard farmers as deserving more assistance than other small businesses to resolve debt disputes. Like other small businesses, farmers enter into finance contracts freely, and have the opportunity to seek professional advice - as they often do in preparing business plans (for finance applications and government assistance applications) and managing tax obligations. 24 The NCC was also unimpressed with the then proposed provision (s 29A) that allowed mediators to apply to the ADT for review of withdrawal of accreditation by the Authority. In this regard the report included the following (Vol 2, p1.126): … allowing review by the Administrative Decisions Tribunal of decisions by the Rural Assistance Authority subjects lenders and farmers to risks of further delay and increased costs, and the review did not show that the Authority's own internal review procedures are inadequate. 25 It may be difficult to understand how any favour could have been found with the NCC's idea that the mediators could seek a review of the Authority's withdrawal of their accreditation from the Authority itself. However one explanation may be gleaned from what was said in the Explanatory Notes to the Bill proposing the repeal of s 29A of the Act (National Competition Policy Health and Other Amendments (Commonwealth Financial Penalties) Bill 2004). Those Notes included the following: The Commonwealth has accepted the NCC's recommendation to impose a penalty for New South Wales' 2003-4 competition payments of $50.8 million. The legislative amendments made by this Bill [including the amendment to the Farm Debt Mediation Act] seek to ensure that this penalty is not imposed in future years and, subject to the NCC's assessment and recommendation, may enable New South Wales to earn back a portion of this penalty. 26 It appears that the price paid for the New South Wales Government's entitlement to win back a portion of the penalty was in part the decision to repeal s 29A of the Act. Section 29A was repealed by the National Competition Policy Health and Other Amendments (Commonwealth Financial Penalties) Act 2004. CONSIDERATION The equitable doctrine of rectification 27 As I have said earlier, the plaintiffs seek rectification of the Deed entered into at the conclusion of the resumed mediation session. Rectification is an independent head of relief and was described in ICF Spry The Principles of Equitable Remedies, 6th ed 2001, LBC Information Services, at p 607 as follows: The rectification of documents is a remedy that has been granted by courts of equity for many centuries. Although it may be obtained in association with other remedies such as specific performance, it is an independent head of relief, and its basis is the protection of an applicant so that he is not put at risk or prejudiced by the existence of a document reliance on which would, without rectification, be unconscionable. Rectification is, like other equitable remedies, discretionary. 28 Meagher, Gummow & Lehane's Equity Doctrines & Remedies 4th Ed., 2002, R Meagher, D Heydon and M Leeming, LexisNexis Butterworths, includes the following: It is of the utmost importance in a proper appreciation of the basis of the equitable doctrine of rectification to realise that the court, by its decree, merely reforms the instrument in which the parties have mistakenly expressed their agreement. [26-010] … the basic doctrine on which the doctrine of rectification rests, … is simply to see that the document executed by the parties accords with their true intentions. [26-030] 29 The use of the expression "merely reforms the instruments" in the above extract from Equity Doctrines & Remedies should not be seen as in any way diminishing the importance of this "independent head of relief", to use Spry's expression. Until the legislature moved into the arena of unconscionable and unfair contracts, one way in which applicants were protected from reliance upon unconscionable contracts was by the application of the "law" or equitable doctrine of rectification. As commercial life has become more complicated with the overlay of legislative regulation, the equitable doctrine of rectification has remained an important part of equity's "inherent flexibility" to adjust to new situations: Lonrho plc v Fayed (No 2) [1991] 4 All ER 961 at 969. Preliminary point - s 7(1) of the Act 30 The parties focused upon s 15 of the Act in their submissions and I will deal with that section and s 16 of the Act. However before doing so I should say that it seems to me that s 15 and s 16 do not apply in a rectification suit because of the provisions of s 7(1) of the Act. Section 7(1) provides, inter alia, that nothing in the Act "affects the operation of" a "law that deals with the granting of relief in respect of … unconscionable … contracts". A similar provision is s 8 of the Evidence Act 1995 (NSW) which provides: "This Act does not affect the operation of the provisions of any other Act". In construing the meaning of the expression "does not affect the operation" in a similar provision in s 8(1) of the Evidence Act 1995 (Cth), in Epeabaka v Minister for Immigration and Multicultural Affairs (1997) 150 ALR 397 (reversed in Minister for Immigration and Multicultural Affairs v Epeabaka (1999) 160 ALR 543 on other grounds and with no disapproval of Finkelstein J's construction of the section) Finkelstein J said at 409: The scope of the operation of s 8(1) is not clear. There will be no difficulty in applying the sub-section in the case where a provision of the Evidence Act is directly inconsistent with the provision of some other enactment. In that event the provision of that other enactment will prevail.

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32 I am of the view that s 7(1) of the Act provides that nothing in the Act "affects the operation of" the application of the equitable doctrine of rectification. The breadth of s 7(1) of the Act leads me to the view that the Act is not to "affect" the way in which rectification suits are proved. In rectification suits evidence of what was said during negotiations is admissible to prove the alleged mutual or unilateral mistake upon which the application is based (the usual rule). That is directly inconsistent with the provisions of s 15 of the Act. The application of Finkelstein J's construction in Epeabaka means that the usual rule prevails over s 15 of the Act. Pursuant to s 7(1) of the Act, s 15 is not to "affect" or "make a difference to" (The New Oxford Dictionary of English, Clarendon Press Oxford 1998) the way in which the remedy or relief is justified, that is, it is not to affect the admissibility of such evidence. If that is right there is no need to consider the matter any further because the plaintiffs are entitled to bring their rectification suit unaffected by the provisions of s 15 of the Act. However in case that view does not ultimately prevail I will consider s 15 and s 16 as they relate to this case. Section 15 and s 16 of the Act 33 Gain v Commonwealth Bank of Australia was a case in which settlement was not achieved at mediation. Gleeson CJ observed that the provisions in s 15 were to encourage candid discussion at mediations and remove the risk of having what is said at mediations used against participants, "if the mediation does not result in settlement" (at 256). The policy identified by Gleeson CJ is particularly directed to the protection of participants in an unsuccessful mediation from having disclosures or admissions made during the mediation used against them when the dispute is litigated. The need for such a policy in relation to successfully mediated disputes is not as clear. However, parties who have reached a mediated settlement may, for various reasons, wish to keep their negotiations confidential, for instance to protect sensitive commercial information.

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34 Matters peripheral to the dispute between the parties may also be the subject of discussion at the mediation. Indeed, matters relevant to disputes between a participant to the mediation and some third party may be the subject of discussion. It may even be the case that statements adverse to the participant's interests in that other dispute may be disclosed. There may be all sorts of things discussed at the mediation, both innocuous and damaging that the parties may wish to keep confidential. If parties to the mediation were cognisant of the prospect of disclosure of their discussions should they succeed in reaching agreement at the mediation, the candid nature of the discussions would probably be compromised. This may lead to fewer settlements being achieved or more mediations being adjourned, in both instances adding to the additional costs of the parties. 35 The Amending Act introduced a process to ensure that the Heads of Agreement recorded the agreement reached by the parties in a successful mediation and excluded that document from the operation of s 15. In that respect the Act clearly accommodates a rectification suit in respect of a Deed or other instrument by reference to the Heads of Agreement. Section 15(3) provides that s 15 "does not apply" to either the Heads of Agreement or the Deed. Section 15(3) does not make admissible anything said or admitted at the mediation. The prohibition in s 15(1) still applies to things said or admitted at the mediation and documents prepared at the mediation other than those referred to in s 15(3) of the Act. The definition of "mediation session" in s 15(2) in combination with s 15(1) extends the prohibition to steps taken in making arrangements for the mediation session and any "follow-up" of the mediation session, whatever that might mean. I am of the view that the introduction into the Act of the requirement for the mediator to prepare a document that may subsequently become the Heads of Agreement and to complete the Summary of the mediation was for the purpose of defining the matters to be excluded from the prohibition in s 15(1) and to preserve the prohibition in respect of discussions and other documents used at the mediation. 36 The plaintiffs submitted that a purposive construction should be given to s 15 the Act, namely, as Rolfe J said in McConnell (at 27), that it is "to ensure that discussions at a mediation [under the Act] have the same status as 'without prejudice' communications aimed at settling litigation". It was submitted that s 15(1) of the Act does no more than ensure that the protection afforded by s 131(1) of the Evidence Act 1995 will be afforded to mediations under the Act. Section 131(1) of the Evidence Act 1995 prohibits the adducing of evidence of: (a) communications in connection with an attempt to negotiate a settlement of the dispute; and (b) a document prepared in connection with an attempt to negotiate a settlement of a dispute. The exemptions from that prohibition include such communications in proceedings to enforce an agreement between the persons in dispute to settle the dispute, or in a proceeding in which the making of such an agreement is in issue (s 131(2)(f)). The Australian Law Reform Commission Report (ALRC 26, vol 1,) in relation to the proposal upon which s 131 is based included the following (par 891): In view of the desirability of encouraging settlements, it is proposed that evidence may not be given of the content of communications made in an attempt to settle a civil dispute (including where a party's agent or a mediator is involved in the negotiations). Proposals are advanced, however, to meet deficiencies in the law. The general rule of exclusion extends to materials produced for the negotiations. The proposal in terms prevents evidence being "given". This formula is to be preferred to other options - eg not admissible. The rationale requires non-disclosure by the parties to the negotiations unless all of them consent. The embargo will not apply to communications which are of a criminal or tortious nature, or are capable of affecting rights and liabilities (such as acts of bankruptcy, defamatory statements, illegal threats, the election of alternative courses of action); and open offers of settlement. 37 In SWV Pty Ltd v Spiroc Pty Ltd [2006] NSWSC 668 Barrett J expressed the view that s 131(2)(f) "is concerned with an acknowledged or alleged agreement representing success (or alleged success) in an attempt to settle that dispute" [42]. His Honour said at [44]: … the particular "dispute" [in s 131(2)(f)] and its settlement are at the heart of the overall "attempt" or each separate "attempt", with the result that, where there are proceedings to enforce (or as to the making of) an agreement to settle that "dispute", the section allows the introduction of evidence of all or any communications made in the course of any one or more of such attempts as have been made to settle that dispute. 38 If the plaintiffs' submission that s 15(1) of the Act does no more than ensure the same protection as provided by s 131(1) of the Evidence Act is correct, s 15(1) only applies to unsuccessful mediations. The terms of s 15 and the history of the legislation seem to me to militate against such a construction. There have been a number of amendments to this Act in the context of the difficulties exposed in Gain and McConnell. The legislature had every opportunity to make it clear that s 15(1) was to apply only to unsuccessful mediations. No step was taken to suggest such an intention. Section 7 was an obvious place for an amendment to accommodate the provisions of s 131 of the Evidence Act 1995. That was not done. The fact that s 15(3) was introduced suggests that the legislature turned its mind to the extent to which the prohibition should be relaxed in respect of successful mediations. It expressly limited that relaxation to the documents identified in s 15(3) of the Act. It is, however, necessary to construe s 15 of the Act in its context and in the light of any relationship with s 16 of the Act.

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39 In the present case settlement was achieved at the mediation or as a result of the mediation, so in that respect it is distinguishable from Gain. The powerful statements of the judges in that case, in particular of Sheppard AJA, in relation to the width, clarity and unambiguous nature of the language of s 15 of the Act, were made without any detailed analysis of the relationship between s 15 and s 16 of the Act. Although s 15 and s 16 of the Act are dealing with different topics, the first with the admissibility of evidence and the second with the prohibition on disclosure, prima facie, their object seems to be the same - the maintenance of confidentiality of the communications at the mediation session - but their purpose is different. Section 15 of the Act makes inadmissible in any proceedings in a court evidence of anything said or admitted during a mediation session and any document prepared for the purpose of, in the course of, or pursuant to, a mediation session. Section 16 of the Act prohibits disclosure of "any information obtained in a mediation session" except in the circumstances provided in s 16(a) to (e). The differences in the expressions used in s 15 of the Act ("anything said or admitted" and "a document") and in s 16 of the Act ("information obtained") are not clear indicators of the true legislative intent where the remedy of rectification in the circumstances of this case is sought. 40 The terms of s 16 of the Act are rather curious if the intention is to keep confidential things that are "said" at the mediation. The word "information" combined with the word "obtained" in the context in which the expression is used in s 16 means "facts" or "knowledge" that a person "acquires" at the mediation session. The word "disclose" in s 16 of the Act means to "make known" or to "reveal": The New Oxford Dictionary of English, Clarendon Press Oxford, 1998; The Macquarie Dictionary, Federation Edition, The Macquarie Library, 2001. Thus s 16 does not prohibit the disclosure of things said at the mediation if those things do not amount to "information obtained" at the mediation. This would result in the curious situation of a party, or a person present at a mediation, being able to "disclose" what was said at a mediation if it was not information "obtained" at the mediation (for example if the information was already known), but then not being able to successfully tender such statements in court proceedings.

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41 The circumstances set out in s 16(a) to (d) of the Act in which disclosure is exempted from the prohibition in s 16 are all lawful excuses. That much is clear from the use of the word "other" in s 16(e) of the Act. Section 16(a) permits disclosure of information obtained at a mediation session "with the consent of the person from whom the information was obtained". Reading s 15 and s 16(a) together suggests that the legislature would not have intended that the information obtained at the mediation could be disclosed if the parties consented to its disclosure, but that the information (if it falls within the descriptions, "anything said or admitted" or "a document prepared" in s 15 of the Act) would then not be admissible in proceedings. 42 Section 16(b) of the Act exempts disclosure from the prohibition in s 16 if it is made "in connection with the administration or execution of this Act". One aspect of the administration of the Act is the Authority's supervisory powers in relation to accredited mediators. The Authority is obliged to withdraw a mediator's accreditation "if the mediator fails, without reasonable excuse, to comply with section 11AA(1) [the preparation of a document setting out the main points of agreement between the farmer and the creditor] or 18A [the completion of the form setting out a summary of the conduct and results of the mediation]" (s 12(3)). Depending upon the circumstances of the particular case, it may be necessary for the mediator to disclose what was said and/or done at the mediation for the purposes of establishing that the mediator had a "reasonable excuse" for not complying with s 11AA(1) of the Act. Such a disclosure is exempted under s 16(b) of the Act from the prohibition in s 16 of the Act. 43 When the Amending Act introduced s 29A(3) providing the right to the mediator to apply to the ADT for review of the Authority's decision to withdraw accreditation, it cannot have been the intention of the legislature that the mediator would be precluded from proving what was before the Authority when the decision was made to withdraw the accreditation. I am of the view that the combined effect of s 16(b) and s 29A leads to the conclusion that s 15 should be read down so that the disclosure made pursuant to s 16(b) when used in support of a claim under s 29A, is exempted from the prohibition of s 15(1).

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45 Section 16(d) of the Act exempts a disclosure that is made in accordance with a requirement imposed by or under a law of the State or the Commonwealth. However such exemption does not apply to any requirement imposed by a subpoena or other compulsory process. The defendant, ANZ, submitted that the provisions of s 16(d) are not consistent with some implied intention that s 15 of the Act should be read down. It is perhaps unhelpful to explore examples in this category because the exemption seems so broad. However, it might be that a "required" disclosure may form the basis of a claim in fraud against a mediator. As hopefully far-fetched as that example may be, and the circumstances would need to be analysed closely, it is difficult to conclude that s 15(1) would prohibit the admission of such evidence. 46 Section 16(e) of the Act allows a person to disclose information obtained at the mediation if it is for some "other lawful excuse". Attorney-General (Cth) v Breckler (1999) 197 CLR 83 was a case in which the High Court considered the terms of Regulation 13.17B of the Superannuation Industry (Supervision) Regulations made pursuant to the Superannuation Industry (Supervision) Act 1993 (Cth). Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ observed at 102-103 (citations omitted): [17] The phrase "reasonable excuse" has been used in many statutes but whether an excuse answers that description depends not only on the circumstances of the particular case but also on the purpose of the provision to which the exception is provided. However, the scope of the phrase "lawful excuse" appears to be more limited. A trustee will have a lawful excuse for failure to comply with an order, direction or determination of the Tribunal if the trustee has a reason recognised by law as sufficient justification for such failure, whether by way of answer, defence, justification or other legal right or immunity. (emphasis added) 47 The question is whether the disclosure of what happened at the mediation in support of a rectification suit in respect of a Deed entered into as a result of a mediation session amounts to "a reason recognised by law as sufficient justification" for the disclosure. The object of the Act is to provide for the "efficient and equitable resolution of farm debt disputes" (s 3). One aspect of the equitable resolution of disputes is that any deed or other instrument that is entered into as a result of the mediation must reflect the true agreement reached between the parties. This was expressly recognised in s 11C of the Act, introduced in the Amending Act in 2002, requiring that any deed or other instrument is to reflect the Heads of Agreement and making it an offence for a creditor to enter into a deed or other instrument that fails to reflect the Heads of Agreement. Notwithstanding the absence of these express provisions in the Act prior to the Amending Act, it could not have been the intention of the legislature that a creditor would be able to enforce a contract against a farmer that did not reflect the true agreement reached by the parties at the mediation. It cannot have been the intention of the legislature that a creditor could rely upon the provisions of s 15 of the Act to defeat the Act's purpose. That could hardly be an equitable resolution of a dispute and it would be against the object and the policy of the Act. 48 The policy and object of the Act lead me to the conclusion that there is sufficient justification for the plaintiffs to disclose information obtained at the mediation for the purpose of bringing the rectification claim and serving their evidence in support of the rectification suit. I am satisfied that such a disclosure falls within s 16(e) of the Act.

Hurworth Nominees Pty Limited v ANZ Banking Group Limited

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Judgment (32 paragraphs)

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Legislation Cited (3)

Cases Cited (6)