Evidence - Admissions and declarations - Admissions - Letters and statements without prejudice - Particular limitations of privilege - Disclosure not during settlement negotiations expressed to be "off the record and without prejudice".

Unilever plc v The Procter & Gamble Co [1999] 2 All ER 691; Prudential Insurance Company of America v Prudential Assurance Company Ltd [2003] EWCA Civ 1154, distinguished.

Procedure - Supreme Court procedure - Tasmania - Practice under Rules of Court - Commencement of proceedings: originating process - Renewal of writ - Renewal of writ out of time.

National Mutual Life Association of Australasia Ltd v Huddlestone 72/1997, applied.

Judgment Number: [2004] TASSC 126

JADWAN PTY LTD v DAVID PORTER, PIGGOTT WOOD & BAKER (No 2)

1 This is an application for the renewal of a writ, and for an extension of the time within which to apply for its renewal. The application relates only to the defendant David Porter QC ("the defendant"). The writ was issued on 18 July 2002, against a number of defendants. By virtue of the Supreme Court Rules 2000, r107(1), it remained in force until and including Saturday 17 July 2003. It was served on the defendant on Monday 19 July 2004. Evans J has held that r51 did not operate to keep the writ in force beyond the Saturday, and has made an order setting aside service thereof on the defendant: Jadwan Pty Ltd v Porter [2004] TASSC 107.

2 An order for the renewal of a writ may be made pursuant to r107(2), which reads as follows:

"(2) On the application of the plaintiff made whilst a writ is in force, the Court or a judge may order that the original writ and any concurrent writ be renewed for 6 months if a defendant named in the writ has not been served."

3 As the time for making an application under r107(2) expired on 17 July 2004, the plaintiff has applied for an extension of the time limited for the seeking of such an order. The extension of time has been sought under r52, which includes the following:

"52 - (1) The Court or a judge may extend or abridge the period for doing any act or taking any proceedings allowed or limited by these rules or by any order of the Court or a judge on any terms the Court or judge considers just.

(2) An extension of any period may be ordered although the application is made after the expiration of the period originally allowed or limited."

4 From at least September 1996 the plaintiff was the owner and operator of a nursing home named Derwent Court Nursing Home. There was in force an approval under the National Health Act 1953 (Cth), s40AA, in respect of its operation as a nursing home. By reason of that approval, a subsidy was payable by the Commonwealth to the plaintiff in respect of the care of residents at the nursing home. Difficulties arose as to the need for the nursing home to comply with standards determined by the Minister for Health and Family Services pursuant to the National Health Act, s45D. A standards monitoring team made an adverse report to the Minister on or about 6 September 1996. A delegate of the Minister thereafter advised that he intended to make a declaration under s45E(1) that the nursing home did not satisfy the relevant standards, and that he might impose sanctions under s45E(2). The plaintiff referred the delegate's notice to a standards review panel pursuant to a provision in the National Health Regulations. On or about 2 December 1996, a review panel reported to the Minister that it had found various deficiencies in relation to the standard of care being provided at the nursing home. On 3 February 1997 a delegate of the Minister purportedly declared, pursuant to s45E(1), that the nursing home did not satisfy the relevant standards, purportedly determined under s45E(2) that benefits under the National Health Act were not payable in respect of any new patients admitted to the nursing home while that declaration remained in force, and required the plaintiff to show cause within three days why the nursing home's approval under Act should not be revoked. On 1 April 1997, a delegate of the Minister advised the plaintiff of her intention to ask the standards review panel again to review the care provided at the nursing home. On 26 May 1997, a second review panel made an adverse report to the Minister. On 20 July 1997, a delegate of the Minister notified the plaintiff of her intention to revoke the nursing home's approval under s44(2)(b). As from 24 July 1997, the residents of the nursing home were transferred to other approved nursing homes.

5 On 22 July 1997, a solicitor named Wicks, acting for the plaintiff, retained the defendant as senior counsel. The evidence before me as to the scope of his retainer is quite vague. A Melbourne solicitor now acting for the plaintiff, Mr Healy, has sworn an affidavit in which he says he has been informed by a director of the plaintiff that the contents of a draft statement of claim are true. It appears from that document that Mr Wicks engaged the defendant "to provide legal services". The defendant has said in an affidavit that he was instructed by Mr Wicks "to provide advice as to the action then being taken against the plaintiff by the Commonwealth Dept of Health & Family Services". He saw Mr Wicks in his chambers on 24 July 1997, spoke to him four times on the telephone, saw him in his chambers again on 5 August 1997, settled an application pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) and an affidavit in support, spoke to Mr Wicks concerning those documents, and sent a note of his fees on 19 August 1997. He had no involvement in relation to the plaintiff after 11 August 1997. He did not learn what became of the application that he settled.

6 On 6 August 1997, a delegate of the Minister decided, in reliance upon the reports of the two review panels, to revoke the nursing home's approval ("the final revocation decision").

7 As from 1 October 1997, nursing homes were regulated under the Aged Care Act 1997 (Cth), which replaced the relevant provisions of the National Health Act. Transitional provisions were enacted in the Aged Care (Consequential Provisions) Act 1997 (Cth). That Act received the Royal assent on 7 July 1997. Under s7 of that Act, the plaintiff could have become an "approved provider" under the Aged Care Act if (a) it was the proprietor of a nursing home approved under the National Health Act as at 30 September 1997, and (b) a Commonwealth benefit was payable to it in respect of an approved nursing home patient for nursing home care received by the patient on 30 September 1997. By 30 September 1997, all of the residents had left the nursing home, with the result that no such Commonwealth benefit was then payable to the plaintiff.

8 The plaintiff made an application to the Federal Court challenging the final revocation decision. It was successful. On 4 December 1998, the Full Court of the Federal Court ordered that the final revocation decision be set aside on the basis that the second review panel was not properly constituted, and that the Minister's delegate had taken into account an irrelevant consideration by relying on that panel's report. However the plaintiff's litigious victory did not result in it becoming an "approved provider" for the purposes of the Aged Care Act because of the absence of any residents in the nursing home as at 30 September 1997.

9 Some 27 months after the Full Court judgment, the plaintiff made a second application to the Federal Court on 9 March 2001. It sought a declaration that it be taken to be, or deemed to be, an approved provider of aged care within the meaning of the Aged Care Act. North J dismissed that application on 23 August 2002. The plaintiff appealed. The Full Court dismissed the appeal on 12 December 2003.

10 In September 2002, following the dismissal of the 2001 application by North J, the plaintiff engaged new solicitors in Melbourne. It engaged a firm named Riordans Lawyers, the firm that employs Mr Healy. That firm acted in relation to the unsuccessful appeal from the decision of North J. It also acted in relation to a number of other proceedings. It acted in relation to a Federal Court application V179/2001 by the plaintiff against the Minister. Mr Healy's affidavit reveals that that application concerned another ministerial decision made in February 1997 in relation to the nursing home, but I have no other information about that application. Riordans Lawyers is also acting for the plaintiff in relation to another action commenced by it in this Court, no 35/2003, in which it is seeking damages from three Hobart legal firms for alleged negligence. Mr Healy arranged for two of those defendants to be served on 30 January 2004 and the other on 2 February 2004, the last day when the writ in that action was in force.

11 The present action was commenced on 18 July 2003, as I have said. On that day a Hobart solicitor filed the writ, which named two defendants, and a concurrent writ, which named three defendants. I infer that he was instructed by Riordans Lawyers. I think I should leave open the question whether an action was thereby commenced against the defendant that was named in the concurrent writ, but not in the writ. That defendant, if it is a defendant, is another Victorian legal firm named Middletons. Counsel made no submissions as to the status of Middletons in this action. That firm may wish to take some point as to whether it has been properly joined.

12 The plaintiff is claiming in this action that, by reason of the negligence of its former legal advisers, including the defendant, it suffered the loss of the benefit of the approval of its nursing home under the National Health Act, and the loss of an opportunity to become an approved provider under the Aged Care Act, and thereby lost the nursing home business that it had conducted at the nursing home. A decision was made by the plaintiff and/or Riordans Lawyers not to serve the originating process herein before the Full Court had given judgment on the appeal from the decision of North J. If that appeal had been successful, the nursing home business might have been restored. After the Full Court judgment, it was apparently decided not to serve the originating process herein until the plaintiff had obtained counsel's advice as to whether it ought to proceed with this action. Although the Full Court dismissed the appeal on 12 December 2003, Mr Healy had still not sought advice from counsel as to the merits of the claims in this action by early July 2004. In his affidavit, he attributed his inactivity in relation to this action to his concentration on the other pending litigation concerning the nursing home, namely Federal Court application V279/2001 and action no 35/2003. His description of the steps that he took in relation to those two proceedings between December 2003 and July 2004 fills one page of his affidavit. I think it can fairly be said that the work he did in relation to the two other cases would not have precluded him from attending to this case, at least to some degree, during the months in question.

13 Mr Healy knew that the writ would become stale if it were not served within 12 months of the date of its issue. He decided to engage a different solicitor as his firm's Hobart agent for the purpose of arranging service. He phoned the new solicitor, Mr Worsley, on either 9 July or 13 July and instructed him to serve the defendant and Messrs Piggott Wood & Baker. Mr Worsley took leave for three days commencing on Wednesday 14 July. Before going on leave, he took no steps to arrange service on the defendant, nor to bring the matter to the attention of anyone else in his office. On Sunday 18 July, he noticed his oversight. On Monday 19 July, he phoned the defendant, had a conversation with him, and arranged for someone to serve him with the writ. The defendant received it about an hour later. The writ was accompanied by a letter from Mr Worsley in which he said, "... without prejudice, I understand that they [Riordans Lawyers] are awaiting senior counsel's advice as to pursuing the action although, at this stage, it appears that it is unlikely that the matter will proceed". During their telephone conversation, Mr Worsley told the defendant that he had been instructed that this action was instituted in order to preserve time, and that advice from senior counsel was expected to the effect that the action should not be proceeded with. Counsel told me that, for the purposes of this application, it is an agreed fact that Mr Worsley said those comments were "off the record and without prejudice". Mr Phillips, for the plaintiff, objected to affidavit evidence from the defendant as to what Mr Worsley said, but I held that that evidence was admissible, and said that I would give my reasons for that ruling when I determined the interlocutory application. I will return to that point shortly.

14 The defendant had had no reason to think about the plaintiff's matter between August 1997 and 19 July 2004. He disposed of his notes a year or two following his last conversation with Mr Wicks about the matter. After receiving the stale writ, he managed to obtain a photocopy of a photocopy of Mr Wicks' file for the relevant period. He carried out an internet search and read the Federal Court judgments from 1998, 2002 and 2003, but he has no other information as to the relevant events after 11 August 1997.

15 Mr Phillips submitted that what Mr Worsley said to the defendant amounted to a "without prejudice" communication, and was therefore inadmissible. He rightly submitted that there are two rationales for the exclusion of evidence of "without prejudice" communications: one relating to public policy, and the other relating to implied agreements. In Rush & Tompkins v Greater London Council [1988] UKHL 7; [1989] AC 1280 at 1299, Lord Griffiths described the "without prejudice" rule as "a rule governing the admissibility of evidence ... founded on the public policy of encouraging litigants to settle their differences rather than litigate them to a finish". Litigants should not be discouraged from settlement discussions by the knowledge that anything said or not said might be used to their prejudice at a trial. See, for example, Cutts v Head [1984] Ch 290 at 306. The second rationale for the rule was referred to by Oliver LJ in Cutts v Head at 307, where his Lordship referred to "an implied agreement imported from the marking of a letter 'without prejudice' that it should not be referred to at all". Thus in David Instance v Denny Bros Ltd [2000] FSR 869, Lloyd J granted a temporary injunction restraining the use of "without prejudice" material in a foreign jurisdiction on the basis that it was strongly arguable that the parties were bound by an implied agreement not to use the material in litigation.

16 Mr Phillips did not base his submissions on public policy arguments. He submitted that, although Mr Worsley's communications of 19 July 2001 were not made in the course of settlement discussions, his use of the words "without prejudice" resulted in the creation of an implied agreement not to refer to his communications in litigation. He submitted that the defendant, if he had not wanted to enter into such an agreement, could have interrupted Mr Worsley and told him that he was not willing to participate in "without prejudice" discussions. He relied on Unilever plc v The Procter & Gamble Co [1999] 2 All ER 691 and Prudential Insurance Company of America v Prudential Assurance Company Ltd [2003] EWCA Civ 1154. The former case is authority for the proposition that the "without prejudice" rule is not confined to admissions, but applies to other statements made during settlement negotiations. Both cases relate to statements made during settlement negotiations, rather than statements made otherwise than in the course of settlement negotiations and expressed to be made "without prejudice".

17 I am not aware of any authority whereby, in a situation quite unconnected with settlement negotiations or discussions, a person can effectively unilaterally elect for something that he or she says to be "off the record". There is no evidence before me of an established practice whereby that can be done. If what Mr Phillips submitted is correct, a lawyer who telephones another lawyer and says that he or she is speaking "off the record" or "without prejudice", and then proceeds to say something unrelated to settlement or compromise, thereby makes a contractual offer, which the other lawyer will automatically accept unless he or she speaks up or hangs up. That cannot be right. The words "off the record" indicate no more than a desire for confidentiality, and do not give rise to a legal obligation of confidentiality. The words "without prejudice", in a context like the present one, should be taken only as indicating (a) that a prediction by the speaker might prove incorrect and should not be relied upon, and/or (b) a desire for confidentiality.

18 As soon as Mr Worsley made his "off the record and without prejudice" disclosure, the information that he imparted ceased to be confidential. As Long Innes J pointed out in Haynes v Hirst (1927) 27 SR (NSW) 480 at 489, "A man, having eaten his cake, does not still have it, even though he professed to eat it without prejudice."

19 In my view, there is no rule of public policy that makes Mr Worsley's communication inadmissible, and there was no agreement that entitles the plaintiff to have the evidence of Mr Worsley's communication excluded from the evidence.

20 In National Mutual Life Association of Australasia Ltd v Huddlestone 72/1997, Zeeman J, with whom Wright and Crawford JJ agreed, said the following, at 4, in relation to the factors to be taken into account on the hearing of an application for the renewal of a writ:

"... the real question is whether the respondents have established that the justice of the case requires that the writ be renewed. It is not possible to state exhaustively the categories of reasons which may result in good reason being established to order a renewal (see Victa Ltd v Johnson (1975) 10 SASR 496 at 504; Van Leer Australia Pty Ltd v Palace Shipping KK [1981] HCA 11; (1979) 180 CLR 337 at 346).

The matters which, it was accepted in argument, are relevant to the question of whether good reason has been established, and therefore relevant to the justice of the case, include the nature of the attempted service, the length of the delay in attempting service, the length of the delay in making the application for an extension of time, the reasons for the delays, the conduct of the parties and hardship or prejudice caused to a party by refusing or granting renewal.

In addition, I consider that the merits of a plaintiff's claim may also be relevant. It is not incumbent upon an applicant for renewal to establish a prima facie cause of action or a cause of action which has reasonable prospects of success. However, matters concerning the merits of a plaintiff's claim ought not to be put aside as having no possible relevance. By way of example, where an application relates to a writ which attempts to raise a cause of action which, on the face of the writ, is bound to fail, the absence of merit may provide a sufficient reason to refuse renewal. Conversely, the existence of a strong case against a defendant may provide a positive reason for granting renewal and outweigh other factors militating against a favourable exercise of the discretion."

21 That case concerned an application under the Rules of the Supreme Court 1965, O8, r1(1), which permitted the court or a judge to grant leave to renew a writ only if satisfied that reasonable efforts had been made to serve the defendants, or that there was "other good reason" to make the order sought. Although r107(2) does not refer to "good reason" or to the efforts made to serve the writ, I think it is clear that it remains the law that, on an application for the renewal of a writ, it is appropriate to take into account whether reasonable efforts have been made to serve the defendant, or whether other good reason has been shown to renew the writ. The fact that a limitation period has expired prior to the making of the application for renewal is one factor relevant to the exercise of the discretion conferred by r107(2): Woodcock v State of Tasmania [2003] TASSC 81 at par23.

22 National Mutual Life Association of Australasia Ltd v Huddlestone (supra) also involved an unsuccessful attempt by a solicitor to effect service of a writ at the eleventh hour. Zeeman J said the following in relation to the availability of an alternative remedy in that case at 4 - 5:

"It should have been apparent to the respondents' solicitor that there was a real risk that service would not be effected within time. It may be that if leave to renew were to be refused the respondents would have a cause of action against their solicitor. I do not consider that to be a matter of great significance. In extension of time matters generally, the availability of an alternative remedy against a negligent solicitor has rarely been considered to be a matter militating against granting the extension particularly, as is the position in the present case, when there is no direct evidence of the likelihood of the success of such an action (see Woolley v Jensen A20/1995; Soper v Matsukawa [1982] VicRp 96; [1982] VR 948)."

23 Nothing was done for the purpose of serving the defendant with the writ until at least 9 July 2004, approximately 6 years 11 months after he completed his work for the plaintiff. It seems reasonable for the plaintiff to have done nothing about suing the defendant between August 1997 and December 1998, since the original Federal Court litigation was pending, and apparently proceeding with reasonable expedition. However I have no evidence that the plaintiff did anything at all in relation to the alleged cause of action against the defendant in 1999 or 2000. It seems surprising that the Federal Court proceedings instituted in March 2001 took nearly three years to reach the stage where a Full Court appeal was dismissed. Counsel for the defendant, Mr McTaggart, has rightly pointed out that I have no evidence as to why those proceedings took so long, nor any evidence that would enable me to make some assessment of the merits of the Full Court appeal. That appeal must have been instituted in or about September 2002, but was not determined until 12 December 2003. There is no reasonable explanation for Mr Healy not having sought counsel's advice as to the merits of the plaintiff's claim against the defendant in the first half of 2004. In my view there is no evidence of any reasonable explanation for the delays on the plaintiff's part throughout 1999 and 2000, and from August 2002 to early July 2004.

24 No attempt was made to serve the defendant prior to the writ becoming stale. It is not the plaintiff's fault, but Mr Worsley's, that absolutely no attempt was made at service. However it was not reasonable for the plaintiff or Mr Healy to delay the making of arrangements for service until less than two weeks before the writ ceased to be in force. If the defendant had left Tasmania for the duration of this Court's July vacation, as counsel sometimes do, service upon him would probably not have been effected, and the likelihood of obtaining an order for the renewal of the writ would have been quite small: Inprint Ltd v Australian Mutual Provident Society, unreported, Supreme Court of Queensland, 24 April 1995. As Helman J observed in that case, at 14, "A lengthy period of inaction, followed by a short spurt of activity would not, in the ordinary course of events I think, be regarded as showing that reasonable efforts [to serve the writ] have been made." However I take into account in the plaintiff's favour the fact that it finds itself in the present situation as a result of Mr Worsley's oversight, and that the availability of a possible remedy against him should not be regarded as a matter of great significance.

25 I have absolutely no evidence that a negligence claim against the defendant would have any merit. I do not know what, if anything, he was asked to do for the plaintiff, apart from settling an application and a supporting affidavit. I do know that the applicant has had various solicitors acting for it, possibly at different times, both in Victoria and Tasmania. It is quite within the bounds of possibility that it might have retained different lawyers to advise and act in relation to different aspects of its problems concerning the nursing home. For example, one firm might have been retained to advise in relation to the implications of the Aged Care Act and the relevant transitional provisions, and another firm retained to advise in relation to the possible review of adverse administrative decisions. I know that the writ was filed, and a decision made to serve the defendant, solely for the purpose of keeping open to the plaintiff the option of proceeding with a professional negligence claim. If there had been evidence that such a claim had some merit, that would have counted in the plaintiff's favour. The lack of any evidence as to merit or lack thereof is a neutral factor. However the fact that this application has been made solely for the purpose of preserving or reinstating the right of the plaintiff to sue the defendant, without any decision yet having been made whether to proceed with the litigation, counts strongly against the plaintiff.

26 If the renewal of the writ is refused, the plaintiff will effectively lose any rights it has against the defendant, the limitation period having expired. However it will retain the right to proceed with negligence claims against the three firms sued by it in the other action in this Court. One of those firms employed Mr Wicks when he briefed the defendant. It also retains the right to proceed with this action against the defendant Piggott Wood & Baker. I cannot rule out the possibility that the proceedings against the firm that employed Mr Wicks might fail on the basis that the firm discharged its duty of care by seeking the advice of the defendant. However I have no evidence that the refusal of the present application would leave the plaintiff without an adequate remedy against one or more of the four Tasmanian firms that it is suing in respect of the losses that are the subject of its claim against the defendant.

27 The defendant has not demonstrated that the renewal of the writ would prejudice his right to a fair trial in any specific way. However it is important not to overlook the general prejudice that he would suffer by reason of the lapse of some seven years since the date on which the cause of action allegedly arose. I bear in mind the comments made in relation to "general prejudice" by McHugh J in Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 at 551 - 553. If this action proceeds to trial, the defendant might very well be able to establish precisely what he was instructed to do, and the substance of any advice that he gave orally to Mr Wicks. There must however be some chance that the available documentation, his recollections, and those of Mr Wicks, are incomplete to some degree. Further, the trial of this action may very well involve a need for evidence as to what the plaintiff could have done between 22 July 1997 and 30 September 1997 to prevent, overturn or circumvent the final revocation decision of 6 August 1997; evidence as to what the plaintiff could have done between those dates to retain one or more residents in its nursing home, or to return one or more residents to it, and to remain or become eligible for the appropriate Commonwealth benefit as at 30 September 1997; and evidence as to the steps the plaintiff could have taken to mitigate its alleged damage in or after 1997. Had this action been brought against the defendant in 1999 or 2000, the task of investigating those matters and preparing a case for trial would have been enormous and might have been very difficult. But the defendant learned of these proceedings only in July 2004. As a result, it seems likely to me that an investigation of the evidence relevant to those complicated issues is likely to be severely prejudiced.

28 All that can be said in the plaintiff's favour is that it has a reasonable explanation for some of the delay during the last seven years, that Mr Worsley's oversight was not its fault, and that any possible remedy against Mr Worsley is not a significant factor. In my view the factors weighing in favour of the defendant, which I have referred to, very much outweigh those factors. It would therefore not be in the interests of justice to renew the writ, nor to make an order extending the time for an application as to the renewal of the writ. The interlocutory application is dismissed.