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Representation: Counsel:
Dr S Baron Levi (plaintiff)
Mr J Green (first, second and third defendants)
Solicitors:
Woods & Day Solicitors (plaintiff)
Fletch Law (first, second and third defendants)

File Number(s): 2021/00229181

Publication restriction: Nil

JUDGMENT

Introduction

1. These reasons deal with an application by the plaintiff to tender a letter dated 2 November 2023 (Exhibit VDC – ‘the letter’) sent to him by the defendants. The defendants object to the letter being tendered and the communication being used, arguing that it is evidence “in connection with an attempt to negotiate a settlement of the dispute”, and thus protected from disclosure or use by s 131(1) of the Evidence Act 1995 (NSW).

2. Ultimately, the plaintiff did not dispute that the communication was “prima facie” within s 131(1), but argued that any protection afforded by that section was displaced by s 131(2)(j) because, given the content of the letter, there are reasonable grounds for finding that the sending of it amounted to a contempt of court. In those circumstances, it is unnecessary to address whether the communication was genuinely one within s 131(1); it is also unnecessary because a finding in those terms “only establishes the possibility of the application of the section. It is not determinative”: Bhagat v Global Custodians Ltd [2002] NSWCA 160 at [27] (‘Bhagat’).

3. Ultimately, as I explain, the contest between the parties turned solely upon whether sending the letter amounted to the defendants applying improper pressure upon the plaintiff, thereby committing a contempt of court.

4. It is, however, important to emphasise that the immediate question is not whether there has been improper pressure and thus a contempt of court, but whether there are “reasonable grounds for finding” a contempt has been committed, and, therefore, that there was an offence within s 131(3) and that the letter was sent in furtherance of that offence: Bhagat at [34].

Background facts

5. The background facts can be briefly outlined, as follows.

6. The plaintiff commenced proceedings by statement of claim filed 11 August 2021 seeking to recover an amount of money that he alleges he loaned to the late Said El Khouri on 14 and 15 September 2008: the first defendant is the Estate, and the second and third defendants are its executors. (The statement of claim identified a fourth defendant, but she has not participated in the proceedings).

7. The defendants dispute – entirely – that there was any transaction between the plaintiff and Mr El Khouri. Their defence was filed on 10 July 2023.

8. On 2 November 2023, the defendants sent the letter to the plaintiff via his solicitor, and I accept that it was received by them at around this time.

9. The letter relevantly provides:

“Without prejudice

RE: Supreme Court Proceedings 2021/00229181

We refer to the above matter.

We understand that your client is not willing to enter any informal settlement discussions with the Estate of the late Said Elkhouri.

The purpose of the discussion which was proposed by the Estate was to enable the Parties to discuss discreet matters, in person, and to ascertain the validity of certain allegations made by your client.

We deny all claims made by your client. Furthermore we allege that:

1. We dispute the authenticity of the alleged loan agreement and the purported signatures contained thereon;

2. No monies were ever deposited into any accounts of the deceased nor was any sum of cash provided to the deceased;

3. Your client deals in proceeds of crime, namely that he sells the drug heroin;

4. Your client does not declare his finances to the Australian Taxation Office; and

5. Your client does not have a job and is not known to have ever undertaken any employment.

We note that we have already been advised by various witnesses that they are prepared to provide Affidavits and give evidence in court in respect of the above matters.

We are currently considering our options in respect of reporting such matters to various Governmental agencies, including but not limited to, the NSW Crime Commission and the Australian Taxation Office.

Furthermore, we intend to Subpoena all of your client’s bank account records and tax returns for the purposes of providing same to forensic accountants, and to ascertain where the alleged loan monies could have possibly come from.

Please find attached an Offer of Compromise of even date.

We reserve our right to file a cross claim against your client for damages and to seek indemnity costs from your client if he is unsuccessful in his claim.

We confirm that the Estate has been provided advice from Senior Counsel on the matter. The estimated costs to take the matter to final hearing will be over $200,000. We will be seeking our costs on an indemnity basis if your client is unsuccessful.

We await your response within 7 days of this letter. We welcome private without prejudice discussions to be had between the Parties. If no response is received within 7 days, we will undertake the actions mentioned above, immediately, and without further notice.

With thanks,

The Estate of the late Said Elkhouri

[signatures]

Karam Elkhouri (co-executor) Philippe Elkhouri (co-executor)”

10. It is appropriate to note that the parties made competing submissions about what inferences should be drawn from, and what findings should be made about, the letter. The key parts of the letter addressed by the parties were those parts where the defendants “allege” certain matters against the plaintiff, where they essentially confirm the willingness of “various witnesses… to provide [a]ffidavits and give evidence in court in respect of” the matters alleged, where they state they were “considering [their] options in respect of reporting such matters” and where they assert that if “no response is received within 7 days, [they] will undertake the actions mentioned above, immediately, and without further notice”. The submissions are addressed later when dealing with the arguments about whether sending the letter amounted to improper pressure being applied to the plaintiff: see [27]ff, below.

11. At the time the letter was sent, the defendants had not served their evidence in the proceedings. Subsequently, they did, serving an affidavit from the second defendant sworn 24 March 2024, an affidavit from the third defendant sworn 25 March 2024 and a report from a forensic document examiner, Melanie Holt, dated 17 August 2024. In relation to what evidence was served – and, importantly, what evidence was not served – by the defendants, it should be noted that, although in the letter it was stated that they “intend” to secure evidence from “forensic accountants”, no report of that kind was served. Further, putting the evidence from the forensic document examiner to one side (adduced because the defendants “dispute the authenticity of the alleged loan agreement…”), none of the evidence served by the defendants addressed the key allegations made by them in the letter.

12. In relation to the key allegations which were the focus of the submissions of the parties – essentially, that the plaintiff “deals in proceeds of crime, namely that he sells the drug heroin” and that he “does not declare his finances to the Australian Taxation Office” – as Mr Green accepted, neither of the matters “alleged” by the defendants were put to the plaintiff during his cross-examination.

The exception: s 131(2)(j) of the Evidence Act

13. Section 131(2)(j) provides:

(2) Subsection (1) does not apply if—

…

(j) the communication was made, or the document was prepared, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty…

14. Section 131(3) is also relevant. It provides:

(3) For the purposes of subsection (2)(j), if commission of the fraud, offence or act is a fact in issue and there are reasonable grounds for finding that—

(a) the fraud, offence or act was committed, and

(b) a communication was made or document prepared in furtherance of the commission of the fraud, offence or act,

the court may find that the communication was so made or the document so prepared.

15. In relation to these provisions, the following two matters should be noted.

16. First, the parties accepted that a contempt of court – whether criminal or civil – is either “an offence” or “an act that renders a person liable to a civil penalty” (plaintiff’s 24 July submissions at [4]; defendants’ submissions at [2.1]). The basis for this approach is the decision in Bhagat, where it was said (at [32]-[33]):

“… In Australia it is authoritatively established that both kinds of proceedings must be seen as essentially “criminal in nature” (Hinch v Attorney-General (Vic) (1987) 164 CLR 15 at 49; Witham v Holloway (1995) 183 CLR 525 at 534)…

… A criminal contempt answers the description of an “offence”. A civil contempt answers the description of an “act that renders a person liable to a civil penalty”. However the particular proceedings are characterised, the outcome is the same. The allegation in the present case concerned interference with the administration of justice and was, accordingly, an allegation of criminal contempt…”

17. Secondly, in determining whether evidence may be adduced, it is unnecessary for a court to determine whether the “offence” was in fact committed, or “whether a person was in fact liable to a civil penalty”; rather, it is sufficient that, given the terms of s 131(3), “the court deciding the issue of admissibility finds that there are reasonable grounds for the requisite finding”: Bhagat at [31].

Contempt: interference with the administration of justice

18. The matter was argued on the basis that improper pressure upon a party is a “recognised category of contempt”: conduct of that kind involves an interference with the administration of justice. (There is a detailed and scholarly analysis of this form of contempt in Professor Rolph’s Contempt (1st ed, 2023, Federation Press) at 354-372). It was also argued on the basis that, relevantly, the following principles apply to a determination of whether sending the letter during the course of the proceedings bears the required character and, thus, amounts to a contempt.

19. First, the distinction is “between proper and improper pressure”: Harkianakis v Skalkos (1997) 42 NSWLR 22, 30 (‘Harkianakis’). There it was said:

“Pressure may be actual or threatened, conditional or unconditional. What is done (or threatened) may be lawful or unlawful conduct. The mere fact that something that is lawful is threatened does not mean that the pressure is necessarily proper. Were it otherwise, a threat to report a legal practitioner to a professional disciplinary body… or to commence a prosecution… could not constitute a contempt. Yet it clearly may.”

See also Bhagat at [35], [37].

20. In Attorney-General v Times Newspapers Ltd [1974] AC 273, 326 (cited approvingly in Bhagat at [36]), the distinction was illustrated as follows:

“To seek to dissuade a litigant from prosecuting or defending proceedings by threats of unlawful action, by abuse, by misrepresentation of the nature of the proceedings or the circumstances out of which they arose and such like, is no doubt a contempt of court; but if the writer states the facts fairly and accurately, and expresses his view in temperate language the fact that the publication may bring pressure – possibly great pressure – to bear on the litigant should not make it a contempt of court.”

21. Secondly, whether, in a given case, the pressure sought to be applied is “‘improper’, depends on all of the circumstances of the case”: Bhagat at [38].

22. Thirdly, there is no requirement for there to be actual interference with the party’s conduct of the proceedings for contempt by improper pressure: Harkianakis at 29. Rather, it is sufficient that the communication has “as a matter of practical reality, a tendency to interfere with the course of justice in a particular case”: Harkianakis at 27, citing John Fairfax & Sons Pty Ltd v McRae (1955) 93 CLR 351, 372; Y and Z v W (2007) 70 NSWLR 377; [2007] NSWCA 329 at [39].

23. Fourthly, there is no requirement to establish any intention to interfere with the due administration of justice or to deter the pending litigation: Harkianakis at 28.

24. Fifthly, the charge, whether criminal or civil, must be established beyond reasonable doubt: Bhagat at [32].

25. Sixthly, the defendants initially argued that whether the conduct is improper “should be assessed objectively”, citing, inter alia, Resolute Ltd v Warnes [2000] WASCA 359 at [19] (‘Resolute’). However, during submissions, the parties accepted that whilst authorities in relation to the “real tendency issue” support an objective test for contempt by publication, different considerations apply in connection with private communications – the situation here. As Spigelman CJ pointed out in Bhagat (at [49]-[50]):

“These authorities are concerned with the law of contempt by publication, in which context different considerations arise when balancing the public interest in freedom of speech against the public interest in the administration of justice. In such cases the element of interference with the administration of justice is mediated by the response of the community, broader than the parties, to whom the publication is sent. At least in the present context of private communications between parties to proceedings, I see no reason why the particular vulnerability of a party, in terms for example of age and means, should not be a material consideration when determining whether the pressure was improper. At least in such a context, I do not see why the Court must choose between an objective and a subjective test. Both dimensions may be pertinent when formulating the judgment about impropriety.

In the present case, the very thrust of the pressure was to dissuade a party from continuing with litigation by undermining whatever sense of security that person had acquired from the undertaking of another to protect them in a material respect. Where such pressure is accompanied by threats and false allegations, in my opinion, it is permissible to take into account the vulnerability of the recipients when determining whether the pressure was improper.”

26. In Bhagat, Ipp A-JA, whose judgment in Resolute at [19] the defendants relied upon, specifically qualified his remarks in Resolute, stating that (at [54]):

“… at least in cases of contempt of Court involving private communications to individuals, regard should be had to the subjective characteristics of the recipients of the communications. That is to say, there should be an objective assessment of the relevant materials, having regard to the subjective characteristics of the recipients of the communications.”

Discussion and consideration

27. The plaintiff argued that the exception provided by s 131(2)(j) is enlivened as there are reasonable grounds for finding that sending the letter constituted a contempt of court because it amounted to improper pressure on the plaintiff to abandon or settle the proceedings (plaintiff’s 24 July submissions at [2]).

28. The defendants, whilst accepting that a contempt of court – whether criminal or civil – would be within that section and, further, accepting that “improper pressure” on a party “is a recognised category of contempt”, nevertheless submitted that the sending of the letter did not impose any improper pressure upon the plaintiff and, necessarily, does not constitute a contempt of court (defendants’ submissions at [2.2] and [3.1]).

29. As I have earlier noted, the question is whether there are “reasonable grounds for finding” a contempt has been committed, and, therefore, that there was an offence within s 131(3) and that the letter was sent in furtherance of that offence: Bhagat at [34].

30. The authorities emphasise, and the defendants noted during submissions, that not all pressure is improper, even if it is directed to a party to proceedings by an opposing one: many forms of pressure, in that context, may be perfectly legitimate – see the discussion in [20], above. Further, as explained in Bhagat at [39]:

“… A firm assertion that the other party must lose and a reasonable statement of the consequences of loss is not a contempt, even if it does exert pressure on a party to withdraw proceedings. The position is otherwise if a demand of that character is accompanied by improper threats or assertions…”

31. The defendants argued that the letter itself is a fairly benign document which contains an offer of settlement and was essentially aimed at “[encouraging] and [facilitating] settlement negotiations”: the ultimate submission was that the letter did not impose any improper pressure upon the plaintiff (defendants’ submissions at [3.1]-[3.3]).

32. In relation to what the defendants characterise as “a number of allegations which [they] make against the [p]laintiff”, the defendants argue that they do not amount to the defendants exerting improper pressure: the defendants submit that these “matters identify [their] perceptions as to the potential issues with, and weaknesses of, the [p]laintiff’s claim” and, building upon this, argue it is “not unusual, let alone, improper, for a party to proceedings to identify perceived weaknesses in an opponent’s case when proposing an offer of settlement in respect of pending litigation/proceedings” (defendants’ submissions at [3.3]). The result, Mr Green submitted, was that all the defendants did was merely raise allegations and, given they were unaccompanied by threats, this meant that what they did could not be considered improper.

33. I do not accept this submission, which is only partly accurate. While some of the letter is expressed in strong and forceful terms and can be taken to be directed at what were perceived by the defendants to be weaknesses in the plaintiff’s claim, the allegations (notably those numbered 3 and 4) go well beyond this. Put a little differently, but to the same end, as the plaintiff essentially submitted, even if it is accepted that there were firm assertions about what the defendants perceived were weaknesses with the plaintiff’s case (coupled with a demand that, contrary to the plaintiff’s wishes at that time, he discuss the matter with them in “private without prejudice discussions”) which exerted pressure upon him, those assertions (and the demand) were accompanied by improper threats – namely, that he “deals in proceeds of crime”, “sells the drug heroin” and does “not declare his finances to the Australian Taxation Office”. They are improper because, as Mr Green accepted, they are extraneous to the proceedings and, in any event, there is no basis in the evidence, on the application or at trial, to substantiate them.

34. The defendants made a number of submissions, the objective of which was to demonstrate that, irrespective of what was contained in earlier parts of the letter, nothing really was going to be done by them about the allegations, and that is how the letter should be construed – viz., whatever the plaintiff did, or did not, do in relation to what was contained in the letter, the defendants would just, in effect, consider their position. That stance is reflected in, at least, the following submissions:

35. that, “on an objective reading of the [l]etter”, it does not state that they will report the matters – they only threatened to do so (defendants’ submissions at [3.4]);

36. that “on an objective reading of the [l]etter, one can conclude that such matters may, nevertheless be reported, irrespective of whether the [p]laintiff accepts the [o]ffer of [c]ompromise and/or agrees to participate in settlement negotiations in respect of the [p]roceedings” (defendants’ submissions at [3.4]); and

37. that the letter did no more than indicate that, “if no response is received” in respect of the allegations, they “will continue to consider their options in respect of reporting matters to various governmental agencies (and not to necessarily report such matters)…” (defendants’ submissions at [3.5]).

38. The endpoint of these submissions was, seemingly, that the letter did no more than confirm that, absent a response, the defendants would, “immediately, and without further notice”, continue to consider their options – and, at least implicitly, that any allegations made by them should be understood as being appreciably diluted in consequence. If that construction was not accepted, Mr Green submitted that the letter could only be understood as simply meaning that the defendants would issue a subpoena upon the plaintiff.

39. The plaintiff submitted that each suggested construction of the letter advanced by the defendants was artificial and untenable. I agree.

40. Whilst, as the defendants submitted, the letter indicated that they were “currently considering [their] options in respect of reporting such matters”, the letter did not end there. In the last paragraph, after indicating that they “await your response within 7 days”, they state that, “[i]f no response is received within 7 days, we will undertake the actions mentioned above, immediately, and without further notice”. The terms of the letter are clear: absent a response, the defendants will report those matters to the relevant authorities.

41. It follows that I accept, as the plaintiff submitted, that there are reasonable grounds for finding that the defendants sending the letter imposed improper pressure upon the plaintiff, and was thereby a contempt: the letter contained a threat of immediate reporting of allegations to law enforcement and revenue authorities unless the plaintiff submitted to judgment or settlement of the claim (or responded to the demand for discussions within seven days), which I accept has, as a “matter of practical reality, a tendency to interfere with the course of justice”.

42. I have reached that conclusion notwithstanding that it is permissible to take into account “the vulnerability of the recipients when determining whether the pressure was improper”: Bhagat at [49]-[50]. If I were to take those features into account, they would include the fact that the plaintiff is of limited means (he is, and was at this time, on a disability support pension) and that he is, by reason of the condition that entitles him to that pension, physically frail; those features would merely reinforce the finding that I have made.

43. I am, therefore, satisfied there are “reasonable grounds for finding” a contempt has been committed, that there was an offence within s 131(3) and that the letter was sent in furtherance of that offence. It warrants emphasising that it does not follow from these findings that the offence has been made out; merely that, contrary to what the defendants argued, s 131(1) “does not apply” to prevent the admission of the letter into evidence.

Orders

41. For the above reasons, I admit the letter dated 2 November 2023.

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