Liu v Chan & Ors [2020] QCA 25

In the third further amended reply and answer, the plaintiff denies that he or an associated company owed any money to the first defendant or an associated company for any project as alleged by the first defendant. The plaintiff denies the defendants’ allegations about the January compromise. The plaintiff specifically denies the January compromise “because in or about October 2014, the plaintiff and the first defendant … agreed that, subject to the execution of a settlement deed prepared by the first defendant’s solicitors, the first defendant would pay to the plaintiff a further $3.8 million …”.

There is evidence in the plaintiff’s case that at a meeting at a café in October 2014 the first defendant admitted that he owed the plaintiff $3.8 million. The plaintiff demanded repayment of that amount and, after the first defendant said he was unable to pay the whole amount at once, they agreed upon a plan for repayment by instalments. The first defendant’s evidence about that conversation is to the effect that he insisted upon the plaintiff honouring the January compromise but the plaintiff refused to do so. The statements made at the café meeting are not said to be protected by without prejudice privilege.

After the meeting at the café the plaintiff and the first defendant conducted negotiations from mid-October 2014 to 13 November 2014 (“the October/November negotiations”) in an unsuccessful attempt to resolve their disputes. Those negotiations were conducted upon the express basis that they were without prejudice. I have examined the details of the negotiations and considered the parties’ submissions about that detail, but because I conclude that the content of the negotiations is protected by without prejudice privilege I will not describe that content. It is sufficient for present purposes merely to give a broad summary of the parties’ arguments about the effect of the negotiations. The plaintiff argued that evidence of the negotiations would support findings that are inconsistent with the central planks of the defendants’ case. In particular, the plaintiff argued that the October/November negotiations were for a compromise to be concluded upon the premise that the first defendant would admit that the money was transferred to him for the purposes alleged by the plaintiff and that, inconsistently with the set off pleaded by the first defendant, he owed the outstanding balance claimed by the plaintiff. The defendant argued to the contrary, that any proposed settlement differed from the plaintiff’s claim and that a without prejudice negotiation for a proposed settlement to be concluded on a particular premise in any event does not involve an admission that the premise is correct. Without deciding the point, it is convenient to assume for the purposes of this appeal that if without prejudice privilege did not apply to the negotiations, evidence of them could be adduced as admissions by the defendants of the kind for which the plaintiff contended.

The primary judge rejected the plaintiff’s argument that inconsistencies between the fact of, and admissions made in, the October/November negotiations and the defendants’ pleaded allegations of the disputed January compromise resulted in without prejudice privilege being waived or that it should not attach because the exclusion of the evidence of the October/November negotiations would mislead the Court. In the primary judge’s view, the maintenance of privilege for those negotiations was not inconsistent with the assertion that the disputes were settled in January 2014. Nor were the October/November negotiations about the basis upon which the dispute might be compromised inconsistent with the assertion of the privilege with respect to those negotiations or the assertion that the same dispute had been compromised earlier. The primary judge considered that the purpose of without prejudice privilege to encourage parties to seek to compromise their disputes would be substantially undermined if engaging in negotiations prevented a party from maintaining that the dispute had been compromised on a different basis earlier or from asserting the privilege with respect to later negotiations. The Court would not relevantly be misled about whether the disputed January 2014 compromise was made by being denied evidence of any admission about that topic subsequently made on a without prejudice basis. Such an admission, being a means of avoiding the need to prove the matter admitted, would not be evidence of the matter itself. The purpose of the privilege, the primary judge considered, comprehended encouraging parties to engage with each other in a way that might include the admission of matters the subject of an inconsistent plea by the party against whom the admission was tendered. A conclusion that the Court might be misled in a way which justified rejection of a claim of privilege merely because a party’s pleading was inconsistent with an admission made in the negotiations conducted on a without prejudice basis would be inconsistent with the purpose of the privilege and result in its intended benefit being greatly diminished or lost.

The grounds of appeal are adverted to in [3] of these reasons. I will discuss ground (d) first. The plaintiff’s argument that without prejudice privilege does not attach to the October/November negotiations relies in part upon the proposition that evidence of conduct occurring after a contract is allegedly concluded is admissible upon the question whether the contract was concluded.² That proposition concerns the question whether evidence is admissible in proof or disproof of an alleged contract, rather than the question whether without prejudice privilege attaches to negotiations for a compromise of a dispute where there is an issue whether the parties had compromised their dispute by much earlier and separate negotiations.

I do not accept the plaintiff’s argument that the October/November negotiations formed part of the bargaining for the January compromise. The plaintiff’s case, both as pleaded and as litigated in the evidence for the plaintiff, is that in or about January 2014 the first defendant acquiesced in the plaintiff’s request for repayment and there were no negotiations before October of the same year. The defendants’ case is that the only negotiations for the January compromise occurred in the conversation by which that compromise was made. The defendants’ case, like the plaintiff’s case, does not refer to any relevant communications during the long period after the disputed January compromise until the café meeting in October. Contrary to the plaintiff’s argument, his pleaded denial that his claim was compromised in January 2014 “because” of the alleged negotiations for a settlement in October 2014 does not justify treating the October/November negotiations as though they were a continuation of the discussions in January.

It is established by many decisions that without prejudice privilege does not preclude the parties from adducing evidence of their negotiations to prove that a settlement was or was not concluded by those negotiations, where that is in issue: see, for example, Knapp v Metropolitan Permanent Building Association,³ Tomlin v Standard Telephones and Cables Ltd,⁴ Harrington v Lowe,⁵ Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd,⁶ and Western Australia v Southern Equities Corporation Pty Ltd (in liq).⁷ Applying those decisions, without prejudice privilege does not attach to evidence of the discussions in January. No party contends that the privilege does apply in relation to that evidence.

The question is whether without prejudice privilege attaches to evidence of the separate October/November negotiations to resolve the parties’ dispute. The cases upon which the plaintiff relies do not support his argument that the privilege does not attach in these circumstances.

In Knapp v Metropolitan Permanent Building Association the defendant pleaded an accord and satisfaction as a defence. “Without prejudice” correspondence had been exchanged by the parties’ attorneys with a view to settlement. In one such letter the plaintiff offered to settle on payment of a specified sum. The defendants’ attorney accepted the offer by a letter which enclosed a cheque for that sum. The plaintiff’s attorney paid the cheque into the plaintiff’s bank. The same attorney returned the amount of the cheque a week later, informing the defendants that no settlement could be made unless the defendants withdrew certain reflections upon the plaintiff’s character. The defendants would not do that and sent back the money. The trial judge refused to allow the defendants to put in evidence of the plaintiff’s letter and cheque in support of the defendants’ plea of accord and satisfaction and gave a verdict for the plaintiff. On appeal Darley CJ (Windeyer and Innes JJ concurring) held that when the cheque was sent by the defendants the case was settled “and the letters which had passed between the parties thereupon lost their privilege, and were, therefore, admissible in evidence”.⁸ It is apparent that the issue about without prejudice privilege concerned only the conduct alleged to constitute the accord and satisfaction.

The plaintiff also relies upon an observation by Danckwerts LJ in Tomlin v Standard Telephones and Cables Ltd⁹ that letters exchanged between solicitors were not privileged “because the point was whether there had been a concluded agreement of any kind between the parties in accordance with that correspondence and it would be impossible to decide whether there was a concluded agreement or not unless one looked at the correspondence”. That observation does not refer to a negotiation to settle a dispute conducted after earlier correspondence by which a settlement was alleged to have been concluded. The plaintiff argues, however, that the claim in Tomlin was that a compromise of liability was made in December 1966, yet subsequent correspondence was admitted upon the ground that it was consistent with the alleged compromise. That is incorrect. The plaintiff in Tomlin did not allege that the compromise was made in December 1966 or at any time before the conclusion of the correspondence, and the defendant contended that all of the correspondence was “without prejudice” and therefore inadmissible.¹⁰ Nor did Danckwerts LJ find that the partial compromise was concluded in December 1966. His reasons are consistent with an offer by the insurer to settle liability made at that time having implicitly been accepted by the plaintiff’s failure to reject that offer in all of the subsequent correspondence. That the whole chain of correspondence constituted the negotiations for the settlement of liability was also the basis upon which the other member of the majority decided the appeal; Sir Gordon Willmer observed that the repeated recitals of the existence of an agreement upon liability “can be, and should be, construed as an acceptance of the plaintiff’s counter-offer”.¹¹

In Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd, the appellant pleaded that a compromise was made by a letter of 27 April 1999 and the discontinuance of an action, whereas the respondents pleaded that a compromise was expressed or implied in a series of correspondence between solicitors.¹² McLure J (Murray and Parker JJ agreeing) observed that “without prejudice negotiations leading to an agreement can be considered where there is a dispute as to whether or not an agreement to settle was made”¹³ and held that whether or not there was a compromise, and the content of its terms, could be resolved only by reference to a chain of correspondence, rather than by reference only to a single letter dated 27 April 1999 forming part of the correspondence.

It is not necessary to multiply references to decisions upon this point. The cases upon which the plaintiff relies involve merely applications of the uncontroversial proposition in [13] of these reasons.

There being no dispute that the October/November negotiations were conducted in an attempt to resolve the parties’ dispute, to allow the plaintiff to adduce evidence of those negotiations in these circumstances would be inconsistent with the central purpose of without prejudice privilege of encouraging compromises “by sparing the parties the embarrassment which might be caused to them if the negotiations fail and later their communications are liable to be put in evidence”.¹⁴ In Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd Byrne J elaborated upon that rationale in terms which seem particularly apt in relation to appeal ground (d):¹⁵

Any such conclusion necessarily would be consequential upon the trial judge first drawing an inference in the defendants’ favour about whether a document to the alleged effect was drawn up. It seems very unlikely that the trial judge would draw that inference in the absence of some additional factor, such as a proposition expressed or implied in cross-examination that no such document was drawn up or a submission for the defendants that such an inference should be drawn. (If an event of that kind occurred, or if in any way the circumstances at trial materially differ from the circumstances in which the primary judge made the interlocutory orders under appeal, the orders could be revisited in the Trial Division).²³

Furthermore, any risk that the trial judge would reason in the way feared by the plaintiff is obviated by my conclusion that for a different reason the trial judge should be informed of the fact that without prejudice negotiations commenced shortly after the café meeting. The defendants plead that it would be inequitable and unjust to grant the plaintiff the relief he seeks because of the plaintiff’s “laches, acquiescence and delay”. That plea is based upon allegations concerning what is submitted to be “inexcusable and inordinate” delay by the plaintiff in commencing the proceedings, allegedly causing prejudice to the defendants, in circumstances in which the plaintiff did not commence the proceedings until 29 July 2015 although the alleged breaches by the defendants occurred between July 2009 and October 2010.²⁴ Understandably, the plaintiff wishes to adduce evidence that for part of the period of the alleged delay the plaintiff negotiated with the defendants with a view to resolving their disputes. In the written submissions for the defendants before the primary judge, the defendants conceded the point, submitting²⁵ that “the plaintiff may adduce evidence of the fact of the correspondence and not its contents”, and that (as I would hold) this submission was supported by Hoefler v Tomlinson.²⁶ There was a brief and inconclusive discussion of the point during oral submissions before the primary judge.²⁷ The defendants did not seek to resile from their concession in their outline of submissions. In view of that concession it is unsurprising that the primary judge did not advert to this topic in his reasons.

The conduct of the defendants in pleading that the plaintiff inexcusably delayed in litigating is inconsistent with the maintenance of confidentiality in the fact and period of the without prejudice negotiations. Maintenance of without prejudice privilege for those matters would be apt to mislead the trial judge into concluding that the plaintiff has no explanation for a material part of the period of delay in commencing the proceedings.

The defendants’ outline of submissions in the appeal upon this point merely referred to paragraphs of their written outline of submissions before the primary judge. In oral submissions, however, the defendants argued that the contention about laches is not within the grounds of appeal. That should not be accepted. Although the only order sought by the appellant would permit him to adduce evidence of the content of the negotiations, appeal ground (c) comprehends the contention about the laches defence, the plaintiff agitated the contention in his first outline of submissions in the appeal, and the defendants did not argue in their outline in response that it was outside the grounds of appeal.

Otherwise the defendants submitted that no relevant issue about laches arose because the plaintiff had not pleaded in his reply a reference to the fact of the without prejudice negotiations. That point was not taken before the primary judge. The plaintiff submits that the orders of the primary judge now preclude him from adverting even to the fact that negotiations were conducted. That is not an unreasonable view of para 6 of the primary judge’s orders, which precludes the plaintiff from adducing “any evidence whatsoever” of identified communications which comprise most of the October/November negotiations.

With leave of the Court, the parties made submissions about the appropriate form of order if the plaintiff succeeded only upon his contention about the laches defence. The plaintiff argues that the primary judge’s orders should be amended to permit the plaintiff to adduce evidence not only about the fact and period of the October/November negotiations but also about the venue and participants in part of the negotiation, the nature of the communications, and the content only of some communications which, the plaintiff submits, do not constitute admissions but show attempts by the plaintiff to expedite negotiations. It is submitted that this additional evidence is necessary to give the Court “a fair picture of the rights and wrongs of the delay”.²⁸

The defendants submit that if the plaintiff’s argument about the plea of laches is upheld it would be appropriate to vary the orders made by the primary judge only by permitting the addition to the list of agreed facts to be tendered at the trial of the fact that the plaintiff and the first defendant conducted without prejudice negotiations from 14 October 2014²⁹ to 13 November 2014, but no agreement was reached.

An exception to permit the plaintiff to adduce evidence upon that subject matter is justified to avoid the Court being misled in relation to the laches defence by the maintenance of the without prejudice privilege. In the absence of any suggestion that the plaintiff did not conduct the October/November negotiations efficiently with a view to resolving the disputes the plaintiff has not identified a sufficient basis for eroding the privilege to any greater degree.

The primary judge ordered that the plaintiff pay the defendants’ costs of the application. The plaintiff submits that the costs of the application before the primary judge and of the appeal should be costs in the proceeding. The defendants submit that they should have their costs of the appeal and the orders made by the primary judge should not be disturbed further.

The focus of the plaintiff’s argument both before the primary judge and on appeal was his contention that without prejudice privilege did not apply in the present case to preclude the plaintiff from adducing evidence of the content of the negotiations. I would hold that the plaintiff failed upon that central point. In my view the defendants should prima facie have their costs of appeal on the ground that they should succeed upon all of the grounds of appeal except in the one relatively minor respect I have identified. As I have mentioned, the defendants conceded before the primary judge that the plaintiff might adduce evidence of the fact of the October/November negotiations. Although order 6 reflected the same order sought in the defendants’ application, in light of the concession before the primary judge it does not appear that the intention of the application or of the order was to preclude the plaintiff from pleading in reply or adducing evidence merely of the fact and period of the negotiations. In these circumstances the plaintiff’s limited success does not justify depriving the defendants of their costs before the primary judge or of the appeal.

Harrington v Lowe (1996) 190 CLR 311 at 323 (Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ), citing Field v Commissioner for Railways (NSW) (1957) 99 CLR 285 at 291 and Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 at 1300. ↩

[2001] 1 Qd R 276 at [28] – [29]. I have omitted internal citations. ↩

Mann v Carnell (1999) 201 CLR 1 at 13. ↩

(2009) 262 ALR 738 at [107]. ↩

DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499 at [115] (Allsop J), followed in Yokogawa at [58]. ↩

Outline of argument of the appellant, para 42. ↩

J A McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121 at 134, lines 45 – 51 (Ryan J) (Macrossan CJ dissented on this point and Kelly SPJ decided the appeal upon different grounds, so Ryan J’s reasons are not authoritative); McFadden v Snow (1951) 69 WN (NSW) 8 at 9 (“… and that he has received no reply thereto”), 10 (“… the statement in the affidavit … that the claimant had received no reply to his letter”) (Kinsella J); Pitts v Adney [1961] NSWR 535 at 539, lines 20 – 25. See also Galafassi v Kelly (2014) 87 NSWLR 119 at [142] (Gleeson JA, Bathurst CJ (in this respect) and Ward JA agreeing) but that was a decision under a statutory provision rather than the common law. ↩

It is not submitted that any particular question in cross-examination is of itself necessarily inconsistent with any identified statement or conduct in the October/November negotiations. ↩

As to the defendants’ argument about the effect of any proposed compromise, see [9] of these reasons. ↩

See, by way of example, Yokogawa Australia Pty Ltd & Others v Alstom Power Ltd (2009) 262 ALR 738 at [109]. ↩

Fourth further amended defence, paras 46 and 47. ↩

Submissions on behalf of the applicants/defendants, paras 38 – 41 and 48. ↩

(1995) 60 FCR 452 at 453 – 455. ↩

Transcript 20 November 2019 at pp 1-40 to 1-43. ↩

Unilever Plc v The Procter & Gamble Co [2000] 1 WLR 2436 at 2444 – 2445. ↩

An affidavit sworn on 19 December 2016 by a solicitor acting for the defendants, Mr Steele, appears to identify 15 October 2014 as the commencement date of the October/November negotiations. I have been unable to find evidence in the appeal record that 14 October was the commencement date or that the parties have agreed upon a commencement date. ↩