Fairfax's first contention: Is sub-section 131(1) limited to only excluding admissions?
42Senior Counsel for Fairfax, Mr Blackburn SC, submitted that her Honour's orders could be upheld, in part or in whole, on the basis that on its proper construction s 131(1) only operates to preclude the adducing of evidence (and consequential production of material) concerning admissions made during the course of settlement discussions and not other statements especially any assertions made by ASIC about Mr Liu's conduct. The forensic significance of this submission was that Fairfax seeks to obtain any material included within the communications which contain assertions by ASIC as to breaches of the law by Mr Liu. Fairfax seeks that material as evidence that ASIC held the opinion referred to in the imputations pleaded by Mr Liu and the contextual imputations pleaded by Fairfax.
43Mr Blackburn SC's submissions in support of his contention that s 131(1) is only limited to excluding admissions made by a party to the settlement discussions had two steps. First, he contends that was the position at common law. Second, he contends that nothing in the Evidence Act reveals any intention to depart from that position.
44Mr Blackburn SC pointed to the following passage from the High Court's decision in Field v Commissioner for Railways (NSW) [1957] HCA 92; 99 CLR 285 at 291-292, which described the operation and rationale of the privilege as follows:
"As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct. For example, neither party can use the readiness of the other to negotiate as an implied admission. It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission." (emphasis added)
45In Field, an injured plaintiff was examined by medical specialists following the instigation of negotiations for settlement between his solicitors and the Commissioner for Railways. The High Court found that statements made by the plaintiff to the doctor as to how the accident occurred which gave rise to his injuries were "not reasonably incidental to the negotiations" and hence the plaintiff could be cross examined on what he had stated (at 293).
46The outcome in Field is not an example of the principle Mr Blackburn SC asserts. The statements made by the injured plaintiff to the doctor were "admissions" but they were found not to be within the scope of the settlement negotiations. The Court stated the test for determining that scope "depends upon what formed part of the negotiations for the settlement of the action and what was reasonably incidental thereto" (at 292).
47Mr Blackburn SC also referred me to the judgment of Hill J in Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd (1990) 27 FCR 86. In Quad it was alleged that during "without prejudice" discussions between the respondent and representatives of MLC the respondent had made misleading and deceptive representations to MLC concerning the applicant. The applicant issued a subpoena to MLC seeking copies of its notes of the meeting. Hill J referred to the passage from Field cited above and stated that "[n]othing in that passage suggests that the privilege extends to every word uttered during the course of settlement negotiations" (at 90) and later (at 91.5) "... that the rule applies to the use of statements or offers by way of admission and not by way of assertion." His Honour concluded that the common law rule did not render inadmissible the proof of misleading conduct in settlement negotiations as that would not involve the adducing of evidence of the relevant statement as an "admission" (at 93). This is reflected in the form of production that his Honour ordered namely "... only so much of those notes as concern what was said on behalf of the respondent as to matters touching upon the representations alleged to have been made and not as to matters going to admissions against interest" (at 93).
48Counsel for Liu, Mr Richardson, disputed that the common law privilege was confined in the manner suggested by Mr Blackburn SC. He referred to a decision of the Full Court of the Supreme Court of South Australia in Yokogawa Australia Pty Ltd v Alstom Power Ltd [2009] SASC 377; 262 ALR 738, especially at [97]-[100] per Duggan J, with whom Sulan and Kourakis JJ agreed. South Australia has not enacted the uniform Evidence Act.
49In Yokogawa at [97] to [99], Duggan J referred to competing statements in English decisions as to whether the scope of "with prejudice" privilege was restricted to admissions made in the course of settlement negotiations (Muller v Linsley [1996] PNLR 74 at 79 per Hoffman LJ; Bradford v Bingley plc v Rashid [2006] 1 WLR 2066; 4 All ER 705; cf Ofulue v Bossert [2009] 2 WLR 749; 3 All ER 93 at [71] per Lord Rodger and at [72] per Lord Neuberger).
50Duggan J concluded at [100]:
"Many of the cases on without prejudice privilege are concerned with admissions, no doubt because this is most often the basis for admission of the communications into evidence. However, the difficulties of confining the principle to such cases, particularly in relation to the production of documents, is plainly to be seen. The restrictive view of the privilege expressed in Muller's case has not been followed in Australia and, for the reasons referred to in the above extracts from the case of Ofulue, I do not think it would be appropriate to confine it in this way."(emphasis added)
51There is considerable room for argument as to whether his Honour was correct in stating that the restrictive view of the scope of the "without prejudice" privilege at common law expressed by Lord Hoffman in Muller's case has not been followed in Australia. The passage from Field extracted above would suggest that the scope of the privilege should not rise above its rationale albeit it covers communications and documents that are "reasonably incidental to the negotiations". Certainly Hill J's analysis in Quad restricted the principle to admissions. The tension between Yokogawa and Quad is highlighted by the passage extracted above at [50] in which Duggan J emphasised the practical difficulty in ordering production of documents if the privilege is restricted to admissions and related statements. The order for production made by Hill J in Quad reflected the very distinction that Duggan J considered difficult to maintain (see [47]).
52I was also referred to a number of decisions post-dating the enactment of the Evidence Act and its equivalents.
53Mr Blackburn SC referred me to the judgment of Beaumont J in Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Ltd [2004] FCA 948. In Airtourer his Honour heard a security for costs application in which the poor financial position of the respondent to the applicant was sought to be established by a statement made during settlement discussions. The parties had engaged in an attempt to discuss a commercial resolution of the proceedings. At one point in the discussions, the respondent pointed to the effect of an order for costs upon the applicant if it lost the proceedings. In response its principal stated that he was not concerned as the applicant had no funds. Beaumont J analysed this discussion as involving two discrete statements, namely (1) there was an attempt by the respondents to compromise the principal proceedings at a figure arrived at as a commercial settlement and (2) a statement by the applicant that because it was insolvent it would not consider such a compromise (Airtourer at [30]).
54His Honour found that, under common law, the first statement would be privileged in the principal proceedings, but the second would not especially so in an application for security for costs that his Honour was considering (Airtourer at [31]). Beaumont J relied on the discussion in Field, to which I have referred (at [44]). After discussing Field his Honour concluded:
"[35] In my opinion, applying common law principles, the statements made by Mr Knox as to the solvency of the applicant were not admissions; rather they were objective facts which were ascertained during the course of the negotiations.
[36] The present question is, of course, now governed by s 131(1)(a) of the Act. However, for the reasons given by Young J and by Austin J, there appears to be no basis for assuming, in enacting the Act, a departure from the common law principles considered in Field. I propose to receive the evidence."
55Thus in Airtourer at [35] Beaumont J analysed the scope of the privilege by reference to whether the various statements made were admissions. With respect the statement made by the principal of the applicant clearly was an admission and was sought to be relied on as such. In any event Beaumont J referred to s 131(1)(a) and stated that there was "no basis for assuming" a departure from common law principles. I return to consider whether there is such a basis below.
56Beaumont J's reference in the above passage from Airtourer to the decision of Young J was to his Honour's judgment in GPI Leisure Corp Ltd (in liq) v Yuill (1997) 42 NSWLR 225. In GPI Leisure, Young J had construed the necessity for there to be a "connection" in s 131(1) with an attempt to negotiate the settlement of a dispute as requiring a "direct connection". In doing so his Honour referred to the statement in Field that the scope of the privilege "depends upon what formed part of the negotiations for a settlement of the action and what was reasonably incidental thereto" (at p 226). However, Young J did not state that s 131(1)(a) was restricted to only excluding admissions.
57Beaumont J's reference to Austin J was to his Honour's judgment in Collins Thomson Pty Ltd (in liq) v Clayton [2002] NSWSC 366. Austin J concluded that a letter which responded to some attempts to negotiate a settlement by rejecting the proposition out of hand and then advancing various assertions as to the likely outcome of the proceedings, did not have a "direct" connection with an "attempt to settle a dispute" sufficient to fall within s 131(1) (at [12]).
58To an extent, Beaumont J's decision in Airtourer assists Mr Blackburn SC's submission in that the passage in Airtourer at [35] directs attention to whether the communications in question contain admissions. However it has its limits. Beaumont J was not referred to the legislative history of the provision. The outcome in Airtourer appears to only be supportable on the basis that the statement made by the principal of the applicant in those proceedings about the applicant's insolvency was not a statement that had a sufficient connection to an attempt to negotiate a settlement of a dispute to fall within s 131(1).
59GPI Leisure and Collins Thomson are examples of cases in which s 131(1) was interpreted in a manner that is informed by that part of Field which kept the scope of the negotiations within relatively narrow confines. They are not support for a proposition that s 131(1) is confined only to excluding admissions, and not assertions.
60In written submissions provided after the hearing Mr Blackburn SC referred to various cases that have addressed s 131(1) and considered whether or not it extends the common law position (Biovision 2020 Pty Ltd v CGU Insurance Ltd [2010] VSC 589 at [32] ff; First Capital Partners Pty Ltd v Sylvatech Ltd [2004] NSWSC 846; 186 FLR 266; Alexander v Australian Community Pharmacy Authority (No 2) [2010] FCA 467 at [11] ff per Tracey J; CJ Redman Constructions Pty Ltd v Tarnap Pty Ltd [2006] NSWSC 173 at [6] ff per Campbell J; Silver Fox Co Pty Ltd v Lenard's Pty Ltd (No 3) [2004] FCA 1570; 214 ALR 621; Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 3) [2009] FCA 1075; 259 ALR 541).
61A number of these cases accept the continuing relevance of Field (eg Alexander at [11]; Silver Fox at [33]), but only in the sense accepted in GPI Leisure and Collins Thomson of narrowly interpreting the scope of communications "made in connection with an attempt to settle the dispute".
62With one exception none of the cases contain any suggestion that s 131(1) is limited to only protecting admissions. The exception is the judgment of Campbell J in CJ Redman. Over objection his Honour allowed the tender of a letter marked without prejudice. It is necessary to set out his Honour's reasoning in full (at [5] to [8]):
"[5] It will be apparent that the letter alludes to there being settlement discussions on foot, but gives no detail of those settlement discussions, and, most importantly, does not involve the writer of the letter either making an admission on behalf of his client concerning the matter of the settlement discussion, or attributing any admission to the recipient of the letter. While the letter alludes to it having been the addressee of the letter who had 'indicated the possibility of a global resolution to all outstanding matters', I do not see that as involving any admission - it is possible for a person to want to resolve a dispute which he or she regards as totally unmeritorious.
[6] The letter is one which one would not be within the rationale of the common law concerning legal professional privilege. That rationale is that people should be free to explore settlement of disputes, and make admissions in the course of those discussions, safe in the knowledge that any admissions which they make will not be tendered against them later in Court, if the negotiations break down. The wording of s 131(1) is capable, on one reading of the expression 'in connection with', of extending wider than did the common law. There is, in one sense of it, a connection between this letter and the settlement negotiations, because the letter talks about the settlement negotiations.
[7] ... In the particular context of s 131, it seems to me that the expression 'in connection with' does not extend to any connection of any kind whatever. Rather, the expression needs to be construed by reference to the purpose of the without prejudice privilege. I see no basis for concluding that the rationale of the without prejudice privilege under s 131 of the Evidence Act is any different to the common law. There are some exceptions to the privilege, in s 131(2), which go wider than the exceptions to the privilege at common law, but I see no basis for concluding that the fundamental prohibition contained in s 131(1) has any different rationale to the common law on the topics.
[8] Reading s 131(1) in that way, there is not here the relevant type of connection between the letter and any attempt to negotiate a settlement of the dispute. For that reason I overrule the objection." (emphasis added)
63Thus Campbell J did not consider that the rationale underlying s 131(1) was any different to the common law. Further his Honour appears to have treated the absence of any admission being made or attributed as determinative of whether the relevant form of connection between the communication and an attempt to settle the dispute had been established.
64The end result is that there are two post Evidence Act first instance decisions, CJ Redman and Airtourer, which provide substantial support for Mr Blackburn SC's proposition that s 131(1) is directed to excluding admissions and related communications. A number of other decisions support a different proposition, namely that that part of Field which confines the common law rule of exclusion strictly to communications which form part of the negotiations or which are necessarily incidental thereto still informs the interpretation of s 131(1).
65Finally in reviewing the case I should note that consistent with his professional duties Mr Blackburn SC (and Mr Richardson) referred me to a passage from the judgment of the Full Court of the Federal Court in Brown v Federal Commission of Taxation [2002] FCA 318; 119 FCR 269 at [99] to the effect that s 131(1)(a) appears to extend the scope of the common law privilege. However the question is whether that appearance reflects reality and, if so, how far is it extended? To that I will now turn.
66Nothing in the text of s 131 supports the proposition submitted by Mr Blackburn SC. Instead, the structure of the provision is to define the scope of the privilege in s 131(1) and (5), and then to build in exceptions in s 131(2). On its face, s 131(1) confers the protection on the entirety of the communications made between the persons in dispute, provided that it answers the description as being made "in connection with an attempt to negotiate a settlement" of that dispute. While this may import an aspect of Field as discussed in GPI Leisure, it does not suggest any restriction of the exclusion to admissions.
67The structure of the section is best illustrated by considering the outcome found by Hill J in Quad. A misleading statement of, say, fact in settlement discussions that induced a party to enter into an agreement would appear to be made "in connection with an attempt to negotiate" a settlement to the dispute. However, being per se actionable the misleading statement would affect a right (s 131(2)(i)). As I will explain, s 131(2)(i) was specifically included to pick up the very type of case considered in Quad. It is also further addressed below at [118] to [128]. Why then should s 131(1) be narrowly interpreted to accommodate a case such as this if it is addressed by an exception in s 131(2)?
68The reports of the Australian Law Reform Commission ("ALRC") upon which the evidence acts are based are strongly against Mr Blackburn SC's contention. Sub-section 3(3) of the Evidence Act provides:
"Without limiting the effect of, and subject to, section 34 of the Interpretation Act 1987, material that may be used in the interpretation of a provision of this Act includes any relevant report of a Law Reform Commission laid before either House of the Parliament of the Commonwealth before the provision was enacted."
69The ALRC published two relevant reports on evidence, an interim report in 1985 (ALRC 26) and a final report in 1987 (ALRC 38). Both of the reports were tabled in the Commonwealth Parliament, the former on 21 August 1985 and the latter on 5 June 1987. On numerous occasions the High Court has considered these reports in construing the various Evidence Acts (see for example Aytugrul v R [2012] HCA 15; 86 ALJR 474 at [47] and [73] per Heydon J; Evans v R [2007] HCA 59; 235 CLR 521 at [64] per Kirby J, and especially at [188] ff per Heydon J; Em v R [2007] HCA 46; 232 CLR 67 at [51] per Gleeson CJ and Heydon J, at [108] per Gummow and Hayne JJ, and at [183] per Kirby J; Cornwell v R [2007] HCA 12; 231 CLR 260 at [31], [58]-[59] and [134] per Gleeson CJ, Gummow, Heydon and Crennan JJ).
70Chapter 19 of ALRC 26 sets out the ALRC's views on the difficulties with the existing forms of privileges which relevantly included what it described as "without prejudice negotiations". In ALRC at [447] the Commission noted that there had been judicial comment on the various misunderstandings concerning "without prejudice" privilege. It stated at [449]:
"The Protection is too Narrow. Two points may be raised:
- The 'Reasonably Incidental' Requirement. It was argued successfully in Field's case that the plaintiff's statement to the defendant's doctor as to how he was injured was not reasonably incidental to his examination for the purpose of settlement negotiation. This means that care must be taken over what is said or written. It will be dangerous to make any admissions or concessions as is often done for the purpose of showing 'good faith and for smoothing the path to settlement' [citation omitted]. Free and frank discussion becomes dangerous. Parties should carefully consider everything they wish to say. Nice arguments are open to any party that wishes to use what was said in the discussion.
- Limits to Dispute and Parties. The authorities that the protection applies only in the same action or dispute between the same parties may be criticised as too limiting if the rationale of the law is to encourage settlement [citation omitted]." (emphasis in original)
71This passage suggests that, rightly or wrongly, the ALRC perceived Field to be problematic. It was said to leave open "[n]ice arguments" as to what was covered and what was not.
72Chapter 38 of ALRC 26 set out the ALRC proposals in respect of privilege which were encompassed in a draft Bill accompanying the report. In Chapter 38 at [890] the ALRC discussed the various rationales for the privilege. It concluded that:
"The public interest in the settlement of disputes is the most satisfactory rationale and is used as the basis for the proposals".
73The ALRC continued at [891]:
"General Proposals. 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 - e,g, not admissible. The rationale requires non-disclosure by the parties to the negotiations unless all of them consent. The embargo would 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." (emphasis added)
74What are the "deficiencies in the law" that the ALRC's proposal were advanced to addressing? They were set out in ALRC 26 at [447] extracted above; ie the perceived narrowness of the privilege and uncertainty of its operation of which the facts in Field were said to be an example. Moreover, in stating that the rationale of the ALRC's proposal was the "public interest in the settlement of disputes", the ALRC was arguably pitching the matter wider than the common law as stated in Field at p 291 which referred to the policy of the law as excluding "admissions by words or conduct made by parties in the course of negotiations to settle litigation".
75The proposal being referred to in the above extracts from ALRC 26 was set out in s 111 of the draft Bill that accompanied the report. Subsection 111(1) provided:
"Evidence may not be given of
(a) the content of the communication made
(i) between persons in dispute; or
(ii) between one or more persons in dispute and a third party, being a communication made in connection with an attempt to settle the dispute; or
(b) the contents of a document that has been prepared in connection with an attempt to settle the dispute, whether or not the document has been delivered."
76Consistent with the structure of the current section, subsection 111(2) of the draft Bill set out various exceptions which included a proposed sub-section 111(2)(g) which provided that sub-section 111(1) does not apply where "the making of the communication or document affects a right of, or gives rise to right of action by, a person". This exception deals with the circumstances described in Quad that I have referred to above. It picked up in the last part of the quote from ALRC 26 at [891] extracted in [73] (i.e. "not apply to communications which are of a ... tortious nature ...").
77I refer below to aspects of ALRC 38 and the revised draft Bill that accompanied that report for the purpose of considering other issues raised by this appeal. Suffice to state that nothing in ALRC 38 or that draft Bill affects this issue.
78In my view, the history and origins of s 131 as revealed by ALRC 26 confirm what is suggested by the text and structure of s 131, namely that it was enacted in an attempt to remove what was perceived to be uncertainty as to the scope of the "without prejudice" privilege. It was intended to embrace all communications which answered the description of being in connection with an attempt to negotiate the settlement of the dispute subject to certain specified exceptions.
79Neither the words of the section nor its legislative origins support the proposition that s 131(1) only operates to exclude admissions made by a party to such communication whether by words or conduct, express or implied. To the extent that Airtourer and CJ Redman decided to the contrary then I respectfully disagree. It is not necessary nor appropriate for me to state whether I consider that the other decisions that I have referred to above which construe s 131(1) in a manner informed by Field so as to required a direct or close connection between the communication and the attempt to settle the dispute are correct or not. Such an approach may still will be correct even in light of the ALRC's misgivings about Field.
80I reject Fairfax's first contention.