Do the documents contain "an attempt to negotiate a settlement of the dispute"?
39Each of the Group A discovered documents over which the "without prejudice" privilege is claimed is a document that comprises or refers to settlement negotiations between the plaintiff and ASIC. Nearly all of them are marked "Without Prejudice". However I accept the proposition that just because a communication is headed "without prejudice" that is not conclusive of whether or not that communication is privileged: see GPI Leisure Corp Ltd v Yuill (1997) 42 NSWLR 225.
40The Group B documents are in a different category. They do not comprise or refer to settlement negotiations. They are documents that were copied and brought into existence into the form in which they are exhibited to Giles 1 for the purpose of settlement negotiations: see Confidential Exhibit RRG 5 at Giles 2. Some of these documents have been produced on subpoena by ASIC and are already in the possession of the defendant. They were attachments to Group A documents in the main and/or provided as part of the negotiation process (T9-10).
41The defendant submitted that the parties were not "in dispute", nor were the communications or documents made or prepared in connection with an attempt to negotiate a settlement of any dispute. The defendant further submitted that in order for the communication document to be protected by s 131(1), the "dispute" must be "a dispute of a kind in respect of which relief may be given in an Australian or overseas proceeding" (ss (5)(a)), but does not include a criminal proceeding or an anticipated criminal proceedings (ss (5)(b)). In my view there is a dispute between ASIC and Mr Liu. The dispute is the propriety of his conduct in relation to the entities referred to earlier in this judgment.
42Next the defendant submitted that a communication that asserted breaches by the plaintiff of the Corporations Act (Cth), by reference to detailed evidence and inviting the plaintiff to make admissions, to consider pleading guilty to the commission of offences, or to consider entering into enforceable undertakings and assisting the Commonwealth to identify other offences or to track down lost funds, would not fall within s 131(1). The defendant says that the plaintiff seeks to shoehorn these communications into the protection of s 131 by suggesting that some or all of the offences which ASIC asserts the plaintiff has committed could be the subject of civil penalties. As far as the defendant can discern from the submissions, the possibility of ASIC taking civil penalty proceedings against the plaintiff is an inference that the Court is invited to draw.
43The defendant correctly identified that the documents in Group A contain settlement negotiations between persons acting on behalf of ASIC and the plaintiff's legal practitioners. However, the defendant submitted that ASIC has said that their investigation involves possible criminal offences. While that is so, the settlement negotiations have canvassed alternative types of action, namely criminal charges and enforceable undertakings. Therefore the documents where the "without prejudice" privilege is claimed cover a number of remedies.
44Enforceable undertakings are covered by ASIC's Regulatory Guide 100, Enforceable undertakings, issued in February 2012. Regulation 100.4 defines enforceable undertakings as:
"one of a number of remedies available to ASIC for breaches of the legislation ASIC is responsible for enforcing. It is an administrative settlement we may accept as an alternative to civil court action or certain other administrative actions."
45Regulation 100.21 relevantly reads:
"We will not accept an enforceable undertaking:
(a) instead of commencing criminal proceedings against a party..."
46Regulation 100.21 is referred to by a representative of ASIC in the Group A documents. It is apparent that the discussion of an enforceable undertaking does not necessarily remove a threat of criminal proceedings against Mr Liu.
47In determining whether the documents fall within the protection of s 131(1) I must consider the public policy behind the privilege. In the second reading speech for the Evidence Bill (Legislative Council, Hansard, 24 May 1994 at 116), the then Attorney-General, the Honourable Jeffrey Shaw, said that:
"In the public interest, evidence of reasons for judicial decisions - matters of State and settlement negotiations - is not to be adduced." (emphasis added).
48In Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 Gleeson CJ discussed the without prejudice privilege at 522:
"The policy of the law which underlies the 'without prejudice' privilege was Stated by Oliver LJ in Cutts v Head [1984] Ch 290 at 306, as follows:
'That the rule rests, at least in part, upon public policy is clear from many authorities, and the convenient starting point of the inquiry is the nature of the underlying policy. It is that parties should be encouraged so far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much the failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings. They should ... be encouraged fully and frankly to put their cards on the table ... The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability.'"
49Section 131 is designed to encourage full and frank settlement discussions between parties and it has long been accepted that resolution of disputes by compromise is in the public interest. It would conflict with this policy to confine confidentiality protections within narrow bounds: Jireh International Pty Ltd (t/as Gloria Jean's Coffees) v Western Export Services Inc (No 2) [2011] NSWCA 294 at [44].
50Despite this Court's determination not to unduly confine the protection of s 131 to give effect to the underlying policy of encouraging settlements, s 131(5)(b) is worded in no uncertain terms. The subsection expressly excludes attempts to negotiate the settlement of a criminal proceeding or an anticipated criminal proceeding from the operation of s 131(1) (b).
51The Dictionary to the Evidence Act defines "criminal proceeding" as "a prosecution for an offence" that includes (a) "a proceeding for the committal of a person for trial or sentence for an offence". "Anticipated" is not defined in the Dictionary. However in Roberts v Burns Philp Trustee Co Ltd (1985) 5 NSWLR 72 it was held that the proper test to determine whether proceedings are "pending or anticipated" (in that case, within the meaning of the Evidence Act 1898, now repealed) is "the reasonable probability or likelihood" of the proceedings.
52Having reviewed the documents upon which the plaintiff claims privilege, I am of the view that the documents are properly characterised as an attempt to negotiate the settlement of an anticipated criminal proceeding and are therefore not "privileged documents" by reason of s 131(1). Section 131(1) is inapplicable by reason of subsection 5(b).
53In case I am wrong on this aspect, I will consider the question whether ss 131(2)(i) precludes the plaintiff from claiming privilege over the documents.