Plaintiff v Defendants

2 The prior proceeding was commenced on 21 December 2001.[1] In the prior proceeding, the plaintiffs included Mrs Maher and the plaintiff in the current proceeding and the defendants included Millennium Markets Pty Ltd ('Millennium') and Isaac Brott. The defendants in the current proceeding were the solicitors on the record for the plaintiffs in the prior proceeding and were partners of the firm Riordan & Partners ('Riordans') at that time.

3 One of the issues between the plaintiff and Millennium in the prior proceeding was whether a condition ('Condition') under an agreement dated 16 March 1999 ('Agreement') had been satisfied. Satisfaction of the Condition would have had the effect of cancelling the sale of an apartment known as unit 20, 50 Bourke Street Melbourne ('Apartment') by the plaintiff to Millennium. The cancellation of the sale would have entitled the plaintiff to a re-transfer of the Apartment for nil consideration.

4 The key issue between the plaintiff and Mr Brott in the prior proceeding was whether Mr Brott had breached various duties that he owed to the plaintiff during the period that he had acted as the plaintiff's solicitor in its dealings with Millennium.

5 The plaintiff had terminated Mr Brott's retainer by the time it had engaged Riordans in March 2001. In the current proceeding, it is not in dispute that Riordans were engaged by Mrs Maher, the plaintiff and others to commence the prior proceeding on their behalf. There is a dispute, however, as to whether the retainer included advice on the provisions of the Agreement which are said to have conferred on the plaintiff an option to purchase the Apartment, on or before 9 July 2001, for $210,000 ('Option').

6 In the events that have occurred, the plaintiff did not exercise the Option and was unsuccessful in its claim against Millennium. On 20 May 2004, Osborn J decided that the Condition had not been satisfied and that, therefore, the plaintiff was not entitled to a re-transfer of the Apartment for nil consideration.[2]

7 In the current proceeding, the plaintiff claims that Riordans breached their retainer and/or that they were negligent in failing to advise it adequately or at all about the Option. The plaintiff claims from Riordans the difference between the Option price of $210,000 (and certain outgoings) and the current value of the Apartment, which is said to exceed $800,000, together with the net costs of the prior proceeding and certain other amounts.

8 Riordans deny that they breached their retainer and that they were negligent, and they rely on various defences. Those defences include that the plaintiff's own negligence has caused its loss and that the plaintiff has failed to mitigate its loss. The evidence that is sought to be elicited from Mrs Maher is said to be relevant to these defences.

9 Mr Booth, who appears for Riordans, has informed me that, through his cross-examination of Mrs Maher, he wishes to adduce evidence which includes the following:

• at the Mediation, Millennium offered to sell the Apartment to the plaintiff for $400,000 and Mr Brott offered to contribute $150,000, thus enabling the plaintiff to acquire the Apartment for a net outlay of $250,000;

• at the Mediation, the plaintiff rejected these offers;

• on 13 October 2003, after the Mediation had concluded unsuccessfully, Millennium made an offer to the plaintiff to sell the Apartment for $1 on the basis that Millennium would fund the claim against Mr Brott and retain any amount that was recovered against him; and

10 Mr Bailey, who appears for the plaintiff, objected to the adduction of the proposed evidence on the basis of s 24A of the Supreme Court Act 1986 (Vic) and s 131(1) of the Evidence Act 2008 (Vic). He disavowed any reliance on the client legal privilege provisions of the Evidence Act.

Section 24A of the Supreme Court Act

11 Section 24A of the Supreme Court Act provides:

Where the Court refers to a proceeding or any part of a proceeding to mediation, other than judicial resolution conference, unless all the parties who attend the mediation otherwise agree in writing, no evidence shall be admitted at the hearing of the proceeding of anything said or done by any person at the mediation.

12 Mr Booth informed me that I should assume that the Mediation was a Court-appointed mediation for the purposes of s 24A. He submitted, however, that the prohibition on the admission of evidence in s 24A was confined to the admission of evidence at the hearing of the prior proceeding and does not apply to the hearing of the current proceeding.

13 I agree with Mr Booth. Section 24A does not render the proposed evidence inadmissible.

Section 131 of the Evidence Act

14 Section 131(1) of the Evidence Act prohibits the adduction of evidence of 'a communication that is made between persons in dispute ... in connection with an attempt to negotiate a settlement of the dispute'. The prohibition in s 131(1) is subject to the exceptions in s 131(2). One of those exceptions is as follows:

(2) Subsection (1) does not apply if -

...

(g) evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence; ...

15 Mr Booth has conceded that the fact that s 24A of the Supreme Court Act does not apply to communications that took place at the Mediation does not prevent s 131(1) of the Evidence Act from applying to those communications.[3] Accordingly, it was common ground between the parties that the proposed evidence would be prohibited by s 131(1) unless s 131(2)(g) applies.

16 In Brown v Commissioner of Taxation,[4] Emmett J held that s 131(2)(g) will apply 'where the court would be likely to be misled as to the existence or contents of an excluded communication or document, where those matters are in issue in the proceeding.'[5]

17 In Mulkearns v Chandos Developments Pty Ltd [No 4],[6] Young CJ in Eq held that evidence of a prior without prejudice offer by the defendant was admissible under s 131(2)(g) because, 'unless this additional fact is permitted into evidence, the plaintiffs may mislead the Court into thinking their case is one against a greedy defendant who would not give an inch and this would be a factor to go to the Court's discretion [whether to order the return of the deposit].'[7]

18 In my opinion, the above cases support the application of s 131(2)(g) to the proposed evidence.

19 A key premise in the plaintiff's case - both in its pleadings and in the evidence of Mrs Maher - is that the breach of retainer and negligence on the part of Riordans in not advising the plaintiff about the Option deprived it of the opportunity to acquire, on 9 July 2001, an apartment that was then worth $600,000, for $210,000. An inference that arises from Mrs Maher's evidence is that the opportunity to acquire the Apartment for a substantially discounted price was lost forever after 9 July 2001 and that the loss of that opportunity was due solely to the breach of retainer and negligence on the part of Riordans.

20 At this stage of the proceeding, I am unable to say what conclusions, if any, would be open to me on the basis of the proposed evidence. For example, I do not know whether there were any legal or practical impediments to the acceptance of the alleged offers or whether any purported acceptance would have created a legally binding contract. It is clear, however, that if the proposed evidence has the effect contended by Mr Booth, the inability of Riordans to adduce that evidence to contradict or qualify Mrs Maher's evidence would be likely to mislead the Court on the issues of contributory negligence and mitigation. Exclusion of the proposed evidence would enable the plaintiff to assert a case which was inconsistent with that evidence.

21 It is not necessary for me to deal with Mr Booth's alternative submission based on implied waiver of the without prejudice privilege.

22 Mr Bailey submitted that s 131(1) was underpinned by strong public policy considerations to which the Court should give effect. There is no doubt that it is in the public interest that parties to a legal dispute should not be discouraged from seeking to settle the dispute due to apprehensions that any statements they make in settlement negotiations may be used against them in litigation. However, it is clear that the Parliament has decided that, where an exception in s 131(2) applies, the public interest in the adduction of evidence of settlement negotiations overrides the public interest in keeping such negotiations confidential.

23 I note, in passing, that Mr Booth has informed me that adduction of the proposed evidence in the current proceeding is unlikely to cause any prejudice to Millennium or to any other party to the prior proceeding because all issues in dispute between the parties to that proceeding have been finally resolved.

24 For the above reasons, I disallow Mr Bailey's objection and will permit Mr Booth to cross-examine Mrs Maher about the matters set out at [9] above and about any other matters that give rise to similar considerations.

[1] The prior proceeding was number 8883 of 2001.

[2] Maher v Millennium Markets Pty Ltd [2004] VSC 174 (20 May 2004) [162], [216]-[218].

[3] Forsyth v Sinclair [No 2] [2010] VSCA 195 (5 August 2010) [13]-[15].

[4] [2001] FCA 596; (2001) 187 ALR 714 ('Brown').

[5] Brown [2001] FCA 596; (2001) 187 ALR 714, 754 [185].

[6] [2005] NSWSC 511 (1 June 2005) ('Mulkearns').

[7] Mulkearns [2005] NSWSC 511 (1 June 2005) [67], [68].