Rajski & Anor v Tectran Corporation Pty Limited & Ors

1 On 1 August 2002, I made an order pursuant to s.110K(1) of the Supreme Court Act 1970 (NSW) referring these proceedings to mediation in circumstances which are set out in my judgment of 31 July 2002. The mediator appointed was Mr Jolson QC. By an order made on 10 September 2002, the mediation was extended to 20 December 2002 and Mr G Charlton was substituted as mediator. 2 On 19 December 2002, Windeyer J granted leave to Mr Rajski to file in Court a Notice of Motion seeking the further extension of the mediation. His Honour ordered that the existing mediation order, which was to expire the following day, continue in force until determination of Mr Rajski's Notice of Motion. His Honour also ordered that no further steps were to be taken in the mediation proceedings pending determination of the Notice of Motion. 3 The Notice of Motion has come on for hearing before me today. At the commencement of the evidence Mr Rajski tendered a volume of documents. Mr Girard, who appears for the First to Fourth Defendants, objects to the tender of a large number of documents in that volume, on the ground that their admission is prohibited by the terms of s.110P(4) and (5) of the Supreme Court Act . 4 The tender is pressed by Mr Rajski and is supported by Mr Hill, who appears for the fifth to seventh defendants. Section 110P is in the following terms: " Privilege

(1) In this section, "mediation session" or "neutral evaluation session" includes any steps taken in the course of making arrangements for the session or in the course of the follow-up of a session.

(2) Subject to subsection (3), the same privilege with respect to defamation as exists with respect to judicial proceedings and a document produced in judicial proceedings exists with respect to:

(a) a mediation session or neutral evaluation session, or

(b) a document or other material sent to or produced to a mediator or evaluator, or sent to or produced at the Court or the registry of the Court, for the purpose of enabling a mediation session or neutral evaluation session to be arranged.

(3) The privilege conferred by subsection (2) only extends to a publication made:

(a) at a mediation session or neutral evaluation session, or

(4) Evidence of anything said or of any admission made in a mediation session or neutral evaluation session is not admissible in any proceedings before any court, tribunal or body.

(5) A document prepared for the purposes of, or in the course of, or as a result of, a mediation session or neutral evaluation session, or any copy of such a document, is not admissible in evidence in any proceedings before any court, tribunal or body. (6) Subsections (4) and (5) do not apply with respect to any evidence or document:

(a) if the persons in attendance at, or identified during, the mediation session or neutral evaluation session and, in the case of a document, all persons identified in the document, consent to the admission of the evidence or document, or

(b) in proceedings instituted with respect to any act or omission in connection with which a disclosure has been made under section 110Q (c)." 5 The issue arises for determination in respect of the tender of the first document in the volume to which objection is taken, namely, a letter dated 25 November 2002. It is a letter from Mr Charlton, the present mediator, to the legal representatives of the parties. Mr Girard submits that this document is a document prepared in the course of, and for the purpose of, the mediation and that it is, therefore, not admissible in any court and in any proceedings. 6 There were a number of documents tendered but this is the first of those documents to which objection is taken. I have not yet admitted any documents, despite the fact that the parties have not objected to them. 7 Mr Hill submits that the issues to be determined in the present application are, first, whether the withdrawal from mediation of the First to Fourth Defendants was justified. Second, whether there is utility in continuing the mediation process by extending the mediation for a further period and, third, whether the Court should simply order that the proceedings continue now to trial. 8 Mr Hill submits that in order to determine these issues, it is necessary for the Court to examine what has happened at the mediation. Accordingly, he says it is necessary for that purpose for the Court to take into evidence the letter of 25 November 2002, as well as other documents produced in respect of the mediation to which objection has not been taken. 9 Mr Hill concedes that the words of s.110P(4) and (5) are unequivocal, but he says that they could not be intended to apply to a case where the Court is supervising the conduct of an existing mediation for the purpose of determining whether it should continue. He says that those subsections are intended to apply only to prevent what is said or done in a mediation from being used as an admission against the party in the proceedings which are being mediated, or in associated proceedings. 10 Mr Hill has not cited any authority in support of this submission, and I am unable to accept it. The clear words of the subsections do not admit of any such gloss. It seems to me that the terms of the subsections are designed to exclude the Court from going into what occurs within the mediation, save in the circumstances described in subsection (6) and in s.110Q(b). Section 110Q(b) is as follows: " Secrecy

A mediator … may disclose information obtained in connection with the administration or execution of this Part only in any one or more of the following circumstances: … (b) in connection with the administration or execution of this Part …" 11 That is so, it seems to me, in order to avoid the very thing that is occurring in this case; that is that instead of the mediation affording a haven from litigation in which parties may negotiate frankly and informally towards settlement of their dispute, the mediation itself becomes yet another area of conflict generating another whole set of proceedings in court. 12 That such a circumstance can come about, as it has come about in this case, is enormously counterproductive not only for the parties themselves, but it is an enormous waste of the resources of the Court, which Pt 7B of the Supreme Court Act was designed to prevent. 13 Mr Hill's second submission is that there has been an implied consent to the admission of the document now tendered, for the purposes of s.110P(6). He says that this is so because the First to Fourth Defendants have filed an affidavit annexing a number of documents produced in the course of, and for the purposes of, the mediation so that they thereby are impliedly assenting to the tender of all such other documents as may enable the Court to evaluate properly the documents which the First to Fourth Defendants tender. 14 This submission is linked, in a sense, to a submission which Mr Rajski makes, founded upon s.131 of the Evidence Act 1995 (NSW). That section provides as follows: " Exclusion of evidence of settlement negotiations

(a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute, or

(b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.

(a) the persons in dispute consent to the evidence being adduced in the proceeding concerned or, if any of those persons has tendered the communication or document in evidence in another Australian or overseas proceeding, all the other persons so consent, or

(b) the substance of the evidence has been disclosed with the express or implied consent of all the persons in dispute, or

(c) the substance of the evidence has been partly disclosed with the express or implied consent of the persons in dispute, and full disclosure of the evidence is reasonably necessary to enable a proper understanding of the other evidence that has already been adduced, or

(d) the communication or document included a statement to the effect that it was not to be treated as confidential, or

(e) the evidence tends to contradict or to qualify evidence that has already been admitted about the course of an attempt to settle the dispute, or

(f) the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue, or

(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, or

(h) the communication or document is relevant to determining liability for costs, or

(i) making the communication, or preparing the document, affects a right of a person, or

(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, or

(k) one of the persons in dispute, or an employee or agent of such a person, knew or ought reasonably to have known that the communication was made, or the document was prepared, in furtherance of a deliberate abuse of a power." 15 Mr Rajski says that the evidence which he now seeks to tender, in particular the letter dated 25 November 2002, is evidence of a communication between parties in the dispute, in connection with an attempt to negotiate a settlement of the dispute, but that that document is not excluded from admission into evidence by virtue of s.131(2)(c) and (g.) 16 It seems to me that s.131(1) and (2) of the Evidence Act are concerned with the exclusion from and admission into evidence generally of matter which may otherwise attract the principles of the common law relating to "without prejudice" communications between parties made for the purposes of negotiating settlement; they are not intended to apply to the special process of settlement negotiation provided by a mediation ordered by the Court under the provisions of Pt 7B of the Supreme Court Act . Pt 7B contains its own rules as to the evidentiary use which may be made of what is said and done in and for the purpose of settlement negotiations in a mediation under that Part and, in my view, those rules override the general provisions of s.131 of the Evidence Act . 17 Mr Hill's third submission is that s.110P(4) and (5) cannot be intended to prohibit evidence of what happened at a mediation. So, for example, he says the Court would need to know whether a mediation commenced, whether it concluded, and whether it concluded successfully or unsuccessfully. For that purpose there must, he says, be some limitation upon the broad words of s.110P(4) and (5). 18 While the Court would obviously need to know whether a mediation has concluded successfully or unsuccessfully I think that, absent consent under s.110K(6)(a), the means by which the Court becomes aware of that circumstance are as provided in s.110Q(b) or by the very fact that, after a reference to mediation, the parties appear in Court to announce either that the proceedings are to be disposed of by consent orders or else are to proceed to trial. Beyond such a disclosure, which in any event could hardly be described as "evidence" in the proceedings within the contemplation of s.110P(4) and (5), it is not for the parties themselves, in my opinion, to tender in Court material for the purpose of giving their own versions, and competing versions at that, of what happened during the course of the mediation. 19 Section 110P(4) and (5) clearly prohibit the tender into evidence in any proceedings of a document prepared for the purposes of, or in the course of, or as a result of the mediation session; it seems to me that the letter of 25 November 2002 is, unquestionably, a document within that description. It is not a document which tells the Court what the result of the mediation was, as would a report to the Court by the mediator under s.110Q(b). It is a document tendered in aid of proving in proceedings seeking the extension of the mediation a contested version of what was done at the mediation and why. 20 There is a problem, I concede, with applying s.110(4) and (5) so as to exclude evidence as to what transpired at a mediation in all proceedings other than as provided in ss.(6). Section 110L provides that it is the duty of each party to proceedings referred to mediation under s.110K to participate in good faith in the mediation. Pt 7B of the Act does not prescribe what remedy is afforded either to the Court or to a party where another party to the mediation deliberately disobeys the statutory injunction to participate in good faith. Is the Court to be powerless to enforce the section? If not, by what evidentiary means is the Court to ascertain whether there has been deliberate disobedience? Is the Court to regard s.110L as having no consequences, punitive or otherwise, if it is flouted? 21 These are questions which, according to the argument which has taken place before me today, are not yet decided by authority. Nothing is said about these questions in Pt 7B of the Act or in the Supreme Court Rules which throws any light upon possible answers. 22 However, those observations are almost by the way, because Mr Hill does not submit that the Tectran interests have refused to participate in good faith, so far as I understand his submission. It may be that Mr Rajski makes that submission. 23 I come back to Mr Hill's submission as to the issues to be decided in this application and to the object of Pt 7B of the Act as I perceive it to be. I do not accept that whether the First to Fourth Defendants were justified in withdrawing from the mediation is an issue in itself. As I have said, it seems to me that the mediation process was intended to facilitate settlements between parties, not to provide them with another battleground. The issue which I have to decide is whether an order extending the mediation should be made in the face of opposition from the First to Fourth Defendants. 24 While an order may certainly be made referring parties to mediation, some of whom, if not all of whom, say it is pointless, nevertheless one can proceed only so far in compelling parties to mediate when there is no longer any realistic purpose in compelling them to do so. 25 I have not yet decided that question, and I am still to hear evidence as to the utility of a continuation of the mediation. But I do not think that it will be helpful, nor is it permissible, nor is it within the spirit and intendment of Pt 7B of the Act, that for the purpose of answering that question, I allow the parties to conduct, as they presently propose to do, four days of hearing in this Court in which what transpired in the mediation is the subject of allegation and counter allegation for the purpose of determining who has acted reasonably or unreasonably, and who is at fault in the breakdown of the mediation process so far. 26 It seems to me, in addition, that even if the material which is directed to that purpose, and contained in various documents which the parties seek to tender, including the letter of 25 November, were admissible for that purpose, that material should be excluded pursuant to s.135 of the Evidence Act on the ground that the probative value of such evidence in relation to the real issue to be determined in this application is substantially outweighed by the danger that the evidence would either be confusing within subparagraph (b) of the section, or else would cause or result in undue waste of time within the meaning and operation of subparagraph (c) of that section. 27 I say that the evidence may be confusing because, as seems clear from what has transpired so far, Mr Girard consents to the tender of certain material, but not to the tender of other material. He says that if he consents to the tender of certain material, that material can be admitted pursuant to s.110P(6)(a). But he says he is nevertheless entitled to object to other material, and that if he does object to that other material, it cannot be admitted. 28 That argument, in my opinion, demonstrates the unreality of this sort of exercise. Obviously if that submission be correct, and if that sort of result may be permitted under s.110P(6)(a), the Court will be presented with a very selective picture of what happened at the mediation, and that is likely to confuse at the very least, if not lead at worst to a substantial miscarriage of justice. 29 The second and more powerful reason is that such evidence should be excluded because an investigation, and a "finger-pointing exercise" in particular, as to what went wrong with the mediation in the past will, in my view, result in an undue waste not only of time but also of the Court's resources. The parties will either achieve a voluntary settlement of their disputes, or they will not. At the end of the day, parties who are unable to resolve their disputes voluntarily by extracurial procedures are entitled to have their dispute determined by the Court. It is not the function of the Court to drive litigants from its doorstep and to compel them to resolve their disputes elsewhere when it has become clear that they cannot. The Court can compel them to enter into negotiations within the process afforded by Pt 7B of the Act, but there comes a time when the Court must determine whether, the mediation process not having reached a successful conclusion, there is any utility in continuing the mediation. 30 I have not yet, as I say, determined that issue in this case, but it seems to me for the reasons that I have given, that I cannot and should not admit the document which is tendered at "H" of Mr Rajski's bundle, being the letter dated 25 November 2002. 31 I suspect that the reasons which I have given at some length here will apply to a great many of the other documents in the tender bundle, but I will leave each document to be tendered and to be ruled on separately, if that is the course which the parties desire to take. 32 For those reasons, I will refuse the admission of the letter of 25 November 2002. The letter of 22 November 2002, which is attached to the letter of 25 November 2002, was not objected to by Mr Girard. I think that this letter should be excluded on the discretionary ground under s.135 of the Evidence Act both under subparagraphs (b) and (c). It is a letter which gets further into the debate as to the conduct of the mediation, which I do not think is permissible, and if admitted on its own even with Mr Girard's consent, it may very well tend to produce a distorted picture of the events which are in contest. 33 At the request of Mr Rajski, I will give my reasons for not accepting some of his submissions to which I have not expressly referred earlier in this judgment. 34 Mr Rajski drew attention to s.110P(2)(b) and (3)(b) of the Supreme Court Act . Mr Rajski contended that those provisions contemplated that documents relating to a mediation may be produced "at the court … for the purpose of enabling a mediation session ... to be arranged" . He said that the motion before the Court today was an endeavour on the part of himself and his interests and the Defendants represented by Mr Hill to arrange a mediation session within the meaning and operation of s.110P(2)(b). He said therefore that the documents must be admissible in court for that purpose. 35 I am unable to accept that submission. In my view s.110P(2) and (3) are concerned with affording privilege with respect to defamation proceedings relating to anything said or done in the course of or for the purpose of a mediation. Subsection (2)(b) is concerned to afford protection to communications or documents produced in a situation which might otherwise not attract privilege against defamation because they are documents or communications produced before the mediation has actually commenced. Subsection (2)(b), in my opinion, is simply designed to extend the privilege against defamation in that circumstance. 36 In the present case we are concerned with a mediation which is already on foot; it has not been brought to an end because its operation was extended by the order of Windeyer J on 19 December 2002. When a mediation has been ordered, s.110P(4) and (5) afford complete protection in respect of the things said and done in the mediation and the documents produced for the purposes of the mediation, including protection against defamation proceedings. That is the situation with which the Court is dealing in the present motion. I do not think, therefore, that s.110P(2)(b) and (3) have any present application. 37 Mr Rajski's second submission was that there had been an implied consent to the tender of the letter of 25 November 2002 because it was included in an affidavit sworn by Mr Thomas, the solicitor for the First to Fourth Defendants, and filed in these proceedings. Mr Girard made it clear to the Court that that affidavit would only be read and relied upon if other material was admitted upon the tender of Mr Rajski over his objection founded on s.110P. Otherwise it would not be read at all, so far as I understood Mr Girard. 38 It seems to me, therefore, that there has not been a consent to the admission of the evidence tendered by Mr Rajski within the meaning of s.110P(6)(a). The affidavit evidence of Mr Thomas was filed, it seems, only to put before the Court certain other evidence should the material tendered by Mr Rajski be admitted without the consent of the First to Fourth Defendants. 39 In any event, for the reasons which I have set out earlier in my judgment, even if the affidavit of Mr Thomas had been read or sought to be read, I would probably have rejected that affidavit in the exercise of discretion under s.135 of the Evidence Act for the reasons which I have already given. It seems to me, as I say, that the Court should not permit the process of mediation to become a further arena of conflict. - oOo -

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