Verde Terra Pty Ltd v Central Coast Council; Central Coast Council v Verde Terra Pty Ltd

Proceedings 2019/203552 MBM Legal (Applicant) Ashurst (First Respondent) Environment Protection Authority (Second Respondent) File Number(s): 2019/101279 and 2019/203552

The Council Claimed Negotiation Privilege Over a Letter

1. The relevant factual background to this latest voir dire in this long running and complex litigation is set out in Verde Terra Pty Ltd v Central Coast Council [2019] NSWLEC 166 (at [1]-[61]) and Verde Terra Pty Ltd v Central Coast Council; Central Coast Council v Verde Terra Pty Ltd (No 2) [2020] NSWLEC 10 (at [11]-[54]). Although relied upon for the purpose of this voir dire, for the sake of brevity only where necessary for the purpose of this judgment is the history expressly repeated. The same abbreviations used in Verde Terra and Verde Terra (No 2) are also repeated herein.
2. As Verde Terra and Verde Terra (No 2) reveal, a central question in the 2019 proceedings is whether the 2014 consent orders and the agreement to enter into those consent orders (that is, the 2014 agreement) resolving the 2012 proceedings, ought to be set aside notwithstanding that the Council was one of the parties that procured the making of those orders.
3. The voir dire concerned the admissibility of a letter from, for all intents and purposes, the solicitors then acting for the Council (PJ Donnellan & Co) and the solicitors (Bowen Legal) acting for the former landowner, R S L Custodian Pty Ltd ("R S L"), dated 16 July 2014, in relation to the 2012 proceedings ("the letter").
4. The letter is in the following terms: Dear Colleagues Re: Gosford City Council v Verde Terra Pty Ltd et Ors LEC No 40900 of 2012 Remodelling of Mangrove Mountain Memorial Golf Course Development Consent 23042 of 1998 Lot 582 DP 1123656 Wisemans Ferry Road Central Mangrove We refer to the above and to your letter of 11 July 2014 in which you indicate that your client would object to the proposed orders to the extent that they bind the landowner and provide entitlements to Verde Terra Pty Limited and comment that this should "come as no surprise to the parties". To the contrary: our client is indeed taken by surprise by this stance given that your client indicated to the Court at the directions hearing on 4 July 2014 that it would take a neutral position and neither consent to nor oppose the orders being sought. Further, your client has been engaged in the mediation process and has been represented at each of the sessions held on 4, 17 and 20 September 2013, 6 December 2013 and 4 March 2014. The various iterations of the proposed consent orders have been provided to you as soon as practicably possible and you have been provided with the LEMP and LMP by the solicitors for the 1st and 3rd respondents. We have seen the letter of Hunt & Hunt to yourselves dated 14 July 2014 and respectfully agree with the matters set out therein. Under those circumstances it is difficult to see how your client could be seen to have been denied the benefit of natural justice nor to have been denied the opportunity to express during the course of these proceedings its consent or lack thereof as 'landowner' or at least the holder of an equitable interest in the land, to consent orders of the nature that have been sought in these proceedings since September last year. While His Honour Craig J indicated that he wished to be persuaded that he had the necessary powers to make the orders sought, we concur with Hunt & Hunt that the parties have yet to make their submissions in that regard. We are presently preparing submissions and will be making them on Friday. We have no doubt that the Court does have the requisite powers to make the orders sought, including under s124 of the Environmental Planning and Assessment Act 1979. We are of the view that there is no necessity to bring an application under s96 for modification of the development consent at the same time as proceedings are before the Court in which the Court is being asked to exercise its powers to remediate a site under circumstances where there has been a breach of the Act. Each of the orders being sought is reasonably necessary to achieve that objective. The outcome, as the Council sees it, of the proposed consent orders will be to achieve an acceptable remediation of the site with: a. a completed 18 hole golf course within a reasonable period of 10 years; b. a specified design for the golf course; c. a specific volume of space able to be filled with waste material; d. appropriate controls and monitoring during the course of the construction of the golf course to minimise risk of environmental harm through an appropriate Landfill Environmental Management Plan and Leachate Management Plan; e. the lining and filing to industry best practice standards of the excavations referred to as Cells W, X, Y and Z; and f. the lowering of the mound of fill in the part of the site referred to as Area B to a more acceptable height. All of the above will serve to improve the quality and value of the land to the landowner's benefit while at the same time mitigating the existing environmental impacts and risks which have been brought about by breaches of the conditions of the original consent over a period of many years. The increased truck movements from 35 per day to an average of 55 per day is, our client considers, reasonable to enable completion of the project in a reasonable time, which is to the benefit of local residents and users of the golf course as well as the landowner. The orders sought will bind Verde Terra Pty Ltd and/or any future operator of the waste facility on the site to carry out works on the site to complete the golf course in accordance with the consent orders, the conditions of consent and the new LEMP and LMP. We see nothing objectionable in that outcome. We trust that your client will adhere to its stated position in Court at the last directions hearing that it would not oppose the making of the proposed orders. If the parties are unable to reach a resolution of the present proceedings, in order to achieve remediation of the site to ensure the mitigation of environmental risk, our client will have to consider its options including issuing a s121B Order against the owner and/or occupier of the land. This is something which our client has not considered necessary to date given the likelihood (indicated by all parties including your client) of achieving satisfactory orders for remediation of the site through the present proceedings.
5. Parts, but not all, of the letter were relevantly reproduced in Verde Terra (No 2) (at [29]) for the purpose of that voir dire.
6. The Verde Terra parties sought to tender the letter. The Council resisted this course on the basis that it was the subject of the privilege conferred by s 131(1) of the Evidence Act 1995 ("negotiation privilege"): 131 Exclusion of evidence of settlement negotiations (1) Evidence is not to be adduced of - (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.
7. The Verde Terra parties submitted, first, that not only is the letter not a communication made "in connection with an attempt to negotiate a settlement of the dispute" because as at the date of the letter the matter had been resolved and there was no longer a "dispute", but second, that the exceptions contained in s 131(2)(b) to (d) applied and the privilege was not engaged. Those exceptions provide that: (2) Subsection (1) does not apply if - … (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…
8. The tender was rejected with brief ex tempore reasons provided with the promise of more fulsome written reasons to be handed down later. These are those reasons.

The Scope of Negotiation Privilege

1. In Verde Terra (No 2) the Court made the following observations concerning the scope of the negotiation privilege both at common law and under the Evidence Act. They are repeated here for convenience (at [77]-[83]): 77 At common law bona fide statements made during the course of negotiation, or in an attempt to settle a dispute, are protected from admission into evidence. In Field v Commissioner for Railways (NSW) [1957] HCA 92; (1957) 99 CLR 285 the High Court made the following observation (at 291 per Dixon CJ, Webb, Kitto and Taylor JJ): 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 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. 78 It is necessary that the negotiations be conducted to settle existing litigation or that litigation will take place if the dispute is not resolved (Glengallan Investments Pty Ltd v Andersen [2001] QCA 115; ([2002] 1 Qd R 233 at [28]). This is because it is in the public interest that disputes are settled and that litigation is minimised. The public policy embodied in the privilege was articulated in Galafassi v Kelly [2014] NSWCA 190; (2014) 87 NSWLR 119 (at [116] per Gleeson JA. That the case concerned the application of s 131 of the Evidence Act does not matter): 116 Each of these requirements of s 131(1) is to be considered having regard to the purpose and policy objectives of this provision of the Evidence Act. As Mansfield J explained in Silver Fox Co Pty Ltd v Lenard's Pty Ltd (No 3) (2004) 214 ALR 621 at [36], the purpose of s 131(1), subject to its exceptions, is to "give effect to the policy of ensuring the course of negotiations - whether private or by mediation - are not adduced into evidence for the purpose of influencing the outcome on the primary matters in issue". This is because it is in the public interest that disputes be quelled or resolved and that negotiations should not be inhibited by the risk of such negotiations influencing the outcome on those primary issues: see also Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2) (Barrett Property) [2011] FCA 276; 193 FCR 479 at [32]-[33] (Bromberg J). This was also the position at common law: Field v Commissioner for Railways (NSW) [1957] HCA 92; 99 CLR 285 at 292. 79 The privilege may be availed upon to resist, as in the present case, the disclosure of evidence of negotiations or settlement attempts in a second dispute if that party had a reasonable expectation that the material would not be used against it in the later dispute (Dowling at [37]). 80 Relevantly for present purposes, the privilege applies not only to negotiations leading to a settlement, but to communication during the drafting of documents to give effect to the settlement (Yokogawa Aust Pty Ltd v Alstom Power Ltd [2009] SASC 377; (2009) 262 ALR 738 at [103]). Further, it can also apply to communications which are reasonably incidental to negotiations but are internal to one party (Yokogawa at [104]). Under the Evidence Act 81 Section 131(1) of the Evidence Act mandates that evidence is not to be adduced of: (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. 82 Again, the onus of establishing any entitlement to the privilege rests on the party claiming it (Ultraceuticals at [20]). That party must demonstrate the facts from which the Court can determine that the privilege is capable of being asserted (Re Southland Coal Pty Ltd (recs & mgrs apptd) (in liq) [2006] NSWSC 899; (2006) 203 FLR 1 at [14(c)]). The "connection" referred to in s 131(1)(a) and (b) of the Evidence Act must be direct; a tenuous connection is not sufficient (GPI Leisure Corporation Ltd (in liq) v Yuill (1997) 42 NSWLR 225 at 226 and Seven Network Limited v News Limited [2006] FCA 343; (2006) 151 FCR 450 at [50]). 83 In addition to the evidence contained in the Ball affidavit, the Court is permitted to inspect the documents to determine if the claim is self-evident (Seven Network at [24]).
2. In Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 1352; (2012) 84 NSWLR 547 Beech-Jones J, in a careful and comprehensive analysis of the scope of the privilege conferred by s 131(1) of the Evidence Act, concluded that, contrary to the decision by Campbell J in CJ Redman Constructions Pty Ltd v Tarnap Pty Ltd [2006] NSWSC 173 (upon which the Verde Terra parties relied), the statutory privilege was not limited to communications involving admissions and that (at [78] and [79]): 78 In 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. 79 Neither 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 require a direct or close connection between the communication and the attempt to settle the dispute are correct or not. Such an approach may still be correct even in light of the ALRC's misgivings about Field.
3. A similarly expansive view of the scope of the statutory privilege was taken by Farrell J in Coshott v Burke [2013] FCA 513, where her Honour noted (at [14]): 14 It is also now not controversial that the term "negotiate" does not require an element of attempt to compromise but rather an attempt to arrange for or bring about a settlement: see Barrett Property Group Pty Limited v Dennis Family Homes Pty Limited (No. 2) [2011] FCA 276 at [34]. This extends the scope of the common law privilege beyond what was previously known as "without prejudice" privilege: Brown v Commissioner of Taxation (2002) 119 FCR 269 at [99]. It is intended to embrace all communications which answer the description of being in connection with an attempt to negotiate the settlement of the dispute subject to certain specified exceptions: Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 1352 at [78]. The privilege may extend to correspondence which repeats offers previously made or foreshadows either concurrence or rejection of those offers or which seeks clarification of the precise ambit of an offer being made; it need not be expressed to be "without prejudice" if it is truly engaged in to attempt settlement: Apotex Pty Limited v Les Laboratoires Servier (No. 5) [2011] FCA 1282 at [24]-[27].
4. I respectfully adopt their Honours' observations and conclusions.

The Privilege is Prima Facie Engaged

1. The Verde Terra parties submitted that s 131(1) of the Evidence Act was not engaged because: 1. as at the date of the letter the proceedings had been resolved, and therefore, the communication was not an attempt to negotiate a settlement of the dispute as this had already been effected; 2. the content of the letter revealed that this was not an attempt to negotiate, but rather ought to be construed as a statement of intention that the Council would exercise its statutory powers, as was evident by the last paragraph of the letter; and 3. all confidentiality in the letter had been lost by reason of its publication in Verde Terra (No 2) and the failure of the Council to take steps in the intervening period to reassert it (citing Glencore International AG v Commissioner of Taxation of the Commonwealth of Australia [2019] HCA 26; (2019) 265 CLR 646), resulting in the loss of the privilege.
2. These submissions may be rejected on the following bases: 1. as the evidence - including the letter itself (see, for example, the last paragraph) - makes tolerably clear (see, for example, transcript of the mentions of the 2012 proceedings before Craig J on 4 July 2014 and 18 July 2014), the dispute was not wholly resolved between all of the parties as at the date of the letter. Indeed the 2014 consent orders were not made until 29 August 2014; 2. on any reasonable reading of the letter, it is plain that the Council was attempting to exert pressure on R S L to agree to the proposed consent orders. There was nothing, contrary to the suggestion by the Verde Terra parties, improper about the Council's recourse to its threat to issue a "s 121B Order" (presumably against R S L as the owner of the land) in the circumstances of the ongoing settlement negotiations. Because the issuing of the order was contingent upon all parties agreeing to the proposed orders, this was more than a bare assertion of a concluded intention by the Council to issue such an order; 3. while confidentiality is an inherent ingredient of negotiation privilege, the privilege is not necessarily lost merely because the communication loses its confidential nature by reason of publication by a third entity, namely, the Court. In this respect the privilege is arguably different from legal professional privilege. There is nothing in the wording of s 131(1) which states otherwise. Rather, if the communication meets the description of that provided for in s 131(1) of the Evidence Act, then prima facie the privilege applies. The confidential nature of the letter was neither abrogated nor lost merely because the Court published excerpts of it in a judgment for a different purpose. The present facts are very different from those in Glencore and the case is distinguishable on this basis. It has been cautioned that care must be exercised when comparing by analogy the exceptions in s 131(2) with those contained in s 122(2) of the Evidence Act. As has been observed by Kelly J, "the two kinds of privilege serve to protect different public interests" (Lexcray Pty Ltd v Northern Territory [2015] NTSC 11; (2015) 292 FLR 447); and 4. as was agreed by the parties, at no point did the Council cease its objection to its tender on the grounds of negotiation privilege and it was not obliged to take positive steps to reassert its claim for privilege or the confidential nature of the communication after the publication of Verde Terra (No 2). As Adams J has opined (Kosciusko Thredbo Pty Ltd v New South Wales [2002] NSWSC 329 at [22]): 22 This argument must be rejected. The material was tendered on the voir dire in circumstances where there was no public disclosure and it being clearly understood that confidentiality orders would be made in respect of the material. If Mr Hammerschlag's submission were made good the contradictor would never be able to litigate an issue under s 131, except on the terms of the person seeking to adduce the evidence. I consider that s 131(2)(g) refers to evidence adduced in the substantive proceedings, not just on the voir dire and the disclosure to which s 131(2)(b) refers is a disclosure other than on the voir dire but in circumstances which make it unnecessary or (possibly) unfair to maintain the confidentiality which the section is designed to protect.
3. Therefore I have found, subject to any applicable exceptions contained in s 131(2) of the Evidence Act, that negotiation privilege attached to the letter.

No Exceptions Apply

1. The Verde Terra parties relied upon the exceptions contained in s 131(2)(b) to (d) of the Evidence Act inclusive to contend that the privilege did not arise.

Section 131(2)(b) and (d) Do Not Apply

1. It is convenient to deal with the exceptions contained in s 131(2)(b) and (d) together given that this was the course that was adopted in submissions by the Verde Terra parties.
2. The Verde Terra parties argued that a proper examination of the letter revealed that its substance had been disclosed with the implied consent of the Council. This was because it was not marked as "without prejudice" and, as referred to above, because the threat to issue an order under s 121B amounted to conduct that was inconsistent with the maintenance of the privilege.
3. The discussion and conclusions above are repeated and applied. That is, read fairly, there is nothing in the letter, either express or implied, that indicated that the Council intended to disclose the contents of the letter to third persons or that its contents were not intended to be treated as confidential. Although the letter was not marked "without prejudice", this does not of itself destroy the privilege (Apotex Pty Ltd v Les Laboratoires Servier (No 5) [2011] FCA 1282; (2011) 199 FCR 62 at [25] and the authorities referred to thereat). Furthermore, there was no, as the Evidence Act requires, statement to the effect that the letter was not to be treated as confidential (s 131(2)(b)). A statutory authority robustly stating what steps it may (or even will) take pursuant to the legislative power conferred upon it if a matter does not settle, is not a statement having the requisite characteristics abrogating the privilege for the purposes of s 131(2)(b) (in this context it is noted that no reliance was placed on the exception contained in s 131(2)(k) by the Verde Terra parties). The letter was therefore not an 'open' letter for the purposes of the privilege.
4. If understood correctly, the Verde Terra parties also argued that because neither the substance of the proposed settlement nor its terms were disclosed in the letter, merely a threat to issue an order under s 121B, s 131(2)(b) applied. But this argument has been rejected by the courts (Adlam v Noack [1999] FCA 1606 at [9]).
5. Accordingly, the exceptions in s 131(2)(b) and (d) are not applicable.

Section 131(2)(c) Does Not Apply

1. The Verde Terra parties again relied on the fact that there had already been part disclosure of the letter in Verde Terra (No 2) to contend that s 131(2)(c) of the Evidence Act precluded any claim of negotiation privilege.
2. The reasons above are repeated. In short, first, there was no express or implied consent of the Council to the disclosure of the letter, the Council having consistently maintained its objection to the tender of the letter throughout the proceedings. Second, its partial reproduction by the Court for the purposes of the voir dire in Verde Terra (No 2) could not amount to the necessary express or implied consent by the Council. Third, because there is no "other evidence that has already been adduced", the exception has no work to do. The letter had not "already been adduced" and the Verde Terra parties were not able to point to any other evidence to which the application of the exception was directed. And fourth, even assuming that the letter was the relevant "other evidence" referred to within the exception, the Verde Terra parties were unable to articulate what aspects of the reproduced parts of the letter required further elucidation thereby reasonably necessitating its full disclosure. This was because there were none.
3. Section 131(2)(c) of the Evidence Act therefore does not apply.

Conclusion

1. Because the letter is protected from disclosure by the privilege contained in s 131(1) of the Evidence Act, the attempted tender of it by the Verde Terra parties must be rejected.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 October 2020