FIRST PARAGRAPH OF THE MOTION
32 The applicants contend that 'without prejudice' privilege cannot be relied upon to resist production of documents where the subject matter of the proceedings is unrelated to the subject matter of the negotiations in respect of which privilege is claimed. The without prejudice privilege can be relied upon only when the subject matter of the proceedings is connected with the subject matter of the privileged negotiations.
33 Recently, Anderson J, in Alstom Power Ltd v Yokogawa Australia Pty Ltd (No 3) [2009] SASC 100 reinforced what might be the starting point in examination of this issue (at [54]-[56]), saying:
54 It is my view that there are strong public policy considerations which support the conclusions drawn both by Beach J in Heron and by the Court of Appeal in Village/Nine. It is also my view that the interpretation of the words of Griffiths LJ in Rush & Tompkins by both Australian courts is correct.
55 When considering rules about production and inspection of documents, it is important that the public policy considerations prevail unless there is an obvious injustice to those seeking production or inspection. It is my view that those considerations require that rules of production, where privilege is claimed, should not be confined to only the parties to the negotiations but should extend to protect communications in subsequent disputes involving third parties.
56 It if were otherwise, the public policy of protecting the parties' negotiations would be defeated and unreasonable restraints placed upon the negotiators with the concern that details of the negotiation could be revealed in later litigation.
34 The general topic was explored in Glengallan Investments Pty Ltd v Andersen [2002] 1 Qd R 233. In that case, the decision of the House of Lords in Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 was considered as it had been by Gleeson CJ (with whom Mahoney and Priestley JJA concurred) in Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 at 523 and in Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd R 276.
35 In Glengallan Investments [2002] 1 Qd R 233 it was held that documents which would attract a 'without prejudice' privilege would not be protected in circumstances where the documents were produced in the context of a tax audit. Those documents were not produced at a time when litigation was contemplated but, in any event, the privilege attaching to them would not be available against a subsequent non-disputant to those negotiations. The Queensland Court of Appeal was of the view that the decisions in Field v Commissioner for Railways (NSW) (1957) 99 CLR 285 and Rush & Tompkins established two essential prerequisites for the operation of the rule being:
(1) A genuine attempt to reach a settlement of a dispute the subject of litigation or which will become so if the dispute is not resolved; and
(2) The making of an express or implied admission in so doing.
The rule is applicable not only to the settlement of litigation but also when litigation is contemplated.
36 The Court considered the rationale developed by Lord Griffiths in Rush & Tompkins where his Lordship hypothesised a main contractor attempting to settle a dispute with one subcontractor and in the course of doing so, making certain admissions. It was said to be clear that those admissions could not be held against the main contractor if the dispute did not settle. Lord Griffiths then went on to observe that it would be equally discouraging if the main contractor knew that if he achieved the settlement against the first subcontractor by use of admissions, those admissions could nevertheless be used against him by any other subcontractor with whom he might also be in dispute. Lord Griffiths was of the view that as a general rule the without prejudice rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement. However the Court of Appeal in Queensland, as did the Court of Appeal in New South Wales, took the view that what his Lordship was referring to was protection from production 'to other parties in the same litigation'. His Lordship was considering the privilege in the context of multi-party litigation.
37 In Quad Consulting Pty Ltd v David R Bleakley & Associates Pty Ltd (1991) 27 FCR 86, the applicant alleged that at a meeting between the respondent and an insurer, misleading representations were made on behalf of the respondent, resulting in damage to the applicant. The respondent moved the Court to set aside a subpoena issued by the applicant to the extent that it concerned notes of the meeting saying that those notes recorded 'without prejudice' discussions which took place. The discussions were without prejudice as there had been a genuine attempt to resolve a dispute. However, Hill J ordered that the amended notes of the meeting be produced as, amongst other things, the same subject matter was not in dispute.
38 In the course of that case, his Honour also touched on a principle which I believe has application in the present dispute. That principle is that the privilege is not absolute. In Pitts v Adney (1961) 78 WN (NSW) 886 at 889, Walsh J said:
It [that is, the rule concerning the privilege] cannot be permitted to put a party into the position of being able to cause a Court to be deceived as to the facts, by shutting out evidence which would rebut inferences upon which that party seeks to rely.
39 Moreover, as his Honour observed, there was nothing in Field 99 CLR 285 to suggest that the privilege extends to every word uttered during the course of settlement negotiations. The form of the privilege is directed against the admission in evidence of express or implied admissions. Hill J continued (at 92-93):
If the respondent's submissions are to be accepted, they involve in their absolute form the proposition that once a court has found there is a meeting during which the parties negotiate as to a legal dispute between them in circumstances which are "without prejudice", the whole of what is there said and done is protected by the privilege, and not only as between the parties to those negotiations, but as to third parties. Such an absolute statement of the rule cannot be accepted. For example, it is clear enough that if the parties to a "without prejudice" negotiation arrive at a settlement and that settlement is subsequently breached or repudiated by one of them, the other can, in proceedings to enforce the settlement, tender the "without prejudice" letters or records of conversations proving the agreement: Bentley v Nelson (supra); Walker v Wilsher (1889) 23 QBD 335; and Tomlin v Standard Telephones and Cables Ltd [1969] 1 WLR 1378; [1969] 1 WLR 1378. That no doubt reflects the public policy already enunciated that the privilege is concerned only with admissions. The tender of the "without prejudice" material in a case such as I have postulated is no longer concerned with admissions so far as the dispute between the parties is concerned, but has proceeded beyond the matter in dispute between the parties into a different subject matter of litigation.
40 See also Austotel Management Pty Ltd v Jamieson (1995) 57 FCR 411 and Australian Competition & Consumer Commission v FFE Building Services Pty Ltd (2003) ATPR 41‑967.
41 The parties have not raised the statutory provisions in the Commonwealth Evidence Act. It is clear that there is, prima facie, a privilege attaching to aspects of the negotiations over the Kevill litigation by virtue of s 131(1) of the Evidence Act 1995 (Cth). However, there is an exception provided by s 131(2)(g) if the evidence that was adduced or an inference from evidence that has been adduced in that context is likely to mislead the Court unless evidence of the communication or document is adduced to contradict or to qualify that evidence. This exception fell for consideration by Emmett J in Brown v Commissioner of Taxation (Cth) (2001) 187 ALR 714 where his Honour said (at [184] and [185]):
[184] I consider that s 131(2)(g) is designed to deal with the sort of circumstances that arose in Pitts v Adney (1961) 78 WN (NSW) 886. Evidence of a "without prejudice" communication was admitted in that case in order to prove the fact of and the nature of the communication. It was not tendered in order to contradict evidence as to the matters in issue, or as an admission.
[185] It is not appropriate to attempt an exhaustive exposition of the effect of s 131(2)(g). However, I consider that it will not be attracted simply because evidence to which s 131(1) applies contradicts or qualifies evidence that has already been adduced. Section 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. The fact of, or the contents of, the communications, of which the commissioner now seeks to adduce evidence are not directly relevant in the proceeding before me. I do not consider that s 131(2)(g) is applicable in relation to the objected material
42 As observed in Bloss Holdings Pty Ltd v Brackley Industries Pty Ltd [2005] NSWSC 756 by Hamilton J (speaking of the New South Wales statutory equivalent) its ambit is not yet very clear. What is clear though, is that the without prejudice privilege must not be abused by being used in any way that would mislead the Court. The typical example of that is where a party seeks to rely upon an admission by silence or non-response when there is in fact without prejudice communication which would negative that inference (Pitts v Adney 78 WN (NSW) 886).