BETWEEN : WESTERN AREAS EXPLORATION PTY LTD (ACN 076 025 066)

Costs - Application for costs of an unsuccessful mediation - What evidence may be relied upon

1 MASTER SANDERSON: On 11 December 2007, Le Miere J, who is managing this matter in the Commercial and Managed Cases List, referred to me the question of whether the defendants should pay the plaintiff's costs allegedly thrown away as a consequence of an unsuccessful mediation. In support of that application, the plaintiff filed two affidavits of Peter William Van der Zanden sworn 7 February 2008 and 27 February 2008. It also filed an affidavit of Martin Lawrence Bennett sworn 7 February 2008. The defendants filed an affidavit of Damien Eugene Molony sworn 21 February 2008.

2 In her written submissions and at the commencement of the hearing, counsel for the defendants objected to any evidence being considered when dealing with this application. In doing so, she relied upon a decision of Commissioner Johnson QC in Pinto v Kinkela [2003] WASC 126. Before dealing with that case, I should say something of the framework both legislative and provided by the rules governing applications for costs in circumstances such as this.

3 Section 71 of the Supreme Court Act 1935 (WA) reads, relevantly, as follows:

(a) anything said or done;

(b) any communication, whether oral or in writing; or

(c) any admission made,

in the course of or for the purposes of an attempt to settle a proceeding by mediation under direction is to be taken to be in confidence and is not admissible in any proceedings before any court, tribunal or body.

(2) ...

(3) Subsections (1) and (2) do not affect the admissibility of any evidence or document in proceedings if -

(c) the proceedings relate to a costs application and, under the rules of court, the evidence or document is admissible for the purposes of determining any question of costs.

4 The only rule which directly addresses the costs of an aborted mediation conference is O 29 r 3(1)(ba). That rule reads:

...

(ba) each party's costs of and incidental to a mediation conference shall be the party's costs in the cause, unless it is ordered otherwise or the parties agree; but a party may apply for those costs if they have been unnecessarily incurred due to the conduct of the other party.

5 A first reading of the section and of the rules would indicate that what is anticipated is a sensible regime as to costs. It is important that what takes place at a mediation conference remains confidential and, for that reason, the section extends privilege to the matters discussed. But occasionally there might arise a situation where a party at a mediation conference is uncooperative, with the result that the costs incurred by the other party are wasted. The section recognises that in these circumstances, and perhaps in other circumstances which might arise from time to time, evidence as to what took place at the mediation conference might be given so someone can determine whether costs ought to be awarded against one of the parties.

6 The order then picks up that possibility by anticipating in certain circumstances costs unnecessarily incurred by the conduct of one party may be awarded against that party. However, the rules do not specifically provide a mechanism by which evidence of what transpired at the unsuccessful mediation conference can be put before the court.

7 It was this situation which arose in Pinto. The learned commissioner dealt with the matter this way:

Section 71(1) confers a statutory confidentiality or privilege on the mediation process. It renders inadmissible any evidence of the substance of the process. Subsection 3(c) creates an exception in relation to costs applications but that exception is qualified by reference to admissibility of the evidence under the Rules of Court for the purposes of determining any question of costs. The Rules deal specifically with evidence of the substance of a mediation conference only in O 29. Rule 3 prohibits the Mediation Registrar from reporting to the Court on a mediation conference but entitles the Registrar to report 'any failure by a party to co-operate in a mediation conference'. Such report is not to be disclosed to the trial judge except for the purpose of determining any question as to costs: O 29 r 3(b). The Rules do not elsewhere address the admissibility of evidence of the substance of a mediation conference for the purposes of determining costs or, indeed, for any other purpose.

Counsel for the plaintiffs submits that the effect of s 71 of the Act and O 29 r 3(b) is that the only evidence of the substance of a mediation conference which is admissible in a proceeding is the report from the Registrar on the failure of a party to co-operate, and then only with respect to the issue of costs.

Counsel for the defendant contends for a less restrictive interpretation of s 71(3)(c) and submits that the qualification that the evidence must be admissible under the Rules of Court is satisfied by reference to those parts of the Rules which deal with evidence generally; for example, O 36.

In my view, the correct interpretation of s 71(3)(c) is that advanced by the plaintiffs. In particular, I consider that the inclusion in s 71(3)(c) of the phrase 'for the purposes of determining any question of costs' requires that the Rule of Court said to justify the admission of the evidence relates specifically to admissibility in proceedings to determine costs. Otherwise, the inclusion of the phrase would have no purpose.

In reaching that conclusion I have considered the fact that, if Parliament had intended to create such a narrow exception to the confidentiality conferred on the mediation process, it would have been far easier to refer specifically to O 29 r 3(b) or to the circumstances therein mentioned. However, I believe the simple answer to that proposition is that the drafting of s 71 is consistent with a Parliamentary intention to restrict the use of the evidence to costs applications and leave the Court to determine whether the use of the evidence should be further limited. As counsel for the plaintiff observed, such an approach is common in legislation where a power to make subsidiary legislation is conferred.

The defendants' primary submission was also supported by the more general proposition that, in relation to the issue of costs, an inability to refer to the substance of the mediation may render incomplete the relevant history of events, thereby creating an unsafe basis for the ultimate decision and potential 'unfairness' to a particular party.

Similar submissions made in relation to other types of privileged information have consistently been rejected by the Courts on public interest grounds: see Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, at 583, per Kirby J. The benefits to litigants and to the community of alternative dispute resolution are well established and the inclusion of the privilege in s 71 of the Act and the obligation of confidentiality imposed on the mediator in s 72 indicate that, in other than the specific situations identified in Part VI, those benefits are considered by Parliament to outweigh any disadvantage which may result to a particular litigant. Further, the statutory confidentiality imposed by s 71 of the Act necessarily creates a situation where parties are on notice that their conduct during the course of the litigation will be viewed without recourse to any matter which transpired in the course of the mediation and can adapt their subsequent conduct of the claim accordingly [6] - [12].

(The reference in the first paragraph above of her Honour's judgment to O 29 r 3(b) should, I think, be a reference to O 29 r (3)(1)(ba). That is the rule which allows an application to be made for costs unnecessarily incurred. Further, the reference in the following paragraph to O 29 r (3)(b) should, I think, be a reference to O 29 r 3(2)(b).)

8 It was the defendants' position in this matter that I ought follow the Pinto decision and exclude all of the evidence filed by the parties. It was the plaintiff's position that Pinto was incorrectly decided and that a proper reading of the section and the rule, taken together, allowed for the admission of evidence and the admission of such evidence would be governed by the provisions of O 36. In written submissions it was also suggested that as this mediation had not formally commenced, the Act and the rules did not apply. That submission was not advanced during oral argument and insofar as it is pursued, it is, in my view, of no merit.

9 The question is whether or not I ought follow the Pinto decision. Strictly speaking, I am not obliged to do so, but the decision has stood for almost five years and although it appears not to have been applied during that period, doubtless it has informed the conduct of parties to litigation. To have conflicting decisions is unhelpful and bound to give rise to uncertainty to the disadvantage of litigants.

10 Reluctantly, then, I have come to the conclusion that I should follow Pinto and exclude from consideration all of the evidence contained in the affidavit material filed by the parties.

11 Having reached that conclusion, I will hear the parties as to the further conduct of this application and as to costs.