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

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : WESTERN AREAS EXPLORATION PTY LTD -v- STREETER [2008] WASC 78

Costs - Application for costs of unsuccessful court ordered mediation - Confidential and without prejudice character of mediation - What evidence may be relied on

Rules of the Supreme Court 1971 (WA), O 29 r 3, O 36, O 37, O 66 r 44

Supreme Court Act 1935 (WA), s 71, s 72, s 167(1)(q)

3 BUSS JA: In action CIV 2126 of 2006 in the Supreme Court, the appellant as plaintiff is suing the respondents as defendants.

4 On 29 August 2007, Registrar S Boyle ordered, relevantly, that the parties submit the dispute, the subject of the litigation, to mediation to be conducted by a mediation registrar of the Supreme Court on a confidential basis in accordance with Pt VI of the Supreme Court Act 1935 (WA) (the Act).

5 The mediation was arranged for 27 November 2007, but abandoned at about the time it was due to commence.

6 By chamber summons filed 10 December 2007, the appellant applied for an order that the respondents pay the appellant's costs thrown away by reason of the mediation not occurring. It filed affidavits of Peter William van der Zanden, sworn 7 February 2008 and 27 February 2008, and an affidavit of Martin Lawrence Bennett, sworn 7 February 2008, in support of the application. The respondents filed an affidavit of Damian Eugene Molony, sworn 21 February 2008, in opposition to the application. On 11 December 2007, Le Miere J, who was managing the action in the commercial and managed cases list, referred the appellant's application to Master Sanderson for hearing and determination.

7 Before the commencement of the hearing before Master Sanderson, counsel for the respondents objected to the tender of any of the affidavits sought to be relied on by the appellant. Counsel cited the decision of Commissioner Johnson QC in Pinto v Kinkela [2003] WASC 126. The learned master decided that, on the authority of Pinto, none of the evidence sought to be relied on was admissible. On 13 May 2008, he made an order in these terms:

All of the evidence contained in the affidavit material filed by the parties be excluded from consideration.

8 The appellant has applied for leave to appeal to this court from the learned master's decision.

9 Part VI of the Act was inserted by s 18 of the Courts Legislation Amendment Act 2000 (WA). It came into operation on 6 July 2000. Part VI reads:

In this Part, unless the contrary intention appears -

'mediation under direction' means mediation carried out by a mediator under a direction of the Court under and subject to the rules of court;

'mediator' means -

(a) a Registrar appointed by the Chief Justice to be a Mediation Registrar under the Rules of Court;

(b) a person approved by the Chief Justice to be a mediator under the Rules of Court; or

(c) a person agreed by the parties.

A mediator carrying out mediation under direction has the same privileges and immunities as a judge of the Court has in the performance of judicial duties as a judge.

(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) Subject to subsection (3) -

(a) any document prepared in the course of or for the purposes of an attempt to settle a proceeding by mediation under direction;

(b) any copy of such a document; or

(c) evidence of any such document,

is to be taken to be subject to a duty of confidence and is not admissible in any proceedings before any court, tribunal or body.

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

(a) the parties to the mediation consent to the admission of the evidence or document in the proceedings;

(b) there is a dispute in the proceedings as to whether or not the parties to the mediation entered into a binding agreement settling all or any of their differences and the evidence or document is relevant to that issue;

(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; or

(d) the proceedings relate to any act or omission in connection with which a disclosure has been made under section 72(2)(c).

(4) A mediator cannot be compelled to give evidence of anything referred to in subsection (1) or (2) or to produce a document or a copy of a document referred to in subsection (2) except -

(a) in proceedings referred to in subsection (3)(d); or

(b) in proceedings relating to a costs application where there is a dispute as to a fact stated or a conclusion reached in a mediator's report prepared under the rules of court on the failure of a party to cooperate in the mediation and the evidence or document is relevant to that issue.

(5) In subsections (3) and (4) -

'costs application' means an application for the costs of the mediation or of the proceedings to which mediation relates.

(1) Subject to subsection (2), a mediator must not disclose any information obtained in the course of or for the purpose of carrying out mediation under direction.

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

(a) the disclosure is made for the purpose of reporting under the rules of court on any failure of a party to cooperate in a mediation;

(b) the disclosure is made with the consent of the parties;

(c) there are reasonable grounds to believe that the disclosure is necessary to prevent or minimize the danger of injury to any person or damage to any property; or

(d) the disclosure is authorised by law or the disclosure is required by or under a law of the State (other than a requirement imposed by a subpoena or other compulsory process) or the Commonwealth.

10 The Courts Legislation Amendment Act 2000 also amended s 167(1) of the Act by deleting para (q) and inserting another paragraph instead. The amended s 167(1)(q) provides:

Rules of court may be made under this Act, by the judges of the Supreme Court, for the following purposes: -

...

(q) For enabling and regulating the mediation of any of the differences between any parties to a proceeding generally and, in particular, providing for -

(i) the reference of a proceeding or any part of a proceeding to a mediator with or without the consent of any party to the proceeding;

(ii) the conduct of the mediator and of the parties;

(iii) the terms and conditions upon which the mediation conference is to be held; and

(iv) the admissibility of evidence in relation to a mediation for the purpose of determining the costs of the mediation or the costs of the proceedings between the parties to the mediation.

...

The power given by the preceding paragraphs shall extend and apply to all matters with respect to which rules of procedure might have been made under any enactment repealed by this Act.

The amendment to s 167(1)(q) came into operation on 6 July 2000. No rules of court have been made pursuant to the amended s 167(1)(q)(iv).

11 At all material times, O 29 r 3 of the Rules of the Supreme Court 1971 (WA) (the Rules) has provided, relevantly:

(a) mediation conferences will take place at the time and place as directed;

(aa) each party shall, subject to any directions, take such steps as may be necessary to ensure that the mediation conference occurs as soon as possible;

(b) each party shall attend the conference or if a party is not a natural person, a representative of that party familiar with the substance of the litigation and with authority to compromise it, and the solicitor or counsel, if any, representing each party;

(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;

(bb) ...

(c) within 2 weeks after the conclusion of the conference, the plaintiff shall lodge with the Court a report, signed by or on behalf of each party -

(i) confirming that the conference has occurred as directed; and

(ii) recording the substance of any resolution or narrowing of the points of difference between the parties resulting from the conference.

(a) shall not, unless the parties agree, report to the Court on a mediation conference;

(b) whether or not the parties agree, may report to the Court on any failure by a party to co-operate in a mediation conference; but the report shall not be disclosed to the trial judge except for the purposes of determining any question as to costs.

Order 29 r 3 has not been amended since 28 October 1996.

12 In Pinto, the learned commissioner held that the only evidence of the substance of a mediation conference which is admissible in a proceeding is a report from the mediation registrar under O 29 r 3(2) on the failure of a party to cooperate, and then only with respect to the issue of costs. Her Honour said:

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(2)(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(2)(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 [6] - [9].

The learned master's decision and reasoning

13 Before the learned master, the appellant argued that Pinto was wrongly decided and that on a proper construction of s 71 and O 29 r 3, read together, evidence on the hearing of the appellant's application was admissible, and the admission of such evidence was governed by O 36 of the Rules. The respondents contended that the learned master should apply Pinto and exclude the evidence sought to be relied on by the appellant.

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.

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 [9] - [10].

15 The learned master did not explain why he was reluctant to follow Pinto or why he apparently thought Pinto might be wrongly decided or a doubtful authority.

The Learned Master erred in law in following the decision of Pinto v Kinkela [2003] WASC 126 and excluding from consideration all of the affidavit material filed by the parties.

17 The learned master's decision was interlocutory in character and, in consequence, leave to appeal to this court is required.

18 In general, an application for leave to appeal must demonstrate that the relevant decision was wrong or at least attended with sufficient doubt to justify the grant of leave, and that substantial injustice would occur if the decision were left unreversed. See Wilson v Metaxas [1989] WAR 285, 294. It must be emphasised, however, that these are not rigid or exhaustive requirements, and leave may be granted if, in all the circumstances, it is in the interests of justice to grant leave. See Western Australia v Bond Corporation Holding Ltd (1991) 5 WAR 50, 56 - 57.

19 At common law (that is, independently of s 19 of the Interpretation Act 1984 (WA)), this court is permitted, in construing Pt VI of the Act, to have regard to the words used by the Parliament in their legal and historical context and, if appropriate, to give them a meaning which will give effect to any purpose of the legislation that can be deduced from its context. See CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, 408; Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85, 112 - 113.

20 During debate in the Legislative Council on the bill which, when enacted, became the Courts Legislation Amendment Act 2000, the Attorney-General, the Hon Peter Foss, said, in the course of his second reading speech:

Mediation in the Supreme Court: it is proposed to insert a new part VI into the Supreme Court Act dealing with court annexed mediation in the Supreme Court. The amendments give statutory force to the principle of confidentiality and the 'without prejudice' evidentiary privilege which are the cornerstones of the mediation process. Mediation conferences were introduced in the Supreme Court in 1993 as part of the case management initiatives designed to reduce delays and costs to litigants, and are now an integral component of the court's case flow management program. Mediation is a highly developed and successful avenue for resolving disputes in the court and an important step in the process by which a matter proceeds to trial. It has brought substantial benefits to the parties to litigation in earlier settlements and the savings of legal costs. It has also brought benefits in saving court trial days, estimated at 670 days in 1998. Currently, the confidentiality of the mediation process and its 'without prejudice' status have been underpinned by the Rules of Court and by the terms of the common form mediation order. This is now seen to be problematic, as recent cases indicate that these matters cannot be adequately addressed other than by amendments to the Supreme Court Act.

The amendments will reinforce the integrity of the mediation process in the Supreme Court by, first, imposing on parties and/or mediators a statutory obligation of confidence; secondly, clearly defining and extending the scope of the 'without prejudice' basis of the mediation; thirdly, conferring on mediators who conduct mediation conferences under the director of the court, the obligations, privileges and immunities of judge; and fourthly, making clear the scope of the court's rule-making powers in respect of mediation. These are non-contentious amendments derived substantially from model legislation drafted by the Law Council of Australia and endorsed by the Standing Committee of Attorneys General.

(See Western Australia, Parliamentary Debates, Legislative Council, 21 June 2000, p 7933.)

21 Counsel for the appellant submitted that s 71(3)(c) of the Act contemplates the admission of evidence about matters occurring at a mediation on an application for costs, 'for the purpose of determining any question of costs'.

22 He argued that O 29 r 3(2) does not proscribe the admission of all evidence, except a report from the mediation registrar. Rather, it creates an exception to the ordinary rule that precludes the mediator from being called as a witness. See s 71(4).

23 According to counsel for the appellant, the affidavits which the appellant had sought to tender are in admissible form. They comply with O 37 of the Rules, which regulates the form and contents of affidavits for use in civil proceedings in the Supreme Court. The test set out in s 71(3)(c) is satisfied, and the affidavits were therefore admissible.

24 It was submitted, on behalf of the appellant, that Pinto was wrongly decided. If, as the learned Commissioner found in Pinto, the only admissible evidence is the report of the mediation registrar, s 71 and O 29 r 3(2)(b) would have been expressed differently.

25 Finally, counsel for the appellant submitted, in the alternative, that Pinto is distinguishable in that the evidence concerning the mediation in that case was sought to be adduced in relation to the issue of the costs of the action as a whole and not merely the costs of the mediation.

The merits of the appellant's ground of appeal

26 Subject to s 71(3), s 71(1) of the Act provides that evidence of:

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

in the course of or for the purposes of an attempt to settle a proceeding by mediation under direction is, relevantly, not admissible in any proceedings before any court, tribunal or body. The rule stated in s 71(1) is of general application and is subject only to certain enumerated exceptions, including those specified in s 71(3).

27 By s 71(3), the prohibition in s 71(1) does not, relevantly, affect the admissibility of any evidence or document in proceedings if:

(a) the parties to the mediation consent to the admission of the evidence or document in the proceedings;

(b) there is a dispute in the proceedings as to whether or not the parties to the mediation entered into a binding agreement settling all or any of their differences and the evidence or document is relevant to that issue;

(c) the proceedings relate to a 'costs application' (as defined in s 71(5)) and, under the Rules of Court, the evidence or document is admissible for the purposes of determining any question of costs; or

(d) the proceedings relate to any act or omission in connection with which a disclosure has been made under s 72(2)(c).

28 The admissibility of evidence or documents under the exception in para (a) of s 71(3) depends on the consent of the parties to the mediation, and not on the evidence or documents being admissible under the Rules of Court.

29 The admissibility of evidence or documents under the exception in para (b) of s 71(3) depends on there being a dispute as to whether or not the parties to the mediation entered into a binding settlement agreement, and not on the evidence or documents being admissible under the Rules of Court.

30 The admissibility of evidence or documents under the exception in para (d) of s 71(3) depends on the proceedings relating to any act or omission in connection with which a disclosure has been made under s 72(2)(c) (that is, there are reasonable grounds to believe that the disclosure is necessary to prevent or minimise the danger of injury to any person or damage to any property), and not on the evidence or documents being admissible under the Rules of Court.

31 By contrast, the admissibility of evidence or documents under the exception in para (c) of s 71(3) depends on the proceedings relating to a 'costs application' (as defined in s 71(5)) and, also, on the evidence or documents being admissible under the Rules of Court for the purposes of determining any question of costs.

32 Section 71(3)(c) is connected with the amended s 167(1)(q). Each provision is concerned in substance with the admissibility of evidence in relation to a mediation under a Rule of Court for the purpose of determining any question of costs between the parties to the mediation.

33 Order 29 r 3 is the only provision in the Rules which specifically relates, amongst other things, to the admissibility of:

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

at a mediation under direction for the purposes of determining any question of costs in the context of an application for the costs of the mediation or of the proceedings to which the mediation relates.

34 Order 29 r 3 does not make any provision for the admissibility of any evidence in connection with an application for the costs of a mediation, except to the extent it provides in O 29 r 3(2)(b) for a mediation registrar or a mediator, whether or not the parties agree, to report to the court on any failure by a party to cooperate in a mediation conference.

35 As I have mentioned, Pt VI and the amended s 167(1)(q) of the Act came into operation on 6 July 2000, and O 29 r 3 has not been amended since 28 October 1996. Accordingly, since Pt VI and the amended s 167(1)(q) came into operation, the Rules of Court have not been amended to make any other provision for the admissibility of evidence or documents for the purpose of determining any question of costs in the context of a 'costs application', as defined in s 71(5).

36 Order 36 of the Rules contains general provisions with respect to the admission of evidence in civil proceedings in the Supreme Court. It does not contain any specific provisions dealing with the admissibility of evidence in relation to a mediation (either for the purpose of determining costs or otherwise).

37 Order 66 r 44 of the Rules sets out the powers of taxing officers in the context of the taxation of costs. The powers are general in character and do not specifically authorise a taxing officer to accept or compel evidence or the production of documents concerning statements, communications and admissions made in the course of a court ordered mediation.

(a) s 71(1) and (3), read with the amended s 167(1)(q); and

(b) the contrast between para (c) of s 71(3) on the one hand, and paras (a), (b) and (d) of s 71(3) on the other, to which I have referred at [28] - [31] above,

indicate that the exception in s 71(3)(c) authorises the admissibility of evidence or documents relating to statements, communications and admissions made, in the course of or for the purposes of an attempt to settle a proceeding by mediation under direction, only where the evidence or documents are sought to be given or tendered:

(c) in proceedings relating to a 'costs application' (as defined in s 71(5)); and

(d) the Rules specifically permit the evidence or documents to be admitted in evidence for the purposes of determining any question of costs (whether in relation to the mediation only or in relation to the civil proceedings as a whole).

39 The construction of s 71(1) and (3) that I prefer is consistent with (and, indeed, reinforced by) the Attorney-General's second reading speech which suggests a Parliamentary intention, in enacting Pt VI of the Act, relevantly, to impose on the parties to civil proceedings a statutory obligation of confidence and to extend the 'without prejudice' basis of court ordered mediation. The new statutory provisions were intended to reinforce the public policy objectives of encouraging parties to settle civil proceedings by the mediation process as soon as practicable before trial. The Attorney-General's speech confirms the ordinary meaning which is conveyed by the statutory text.

40 Order 29 r 3 did not, in the present case, authorise the admission into evidence of the affidavits sought to be relied on by the appellant. No other provision of the Rules specifically authorised the admission of the affidavits. The exception in s 71(3)(c) was therefore unavailable.

41 Pinto was not wrongly decided. Further, the decision in that case is not relevantly distinguishable. Section 71(1) and (3) apply not only to the admissibility of evidence or documents of the character governed by s 71 in the context of an application for the costs of a mediation only, but also in the context of an application for the costs of civil proceedings as a whole.

43 The application for leave to appeal raises a question of some importance which has not previously been considered by this court. I would, on that account, grant leave to appeal. The appeal itself should, however, for the reasons I have given, be dismissed.

44 Where a mediator reports to the court under O 29 r 3(2)(b) on any failure by a party to cooperate in a mediation conference for the purpose of determining any question as to costs, and the mediator is compelled under s 71(4) to give evidence because there is a dispute as to a fact stated or a conclusion reached in his or her report, an issue may arise as to the extent to which the parties are entitled to elicit from the mediator, in cross-examination, evidence of communications, etcetera, in the course of the mediation process or to call evidence for the purpose of corroborating or rebutting the mediator's evidence. This issue does not arise in the present case, and it is therefore inappropriate to express any view on it.