White v Director of Housing [2003] VSC 124

Supreme Court of Victoria|2003-04-29|Before: GILLARD J.

OFFER OF COMPROMISE contained in two documents - Not an offer within Order 26 of Rules of Court - Purported acceptance of offer - No agreement reached - Privilege from disclosure of negotiations at trial.

This is the return of a summons issued by the plaintiff in the proceeding, seeking an order, in effect, to enforce an alleged agreement settling the proceeding.

The proceeding was commenced by writ on 7 March 2003. The plaintiff, Pamela Jean White, suffers from pleural mesothelioma and has a severely reduced life expectancy. The Listing Master has made an order granting the plaintiff a speedy trial and the matter has been fixed for trial on 16 May 2003. The plaintiff's claim is for damages for negligence arising out of her occupation of premises in Reservoir from 1966 until about 1990. The premises were owned by the Housing Commission and the defendant, the Director of Housing, is sued as being responsible for the liabilities and obligations of the Housing Commission. It is alleged that present on the property were materials made of or containing asbestos, which caused her injuries.

A pre-trial conference took place and negotiations occurred between the parties to settle the matter. At all times, the defendant stressed a requirement of confidentiality.

On 16 April 2003, the defendant's solicitor, James Syme, the Victorian Government Solicitor, faxed a letter to the plaintiff's solicitors. Omitting formal parts, it stated -

"I enclose Offer of Compromise by way of service. This offer is made on the basis that your client signs a release incorporating a confidentiality clause. As negotiations are now finalised, I suggest that the Mention before Master Kings on Wednesday, 23 April 2003 is no longer appropriate."

The offer gave notice that the defendant offered a certain sum of money, together with the "plaintiff's reasonable costs and disbursements, to be taxed in default of agreement on the appropriate scale, with a denial of liability."

The offer went on to give notice that the offer remained open for acceptance within 14 days of 16 April 2003 and concluded with the following -

"This offer of compromise is served in accordance with Part 2 of Order 26 of the Rules of Civil Procedure."

On 22 April 2003, the plaintiff's solicitors purported to accept the offer. The letter omitting formal parts provided -

"We refer to your Offer of Compromise and letter dated 16 April 2003 and our letter of 17 April 2003 acknowledging same. We are instructed to accept the Offer of Compromise. That acceptance does not include agreeing to collateral requirement referred to in the letter which accompanied the said Offer of Compromise. In our view, it is trite law that an Offer of Compromise cannot be fettered or qualified by collateral conditions, referred to in other communications between the parties. Moreover, we make it clear that our client believes she ought to tell her story publicly in the public interest. Should you have a different view we suggest that you make an appropriate application at tomorrow's Directions' Hearing at 10.30 a.m. before Master Kings."

The defendant does not accept that the offer of compromise has been accepted and hence, the application by the plaintiff.

Although the plaintiff's summons seeks an order that the action be deemed to be resolved by virtue of the acceptance of the offer of compromise, I treat the summons as seeking an order that the alleged agreement to compromise the proceeding be enforced.

The defendant's offer to compromise the proceeding is constituted by the letter of 16 April 2003 and the attached document described as "OFFER OF COMPROMISE". Each document contains terms of the one offer. The offer is not wholly comprised in the document headed "OFFER OF COMPROMISE" even though that document notes that it is served in accordance with Part 2 of Order 26 of the Rules.

Accordingly, unless the plaintiff has accepted the offer, there is no agreement between the parties and hence, nothing to enforce.

In my opinion, the plaintiff's response through her solicitors is not an acceptance of the defendant's whole offer, but does in fact constitute a counter-offer which has not been accepted. The fact is that the parties have not agreed on all the terms. This is not a case where the evidence establishes that there has been agreement in relation to a discrete issue in the proceeding. See, by way of example, Tomlin v Standard Telephones.[1]

Accordingly, the plaintiff does not have an enforceable contract of compromise.

Order 26 of the Rules of Court deals with an offer of compromise. The Order replaced the payment into court Rules in the former Rules of Court.

No form is prescribed by the Rules. Clearly, the offer must comply with the requirements of Order 26 but those requirements are minimal. The Rules have now been in operation for some 17 years and a standard form of notice has evolved. The offer must be in writing, specify the terms of the offer and must contain a statement to the effect that it is served in accordance with Order 26. See Rule 26.02. The offer may contain a term as to the time during which the offer is open. See Rule 26.03(3). It may also contain a term that the offer is not made without prejudice (see Rule 26.05) although the absence of such a term will mean that the offer is made without prejudice. See Rule 26.04. There is no requirement that the offer specify the costs because the Rules provide for costs following an acceptance. See Rule 26.03(7).

In my opinion, although the defendant has purported to make the offer pursuant to Part 2 of Order 26, the imposition of terms relating to a release and to confidentiality took the offer outside Order 26. That conclusion follows because the purpose of Order 26 is to put the opposing litigant at risk in relation to costs and certain consequences may follow if a party refuses to accept an offer, depending on the outcome. The Rules provide what is to happen and if the offer does not enable the Rules to operate, then the offer is not within the Rules. That is the position here. Rules 26.08-26.10 (inclusive) deal with the cost consequences resulting from a failure to accept the offer. It is trite to observe that the terms of the offer must be clear, precise, certain and capable of acceptance so that if a party fails to accept the offer, the Court is in a position to give effect to the Rules relating to a failure to accept, where the offeree obtains a judgment less favourable than the terms of the offer. In my opinion, there is no way that a court could evaluate in money terms, the terms imposed by the defendant in the present offer of compromise, namely, release and confidentiality. Because it is not possible for the Rules to operate in relation to the offer of compromise, in my opinion, despite what the defendant purported to do, the offer of compromise is not one within the provisions of Order 26 of the Rules.

Of course, that does not mean that the offer could not be accepted in accordance with its terms. Clearly, it could have been accepted.

It follows that the Rules do not apply to the offer.

It is unnecessary for me to decide what effect, if any, the present offer of compromise would have if the proceeding was to go to trial and the plaintiff obtained damages less than the amount set out in the offer of compromise. I have decided there was no enforceable agreement and Order 26 does not apply to the offer. Nevertheless, it may be helpful to the parties if I make a number of observations concerning the negotiations.

It is clear that in certain circumstances, an informal offer of compromise can be taken into account when the Court considers the question of costs. See Grbavac v Hart.[2]

However, my provisional view is that it would not be open for the Court to take into account the present offer of compromise and the counter-offer, because both offers and the negotiations are protected by privilege against disclosure during the trial and after judgment.

Attempts by parties to settle their differences, which are bona fide attempts to compromise a proceeding, are privileged. Accordingly, negotiations to reach agreement are made without prejudice. The fact that they were not so expressed is, of course, of no consequence. See Rodgers v Rodgers.[3] This appears to be the position in this proceeding. This conclusion is reinforced by the fact that the defendant purported to serve the offer of compromise pursuant to Order 26, which provides that the offer is made without prejudice. There is no evidence that either party has purported to negotiate on a `not without prejudice' basis and neither party has expressed the view that the offer made and the purported acceptance were `not without prejudice'. The privilege is joint and may only be displaced by consent.

A point may be reached where the negotiations cease. Statements made thereafter may be admissible. See Dixon Stores v Thames T.V.[4] But to change the privileged basis of the negotiations, the change must be mutual, that is, the parties have evinced a common intention that their negotiations are to be open. The change is bilateral. See Cheddar Valley Ltd v Chaddlewood Ltd.[5]

The negotiations are admissible if an agreement is reached. See Walker v Wilsher[6] and Rush and Tomkins v G.L.C.[7]

The mere fact that the plaintiff has sought to enforce an alleged agreement of compromise does not, in my view, result in a bilateral waiver of the mutual privilege which covers the bona fide negotiations and precludes their disclosure. The documents are produced for a limited purpose only, and the privilege is not lost, in the absence of a clear common intention by the parties to waive it.

In Rush and Tomkins v G.L.C.,[8] Lord Griffiths, speaking for the House of Lords, referred with approval to what Oliver LJ said in Cutts v Head[9] as to the policy behind the privilege. Oliver LJ said -

"The public policy justification, in truth, essentially rests on the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability."

Lord Griffiths noted that the rule was not absolute and resort may be had to the privileged material for a variety of reasons when the justice of the case requires it and, by way of example, where it is alleged that there was a settlement. His Lordship made it clear that the failure to prove any compromise did not make the statements admissible in evidence. He said, at p.1300 -

"If the compromise fails the admission of the facts made for the purpose of the compromise should not be held against the maker of the admission and should therefore not be received in evidence."

Earlier, he had referred to the Calderbank-type offer which was discussed in Cutts v Head.[10] But an essential feature of that offer is that the party making the offer has made it clear that the privilege extends only to the judgment on the issues in the proceeding and not the question of costs. Here, there was no Calderbank-type offer made. Accordingly, in my view, the general rule applies, namely, that negotiations bona fide entered into in an effort to compromise the issues accordingly are not admissible in evidence. See Calderbank v Calderbank.[11] It is an essential element of a valid Calderbank offer that the offer is expressed to be "without prejudice save as to costs".

It follows that the negotiations are privileged from disclosure and could not be disclosed and relied upon by either party at or after the trial.

The plaintiff did not accept the offer of compromise made by the defendant in the proceeding and hence, there is no enforceable contract of compromise. Indeed, the plaintiff made a counter-offer. In my opinion, the offer of compromise by the defendant was not made pursuant to Order 26 of the Rules. It is my provisional opinion that the negotiations leading to the offer and counter-offer are still protected by the mutual privilege relating to bona fide negotiations to settle a dispute. Accordingly, unless the parties agree, the negotiations cannot be disclosed at trial or after trial. The offers made are not Calderbank-type offers because neither was expressed to be on a "without prejudice basis save as to costs". Hence, neither offer could be used on the question of costs after trial.

It follows that the plaintiff's summons must be dismissed.

Subject to submissions by counsel, I propose to make the following orders:

(a) that the plaintiff's summons filed 24 April 2003 be dismissed;

(b) that the plaintiff pay the defendant's costs of her summons.

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[2] [1996] VSC 37; [1997] 1 VR 154 at 155, 160 and 165.

At a glance

Court

Decision date

Before

Source

Judgment (48 paragraphs)

Parties

Cases Cited (1)