In Pihiga Pty Ltd v Roche the respondents applied for injunctive relief restraining the applicants from introducing as evidence documents brought into existence for a previously held mediation and any oral exchanges during the mediation (see [5] for the specific orders sought).  In his very comprehensive decision Lander J considered the scope of “without prejudice ” communications and the operation of section 131(1) of the Evidence Act.

FACTS

The relief sought by the applicants in the proceeding is to set aside a settlement deed executed by the parties on 25 October 2009. The applicants allege that the respondents breached  section 1325 of the Corporations Act, section 87 of the Trade Practices Act and sections 72 and 85 of the Fair Trading Act in that they misled the applicants during a two day mediation.  The  alleged misrepresentation resulted in the applicants executing a settlement deed. Prior to the mediation  position papers were prepared and presented.  The nature of the misrepresentations included a claim that valuations contained in documents were false.

DECISION

Without prejudice communications

The bases of the respondents’ application for injunctive relief were:

• the common law without prejudice privilege; and
• the mediation agreement  which provided that communications would be conducted on a without prejudice basis [75]

Lander J undertook a very detailed analysis of the operation of the “without prejudice” rule ([80] – [111]) noting:

• the protection afforded to without prejudice communications is based on both public policy but also express or implied agreement of the part of the communications would not be admissible in evidence if they did not lead to the settlement([83] & [86]);
• “the rule is not restricted simply to an offer made and not accepted but also includes communications of all kinds which are genuinely entered into for the purpose of trying to reach compromise” ([87]);
• the rule rendered inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement. ([93])
• the rule does not extend to proceedings which do not concern the same subject matter of the dispute which was the subject of the without prejudice communication ([103])
• exceptions to the rule ([88]) include:

1. evidence of negotiations which show that an agreement was apparently concluded as a result of misrepresentation, fraud or undue influence.

2. a clear statement made by one party to negotiations, and on which the other party intended to act and did in fact act, giving rise to an estoppel.

3. evidence of what is said or written if the exclusion of the evidence would act as a cloak for perjury, blackmail or other “unambiguous impropriety” but only where there is the clearest cases of abuse of a privileged occasion;

4. in order to explain delay or apparent acquiescence

5. an offer expressly made “without prejudice except as to costs” based on an express or implied agreement between the parties as to the conduct of the parties in deciding questions of costs

His Honour found that the applicants claim related to the contravention of the Corporations Act and the Trade Practices Act (amongst others). This is an allegation of misrepresentation, fraud or undue influence referred to in the exceptions above.([96]). He said, at [97]:

In my opinion, the common law without prejudice rule does not prevent the applicants from adducing the evidence referred to in the notice of motion in circumstances where the applicants claim that a concluded compromise agreement has been reached in circumstances where they were misled.

His Honour found no difficulty in rejecting the respondents argument that the parties were bound by the confidentiality terms of the mediation agreement. at [112], noting that a party is not entitled to avoid the consequences of statutory provisions by relying on a contractual exclusionary provision.

Section 113 of the Evidence Act

Lander J found that exception to the exclusion of evidence under the Evidence Act (section 131(1)), a statutory form of the without prejudice rule, did not apply because  of the exception  at section 131 (2)(f) providing:

the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue

When the issue is whether to set aside a settlement agreement it is necessary for the court to have regard to evidence of “..the factual matrix which would be relevant to a determination of the objective intention of the parties” ([123]).  Lander J also accepted the applicant’s submissions that 131(2)(i) also applies to permit such evidence being adduced because the negotiations and communications were designed to affect the rights of the party; in this case the party’s rights would change when entering into the settlement deed. ([126] – [127])

ISSUES

“Without prejudice” communications are not absolutely protected at common law or through the operation of  section 131 of the Evidence Act.  While courts move cautiously in lifting  the veil of confidentiality protecting settlement negotiations in claims involving fraud and misrepresentation documents and oral testimony may be the only or primary means to prove the allegations. It is also relevant to note that there are many instances where documents labelled “without prejudice” do not have the character of such communications.