FEDERAL COURT OF AUSTRALIA

Gibbins Investments Pty Ltd v Samuel Savage as Executor of the Estate of John Thomas Savage (Deceased) [2012] FCA 742

THE COURT DECLARES THAT:

The communications referred to in order 7 of the orders of Jessup J of 11 May 2012 are not protected from disclosure by s 131 of the Evidence Act 1995 (Cth) and may be adduced at the trial of the proceeding.

THE COURT ORDERS THAT:

The respondents pay the applicant’s costs of the determination of the separate question referred to at paragraph 10 of the order of Jessup J of 11 May 2012.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    This matter was allocated to me in my capacity as duty judge, notwithstanding that it was not urgent, because it was a practical way of securing a listing of the interlocutory application by someone other than the docket judge.

2    Before the commencement of argument, counsel and the Court were agreed that I not publish reasons for my interlocutory judgment until after the docket judge had published his reasons for judgment in the substantive proceeding. However, I did indicate that I would give brief reasons for my decision orally at the conclusion of the interlocutory hearing. I did so, on the footing that the reasons were confidential to the parties. It was also a way of recording briefly what actuated my ruling, as a foundation for expanding on it later.

3    Shortly after the hearing of the interlocutory application, my Associate received correspondence from the solicitor for the respondents requesting more detailed reasons to be provided “as soon as possible”.

4    She replied as follows:

...In the outline of submissions by the respondents it was requested that Justice Marshall not give reasons for judgment in respect of his interlocutory decision until after the giving of judgment by Justice Jessup in the substantive proceeding. His Honour at the hearing of the interlocutory application on Wednesday informed counsel that his preferred approach was to give very brief reasons for his decision on the interlocutory issue and to give those reasons on transcript with the transcript of reasons not to be published. This course was agreed in by counsel for all parties….What his Honour proposes to do is to wait until Justice Jessup finally determines the matter. His Honour will give fuller reasons for his decision at that stage if requested by any party.

5    I have now been informed that the respondents seek leave to appeal from my interlocutory orders. I would have preferred the opportunity to more fulsomely set out my reasons, after judgment in the substantive proceeding. Events have conspired to prevent that happening, given that the application for leave to appeal is listed for hearing next Monday, 16 July 2012. What follows is a public version, slightly edited, of the reasons I gave orally on 21 June 2012.

The application

6    The interlocutory application concerned a claim by the respondents, that certain documents and communications sought to be adduced at trial by the applicant, Gibbins Investments Pty Ltd (“Gibbins Investments”), are protected from disclosure in accordance with s 131(1) of the Evidence Act 1995 (Cth) (“the Act”). Gibbins Investments seeks to adduce this evidence for the purpose of proving, in the substantive proceeding, a concluded and binding agreement to purchase shares in two companies controlled by the respondents (Peko Rehabilitation Project Pty Ltd and Australian Magnetite Pty Ltd).

7    The communications in question are those which passed between (a) Ms Teresa Clegg (an executor of Mr Samuel Savage’s estate) and Mr Bill Gibbins (the sole director of Gibbins Investments) on 13 March 2012; and (b) Mr Mark Yorston (solicitor for Gibbins Investments) and Mr Neil Hannan (solicitor for the estate) on 14 and 21 March 2012. Specifically, the “relevant communications” (as I will refer to them) are:

(a)    an email from Ms Teresa Clegg to Mr Bill Gibbins dated 13 March 2012 attaching a deed of settlement;

(b)    a telephone conversation between Mr Hannan and Mr Yorston of 14 March 2012; and

(c)    a telephone conversation between Mr Hannan and Mr Yorston of 21 March 2012.

the legislative context

8    Section 131 has been held to codify the common law “without prejudice” privilege. Subject to the exceptions found in s 131(2) of the Act, s 131(1) provides:

(1)    Evidence is not to be adduced of:

(a)    a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or

(b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.

Section 131(2) relevantly provides:

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

        …    

(b)    the substance of the evidence has been disclosed with the express or implied consent of all the persons in dispute; or

…

(f)     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; or

        …

(i)     making the communication, or preparing the document, affects a right of a person.

The parties’ contentions

9    The respondents bear the onus of proving a sufficient factual basis to establish the “without prejudice” privilege. Central to the respondents’ application, is the claim that the relevant communications took place during a period of negotiation and with the aim of reaching a settlement about the sale of shares in various companies and the Sitzler Savage Discretionary Unit Trust to the applicant. The respondents further allege that this attempt at settlement was entered into to conclude the business relationship, in the context of a long-running dispute between the parties.

10    Gibbins Investments submits that the label “without prejudice” does not protect communications, unless used appropriately and confined to its legitimate purpose of facilitating the settlement of disputes. It argues that, in respect of the relevant communications, there was and is no relevant “dispute” capable of being settled. The relevant communications, it says, represent no more than an offer to sell shares, rather than an attempt to negotiate the settlement of any dispute. Further, Gibbins Investments contends that the relevant communications demonstrate a “take it or leave it” attitude, with no element of negotiation or compromise.

11    Gibbins Investments submits that if the respondents can establish a sufficient basis for non-disclosure of the relevant communications under s 131(1) of the Act, such protection should be excluded by various provisions in s 131(2).

CONSIDERATION

12    This application raises competing considerations of public interest. On the one hand, there is a strong public interest in promoting out-of-court settlements by facilitating frank negotiation between parties. Equally important, in the interests of justice, is the need to ensure that all admissible evidence is able to be adduced at trial.

13    I have assumed for the purpose of making these orders that the relevant communications were made between persons in dispute. However, I am not satisfied that the email and deed of settlement are communications in connection with an attempt to negotiate a compromise. As Hill J said in Quad Consulting Pty Ltd v David R Bleakley & Assocs Pty Ltd (1990) 27 FCR 86 at p 89:

[W]hether negotiations are within the concept of the privilege, that is to say, “without prejudice”, depends not on whether the parties have so labelled them, but upon the intentions of the parties to be ascertained from the nature of discussion or negotiations between them.

14    While it is common for parties to label their communications “without prejudice”, it is trite law that the privilege only attaches to genuine negotiations; see Buckinghamshire CC v Moran [1989] 2 All ER 225 per Slade LJ. In my opinion, the email from Ms Clegg to Mr Gibbins dated 13 March 2012 reveals a “take it or leave it” approach. Those communications are therefore not protected by s 131(1) of the Act.

15    The solicitors’ communications of 14 and 21 March 2012 are, in my view, covered by the exception in s 131(2)(b). That is because the substance of the evidence has been disclosed in the Fast Track Response with the implied consent of the respondents. The same applies to the email but not to the deed itself.

16    Further, I consider that s 131(2)(f) applies, because the proceeding is one to enforce an agreement or one in respect of which the making of such an agreement is in issue.

17    Finally, on balance, I consider that s 131(2)(i) is engaged because the communications affect the right of the applicant to enforce its pre-emptive right to purchase shares in the two relevant companies, Peko and Australian Magnetite.

18    The Court made the declaration and order referred to in the order page accompanying these reasons for judgment, at the conclusion of submissions on 21 June 2012.

Associate:

Dated:    11 July 2012