FEDERAL COURT OF AUSTRALIA

Grocon Constructors (QLD) Pty Ltd v Dexus Funds Management Limited as Trustee for the Dexus 480Q Trust [2019] FCA 601

ORDERS

THE COURT ORDERS THAT:

1.    Subject to any further or contrary order of the trial judge, paragraph 3 and the words in paragraph 4 “As a consequence of those discussions…” be struck out of the Cameron Affidavits filed in VID 138 of 2019 and VID 139 of 2019.

2.    The parties bear their own costs of and incidental to this application.

3.    Liberty to apply.

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

REASONS FOR JUDGMENT

ANASTASSIOU J:

background

1    In the principal proceedings to which these applications relate, the applicants, Grocon Constructors (Qld) Pty Ltd and Grocon Constructors (Vic) Pty Ltd, have applied to set aside statutory demands served upon each of them by the respondent, Dexus Funds Management Limited, pursuant to s 459G of the Corporations Act 2001 (Cth). Both proceedings seek identical relief and except where it may be relevant to distinguish between the separate proceedings, I shall refer to Grocon Constructors as a collective shorthand for both Grocon Constructors (Vic) Pty Ltd and Grocon Constructors (Qld) Pty Ltd.

2    The statutory demands claim large sums of money owing. In the case of Grocon Constructors (Qld) Pty Ltd, the claim is for $14,626,538.60 allegedly owing under a deed of surrender of lease dated 1 May 2018 in relation to a property at 480 Queen Street, Brisbane. The statutory demand made upon Grocon Constructors (Vic) Pty Ltd involves a further claim of $28,561,910.14 allegedly owing under the ‘Lease Documents’ as defined in the deed of surrender of lease dated 1 May 2018.

3    In the principal proceedings Grocon Constructors seek orders setting aside the statutory demands on various grounds. One of the grounds relevant to the present application is that the statutory demand in each proceeding is, and was, an abuse of process. It is unnecessary for present purposes to say anything more about the substance of the underlying dispute or the grounds relied upon by Grocon Constructors to set aside the statutory demands.

Application

4    Before the Court is an application by Grocon Constructors for rulings pursuant to s 192A of the Evidence Act 1995 (Cth) that parts of two identical affidavits filed on behalf of Dexus by Brett David Cameron (referred to in the singular as the Cameron Affidavit herein) are inadmissible pursuant to s 131(1) of the Evidence Act.

5    Sub-paragraph 131(1)(a) of the Evidence Act 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

…

6    The parts of the Cameron Affidavit objected to are as follows:

3.     On around 21 December 2018, and on or around 27 or 28 December 2018, I had telephone conversations with Carmen Hollingsworth, who I know to be the head of People & Culture and Group General Counsel for the Grocon Group, about the payment of the money subject of the statutory demands the subject of this proceeding. As the discussions were without prejudice, I do not disclose the content of those discussions.

4.     As a consequence of those discussions, I and [Dexus] formed an opinion that [Grocon Constructors] was unable to pay the debts the subject of the statutory demand.

5.     It is for that reason that [Dexus] issued the statutory demand the subject of this proceeding to the plaintiff.

7    It is common ground that the discussions referred to in paragraph 3 were subject to without prejudice privilege within the meaning of ss 131(1)(a) of the Evidence Act.

8    The above paragraphs of the Cameron Affidavit have been filed in anticipation of being tendered in evidence in answer by Dexus to the allegations by Grocon Constructors that the statutory demand in each proceeding constitutes an abuse of process.

9    The principal submission on behalf of Grocon Constructors was that the Cameron Affidavit contravenes sub-section 131(1)(a) by impliedly conveying what was said during the without prejudice discussions. I do not agree. Section 131 prohibits the adducing of evidence of the without prejudice communication. It does not prohibit evidence about the fact of without prejudice communications. In the final sentence of paragraph 3, the prohibition on disclosing the content of the discussions is expressly acknowledged.

10    Grocon Constructors sought an order that this application be heard by a judge different to the judge hearing the principal proceeding. Presumably this was requested on the basis that the Cameron Affidavit by its terms impliedly disclosed without prejudice communications. During the hearing of the application, I asked whether either party proposed to tender evidence concerning the content of the without prejudice communications. Neither party wished to do so. As a result, though nothing turns upon this, in my view, the present application need not be determined by a judge other than the judge hearing the principal proceeding.

11    In the course of argument, I raised with counsel for Grocon Constructors whether there was potential unfairness or prejudice arising from reliance by Cameron upon the without prejudice communications as the sole basis for the opinion expressed in paragraph 4 of the Cameron Affidavit referred to above, and derivatively, the reason given in paragraph 5 for the issue of the statutory demand.

12    I gave counsel for Dexus and counsel for Grocon Constructors the opportunity to make submissions about whether all or part of the Cameron Affidavit should be excluded pursuant to the discretion conferred by s 135 of the Evidence Act. That section provides:

The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might:

(a)     be unfairly prejudicial to a party; or

(b)     be misleading or confusing; or

(c)     cause or result in undue waste of time.

13    The hearing of the application was adjourned from 15 April to 18 April to allow written and oral submissions to be made concerning s 135. The Court received helpful written submissions from both parties as well as oral submissions. I do not propose to repeat the various submissions made by both parties, but rather refer to the principal contentions of both parties in relation to s 135.

14    In paragraphs 8 and 9 of Grocon Constructor’s further submissions in relation to s 135 of the Evidence Act, it contended:

8.     In any event, in the absence of detail as to the factual matters underpinning Mr Cameron’s belief or opinion, the remaining evidence is of limited probative value and unfairly prejudicial or misleading or confusing within the meaning of s 135. The applicants cannot reasonably challenge and the Court cannot properly assess the reliability of the evidence, for example the genuineness of the alleged opinion. This is because the applicants are unable to effectively cross-examine Mr Cameron on his opinion or belief. This is wholly unsatisfactory given the accepted importance of Mr Cameron’s evidence in the context of the substantive proceeding – Senior Counsel for the respondent stated on 15 April 2019 that Mr Cameron’s opinion “should be decisive” in relation to the abuse of process arguments raised by the applicants.

9.     The same conclusion flows in the second of the scenarios as detailed in paragraph 5(b) above [referring to a hypothetical scenario whereby the Court held that paragraph 4 of the Cameron Affidavit was not a ‘communication’]. While the applicants maintain the position that the opinion expressed in the Cameron affidavit necessarily discloses by inference the effect of the without prejudice statements purportedly made by Ms Hollingsworth, the full content of the conversation that is said to have given rise to the opinion or belief is not (and, consistent with the s 131(1) prohibition, should not be) set out in the Cameron affidavits. Where an opinion or belief is founded on a conversation, it is necessary for at least the substance of the conversation to be reproduced so as to allow the opinion or belief to be properly interpreted in context and effectively tested by way of cross-examination or otherwise. The Cameron affidavits do not do this. This gives rise to an inability to effectively test Mr Cameron’s evidence in the circumstances of the current case.

15    Dexus submitted there were three reasons why Grocon Constructors had not demonstrated that the Cameron Affidavit created a danger of unfair prejudice or that the trial judge would be misled or confused, as set out in paragraphs 14 – 20 of its submissions:

14.     First, Grocon has not demonstrated that it would suffer any difficulty in cross-examining Mr Cameron as to the existence of his opinion. It submits that it cannot reasonably challenge Mr Cameron’s evidence, but it does not support that submission by reference to any facts.

15.     In so far as Mr Cameron points to no particular statements as the basis of his opinion, that will affect the weight that the trial judge accords to his evidence of the existence of the opinion in the context of the surrounding objective evidence (on which Grocon purports to found its abuse of process argument). In that regard, its absence can only assist Grocon’s case.

16.     In so far as the submission is founded on an alleged incapacity to test Mr Cameron’s evidence, there is nothing to prevent Grocon from challenging him by reference to those objective facts.

17.     In so far as the submission is implicitly founded on an incapacity to cross-examine Mr Cameron as to the content of the without prejudice conversations, or some difficulty in so cross-examining him, Grocon bears the onus to establish that: Aytugrul v R (2012) 247 CLR 170, 176 [6]. Prejudice must be real and not merely hypothetical: [R v Suteski (2002) 56 NSWLR 182]. The onus is therefore on Grocon to identify the material on which it might cross-examine him and demonstrate how its absence would cause Grocon prejudice. Ms Hollingsworth is a Grocon employee; evidence of the conversations is within Grocon’s control. In the absence of evidence of what the cross-examination material might be, the Court cannot act on a submission that Grocon would be prejudiced by an alleged inability to question Mr Cameron about it, let alone assess the degree of prejudice that such an inability might cause.

18.     Secondly, even if the conversations contained material that might assist in cross-examining Mr Cameron as to the veracity of his statement that he reached his opinion, s 131(2)(g) has the effect that the s. 131(1) privilege would not prevent Grocon from putting the facts to Mr Cameron if their absence might otherwise cause the Court to be misled as to the inferences to be drawn from the impugned evidence.

19.     Thirdly, what Grocon relies on as prejudice – even if it were to involve a decision as to whether to waive the privilege – is in fact no more than a strategic decision. In [La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299], Finkelstein J held at 315 [71] (emphasis added):

Where a litigant faces evidence from his/her opponent that is in some respects ambiguous or unsubstantiated, counsel has a strategic choice to make about how to deal with the shortcomings. Counsel may choose to explore and seek to expose those shortcomings in cross-examination, at the risk of allowing the witness to remedy the position through further evidence. Alternatively, counsel may choose to leave the evidence as is. To be faced with a strategic decision is not to be burdened with a forensic disadvantage. The possibility of helping an opponent make out his/her case is one of the risks of cross-examination.

20.     Jacobson and Besanko JJ agreed.

consideration

16    In my opinion, paragraphs 3 and 4 of the Cameron Affidavit, when read together, are prejudicial to Grocon Constructors. Those paragraphs are the express bases for the reason given in paragraph 5. The without prejudice communication is thereby invoked (without disclosing the content) as the sole basis for the opinion and consequently the reason to be given in answer to the abuse of process claim.

17    If the communication was subject to legal professional privilege rather than the joint without prejudice privilege under s 131, the use of the privilege in this way would plainly, in my opinion, constitute an implied waiver of the privilege: Mann v Carnell (1999) 201 CLR 1. The analogy is not perfect, but it does reveal the essential vice in maintaining privilege over the content of the communication and yet enlisting the fact of the communication as the basis for forming the relevant opinion.

18    The inability of Grocon Constructors to ask questions in cross-examination concerning what was said during the without prejudice communications upon which Dexus purportedly relied in forming the opinion is self-evidently prejudicial. If the evidence proposed to be given were admissible, counsel for Grocon Constructors would be unable to explore in cross-examination even the most basic question concerning the content of the communication for the purpose of testing whether what was said was rationally capable of providing a basis for the opinion.

19    For these reasons, pursuant to section 135 the first six words in paragraph 4, namely “As a consequence of those discussions…” will be struck out. In the absence of those words, paragraph 3 has no relevance and should be struck out pursuant to s 55 of the Evidence Act.

20    I allow the balance of paragraphs 4 and 5 to remain, without foreclosing a later opportunity to object to those paragraphs upon such further grounds as Grocon Constructors may be advised.

21    As I am not the judge hearing the principal proceeding, and having regard to the possibility that the conduct of the hearing may take a course I cannot presently anticipate, I do not think it is appropriate to constrain, in any way, the trial judge from taking a different view to my own in relation to the exercise of the discretion under s 135. Accordingly, I shall make orders as I have described, but subject to any further or contrary order that may be made by the trial judge.

22    For the sake of completeness, I note that Dexus advanced an alternative argument that any prejudice arising from the reference in the Cameron Affidavit to the without prejudice communications could be cured by invoking the exception to the without prejudice privilege in sub-section 131(2)(g) -

(g)    evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence; or

…

23    It was submitted on behalf of Dexus that the exception could be invoked to the extent necessary to avert the prejudice, if any, that may arise. I am not able to form a concluded view about whether this exception might operate in the absence of evidence concerning the content of the without prejudice communications. Further, it seems to me inherently self-contradicting to assert the privilege on the one hand, and yet, by descriptive reference to the fact of the privileged communications, contend that any prejudice may be cured by invoking the exception to the extent that it may become necessary. The privilege is a shared privilege and in my view the solution posed by Dexus would make a virtue out of the mischief it created, as well as putting Grocon Constructors in a position where it may have to decide whether to subordinate its privilege or suffer the potential adverse consequence of evidence being admitted without any opportunity to test the factual basis for the opinion. In my view, this potential dilemma further demonstrates that the evidence should be excluded pursuant to s 135.

24    For these reasons, I shall order that, subject to any further or contrary order of the trial judge, paragraph 3 and the words in paragraph 4 “As a consequence of those discussions…” be struck out of the Cameron Affidavit.

25    I have decided that the parties should bear their own costs of this application. Although Grocon Constructors has been largely successful in the result, I have rejected the primary basis upon which it made this application. In the circumstances, I consider that costs should not follow the outcome but should lie where they fall.

Associate:

Dated:    7 May 2019