_ JUDGMENT No. wu. t3 eteccesSereceel, eneveseonece CATCHWORDS PRACTICE AND PROCEDURE - compromise of action - whether statement by counsel during negotiations for settlement was misleading - effect of failure to discover a document the existence of which had been forgotten - whether there was a misrepresentation as to full discovery ~- whether the filing and service of a witness's statement conveys a representation of the facts in it, or only of the intention to call bona fide evidence in chief to that effect - consideration of question whether a settlement offer contemplated immediate agreement or was subject to execution of a deed of settlement - whether confidentiality orders were appropriate in litigation challenging the validity of a settlement the terms of which the parties had agreed to keep confidential. Poseidon Ltd v. Adelaide Petroleum NL (1991) 105 ALR 25 Laws v. Australian Broadcasting Tribunal (1990) 170 CLR 70 Spies v. Commonwealth Bank of Australia (1991) 24 NSWLR 691 Masters v. Cameron (1954) 91 CLR 353 Australian Broadcasting Commission v. Parish (1980) 29 ALR 228 Alexander v. Cambridge Credit Corp Ltd (1985) 2 NSWLR 685 I Vv. EPH HEDI VG 314 of 1994 Rv. HIN HEDI. VG 315 of 1994 Burchett, Foster & O'Loughlin JJ. Melbourne 7 October 1994 RECEIVED 18 OCT 1994 FEDERAL COURT OF AUSTRALIA PRINCIPAL, REGISTAY VG 314 of 1994 VG 315 of 1994 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: LEWI and MI FREDERICK WINTER Appellants AND: ED MAR; T HH LA! JAMES MYERS and ALEX CHERNOV First Named Respondents AND: METZKE & ALLAN Second Named Respondent AND: ES_ PT TD Third Named Respondent AND: PETER HANN Fourth Named Respondent BETWEEN: GRAY _& WINTER Appellants AND: EP. PAUL MAR iT. P JAMES MYERS and ALEX CHERNOV First Named Respondents AND: METZKE_ & ALLAN Second Named Respondent AND: HANN NOMINEES PTY LTD Third Named Respondent AND: PETER HANN Fourth Named Respondent 2. CORAM: Burchett, Foster and O'Loughlin JJ. PLACE: Melbourne DATE : 7 October 1994 REASONS FOR JUDGMENT THE COURT: These appeals relate to orders made in an application by the appellants Messrs Gray and Winter seeking a declaration that a settlement agreement be declared void and of no effect, and also an application, made by motion in the proceeding alleged to have been settled, brought against the appellants to have judgment entered in accordance with the terms of settlement. The trial Judge rejected the attack made upon the compromise of the action, and accordingly dismissed the appellants' application and made orders designed to carry out the settlement. As there was a provision, in the agreement his Honour held to have been validly concluded, to the effect that its terms not be disclosed, an order designed to ensure the confidentiality of the proceedings and documents was also sought in relation to each application, and such orders were made. The proceeding the subject of the compromise had been brought by the first named respondents, a Judge of the Supreme Court of Victoria and four senior counsel, against the appellants who were in practice as a firm of solicitors, and also against the other respondents. In the proceedings, allegations were made against the appellants under s. 11 of the Fair Trading Act 1985 (Vic), of negligence at common law and of breach of fiduciary duty. These allegations arose out of certain alleged 3. representations made by the appellants in relation to an orchard purchased by the first respondents, as they said upon the basis of the representations, which were claimed to be misleading or deceptive. By the appellants' defence, the representations and reliance upon them were all denied. A number of other defences were raised. It is relevant to observe that the interlocutory procedures in the action included an application for further and better discovery made by the appellants, which was dismigsed. Documents were also sought to be obtained by the issue of subpoenas, but apparently the appellants were content to have those subpoenas issued to be called upon on the day of the hearing, and not at some earlier date. On the day fixed for the commencement of the hearing, 29 August 1994, the learned trial Judge was asked to delay the matter to enable settlement negotiations to continue. They had apparently been in progress for some days. The delay in the commencement of the hearing continued into the next day, 30 August 1994, and at about noon on that day the Judge was informed that the matter had been settled. Consent orders were to be filed in Court later in the day or on the following day. The consent orders were not filed. Instead, the motion the subject of one of the present appeals was opened to the Court, and the application the subject of the other appeal was foreshadowed. Both proceeded to a hearing shortly afterwards. 4. The appellants' case was that the agreement of settlement was made on 30 August 1994 upon the basis of certain misrepresentations made on behalf of the first respondents, by reason of which the appellants, on the following day, having ascertained the true situation, repudiated the settlement. The matters relied upon may be summarized as follows: 1. It was said that statements of witnesses, including a statement by Mr Justice Hedigan, were served in the proceeding, and that an implied representation was thereby made of the truth of the contents of those statements. But the statement of Mr Justice Hedigan was alleged to have been found to be untrue because, so it was asserted, it was inconsistent with a letter dated 11 January 1990 he had written to his bank; 2. The letter to the bank not having been discovered in the relevant affidavit of discovery, a representation was alleged to have been made, again asserted to be false, that the documents discovered were in full compliance with the obligation to discover; 3. A representation is said to have been made by Chernov Q.C. that he would give truthful evidence to the effect the appellants had submitted without his authority a certain application for finance; and 5. 4. It was said that senior counsel for the first respondents, Winneke Q.C., had represented during the settlement negotiations on 30 August 1990 that the first respondents were aware of the letter to the bank and had a complete answer to it. Alternatively, the appellants relied on the contention that the settlement agreement was conditional upon the execution of a formal deed, a condition which had not been satisfied. The learned trial Judge accepted the evidence of Winneke Q.C. that senior counsel then appearing for the appellants, Morris Q.C., had put certain quite specific terms to him as an offer of settlement and that, acting on instructions, he had accepted the offer. One of the terms provided for a deed ta be drawn up to "record the terms of settlement". The Judge understood this term as not imposing a condition to prevent the coming into existence of a present agreement, but simply as a term of the agreement concluded by the acceptance of the offer. The acceptance had been communicated some time between 11.30 am and 11.45 am on 30 August 1994. The evidence called on behalf of the appellants showed that, some time shortly before 11 am on 30 August 1994, their instructing solicitor at court that day located, among documents produced by a bank, the letter to which reference has been made. He showed it to the appellants' then counsel Morris Q.C. and J. 6. Svehla. The affidavit of Morris Q.C. states that he read the letter, although he also suggested his reading was somewhat perfunctory. However, there is evidence that he referred to it as being "like a curate's egg", by which he said he meant that it was neither good nor bad from the appellants' point of view. But according to Winneke Q.C., Morris Q.C. suggested to him that the letter was not going to look good for his clients' case saying: "I'll have to put these matters to Jack [meaning Mr Justice Hedigan] and I don't want to have to put them to him". The conversation between Morris Q.C. and Winneke Q.C. raises the fourth matter noted above. For Winneke Q.C., who did not know what letter was being referred to, responded: "Well that doesn't worry us", pretending to know about it. Morris Q.C., who had not read the letter carefully, according to his account, did appreciate that it showed some matters not evident from the documents filed by the first respondents, but said he assumed that Winneke Q.C. had some ready answer to it. It is clear that both Morris Q.C. and Svehla were concentrating on the settlement negotiation. Both believed that their clients wanted to settle. They did not perceive the letter as sufficiently serious in its implications to require them to delay the negotiations in order to analyse it. The learned trial Judge accepted the evidence of Chernov Q.C., according to which the representation alleged to have been made by him had simply not been made; rather a different 7. statement had been misheard by counsel for the appellants. That is a finding of fact which was amply justified by the evidence of several witnesses, and cannot be disturbed. As to the response made by Winneke Q.C. to Morris Q.C's reference to the letter to the bank, his Honour pointed out that if Morris Q.C. had not really perceived anything significant in the letter, it was difficult to see how he had been relevantly misled by what Winneke Q.C. said. Counsel were engaged in a bargaining process in which the letter was mentioned by Morris Q.Cc. but "without any real belief as to its significance". His Honour's curt rejection of this particular allegation seems completely justified. The process of negotiation does not take place with all the cards face up on the table. To appear unconcerned by an opponent's strong point is a well recognised negotiating stance. To construe this as a firm representation would be quite contrary to every day practice, particularly when, on Morris Q.C's own evidence, he, for his part, did not really regard the letter as particularly significant, notwithstanding he was putting it to Winneke Q.C. as a real embarrassment to his case. See Poseidon Ltd v. Adelaide Petroleum NL (1991) 105 ALR 25 at 26. The next question is whether the first and second of the alleged representations summarized above were made out, that is to say, those relating to Mr Justice Hedigan's statement and his affidavit of discovery. In the first place, it should not be 8. overlooked that the affidavit of discovery was not in absolute terms. It acknowledged, explaining the circumstances, that some documents had been lost, which might have included discoverable documents. In precise terms, Mr Justice Hedigan swore: "Moreover, on an accommodation transfer numerous documents possibly including documents concerning Murray Valley Fruit [a reference to the transaction in suit] were lost or misplaced." In the light of the terms of the affidavit of discovery, it cannot be said that the second misrepresentation alleged was made out. There was not a representation that "the documents discovered were in full compliance with the obligation to discover", but an acknowledgment that full compliance might not have been achieved. Had the evidence shown that this part of the affidavit of discovery amounted to a ploy to avoid the proper discharge of legal obligations to discover, it may be that a case for some relief might have been made out. But nothing like this was shown. Indeed, the trial Judge recorded that "Gray & Winter do not say that the failure to discover was fraudulent. They do not challenge [Mr Justice] Hedigan's evidence that at the time he gave discovery he had forgotten that he had ever written the letter. I accept his evidence that he gave discovery according to the best of his recollection at the time." This in itself would negative misrepresentation even if the affidavit of discovery had been unqualified, since it would then have represented only the belief of the deponent on the relevant questions. 9. Even if a case had been made out of a misrepresentation in respect of the completeness of discovery, the appellants would still have confronted the insuperable problem of showing any relevant reliance upon that misrepresentation. For the letter had come to light prior to settlement, so that it was plainly evident and clearly appreciated by the appellants' advisers that complete discovery had not been given. The appellants' argument, as put to us, really is that the lateness of disclosure of the letter impeded them in their assessment of the strengths and weaknesses of their case. If they suffered damage in this way, it resulted from what has been held to have been an honest error in compliance with interlocutory orders, and had nothing to do with the alleged misrepresentation pleaded. It would be impossible to sustain the appeal, even if it were otherwise made out, upon a ground so different from that asserted and fought at the hearing. But the appellants' principal contention related to the statement of Mr Justice Hedigan. Although the trial Judge seems clearly to have been of the view that the letter to the bank was not wholly or necessarily inconsistent with the appellants' case, the argument put on the appeal was that the letter demonstrated Mr Justice Hedigan's statement to have been objectively erroneous in vital respects. We need not pause to analyse the assertions in the letter and in the statement to resolve this question. The trial Judge expressly found, after hearing Mr Justice Hedigan cross-examined in detail and at length: "I also accept his evidence that the statements made in his witness statement 10. accorded with his recollection of the facts at the time the witness statement was prepared." The question is whether the filing and service of the statement conveyed any representation beyond a representation that it was the then intention of Mr Justice Hedigan to give evidence in chief in the terms set out in the statement, and that he genuinely believed evidence to that effect would be true. There is clear authority that assertions made in a pleading do not convey a representation of the truth of the facts alleged in an objective sense, but rather that this is the case genuinely put forward: Laws v. Australian Broadcasting Tribunal (1990) 170 CLR 70 at 85-86, 98; ies _v ommonwealth ° ustrali (1991) 24 NSWLR 691 at 697-698. But the appellants claim a statement filed and served in relation to a proceeding does convey the further representation that the facts asserted in it are objectively true. The context within which this question must here be considered is the context of negotiations for the settlement of an action in which virtually all the facts asserted by the claimants were denied by the defendants. Where the objective truth lay in the matter was, at least in very large measure, actually known to the parties. What the negotiations were about was not where objective truth lay, but whether there was a prospect, and how great that prospect was, that the court, if the matter proceeded, would find particular facts established. Viewed from this perspective, there would have been no relevance 11. in a representation as to the actual truth of the allegations made. That was not the issue. The relevant representation was that the witness would give evidence to a particular effect and, as it would have a bearing on the reality of the party's contention and the acceptability of the evidence, that his evidence would be genuinely put forward. These considerations confirm the view, which would appear to be suggested by the established law concerning the effect of pleadings, that the statement filed and served did not convey the representation alleged on behalf of the appellants. But even if the representation contended for was made, the proper conclusion from the matters just discussed is that it did not induce the settlement. What could have had that effect would have been a representation as to the evidence intended to be adduced. The last matter put in the appeal against the relief granted at the hearing was what was called the point under Masters v. Cameron (1954) 91 CLR 353, that is, that there was no final agreement without execution of the contemplated deed. On the evidence accepted by the Judge, there is no substance in this point. It should be remembered that counsel were negotiating to settle an action listed for immediate hearing. Only a concluded agreement could be an acceptable settlement, unless in unusual circumstances, and had counsel intended a departure from the normal course of the settlement of litigation, express reference to that intention was to be expected. There is no suggestion of 12. any mention of a doubt about the finality of the settlement, either between counsel, or in the notification of the settlement to the Court. No ground of appeal was argued in relation to the nature of the relief granted. The only other question raised upon the appeal related to the interlocutory orders made for confidentiality. After this Court had declined to make any like order in the appeal, this question became largely (but not entirely) academic, and counsel for the first respondents withdrew his opposition to the grant of leave to appeal and to the appeal on this point. In the circumstances, we think leave should be granted and the appeal allowed so as to set aside the confidentiality orders. But the Court makes it clear, lest there be misunderstanding, that the orders may well have been appropriate initially, until the facts were explored. What was not appropriate was their continuance after the circumstances were clarified. The reasons why the orders must then be seen to have been unjustified are the same reasons for which this Court, earlier in this appeal, declined to make similar orders. We desire to add to those reasons, in which Australian Broadcasting Commission y. Parish (1980) 29 ALR 228 was cited, only a reference to Alexander vy. Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 at 689. For these reasons, leave to appeal is granted in respect of the interlocutory orders for confidentiality, and those orders 13. are set aside, but otherwise the appeals are dismissed with costs. I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Court. Associate: Praliyppo. OxklGa_ Date: 17 October 1994 Counsel for the Appellants: Mr D.E. Grieve Q.C. with Miss D.M. Coulton Solicitors for the Appellants: Messrs Gray & Winter Counsel for the First Named Mr J.E. Middleton Q.C. Respondents: with Mr P.J. Jopling and Mr J. Tsalanidis Solicitors for the First Named Messrs Mahony Galvin Respondents: Rylah Counsel for the Third and Miss S.M. Cohen Fourth Named Respondents: Solicitors for the Third and Messrs Phillips Fox Fourth Named Respondents: Dates of hearing: 6 and 7 October 1994