CATCHWORDS DISCOVERY AND INSPECTION OF DOCUMENTS - different proceedings in which respective claims for loss overlap - partial settlement of one proceeding - whether settlement agreement and related documents discoverable in other proceedings - claims as to privilege from productions: common interest privilege, privilege of "without prejudice" negotiations - significance on all claims of Evidence Act 1995 (Cth) - whether order for production necessary Evidence Act 1995 (Cth) ss 118, 119, 126, 131(1) Federal Court Rules O 15 rr 7A, 8, 11, 15 Supreme Court Rules 1987 (SA) R 58 Manser v Spry & Anor (1994) 124 ALR 539 D'Angola v Rio Pioneer Gravel Co Pty Ltd & Anor (1979) 1 NSWLR 495 Monroe Schneider Associates (Inc) & Anor v No 1 Raberem Pty Ltd & Ors (1991) 104 ALR 397) Attorney-General for the Northern Territory v Maurice & Ors (1986) 161 CLR 475 Hong Kong Bank of Australia Ltd v Murphy & Ors [1993] 2 VR 419 Rush & Tompkins Ltd v Greater London Council & Anor [1989] 1 AC 1280 at 1299 Buttes Gas and Oil Co. & Anor v Hammer & Anor (No.3) [1981] 1 QB 223 at 267 Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd unreported on relevant point No. SG 30 of 1995 ROBERT & LORNA ABROOK & ORS v GREG PATTERSON & ORS, WILLIAM JOHN EAST as Administrator of the Family Security Friendly Society & PATRICK FINAN & ORS Branson J Adelaide 30 August 1995 IN THE FEDERAL COURT OF AUSTRALIA) ) SOUTH AUSTRALIA DISTRICT REGISTRY) No. SG 30 of 1995 ) GENERAL DIVISION ) BETWEEN: ROBERT & LORNA ABROOK & ORS Applicants - and - GREG PATERSON & ORS First to Seventh Respondents - and - WILLIAM JOHN EAST as Administrator of the Family Security Friendly Society Eighth Respondent - and - PATRICK FINAN & ORS Cross-Respondents REASONS FOR DECISION CORAM: Branson J PLACE: Adelaide DATE: 30 August 1995 The first to seventh respondents ("Horwaths") by notice of motion dated 18 August 1995 seek orders:- 1. That the applicants produce for inspection by Horwath & Horwath the complete originals of the documents referred to (sic) part 3 of the first schedule to the applicants' updated list of documents dated 8 August 1995. 2. That the applicants provide discovery to Horwath & Horwath of all documents that are now, or have been, in the possession, custody or power of any of the applicants relating to any settlement recorded or evidenced by the documents referred to in paragraph 1 of this notice of motion. The documents referred to in part 3 of the first schedule to the applicants' updated list of documents dated 8 August 1995 are described in that updated list as:- "Settlement agreements between the Applicants or some of the Applicants and Bain and Co and Police Credit Union". The settlement agreements referred to in the applicants' updated list of documents relate to Action No.1173 of 1993 in the Supreme Court of South Australia ("the Supreme Court proceedings") between certain South Australian investors in the Family Security Friendly Society ("FSFS") as plaintiffs ("the Supreme Court plaintiffs") and a number of parties including Bain & Company Limited, Bain & Company Investors Services Limited and the Police Credit Union (which three are together described hereafter as "the third parties") as defendants. In the Supreme Court proceedings the plaintiffs seek recovery of amounts invested by them in FSFS which were lost upon the winding up of FSFS. It is accepted before me that there is overlap between the amounts claimed as loss and damage in the Supreme Court proceedings and the amounts sought to be recovered by the applicants, or some of them, in these proceedings. The compromise of the claims of the Supreme Court plaintiffs against the third parties in the Supreme Court proceedings suggests that the applicants in these proceedings, or some of them, may have received some moneys from the third parties in mitigation of the loss sought to be recovered in these proceedings. Such amounts may not, of course, be recovered twice (Manser v Spry & Anor (1994) 124 ALR 539; D'Angola v Rio Pioneer Gravel Co Pty Ltd & Anor (1979) 1 NSWLR 495; Monroe Schneider Associates (Inc) & Anor v No 1 Raberem Pty Ltd & Ors (1991) 104 ALR 397). The applicants have foreshadowed that they will argue during the hearing of this matter that the amounts paid under the settlement agreements were not received in mitigation of the loss sought to be recovered in these proceedings. The proper construction of the settlement agreements will be an issue for determination of the trial judge. He will be required to determine whether the monies received from the third parties are to be taken into account in determination of the applicants' claim for damages in these proceedings. Despite the inclusion in the updated list of reference to the settlement agreements, the applicants initially asserted that such agreements did not relate to the matters in question in these proceedings and were not discoverable. The applicants no longer seek to maintain that position. They have by letter dated 24 August 1995 from Messrs Fisher Jeffries to Messrs Kelly & Co given informal discovery as follows:- 1. Deed of settlement dated 28 October 1993 between the South Australian Members and Bain & Company Limited and others (excluding paragraph 7 which is irrelevant). 2. Settlement agreement between certain of our clients and Police Credit Union dated June 1995. 3. Letter from Bain & Company Limited to the members FSFS Recovery Fund dated 29 October 1993. 4. Letter from FSFS Recovery Fund Committee to Bain & Company Limited undated. 5. Letter from Bain & Company to members of Recovery Fund dated 20 December 1993. 6. Letter from Bain & Company Investors Services Limited to FSFS Recovery Fund dated 29 October 1993. The applicants assert, however, that the documents so discovered are privileged from production. The claim for discovery made by paragraph 2 of the notice of motion is technically too wide. The obligation of the applicants is to give discovery of documents "relating to any matter in question" between the parties. In view of the supplementary informal discovery given by the applicants referred to above I am not satisfied that there are presently grounds for a belief that some document or class of document relating to any matter in question in the proceedings is in the possession, custody or power of the applicants but not discovered (Federal Court Rules O15 r8). I do not understand there to be any complaint in respect of the informal nature of the discovery given. One of the settlement agreements makes reference to a letter of advice provided to the Supreme Court plaintiffs by, in effect, their solicitors. Horwaths seek discovery and production of that letter. In my view it has not been shown to be relevant to any matter presently in question in this action. It may be that at some time in the future a question will arise in this action to which the letter does relate. It will then be discoverable. The letter is one which prima facie attracts legal professional privilege (s118 Evidence Act 1995 (Cth) - "the Evidence Act"). It may be arguable at some time in the future that s126 of the Evidence Act has an application to the letter so as to allow evidence of its contents to be adduced in evidence. I am not satisfied that it has been so established before me. To the extent that it is presently relevant for me to do so, I make it clear that I do not consider that there has been to date any actual or implied waiver of legal professional privilege in respect of that letter (Attorney-General for the Northern Territory v Maurice & Ors (1986) 161 CLR 475; Hong Kong Bank of Australia Ltd v Murphy & Ors [1993] 2 VR 419). No order will be made pursuant to paragraph 2 of the notice of motion. Whilst asserting that the documents are privileged from production, the applicants have been prepared to allow disclosure to Horwaths on certain conditions of certain of the informally discovered documents in their entirety and of others with certain deletions (e.g. the dollar amounts referred to in the settlement agreements). Horwaths seek production of all of the documents without deletions. The parties in this matter, which was commenced in the Supreme Court of South Australia, are under a continuing obligation to provide full discovery (Supreme Court Rules 1987 (SA) Rule 58 and Federal Court Rules O15 r7A). Ordinarily upon discovery being given by one party, subject to any question of privilege which may arise, the opposing party may expect the documents so discovered to be produced for inspection (Federal Court Rule O15 r11). However, as Mr Blue, who appeared on the notice of motion for the applicants in the substantive proceedings, pointed out, O15 r15 of the Federal Court Rules provides that an order for the production of a document will not be made unless the Court is satisfied that the order is necessary at the time when the order is made. I deal first with the claims for privilege made in respect of the documents. Privilege of without prejudice negotiations It is contended on behalf of the applicants that the documents are privileged from production as they constitute without prejudice negotiations between the parties to the settlement agreements. As was pointed by Lord Griffiths in Rush & Tompkins Ltd v Greater London Council & Anor [1989] 1 AC 1280 at 1299 "[t]he 'without prejudice' rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish." The extent of the without prejudice rule in this Court is now governed by s131(1) of the Evidence Act. Section 131(1) provides as follows:- "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." Documents numbered 3 and 6 in the letter of informal discovery have been provided to me for my inspection. Although they each bear a date which is later than that appearing on the deed of settlement which is the document numbered 1 in the letter of informal discovery, it is plain upon reading them that each of them is a document which was prepared in connection with an attempt to negotiate the dispute in fact settled as evidenced by that deed of settlement. The explanation for the dating of the respective documents in unclear. It has not been established, however, that any other of the documents falls within the terms of s131(1). Neither of the settlement agreements is a "communication ... between persons in dispute ... in connection with an attempt to negotiate a settlement of the dispute" or a document that has "been prepared in connection with an attempt to negotiate a settlement of a dispute". Each of them records a completed settlement. Document numbered 5 in the letter of informal discovery was apparently brought into existence later than the date of the settlement agreement. It has not been established that either that document or the document numbered 4 in the letter of informal discovery falls within the terms of s131(1) of the Evidence Act. Even before the coming into operation of the Evidence Act the settlement agreements would not, in my view, have attracted the privilege which applies to protect genuine negotiations from being admissible in evidence: the documents in question evidence not negotiation but concluded settlements. It seems fair to conclude that the documents numbered 4 and 5 in the letter of informal discovery relate to one of the concluded settlements and not to negotiations. The applicants place reliance on the decision in Rush & Tompkins Ltd v Greater London Council & Anor. In that case it was not sought to be argued that the actual compromise reached between the plaintiff and the first defendant was privileged from production: the dispute in that case concerned the right of the second defendant to obtain discovery or production of documents evidencing the negotiations which took place leading up to the compromise of the action between the plaintiff and the first defendant. Common interest privilege The applicants also call in aid common interest privilege with respect to the document numbered 6 in the letter of informal discovery and in respect of one paragraph of the document numbered 2 in that letter. Brightman CJ considered common interest privilege at common law in Buttes Gas and Oil Co. & Anor v Hammer & Anor (No.3) [1981] 1 QB 223 at 267. He expressed the principle of law as follows:- "... if two parties with a common interest and a common solicitor exchange information for the dominant purpose of informing each other of the facts, or the issues, or advice received, or of obtaining legal advice in respect of contemplated or pending litigation, the document or copies containing that information are privileged from production in the hands of each." It may be that it is not necessary at common law that the two parties be represented by the same solicitor as long as their interests are close enough to be able to be so represented (Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd unreported on this issue - cited in Discovery by Matthews and Malek (1992) at p.181). The relationship between the Supreme Court plaintiffs and the third parties, or any of them, is not such as to give rise to common interest privilege at common law. Nor, in my view, is the relationship between the applicants and the third parties, or any of them. As common interest privilege is also a rule governing the admissibility of evidence, in this Court it is now necessary to give consideration to the Evidence Act. Section 119 of the Act provides as follows:- "119. Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of: (a) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or (b) the contents of a confidential document (whether delivered or not) that was prepared; for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party." The onus of establishing privilege from production is upon the party that asserts it. In this case the material before me does not satisfy me that the documents in respect of which common interest privilege is asserted were prepared for the dominant purpose of the plaintiffs in the Supreme Court proceedings, or the applicants in this case, being provided with professional legal services relating to the Supreme Court proceedings or these proceedings. Such documents relate to agreements intended to achieve settlement between the plaintiff and the third parties in the Supreme Court proceedings. I conclude that none of the documents attract common interest privilege. However, as set out above, I have concluded that the documents in respect of which such privilege is claimed do attract the privilege of without prejudice negotiations. Production I turn to consider whether an order for production of those documents in respect of which privilege cannot be established is necessary now. The hearing of this action has commenced. The hearing is concerned both with issues of liability and damages. I accept, and I do not think that it was suggested otherwise, that the documents may be relevant to the issue of the quantum of any damages that might be awarded should a finding on liability adverse to Horwaths be made in these proceedings. It may be necessary for counsel for Horwaths to cross-examine one or more applicants, and possibly other witnesses, with respect to the settlement reached between the Supreme Court plaintiffs and the third parties in the Supreme Court proceedings. The occasion for such cross-examination, as I understand it, may arise shortly. The applicants offered at the hearing of this motion to provide to Horwaths' solicitors, on a confidential basis, confirmation on an order of magnitude basis, of maximum amounts paid under the settlement agreements. I do not consider that this is a satisfactory answer to the claim of Horwaths for production of the settlement agreements. At the hearing of this motion counsel for Bain & Company Limited and Bain & Company Investors Services Limited ("the Bain companies") was granted leave to appear and place submissions before the Court. It was submitted on behalf of the Bain companies that, having regard to the various proceedings which are presently on foot arising out of the winding up of FSFS, it was appropriate for the confidentiality of the settlement agreements to be maintained. I am satisfied that this is so to the extent that the interests of justice allow. I do not consider that the interests of justice allow such documents to be kept from the legal advisers to Horwaths or from the person who instructs them. It was further suggested on behalf of the Bain companies that an order for production of the documents may result in the judge before whom this matter is being heard becoming disqualified from hearing related matters which are presently scheduled for hearing before him. It would be regrettable if this were to occur. However, I do not consider that it is a factor which I am entitled to take into account on this motion. In my view it is in the circumstances appropriate for an order for production to be made now - subject to appropriate arrangements as to confidentiality. I will hear counsel as to the appropriate orders to be made. I certify that this and the preceding pages are a true copy of the Reasons for Decision of Justice Branson. Associate: Dated: Counsel for the Applicants : Mr M Blue Solicitors for the Applicants : Fisher Jeffries Counsel for the Respondents : Mr J Bond Solicitors for the Respondents : Clayton Utz Counsel for the Interveners : Mr D Trim Bain & Company Limited Bain & Company Investors Services Limited Solicitors for the Interveners : Mouldens Hearing Date : 23 August 1995