FEDERAL COURT OF AUSTRALIA Coshott v Burke [2013] FCA 513 Citation: Coshott v Burke [2013] FCA 513 Parties: ROBERT GILBERT COSHOTT v JOHN CHRISTOPHER BURKE and THE OFFICIAL TRUSTEE IN BANKRUPTCY File number: NSD 1208 of 2009 Judge: FARRELL J Date of judgment: 27 May 2013 Catchwords: EVIDENCE – Federal Court Rule 2011 (Cth) 24.20(6) – documents produced under subpoena – objection to inspection by a party – section 131(1) and 131(2)(h) Evidence Act 1995 (Cth) – whether document constitutes a communication in connection with negotiating a settlement – whether document prepared in connection with attempt to negotiate settlement Legislation: Bankruptcy Act 1966 (Cth) s 155H Evidence Act 1995 (Cth) s 131 Federal Court Rules 2011 (Cth) r 24.20 Cases cited: ACCC v Australian Safeway Stores Pty. Limited (No 3) [2002] ATPR 41-901 Apotex Pty Limited v Les Laboratoires Servier (No. 5) [2011] FCA 1282 Barrett Property Group Pty Limited v Dennis Family Homes Pty Limited (No. 2) [2011] FCA 276 Brown v Commissioner of Taxation (2002) 119 FCR 269 First Capital Partners Pty Ltd v Sylvatech Ltd (2004) 186 FLR 266 Korean Air Lines v Australian Competition & Consumer Commission (No 3) [2008] FCA 701 Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 1352 Date of hearing: 23 May 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 26 Counsel for the Applicant: Self Represented Counsel for the First Respondent: Ms King Solicitor for the First Respondent: Sally Nash & Co Counsel for the Second Respondent: The Second Respondent did not appear IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1208 of 2009 BETWEEN: ROBERT GILBERT COSHOTT Applicant AND: JOHN CHRISTOPHER BURKE First Respondent THE OFFICIAL TRUSTEE IN BANKRUPTCY Second Respondent JUDGE: FARRELL J DATE OF ORDER: 27 MAY 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The first respondent's interim application stamped as filed on 20 May 2013 be dismissed. 2. The applicant, Mr Coshott, must not have access to the documents dated 1 March 2006 (file note signed MEB), 26 March 2012 (letter from Dr Steven Hock) and 6 June 2012 (letter from Dr Deirdre Horne) for inspection. 3. The first respondent pay the applicant's costs of the interim application filed 20 May 2013 as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1208 of 2009 BETWEEN: ROBERT GILBERT COSHOTT Applicant AND: JOHN CHRISTOPHER BURKE First Respondent THE OFFICIAL TRUSTEE IN BANKRUPTCY Second Respondent JUDGE: FARRELL J DATE: 27 MAY 2013 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 25 February 2013, Buchanan J made orders in an action by Robert Gilbert Coshott (Mr Coshott) seeking to remove his trustee in bankruptcy, John Christopher Burke (Mr Burke). The petition for Mr Coshott's bankruptcy was made in June 2009 and there appears to have been a complex web of litigation since then of which the proceeding before Buchanan J was but one. 2 The first order made by Buchanan J on 25 February 2013 permitted Mr Burke to retire as the trustee of Mr Coshott's bankrupt estate. Order 2 provided as follows: The cost of this application be a cost of the bankruptcy administration from 27 October 2009 when the claim was commenced, to 14 December 2012, when the amended statement of claim was filed. 3 By an interim application dated 3 May 2013, Mr Coshott sought orders that: 1. Order 2 made on 25 February 2013 be revoked. 2. John Christopher Burke to pay the costs of and incidental to these proceedings without recourse to or claim upon the bankrupt estate of Robert Gilbert Coshott. 3. The trustee of the bankrupt estate of Robert Gilbert Coshott shall not retain Sally Nash or James T Johnson to act for him in regard to the bankrupt estate of Robert Gilbert Coshott. 4. Costs. 4 On 9 May 2013, a subpoena was issued to the Inspector General in Bankruptcy (Inspector General) at the request of Mr Coshott. The subpoena sought: All documents and/or records in your power, custody, or possession relating to the deregistration of John Christopher Burke as a registered trustee under the Bankruptcy Act 1966. 5 By an interim application dated 20 May 2013, Mr Burke sought interim orders prohibiting Mr Coshott from having access to nominated documents produced by the Inspector General and costs of the application. The hearing of this application took place before me on 23 May 2013 and these reasons have been rendered under pressing time constraints due to the need to accommodate other aspects of the timetable of this litigation. 6 Mr Burke does not consent to Mr Coshott having access to the documents referred to in Mr Burke's interim application. In relation to all but three of those documents, Mr Burke's objection is on the basis that those documents contain evidence of settlement negotiations entered into between Mr Burke and the Inspector General who were involved in a dispute at the time those documents were written: see [3] of the affidavit of Daniela Rose Favio dated 17 May 2013 (Ms Favio's Affidavit), which supports Mr Burke's interim application. 7 Counsel for Mr Burke told the Court that the Inspector General has advised her instructing solicitors that the Inspector General has waived privilege in the bundle of documents in an envelope marked "privileged" (being all of the documents referred to in the interim application) which have been collated by solicitors for Mr Burke. 8 Based on Mr Coshott's affidavit supporting his application of 3 May 2013, it appears that: a. The Inspector General issued to Mr Burke a "show cause" notice under s 155H of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) on 26 July 2011, thus commencing an involuntary deregistration process. The Inspector General then moved to convene a committee pursuant to s 155H. b. On 4 May 2012, Mr Burke applied to the Federal Magistrate's Court (now known as the Federal Circuit Court) seeking to restrain the Inspector General from completing the process. These proceedings were SYG 980/2012. The proceedings were dismissed on 8 May 2012. c. On 9 May 2012, the Inspector General scheduled the committee to meet on 30 May 2012. d. On 25 May 2012 another application (SYG 1136/2012) was commenced by Mr Burke to restrain the Inspector General and other members of the committee from proceeding with the involuntary deregistration. These proceedings were adjourned on several occasions until they were finally heard on 17 October 2012 and were stood over for a further hearing on 14 December 2012. e. Reserved judgment dismissing the application in SYG 1136/2012 was handed down on 8 February 2013. f. Justice Buchanan of this Court, in these proceedings 1208 of 2009, heard evidence on 22 November 2012 and 25 February 2013. There were directions hearings on 13 August 2012 and 21 December 2012. g. On 27 February 2013, Mr Burke was deregistered as a registered bankruptcy trustee. 9 I have used these dates deposed to in Mr Coshott's affidavit because written submissions by Counsel for Mr Burke indicate that there is no contention between Mr Burke and Mr Coshott as to the disputes between Mr Burke and the Inspector General. 10 Based on Mr Coshott's affidavit of 3 May 2013 supporting his application to set aside Order 2 made by Buchanan J on 25 February 2013, an element of Mr Coshott's complaint is that at all times during the proceedings from 26 July 2011 (Mr Coshott says on 10 occasions) neither Mr Burke nor anyone acting for him told the Court of the actions taken by the Inspector General. RELEVANT PRINCIPLES 11 Rule 24.20(6) of the Federal Court Rules 2011 (Cth) (Rules) permits a party or a person with a sufficient interest to object to a document being inspected by a party to a proceeding by notifying the Registrar in writing of the objection. The Registrar must then refer the objection to the Court for hearing and determination, as has happened here. 12 Section 131 of the Evidence Act 1995 (Cth) (Evidence Act) governs the exclusion of evidence of settlement negotiations. Relevantly to the arguments raised by Mr Coshott and Counsel for Mr Burke before me, s 131 provides: Exclusion of evidence of settlement negotiations (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 the dispute. (2) Subsection (1) does not apply if: ……. (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 (h) the communication or document is relevant to determining liability for costs; ……. (5) In this section: (a) a reference to a dispute is a reference to a dispute of a kind in respect of which relief may be given in an Australian or overseas proceeding: and .……. 13 Counsel for Mr Burke submitted that the scope of the privilege under s 131 is not confined to attempts to settle the current proceedings and relies on the analysis of Jacobson J in Korean Air Lines v Australian Competition & Consumer Commission (No 3) [2008] FCA 701 at [67]. I consider that this paragraph, read in the context of paragraphs [68] and [70], is directed at the proposition that the privilege may extend to a situation where litigation has not yet commenced. However, it is clear that Jacobson J does accept the proposition that the privilege applies even where it is claimed to resist disclosure of settlement negotiations in a different dispute: see paragraph [71]. See also First Capital Partners Pty Ltd v Sylvatech Ltd (2004) 186 FLR 266 at [28]–[37]. Justice Campbell of the Supreme Court of New South Wales rejected both the proposition that s 131 applies only in litigation between the people who were in dispute, and the proposition that once the settlement has been concluded the rationale of the privilege had gone and so the privilege itself had gone. 14 It is also now not controversial that the term "negotiate" does not require an element of attempt to compromise but rather an attempt to arrange for or bring about a settlement: see Barrett Property Group Pty Limited v Dennis Family Homes Pty Limited (No. 2) [2011] FCA 276 at [34]. This extends the scope of the common law privilege beyond what was previously known as "without prejudice" privilege: Brown v Commissioner of Taxation (2002) 119 FCR 269 at [99]. It is intended to embrace all communications which answer the description of being in connection with an attempt to negotiate the settlement of the dispute subject to certain specified exceptions: Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 1352 at [78]. The privilege may extend to correspondence which repeats offers previously made or foreshadows either concurrence or rejection of those offers or which seeks clarification of the precise ambit of an offer being made; it need not be expressed to be "without prejudice" if it is truly engaged in to attempt settlement: Apotex Pty Limited v Les Laboratoires Servier (No. 5) [2011] FCA 1282 at [24]–[27]. CONSIDERATION 15 While the interim application filed on 20 May 2013 and its supporting affidavit refer to the same documents, they do so with different numbering. For clarity, I will use the numbering in the interim application. At the hearing, it was unclear if all documents referenced by the interim application were in one of the two bundles marked "privileged", and Counsel for Mr Burke attempted to ensure that that bundle contained all and only documents relevant to the application during a brief adjournment in the presence of my Associate and Mr Coshott. However, it appears that there are a few documents which were listed more than once and one document appears to be in the bundle but is not referenced on the application. 16 Counsel for Mr Burke said that documents dated 1 March 2006 (file note signed MEB), 26 March 2012 (letter from Dr Steven Hock) and 6 June 2012 (letter from Dr Deirdre Horne) related to Mr Burke's medical condition. Mr Coshott accepted that he was aware of the medical issues faced by Mr Burke and his family and on that basis he did not press access to those documents. 17 Although Counsel for Mr Burke submitted that some of the documents in [3] of Ms Favio's Affidavit constitute consideration of offers made by Mr Burke, she did not identify to which documents this argument might apply. Counsel argued that even if the Inspector General has waived legal professional privilege in relation to some documents, as those documents were prepared in connection with an attempt to negotiate settlement of the dispute, they fall within s 131(1) of the Evidence Act. Where I consider that to be the case, I have included them in the list of documents which I consider fall within the ambit of s 131(1) referred in [19] below. 18 I do not consider that the following documents constitute a "communication … in connection with an attempt to negotiate a settlement" between parties to a dispute within s 131(1)(a) or a "document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute" within s 131(1)(b). f) 10 May 2012 – Letter Sally Nash & Co to AGS. This letter is dated two days after the Federal Magistrate's decision in SYG 980/2012 and complains about actions taken by the Inspector General. Not expressed to be without prejudice. g) 11 May 2012 – Letter AGS to Sally Nash & Co. This letter replies to the complaint raised in the letter of 10 May 2012. Not expressed to be without prejudice. n) 25 June 2012 – Draft affidavits of Mark Findlay in proceedings SYG 1136/2012. See comments in [20] and [21] below. w) 21 November 2012 – Draft letter from AGS to Sally Nash & Co. This letter is not expressed to be without prejudice. It is apparent that it is in a course of correspondence and its contents go beyond the subject matter of the proceedings. x), aa) 27 November 2012 – Email from Findlay to Rowling. 29 November 2012 - Email from Tom to Findlay. These emails are part of a chain which includes an email dated 28 November 2012 from Findlay to Tom and an email from Eastwood to Finlay which are items y) and z) in relation to which the privilege claims were not pressed. This ruling follows on from the ruling in relation to item w). bb), cc) 4 December 2012 – Letter from Sally Nash & Co to AGS. This letter is not expressed be without prejudice and it responds to the issues in the letter referred to in w). dd), ff) 4 December 2012 – Email from Eastwood to Findlay in a chain with email from Eastwood to Findlay dated 7 December 2012. Email dated 4 December 2012 from Findlay to Eastwood was not pressed. Duplicates. hh), jj), 10 December 2012 – Email from Eastwood to Findlay. Privilege was not pressed on this email. Duplicates. No number 10 December 2012 – unnumbered email from Eastward to Findlay about preparation of an agreed statement of facts mm) 10 December 2012 – Letter from AGS to Sally Nash & Co responding to 4 December 2012 letter referred to in bb) and cc). Letter not expressed to be without prejudice. oo) 20 December 2012 – Email from Findlay to Osborne, deals with issues referred to in w). pp) 6 February 2012 – Email from Eastwood to Findlay. This email deals with the question of costs in the event of a successful decision from the Federal Magistrate in SYG 1136/2012 and is accordingly a document within s 131(2)(h) of the Evidence Act. 19 I consider that the following documents do fall within the ambit of s 131(1) of the Evidence Act: c) 8 May 2012 – Letter Sally Nash & Co to AGS h) 15 May 2012 – Email from Boyce to Findlay i) 15 May 2012 – Letter Sally Nash & Co to AGS k) Undated draft letter from AGS l) 16 May 2012 – Email Boyce to Findlay m) 16 May 2012 – Letter AGS to Nash & Co p), q) 8 October 2012 – Email from Findlay to Heath and from Heath to Eastwood including all emails in that chain other than email from Eastwood to Tom and Findlay dated 5 October 2012 4:20 8 PM o) 8 October 2012 – Email from Findlay to Eastwood r) 8 October 2012 – Letter AGS to Sally Nash & Co s) 8 October 2012 – Email from Eastwood to Findlay t) 8 October 2012 – Email from Findlay to Eastwood u), v) 15 October 2012 – Letter from Sally Nash & Co to AGS. Duplicates ee) 7 December 2012 – Letter from Sally Nash & Co to AGS gg), ii) kk) 10 December 2012 – Email from Rowling to Findlay. All are duplicates nn) 11 December 2012 – Letter from AGS to Sally Nash & Co qq), ss), tt) Comprise emails and a letter all dated 20 December 2012. They are two emails from Rowling to Findlay, an email from Findlay to Rowling and a letter from AGS to Sally Nash & Co relating to an offer by Mr Burke not to appeal the Federal Magistrate's decision if AGS does not pursue costs. uu), vv A draft briefing note for the Inspector General and final briefing note dated 25 February 2013 20 The items referred to in n) of the interim application filed on 20 May 2013 are undated drafts of an affidavit of Mark Findlay in proceedings SYG 1136/2012. Ms Fazio's Affidavit at [5] states: I am informed and believed that the affidavit of Mark Findlay which was undated in the version produced in response to the subpoena, but subsequently sworn 25 June 2012 was subject to a confidentiality order in the proceedings in which it was read. 21 No further evidence was provided as to the status of the affidavit sworn by Mr Findlay. This document contains the "show cause" letter of 26 July 2011 and details of issues relevant to Mr Burke's administration of other bankrupt estates, but not Mr Coshott's. I do not consider that this document falls within the scope of s 131(1) of the Evidence Act. As Mr Coshott appears to be aware of the limits to which material obtained under subpoena or discovery may be put, I do not think it necessary to impose on him a confidentiality undertaking as a condition of access to the document. However, having regard to the nature of the material in the "show cause" letter, it may be appropriate for a Court in which any use of this material is sought to be made to impose a similar confidentiality order. 22 At the hearing, Mr Coshott submitted that if s 131(1) of the Evidence Act applied to any of the documents, then he sought to invoke the exceptions provided by s 131(2) and in particular paragraphs (g) and (h). 23 In so far as Mr Coshott sought to rely on s 131(2)(g), he is at a disadvantage because he has not had access to the documents and so he is not in a position to provide specific instances in which evidence given by Mr Burke before Buchanan J may have been misleading without evidence contained in the document the subject of the interim application. I have only had the benefit of Mr Coshott's affidavit in support of his application and Mr Burke's affidavit of 23 January 2013 filed in these proceedings. I note [82] of Mr Burke's affidavit in which he claims that none of his personal difficulties have impacted in any way upon the administration of the bankrupt estate of Mr Coshott. I am not satisfied that any of the documents which are the subject of the interim application bear directly on this issue. In the absence of specific examples in which s 131(2)(g) can be said to apply, I am not satisfied that Mr Coshott has made out this ground. 24 Counsel for Mr Burke argues that Mr Coshott cannot successfully invoke the exception in s 131(2)(h) because Order 2 made by Buchanan J on 25 February 2013 relates to Mr Burke's remuneration as trustee of the bankrupt estate, not to costs. Mr Coshott says that as Mr Burke has resigned as trustee of the bankrupt estate, and in the circumstances in which that occurred, costs are the heart of the issue to be determined on his application, which is in the same proceedings as the costs order was made. I agree, and consider that to characterise the issue as one of trustee's remuneration is wholly misconceived. Where a bankrupt is party to litigation, it is common (where costs are awarded in favour of another party) for the Court to order that they be paid from the bankrupt estate. It appears to me that this is what Buchanan J has done, in a short hand way. 25 Under s 131(2)(h) of the Evidence Act, any without prejudice communication, whether limited as to costs or not, will be admissible on the question of costs: see ACCC v Australian Safeway Stores Pty. Limited (No 3) [2002] ATPR 41-901. This is so notwithstanding any limitations which may previously have been imposed by the common law. 26 On that basis, though s 131(1) applies to the documents referred to in [19], Mr Coshott is entitled to inspect all of the documents the subject of Mr Burke's interim application with the exception of those documents listed at [16] to which Mr Coshott did not press access. Accordingly, Mr Burke's application is dismissed. Since Mr Coshott has been wholly successful, I consider that Mr Burke should pay his costs of this application and I will make orders accordingly. I certify that the preceding twenty-six (26) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell. Associate: Dated: 27 May 2013