Land and Environment Court of New South Wales CITATION : Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 3); The Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 2) [2010] NSWLEC 238 APPLICANT PARTIES : The Hills Shire Council RESPONDENT Ko-veda Holiday Park Estate Limited FILE NUMBER(S) : 40625 of 2007; 41019 of 2009 CORAM: Pain J KEY ISSUES: PRACTICE AND PROCEDURE :- whether evidence of settlement negotiations otherwise confidential under s 131(1) is admissible in costs hearing under s 131(2)(h) exemption in the Evidence Act 1995 Civil Procedure Act 2005 s 30(4) LEGISLATION CITED: Evidence Act 1995 s 131, s 135 Industrial Relations Act 1996 Land and Environment Court Act 1979 s 34 Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 Burgess & Ors v Mount Thorley Operations Pty Ltd [2003] NSWIR Comm 432 CASES CITED: Silver Fox v Lenards Pty Ltd (No 3) [2004] FCA 1570; (2004) 214 ALR 621 Taylor v Port Macquarie-Hastings Council [2010] NSWLEC 142 Tony Azzi (Automobiles) Pty Ltd v Volvo Car Australia Pty Ltd [2007] NSWSC 375; (2007) 71 NSWLR 140 DATES OF HEARING: 15 November 2010 EX TEMPORE JUDGMENT DATE : 15 November 2010 APPLICANT Mr A Galasso SC SOLICITOR The Hills Shire Council LEGAL REPRESENTATIVES: RESPONDENT Mr T Robertson SC SOLICITOR Hones La Hood JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES PAIN J 15 November 2010 40625 of 2007 Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 3) 41019 of 2009 The Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 2) EX TEMPORE JUDGMENT 1 Her Honour: The determination of costs now arises in these lengthy proceedings. Both parties seek costs orders. The Respondent seeks to rely on oral communications in settlement negotiations otherwise inadmissible under s 131(1) of the Evidence Act 1995 on the basis these can be admitted as an exception under s 131(2)(h) which provides: (h) the communication or document is relevant to determining liability for costs 2 On 3 August 2007 the proceedings were stood over to allow the parties to engage in informal negotiations. According to subsequent correspondence between the solicitors referred to in submissions there was some uncertainty about whether mediation had been ordered by the Court on 3 August 2007 but it is clear from the Court file that it had not. The Applicant accepts today that the Court did not order mediation. It opposes the evidence being admitted because the parties agreed that whatever occurred at the negotiations was confidential so that it would now be unfairly prejudicial for those communications to be revealed and they should be excluded under s 135 of the Evidence Act. It submits that the process was effectively a mediation, although not formalised and conducted without a mediator. 3 The Respondent argues that s 131(2)(h) renders admissible what is inadmissible under s 131(1)(a) of the Evidence Act. The authorities of Silver Fox v Lenards Pty Ltd (No 3) [2004] FCA 1570; (2004) 214 ALR 621 and Burgess & Ors v Mount Thorley Operations Pty Ltd [2003] NSWIR Comm 432 support a finding of admissibility of settlement negotiations under s 131(2)(h) as an exception to s 131(1). Tony Azzi (Automobiles) Pty Ltd v Volvo Car Australia Pty Ltd [2007] NSWSC 375; (2007) 71 NSWLR 140 addresses the operation of Pt 4 of the Civil Procedure Act 2005 (the CP Act) particularly s 30(4) which maintains the confidentiality of mediations which the Court orders. There is no similar protection for other types of settlement negotiations under the CP Act. The negotiations conducted in person in this case were not relevantly different from what would be referred to in correspondence between the parties, which correspondence would generally be admissible under s 131(2)(h). Finding 4 Whether communications made in the course of settlement discussions are admissible under s 131(2) does not appear to have received much judicial consideration. No decision of this Court was referred to other than Taylor v Port Macquarie-Hastings Council [2010] NSWLEC 142, Class 3 proceedings where the issue arose of whether communications at a conciliation conference held pursuant to s 34 of the Land and Environment Court Act 1979 (the Court Act) should be admitted subsequently at a costs hearing. Section 34 provides that anything said at a conciliation conference is not admissible as evidence unless both parties agree. Biscoe J referred to similar provisions in s 30(4) of the CP Act in relation to mediation. In applying the rules of evidence by analogy, Biscoe J held that there was no waiver of privilege and further that he would not allow the evidence to be admitted because of its prejudicial nature, as provided for under s 135 of the Evidence Act. 5 Section 30(4) of the CP Act was considered in Azzi by Brereton J who determined that Pt 4 of the CP Act ought apply to prevent evidence of what occurred at a court ordered mediation being admitted as evidence in a costs application in reliance on s 131(2)(h) of the Evidence Act. His Honour's reasoning in relation to s 30(4) of the CP Act is useful to consider at [18] – [19] of his judgment. 18 … Another way of looking at it is that, while the Evidence Act contains a general provision excluding evidence of settlement negotiations, with an exception to that general exclusion where the negotiations are relevant to costs, Civil Procedure Act s 30(4) is a more specific provision directed specifically to negotiations in a mediation session, excluding evidence of such negotiations, without any corresponding exception. When it applies, the later and more specific provision prevails over the more general one. 19 The view that I take of the relationship between Evidence Act, s 131(2)(h), and Civil Procedure Act, s 30(4), is substantially the same as that expressed by Palmer J in Rajski v Tectran Corporation Pty Limited [2003] NSWSC 476. His Honour identified (at [11]) that the purpose of such provisions included avoiding the circumstance that a mediation, rather than affording a haven for litigation in which parties negotiate frankly and informally towards settlement of their dispute, instead become another area of conflict, generating further proceedings in Court. Then his Honour said, (at [16])]: It seems to me that s 131(1) and (2) of the Evidence Act are concerned with the exclusion from and admission into evidence generally of matter which may otherwise attract the principles of the common law relating to "without prejudice" communications between parties made for the purposes of negotiating settlement; they are not intended to apply to the special process of settlement negotiation provided by a mediation ordered by the Court under the provisions of Pt 7B of the Supreme Court Act. Part 7B contains its own Rules as the evidentiary use which may be made of what is said and done in and for the purpose of settlement negotiations in a mediation under that Part and, in my view, those Rules override the general provisions of s 131 of the Evidence Act. 6 Brereton J distinguished Silver Fox and Burgess on the basis that there was no section equivalent to s 30(4) of the CP Act in force in the statutory regime considered in those matters. His Honour stated at [27] that he need not consider the alternative argument before him of whether the evidence should be excluded as a matter of discretion under s 135 of the Evidence Act as the plaintiffs embarked on the mediation in the belief that evidence of what was said could not subsequently be given, as provided for in the mediation agreement. He did not consider this argument was raised in Silver Fox or Burgess. 7 In Silver Fox, Mansfield J was considering whether evidence of what occurred at a mediation should be admitted under s 131(2)(h) of the Evidence Act in argument on a costs application. The parties had engaged in voluntary mediation subject to a mediation agreement providing for confidentiality of communications at the mediation. At [33] and following his Honour notes that the making of offers during mediation will be relevant to the determination of costs and refers to cases where offers which are "without prejudice" have been admitted under s 131(2)(h). He cites Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 at [17]-[18] on the policy of s 131 as twofold in the context of "without prejudice" communications. Mansfield distinguished Safeway as dealing with whether the offers were relevant rather than directly arguing about admissibility by reason of the agreement to preserve confidentiality. At [36] he sets out his view of the effect of s 131(1) and s 131(2)(h) as follows: … Section 131(1), subject to its exceptions, gives effect to the policy of ensuring the course of negotiations – whether private or by mediation – are not adduced into evidence for the purpose of influencing the outcome on the primary matters in issue. Clearly, it is in the public interest that negotiations to explore resolution of proceedings should not be inhibited by the risk of such negotiations influencing the outcome on those primary issues. It is equally in the public interest that negotiations should be conducted genuinely and realistically. The effect of s 131(2)(h) is to expose that issue to inspection when costs issues only are to be resolved. There is no apparent public interest in permitting a party to avoid such exposure by imposing terms upon the communication, whether by the use of the expression 'without prejudice' or by a mediation agreement. 8 Mansfield J did not consider at [37] the terms of the mediation agreement providing for confidentiality per se to demonstrate prejudice such as could arise under s 135 of the Evidence Act, and he stated he would be reluctant to accede to such a general proposition. No circumstances suggesting that exposure of settlement negotiations may be unfairly prejudicial were otherwise provided. He therefore considered the evidence should be admitted under s 131(2)(h) of the Evidence Act. The expectation of the parties in Silver Fox was that the mediation would be confidential. 9 In Burgess, Schmidt J considered the regime for conciliation conferences under the Industrial Relations Act 1996 and the costs provisions to determine whether settlement offers at a conciliation conference ought be admitted. There was no section equivalent to s 34 of the Court Act in place in relation to conciliation conferences. She considered at [40] that the conduct of parties at a conciliation conference may ultimately become relevant to cost issues and that there is an inherent risk in rejecting any offer of settlement including one made in conciliation where the parties do no better than what was offered. The risk arises where one party seeks to rely on the offer being made subsequently when costs fall to be determined. She determined the exception in s 131(2)(h) should apply to allow in the evidence of settlement offers in the costs hearing. 10 None of these authorities is binding on me. This is the first time I am aware that the application of s 131(2)(h) has arisen in this context in this Court. There is no statutory protection of confidentiality such as s 30(4) of the CP Act or s 34 of the Court Act for the settlement negotiations between the parties which took place in this matter. 11 The terms of s 131(1) provide that evidence of settlement negotiations cannot be adduced in proceedings except in defined circumstances including those defined in s 131(2)(h). Section 131(2)(h) is stated in wide terms. Where parties participate in settlement negotiations on the basis these are confidential and the only prejudice relied on for the purposes of s 135 of the Evidence Act is that the negotiations were confidential so that the exception ought not apply, the exception in s 131(2)(h) will be relatively easily excluded from application. The expectation of confidentiality of settlement negotiations is confirmed by s 131(1) so that parties' specific agreement to that effect is no more than a recognition of what the Evidence Act otherwise provides in s 131(1). The Act has been drafted to provide for a specific exemption in relation to the admissibility of evidence of settlement negotiations for the purposes of determining costs. 12 The scheme of the Evidence Act suggests that the exemption in s 131(2)(h) should be applied in the circumstances of this case where no specific additional prejudice is relied on by the Applicant. This approach is informed by the observations of Mansfield J in Silver Fox and Schmidt J in Burgess outlined above. Azzi is addressing the provisions in s 30(4) of the CP Act which do not apply here. 13 The evidence in the affidavits and correspondence relating to the settlement negotiations ought be read in these costs applications. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.