New South Wales Supreme Court CITATION : Volpes v Permanent Custodians Limited [2005] NSWSC 111 HEARING DATE(S) : 17 February 2005 JUDGMENT DATE : 25 February 2005 JURISDICTION : Equity Division JUDGMENT OF : Windeyer J at 1 DECISION : Interlocutory injunction ordered CATCHWORDS : EQUITY - injunctions - whether offers of settlement headed "without prejudice" and "confidential - not to be disclosed to third parties" contained confidential information - threat to disclose to outside funder maintaining proceedings - motion to restrain disclosure the subject of judgment - substantive motion for stay based on abuse of process Consumer Credit Code (NSW) s72 LEGISLATION CITED : Contracts Review Act 1980 Coco v A N Clark (Engineers) Limited [1969] RPC 41 at 47 Langley v The Age Ltd [2000] VSC 378 CASES CITED : Rush & Tompkins Ltd v Greater London Council [1989] 1 AC 1280 Foulson & Phipps: Confidentiality, London Sweet & Maxwell 1966 Gurry: Breach of Confidence, Oxford University Press 1986 Gioacchino Volpes and Stacy Ann Volpes (Plaintiffs/Respondents) PARTIES : Permanent Custodians Limited (Defendant/Applicant) FILE NUMBER(S) : SC 1584/04 Mr D Grieve QC with him Mr A A Henskens (Plaintiffs/Respondents) COUNSEL : Mr T D Castle with him Mr A J Abadee (Defendant/Applicant) Middletons (Plaintiffs/Respondents) SOLICITORS : Gadens (Defendant/Applicant) LOWER COURT JURISDICTION : - 6 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J FRIDAY 25 FEBRUARY 2005 1584/04 GIOACCHINO VOLPES & ANOR V PERMANENT CUSTODIANS LIMITED JUDGMENT 1 By notice of motion filed on 15 February 2005, the defendant, Permanent Custodians Limited (Permanent) seeks an interlocutory order restraining the plaintiffs from providing copies of or otherwise disclosing to Liberty Financial Pty Limited (Liberty) or any associate of that company the terms of certain correspondence between the solicitors for the plaintiffs in this action, Gioacchino Volpes and Stacy Ann Volpes (Volpes) and the solicitors for Permanent. The simple facts relevant to this matter are these: 2 As between plaintiffs and defendant: (a) Volpes borrowed $412,000 from Permanent; (b) the loan agreement was a credit contract within the Consumer Credit (NSW) Code ; (c) the agreement entitled Permanent to charge a deferred establishment fee of 4% in certain circumstances on discharge; (d) the loan was repaid in full and the deferred establishment fee was paid; (e) Volpes claim that for various reasons the deferred establishment fee was unreasonable pursuant to s72 of the Consumer Credit Code and further it was unjust pursuant to the Contracts Review Act 1980 ; (f) the fee charged was $16,480. The claim is for that amount and interest and costs. What is extraordinary is that this action should be in this Court, but there are obviously reasons for this far beyond the actual money claim. The facts on the motion are as follows: (a) the plaintiffs, Mr & Mrs Volpes are being fully funded in this action by Liberty. The funding agreement is a confidential exhibit, but parts of it were referred to in open court; (b) Liberty has full control of the action, but no financial interest in the proceeds other than an entitlement to any costs recovered. In other words it is an agreement for maintenance but not a champertous agreement; (c) Under the agreement the action cannot be settled without the consent of Liberty; (d) Permanent is the trustee of certain lending trusts which make loans originated by Bluestone Group Pty Limited. The loan to the plaintiffs was one of these. Bluestone and Liberty are loan originators operating in what is described in evidence as the sub-prime market. They are the largest lenders in that market, obviously in competition with each other; (e) On 2 December 2004, Permanent filed a notice of motion seeking orders for stay of the proceedings, or in the alternative that Liberty be restrained from funding the plaintiffs. In the further alternative, Permanent seeks security for costs. That motion has not been heard; (f) Permanent has made an offer of settlement in a letter headed: "Without prejudice save as to costs" "Confidential – not to be disclosed to any third party". 3 The solicitors on the record for the plaintiffs advised the solicitors for Permanent that they intended to disclose the offer to Liberty. As a result Permanent filed this motion. It would, of course, have been desirable for the stay application to be heard at the same time as this motion, the stay being sought on the basis of abuse of process, but that was not the course taken and it has become necessary to decide the question on the second motion separately, albeit on an interlocutory basis. Principles 4 It is necessary to bear in mind the difference between confidential information and documents which cannot be put into evidence. Correspondence marked "without prejudice" containing offers to settle court proceedings is not admissible in evidence. No authority was put forward by counsel to support the proposition that such offers could not be disclosed to non-parties. In fact, of course, they are disclosed all the time. Parties may need to disclose them to lenders and other advisers. That does not mean they can be disclosed to the world at large. 5 One question is whether the placing on correspondence of the words "confidential – not to be disclosed to any third party" clothes the correspondence with some special protection so that a restraint should be ordered. 6 There is no contract so there is no contractual basis for restraint by way of injunction for breach of negative stipulation. No basis at law as opposed to equity has been put forward to justify the restraint sought, except perhaps that the proceedings are an abuse of process. That, however, must be determined separately. 7 The question for a final hearing is whether the information in the correspondence or letter of offer is confidential and should be protected in equity on the basis that disclosure will amount to a breach of confidence. As this is an interlocutory and not a final hearing the question now is whether there is a serious question to be tried on this issue. There are some procedural problems about the motion in that it appears not to be connected to any final relief claimed. Nevertheless the application for a stay as an abuse of process would in fact be in the nature of a final order if made. What is claimed to be confidential is not necessarily confidential information which equity will protect. An offer of settlement is not within the usual categories of confidential information conveniently listed in Gurry: Breach of Confidence Oxford University Press 1986 as trade secrets, personal confidences, artistic and literary confidences and government secrets. Inaccessibility may be a requirement of confidentiality but inaccessibility does not of itself make a communication confidential. 8 None of the cases relied upon by counsel for Permanent in the hearing before me directly supports its claim. In the most part they relate to admissibility into evidence, and in some cases the disclosure to other parties in litigation of without prejudice communications: for example Rush & Tompkins Ltd v Greater London Council [1989] 1 AC 1280. It is reasonably arguable that information in a settlement offer has the quality of confidence (see Coco v A N Clark (Engineers) Limited [1969] RPC 41 at 47) necessary to support an injunction. While the proceedings remain on foot Liberty has a real interest in them. In fact while the funding agreement remains in place the proceedings cannot be settled without disclosure and clearly there is a contractual obligation to disclose. Disclosure to the funder does not of itself entitle the funder to disclose to others. It is at least arguable that without prejudice correspondence in settlement negotiations is subject to some restraint as to its being published to the world at large as such publication would be contrary to the policy considerations which make such correspondence inadmissible in evidence. There is a lot to be said for the view expressed by Foulson & Phipps in Confidentiality London Sweet & Maxwell 1996 at p199 that: If no duty of confidentiality were owed at all, a party to 'without prejudice' negotiations would be at liberty to publicize them at large. This would be inimical to the object of such negotiations and contrary to the assumption on which they are ordinarily conducted. This passage appears below one which accepts that authorized funders, such as legal aid bodies have a proper interest in negotiations and that there may be an obligation to disclose offers to them. 9 My conclusion is this. The motion for a stay of proceedings as an abuse of process is not one which will clearly fail. The law as to maintenance of actions for a collateral purpose is not yet certain even in days of competition policy. If the motion for a stay succeeds then it is my view it would be a breach of confidence to disclose the offer to Liberty. If the stay application fails I consider it clear that an order would not be made preventing disclosure to Liberty. I do not consider the addition of the words "confidential – not to be disclosed to any third party" takes the matter further than the "without prejudice" endorsement. 10 On the balance of convenience it has not been shown that there is any harm to Volpes if the order I propose is made. I should add that by arrangement between counsel I was on 23 February 2005 referred to the decision of Eames J in Langley v The Age Ltd [2000] VSC 378 which supports my decision in some aspects. 11 The following orders will be made subject to Permanent giving the usual undertaking as to damages. 1. Order that up to the determination of the claim in paragraph 1 of the notice of motion filed on 2 December 2004 or earlier order, the plaintiffs be restrained from disclosing to Liberty Finance Pty Ltd the contents of without prejudice offers of settlement made by the defendants to the plaintiffs. 2. Order the costs of the notice of motion be costs in the proceedings on paragraph 1 of the notice of motion filed on 2 December 2004. ********** 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.