Supreme Court New South Wales Medium Neutral Citation: Peter Lawrence Lewis v Russell William Lamb [2011] NSWSC 873 Hearing dates: 11 August 2011 Decision date: 17 August 2011 Before: Ball J Decision: Proceedings dismissed with costs Catchwords: EVIDENCE - admissibility - mediation privilege - whether s 30 of the Civil Procedure Act applies - s 30 only applies to court ordered mediation under Part 4 of Civil Procedure Act - other mediations do not attract mediation privilege of s 30 RESTITUTION - account stated - accounts as admissions of debt - whether statute barred - limitations period runs from time of accrual of underlying debt or cause of action, not time of admission - documents relied upon do not constitute admissions Legislation Cited: Civil Procedure Act 2005 (NSW) Evidence Act 1995 (NSW) Limitation Act 1969 (NSW) Cases Cited: Commonwealth Dairy Produce Equalisation Committee Ltd v McCabe (1938) 38 SR (NSW) 397; 55 WN (NSW) 144 Executor Trustee & Agency Co of South Australia Ltd v Thompson (1919) 27 CLR 162 Lewis v Nortex Pty Ltd (in liq) [2004] NSWSC 1143 Lewis v Wilson (1997) 42 NSWLR 228 Category: Principal judgment Parties: Peter Lawrence Lewis (Plaintiff) Russell William Lamb (Defendant) Representation: J T Johnson (Plaintiff) M W Young (Defendant) Toomey Pegg (Plaintiff) Lyons & Lyons (Defendant) File Number(s): 2003/84023 Judgment 1In 1991, the plaintiff, Mr Lewis, and the defendant, Mr Lamb, commenced carrying on business together wholesaling manchester. The business was carried on through a company, Nortex Pty Limited, which acted as trustee of the Nortex Unit Trust. Kation Pty Limited, a company controlled by Mr Lewis, held a 60 percent interest in Nortex and the unit trust and Lamru Pty Limited, a company controlled by Mr Lamb, held a 40 percent interest. Mr Lewis and Mr Lamb were the sole directors of Nortex. 2The business operated successfully for several years. However, Mr Lewis and Mr Lamb started to quarrel in the latter part of 1995 about the terms on which Mr Lewis proposed to bring his son into the business. The quarrel became bitter. Mr Lamb left the business and a number of court proceedings were commenced. There was a mediation of the parties' disputes conducted by Sir Laurence Street in 1997. However, that mediation failed and, ultimately, Nortex was placed into liquidation and the business carried on by it was sold. 3The principal proceedings concerning the disputes between the parties were heard by Hamilton J intermittently during 2002 to 2004. Mr Lamb was not a party to those proceedings, although Lamru was. His Honour delivered judgment on 29 November 2004 ( Lewis v Nortex Pty Ltd (in liq) [2004] NSWSC 1143), and also delivered three supplementary judgments. 4In the current proceedings, commenced on 19 May 2003, Mr Lewis claims that he and Mr Lamb kept a private account not recorded in the books of Nortex or the Nortex Unit Trust involving various debits and credits against or in favour of each other. Mr Lewis says that the balance owing to him on that account is the sum of $121,915. He sues for that amount on the basis of various documents each of which he says amounts to an account stated. 5The first set of documents relied on by Mr Lewis is a bundle of documents he says Mr Lamb handed to him on 28 June 1996 and which became an exhibit in the proceedings before Hamilton J. The bundle includes various spreadsheet calculations prepared by Mr Lamb, which include calculations relating to the private account. 6The second set of documents is a bundle of documents sent by Lyons & Lyons, Mr Lamb's solicitors at the time, under cover of a letter dated 21 May 1997 to Malleson Stephen Jaques, Mr Lewis's solicitors at the time. The covering letter describes the documents as "our Position Statement" for the purposes of the mediation. The documents relevantly consist of a number of spreadsheets described as "Lamru Pty Ltd Loan Acc Analysis". In one of the spreadsheets there is a heading "Note 11 PVT Loan - Lewis:Lamb (Aust)" and then a reference to the amount claimed by Mr Lewis in these proceedings. Note 11 to the document says, in part, "Lewis advised balance was $126,132.00. Lewis agreed that no interest was payable on this loan. Amount in dispute $4,217.00". In circumstances which are not explained in the evidence, that document became exhibit A40 in the proceedings before Hamilton J. 7The third document which is said to constitute an account stated is a document attached to a report of Mr Lamb's accountant, Mr Dawson, dated 28 May 1997 which was also prepared for the mediation. That report purports to set out a summary of the differences between the parties to be discussed by Mr Dawson with Mr Vella, the expert accountant engaged by Mr Lewis. The relevant document lists a number of items and then has several columns. One column is headed "RL", which is obviously a reference to Mr Lamb, another is headed "PL", which is obviously a reference to Mr Lewis, and a third is headed "Difference". One item is described as "Private Loans - 1 principle [sic]" and immediately under that line is a line for interest. In respect of principal, there is a figure of "- 121915" in the column headed "RL", a figure of "-126132" in the column headed "PL" and an amount of "4217" in the difference column. In respect of interest, there is a figure of "0" in the column headed "RL", an amount of "-70458" in the column headed "PL" and a figure of "70468" in the difference column. 8The fourth document that is said to constitute an account stated is a document prepared by Mr Lamb entitled "Lamb & Lewis - Basis of offer to resolve issues being mediated". That document was given by Mr Lamb to Mr Lewis during or shortly after the mediation. It also became an exhibit in the proceedings heard by Hamilton J. Under the heading "Note 3", is the following: Private Loan Lamb:Lewis Outstanding 30/6/96 121,915.0 Amount to be collected by Lewis 30/6/96 101,109.00 Since collected by Lewis in excess of 300,000.00 Prepared to offset these amounts and not look further into details 9Lastly, Mr Lewis relies on the transcript of evidence given by Mr Lamb in the proceedings before Hamilton J. In those proceedings, Mr Lamb was cross-examined on exhibit A40 (the position statement). During the course of that cross-examination he gave the following evidence: Q. (Counsel approached). I show you exhibit A40, the document tendered this morning by your counsel. Can I show you the schedule annexed to the letter with note 11 against it, "private loan - Lewis/Lamb(Aust) $121,915". That's a reference, is it not, to the account that you have done a calculation for in exhibit A39? A. Yes. Q. And you were there, of course, showing it as an amount owing by you to Mr Lewis and deducting it from the Lamru account calculation that you have made? A. In that document I am showing it as something I'm prepared to offset against the overall balance of some $2 million, yes. Q. Right, but offset because on private loan account Lewis/Lamb you say you owe Mr Lewis $121,915. A. I was prepared to accept that figure at that time as part of the settlement discussions. Q. It is a figure that you yourself had calculated, had you not? A. Yes. Q. Indeed, the calculation is the sheet that you have in front you, the very first page of exhibit A39. A. Yes. Q. You had calculated that you say, do you not, from the records that you were maintaining on the computer system? A. One way or another I was maintaining it, yes. Q. Indeed, you say through the answer you made last week to the notice to produce that you produced a copy of the disk as it stood at 28 or 29 June 1996 to Mr Lewis and your affidavit read today contained the print-out from those disks. A. Yes. Q. And likewise, you had made a print-out of the disk, albeit in November of 1997, in order to do a calculation of the private loan account balance at $121,915? A. I believe this document was printed out in November 1997 but the calculations were done presumably prior to the mediation in early 1997. HIS HONOUR Q. Am I right, that to come to that figure of $121,915 that you owed, you credited Lewis with his share of the $101,109; is that right? A. No. What I've done there, I have worked on the assumption that he would collect all of that after I was no longer at the business. This document was prepared in anticipation of settlement discussions, that we would be apart from then on. 10There is no dispute that the limitation period in respect of the causes of action on which Mr Lewis relies is 6 years running from the date on which the cause of action first accrued: Limitation Act 1969, ss 14, 15. 11Mr Johnson, who appeared for Mr Lewis, submitted that the cause of action on which he relied was an account stated and that that cause of action did not accrue until the acknowledgements that are said to constitute the accounts stated were given by Mr Lamb. On that basis, he accepted that the cause of action for an account stated based on the document Mr Lamb handed Mr Lewis on 28 June 1996 is statute barred, since it was given to Mr Lewis more than 6 years before these proceedings were commenced. For that reason it can be put to one side. The evidence given by Mr Lamb in the proceedings before Hamilton J is not alleged in the statement of claim to be an account stated. For that reason, I think it also can be put to one side. That leaves the three documents prepared for the purposes of the mediation. 12Mr Young, who appeared for Mr Lamb, raised three objections to Mr Lewis's claim based on those three documents. First, he submitted that the documents on which Mr Lamb relies were inadmissible under s 30 of the Civil Procedure Act 2005. Second, he submitted that the causes of action on which Mr Lewis sued did not first arise at the time the relevant documents were provided to Mr Lewis or his agent. They arose at the time of the underlying transactions. Third, he submitted that the relevant statements were not admissions that could give rise to accounts stated. I do not accept the first of these submissions, but I accept the other two. 13Section 30 of the Civil Procedure Act 2005 relevantly provides: (4) Subject to section 29 (2): (a) evidence of anything said or of any admission made in a mediation session is not admissible in any proceedings before any court or other body, and (b) a document prepared for the purposes of, or in the course of, or as a result of, a mediation session, or any copy of such a document, is not admissible in evidence in any proceedings before any court or other body. (5) Subsection (4) does not apply with respect to any evidence or document: (a) if the persons in attendance at, or identified during, the mediation session and, in the case of a document, all persons specified in the document, consent to the admission of the evidence or document, or (b) in proceedings commenced with respect to any act or omission in connection with which a disclosure has been made as referred to in section 31 (c). Section 29(2) creates an exception where the evidence is adduced for the purpose of establishing that an agreement or arrangement was reached at the mediation and, if it was, its terms. 14However, s 30 must be read in context. Section 26 gives the court power, by order, to refer proceedings or part of proceedings to mediation. "Mediation" is defined in s 25 to mean: a structured negotiation process in which the mediator, as a neutral and independent party, assists the parties to a dispute to achieve their own resolution of the dispute. "Mediator" is defined in the same section to mean: a person to whom the court has referred a matter for mediation. "Mediation session" is defined to mean: a meeting arranged for the mediation of a matter. 15Section 30 is concerned with evidence of what was said and documents produced in a "mediation session". A mediation session is a meeting arranged for a mediation. A mediation is a process involving a mediator. A mediator is someone who is appointed by the court. It follows that s 30 is only concerned with court ordered mediations. That conclusion is reinforced by s 34 which provides that nothing in Part 4 of the Act (the Part containing s 30) prevents the parties to proceedings from agreeing to and arranging for mediation of any matter otherwise than as referred to in the Part. But in that case, s 30 does not apply. 16If the parties engage in a mediation other than in accordance with Part 4 of the Act, what occurs in the mediation is still the subject of the privilege set out in s 131 of the Evidence Act 1995. However, Mr Young properly conceded that that section did not apply because the relevant material had been disclosed in the proceedings before Hamilton J. 17As to Mr Young's second submission, the parties agreed that the expression "account stated" is used ambiguously. Sometimes, it is used to refer to an admission by a party that an amount on an account between that person and another is owing. In that case, the relevant cause of action is the cause of action arising from the underlying transactions and the admission is simply evidence (which can be rebutted) that the underlying transactions gives rise to the amount claimed. In other cases, the expression "account stated" means an enforceable agreement arising from the agreement of the parties in relation to the consequences of mutual dealings between them. In that case, the agreement supersedes the underlying transactions giving rise to the parties' respective rights. The consideration that each gives for the new agreement is that each gives up the rights he or she may have arising from the underlying transactions. Jordan CJ in Commonwealth Dairy Produce Equalisation Committee Ltd v McCabe (1938) 38 SR (NSW) 397; 55 WN (NSW) 144 at 401; 146 explained the difference in these terms (omitting authorities): ... An action for money found to be due on accounts stated may take one of two forms. It is always essential in such an action that there should have been before action brought an admission by the defendant or his agent to the plaintiff or his agent that the sum claimed is due by the defendant to the plaintiff ... But this admission may be so framed as to be merely an acknowledgement of indebtedness, in which case although it supplies evidence of the debt the evidence may be rebutted by proof that no debt in fact existed. Or it may take the form of an account stated and agreed to between two parties, by which it is in effect agreed that the items on both sides shall be set-off and the balance paid. In the latter type of case, the agreement for set-off supplies good consideration for the promise to pay the amount of the balance; and the account stated is itself an agreement for valuable consideration constituting a cause of action, and not merely evidence of liability. See also Lewis v Wilson (1997) 42 NSWLR 228 at 230 per Sperling J. 18Mr Johnson made it clear that Mr Lewis did not assert that the accounts stated on which he relied were supported by consideration. Rather, he relied on the accounts stated as admissions. However, put in that way, Mr Lewis's claim depends on the underlying causes of action and the limitation period starts to run from the time that those underlying causes of action first accrued. As Isaacs J explained in Executor Trustee & Agency Co of South Australia Ltd v Thompson (1919) 27 CLR 162 at 169: Now, an account stated is a distinct cause of action ... and, because it is a distinct cause of action, Mr Parsons contended that that was sufficient to oust the Statute [that is, the Limitation of Suits and Actions Act 1866]. But I cannot go so far as that. An account stated may be a mere admission of a debt, merely evidence of it, to which, in the circumstances, the law attaches a promise to pay. In such a case the obligation as to the old debt remains unaltered, and the account stated, though a new ground of action, is not conclusive or exclusive ... And then the Statute of Limitations applies ... In this case, Mr Lewis accepts that Mr Lamb's liability to pay the amount claimed by Mr Lewis arose more than 6 years before these proceedings were commenced. It follows that the claim is statute barred. 19A question was raised on the written submissions provided by the parties on whether s 54 of the Limitation Act applied in that case. That section relevantly provides: (1) Where, after a limitation period fixed by or under this Act for a cause of action commences to run but before the expiration of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation. (2) ... (3) ... (4) An acknowledgment for the purposes of this section must be in writing and signed by the maker. It is clear, however, that this section has no application in this case. None of the documents on which Mr Lewis relies was signed by Mr Lamb. 20I also accept Mr Young's submission that none of the documents relied on by Mr Lewis can properly be regarded as an admission. They are all documents prepared for the purpose of a mediation and indicate concessions that Mr Lamb was willing to make for the purposes of reaching an agreement. It is not unusual for parties during the course of a mediation to indicate amounts that they are willing to pay for the purpose of reaching a settlement. In some cases, those amounts may not be referable to particular claims, but in other cases they may be. It appears from the position paper, and the document prepared by Mr Dawson, that Mr Lamb was willing to concede that he owed $121,915 on the private account but he disputed an amount of $4,217 and disputed any liability to pay interest. Although the position paper suggests that Mr Lewis accepted Mr Lamb's position in relation to interest, Mr Dawson's report, which bears a later date, suggests that the dispute about interest remained. In any event, the parties did not reach an agreement. In the absence of clear words to the contrary, given the context in which the spreadsheets were prepared, the figures contained in them should only be treated as concessions that Mr Lamb was prepared to make in order to reach an agreement. They should not be treated as admissions. This conclusion is consistent with the document Mr Lamb gave to Mr Lewis at or shortly after the mediation. That document is described as "Basis of offer to resolve issues being mediated". The figures and statements contained in the document must be read in that context. The document was a proposal, not an admission. That conclusion is also consistent with the evidence given by Mr Lamb before Hamilton J that he was "prepared to accept that figure [that is, the figure of $121,915] at that time as part of the settlement discussions". 21The proceedings should be dismissed with costs. ********** 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. Decision last updated: 17 August 2011