Supreme Court New South Wales Medium Neutral Citation: Brightstars Holding Co Pty Ltd v Johnston [2012] NSWSC 929 Hearing dates: 13 August 2012 Decision date: 14 August 2012 Jurisdiction: Equity Division Before: Stevenson J Decision: 1.Paragraphs 26, 39, 40, 41, 42 and 43 of Mr Mattiussi's affidavit of 3 August 2012 are rejected 2.Letters from Wood Marshall Williams to Willis & Bowring of 7 March 2012 and 12 June 2012 are admitted 3.Letter from Wood Marshall Williams to Willis & Bowring of 9 March 2012, Willis & Bowring's letter to Wood Marshall Williams of 22 April 2012 and the letter from Willis & Bowring to Wood Marshall Williams of 27 June 2012 are rejected Catchwords: EVIDENCE - affidavit - communications made in attempt to negotiate settlement of underlying proceedings - without prejudice - whether evidence receivable because it falls within s 131(2)(g) of Evidence Act 1995 Legislation Cited: Evidence Act 1995 Cases Cited: Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2) [2011] FCA 276; (2011) 193 FCR 479 Brown v Commissioner v Taxation [2001] FCA 596; (2001) 187 ALR 714 Category: Interlocutory applications Parties: Brightstars Holding Co Pty Ltd (first plaintiff) Peter Wilson (second plaintiff) Paul Arthur Johnston (first defendant) Blair Massey Warren (second defendant) Brightstars Early Learning Centres Pty Ltd (third defendant) John Nich Pty Ltd (fourth defendant) Gloria El-Kafrouni (fifth defendant) Representation: C M Harris SC (plaintiffs) M Hadley (first defendant) A Barrie (second defendant) Willis & Bowring (plaintiffs) Austcom Law (first and fourth defendants) Pikes & Verekers Lawyers (second defendant) Picone & Co (third defendant) File Number(s): SC 2011/324919 Judgment Introduction 1The plaintiffs read the affidavit of Mr Adrian Mattiussi ("Mr Mattiussi") of 3 August 2012. Mr Mattiussi is the plaintiffs' solicitor and is a partner of Willis & Bowring. 2The defendants object to paragraphs 26, 39, 40, 41, 42 and 43 of Mr Mattiussi's affidavit, and to certain letters annexed to the affidavit, upon the basis that the conversations and letters are communications made in an attempt to negotiate settlement of the dispute underlying these proceedings. There is no dispute that, on the face of it, this material falls within s 131(1)(a) of the Evidence Act 1995 ("the Act"). 3I made rulings immediately before the Court adjourned yesterday, and said I would deliver reasons today. These are those reasons. 4The plaintiffs argue that the evidence is receivable because it falls within s 131(2)(g) of the Act which states that s 131(1) does not apply if, relevantly:- "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 of qualify that evidence." Background 5In the proceedings, the plaintiffs seek to enforce promises they contend were made by the defendants in two documents that were entered into to settle earlier proceedings (being proceedings numbered 2010/372333). Those two documents are a Deed of Settlement and a Share Sale Deed both dated 12 May 2011. 6In the Share Sale Deed the first plaintiff agreed to purchase from the defendants shares in various companies for $900,000. 7In the Deed of Settlement the defendants agreed to pay, on completion of the Deed of Settlement and the Share Sale Deed, $170,000 from that $900,000 to the plaintiffs' solicitors, Willis & Bowring, "on account of" certain legal costs. 8Settlement of the Share Sale Deed took place on 1 December 2011. The plaintiffs paid to the defendants the $900,000. It is the plaintiffs' case that, despite the terms of the Deed of Settlement, the defendants did not pay the $170,000 from the $900,000 on account of the legal costs to which I have referred. 9On 28 March 2012 the matter was fixed for hearing before me on 5 and 6 July 2012. On 5 July 2012, for the reasons set forth in my judgment on that day, I granted the defendants an adjournment until 13 August 2012. 10I also directed that the defendants file their defence to the plaintiffs' Further Amended Statement of Claim, and any affidavits, by 13 July 2012. 11In their defences, and those affidavits, the defendants contended, for the first time, that the agreements constituted by the Deed of Settlement and Share Sale Deed were varied, or replaced by a new agreement. The alleged new agreement is to the effect that the defendants would transfer the relevant shares to the plaintiffs for $900,000 and that the defendants would be released from any obligation to pay the sum of $170,000. 12That agreement is said to arise out of a letter that Mr Mattiussi sent to the defendants' then solicitors on 25 November 2011. 13That letter included a statement that: - "As you are aware, our instructions are to proceed [on a basis set out earlier in the letter involving receipt of $900,000]. The question of this firm's costs as evidenced in the settlement documents is to be a matter between this firm and our client. We have taken this approach in order to facilitate settlement of the Engadine property with out further delay" (emphasis added). The "evidence adduced" 14In that context, the plaintiffs contend that there is "evidence that has been adduced in the proceeding" by the defendants that would mislead the Court unless evidence of the without prejudice communications to which I have referred "is adduced to contradict or to qualify" that evidence for the purposes of s 131(2)(g) of the Act. 15That evidence includes evidence given by the second defendant, Mr Blair Warren, in his affidavit of 13 July 2012, as follows: - "I received a copy of [Mr Mattiussi's letter of 25 November 2011] from my then solicitors shortly after it was sent and after I read it I gave instructions to my solicitors to proceed with the sale of the shares. I would not have done so if the November letter had not said that the plaintiffs would not require payment of $170,000 of the purchase price to Willis & Bowring and that their costs were a matter between the plaintiffs and Willis & Bowring." 16The evidence from the first defendant, Mr Paul Johnston ("Mr Johnston"), is as follows: - "I had a telephone conversation with Mr. Mattiussi on or about 29 November 2011, being the Tuesday following receipt of [Mr Mattuissi's letter of 25 November 2011], during which words were said to the following effect: [Mr Johnston]: 'Adrian, Amber emailed me your letter of last Friday. I am so pleased that we can finally bring this to an end. I see that you're taking up the fees with your client.' [Mr Mattiussi]: 'Yes, Peter Wilson will have to come up with my legals. As I stated in the letter, the fees are between me and my clients.' I understood the above comments to mean that, if the sale of shares was settled, then I would not have any obligation to ever pay any money to Willis & Bowring. ... As at 1 December 2011, being the date of the settlement of the share transfer and related matters, I considered the transaction to be at an end. In this regard, I considered the transaction to be the sale of the shares in the companies and the payment of $900,000 by Wilson and his interests, with all of those funds to be directed to the NAB." (at [13] and [15]) The evidence objected to 17In paragraphs 26, 39, 40, 41, 42 and 43 of his affidavit, Mr Mattiussi gives evidence of conversations he had with various representatives of the defendants in October 2011 and in June 2012 in which settlement of these proceedings was discussed. However I see nothing in those paragraphs which would tend to contradict or qualify the evidence given by the defendants in their affidavits which I have set out. 18However, two of the without prejudice letters annexed to Mr Mattiussi's affidavit do tend to contradict or qualify the defendants' evidence. 19A letter from the defendants' then solicitor to the plaintiffs' solicitor of 7 March 2012 stated that "provided all other matters can be resolved" mortgage security could be offered for the $170,000 over a property owned by the second defendant in Woollahra. The letter continued: - "We are instructed that our clients intend upon sourcing the sum of $170,000 [from the sale of the Woollahra property]". 20Although the letter made a proposal about how the $170,000 would be paid (ultimately from the proceeds of sale of the Woollahra property, over which the plaintiffs would, in the meantime, have security), it was implicit in the letter that the $170,000 was payable. No suggestion was made in the letter of the varied or new agreement now alleged. 21On 12 June 2012, the defendants' then solicitor forwarded to the plaintiffs' solicitor a letter from the second defendant. That letter responded to a "without prejudice" offer made by the plaintiffs' solicitors. In the letter the second defendant stated: - "The base figure of $170K of course was the figure in the original Deed of Settlement, however the rest of the claim in my opinion is incorrect as follows". 22The second defendant then gave a detailed refutation of the plaintiffs' contentions. But the letter made no suggestion of any agreement by the plaintiffs to not press their claim for the $170,000. On the contrary, it suggested that the one element of the plaintiffs' claim that was not challenged, was the claim for the $170,000. 23Varying views have been expressed as to the breadth of s 131(2)(g) of the Act. A more expansive view of the section has been adopted in a number of decisions in this Court compared to consideration given to the section by the Federal Court of Australia. The various authorities are conveniently gathered together in the decision of Bromberg J in Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2) [2011] FCA 276; (2011) 193 FCR 479 at [43] - [57], particularly [52] - [54]. 24As Bromberg J said at [55]: - "I respectfully agree with the analysis of Emmett J ... [in Brown v Commissioner v Taxation [2001] FCA 596; (2001) 187 ALR 714] and his Honour's conclusion that s 131(2)(g) is not attracted simply because evidence to which s 131(1) applies, contradicts or qualifies evidence that has already been adduced. I would respectfully add that s 131(2)(g) is only attracted where the exclusionary rule in s 131(1) would operate to allow a party which has adduced evidence, to use the exclusionary rule as an instrument for misleading the court." 25I agree that more than mere contradiction or qualification of earlier evidence is necessary. The subsection requires that, absent such contradiction or qualification, there be a likely misleading of the Court. 26The present case falls within the narrower view of the subsection favoured by Bromberg J. This is because exclusion of the "without prejudice" communications from the defendants' solicitor of 7 March 2012 and 12 June 2012 would, in my opinion, have the result that the evidence adduced by the defendants, who seek to rely on the exclusionary rule, would likely mislead the Court. 27Uncontradicted, or unqualified by the contents of the letters of 7 March 2012 and 12 June 2012, the defendants' evidence as to their true understanding of the events leading up to the settlement of 1 December 2011 would be, to say the very least, incomplete and likely to mislead the Court as to their true state of mind. 28The remaining "without prejudice" correspondence sought to be tendered by the plaintiffs comprises letters between the plaintiffs' solicitors and the defendants' then solicitors. These letters are relevantly equivocal. I do not think these letters are in the same category as those emanating from the defendants' side. 29For those reasons, I make the following orders: - (1)I reject paragraphs 26, 39, 40, 41, 42 and 43 of Mr Mattiussi's affidavit of 3 August 2012; (2)I admit the letters from Wood Marshall Williams to Willis & Bowring of 7 March 2012 (being annexure "Y" to Mr Mattiussi's affidavit and being the document at court book p 470) and 12 June 2012 (being annexure "AB" to Mr Mattiussi's affidavit and being the document at court book p 492 to 513); (3)I reject the letter from Wood Marshall Williams to Willis & Bowring of 9 March 2012 (being the document at court book p 471), Willis & Bowring's letter to Wood Marshall Williams of 22 April 2012 (being annexure "AA" to Mr Mattiussi's affidavit being the document at p 491 of the court book) and the letter from Willis & Bowring to Wood Marshall Williams of 27 June 2012 (being annexure "AC" to Mr Mattiussi's affidavit and being the document at p 514 to 515 of the court book). ********** 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: 20 August 2012