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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2007-404-5383
BETWEEN DAE BONG JUNG AND YANG HEE
SHIN
Plaintiffs
AND WARREN GEORGE CROFT
TEMPLETON
Defendant
Hearing: 17 and 21 September 2009
Counsel: D F Dugdale for Plaintiffs
M O Robertson and H M Twomey for Defendant
Judgment: 21 September
2009
Reasons: 30 September 2009
REASONS FOR JUDGMENT OF HEATH J
Solicitors:
Song Jae Hon, PO Box
33359, Takapuna, Auckland
Shieff Angland, PO Box 2180, Auckland
Counsel:
D F Dugdale, PO Box 46281, Herne Bay, Auckland
JUNG V
TEMPLETON HC AK CIV 2007-404-5383 21 September 2009
Contents
Application and result
[1]
Background
[8]
The mediation process [19]
The confidentiality agreements
[24]
Does the Evidence Act 2006 apply?
[28]
The pre Evidence Act 2006 law [36]
Section 57 of the Evidence Act 2006: some
comments [51]
Conclusion [65]
Application
and result
[1] Dr Jung and his wife Ms Shin, sue their former counsel, Mr Templeton, in
negligence. They allege that Mr Templeton
advised them negligently, while acting
on their behalf at a mediation. As a result of Mr Templeton's alleged negligent
advice, Dr
Jung and Ms Shin contend that they signed an unfavourable settlement
agreement.
[2] Damages are sought in the sum of $375,000,
plus interest and costs. The
proceeding has been set down for hearing on 19 October 2009 and is estimated to
take eight days. Although
the allegations of negligent advice encompass events that
occurred both before and during the mediation, some evidence will be required
about
what happened during the course of it, to put the advice into context.
[3] On 23 June 2009, on Mr Templeton's application,
Allan J made an order that
the following question be determined before trial:
Whether or not Dr Jung and/or Mr Templeton
are entitled to rely on, or
introduce evidence in this proceeding, relating to:
1. The course of the proceeding Jung
& Ors v Auckland City Council &
Ors CIV 2005-404-5076 `the original proceeding' in the mediation and
in relation
to any exchanges oral or documentary concerning the dispute
passing between any of the parties and the mediator or any
two or more
of the parties during the course of the mediation.
2. Exchanges whether oral or documentary concerning
the dispute passing
between any of the parties to the original proceeding and the mediator or
between any two
or more of the parties during the course of a mediation
on 19 March 2007 (including preparatory steps); and
3.
Views expressed or suggestions or proposals made within the mediation
on 19 March 2007 by the mediator or any party in
respect of a possible
settlement of the dispute; and
4. Admissions made within the mediation on 19 March 2007
by any party;
and
5. The fact that any party has indicated within the mediation on 19 March
2007 willingness
to accept any proposal for the settlement made by the
mediator or by any party; and
6. Documents brought into
existence for the purpose of the mediation on
19 March 2007; and
Notes or statements made within the mediation on 19 March 2007 by the
mediator or by any party.
[4] I heard argument on the pre-trial question on 17 September 2009. At that
hearing, counsel made submissions on the impact
of both ss 57 and 69 of the
Evidence Act 2006 (the Act). Section 57 creates a privilege for discussions at a
mediation, whereas s
69 deals with the admission of (otherwise) confidential
information.
[5] After reserving judgment, I realised that the mediation
took place on 19
March 2007, before the Act came into force on 1 August 2007. On 18 September, I
issued a Minute requesting further
submissions from counsel on whether any
transitional provisions operated to apply ss 57 and 69 to the facts of this case. I also
sought assistance on relevant pre-existing law. I directed that those submissions be
made orally on 21 September 2009.
[6]
I determined the question immediately after the hearing on 21 September
2009:
[3] I make the following orders:
a) Mr Templeton has leave to issue subpoenas out of the Court to
compel witnesses [who] attended the mediation
to appear in Court
for the purpose of giving evidence.
b) If the witnesses co-operate, witness statements
should be served
in the manner contemplated by directions I will make shortly. If the
witnesses do
not co-operate, leave is given for their evidence to be
called orally.
[4] The following timetabling directions
are made to adjust those previously
in force.
a) Witness statements shall be served by the plaintiffs on
or before
25 September 2009 together with a list of documents that the
plaintiffs wish to have inserted
into the agreed bundle.
b) Witness statements on behalf of the defendant shall be served on
or before
15 October 2009.
c) An agreed bundle of documents shall be filed by 3pm on 16
October 2009.
[7]
I indicated that I would give reasons for those orders as soon as practicable.
These are my reasons.
Background
[8] In January
2008, Dr Jung and his wife contracted to buy a unit situated at
25B Cleveland Road, Parnell. They completed the purchase on 28 February
2003.
[9] Subsequently, they discovered defects in the construction of the unit. They
saw a solicitor, Mr Ganda, who retained
Mr Templeton to act as counsel for Dr Jung
and Ms Shin to seek redress for alleged financial losses sought by them.
[10] Mr Templeton
had primary carriage of the proceeding. Proceedings were
issued out of this Court against the Auckland City Council (the Council).
The
amount sought, as at the date on which mediation took place, was $430,000.
Mr Thomas, a neighbour, was a co-plaintiff in the
proceeding and was also
represented by Mr Ganda and Mr Templeton. He claimed in respect of the adjoining
unit, on the same basis.
[11] Three other parties were represented at the mediation, having been joined to
the proceeding against the Council. The Body
Corporate was joined as a third
plaintiff, to deal with any problem relating to the ownership of a boundary wall in
which some cracks
had been discovered. Mr Underwood, trading as "Able
Inspections", was joined as a second defendant, having provided Dr
Jung with a
building report prior to the contract being declared unconditional. The Council
joined Mr Mulligan, a deck repairer,
who carried out alleged unsatisfactory repairs to
Dr Jung's deck shortly before the unit was purchased, as a third party.
[12]
It seemed likely that the Council was raising contributory negligence as a
defence to Dr Jung's and Ms Shin's claims. While not
pleaded in its Statement of
Defence, the issue was signalled in a joint memorandum of counsel for a case
management conference on
20 October 2005. There were also discussions, on an
open basis, between Mr Templeton and a solicitor acting for the Council that
confirmed the latter's reliance on contributory
negligence.
[13] A mediation was held on 19 March 2007. All parties to the proceeding were
present and represented by legal and
other advisers. The mediation process began at
9.30am and concluded with the execution of a signed settlement agreement, at
8.30pm.
Dr Jung signed the agreement, on behalf of himself and his wife.
[14] As a result of execution of the settlement agreement, Dr
Jung, Ms Shin and
Mr Thomas agreed to discontinue their claims against the defendants. In return, the
three of them were paid $110,000,
with contributions being made by various
defendants. The settlement sum was applied towards the cost of repairing the two
units.
The agreement was silent on how the sum of $110,000 would be apportioned,
as between Dr Jung and Ms Shin (on the one hand) and Mr
Thomas (on the other).
Subsequently, they agreed to receive $55,000 each.
[15] Dr Jung and Ms Shin alleges that the issue of
contributory negligence became
the focus of the mediation. The Council contended that their claim should be
reduced because they
had failed to mitigate loss by exercising a contractual right to
terminate the agreement for sale and purchase.
[16] Dr Jung
and his wife allege that Mr Templeton, in negotiating during the
course of the mediation and in advising Dr Jung in relation to the
proposed
settlement, acted carelessly and unskilfully. They assert that Mr Templeton ought to
have refused to permit the mediation
to continue because the allegation of
contributory negligence was one which had neither been pleaded by the Council nor
properly
particularised. Alternatively, they claim that Mr Templeton ought to have
advised the Council's solicitors that their client's contention
had no substance
because the serious defects had not been discovered by the latest time at which they
could have exercised the power
to terminate the contract.
[17] Mr Templeton denies that he acted negligently. He says that he cannot
properly respond to the
allegations of what was said and done at the mediation
because what occurred was confidential to the parties. On that basis, a direction
that
the evidence he seeks to adduce is compellable is sought.
[18] While Mr Templeton also represented the co-plaintiff at the
mediation,
Mr Thomas is not a party to the present proceeding.
The mediation process
[19] The term "mediation" is not defined
in the Act. In its standard form, it is a
consensual process by which parties to a dispute meet in an attempt to resolve their
differences.
The difference between direct negotiation and a mediation is one of
process. An independent facilitator (the mediator) is engaged
contractually to assist
the parties to reach agreement.
[20] Usually, a formal process is followed involving a civil exchange
of
competing positions, articulation of the reasons why a particular party takes a
specific stance, a discussion (led by the mediator)
to tease out factual and legal
differences between the parties, an analysis of the strengths and weaknesses of
respective cases and
a consideration of the risks and costs of litigation. Depending
upon the style adopted by a particular mediator, there may be a greater
or lesser
degree of intervention on each of those issues, particularly the strength or weakness
of aspects of the respective cases.
[21] Some mediators will caucus with individual parties to promote resolution of
the dispute. The process of caucusing involves
the mediator seeing a party (usually
with his or her adviser) privately, in the absence of the opposing party or parties.
When that
process is used the mediator might conduct "shuttle diplomacy", to
maintain a dialogue at a time when the parties might find it too
stressful to deal
directly with each other.
[22] The nature of the mediation process demands confidentiality attach to it.
When
parties attempt in good faith to negotiate a settlement of prospective or
pending proceedings, they need to have confidence that what is said in the mediation
process is not admissible in any subsequent curial or arbitral hearing, should
settlement not be reached. Such confidence
fosters frank communications and
enables each party to make informed decisions, based on solid factual and legal
foundations, about
whether or not to settle, having regards to the risks and costs of
litigation.
[23] The need for continued confidentiality is
less clear once a settlement
agreement has been formalised. In Vaucluse Holdings Ltd v Lindsay (1997) 10
PRNZ 557 (CA) at 559, the Court described the "point of mediation" as "to remove
the process from litigation or arbitration and to ensure
that anything said or done in a
mediation does not later rebound to the detriment to any party, should the mediation
fail to achieve
settlement" (my emphasis).
The confidentiality agreements
[24] Two agreements were signed at the mediation that provided for
confidentiality of discussions.
[25] The first is the Mediation Agreement, cl 5 of which provided:
(i) The Mediator
and the parties and all persons brought into the mediation
by either party, will not seek to rely on or introduce as
evidence in
arbitral or judicial proceedings whether or not the proceedings relate to
this dispute-
a) exchanges whether oral or documentary concerning the dispute
passing between any of the parties
and the Mediator or between
any two or more of the parties during the course of the mediation
(including preparatory steps); and
b) views expressed or suggestions or proposals made within the
mediation by the Mediator or any party in respect of a possible
settlement of the dispute; and
c) admissions made within the mediation by any party; and
d) the fact that any party has indicated within
the mediation
willingness to accept any proposal for the settlement made by
the Mediator
or by any party; and
e) documents brought into existence for the purpose of the
mediation; and
notes or statements made within the mediation by the Mediator or by
any party.
(iii) The
parties and all non-parties brought into the mediation
by any party shall sign a Confidentiality Agreement
in the
accompanying form.
(iv) Every aspect of and communication within the mediation
shall be without prejudice.
(v) This clause in no way fetters the legitimate use in
enforcement proceedings or otherwise of any written and
signed settlement agreement
reached in or as a result of this
mediation. Any constraints on disclosure included in such
settlement agreement will have effect in accordance with
their terms. (my emphasis)
Clause 5 is
reproduced as it stands, with non-sequential numbering. The Mediation
Agreement was signed by all parties who attended the mediation.
[26] Separately, the contemplated Confidentiality Agreement was signed. This
agreement was executed not only by the parties who
signed the Mediation
Agreement but by all advisers present at the mediation (including Mr Templeton)
and the mediator. That agreement
provides:
As the condition of my being present or participating in this mediation I
agree that I will unless otherwise
compelled by law preserve total
confidentiality in relation to the course of proceedings in this mediation and
in relation
to any exchanges that may come to my knowledge whether oral or
documentary concerning the dispute passing between any of the
parties and
the Mediator or between any two or more of the parties during the course of
the mediation. This agreement
does not restrict my freedom to disclose and
discuss the course of proceedings and exchanges in the mediation within the
organisation and legitimate field of intimacy of the party on whose behalf or
at whose request I am present at the mediation
including the advisers and
insurers of that party provided always that any such disclosures and
discussions will only
be on this same basis of confidentiality. (my emphasis)
[27] The Confidentiality Agreement is expressly subject to evidence of what
occurred at the mediation being adduced through compulsion
of law. The
highlighted terms of para (e)(iii) of the Mediation Agreement (see para [25] above)
suggest strongly
that the specific terms of the Confidentiality Agreement was
designed to articulate the nature of the obligation of confidence assumed
by cl 5. It
is plain that the signatories to that agreement contemplated a situation in which the
Court might compel one or more
of them to give evidence about what occurred
during the course of the process, whether in respect of the actual dispute or some
other
proceeding.
Does the Evidence Act 2006 apply?
[28] At the resumed hearing on 21 September 2009, Mr Dugdale, for Dr Jung and
Ms Shin, argued that s 5 of the Act operated to apply its terms, even though the
events in issue occurred before the Act came into
force. Section 5(3) provides:
5 Application
...
(3) This Act applies to all proceedings commenced before,
on, or after the
commencement of this [section] except--
(a) the continuation of a hearing that commenced before
the
commencement of this [section]; and
(b) any appeal from, or review of, a determination made at a
hearing
of that kind.
The present proceeding was issued after the Act came into force.
[29] Mr Robertson, for
Mr Templeton, did not appear to take a firm view on
whether the Act applied or not. I was left unclear as to his precise position,
though
he did refer me to a limited number of authorities decided before the Act came into
force that deal with admission of without
prejudice communications.
[30] A similar issue came before this Court last year, in the context of a claim for
legal professional
privilege under s 54 of the Act: see Todd Pohokura Ltd v Shell
Exploration NZ Ltd (2008) 18 PRNZ 1026 (HC). As here, the question was whether
a communication for which a privilege had been created by the Act was subject to
s 5(3).
The contrary argument was that the section was substantive in nature and the
presumption against retrospective legislation ought
to operate to ensure that pre-
existing law applied.
[31] Dobson J held that substantive rights were created by the Act and
that s 5 was
intended only to deal with provisions of the Act of a procedural nature. His Honour
said:
[76] Section 5 does
not explicitly mandate retrospective application of the
Act. Nor, logically, could it do so. Overall, the Act is concerned
with
procedural law, not substantive law. Thus its application is current and
prospective in relation to all proceedings
that were ongoing when it came
into effect. Obviously a change to procedural rules cannot affect steps
already taken
in proceedings, because those steps, and indeed earlier
proceedings, have already occurred. Thus, the essence of s 5 is that
from the
date of commencement, the Court should adopt the procedures mandated by
the Act in all proceedings, regardless
of when they were commenced. An
analogy arises with Blyth v Blyth [1965] 2 All ER 817 (EWCA) per Willmer
LJ at 823:
In the light of these authorities it becomes clear that what s 1
of the Matrimonial Causes Act 1963 is dealing with is a
purely procedural matter, viz, the admissibility of
evidence to
rebut what had hitherto been held to be conclusive evidence
against a husband. The effect
of the section is to abolish the
procedural anomaly whereby a distinction was drawn between
husband
and wife with regard to the evidence which they were
permitted to give. This being so, I think that the section is
to
be construed as governing the procedure to be followed in all
cases brought to trial after the
Act of 1963 came into force,
irrespective of the date of the events to which the evidence
may be
directed. To say that this involves the section being
given retrospective effect is, I think, perhaps misleading.
The
true view is rather that the section looks forward to the
conduct of trials that take place after
the coming into force of
the Act. (emphasis added.)
[77] Thus it is not accurate to treat s 5 as permitting
retrospective
application. By virtue of being procedural legislation, the Act may only
logically have prospective
application, because it is concerned with
regulating actions in the present or future it cannot regulate past actions
because those actions have already been regulated. The previous law applied
to the conduct of proceedings up to 1
August 2007 (the date of
commencement).
[78] In contrast, substantive law that establishes legal rights and obligations
may have both prospective and retrospective application. It exists
independently of legal proceedings, and so if
Parliament explicitly mandates
it, a new substantive law can apply to past actions, either establishing or
removing
legal rights and obligations ex post facto.
[32] Dobson J held (by reference to R v Derby Magistrate's Court, Ex parte B)
[1995] UKHL 18; [1995] 4 All ER 526 (CA) at 540-541 and B v Auckland District Law Society [2004]
1 NZLR 326 (PC) at para [44]), that "privilege" is a substantive legal
concept that
exists independently of proceedings and is applied other than in litigation: see paras
[79]-[81] of his judgment.
[33] Section 7 of the Interpretation Act 1999 makes it clear that a substantive
enactment does not have retrospective effect.
After discussing academic works on
the topic of statutory interpretation and the procedure/substance dichotomy
considered in Yew
Bon Tew v Kenderaan Bas Mara [1982] 3 All ER 833 (PC) at
836, Dobson J held that the pre-existing law applied in relation to discovery of
documents protected by such privilege before
the Act came into force.
[34] With respect, I agree with Dobson J that those provisions of the Act which
deal with substantive
rights ought not to be given retrospective effect. In general
terms, I cannot improve on the reasoning set out in Dobson J's judgment.
In the
context of the present case, it would be wrong in principle to apply a "privilege"
regime to the discussions at mediation
which was not in force at the time the parties
reached their agreement. The parties must be assumed to have entered into the
mediation
process on their understanding of applicable law, as at 19 March 2007.
The change to the "privilege" attaching to mediation was substantive
in nature, as
opposed to the codification of pre-existing law: see paras [55]-[60] below.
[35] The parties' and advisers' understanding
of their obligations is evidenced by
the terms of the Mediation Agreement and Confidentiality Agreement they executed.
That "understanding"
involved a belief that a Court could compel a participant to
attend before it, to give evidence on matters that, otherwise, would
attract
confidentiality.
The pre Evidence Act 2006 law
[36] Mr Robertson referred me to Keane J's judgment in New Zealand Institute
of
Chartered Accountants v Clarke [2009] 3 NZLR 264 (HC). In that case, the Judge
was concerned with "without prejudice" communications and whether the threshold
for disallowance of
a privilege attaching to them had been established, by dishonest
purpose. The Judge spoke of the scope of the common law privilege,
as follows:
[43] Section 57, according to The Evidence Act 2006: Act and Analysis,
233, EV 57.09, is definitive:
`Section 57(3) sets out the only exceptions to
the privilege for settlement negotiations or mediation which are recognised
by the Act.' And as to the common law exceptions: `The common law
recognised other exceptions to the privilege. However,
the effect of
codification is that there is little room to argue for the continued existence of
these earlier exceptions.'
Section 67 confers the only independent ability to
disallow privilege.
[44] I prefer, myself, the opinion expressed
in Cross on Evidence, 3614,
EVA 57.9, which allows the common law a continuing place in setting
boundaries to the privilege
conferred:
There are a variety of common law exceptions to the without
prejudice rule, including `unambiguous
impropriety', misleading the
Court, threats, or acts of bankruptcy. None of these exceptions are
provided
for in the Act, but all, it is submitted, can readily be
subsumed into a proper approach to ... interpreting the statutory
privilege ...
[45] The common law distinguished what was privileged from what was not,
not formally,
but in substance. It admitted without prejudice
communications, or aspects of them, where that did not offend the purpose
of the privilege. It withheld privilege from anything tainted. The words
`without prejudice' have never been conclusive:
South Shropshire District
Council v Amos [1986] 1 WLR 1271; Buckinghamshire County Council v
Moran [1989] 2 WLR 152; Telecom New Zealand Ltd v Sintel-Com Ltd
[2007] NZCA 499; [2008] 1 NZLR 780, CA, at 784; Telecom New Zealand Ltd v Sintel-Com
Ltd [2007] NZCA 499; [2008] 1 NZLR 780, CA, at 784.
[46] Thus in the 18th century a privileged document was allowed in to
identify handwriting: Waldridge
v Kennison (1794) 1 ESP 143; 170 ER 306;
in the 19th century to establish the fact of a communication and its date, to
prove delay: Walker v Wilsher (1889) 23 QBD 335, 337; and to prove an act
of bankruptcy: Re Daintrey: ex parte Holt (1893) 2 QB 116. In Field v
Commissioner of Railways (NSW) [1957] HCA 92; (1955) 99 CLR 285, 291 293, an
admission was held not privileged, because not reasonably incidental to the
negotiation or settlement.
Unqualified admissions in civil negotiations have
been admitted in criminal proceedings: Davies & Davies v Nyland & O'Neill
(1974) 10 S.A.S.R. 76, 90 91,Wells J.
[47] The purpose of the rule, Robert Walker LJ said in Unilever Plc v
Procter & Gamble Co [2001] 1 All ER 783, 792, which is based partly on
public policy and partly on express or implied agreement, is to protect
admissions against
interest in settlement negotiations should the matter go to
trial. In the eight categories of exception to the rule that he
identified none,
he said at 793, involved `the disclosure of admissions bearing on the subject
matter in dispute'.
In that sense the exceptions he identified could be thought
of, not just as exceptions, but as instances beyond the true scope
of the
privilege.
[37] Although Keane J invoked s 57 of the Act, it is clear that the communications
in issue came into
existence before the Act came into force. The question whether
s 57 applied was not one argued before Keane J, even though Dobson
J's decision in
Todd Pohokura Ltd v Shell Exploration NZ Ltd had been delivered before judgment
was given in Clarke. Nevertheless,
the discussion of the pre-existing common law is
helpful, as a mediation fulfils much the same role as without prejudice settlement
negotiations: see also para [56] below.
[38] There are two other cases of relevance. They are Vaucluse Holdings Ltd v
Lindsay
(High Court, Auckland, CP 318/97, 8 February 1999, Williams J) and Wicks
v Waitakere City Council (High Court, Auckland, CIV 2005-404-5146,
13 October
2006, Rodney Hansen J).
[39] The judgment of Hugh Williams J, in Vaucluse Holdings Ltd v Lindsay, was
a sequel to
that of the Court of Appeal (see para [23] above) in which Vaucluse had
appealed unsuccessfully against entry of summary judgment
against it by Master
Kennedy-Grant: (1997) 10 PRNZ 557 (HC). Hugh Williams J adopted the Court of
Appeal's comments on the confidentiality of mediation agreements and the reason
for confidentiality
being extended to them: at 7. While accepting that the Court of
Appeal had treated the issue as one of first impression, the Judge
referred to
authority that tended to support that view: in particular, McNicol: Law of Privilege
(1992) 457-459, Lukies v Ripley
(No 2) (1994) 35 NSWLR 283 (SC) and AWA Ltd v
Daniels (t/a Deloitte Haskins & Sells) (1992) 7 ACSR 463 (SCNSW).
[40] In Wicks, Rodney Hansen J was asked to refer to discussions at a judicial
settlement conference to assist in interpreting
the terms of a settlement agreement
reached in that forum. Referring to the Vaucluse litigation, the Judge said:
[21] Mediation
is a well recognised application of the "without prejudice"
rule. As was said by the Court of Appeal in Vaucluse Holdings
Limited v
Lyndsay (1997) 10 PRNZ 557 at 559:
The whole point of mediation is to remove the process from
litigation or arbitration and to
ensure that anything said or done in a
mediation does not later redound to the detriment of any party,
should the mediation fail to achieve a settlement.
See also the discussion of Williams J in Vaucluse Holdings Limited
v
Lyndsay HC AK CP 318/97 8 February 1999. He referred to AWA Limited v
Daniels t/a Deloitte Haskins and Sells 18 March
1992 SC of NSW Com. Div
where Rolfe J said at p 7:
... there is a marked similarity between mediation and
other attempts
at achieving settlement. Each is conducted, usually, on a without
prejudice basis
and, generally speaking, confidentiality attaches to
the latter. Each recognises the need for some degree of frankness
and
disclosure inter partes, which generally transcends what would
occur if the matter were fought
out in Court; each must proceed on
the basis that what is sought to be achieved is a settlement, which, ex
hypothesi, involves the giving up by each party of some right to
which each may consider it would be entitled
if the matter were
litigated to conclusion.
He went on to say:
... that admissions or statements
made in mediation, which is being
carried out on a confidential and without prejudice basis, or at
without prejudice settlement negotiations, can be proved in Court,
unless, of course, the parties consent ... (at
p 12).
(As Williams J points out, it is clear that the word "can" in this last passage
should read "cannot".)
...
[23] I do not see the involvement of Judges in the process as necessitating a
different approach. The
public policy considerations are unchanged.
Weighing against disclosure is the underlying purpose of the "without
prejudice" rule, that is, the public interest in promoting a settlement.
Favouring disclosure is the public interest in
seeing justice done in
cases where what was said or done during a conference has direct
relevance to the particular
case.
[24] I do not see why the involvement of a judge in the process should affect
the way in which these competing
interests are balanced. It does not alter its
essential character or the basis on which it is conducted. And it should
not compromise the interests of justice in cases where, for one reason
or another, what occurred during the conference
has direct relevance
to matters in issue in subsequent litigation.
[41] Rodney Hansen J considered that the interests
of justice required admission
of statements made at the conference which bore on the issues before the Court. He
said:
[27]
... These are defined and limited purposes. They do not cut across the
primary interests sought to be protected by the without
prejudice rule. There
is no risk of the defendant being held to admissions made for the purpose of
achieving a settlement
in the expectation that they would not later be used in
evidence. The without prejudice rule is not being abrogated. It is
being
departed from to the extent required to enable the plaintiff to advance
its case. Without evidence of what
was said at the conference, claims
which he is entitled to mount would have no chance of succeeding.
The interests
of justice could be defeated if the rule were so applied.
[42] Section 35 of the Evidence Amendment Act (No 2) 1980 provided:
35. Discretion of Court to excuse witness from giving any particular
evidence
(1) In any proceeding before
any Court, the Court may, in its discretion,
excuse any witness (including a party) from answering any question or
producing any document that he would otherwise be
compellable to answer
or produce, on the ground that to supply the information or produce the
document would be a breach
by the witness of a confidence that, having
regard to the special relationship existing between him and the person from
whom he obtained the information or document and to the matters specified
in subsection (2) of this section, the witness
should not be compelled to
breach.
(2) In deciding any application for the exercise of its discretion under
subsection (1) of this section, the Court shall consider whether or not the
public interest in having the evidence disclosed
to the Court is outweighed,
in the particular case, by the public interest in the preservation of
confidences between
persons in the relative positions of the confidant and
the witness and the encouragement of free communication between such
person, having regard to the following matters:
(a) The likely significance of the evidence to the resolution
of the
issues to be decided in the proceeding:
(b) The nature of the confidence and of the special
relationship
between the confidant and the witness:
(c) The likely effect of the disclosure on the
confidant or any other
person.
(3) An application to the Court for the exercise of its discretion under
subsection (1) of this section may be made by any party to the proceeding, or
by the witness concerned, at any time before
the commencement of the
hearing of the proceeding or at the hearing.
(4) Nothing in subsection (1) of this section
shall derogate from any other
privilege or from any discretion vested in the Court by any other provision of
this Act
or of any other enactment or rule of law.
[43] Section 35 conferred a statutory discretion on the Court to excuse any witness
from answering any question or producing any document on the ground that to do so
would amount to a breach of confidence that the
witness should not be compelled to
breach. In determining whether to allow such evidence to be adduced, the Court was
required to
conduct a balancing exercise weighing the public interest in having the
evidence disclosed to the Court against the public interest
for the preservation of
confidences between the relevant persons and the encouragement of free
communication between them: see s
35(2), R v Howse [1983] NZLR 246 (CA) at
251 and New Zealand Police v Campbell (High Court, Wanganui, CIV 2009-483-
127, 7 August 2009, Randerson J), at paras [52]-[53].
[44] The nature of the s 35 discretion was such that, prima facie, the evidence was
compellable but the Court might excuse the
witness from giving it. An application
under s 35 could be made by either a party or the witness, before or at the hearing of
the
proceeding: s 35(3).
[45] Applying the balancing test contemplated by s 35(2) I have no doubt that the
balancing of public interests
requires disclosure of what was said and done at the
mediation, insofar as it is relevant to the complaints made about Mr Templeton's
conduct.
[46] First, the confidentiality agreement itself anticipated the possibility of the
disclosure of information by compulsion,
through Court order.
[47] Second, an important aspect of the balancing exercise is that this is not a
proceeding involving a
dispute between the parties to the mediation. Nor is it an
attempt to set aside or to attack (in a collateral way) the terms of the
settlement
agreed. The parties to the mediation retain the benefit of the certainty created by the
settlement. To that extent, their
interest in continued protection of confidential
discussions is limited: see Wicks v Waitakere City Council, at para [27].
[48]
Third, the purpose of the confidentiality agreement is not undermined by
allowing necessary disclosures of what happened at the
mediation, to enable a fair
trial between Dr Jung and Ms Shin's claims on negligence against Mr Templeton.
[49] In those circumstances,
the interests of a fair trial far outweigh the limited
benefits of the continued protection of confidential communications at the
mediation.
[50] It is true that the Court of Appeal, in Vaucluse, at 559, was concerned about
the possibility of something said
or done at mediation later rebounding to the
detriment of any party. Importantly, those observations were qualified by the phrase
"should the mediation fail to achieve settlement": see para [23] above. The primary
reason for confidentiality is to protect the
parties in the event that the proceeding
does not settle, as was the case with the old "without prejudice" rule. In this case,
settlement
resulted, requiring the competing public interests at issue to be balanced
in a more nuanced way.
Section 57 of the Evidence Act
2006: some comments
[51] Having undertaken some preliminary work on the scope of the s 57 privilege,
I make some (necessarily)
obiter comments, as there are some difficult issues
involved which may require Parliamentary reconsideration.
[52] The starting
point for analysis is s 7 of the Act. That provides that all
relevant evidence is admissible unless excluded or declared inadmissible
under in
statute: s 7(1). Evidence is relevant if it has a tendency to prove or disprove
anything that is of consequence to the
determination of the proceeding: s 7(3).
[53] Section 10 requires the Court to interpret the Act in a manner that "promotes
its
purposes and principles". That requirement is not subject to any rule that statutes
in derogation of the common law should be strictly
construed. However, it is
permissible to have recourse to the common law only to the extent that the common
law is consistent with
the provisions of the Act, the promotion of its purposes and
principles and the application of the rule in s 12: s 10(1). The need
to interpret
legislation by reference to text read in light of purpose is not affected: s 10(2) and s 5
of the Interpretation Act
1999.
[54] Section 57 of the Act creates a "privilege" for settlement negotiations or
mediation:
57 Privilege for settlement
negotiations or mediation
(1) A person who is a party to, or a mediator in, a dispute of a kind for
which relief may
be given in a civil proceeding has a privilege in respect of
any communication between that person and any other person who
is a party
to the dispute if the communication--
(a) was intended to be confidential; and
(b) was made in
connection with an attempt to settle or mediate the
dispute between the persons.
(2) A person who is a party
to a dispute of a kind for which relief may be
given in a civil proceeding has a privilege in respect of a confidential
document that the person has prepared, or caused to be prepared, in
connection with an attempt to mediate the dispute
or to negotiate a
settlement of the dispute.
(3) This section does not apply to--
(a) the terms of
an agreement settling the dispute; or
(b) evidence necessary to prove the existence of such an agreement
in a proceeding in which the conclusion of such an agreement is in
issue; or
(c) the use in
a proceeding, solely for the purposes of an award of
costs, of a written offer that--
(i)
is expressly stated to be without prejudice except as to
costs; and
(ii) relates to
an issue in the proceeding.
[55] The Act had its genesis in the Law Commission's report, Evidence: Evidence
Code and Commentary
(NZLC R 55 Vol 2 1999). The Commission recommended
a new section providing a privilege for settlement negotiations generally. The
draft s
58 provided:
58 Privilege for settlement negotiations
(1) A person who is a party to a dispute of a kind
for which relief may
be given in a civil proceeding has a privilege in respect of any
communication
between that person and any other person who is a
party to the dispute if the communication was intended to be
confidential and was made in connection with an attempt to settle
the dispute between the persons.
(2) A person who is a party to a dispute of a kind for which relief may
be given in a civil proceeding has
a privilege in respect of a
confidential document which that person has prepared, or caused to
be prepared,
in connection with an attempt to negotiate a settlement
of the dispute.
(3) This section does not apply
(a) where an agreement settling the dispute has been concluded; or
(b) in a proceeding where the
conclusion of such an agreement is in
issue. (my emphasis)
[56] In Vol 1 of its report, at para 263, the Commission
mentioned that one
commentator suggested that the provision "expressly cover mediation" but the
Commission considered that its draft
provided "adequate protections for
communication between parties involved in a mediation". The commentary to the
draft Code, in Vol
2 (para C.247) made it clear that the "section [was] intended to
state the existing law".
[57] Section 53 is the foundation stone
for the privileges created or restated by the
Act. Privileges are created for communications with legal advisers and solicitors'
trust account records (ss 54 and 55), preparatory materials for proceedings (s 56),
settlement negotiations or mediation (s 57),
information obtained by medical
practitioners and clinical psychologists in criminal proceedings (s 59) and self-
incrimination (s
60). Section 53 of the Act has a generic provision dealing with the
effect and protection of privilege. It applies to s 57: s 53(1).
Sections 53(3) and (4)
provide:
53 Effect and protection of privilege
...
(3) A person who has a privilege
conferred by any of sections 54 to 59 and
64 in respect of a communication, information, opinion, or document may
require
that the communication, information, opinion, or document not be
disclosed in a proceeding--
(a) by the person
to whom the communication is made or the
information is given, or by whom the opinion is given or the
information or document is prepared or compiled; or
(b) by any other person who has come into possession of it with the
authority of the person who has
the privilege, in confidence and for
purposes related to the circumstances that have given rise to the
privilege.
[58] Section 65 deals with waiver of privilege. Importantly, in the context of s 57
(settlement negotiations and
mediation), the privilege may only be waived by all the
persons who have that privilege: s 65(5).
[59] Section 67 provides a
power for a Judge to disallow a privilege in specified
circumstances:
67 Powers of Judge to disallow privilege
(1)
A Judge must disallow a claim of privilege conferred by any of sections
54 to 59 and 64 in respect of a communication or information
if satisfied
there is a prima facie case that the communication was made or received, or
the information was compiled
or prepared, for a dishonest purpose or to
enable or aid anyone to commit or plan to commit what the person claiming
the privilege knew, or reasonably should have known, to be an offence.
(2) A Judge may disallow a claim of privilege conferred
by any of sections
54 to 59 and 64 in respect of a communication or information if the Judge is
of the opinion that
evidence of the communication or information is
necessary to enable the defendant in a criminal proceeding to present an
effective defence.
(3) Any communication or information disclosed as the result of the
disallowance of a claim
of privilege under subsection (2) and any
information derived from that disclosure cannot be used against the holder of
the privilege in a proceeding in New Zealand.
While s 67(2) refers to presentation of an effective defence at a criminal trial,
no
similar exception is made for civil proceedings.
[60] It is possible that a problem has arisen because Parliament modified
the
recommendations of the Law Commission. The Law Commission's
recommendations intended that the privilege
relate to the specific dispute in issue:
see draft section 58(3)(a), set out at para [55] above. In addition, the specific
privilege
for mediation has created another problem, namely that the privilege cannot
be waived by only some of the participants: s 65(5).
The "waiver" problem is
particularly acute in multi-party mediations.
[61] Mahoney McDonald Optican and Tinsley, The Evidence
Act 2006: Act and
Analysis (Thomson Brookers 2007) suggest, at para EV 53.01, at 221, that s 53 "is a
pivotal section" that "details
the protection that flows from a privilege". They opine
that, in doing so, the section "attempts to clarify aspects of the earlier
law". At para
EV 53.02, at 222, the authors draw attention to the variation in focus of individual
subsections of s 53 They suggest
it is important to inquire whether the material in
question, whether communication, information to the opinion, or document, comes
within the scope of the particular privilege in question.
[62] That observation is reinforced by the authors' commentary on
s 57(2), at para
EV 57.10, at 233:
EV 57.10 Subsection (2): extent of material protected by privilege
In the
discussion of s 53 the point was made that there is a substantial
variation among the individual privileges dealt with in
this Subpart of the
Act insofar as the range of material that is protected. This is well illustrated
by s 57(2).
Consider a case where, in an attempt to settle a dispute, a party
wishes to obtain an expert's opinion on facts which are
relevant to the
dispute and which the party summarises in a document passed on to the
expert. It is important to
note that, at this point, no privilege has arisen
under s 57(1) because no privileged communication has yet taken place.
It is submitted that s 53(1)(c) does not grant
a privilege to the expert's
opinion in this example. Section 57(2) grants a privilege (only) to the
document. Although
s 53 does, on occasion, refer to specifically to
documents that are protected by privilege (eg, s 53(3) and (4)), the pertinent
subsection for this example, s 53(1)(c), does not do so. Section 53(1)(c)
only protects opinions based on a privileged
communication or information.
This does not operate insofar as s 57(2) is concerned, because that section
focuses
solely on documents.
[63] If I had been obliged to apply s 57, I would have held that Parliament had
intended to enhance the
protections available for mediation. The most telling
provisions of the Act which support that proposition are s 65(5)
and s 67(2).
[64] Therefore, applying s 57, I would have reached the view that either party was
prohibited from calling evidence
about what happened at the mediation of the type
set out in the questions posed by Allan J: see para [3] above. Given the Law
Commission's
intentions, I am not sure whether that conclusion represents
Parliament's will or is an unintended consequence. I have been unable
to locate any
information from the Parliamentary process that provides a clear answer on the
point.
Conclusion
[65] For those
reasons, on 21 September 2009, I made the orders and directions
set out in para [6] above.
[66] All questions of costs are
reserved, to be dealt with by the trial Judge.
[67] Deliberately, I have not answered all questions set out by Allan J in his
judgment. My conclusion that the witnesses are compellable is sufficient. Any
issues of relevance will be for the trial Judge to
determine in a manner that will
intrude, as little as possible, on the confidentiality agreed at the mediation.
[68] As the proposed
witnesses have not been heard, they will retain a right to
raise any objection at the hearing if they consider that they ought to
be excused from
answering any particular questions.
[69] My Associate will forward a copy of this judgment to the Ministry of
Justice
and the Law Commission, so that they may consider whether to review the policy
implications of s 57, in light of my comments.
_____________________________
P R Heath J
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