What used to be called ‘without prejudice’ privilege is now covered in Australia by Section 131 of the Evidence Act 2008. It is designed to ensure that people in dispute can try to negotiate settlements without fearing that evidence what they have said or written will be used against them in Court if the matter continues without settling. Questions sometimes arise as to whether or not specific communications were part of an attempt to negotiate settlement or not. These questions can be the subject of heated argument, as one side may think the particular communication will be a great help to their argument in the proceeding (and will argue it is not privileged), whilst the other is very keen to keep it private (arguing that it is).
A recent NSW decision has helpfully set out some relevant principles to consider.
Section 131(1) of the Evidence Act 2008 states:
Evidence is not to be adduced of –
(a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or
(b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute”.
There are exceptions set out in subsection (2).
In Mordecai v Attorney General of NSW (2013) NSWSC 1307 there was a dispute as to whether a letter written by Mordecai to the other parties in the earlier proceeding (which Mordecai was seeking leave to appeal) was covered by S131 privilege. Mordecai argued that the letter was covered by the privilege: that he had written it in an endeavor to settle the earlier proceeding. His opponents argued that it was not an attempt to negotiate settlement and they should now be able to rely on it.
Justice Garling rejected tender of the letter. In a discussion at paragraphs [20-25] of his judgment, His Honour reiterated that it is now ‘beyond argument’ that the mere insertion of, or use of the words ‘without prejudice’ on a document is not, without more, determinative of the issue of whether a communication is ‘in connection with a settlement’: GPI Leisure Corporation (In Liq) v Yuill (1997) 42 NSWLR 225 at 226G per Young, J. However, it will be some evidence of an intention that the communication is made for the purpose of attempting to negotiate a settlement of a dispute: Barrett Property Group Pty. Ltd. v Dennis Family Homes Pty. Ltd.  FCA 276.
His Honour went on to consider what ‘attempt to negotiate a settlement’ means, and said it was appropriate to keep in mind what Bromberg J said in Barrett Property at  to : ‘It does not require an attempt to negotiate a compromise in which some middle ground is found’.
Quoting Spigelman CJ in Bhagat v Global Custodians Ltd  NSWCA 160 at , ‘a demand for surrender may constitute an attempt to negotiate a settlement, even though no compromise is offered.’ There does not have to be an offer capable of acceptance: it is sufficient that the communication can be described as an ‘opening shot’ in negotiations: GPI Leisure v Yuill. Applying these principles to the letter in question, His Honour found that it was privileged under s131, amounting to a genuine attempt to negotiate a settlement of the proceedings. This was not altered by the fact that it referred to and made a demand about extraneous subject matter (not part of the proceedings in question), nor that it did not clearly specify what settlement was proposed. He pointed out that ‘staking out’ what boundaries a party wants to negotiate within is common in negotiations. He also held that ‘the fact that an offer includes one term, which may be impossible to accept, does not mean that the entire offer is not a genuine attempt to resolve the position’ . An opening letter in settlement negotiations or a ‘shot across the bows’ may still be a genuine attempt to negotiate a settlement .