By Ben Vincent – Lawyer
Negotiating a settlement in private often has advantages over litigation in the Federal Circuit and Family Court of Australia. As a matter of public policy, parties reaching agreements also reduces the burden on the court system. To encourage negotiations, the confidentiality of those negotiations is protected under Section 131 of the Evidence Act 2008.
However, there are important exceptions, such as when a fact or admission in negotiations reveals an inconsistency with what you have said, or will say, to the Court in the future.
Section 131 of the Evidence Act 2008 – Without Prejudice communications
Section 131 of the Evidence Act 2008 prevents parties from adducing evidence to the court of communications (both written and verbal) made when negotiating a settlement.
Section 131 is derived from principles in common law. The High Court stated the purpose as:
‘To enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered.[1]’
These are often referred to as “without prejudice” communications.
What does Section 131(1) say?
Section 131(1) of the Evidence Act states:
- Evidence is not to be adduced of:
- 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
- a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.
Exceptions to the Rule
Some exceptions allow without prejudice communications to be used in court.
One exception is that, without prejudice communications can be used in court if both the sender and receiver consent.
Another important exception is found in Section 131(2)(g) of the Evidence Act which allows evidence of the communication to be used in court if:
- evidence that has been adduced in the proceeding, or an inference from 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 or to qualify that evidence
Narrow vs Broad interpretation of Section 131(2)(g)
Two interpretations of this exception exist:
- Broad View – Allows without prejudice communications to be used to correct any misleading evidence, even if the misleading evidence is not related to the settlement.
- Narrow View – Limits the use of without prejudice communications to correcting evidence directly related to the settlement itself.
In 2019, the Full Court of the Family Court, in the case of Phe & Leng comprised of Alstergren CJ, Strickland and Watts JJ preferred the broad view, but did not fully close the gate on the narrow view, stating that: [2]
However, recognising that another court on receiving that argument may decide otherwise, we are nevertheless of the view, in this case, that the broader interpretation of the meaning and operation of s 131(2)(g) of the Evidence Act, based as it is upon the ordinary words of s 131(2)(g), is to be preferred to its narrower construction.
The Full Court noted that the broad view is consistent with the obligations of full and frank disclosure under the Family Law Act 1975.[3]
This issue came before a primary judge in Kain & Kain the following year when at least 3 Queen’s Counsel traversed the history of the protection. The court determined that the decision of the Full Court in Phe & Leng to prefer the broad view is now binding on lower courts.[4]
Examples of Section 131(2)(g) in action
It is useful to look at some situations where section 131(2)(g) was applied, and where the court found it was at risk of being misled if the without prejudice communication was not admitted.
In Leon & Bonnay the father asserted in court that he was unable to pay private school fees. He later attempted to negotiate with the mother, saying that he would pay half the school fees, if she agreed to a week about parenting arrangement.
The father’s proposal to pay the school fees was inconsistent with his evidence to the court that he could not. As a result, the communication was received into evidence.[5]
In Phe & Leng the wife gave evidence disputing the existence of a loan to the father’s parents, but later attempted to negotiate with the father in the following way:
[P]lease tell father and mother as long as M can come back to Sydney, I’m willing to give up everything in Taiwan and return the $3 million they have put into the Suburb F property to show my sincerity.
The wife said that this was her attempt to negotiate the eldest child’s return to Australia and, even though her message referred to the money as being the husband’s parents’ money, it was the father’s money.
The primary judge rejected that and inferred from the message that the wife was aware of a loan to the husband’s parents. The wife appealed the decision, stating that her message should not have been admitted as evidence. The appeal was dismissed by the Full Court of Alstergren CJ, Strickland and Watts JJ who found it was likely the primary judge would have been misled into accepting the wife’s evidence of being unaware of the loan if the communication had been excluded.[6]
In Bence & Bence, the controversy was again the existence of liabilities. The husband claimed that liabilities had arisen through promissory notes. The wife said the liabilities did not exist. To strengthen her argument, the wife sought to introduce a document provided by the husband during negotiations, in which he listed the parties’ financial interests but made no mention of any liabilities.
The husband contended that, as this document was part of settlement negotiations, it was protected under section 131 of the Evidence Act. The court accepted that the document was provided in the context of settlement negotiations, but was still admissible because it supported the conclusion that the liabilities did not exist at the time the document was created.[7]
In Kain & Kain a dispute arose as to whether a signed in principle agreement entered into during mediation was protected under section 131(1) of the Evidence Act.
The Court adopted the broad interpretation of section 131(2)(g).
The wife accepted that the in principle agreement was not legally binding. However, she referred to the signed document in an affidavit to support her contention that the husband thought the agreement was just and equitable at the time of signing and that it should be considered by the court pursuant to the Full Court decision of In the Marriage of Woodland & Todd.
The judge commented “I certainly would not allow the so-called settlement agreement into evidence solely on the basis that the agreement demonstrated that the parties regarded the arrangement recorded therein as representing a just and equitable resolution of the application under s 79”
However, the husband gave evidence that no agreement at all was reached at the mediation. The wife successfully argued the agreement could be received into evidence under section 131(2)(g) of the Evidence Act as the court would otherwise be misled by the husband’s assertion that there was no agreement reached at all.
It seems that if the husband had simply objected to the document being accepted in evidence based on section 131(1), rather than asserting there was no agreement reached at all, the agreement may not have been admissible. The husband potentially misleading the court would not have been in issue and the exception in section 131(2)(g) would not have been engaged.
Can I tell the Court about an offer I made to try to avoid litigation?
In some circumstances, it can be advantageous to tell the court about an offer you made to try to avoid litigation. Particularly to support an application for a costs order against the other party.
Section 131(2)(d) of the Evidence Act allows for a communication or document to be used in evidence if that communication clearly indicates that it is not to be treated as confidential. This type of communication is known as “open correspondence.”
Advice and guidance
If you are involved in a family law dispute it is important to understand how Section 131 of the Evidence Act 2008 and other legal principles may impact your negotiations.
Please contact Blackwood Family Lawyers on (03) 8672 5222 to arrange an appointment with one of our experienced lawyers. We can guide you in navigating settlement discussions while protecting your interests.
[1] Field v Cmr For Railways (NSW) (1957) 99 CLR 285
[2] Phe & Leng [2019] FAMCAFC 17 Ibid [48]
[3] Ibid
[4] Kain & Kain [2020] FAMCA 650 [109]
[5] Leon & Bonnay (No 2) [2024] FEDCFAMC1F 305
[6] Phe & Leng [2019] FAMCAFC 17 [49]
[7] Bence & Bence [2020] FAMCA 748 [167]
