Without prejudice privilege - common law rule
Without prejudice terms in mediation agreements
Operation of the Evidence Act
Court-ordered mediations



In the course of a mediation, without prejudice privilege is often attached to discussions regarding settlement and documents prepared in aid of settlement. Such negotiations and documents are also usually protected by express without prejudice terms contained in most mediation agreements, and as such cannot be used as evidence in any subsequent judicial proceeding. However, in Pihiga Pty Ltd v Roche the court found that:

  • exceptions to the common law without prejudice rule exist - evidence of negotiations may be adduced in circumstances where a concluded compromise agreement has been reached, but where it is asserted false or misleading representations have been relied on; and
  • without prejudice or confidentiality terms contained in mediation agreements, no matter how unequivocally expressed, provide no better protection than the common law, where false or misleading representations are alleged.


A dispute arose between the parties, concerning refinancing and appointment of directors within a company group. By consent (not by court order), the parties participated in a mediation. This culminated in a settlement deed being entered into, whereby the applicants agreed to sell their shares in the relevant companies to the second respondent.

The mediation agreement contained provisions to the following effect:

  • the parties were to act in good faith and the mediation would be confidential;
  • all negotiations in the context of the mediation were to be without prejudice; and
  • no documents or oral exchanges connected to the mediation were to be used as evidence in any subsequent judicial proceeding.

The applicants in the proceeding sought relief in the form of an order declaring the settlement deed void, setting it aside or rescinding it on the basis that the respondents made false and misleading representations during settlement negotiations. It was asserted that the false or misleading representations induced the applicant to enter into the settlement deed.

The respondents sought an injunction restraining the applicants from introducing as evidence documents prepared for, and statements made, during the mediation. These included the parties' mediation position papers, documents revealing valuations of company assets (prepared by the respondents in pursuance of a settlement offer), and affidavit evidence detailing the relevant oral exchanges in the course of the mediation. The respondents' application was based on the common law without prejudice privilege and the mediation agreement itself.

Without prejudice privilege - common law rule

Generally, the rule prohibits communications regarding settlement and documents prepared in aid of settlement from being used as evidence against a party in subsequent judicial proceedings. Justice Lander considered the operation of the rule at length, noting:

  • the rule rests partly on public policy, aiming to encourage parties to settle the dispute without recourse to the court by providing circumstances where the parties can exchange their positions frankly and freely and without fear that anything said may be used against them;
  • the protection afforded by the rule is also founded on the express or implied agreement of the parties that their communications between themselves should not be admissible in evidence if those communications do not lead to a settlement;
  • the rule is not restricted simply to an offer made and not accepted, but also includes all communications that are genuinely entered into for the purpose of trying to reach a compromise; and
  • the rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement.

However, Lander suggested that the rule is not absolute and identified specific exceptions, including:

  • where there is evidence of negotiations to show that an agreement apparently concluded between the parties should be set aside on the ground of misrepresentation, fraud or undue influence;
  • where a clear statement is made by one party on which the other party intended to act, and did act, giving rise to an estoppel;
  • where exclusion of evidence of what is said or documented during negotiations would act as a cloak for perjury, blackmail or other 'unambiguous impropriety';
  • where the evidence explained delay or apparent acquiescence;
  • where there is disagreement as to whether without prejudice communications have resulted in a concluded compromise agreement; and
  • where an offer is expressly made 'without prejudice except as to costs' - evidence of the negotiations may be admissible when deciding the issue of costs.

Lander ultimately found that the relevant mediation evidence was not protected by the common law without prejudice rule due to the applicants' claim that a concluded compromise agreement was reached in circumstances where the applicants were induced by the respondents' false or misleading and deceptive conduct.

Without prejudice terms in mediation agreements

The respondents submitted that the parties were bound by the express terms of the mediation agreement as set out above.

Lander rejected the respondents' submissions, noting that the protection afforded by such terms was no greater than that of the common law. A party is not entitled to absolve itself from the consequences of breaching the Trade Practices Act 1974 (Cth), Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) by relying on contractual exclusionary provisions.

The mediation documents and communications were therefore able to be adduced as evidence in subsequent litigation.

Operation of the Evidence Act

As an alternative to injunctive relief, the respondents also sought to rely on the statutory form of the without prejudice privilege rule under Section 131 (exclusion of evidence of settlement negotiations) of the Evidence Act 1995 (Cth). They argued that the court should exercise its discretion pursuant to the act and declare the evidence inadmissible, by virtue of the fact that it may be unfairly prejudicial to them.

The respondents' arguments ultimately failed. Lander found that although the relevant documents and communications were evidence of settlement negotiations and therefore usually excluded under Section 131(1), they qualified as an exception because the applicants sought to enforce an agreement between the parties in dispute to settle that dispute.

Lander also accepted the applicants' assertions that Section 131(2)(i) also applied to permit such evidence to be adduced because:

"the communication which was made in an attempt to negotiate a settlement and the document which had been prepared affects the applicants' rights. The applicants contended that they had a right, whilst engaged in negotiations with the respondents, not to have representations made to them which were false which would amount to misleading and deceptive conduct and, as a result, cause them damage by entering into the settlement deed."

Court-ordered mediations

The respondents also raised Section 53B of the Federal Court of Australia Act 1976 (Cth), which provides that anything said, or any admission made, in the course of conducting a mediation conference ordered by the court is not admissible as evidence in any court or proceedings.

Lander held that the section "is in absolute terms and admits of no exceptions". He also found that the provision had no direct application on the proceedings at hand, as the mediation was not carried out pursuant to a court order.


Certain communications, involving allegations of fraud, misleading or deceptive conduct or impropriety during a mediation, will likely fall outside the protection of the without prejudice privilege rule, the Evidence Act and even express contractual terms of the mediation agreement.

Parties to court-ordered mediations need to be aware of the possible distinction from mediations by consent regarding the admissibility of statements made during mediation.

For further information on this topic please contact James Parkin at Piper Alderman by telephone (+61 2 9253 9999), fax (+61 2 9253 9900) or email ([email protected]).