Ford Motor Co of Australia Ltd v Tallevine Pty Ltd (as trustee for the Thornleigh Trading Trust)

In a summons filed in the NSW Supreme Court in March 2017, the plaintiff (Ford) alleged that the defendant (Tallevine) was in breach of the terms of a settlement deed and consent orders reached as a result of a mediation held in September 2015 in the course of resolving previous proceedings.

This interlocutory judgment deals with numerous issues, however, this case note focuses on Tallevine’s intention to rely on evidence of false representations (representations) it alleges were made by Ford during the mediation. Ford denies it made false representations. The decision considers the operation of the Evidence Act 1995 (Cth), specifically s 131 — Exclusion of evidence of settlement negotiations. It concludes that because Tallevine’s allegations call into question whether the agreement was in fact made, s 131(2)(f) meant that the protections offered in s 131(1) did not apply.

Tallevine was a Ford dealer on a conditional basis from around November 2010 and from April 2011 pursuant to a standard Ford dealer agreement. In August 2013 Mr Creak, who is a director of Tallevine, and one of Tallevine’s employees were convicted of offences directly relating to his conduct of the dealership. The offences included tampering with odometers. Ford took steps to terminate the dealer agreement.

Ford commenced proceedings in the Victorian County Court in May 2014, alleging that Tallevine was in breach of the dealer agreement. A mediation was held on 21 May 2015. It was unsuccessful.

A further mediation was held on 8 and 10 September 2015. The mediation agreement signed by the parties on 8 September 2017 (mediation agreement) contained standard clauses relating to confidentiality and privilege. On 16 September 2015 Ford and Tallevine executed a settlement agreement (2015 settlement agreement) and Consent Orders were filed.

On 10 March 2017 Ford commenced proceedings alleging that Tallevine had acted in contempt of the court by failing to comply with the consent orders.

On 8 May 2017, Tallevine served a notice of motion seeking to set aside the consent orders alleging Ford had made the representations. Tallevine subsequently filed a cross-claim. Tallevine alleges that at the mediation, representatives of Ford made representations to the effect that Ford had no intention of taking any steps to prevent Tallevine from operating its business or of withholding certain consent or approvals.

In its notice of motion filed on 7 September 2017, Ford sought numerous orders, including summary dismissal, advance ruling of inadmissibility and security for costs. Relevantly, Ford sought orders that evidence of alleged communications made between the parties in the course of a mediation and settlement discussions, in connection with an attempt to negotiate a settlement:

• is subject to privilege pursuant to s 131 of the Evidence Act
• is subject to confidentiality pursuant to the terms of the mediation agreement

The disputed evidence Tallevine filed three affidavits of Mr Creak in which the representations are described, at least in part. Harrison J’s decision recites some of the evidence from Mr Creak’s affidavits.1 It includes:

52. During the 8 September 2015 mediation conference held in Melbourne, I was present during conversations in words the following effect: I said: Any deal must include a guarantee of supply of a new Ford motor vehicles and I want a written assurance to that effect. Ford representative said: Yes, we will consider this requirement.

55. … David Jefferies said: Of course Tallevine is entitled to purchase cars from the existing Ford dealer network and should there be a satisfactory purchaser we would welcome representation back at Thornleigh.

Harrison J noted that it was extremely regrettable that not all of Tallevine’s evidence had been served on Ford. He further noted Tallevine’s curious way of reserving its position in relation to further evidence.2

Ford maintained that by reason of s 131(1) of the Evidence Act, Mr Creak’s evidence is inadmissible. Tallevine relied on s 131(2)(f). Section 131 provides:

131 Exclusion of evidence of settlement negotiations

(1) 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 a 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.
(2) Subsection (1) does not apply if: …
(f) the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue, or …

For s 131(2)(f) to apply, the proceeding must be a proceeding to enforce an agreement or a proceeding in which the making of such an agreement is in issue. The “proceeding” under consideration was Tallevine’s crossclaim, not Ford’s summons. This is significant because, even though it was not argued, it was at least arguable that the summons satisfied the first limb of s 131(2)(f). The consideration of the cross-claim focused entirely on the second limb, that is, whether “the making of such an agreement is in issue”.

Ford maintained that by reason of s 131(1) of the Evidence Act, Mr Creak’s evidence is inadmissible. Tallevine relied on s 131(2)(f). Section 131 provides:

131 Exclusion of evidence of settlement negotiations

(1) 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 a 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.
(2) Subsection (1) does not apply if: …
(f) the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue, or …

For s 131(2)(f) to apply, the proceeding must be a proceeding to enforce an agreement or a proceeding in which the making of such an agreement is in issue. The “proceeding” under consideration was Tallevine’s crossclaim, not Ford’s summons. This is significant because, even though it was not argued, it was at least arguable that the summons satisfied the first limb of s 131(2)(f). The consideration of the cross-claim focused entirely on the second limb, that is, whether “the making of such an agreement is in issue”.

Ford submitted that s 131(2)(f) did not apply and relied on Asciak v Australian Secured and Managed Mortgages Pty Ltd (Asciak).3 Asciak involved a proceeding to have Family Court consent orders set aside. Section 131(2)(f) was held not to apply in those circumstances.

Tallevine relied on Fermiscan Ltd v James(Fermiscan).4 In Fermiscan the relief claimed was characterised as enforcement of certain provisions of a settlement deed and therefore s 131(2)(f) applied.

Harrison J said that the decisions in Asciak and Fermiscan “underscore the fact that each case will ultimately and necessarily turn upon its own facts”.5 Asciak did not involve enforcement of the consent orders, nor was the making of the agreement in issue. His Honour disagreed with any assumption that Asciak is authority for the proposition: …

that proceedings to set aside an agreement upon the basis of the existence of some fundamental vitiating factor thereby fall outside s 131(2)(f) or can never be proceedings that are concerned with the making of the agreement in question.6

Tallevine contended that the agreement never came into effect because it was induced by Ford’s representations. Whether those representations are proven will inform whether the agreement was in fact made. It therefore follows that the proceedings are at least in part concerned with the making of the settlement agreement, as required by s 131(2)(f).

His Honour concluded that s 131(2)(f) of the Evidence Act applies to Tallevine’s evidence and was “not inclined to rule that the evidence of the representations cannot be adduced”.7

Ford also sought an order that the evidence sought to be adduced by Tallevine was subject to confidentiality pursuant to the confidentiality clauses contained in the 2015 mediation agreement and that this precluded Tallevine from relying on Mr Creak’s evidence. His Honour noted Ford was: …

not unreasonably concerned that the integrity and sanctity of the confidential mediation process is imperilled by Tallevine’s attempts to lead evidence of what might have been said by Ford’s representatives in the mediation.8

However, Harrison J did not consider it appropriate to give a ruling or make a finding before Tallevine’s evidence was adduced.9 Harrison J noted that s 30(4) of the Civil Procedure Act 2005 (NSW) (CPA) did not apply as the September 2015 mediation was not a court ordered mediation.10

His Honour declined to summarily dismiss Tallevine’s cross-claim and ordered Tallevine to provide security for Ford’s costs in the sum of $150,000.

When rejecting Ford’s application for summary disposal of the cross-claim, his Honour said “on one view … Tallevine’s prospects of establishing that the representations were made [and relied on] … could be described as slim or improbable”.11 Even in such a case, the court did not hesitate to rule that s 131(2)(f) applied and that evidence of what transpired at the mediation could be adduced. Any resulting trial and decision will be interesting.

Kerry Hogan-Ross
Kerry Hogan-Ross Mediations
kerry@hogan-ross.com
www.hogan-ross.com

1. Ford Motor Co of Australia Ltd v Tallevine Pty Ltd (as trustee for the Thornleigh Trading Trust) [2017] NSWSC 1703; BC201710736 at [56].
2. At [84].
3. Asciak v Australian Secured and Managed Mortgages Pty Ltd (2008) 66 ACSR 298; [2008] FCA 753; BC200803788.
4. Fermiscan Ltd v James [2009] NSWSC 462; BC200904588.
5. Above n 1, at [66].
6. Above.
7. Above n 1, at [81].
8. Above n 1, at [83].
9. Above.
10. Above n 1, at [62].
11. Above n 1, at [93].