Can statements made in negotiations ever be admissible?
As a general rule, and pursuant to s131 of the Evidence Act 1995 (Cth), statements made in the course of negotiating the settlement of a dispute are deemed to be privileged or confidential, and therefore not admissible as evidence if the negotiations fail and the matter comes before the Court.
The Full Court of the Family Court of Australia has described the policy objectives of this legislation to be twofold, namely to encourage settlement negotiation and also to encourage “genuine presentations during those negotiations”.
In the recent matter of Phe & Leng  FamCAFC 17, the Full Court discussed the interpretation of s131(2) of the Evidence Act which offers exceptions to the rule, namely (at subsection g) that it “does not apply 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”.
In this matter, the primary judge had determined that the asset pool included a loan from the husband’s father to the husband in the sum of $145,000.00. The wife denied the existence of such a loan.
There was evidence to support the finding that it was a loan to be repaid, namely the evidence of the husband and the husband’s father, bank statements, a settlement statement, and handwritten records of payments.
There was also evidence, adduced by the husband, of a text message from the wife to the husband’s sister acknowledging that the loan existed. On Appeal, the wife objected to the admissibility of this text message as evidence as it was sent in the context of trying to persuade the husband’s family in Taiwan to return the parties’ eldest child to Australia, and thus should have been privileged as a statement made in connection with an attempt to negotiate settlement of a dispute.
The Full Court chose to adopt a broad view of the interpretation of s131(2)(g), stating that the section “applies where the existence or the contents of otherwise privileged communication contradicts or qualifies existing evidence or an inference from that evidence and the court is otherwise likely to be misled unless the communication is adduced.”
In this case the exception would apply because the evidence of the text message contradicted the evidence that the wife gave at Trial.
In addition, the Full Court found that the exclusion of the text message as evidence may have misled the primary judge. Whilst it was noted by the primary judge that the husband was a helpful and apparently honest witness, his memory for dates and figures was not as good as the wife’s, and he had earlier made an inconsistent statement about the amount and source of the loan. Despite the other evidence of the husband, the primary judge may well have preferred the evidence of the wife in the absence of the text message.
Whilst it is accepted that parties should be free to negotiate genuinely and realistically when trying to resolve disputes, in the words of the Full Court “it is not sound public policy to permit a party to assert something is “white” when attempting to negotiate a settlement and then give sworn evidence that it is “black”, without the court knowing the witness had previously said that it was “white” and the witness being exposed to being tested upon the assertion made during settlement negotiations”.
Parties should therefore be very careful about making statements during the course of negotiations if they intend to deny or contradict those statements under oath. The Court will always treat very carefully any evidence which is purported to be made during settlement negotiations but ultimately may accept such evidence if any of the exceptions under s131(2) apply.