Privilege for ‘without prejudice’ docs challenged in leaky building case
/Body Corporate 212050 v Covekinloch Auckland Ltd [2017] NZHC 2642
A series of misfortunate events
When the owners of apartments at 150 Symonds Street apartments discovered they had a leaky building on their hands, they issued proceedings against James Hardie and Hawkins Construction (“the Constructors”) for negligence. The plaintiffs claimed remediation costs from the Constructors, basing the quantum on designs prepared by CoveKinloch Auckland Ltd and Chester Consultants Ltd. The parties eventually settled the claim in 2013.
In the judge’s own words, the misfortunes of the plaintiffs, far from ending at the point where the remediation work was commenced, actually multiplied. The project was a disaster and the consultants’ projected cost of $4,300,000 soared to $11,649,053. The project was eventually abandoned in 2016 and the building was demolished.
A novel duty of care
In the wake of these developments, the plaintiffs issued proceedings against Auckland Council for ‘loss of chance’. Their argument was based on a ‘novel’ duty of care: if Auckland Council had picked up the defects in the remediation designs at building consent stage, the plaintiffs would have realised the need to amend the designs and allow for greater construction costs. This, the plaintiffs argued, would have given them the chance to hold out for a greater settlement sum when negotiating with the Constructors.
Without prejudice documents and s 57(3)(d) of the Evidence Act
Auckland Council wanted the plaintiffs to disclose the without prejudice documents exchanged between the plaintiffs and the Constructors in their attempt to reach settlement in 2013.
Under s 57 of the Evidence Act, the default position is that any document made in connection with a settlement negotiation or mediation is confidential and subject to privilege. The question in this case was whether the new exception in s 57(3)(d) applied: In the interests of justice, did the need for the communication or document to be disclosed in the proceeding outweigh the need for the privilege?
The judge thought it was possible that disclosing the without prejudice communications might uncover relevant information. For example, other design options may have been on the table during negotiations, and a cheaper option was agreed on. This would indicate that the plaintiffs embarked upon a remediation plan which they were aware had shortcomings. While the judge acknowledged that it was difficult for Auckland Council to surmise what documents might exist, the judge ultimately thought it was too uncertain that relevant information of the kind would be uncovered.
Unpersuaded that the need for disclosure outweighed the need for privilege, the judge held that the without prejudice documents were to remain confidential.
Comment
Cecily Brick, Partner at Fee Langstone, says parties to a civil dispute have been able to engage in without prejudice negotiations with confidence that documents related to the negotiations are privileged and cannot be referred to later, unless there was a dispute as to the terms of a settlement. The recent change to the Evidence Act means this is no longer the case, as the Court has the ability to weigh up whether it is just to require the documents to be disclosed. As this High Court decision shows, the circumstances in which a party may apply for disclosure of without prejudice documents are likely to be wide-ranging. Applications for disclosure are likely to be frequent unless some firm guidelines emerge from the Courts limiting disclosure to exceptional cases.
