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When facing a legal dispute, it’s encouraged that you first exhaust all other avenues before settling the matter in court. Typically, parties may try to resolve their dispute through mediation where an independent third party assists them in reaching a mutually agreed settlement. But what happens when mediation is unsuccessful? Communications between the parties and the mediator and documents shared during mediation are usually inadmissible in court. Below, we consider an exception to the rule where a court might be misled unless certain evidence from the settlement negotiation is submitted.

What Does the Legislation Say?

Under Section 131 of the Evidence Act 2008 (Vic) (‘the Act’), parties cannot cite as evidence communications (including documents) connected with an attempt to negotiate a settlement of the dispute.

Section 131(2)(g) however contains an exception to this rule. If a party produces evidence in court, that is or is likely to mislead the court, a party can adduce the documents and communications from mediation sessions.

What do the Cases Say?

The cases have set out two approaches to applying this exception. The first is to interpret section 131(2)(g) according to its simple meaning – parties can only rely on evidence of settlement negotiations where its omission is likely to mislead the court.

Justice Emmett adopted an alternative approach in the Federal Court case of Brown v Federal Commissioner of Taxation. In that case, his Honour stated that section 131(2)(g) would only apply where the excluded communications or document would mislead the Court about those matters that are an issue in the proceeding.

In other words, a party bringing forward evidence which contradicts what took place in the mediation isn’t sufficient grounds to adduce evidence from the mediation. To do so, you will need to show that the evidence would mislead the court as to a necessary fact in the case.

Justice Bromberg of the Federal Court of Australia accepted Justice Emmett’s view in Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2). He added that section 131(2)(g) ultimately operates to prevent parties actively misleading the court on important facts of the case.

Key Points to Remember

The exception to the rule prohibiting reference to settlement negotiations in a case will only apply where evidence of the settlement negotiations is relevant to the case. To satisfy ‘relevance’, it’s not enough to show that the court may otherwise be misled. You also need to show that the court will be misled as to a necessary fact in the case.

To apply section 131(2)(g), evidence which may mislead the court must have already been brought forward. Parties should exercise care in communicating or preparing documents in regards to settlement negotiations, as there may be circumstances in which they may be admitted into evidence at a trial.

Finally, parties must keep in mind what has been said or documented between them in the course of settlement negotiations when presenting their case at trial.

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When resolving a legal dispute through mediation is unsuccessful, it is important to understand the rules involved when preparing a case for court. LegalVision’s disputes resolution lawyers can assist with the mediation process and other methods of ADR, as well as helping you prepare for a trial if you decide to settle in court. If you have questions about a dispute you’re facing, get in touch on 1300 544 755 or fill out the form on this page.

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