In Joel v The Estate of the late Said El Khouri (No 4) [2026] NSWSC 949, the plaintiff sought to tender a letter sent to him by the defendants on a without prejudice basis dated 2 November 2023 (the Letter) pursuant to s 131(2)(j) of the Evidence Act 1995 (NSW) (the Evidence Act).[i] The defendants objected arguing that the Letter was evidence “in connection with an attempt to negotiate settlement of the dispute” pursuant to s 131(1) of the Evidence Act.[ii]
The plaintiff’s application was brought in proceedings for the recovery of an alleged loan by the plaintiff to the late Said El Khouri, from the estate (the first defendant) and the executors (second and third defendants).[iii] The defendants dispute that there was any loan. After filing their defence but prior to serving their evidence, the defendants sent the Letter containing the following key allegations that went beyond the defendants’ position as pleaded:[iv]
Importantly, the defendants did not serve any evidence in relation to the key allegations made in the Letter, did not serve any forensic accountant’s report and did not put the key allegations to the plaintiff in cross-examination.[v]
Pursuant to the relevant subsections of s 131 of the Evidence Act:
(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 the dispute, or …
(2) Subsection (1) does not apply if –
(j) the communication was made, or the document was prepared, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty …
(3) For the purposes of subsection (2)(j), if commission of the fraud, offence or act is a fact in issue and there are reasonable grounds for finding that—
(a) the fraud, offence or act was committed, and
(b) a communication was made or document prepared in furtherance of the commission of the fraud, offence or act,
the court may find that the communication was so made or the document so prepared.[vi]
Justice Chen emphasised that in light of s 131(3) of the Evidence Act, it is not necessary to establish that the content of the Letter constituted contempt of court, but that it was sufficient for there to be “reasonable grounds for finding a contempt has been committed” and that the Letter was sent in furtherance of the contempt.[vii] The parties accepted that a contempt of court is either an offence or an act that renders a person liable to a civil penalty within s 131(2)(j) and (3) of the Evidence Act,[viii] and “that putting improper pressure on a party is a recognised category of contempt”.[ix]
The parties disagreed on whether sending the Letter put improper pressure on the plaintiff to abandon or settle the proceedings.[x]
The defendants argued that the Letter merely identified perceived weaknesses in the plaintiff’s claim and that the allegations were “unaccompanied by threats”.[xi] Justice Chen held that in particular the allegations regarding the plaintiff’s alleged sale of heroin and not declaring his finances to the ATO, “are improper because … they are extraneous to the proceedings and … there is no basis in the evidence, on the application or at trial, to substantiate them”.[xii]
The defendants also submitted that on an objective reading of the Letter, it was clear that the defendants would not necessarily report the plaintiff, but merely threatened to do so and if no response was received they would continue to consider their position and would issue a subpoena upon the plaintiff.[xiii] Justice Chen agreed with the plaintiff that the defendants’ construction “was artificial and untenable”.[xiv] In particular, the Letter clearly stated that the defendants will (not may) carry out the actions mentioned, including reporting the plaintiff to the authorities, absent a response within 7 days.[xv]
In light of the Letter containing “a threat of immediate reporting of allegations to law enforcement and revenue authorities”,[xvi] Justice Chen was “satisfied that there are reasonable ground for finding a contempt had been committed, that there was an offence within s 131(3) and that the [L]etter was sent in furtherance of that offence”.[xvii]
This case provides a helpful example of the level of scrutiny employed by the Courts when examining communications and documents marked without prejudice. Justice Chen’s diligent analysis of the threats contained in the Letter serves as a reminder that the choice of words, such as the use of will versus may, matter: There is a difference between reserving your rights and foreshadowing actions conditional on an event, the latter being more likely to constitute improper pressure, particularly if the foreshadowed actions are not directly relevant to the facts in issue.
[i] Joel v The Estate of the late Said El Khouri (No 4) [2026] NSWSC 949 (Joel (No 4)) at [1], [2].
[ii] Joel (No 4) at [1].
[iii] Joel (No 4) at [6].
[iv] Joel (No 4) at [9].
[v] Joel (No 4) at [11], [12].
[vi] s 131(2)(j) of the Evidence Act 1995 (NSW) (Evidence Act).
[vii] Joel (No 4) at [4], [13], [14], [17].
[viii] Joel (No 4) at [16].
[ix] Joel (No 4) at [16], [28].
[x] Joel (No 4) at [27], [28], [31].
[xi] Joel (No 4) at [32].
[xii] Joel (No 4) at [33].
[xiii] Joel (No 4) at [34], [35].
[xiv] Joel (No 4) at [36].
[xv] Joel (No 4) at [37].
[xvi] Joel (No 4) at [38].
[xvii] Joel (No 4) at [40].
The recent case of McCallum has developed the Australian case law relating to moral rights, a relatively new concept in Australia incorporated into the Copyright Act 1968 (Cth) (the Act). It also serves as a reminder of the limitation of the moral rights regime and the importance of the Australian Consumer Law (the ACL) in ‘policing’ an author’s moral rights.