The Malaysian High Court held that settlement offers (and their rejections) are inadmissible as evidence, if those settlement discussions took place while conciliation proceedings were still ongoing.

The High Court held that settlement offers (and their rejections) are inadmissible as evidence, if those settlement discussions took place while conciliation proceedings were still ongoing.

Our firm recently acted for an employee (“Employee”) who had filed an unfair dismissal claim against his former employer (“Employer”).  While conciliation proceedings were ongoing before the Director General of Industrial Relations, the Employer made an offer for reinstatement, subject to certain terms (including delayed payment of back wages to be paid out over instalments) (“Offer”).  The Offer was rejected by the Employee on the basis that he found the terms to be insincere and unreasonable.

As conciliation talks failed, the Minister of Human Resources made a decision to refer the dispute to the Industrial Court.  The Employer thereafter filed an application for judicial review seeking to quash the Minister’s decision.  The application was premised on the basis that since the primary remedy sought in the Industrial Court is reinstatement, the Employee’s rejection of the Offer meant that the Employee had no right to have his complaint heard by the Industrial Court. The Employer was therefore of the view that the Minister should not have referred the complaint to the Industrial Court.

We opposed the application for leave for judicial review on the basis that the Offer and its rejection, being evidence of settlement discussions while conciliation proceedings are ongoing, are inadmissible by virtue of Section 54 of the Industrial Relations Act (“Act”):

“In a proceeding before the Court on a reference to the Court under subsection 20(3), no evidence shall be given of any proceeding before the Director General under subsection 20(2) other than a written statement in relation thereto agreed to and signed by the parties to the reference.”

Since the judicial review application was premised wholly on the Employee’s rejection of the Offer, once the Offer and its rejection are excluded from evidence, there is nothing else to support the judicial review application and it was doomed to fail.

The High Court ultimately agreed with our submissions and refused to grant leave to the Employer for their judicial review application. In so holding, the High Court made several important observations and findings:

  1.  The exclusions in Section 54 of the Act equally apply to the High Court by virtue of Section 54(4) of the Act [which was incorporated into the Act by amendment effective 2008]. Section 54(4) of the Act expressly states that the exclusion of evidence is applicable “in any proceedings before any other court”. The Court held that this must necessarily include the High Court. The Employer’s argument that Section 54 was only applicable to the Industrial Court was therefore without merit in light of the amendments to the Act.
  1. Correspondence between parties relating to proposed settlement terms are inadmissible even if the Director General was not copied or privy to the correspondence. That correspondence can be deemed as “evidence of any proceedings before the Director General” so long as the correspondence took place pursuant to the conciliation meeting.
  1. The intention of Section 54 of the Act is to prevent evidence of settlement discussions from being disclosed in court proceedings. Since the judicial review application was premised wholly around the rejection of the settlement offer, its exclusion means the Employer’s application is unarguable and groundless. There was no purpose for the court to grant leave for judicial review.

The High Court’s decision is welcome as it upholds Parliament’s intention and purpose in enacting Section 54 of the Act.  The purpose of the statutorily required conciliation proceedings under the Act is to encourage an amicable resolution of trade disputes. These conciliation proceedings would be of little value if parties were aware that should such settlement discussions fail, what they have said may be used against them. This decision may also hopefully prevent employers from making non bona fide offers for reinstatement in hopes of defeating an unfair dismissal claim.

UPDATE: On 16 August 2016, the Court of Appeal upheld the decision of the High Court, agreeing that discussions during the conciliation proceedings are inadmissible in judicial review proceedings before the High Court.

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ABOUT THE AUTHOR. Donovan Cheah is a partner at Donovan & Ho. He is an advocate and solicitor of the High Court of Malaya, and his writings have been featured in publications like The Edge, The Star, the American Chamber of Commerce updates, and Asialaw.

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