Hearsay ... the Journal of the Bar Association of Queensland
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Obtaining Early Disclosure of Policies of Insurance Print E-mail

disclosure-intro.jpgUnder the UCPR, disclosure, both between the parties and from non parties, is primarily limited to documents directly relevant to issues identified in the pleadings: r 211(1)(b) and r 242(1)(a) UCPR.

The purpose of this article is to identify, notwithstanding the proscription contained in r 211(1)(b) and r.242(1)(a) UCPR, means by which disclosure may be obtained of policies of insurance, where the issue of a defendant’s entitlement to indemnity is not raised in the pleadings and the insurer(s) are not parties to the proceeding.

Disclosure might be sought to identify whether a defendant to the proceeding is entitled to indemnity in respect of the loss or damage claimed in the proceeding, or part of it. There may be good reasons why such disclosure is needed – and needed early in the proceeding – for instance where a defendant is impecunious and the question whether it is entitled to indemnity will determine whether there is a point to pursuing the litigation.

This article first addresses the basis for orders for further disclosure of insurance policies which might be made against parties to the proceeding, before turning to consider orders for disclosure of insurance policies that might be made against insurers who are not parties.

Orders for further disclosure against parties

There is authority of the Queensland Supreme Court that disclosure may be ordered against a party, where what is sought are insurance policies in the possession or under the control of the party: Company Solutions (Aust) Pty Ltd v Keppel Cairncross Shipyard Limited (in liq) & Ors [2004] QSC 379; Lampson (Australia) Pty Ltd v Ahden Engineering (Aust) Pty Ltd [1999] 2 Qd R 252.

Orders for further disclosure of policies of insurance have been made, even where the existence or otherwise of insurance is not in issue on the pleadings, on the footing that r 223(4)(a) (and its predecessor Order 35 Rule 14) gives the Court power to do so where “there are special circumstances and the interests of justice require it”.

In Company Solutions (Aust) Pty Ltd v Keppel Cairncross Shipyard Limited (in liq) & Ors Douglas J made an order that the company disclose a copy of the policy pursuant to r.223 UCPR. His Honour said at [8] - [9]:

“In those circumstances it is also appropriate to order that the policy be disclosed to Company Solutions. The question of the cover provided by the insurance policy is not in issue on the pleadings between it and Keppel Cairncross but it is highly important to the practical issue whether that litigation should proceed. In Lampson (Australia) Pty Ltd v Ahden Engineering (Aust) Pty Ltd [1999] 2 Qd R 252, 256-257 Moynihan J said:

‘The test of direct relevance introduced by O. 35 r. 4 replaces the previous rule which required discovery of indirectly relevant documents which ‘might lead to a train of inquiry’; this being the test stated in Compagnie Financiere Et Commerciale du Pacifique v Peruvian Guano Co. Under this discovery regime an affidavit of discovery was conclusive unless the existence of other discoverable documents could be established or it could be demonstrated that documents had been excluded under a misconception, Mulley v Manifold. In this context O. 35 r. 14(4)(a) gives power in the circumstances there specified to order the disclosure of documents beyond those directly relevant to the issues in the cause or in the circumstances contemplated by subr(4).’ (My emphasis.)

Coincidentally that case also dealt with an application for disclosure of an insurance policy to assist one insurer to engage in a mediation knowing whether or not it could look to co-insurers for contribution. The situation here is that neither Company Solutions nor Mr Pavlic now know whether it is worth pursuing Keppel Cairncross further. It may be true that they can prosecute their claims to finality and then discover whether any judgment against Keppel Cairncross is valuable. It was also submitted that they could fund the liquidators to test whether the policy covered the company’s liability. Neither solution is commercially realistic where the parties do not know whether it is worth pursuing a claim based on the policy.”

Douglas J said it was decisive that until disclosure of the policy was made, the parties did not know whether it was worth pursuing the claim and that disclosure of any policy would facilitate the just and expeditious resolution fo the real issues in the proceedings at a minimum of expense consistent with r 5. His Honour said (at [10] – [11]):

“That seems to me to create special circumstances where the interests of justice require such an order and where the overriding philosophy of the rules suggests that the order would facilitate the just and expeditious resolution of the real issues in the proceedings at a minimum of expense; see r. 5. As Pincus JA said in Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd R 276, 283 at [10]:

‘The former inflexible approach to applications for further discovery … is no longer necessarily appropriate, under the current disclosure system, and because of the notions expressed in r. 5 of the Uniform Civil Procedure Rules. If it appeared, for example, that an order for further disclosure would be likely to ‘facilitate the just and expeditious resolution of the real issues’, that would enable and perhaps require the making of such an order.’

Where, as here, the form of the policy is relevant to the application pursued by Mr Pavlic, is of great practical relevance to Company Solutions for the further conduct of its role in the litigation, there is no doubt that the insurance policy exists and is in the possession of Keppel Cairncross, it seems to me that there are special circumstances and the interests of justice require the disclosure of the document.”

Similar considerations arose in Lampson (Australia) Pty Limited v Ahden Engineering (Aust) Pty Limited [1999] 2 Qd R 525 where Moynihan J considered the circumstances in which O. 35 r. 14(4)(a) Supreme Court Rules gave power to order disclosure of documents beyond those directly relevant to the issues in the proceeding.

The rule permitted an order for disclosure to be made only if there were “special circumstances and the interests of justice require it” or if “there is an objective likelihood that … the duty to disclose has not been complied with…”. His Honour said (at 257):

“The interests of justice will obviously vary according to the circumstances of the case and will often involve the balancing of competing considerations. … The material founds a conclusion, supported by experience, that the mediation process will be enhanced if HIH embarks on it knowing whether or not it can look to co-insurers for contribution. On the other hand it has not been demonstrated that Ahden would suffer any particular disadvantage by virtue of disclosure. In the circumstances the disclosure sought is justified.”

Orders for disclosure against non parties

The first step to seeking disclosure of relevant policies of insurance from an insurer who is not a party to the proceeding would be to serve the insurer with a notice of non party disclosure.

If (as is likely) the insurer objects to production of the documents pursuant to r 245, it will be necessary for the party seeking disclosure to apply pursuant to r 247 for an order lifting the stay over the notice.

It is contended below that there are two bases that might be advanced at such an application as to why the stay should be lifted and disclosure made by the insurer.

First, the Court has power under Rule 247(2) which is arguably analogous to the power under r 223(4)(a) which is examined above. Rule 247(2) provides that on the hearing of an application about an objection to a notice of non party disclosure, the Court may “make any orders it considers appropriate”.

That power is itself in terms of wide compass. It is, of course, to be read together with r.5 UCPR. It is contended that it would be consistent with r.5 UCPR for the power to be available in circumstances such as those considered here, where disclosure of any polices would potentially lead to savings of Court time and parties’ resources.

This is because if the plaintiff were not able to satisfy itself by this process as to the availability of insurance cover, and thus as to the utility of proceeding with the action, it would be forced to proceed to have a proceeding set down for trial and proceed to enter judgment, perhaps in the absence of any representation from an impecunious defendant.

It would then have to embark upon a process of seeking to enforce the judgment and perhaps having to fund a liquidator to pursue indemnity against an impecunious defendant’s insurer.

It would be far more economical (for the parties, and for the savings of Court time) for a non party insurer of a defendant to disclose any policies caught by the terms of the notice of non party disclosure served upon it.

An alternate means by which access might be obtained to insurance policies held by non party insurers might be to contend that the documents caught by the notice of non party disclosure should be ordered to be produced in the Court’s inherent jurisdiction. The Supreme Court has inherent jurisdiction to order “equitable discovery” or “a bill of discovery”. Its power to make such orders is preserved by r 255: Wilkinson v Wilkinson [2009] QSC 191 at p 1-6.

The power was exercised in Wilkinson v Wilkinson, where Douglas J made a pre-litigation order for disclosure of documents evidencing compliance (or otherwise) with an agreement to compromise proceedings.

The agreement did not include any mechanism by which the respondent would advise the applicant that the terms had been carried out. The application was made approximately five and a half years after the deed was executed.

The applicant also sought (and was granted) leave to issue interrogatories. In granting the relief sought, Douglas J said:

“The applicant’s legitimate concern is that it has not been established that the respondent has meet her obligations under the deed. The applicant’s rights may be affected if this issue remains unresolved by the time of the expiration of any limitation period arising under the deed, whether it be a six year period or a 12 year period. They may also be affected by the prospects of survival of her mother. Although there is no evidence that her health is poor, the respondent is 85 years old.

In those circumstances, there is a distinct possibility that, if the terms of the deed have not been complied with, the applicant may have a right of action in damages but one which she is not presently in a position to institute because of lack of information about whether or not the obligations imposed on the respondent have been met by her. It is that situation which has led to this application.”

His Honour granted the relief sought on the basis of r.250 UCPR, “which permits the Court to make an order for the inspection of property if the property is property about which a question may arise in a proceeding.” (at 1-4). His Honour identified a further basis upon which the application could be granted (the right to seek a bill of discovery) at 1-6.

It is contended that this might be an alternate basis for seeking disclosure from an insurer who is not party to the proceeding of policies indemnifying a defendant for loss or damage claimed in the proceeding.

By David de Jersey

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