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Douglas Campbell KC - 18 Inns Barristers' Chambers - Hemmant’s List
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Thursday 18th August, 2022
Queensland’s New Preliminary Disclosure Process
It is often difficult to understand the strength of an action when important documents are held by the other side. This difficulty was recognised some years ago by both the Federal Court and in New South Wales. Division 7.3 of the Federal Court Rules 2011 (Cth) (FCR) and Part 5 of the Uniform Civil Procedure Rules 2005 (NSW) permit a Judge to make an order requiring a prospective Defendant to discover documents to a prospective Plaintiff in advance of an action being commenced.
This process has been adopted in Queensland late last year by the introduction of a new Chapter 7 Part 1 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR(Q))[1].
In order to obtain pre-trial discovery of a document in the Federal Court it is necessary to show a reasonable belief that ‘the prospective Respondent has or is likely to have, or has had, or is likely to have had, in the prospective Respondent’s control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief’. The key words are the existence of documents relating to ‘a right to obtain the relief’. By this, the Courts endeavour to avoid fishing expeditions, at least on a grand scale.
The Regime found in both New South Wales and Queensland is slightly more liberal. Pursuant to Rule 208D of the UPCR(Q) the Court may order disclosure of documents if it appears to the Court that:
an Applicant may have a right to relief against a prospective Respondent;
it is impracticable to start a proceeding against the prospective Respondent without reference to a document;
there is an objective likelihood that the prospective Respondent has, or is likely to have, possession or control of the documents;
inspection of the document would assist the Applicant in making the decision to start the proceeding;
the interests of justice require the order to be made.
The new Queensland rules are similar in design to those found in rule 5.3 of the New South Wales Uniform Civil Procedure Rules. In the NSW context, Courts have relevantly commented that:
the test to be applied is ‘appears to the Court’ test. This requires that ‘there is reasonable cause to believe that the Applicant has, or may have, the right to obtain relief’[2];
an application for preliminary discovery does not involve a determination of the merits of the claim, but rather whether it appears to the Court whether a cause of action may exist[3];
preliminary disclosure only extends to information that is necessary and to give the Applicant sufficient information which it does not already possess[4];
the question is not whether the Applicant has sufficient information to decide if a cause of action is available against the prospective Respondent, but rather whether the Applicant has sufficient information to start a proceeding. Accordingly, an application for preliminary disclosure may be entitled to disclose what defences are entitled to a Respondent and the strength of those defences[5];
the documents of which discovery may be ordered are not limited to the entitlement to make a claim but extend to documents going only to the quantum of a claim[6].
The NSW rule requires a prospective Respondent to have made ‘reasonable enquiries’ before an application can be made. This requirement does not appear in the Queensland rule.
Insurance Documents
At least in class actions, but perhaps also in most commercial litigation, knowledge of a defendant’s insurance coverage may materially assist a matter to settle in a mediation. The existence of adequate insurance may be a dominant factor in making any decision whether to start proceedings. In class actions it may also be necessary to show the court that a proposed settlement is appropriate in terms of the quantum that a defendant can bear or a plaintiff at best is likely to receive.
Insurance documents could be sought at two different times – either as a preliminary document before an action has commenced, or as part of the general discovery.
Perhaps because of the existence of funders (who are always interested in the bottom line), the question of discovery of insurance documents in class actions is more common. The issue of pre-trial discovery has been particularly contentious in class actions as proposed applicants have sought discovery of a Respondent’s insurance documents in an endeavour to assess the value of the claim that might exist. In Centro Properties Class Action[7], Ryan J commented on the reasons why discovery of an insurance contract is not normally permitted:
The traditional reluctance of Courts to compel the disclosure of details of a party’s insurance cover doubtless owes much to a concern of shielding juries of the temptation to affect redistributive justice (see Rodolfo Lopez Star World Enterprises [1997] FCA 454,per Olney J).However the underlying justification for the traditional view remains. That is, that the existence of policies of insurance held by a party or the details of such policies will not normally be relevant to the proof of any cause of action pleaded against that party.
Certainly, pre-trial discovery of insurance documents is unlikely to be successful in the Federal Court because the documents are unlikely to go to an Applicant’s right to obtain relief.
The issue of discover of insurance documents after an action has been commenced came up for consideration by Gleeson J in Simpson v Thorn Australia[8] (Radio Rentals Class Action). In that decision, the Applicant sought discovery of insurance documents pursuant to the Court’s general power given under s.33ZF of the Federal Court of Australia Act 1976 (Cth) (FCA).
Section 33ZF(1) of the FCA provides as follows:
Section 33ZF General power of Court to make Orders
General power of Court to make orders
In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.
Gleeson J ordered that the Defendant produce the insurance policies noting that her decision was different to the earlier decision of Ryan J in the Centro Properties Class Action. Her Honour noted that s.33ZF of the FCA was not considered by Ryan J.
In permitting the insurance documents to be disclosed, Her Honour weighed up the factors regarding disclosure and considered that on balance, those favouring disclosure outweighed those against; namely, (a) that there was a real possibility, that if judgment was obtained, the Second Respondent would not be able to meet it; (b) there was an imminent mediation and the insurance documents were likely to be of utility to the Applicant for the purposes of its participation in that mediation; (c) the prospects of a settlement would be reduced if the Applicants’ legal representatives are required to assess any settlement offer without information about the Second Respondent’s insurance position; and (d) any settlement that might be achieved will require Court approval including evidence that the Applicants’ legal representatives are satisfied that the settlement is fair and reasonable and in the interests of Group Members as a whole. One factor that material filed in support of the Application for settlement that is usually require to be addressed is ‘(g) the ability of a Respondent to withstand a greater Judgment’.
This decision has not been without controversy. More recently, the issue came up for consideration by Beech J in Evans v Davantage Pty Ltd[9]. In that decision, His Honour dismissed an application seeking disclosure of insurance documents. In doing so, the Judge commented on the earlier decision of Gleeson J in the Radio Rentals Class Action. He distinguished this case in three ways:
first, His Honour noted that the insurer had already been joined in the proceedings and that it had been conceded by the insurer that there was an arguable case against it for an indemnity (none of which applied in the Evans v Davantage matter);
second, the Radio Rentals Class Action was decided prior to the High Court handing down its decision in BMW v Brewster[10]which in part dealt with the Court’s power under s 33ZF. In particular, His Honour was concerned that since BMW v Brewster the powers available under s.33ZF(1) of the FCA were limited;
finally, His Honour commented on the way in which Gleeson J sought to distinguish the Centro Properties Class Action.
In those circumstances, His Honour did not make an order permitting discovery of insurance documents.
Since then, I note Lee J has made an order in Matheson Property Group Pty Ltd v Virgin Australia Holdings Limited[11] requiring Virgin to provide the Applicant with copies of the relevant insurance policies. His Honour gave no reasons for this Order.
It follows that there seems to be some division within the Federal Court surrounding the disclosure of insurance documents.
The question of whether the Supreme Court of Queensland will permit either pre-trial or later discovery of insurance documents is more open. The new rules certainly give the court power to do so as the existence of insurance may be material to a party deciding whether to commence an action and disclosure may be in the “interests of justice” as it would lead to a settlement.
My feeling is that the Supreme Court of Queensland is likely to take a conversative approach particularly when it comes to insurance documents which are not directly relevant to a proposed cause of action. In slightly different circumstances an orthodox approach rejecting disclosure of insurance documents was taken by Mullins J in Mallonland Pty Ltd v Advanta Seeds Pty Ltd[12].
Having said that there is an attractive commercial argument that insurance documents should be disclosed. The Court is given broad power under the new rules. The existence and extent of insurance will have a significant impact of a party’s decision as whether to commence an action. Further, in a mediation it provides the parties with a framework as to what a plaintiff can reasonably expect. The interests of justice are surely best served in circumstance where the parties can negotiate a settlement in full knowledge of what can be realistically achieved.
