ACN 010 087 573 & Anor v FAI Insce

[2000] HCATrans 517

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B9 of 2000

B e t w e e n -

ACN 010 087 573 PTY LTD

First Applicant

MICHAEL GEORGE TIDBOLD

Second Applicant

and

FAI GENERAL INSURANCE COMPANY LIMITED

Respondent

Application for special leave to appeal

GUMMOW J
KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 24 NOVEMBER 2000, AT 9.31 AM

Copyright in the High Court of Australia

MR S.L. DOYLE, SC:   Your Honours, I appear with MR L.F. KELLY for the applicants.  (instructed by Allen Allen & Hemsley)

MR P.R. GARLING, SC:   Your Honours, I appear for the respondent.  (instructed by Tress Cocks & Maddox)

GUMMOW J:   Yes, Mr Doyle.

MR DOYLE:   Your Honours, this is an application which we submit raises an important question.  As appears from our summary of argument, it involves a situation where an insurer, who has yet to confirm indemnity, instructs solicitors in an action to defend the proceedings on behalf of the insured.  The issue in this case is to what extent the insured can have access to and use the information which is acquired by those solicitors if the insurer subsequently refuses indemnity in relation to proceedings the insured may take against the insurer.

Before we come to the judgment below in this case, could we deal with what we would submit is the general rule as it applied before the decision in this case.

GUMMOW J:   I think one can see that there is, in the abstract sense at any rate, a difficult question here, but what do you say as to the utility objections put at page 64 of the application book by your opponents?  They fix upon the fact that the judgment was handed down in the trial some time ago now.

MR DOYLE:   That seems, with respect, to be a non‑issue in one way.  There were two applications which were brought, or two, if you like, purposes for which the documents could have been said to be sought.  One was to be used in relation to the cross‑examination of witnesses in that action and that, of course, no longer can be of any utility because the action has been concluded by a judgment.  The other, which is what really is focused upon by Justice Byrne, with whom Justice McPherson agreed, is the possible use of the material against the insurer.  Now, the conclusion of the ‑ ‑ ‑

GUMMOW J:   I know that, but what order would we make here, in which action?

MR DOYLE:   In the originating application which was brought by the applicant against the solicitors seeking access to the documents.

HAYNE J:   Which brings me to the difficulty, or a difficulty, that we seem to have gone from a fight about access to the documents to a fight about the use that may be made of documents and we seem to have a very elaborate legal superstructure built on a very narrow factual substructure.

MR DOYLE:   In a sense, we would submit there is nothing elaborate at all about it.  The client has the right to access to the documents.  There are certain circumstances in which, where two parties retain the same solicitor, one of them might separately provide information confidentially to the solicitor, and there are arguments in those circumstances as to the extent to which the other client can have access to that confidentially provided information, but none of that applies here.

What has happened here in the majority judgment is really the inversion of the rule.  The proposition which the majority judgment has advanced is that the other client, the insured in this case, may not have access to the information unless it can point to some permission.  Of course, the judges then go off on the question of whether or not one can identify permission, which itself is a factual question, although not a very difficult one, we would submit, here.  But that to ask that question, we would submit, is the error of principle.

HAYNE J:   But the application appears to have begun life as one in which the issue was essentially one of legal professional privilege; later it seems to have become a joint privilege or a common interest privilege.  We seem now to have moved somehow, in a way I do not understand, to a fight about use, which seems, at first blush, to depend in part, perhaps to depend wholly, I do not know, upon the particular terms on which particular pieces of information may or may not have been provided by one or other of these two parties to the solicitors.  But is that to misconstrue how this problem presents?

MR DOYLE:   That is how the problem is presented to the applicant, your Honour.  It commenced as an application for access by a client to the solicitor’s file.  The course of the judgment in the Court of Appeal has made it into a determination of use, because they have said they have been able to, by inverting the principle as we have suggested, said that the client cannot have access unless they can point to a permissible use and/or of permission.  And that is the error which we point out.  The right question is the one that was raised in the application originally:  “Is the client entitled to access and has anything occurred which precludes that access?”  Now, if that is the way the matter is approached, as we urged it, the answer, we would submit, is clear.  It is really because of the error in principle in the Court of Appeal that one starts to focus on questions of confidential information and legitimacy of use of the documents.

GUMMOW J:   But you want to restore the orders of Justice White, do you not; that is the relief you seek from us?

MR DOYLE:   Yes.

GUMMOW J:   Well, what would be the utility of that?  You seek to restore the orders at page 19.

MR DOYLE:   We wish to have access to the documents, your Honour; that is the application which was originally brought before her Honour.

GUMMOW J:   Yes, that was an interlocutory application in the course of now concluded litigation.  It is not a freestanding suit of any sort.

MR DOYLE:   No, the application which we brought was an originating application as between solicitor and client for production to the client of the documents.

GUMMOW J:   Yes, I see.

MR DOYLE:   I suppose, the timing of it in part arose because two witnesses were under cross‑examination and there was a subpoena to produce certain documents as well, but there were two ‑ ‑ ‑

KIRBY J:   Can I just get it clear in my mind, that your application you say was, to use Justice Gummow’s words, in a sense freestanding.  You still have a dispute with the insurer concerning indemnity.  You consider that access to your solicitor’s file might still be pertinent to the litigation of that dispute between you and the insurer and you want to have access to your solicitor’s file.

MR DOYLE:   That is so.

KIRBY J:   Is that correct?  I have the same concern as Justice Gummow mentioned to you, namely, that to be satisfied that this is still useful, that this is still a pertinent matter, given that at least some of the litigation has been fought to conclusion.

MR DOYLE:   Your Honour Justice Kirby is correct.  Could I ask you to go to page 2 of the application book.  You will see at line 2 her Honour states:

There are two applications before the Court which involve similar matters of principle.  The first to be argued seeks access to certain documents in the custody, although formally in the custody of the Court, of solicitors –

and at line 20:

The second concerns a subpoena duces tecum directed to a valuer –

The first of those was an originating application, stand‑alone application.  It is not in the application book but I have it before me and it seeks ‑ ‑ ‑

GUMMOW J:   Well, that is why I have been a bit mystified.  Yes.

MR DOYLE:   We are sorry for that.

GUMMOW J:   The second was a subpoena duces tecum in the course of other litigation.

MR DOYLE:   That is so.  The disposition of the trial, of course, disposes of the utility of using the documents to cross‑examine the valuers, but there remains the dispute between the insured and the insurer.  There is no action but there is a denial of indemnity and the possibility of an action between the two, in relation to which the client wishes to inspect the file, and there is utility, we would submit, in permitting it to do so.

HAYNE J:   The client wishes to inspect the file in circumstances where, at or before the appointment of Clayton Utz, it was suggested, I think from the FAI end, that they can be appointed on terms that each has access to everything they get and your client denied that, did it not?

MR DOYLE:   My client was not prepared to allow FAI, until it had confirmed indemnity, have access to that information, but what is ‑ ‑ ‑

HAYNE J:   Therefore, is the retainer which you assert a retainer that had a one‑way access consequence:  you could have access to everything, but FAI could have only limited access?

MR DOYLE:   I think not, your Honour, but can I put it this way ‑ ‑ ‑

HAYNE J:   Because it is this factual base for this point which is the troublesome point in my mind.  That the point is important I may need less persuasion of, but that there is a sufficient and useful factual base for its determination troubles me.

MR DOYLE:   Well, might I take a moment to answer it; it cannot be answered in a sentence, but a moment.  The general rule for which we would contend - and we have given your Honours an extract from Phipson which, we would submit, together with some other cases, supports this.  The general rule is that in these circumstances both clients have the right to inspect the file.  There is a qualification to that in these circumstances, that where one of them provides information to the solicitor, pertinent to the possible controversy between the two clients, in circumstances which itself imposes - suggests confidentiality, the other may not have access to that particular information.  Now this normally arises because the insured has to disclose information which is relevant to the defence of the action, but may also be relevant to the indemnity question.  So it usually concerns the qualification at least.

KIRBY J:   Why should that not be a mutual rule?  Why is it not a mutual rule?

MR DOYLE:   It probably is, your Honour.  I am just saying that it usually arises that the insured is the one who is making the damaging confidential disclosure rather than the insurer, but the thing can operate both ways.  Now, where it operates in both ways, that is perfectly consistent with the principles for which we contend:  the general rule qualified by particular circumstances where there is disclosure by the client to the solicitor of confidential information.  Now the factual controversy in this case arose because FAI, if you like, wished to impose a departure from that.  It sought to have it agreed up front that there would be no such qualification and the insured merely refused.  There was no agreement as to the basis upon which the disclosure would be permitted.  We are back to the general position, if you like, because there was no agreement, and it was the insurer who then, exercising its rights under the policy, retained a solicitor.

So that the factual matrix which led up to that, in a sense, is irrelevant.  There being no actual agreement, it does not affect what we would contend would be the general rule.  Plus, in this case, no one, in the negotiations leading up to the retain of the solicitor, suggested that my client could not have access to the information.  FAI was asserting both parties could.  My client was asserting, until FAI admitted indemnity, that it could not.  But no one was suggesting that my client could not.  So if the matter is to be judged by the imposition of a duty of confidence or an obligation of confidence, in the antecedent negotiations there was no suggestion that there was to be a duty of confidence which would preclude my side seeing the documents.

So that, ultimately, we accept that there are some negotiations which preceded the solicitor being retained in this case.  We would be surprised if they are atypical, in a sense that we imagine it arises from time to time, but in terms of the matter of principle, we would submit that the negotiations do not make this an unsuitable case for determining the matter of principle.

GUMMOW J:   Now, Justice White’s reasons – and if one looks at page 2, line 46 – proceeded on a factual base of the Interchase pending litigation, did they not?

MR DOYLE:   Yes.

GUMMOW J:   She talks about “the trial of this action”; she does not say, “I have got a freestanding application”, et cetera.  But taking your point that there was an independent application, where is the necessary evidence which would show a dispute between the two of you which outlives that litigation and makes this still a live matter?  There is material in the leave applications saying that we may be in dispute, but is there any finding about that, at any stage?

MR DOYLE:   I will have my learned junior find whether it appears in the judgment, your Honour.  Your Honour, I cannot answer your Honour directly.  At page 8 of the record in her Honour’s judgment at line 52, you will see that she refers to:

FAI subsequently declined to indemnify makes this a stronger case for permitting access.

GUMMOW J:   Yes.

MR DOYLE:   There is certainly no evidence that that has been resolved and the submissions by our learned friends make it clear that it has not been, because one of the things they put against us is that we can obtain these documents by discovery in prospective litigation between the two of us.

KIRBY J:   What is the answer that you give to that contention?  Why would that not be a neater vehicle?  Do you say that, having regard to the decision of the Court of Appeal that it would be unsuccessful?

MR DOYLE:   Well, we would like to urge that it will not be.  There are a number of things we would say in respect of that.  I suppose the first is that that answer, in effect, denudes entirely the right which we contend for of any content.  We say the client has the right to inspect the solicitor’s file and the answer is, “No you do not; even if you do, you should not have that determined by this Court, because you can sue the other party and obtain the documents by discovery”.  Well that, in effect, denudes entirely the right for which we contend of content. 

Every time a client wishes to obtain access to the file, for the purposes of pursuing indemnity disputes with the insurer, the answer can be the same:  you do not have that right and, in any event, even if you do, there is no utility in pursuing it, because you can sue us and get it from discovery.  Secondly, it really requires the client to make the decision to sue, without access to the documents which may well be pertinent to that question.  It is circular, in a sense, to say that you can sue us and get discovery, because

the right to access is relevant to the question, not only of how we go in the litigation, but whether or not to commence the litigation.

GUMMOW J:   What do you say about Justice McPherson at page 27?  The approach he took, which leads one to wonder just what is actively in this matter.  See he said, “I can identify no purpose”, et cetera; do you see that?

MR DOYLE:   I do, your Honour.

GUMMOW J:   That is wrong, is it?

MR DOYLE:   It is wrong, your Honour.  His Honour merely says that he “can identify no purpose” and you will see that he says:

for which at present access to the documents could legitimately now be required –

which, having regard to what Justice Byrne says is, we would submit - Justice McPherson agreeing with the proposition that it is an illegitimate purpose to obtain access to the documents for the purposes of using them against the insurer.  So it is not a conclusion as to utility, but an absence of utility apart from a purpose which his Honour agrees with Justice Byrne is an illegitimate one.  It is the conclusion that the purpose is illegitimate is the conclusion we wish to challenge in these proceedings.

GUMMOW J:   Yes, thank you.

KIRBY J:   This would be quite a common arrangement that insurers take over the conduct of the proceedings and then have some dispute concerning indemnity and then the client has, if this decision of the Court of Appeal is correct, significant limitation on the access to its solicitor’s file.

MR DOYLE:   We would submit, very common.  So common in fact, if it is of any moment, that Justice Byrne adverts to a usual procedure which is adopted overseas to overcome this problem, which is of the insurer not becoming the client of the solicitor.  In any event, we would submit it is a common thing and likely to be repeated in other litigation.  Well, in a sense, your Honours, those are our submissions.

GUMMOW J:   Yes, thank you, Mr Doyle.  Yes, Mr Garling.

MR GARLING:   Your Honours, the application ought be refused.  The application depends on a number of factual constructs, which apply simply to this case.  These are, firstly, the particular terms of this policy, which gave the insurer the contractual right to appoint a firm of solicitors.

HAYNE J:   That is a very common term, is it not, Mr Garling, not to say almost universal.

MR GARLING:   The right to appoint, yes, your Honour, but the particular term, we do not know how common it is, the particular words.  The second question is, factual question, the particular terms upon which Clayton Utz accepted the retainer.  Now, your Honours, I would agree that it is common to see a firm of solicitors, as your Honour Justice Kirby just mentioned, appointed to conduct a defence, but this was a particular appointment, because the parties identified an indemnity dispute before this appointment of Clayton Utz arose.  They appointed Clayton Utz, specifically, not to deal with indemnity or to deal with any information relevant to indemnity, but merely to conduct the defence of the valuation action.  Clayton Utz wrote to both parties asking them to refrain from sending them any material relevant to indemnity.

KIRBY J:   All the more reason why the client should have access to its solicitor’s file.

MR GARLING:   That may be, your Honour, but that then throws up the finding in the Court of Appeal that there was particular confidentiality with respect to the documents, the purpose of access for which was a breach of that confidentiality.  Your Honours, the findings are that the solicitors, Clayton Utz, were solicitors for both insurer and insured; it is not a question ‑ ‑ ‑

KIRBY J:   That is not at all uncommon; it happened when I was a solicitor for seven years, I was doing that all the time; all the time.  Hundreds of solicitors doing that all the time.

MR GARLING:   Yes, your Honour, but the application seems to advance itself by seeking to advance the proposition that, in effect, the solicitors were the solicitors for the ‑ insure the loan rather than for both insurer and insured with respect to this particular term of appointment.

KIRBY J:   I do not understand them to say that.

MR GARLING:   Your Honour, when it is submitted that the client, if I may use the expression for a moment, the insured has no impediment to access to the documents, that of itself excludes the rights of the insurer, which is also a client of the solicitor.  This solicitor has taken on two clients with mutual obligations between them.  The solicitor has specifically said, “Don’t send us any information about indemnity because we know you are in dispute about indemnity”.

Now, when this case was before the trial judge and the Court of Appeal, two live purposes for access to the documents were ventilated.  One was for the purpose of cross‑examination of the witnesses in the trial, and your Honours will recall that that is against this factual background, that the experts retained by Clayton Utz were to be called by the other parties to the litigation and the solicitors for the applicants here were also the solicitors for the plaintiff in that litigation.  So they had two roles and the access was being sought for the purpose of cross‑examination.  That purpose, of course, your Honours, has now evaporated.

The second purpose was to use the documents in any potential action against my client.  In other words, to take the documents of a solicitor jointly appointed and to use them against one of the parties.

KIRBY J:   I realise that, but that really knocks on the head your suggestion that this has no utility.  These proceedings would have great utility, potentially.

MR GARLING:   No, your Honour, it does not for this reason.  Any future proceedings are not about the defence of what I might call the valuation action.  They are about the question of indemnity between the parties.  That is the very purpose for which this firm of solicitors was not appointed and this firm of solicitors said, “Please, don’t send us any information relevant to indemnity because we don’t wish to enter into that”.  So, your Honour, the purpose of the appointment of the solicitors was to conduct, for a limited period, the defence of the action which has now run to judgment and is finalised, hence the utility finding in the Court of Appeal and hence our submissions here that this is of no utility.

That leads to the second point, your Honours, namely, this, that if an action eventuates about indemnity and there is no action presently on foot about that and the documents are relevant to that action, there is another better forum in which access to those documents may be determined, and that is in the course of the ordinary interlocutory processes of discovery and the like in the course of that action where the ordinary principles of discovery would apply.  So that the determination of this application before your Honours adversely to the applicants does not rule out permanent relief with respect to these documents, and that is acknowledged certainly by the judgment of Justice Byrne where he says at 39, line 22:

Until it can be shown, to a judge if need be, that access would serve a beneficial purpose –

et cetera, and by Justice McPherson when he says at line 21 on page 27, “I can identify no purpose for which” the documents can appropriately be used.  The concern that the Court of Appeal had and the reason, we would

submit, underlying this being a particularly factual issue is whether, given the coincidence of identity of the firm of solicitors acting for the plaintiff Interchase and the applicants in this litigation, bringing this application in the course of the trial meant that there was a real fear of the use of the documents for an ulterior purpose.

That is what led to, we would submit, the clear finding of confidence attaching to these documents.  That is to be found in Justice Byrne’s judgment at page 38, line 6, where he says:

Accordingly, that information retains the quality of confidence necessary to attract equitable protection.

GUMMOW J:   Are you assuming perhaps that that level of confidence has now evaporated with the trial?

MR GARLING:   Well, yes and no, your Honour, because there being an appeal, there is always the prospect of some further litigation in the principal proceedings, but it has not completely evaporated.  Nevertheless, the issue of confidence would remain in any event, given the particular terms of the retainer of Clayton Utz, which, we would submit, are – it is a question of hypothetical debate as to whether they are common or not.  It was a very specially crafted letter that Clayton Utz wrote and which they accepted.

Lastly, we do remind the Court, with respect, by drawing attention to it, to the original position at the time of the retainer of Clayton Utz of the applicants, which was that these documents were not to be made available.  Now, that was their position at the time of instructing Clayton Utz.  They seek now, in the absence of any concluded different agreement, to argue to the contrary of that position and we would submit that these proceedings are not an effective or suitable vehicle in which to debate those questions.  For those reasons, your Honours, we submit the application should be refused.

GUMMOW J:   Yes, thank you, Mr Garling.  Yes, Mr Doyle.

MR DOYLE:   There is only one matters, your Honours.  Could we ask you to go to page 39 of the application book, to paragraph [46], to the sentence that our learned friend asked your Honours to read, and invite you to read the sentence that immediately precedes that.

GUMMOW J:   Yes.

MR DOYLE:   The suggestion that we can go back before another judge to get access to these documents is true, but not for the purpose that Justice Byrne and Justice McPherson have concluded is the threatened

unlawful use, namely, for proceedings against the insurer, and that is the very thing that we bring this application to correct.

KIRBY J:   The claim for indemnity would be a very substantial one.  I think it runs to $20 million or something, does it not?

MR DOYLE:   That is so, yes.

KIRBY J:   So these are well‑lawyered parties willing to argue an interesting point, which you say is highly important to you.

MR DOYLE:   And we would submit, not only to my client, but it raises a question of the importance ‑ ‑ ‑

KIRBY J:   You are thinking of all the little people out there with other lawyers, are you?

MR DOYLE:   That is so, your Honour, as your Honour appreciates.  Those are our submissions.

GUMMOW J:   Yes, thank you, Mr Doyle.  We will take a short adjournment.

AT 10.00 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.05 AM:

GUMMOW J:   There will be a grant of leave in the first application.  Before we leave it, are we correct in assuming this will be a one‑day appeal?

MR DOYLE:   Yes, your Honour.

GUMMOW J:   Thank you, gentlemen.

AT 10.06 AM THE MATTER WAS CONCLUDED