Agnello v Heritage Care Pty Ltd; Fotiadis v St Basil's Homes for the Aged in Victoria (No 2)
[2023] VSC 653
•10 November 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
GROUP PROCEEDINGS LIST
S ECI 2020 03282
| SEBASTIAN AGNELLO | Plaintiff |
| v | |
| HERITAGE CARE PTY LTD (ACN 106 873 796) | Defendant |
S ECI 2020 03339
| EFSTATHIA (EFFIE) FOTIADIS | Plaintiff |
| v | |
| ST BASIL’S HOMES FOR THE AGED IN VICTORIA (ACN 070 511 616) & ORS | Defendants |
---
JUDGE: | Keogh J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 October 2023 |
DATE OF RULING: | 10 November 2023 |
CASE MAY BE CITED AS: | Agnello v Heritage Care Pty Ltd; Fotiadis v St Basil’s Homes for the Aged in Victoria (No 2) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 653 |
---
GROUP PROCEEDINGS — Discovery — Practice and procedure — Plaintiffs seeking discovery of defendants’ insurance documents — Ability to meet judgment — Power to order discovery of documents not relevant to any issue in dispute — Whether orders are necessary or appropriate for meaningful mediation — Civil Procedure Act 2010, s 55 — Regent Holdings Pty Ltd v State of Victoria (2012) 36 VR 424 — Simpson v Thorn Australia Pty Ltd trading as Radio Rentals (No 4) [2019] FCA 1229 — Evans vDavantage Group Pty Ltd (No 2) [2020] FCA 473 — Appeal from refusal by Judicial Registrar to order discovery — Appeal dismissed.
---
APPEARANCES: | Counsel | Solicitors |
In proceeding S ECI 2020 03282 | ||
| For the Plaintiff | A Broadfoot KC | Carbone Lawyers |
| For the Defendant | C Caleo KC with J Page | Arnold Bloch Leibler |
| For the Intervener | C Parkinson KC with S Hogan | Mills Oakley |
In proceeding S ECI 2020 03339 | ||
| For the Plaintiff | A Broadfoot KC | Carbone Lawyers |
| For the First Defendant | P Over | Arnold Bloch Leibler |
| For the Second and Fourth Defendants | N Younan, solicitor | Gilchrist Connell Pty Ltd |
| No appearance for the Third Defendant | Galbally & O’Bryan | |
| For the Intervener | C Parkinson KC with S Hogan | Mills Oakley |
HIS HONOUR:
These representative proceedings concern the death of residents in two aged care facilities as a result of having contracted COVID-19. The aged care facilities were operated or on premises occupied by the defendants. The plaintiffs bring claims in negligence, breach of contract, and breach of the Australian Consumer Law[1] against the defendants on behalf of residents, family members, and the personal representatives of deceased residents of the facilities.
[1]Competition and Consumer Act 2010 (Cth), sch 2.
As a result of enquiries made, the plaintiffs in both proceedings have become concerned about the capacity of the defendants to pay the amount of any settlement or judgment obtained in the proceedings. Consequentially, the plaintiffs have applied for discovery of insurance policies that may provide indemnity to the defendants, and in the case of the Agnello proceeding (‘Agnello’), the defendant’s financial records.
The relevant insurer is Berkley Insurance Company (t/as Berkley Re Australia) (ABN 53 126 559 706) (‘Berkley Re’). Berkley Re has been granted leave to intervene and be heard on the discovery applications.
The discovery applications were opposed by the defendants in Agnello and by Berkley Re in both proceedings.
On 4 July 2023, a judicial registrar delivered a ruling dismissing the discovery applications.[2] Orders to that effect were made on 13 July 2023.
[2]Agnello v Heritage Care Pty Ltd; Fotiadis v St Basil’s & Ors (Supreme Court of Victoria, Baker JR, 4 July 2023) [57]–[60]) (‘Ruling’).
The plaintiffs have appealed the orders dismissing the discovery applications. Pursuant to r 84.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’), the appeals are conducted by way of a hearing de novo.[3]
[3]Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’); Zaric & Ors v City of Greater Dandenong [2022] VSC 680, [12].
Evidence
Evidence on the Agnello application is:
(a) affidavit of John Karantzis, solicitor for the plaintiff, sworn 12 December 2022;
(b) affidavit of Stephen David Lloyd, solicitor for the defendant, affirmed 15 December 2022;
(c) affidavit of Darren James, solicitor for Berkley Re, affirmed 14 March 2023.
Evidence on the Fotiadis proceeding (‘Fotiadis’) application is:
(a) affidavit of John Karantzis sworn 10 February 2023;
(b) affidavit of Darren James affirmed 14 March 2023.
Karantzis gave evidence on the following topics:
(a) the potential quantum of damages in the proceedings;
(b) the financial position of the defendants based on searches he had made;
(c) his requests for discovery of the defendants’ insurance policies and financial position documents.
Karantzis’ purposes in seeking the insurance and financial documents were to ‘facilitate settlement of the proceeding’ and to inform ‘an opinion on the reasonableness of any potential outcome of negotiations between the parties for the purpose of providing advice’ to group members and to the Court under s 33V of the Supreme Court Act 1986 (Vic) in relation to a proposed settlement.
Lloyd’s affidavit concerned the defendant’s financial position in Agnello, and the provision of financial position documents in response to Agnello’s request.
James’ evidence details Berkley Re’s opposition to discovery of insurance documents, including by reason of their confidential nature, and the application by Berkley Re to intervene and be heard.
The applications
The plaintiff in Agnello applied for discovery by the defendant of the following documents:
(a) audited financial statements for the 2020/2021 and 2021/2022 financial years;
(b) financial records evidencing its current position (ie management accounts and internal financial reports); and
(c) insurance policies issued by any insurer to the defendant applicable to the period 1 January 2020 to date.
In Fotiadis, the plaintiff sought discovery of insurance policies held by the first defendant with Berkeley Re applicable in the period 1 July 2019 to 30 June 2021. The plaintiff also sought provision of certain information in respect of the insurance policies such as whether any claims had been made or whether Berkley Re had provided any indemnity or coverage for the first defendant’s costs and liabilities in the proceeding.
Provisions
Rule 29 of the Rules governs discovery of documents in proceedings. The scope of discovery is as set out in r 29.01.1:
Scope of discovery
(1)Unless the Court otherwise orders, discovery of documents pursuant to this Order is limited to the documents referred to in paragraph (3).
(2) Paragraph (1) applies despite any other rule of law to the contrary.
(3)Without limiting Rules 29.05 and 29.07, for the purposes of this Order, the documents required to be discovered are any of the following documents of which the party giving discovery is, after a reasonable search, aware at the time discovery is given—
(a) documents on which the party relies;
(b) documents that adversely affect the party’s own case;
(c) documents that adversely affect another party’s case;
(d) documents that support another party’s case.
Rules 29.05 and 29.05.2 empower the Court to limit discovery that would otherwise be required, and to expand the obligation to give discovery beyond that required by r 29.01.1. Rule 29.07 provides for discovery before the close of pleadings.
Rule 29.08 governs orders for particular discovery:
Order for particular discovery
(1) This Rule applies to any proceeding in the Court.
(2)Where, at any stage of a proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on any other party an affidavit stating—
(a)whether that document or any, and if so what, document or documents of that class is or has been in that party’s possession; and
(b)if it has been but is no longer in that party’s possession, when the party parted with it and that party's belief as to what has become of it.
Discovery is defined in the Rules to mean:
“discovery” includes discovery and inspection of documents and discovery by written interrogatories or oral examination, and make discovery of documents means make an affidavit of documents complying with the requirements of these Rules, file the affidavit and serve a copy on the party or person entitled to the discovery.
Part 4.3 of the Civil Procedure Act 2010 (Vic) (‘Act’) deals with disclosure and discovery. Section 54 links the discovery of documents to the Rules:
Discovery of documents to be in accordance with rules of court
Unless a court otherwise orders, discovery of documents in a civil proceeding is to be in accordance with the rules of court.
The plaintiffs principally rely on s 55 of the Act which concerns Court orders for discovery:
Court orders for discovery
(1)A court may make any order or give any directions in relation to discovery that it considers necessary or appropriate.
(2)Without limiting subsection (1), a court may make any order or give any directions—
(a)requiring a party to make discovery to another party of—
(i)any documents within a class or classes specified in the order; or
(ii)one or more samples of documents within a class or classes, selected in any manner which the court specifies in the order;
(b)relieving a party from the obligation to provide discovery;
(c)limiting the obligation of discovery to—
(i)a class or classes of documents specified in the order; or
(ii)documents relating to one or more specified facts or issues in dispute; or
(iii)some or all of the issues set out in a statement of issues filed in the proceeding;
(d)that discovery occur in separate stages;
(e)requiring discovery of specified classes of documents prior to the close of pleadings;
(f)expanding a party’s obligation to provide discovery;
(g)requiring a list of documents be indexed or arranged in a particular way;
(h)requiring discovery or inspection of documents to be provided by a specific time;
(i)as to which parties are to be provided with inspection of documents by another party;
(j)relieving a party of the obligation to provide an affidavit of documents;
(k)modifying or regulating discovery of documents in any other way the court thinks fit.
The broad discretion conferred by s 55 must be interpreted and exercised to give effect to the overarching purpose in s 7 of the Act:[4]
[4]Civil Procedure Act 2010 (Vic) s 8 (‘Act’).
Overarching purpose
(1)The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute.
(2)Without limiting how the overarching purpose is achieved, it may be achieved by—
(a)the determination of the proceeding by the court;
(b)agreement between the parties;
(c)any appropriate dispute resolution process—
(i)agreed to by the parties; or
(ii)ordered by the court.
Relevantly, s 9(1) provides:
In making any order or giving any direction in a civil proceeding, a court shall further the overarching purpose by having regard to the following objects—
(a) the just determination of the civil proceeding;
(b)the public interest in the early settlement of disputes by agreement between parties;
(c) the efficient conduct of the business of the court;
(d) the efficient use of judicial and administrative resources;
(e) minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i) the fair and just determination of the real issues in dispute; and
(ii) the preparation of the case for trial;
(f) the timely determination of the civil proceeding;
(g) dealing with a civil proceeding in a manner proportionate to—
(i)the complexity or importance of the issues in dispute; and
(ii) the amount in dispute.
Submissions
Plaintiffs
The Act contains extremely broad powers that should be exercised in a manner which facilitate the early, efficient and timely resolution of disputes, including by having regard to ‘the public interest in the early settlement of disputes by agreement between parties’.[5] The overarching obligations of the Act apply not only to the parties but also to any person who provides financial or other assistance, specifically and expressly including insurers.[6]
[5]Ibid ss 9(1)(b), (c), (d), (f).
[6]Ibid ss 10(1)(a), (d).
It is a proper exercise of the power contained in the Act to order ‘discovery calculated to facilitate mediation’.[7] It is desirable that:
a.the resources of the Court and the parties should not be occupied with litigation that is pointless, because a defendant will be unable to satisfy any award of damages; and
b.mediation and settlement negotiations should not take place in circumstances where one party is at a disadvantage in terms of understanding what a claim is worth, or whether another party is being candid.
[7]Regent Holdings Pty Ltd v State of Victoria (2012) 36 VR 424 [20] (Nettle, Redlich and Osborn JJA) (‘Regent Holdings’).
Accurate and complete information as to quantum should be available at mediation to allow rational settlements to be achieved.[8] By parity of reasoning, information that sheds light on whether a defendant is able to satisfy any award of damages should also be made available. Where there is doubt as to this, it is appropriate to require discovery of financial and insurance related information. If a defendant has no money and no insurance, that should be made clear at an early stage having regard to the overarching obligations. That will in turn, one would expect, result in the discontinuance of the proceeding.
[8]Ibid [23].
Financial and insurance documents should be made available to enable:
(a) the plaintiffs to determine whether, or the extent to which, the defendants can meet any judgment;[9]
[9]Simpson v Thorn Australia Pty Ltd trading as Radio Rentals (No 4) [2019] FCA 1229, [22] (‘Simpson’).
(b) the plaintiffs’ legal representatives to be properly satisfied that any future settlement is fair and reasonable and in the interest of group members;[10]
(c) increased prospects of settlement by ensuring the plaintiffs’ solicitors are able to assess the complete financial picture;[11]
(d) the plaintiffs to ensure that any insurance policy is properly enlivened if that becomes necessary.[12]
[10]Ibid [22], [24].
[11]Ibid [23].
[12]Ibid [25].
The application should be allowed in the interests of justice to enhance transparency in the resolution and conduct of proceedings and mitigate against the risk that, if the defendants have no assets and no insurance, the resources of the Court will not be wasted on litigation that turns out to be pointless.
Defendants and Intervener
The defendant in Agnello, and the intervener in both proceedings, opposed the orders sought in the plaintiffs’ summons, submitting:
(a) the documents sought are not relevant to the plaintiffs’ pleaded case, and there is no power that enables the Court to order discovery of them;
(b) alternatively, it would be inappropriate for the Court to exercise its discretion to order discovery of the documents sought.
The first defendant in Fotiadis neither consented to nor opposed the orders sought by the plaintiff in that proceeding. The first, second and fourth defendants in Fotiadis attended the hearing of the application, but took no active role.
Analysis
The power to order discovery and inspection of documents is not part of the inherent jurisdiction of the Court.[13]
[13]State of Victoria v Intralot Australia Pty Ltd [2015] VSCA 358, [49]–[52] (Beach, Kyrou JJA and Cavanough AJA).
Discovery involves compulsory disclosure of often confidential information and documents. ‘The public interest in privacy and confidence demands that the compulsion should not be pressed further than the course of justice requires.’[14]
[14]Riddick v Thames Board Mills Ltd [1977] QB 881, 896 (Lord Denning MR) (‘Riddick’); Mobil Oil Australia Ltd v McDonald’s Australia Ltd & Guina Developments Pty Ltd [1996] 2 VR 34, [37]-[38] (Hayne JA).
The authorities support the principle that discovery is of documents that relate to a question or fact in issue on pleadings between parties. In Mulley & Marney v Manifold,[15] Menzies J said:
I now turn to the pleadings to determine what are the matters at issue between the parties, because discovery is a procedure directed towards obtaining a proper examination and determination of these issues — not towards assisting a party upon a fishing expedition. Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to a train of enquiry which would, either advance a party’s own case or damage that of his adversary.
[15](1959) 103 CLR 341, 345.
In Volunteer Fire Brigades Victoria v CFA (Discovery Ruling),[16] J Forrest J recognised the broad scope of the Court’s powers in relation to discovery provided by ss 7 and 55 of the Act and r 29 of the Rules. His Honour referred, in relation to the overarching purpose of the Act and the limits to the broad discretion it provides, to Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited,[17] where the High Court said in relation to the corresponding New South Wales legislation:
That purpose may require a more robust and proactive approach on the part of the courts. Unduly technical and costly disputes about non-essential issues are clearly to be avoided. However, the powers of the court are not at large and are not to be exercised according to a judge’s individualistic idea of what is fair in a given circumstance. Rather, the dictates of justice referred to in s 58 require that in determining what directions or orders to make in the conduct of the proceedings, regard is to be had in the first place to how the overriding purpose of the CPA can be furthered, together with other relevant matters, including those referred to in s 58(2). The focus is upon facilitating a just, quick and cheap resolution of the real issues in the proceedings, although not at all costs. The terms of the CPA assume that its purpose, to a large extent, will coincide with the dictates of justice.
Applying that reasoning to the case before him, J Forrest J said:[18]
The overriding consideration of the CPA is to ensure that the parties receive a fair trial i.e. ‘a just resolution’ to use the words of the CPA. However, a fair trial is not a perfect trial. It is, rather, the best trial that a court can provide to the parties within reason and in proportion to the issues in dispute and the court’s resources. Accordingly, demands for discovery of documents which are peripheral to the central issues cannot be entertained. The Court is obliged to focus on the central issues as best it can be determined at this point in the litigation.
[16][2016] VSC 573.
[17](2013) 250 CLR 303, [57] (French CJ, Kiefel, Bell, Gageler and Keane JJ).
[18][2016] VSC 573, [34] (citations omitted).
In Cargill Australia Ltd v Viterra Malt Pty Ltd (No 9),[19] Elliott J said, to like effect:
The relevance of documents to the proceeding is a threshold factor to be considered. If documents sought to be discovered are not relevant to the proceeding then there is no basis for ordering their production.
[19][2018] VSC 433, [40].
And more recently in Bogan & Anor v The Estate of Peter John Smedley (deceased) & Ors,[20] Stephensen AsJ said:
[20][2022] VSC 645, [6]–[8] (citations omitted).
6.The principles with respect to discovery are clear. Discovery is to be made of documents which are directly relevant to matters in issue in the proceedings, and that is determined by reference to the pleadings.
7.Section 55(1) of the Civil Procedure Act 2010 (Vic) gives the court an overriding discretion to ‘make any order or give any directions in relation to discovery that it considers necessary or appropriate.’ As set out in Volunteer Fire Brigades Victoria Inc v Country Fire Authority:
... demands for discovery of documents which are peripheral to the central issues cannot be entertained. The Court is obliged to focus on the central issues as best it can be determined at this point in the litigation.
8.Discovery orders should be directed to finding the most efficient, effective and economical management of the discovery exercise, bearing in mind the nature and complexity of the trial.
Any number of authorities for this principle could have been cited. The plaintiffs were unable to identify any authority that addressed the scope of discovery under Part 4.3 of the Act or r 29 of the Rules that supported their contention that there is power to order discovery of documents that are not relevant to the facts in issue in the proceeding.
The plaintiffs relied heavily on the decision on appeal in Regent Holdings Pty Ltd v State of Victoria & Anor (2012) (‘Regent Holdings’),[21] which concerned an interlocutory appeal against orders made in a representative proceeding by the trial judge that 14 group members provide particulars and discovery of documents relating to quantum. The proceeding had been set down for the trial of common issues of fact and law and determination of the lead plaintiff’s claim. That trial was not intended to deal with the quantum of group members’ claims. The trial judge made the impugned discovery order to facilitate a mediation that had been ordered. The plaintiff, who was the applicant for leave to appeal, complained the order was wrong in principle and productive of substantial injustice.
[21](2012) 36 VR 424.
On appeal, the Court rejected the plaintiff’s submissions, and said the case before it illustrated that depending on the circumstances ‘group members may be asked to take some step before common questions of liability are resolved’.[22] The particular circumstances identified by the Court included that the group was limited and closed, and that all members of the group were represented by the one firm of solicitors and were in effect engaged in a joint enterprise with a view to maximising recovery.[23] The Court concluded that in those circumstances it made sense to order that the identified group members provide particulars and discovery to assist in formulation of rational settlement offers. The Court rejected the plaintiff’s submission, based on observations by Bell AJA in National Australia Bank Limited v Pathway Investments Pty Ltd,[24] that discovery from group members should only ever be required if it was necessary for a determination of the representative party’s claim. In doing so, the Court observed:[25]
Care should be taken to avoid reading judgments on fact specific interlocutory issues of practice and procedure as if they were determinative of precepts and principles of general application. A fortiori, when one is concerned with interlocutory orders for discovery. Peruvian Guano and Mulley v Manifold aside, there are only a handful of discovery authorities of general application. National Australia Bank v Pathway is not one of them.
[22]Ibid [12] (Nettle, Redlich and Osborn JJA).
[23]Ibid [14].
[24](2012) 265 FLR 247.
[25]Regent Holdings (n 7) [19] (Nettle, Redlich and Osborn JJA) (citations omitted).
The Court referred to the desirability that proceedings be settled, the obligations imposed by the Act upon parties to ‘strive to achieve that end’, and concluded ‘it is not improper for a judge to make orders for particulars and discovery calculated to facilitate mediation’.[26] The Court accepted that mediation should be conducted without prejudice and said:
But that does not mean that is [sic] should be conducted in ignorance. Court ordered mediation is not a game of bluff and bluster in which one party is free to mislead another to conclude that a claim is worth more than it is. It is designed to be an exercise in rational bargaining between relatively well-informed parties aimed at providing just compensation for worthy claims. The more accurate and complete the available information as to quantum, the more likely that rational settlements will be achieved. Where a party seeks the court’s assistance to obtain further information which ex facie will facilitate a court directed mediation process, cogent submissions are required to demonstrate that the provision of that assistance will undermine the process.[27]
The Court then referred with approval to the following statement of J Forrest J in Thomas v Powercor Australia Limited (Ruling No 1):[28]
Contrary to the submissions made on behalf of Mr Thomas, it is patently contrary to the purpose and intent of the C.P.A for a court to sit by passively and allow a case to proceed to what may be a lengthy trial of Mr Thomas’ claim on liability and quantum, without ensuring that there is adequate information available to both Mr Thomas and Powercor to achieve resolution, not only of Mr Thomas’ claim but also of the claims of the group members. In my experience this is not a novel proposition. Often in group proceedings the solicitors for the representative plaintiff provide particulars and, where necessary, supporting documentation relevant to the quantum of group members’ claims. The initial bulldog approach adopted by Mr Thomas’ lawyers is outmoded and runs contrary to the provisions of the C.P.A. This is a case in which the court should exercise its powers to ensure that there is adequate material available to Powercor to enable it to form a considered view as to the likely resolution of the group’s claim.
[26]Ibid [20].
[27]Ibid [23].
[28][2010] VSC 489, [49] (citations omitted).
The discovery ordered in Regent Holdings was of documents relevant to a fact in issue in the proceeding, namely quantification of the claim for damages made by group members. That was the basis upon which the order for discovery was made and confirmed on appeal. In the circumstances of that proceeding, the Court concluded there was nothing improper or unfair about such an order. In contrast, by the applications that are the subject of this ruling the plaintiffs seek to have imposed on the defendants an obligation to discover documents that are not related to any fact in issue in the proceedings. The plaintiffs’ reliance on Regent Holdings is contrary to the observation of the Court in that case set out at paragraph [36] above.
In my view there is little if any support in the text of the Rules or the Act for extending the power to order discovery to documents that are not related to the facts in issue in a proceeding.
The classes of documents set out in r 29.01.1(3) clearly relate to the facts in issue between the parties on the case before the Court. Rule 29.02 directs that a notice for discovery may be served after pleadings are closed, in other words when the facts in issue between the parties on the pleadings can be known. Rule 29.08 gives the Court power to order further particular discovery of any document or class of document relating to any question in the proceeding that may be or may have been in the possession of a party.
Interrogation is a form of discovery. Rule 30.02(1) provides that ‘any party may serve interrogatories on another party relating to any question between them in the proceeding’. A party may object to answering an interrogatory on the ground that it does not relate to any question between the party and the interrogating party.[29]
[29]Rules (n 3) r 30.07(1)(a).
While r 29.05.2 gives the Court power to order discovery beyond the scope in r 29.01.1(3), it is not an unfettered power to order discovery as the Court sees fit in any particular case. ‘Expanded’ discovery in r 29.05.2 is an extension to the power in r 29.01.1. The scope of discovery that may be ordered under r 29.05.2 is informed by r 29.01.1 and the other rules in relation to discovery to which I have referred which share the limiting feature that discovery must be relevant to the facts in issue between the parties in a proceeding.
The Act does not define discovery. Section 54 provides that unless otherwise ordered, discovery of documents is to be in accordance with the Rules. This makes the definition and concept of discovery in the Rules relevant to construction of the provisions in Part 4.3 of the Act.
The subject matter of the overarching purpose in s 7 of the Act, which governs the interpretation and exercise of the powers in Part 4.3, is ‘resolution of the real issues in dispute’. The plaintiffs placed emphasis on the word ‘resolution’ in s 7 in support for their broad construction of the power in s 55. However, while the Act recognises that the overarching purpose may be achieved by appropriate dispute resolution, it remains that what is to be resolved are the real issues in dispute between the parties.
The powers in s 55(1) of the Act to make orders and give directions in relation to discovery, and in s 55(2)(f) to expand discovery are not ‘at large’ or ‘to be exercised according to a judge’s individualistic idea of what is fair’.[30] Rather, the powers in s 55 are limited by the requirement in the overarching purpose that discovery relate to the real issues in dispute between the parties.
[30]Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303, [57] (French CJ, Kiefel, Bell, Gageler and Keane JJ).
The parties placed reliance on decisions of the Federal Court including Simpson v Thorn Australia Pty Ltd trading as Radio Rentals (No 4) (‘Simpson’)[31] and Evans vDavantage Group Pty Ltd (No 2) (‘Davantage’).[32] It is important to keep in mind when considering these decisions that they are based on a statutory discovery regime that differs from the provisions relevant here.
[31][2019] FCA 1229.
[32][2020] FCA 473 (‘Davantage’).
In Simpson, Gleeson J had already ordered that the relevant insurer be joined as a party to the proceeding. Having been joined, the insurer denied liability to indemnify the other defendants. Mediation had been ordered, and the plaintiff sought discovery of the insurance policies for the following purposes:
(1)to review the excess layer policies to ensure that any issues surrounding the activation of those policies is addressed at the final hearing, to the intent that the policies are properly enlivened if the applicant is successful in her claims; and
(2)for the purposes of mediation and prospective settlement approval.
Gleeson J concluded the documents were likely to be relevant to the first of these matters, and would be of utility for the purposes of a mediation.
Gleeson J was satisfied in Simpson that the Court had power under s 33ZF of the Federal Court of Australia Act 1976 (Cth) to order production of the documents. After setting out the reasons supporting an order, Gleeson J said:[33]
I accepted that the production of Mr Marshall’s insurance documents will confer a tactical advantage on the applicant to the detriment of AIG and that the documents are not relevant to an issue in the proceeding. However, balancing those matters against the considerations in favour of production, I was satisfied that an order for production of the documents is appropriate (and likely necessary) to ensure that justice is done in the proceeding.
It is not clear from the reasons what Gleeson J meant when saying the documents were not relevant to an issue in the proceeding. The insurers were a party to the proceeding, and the documents were relevant to the first purpose for which discovery was sought. It is possible Gleeson J meant that the documents were not relevant to the matters in issue on the principal claim by the plaintiff against the first defendant.
[33]Simpson (n 9) [26].
In Davantage, the applicant sought discovery of insurance documents relevant to indemnity available to the defendant. Material before the Court indicated that to the extent the plaintiff’s claims in the proceeding were not covered by insurance, any judgment or settlement may not be recoverable. Beach J concluded that there was power under s 23 of the Federal Court of Australia Act 1976 (Cth) to make the orders sought by the plaintiff but that in the circumstances of that case the power should not be exercised.
The plaintiff in Davantage sought production of the insurance documents to facilitate the mediation, for the purposes of an application for approval of any settlement that was achieved, and to advise group members about whether other proceedings should be brought against the insurers. Beach J rejected the plaintiff’s application for the following reasons:
(a) as was accepted by the plaintiff, the insurance documents were not relevant to the determination of any fact in issue in the proceeding;[34]
[34]Davantage (n 32) [46].
(b) a plaintiff has no right to examine a defendant as to its financial means ahead of a trial in order to decide whether it is worth proceeding with the case;[35]
[35]Ibid [47].
(c) Simpson was distinguishable on its facts because in that case the insurer had already been joined as a party and conceded there was an arguable case against it for indemnity;
(d) the source of power relied on by Gleeson J could not be used to order the disclosure of insurance documents;[36]
[36]Ibid [69]–[70]; BMW Australia Ltd v Brewster; Westpac Banking Corp v Lenthall (2019) 269 CLR 574.
(e) the reasoning of Mullins J in Mallonland Pty Ltd v Advanta Seeds Pty Ltd[37] that it was neither appropriate nor necessary to order disclosure of insurance documents to facilitate settlement discussions or mediation in order to ensure that justice was done, and that it was premature for the plaintiffs to be concerned about how they would satisfy the Court of the reasonableness of any settlement, was to be preferred;[38]
[37][2019] QSC 250.
[38]Davantage (n 32) [68].
(f) requiring discovery of insurance documents would cause asymmetry in bargaining positions that would prejudice the defendants;[39]
(g) case management principles of themselves did not justify an order for production of an insurance policy that was not otherwise discoverable;[40] and
(h) an application for discovery against the defendants is not the appropriate vehicle to obtain insurance documents for the purpose of determining whether to commence proceedings against a third party.[41] In any event, considerable difficulties would be faced by the plaintiff as a stranger to the policies in bringing proceedings against the insurer outside an insolvency scenario.[42]
[39]Ibid [73], [74].
[40]Ibid [77]–[80]; Beneficial Finance Corporation Limited v Price Waterhouse (1996) 68 SASR 19 (‘Beneficial Finance’).
[41]Davantage (n 32) [88].
[42]Ibid [90].
Beach J placed some reliance on the decision in Beneficial Finance Corporation Ltd v Price Waterhouse.[43] In that case Perry J did not accept that case management rules had anything to do with the scope of discovery.[44] Lander J said:
I cannot agree that the system of case flow management entitles or disentitles a party to a substantive right that the party did not or did enjoy prior to the introduction of the system except to disentitle parties from conducting their litigation otherwise than efficiently and expeditiously.
More particularly case flow management, in my opinion, cannot be used for the purpose of making discoverable a document which would otherwise not be discoverable …[45]
[43]Beneficial Finance (n 40); see also Davantage (n 32); Commonwealth Bank of Australia v ACN 076 848 112 Pty Ltd [2015] NSWSC 666.
[44]Beneficial Finance (n 40), 34.
[45]Ibid 58.
In Davantage, Beach J considered whether insurance documents might be justifiably made discoverable for the purposes of mediation:[46]
[46]Davantage (n 32) [95] (citations omitted).
95.As I have already indicated, the fact that the insurance documents might assist the applicant in a mediation does not justify their discovery. As Perry J said in Beneficial Finance Corporation (at 35):
Mediation is an entirely different procedure from the trial of an action at law. While mediation may be mandated, nonetheless it is essentially a consensual procedure. It would be contrary to the proper disposal of pretrial procedures relating to proceedings in the civil jurisdiction of the court (as opposed to mediation) to confuse those procedures by taking steps which might be thought desirable if there was to be a mediation.
...
It was contended that disclosure of the extent of the indemnity available to the defendants might have an effect upon decisions taken by the plaintiff as to what issues it will pursue at the trial, with a potential saving in cost if the issues were for that reason reduced. I do not see that as a matter which would justify joinder or discovery in aid of discovery. Ordinarily, matters of that kind might well emerge at the pretrial conference stage. But unless a party sued volunteers the information, there is no right in a plaintiff to examine a defendant ahead of the trial in an endeavour to elicit information about the defendant's means, with a view to deciding whether it is worth his or her while to go on with the case, or some part of it.
96. And as Lander J said (at 58):
Next his Honour relied upon alternative dispute resolution, because it was submitted to his Honour, the respondents may well give consideration to limiting the scope of their claim and thus the issues to be tried. So also his Honour said that the possibility of mediation was a fact relevant to the making of this order.
Again I cannot agree with the learned judge. Because a court may require parties to submit to mediation is not, in my opinion, in any way relevant to determine whether or not a party ought to make discovery of a document which records its commercial relationship with a party, not then a party to the proceedings, and in circumstances where the document is not relevant to any matter currently in the proceedings.
The matters of alternative dispute resolution or mediation are not good reasons to override a party’s right to keep its commercial documents or any of its documents confidential, nor are they a reason to allow one party to intermeddle in the affairs of another party and its insurers.
97.In Commonwealth Bank of Australia v ACN 076 848 112 Pty Limited, Ball J (at [23]) elaborated upon similar themes.
The plaintiffs placed some reliance on comments made by Lee J in Watson & Co Superannuation Pty Ltd v Dixon Advisory and Superannuation Services Ltd (No 3).[47] In that ruling, having refused to order production of insurance policies, Lee J commented on the asymmetry factor discussed by Beach J in Davantage:[48]
Without suggesting the discretion in refusing relief was not properly refused in the particular circumstances of those cases, it is somewhat unclear to me as to why this “asymmetry” could usually result from an order for production. Asymmetry means a lack of equality or equivalence between parts or aspects of something or of knowledge. Here, the whole purpose of the order is provide a symmetry of knowledge as to the financial position of E&P between both parties required to attempt to negotiate a resolution which, if approved, must have a particular character: that is, it is fair, reasonable and in the interests of specific strangers to the negotiations, being the group members.
This comment may reflect a misreading of what was said by Beach J in Davantage about the asymmetry of information that would flow from requiring production of insurance documents, and prejudice to the defendant that would result. The asymmetry identified by Beach J arose because documents and information relevant to the motivation to settle would become known in respect of one party but not the other. Similarly, in Simpson, Gleeson J recognised that an effect of ordering the discovery sought would be to confer a tactical advantage on one party and a corresponding disadvantage on the other.[49] It is relevant to the application before me that the prejudice recognised by Beach J in Davantage and Gleeson J in Simpson would extend to an insurer who is not a party to the proceeding, and to whom the plaintiffs are strangers.
[47][2023] FCA 988.
[48]Ibid [7].
[49]Simpson (n 9) [26].
The judicial registrar concluded that because of the lack of any limitation on the powers in r 29.05.2(1) to expand a party’s obligation to give discovery, s 54 of the Act to depart from the Rules in relation to discovery, and s 55(2)(f) also to expand a party’s discovery obligations, that it was likely the Court had the power in appropriate circumstances to order discovery of documents that were not relevant to any fact in issue in the proceeding.[50] Based on the above analysis, I doubt that such a power exists. However, assuming the power exists, I reach the same conclusion as the judicial registrar that in the circumstances of these cases it is not appropriate to order the defendants to make discovery of the documents sought by the plaintiffs. My reasons, which are also consistent with the reasoning of Beach J in Davantage, are as follows.
[50]Ruling (n 2) [57]–[60].
First, the insurance and financial documents are not relevant to the determination of any fact in issue in the proceeding.
Second, the documents are confidential to the defendants and the insurer. They should not be obliged to disclose private information unless ‘the course of justice requires’[51] that be done. There is no right to discovery of financial and insurance documents simply for the purpose of examining a defendant’s means in order to decide whether to settle or proceed with a case.[52]
[51]Riddick (n 14) 896 (Lord Denning MR).
[52]Beneficial Finance (n 40); Davantage (n 32).
Third, requiring discovery of the documents would cause an asymmetry in bargaining positions that would prejudice the defendants and likely the insurer. On this issue, I adopt what was said by the judicial registrar:[53]
Disclosure of the insurance policies is likely to risk conferring an asymmetrical advantage to the plaintiffs in any mediation. It seems to me that this arises not only because the disclosure sought would provide the plaintiffs with information about coverage amounts and limits to which they would not otherwise be entitled, but also because it has the potential to arm them with information that could allow them to better configure or pursue their claims outside the mediation to improve their position in the litigation – if the documents disclosed particular terms, parameters or conditions affecting when and how coverage is to be provided, for instance. I consider that this kind of information goes well beyond merely ensuring that a mediation occurs in a well-informed setting, and comes closer to tilting the playing field in one party’s favour. As was noted in the course of the hearing the object in the [Act] of facilitating the just resolution of the real issue in dispute requires doing justice to the defendants as much as it does to the plaintiffs and group members.
[53]Ruling (n 2) [64].
Fourth, it is not appropriate to order discovery of the documents because information in them may ultimately be relevant to whether approval is given under s 33V of the Supreme Court Act 1986 (Vic) for settlement of the proceedings. What information is necessary to consider approval of the settlement, and whether the parties should be compelled to disclose confidential information for that purpose, can only be determined when application has been made for approval of terms of settlement to which the parties are agreed. At that time, alternative mechanisms are available to the Court and the parties to compel disclosure of that information.
Fifth, the plaintiffs have not articulated any principled basis for ordering discovery of financial information and insurance policies that do not relate to any fact in issue in the proceeding and are otherwise confidential to the defendants in this case. It is difficult to know what limits would be placed on the right to discovery if the plaintiffs’ applications were successful. Without more, case management principles do not justify an order for production of documents that are not otherwise discoverable.
Sixth, as the judicial registrar observed, the plaintiffs have overstated the difficulty they face in assessing any offer made at mediation and advising group members. A party at mediation can challenge assertions about lack of financial means or insurance made to justify the quantum of an offer. The party making the offer would be motivated to establish the truth of the asserted lack of financial means to encourage acceptance of the offer. Further, as the judicial registrar said:[54]
As against the risk that the plaintiffs might be positively misled by a defendant about their resources or insurance, the plaintiffs can note the existence of the overarching obligations in at least ss 17 (obligation to act honestly), 21 (obligation not to mislead or deceive), 22 (obligation to use reasonable endeavours to resolve disputes) and 24 (obligation to ensure costs are reasonable and proportionate), as well as the relevant conduct rules applicable to solicitors and barristers.
[54]Ibid [87].
Seventh, Berkley Re is not a party to the proceedings. The grant of leave to intervene for the specific purpose of being heard on the discovery applications does not change that fact.
Eighth, the plaintiff in Agnello has already obtained some information regarding the defendant’s financial position from the defendant on a confidential and without prejudice basis. The first defendant in Fotiadis is only one of four defendants whose financial capacity to satisfy a judgment is of concern. These circumstances weaken the plaintiffs’ assertion that disclosure of insurance documents is appropriate in these circumstances.
Conclusion
The applications by the plaintiff in each proceeding for discovery of insurance and financial documents will be dismissed. I will hear from the parties as to the appropriate consequential orders.
3
7
0