Andy Haridemos v Insurance Australia Limited
[2013] ACTSC 130
•18 July 2013
ANDY HARIDEMOS & ANOR v INSURANCE AUSTRALIA LIMITED
[2013] ACTSC 130 (18 July 2013)
PRACTICE AND PROCEDURE – discovery and production of documents for inspection – expert reports not protected by privilege – dispute between insured and insurer over rejected claim for theft of motor vehicle – exercise of Markus discretion to exempt insurer from obligation to produce expert reports and supporting documents
Broadwater Taxation & Investments Services Pty Ltd v Hendricks, unreported, Santow J, Supreme Court of NSW, Equity Division, 20 September 1993
Forrest v Insurance Australia Limited [2012] ACTSC 47
Halpin v Lumley General Insurance Limited (2009) 78 NSWLR 265
Kon v AMP Life Limited [2006] NSWSC 957
Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1
No. SC 807 of 2009
Judge: Master Harper
Supreme Court of the ACT
Date: 18 July 2013
IN THE SUPREME COURT OF THE )
) No. SC 807 of 2009
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN: ANDY HARIDEMOS
First plaintiff
BETWEEN: MARIA HARIDEMOS
Second plaintiff
AND:INSURANCE AUSTRALIA LIMITED ACN 000 016 722
Defendant
ORDER
Judge: Master Harper
Date: 18 July 2013
Place: Canberra
THE COURT ORDERS THAT:
the obligation on the defendant to serve on the plaintiffs the confidential affidavit of Elizabeth Basmajian sworn on 18 October 2012 (including exhibits) be dispensed with.
that affidavit (including exhibits) be sealed and not available for inspection by the plaintiffs or the public until further order.
any obligation upon the defendant to produce that affidavit or any documents included in its exhibits whether on discovery or pursuant to notice be dispensed with.
the costs of the application be costs in the cause.
This is an interlocutory application in the course of an action by the plaintiffs, insured under a comprehensive motor vehicle policy, against the insurance company, following its refusal to meet a claim for theft of the motor vehicle. Both parties have filed affidavits of documents as part of the discovery process. The present application is brought by the defendant insurer, which argues that it should not be required to produce certain discoverable documents. The insurer asked the court to exercise its discretion under the Markus principle: Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1.
I dealt with an earlier Markus application in these proceedings, in Haridemos v Insurance Australia Ltd [2012] ACTSC 12. In my reasons for decision, I set out the factual background, which I shall not repeat, other than to say that the plaintiffs say that their motor vehicle was stolen from the driveway outside their house on 15 May 2009. The plaintiffs say that the vehicle was covered by a comprehensive policy issued by the defendant which entitled them to payment of the sum insured on theft of the vehicle. The insurer’s position is that the vehicle was not stolen, and that the apparent theft was arranged by the plaintiffs. The vehicle was found in the suburbs of Canberra in August 2009 and is presently in the custody of the insurer.
The insurer has not pleaded fraud against the plaintiffs, but has simply denied the assertions in the statement of claim about the alleged theft of the vehicle, putting the plaintiffs to proof. Following my earlier decision, the insurer amended its defence to assert that, in breach of what has been called the “not truthful and frank” term of the policy, the second plaintiff made some statements to the insurer or its representatives which were false, and that in breach of the “co-operation” term of the policy, the plaintiffs have refused to provide the insurer with certain requested financial records and other information.
On the hearing of the present application, the insurer relied upon an affidavit which has not been seen by the representatives of the plaintiffs, and seeks to be relieved of the usual obligation to serve the affidavit. A large number of documents are exhibited to the affidavit, and the insurer seeks to be relieved from the obligation to provide the plaintiffs with access to those documents for inspection.
It is acknowledged that the Court has discretion under the Markus principle to exempt a party from a requirement to serve an affidavit or witness statement, and to refuse leave to a party to inspect documents produced on subpoena or notice for production. The discretion may be exercised where two major criteria are satisfied, as identified by Barrett J in Kon v AMP Life Limited [2006] NSWSC 957:
[10] In each of these cases the material in question was withheld. There were two main reasons. The first was that the material was not of a kind that could assist the deprived party in the formulation and presentation of its own case. It was of such a nature that it could be of assistance only to the applicant in meeting the case made by the deprived party and, depending upon what came out in the deprived party’s case, it might not even be relied on for that purpose. In other words, the evidence in question might, after the close of the deprived party’s case, be seen to be of no use in any event.
[11] The second point was that the material was of such a nature that it would, if made available, tend to tempt the deprived party to tailor its evidence or at least consider doing so.
The discretion has been exercised to exempt a party from a requirement to serve affidavits before trial: Broadwater Taxation & Investments Services Pty Ltd v Hendricks, unreported, Santow J, Supreme Court of NSW, Equity Division, 20 September 1993; Kon v AMP Life Limited; Halpin v Lumley General Insurance Limited (2009) 78 NSWLR 265.
The documents which the insurer seeks to keep from the plaintiffs in the present case are said to be documents not capable of advancing their case, and documents which, if disclosed, would enable them to tailor or try to tailor their evidence, thus depriving the insurer of a legitimate forensic advantage.
In Forrest v Insurance Australia Limited [2012] ACTSC 47, I said in obiter dicta that where an insurer chose to disclose the existence of an investigation report and to quote selectively from it in an endeavour to influence an insured not to pursue its claim, I would not be minded to exercise the Markus discretion in the insurer’s favour.
The affidavit relied on by the insurer which it does not wish to have to serve on the plaintiffs is an affidavit sworn on 18 October 2012 by Elizabeth Basmajian, who gives her occupation as Senior Litigation Specialist employed by the insurer. The affidavit lists and annexes a number of documents which the insurer seeks not to have to provide to the plaintiffs.
One of these documents is an investigation report by NKG Management Services, a firm of investigators instructed by the insurer. The report was commissioned by the insurer in July 2009, prior to the formal refusal of the claim and prior to the institution of these proceedings. The report is dated 23 October 2009, after the institution of proceedings. It could be argued that the report was brought into existence by the insurer for the purposes of its consideration as to whether or not to meet the claim, rather than for the purposes of the present litigation, but the plaintiffs do not pursue the question of access to that report. There are numerous documents annexed to the report, some of which were provided to the investigators by the insurer with their instructions. Of these, a significant number were provided by the plaintiffs to the insurer at its request. I am assured by counsel for the insurer that with one exception (an item in the Canberra Times about the purchase by the plaintiffs of their house) the other items are either already in the possession of the plaintiffs or their solicitors, or they fall into the category of communications between the insurer and the investigators. I assume from the course of the hearing that the solicitors for the plaintiff now have a copy of the Canberra Times article (Annexure O to the report) and that I do not need to make an order about it. The insurer should not have to produce the report or the other documents, nor is production sought by the plaintiffs.
The documents exhibited to the affidavit and in dispute between the parties are reports commissioned by the insurer from a firm which describes itself as engaged in forensic locksmith services. The first of these reports is dated 1 July 2009, well before the refusal of the claim or commencement of proceedings. It is not suggested by the insurer that this report was obtained in contemplation of litigation, and there is no claim for privilege in respect of it. A subsequent report by the same firm was obtained after litigation had commenced, but the real issue is whether the Markus discretion should be exercised in relation to the locksmith reports.
Protection is also sought in relation to the instructions given to the locksmith firm, and other communications between the insurer and the firm.
Counsel for the plaintiffs submits that the insurer chose to quote to the plaintiffs selectively from the report by the locksmith firm in a manner which would have amounted to a waiver of privilege, had privilege been applicable, and that in those circumstances I should not exercise my discretion in the insurer’s favour about that report: see Forrest v Insurance Australia Limited at [28].
The plaintiffs place some reliance on the fact that during the discovery process, they were provided with copies of drafts of a letter to them from the insurer, which in the event was not sent. The first draft was dated 6 November 2009. It was a draft of a letter informing them that the insurer had decided to refuse their claim, and giving reasons. The reasons set out in the draft letter included passages quoted from the forensic locksmith report. The second draft, dated 11 November 2009, did not include any such passages but showed, lined through but legibly, the parts of the first draft which had been omitted in the second draft. The argument for the plaintiffs is that this amounted to disclosure of certain of the material now sought to be quarantined, and that, part of it having been disclosed, the balance should not be protected. I am not persuaded that this analysis is correct. In Forrest, the insurer had quoted extensively from an investigation report, for purposes which might be described as in terrorem – that is, in an attempt to persuade the insured to drop the claim. In the present case, the draft letter was merely a draft which was never sent. It was disclosed on discovery only because the insurer, presumably on advice, took the view that it was obliged to disclose it. I am not persuaded that the consideration to which I adverted in Forrest applies on the facts of the present case.
Counsel for the plaintiffs argued that the defendant should not be permitted to withhold production of an expert report, having regard to the provisions contained in the Court Procedures Rules 2006 about service of expert reports well in advance of hearing. This submission, it seemed to me, suffered from a misconception. The purpose of the Rules is to ensure that a party is not taken by surprise when an expert witness is called to give evidence, or a report by an expert witness is tendered, at trial. The party is entitled to notice, partly to avoid surprise and partly to provide an opportunity to qualify an expert in the same field who might arrive at a different opinion.
The present case has not reached the stage of service of expert reports prior to trial. The application I am dealing with relates to the discovery process. Generally speaking, there is no requirement to disclose an expert report as part of discovery, because expert reports generally have come into existence in circumstances where they are covered by privilege.
The forensic locksmith reports meet, it seems to me, the criteria for Markus protection. They are not reports which might advance the case for the plaintiffs or damage the case for the defendant. They are reports which, if disclosed, might tempt the plaintiffs to tailor their evidence to meet them. It is therefore in the interest of justice to exempt the defendant from the general obligation to disclose the reports as part of discovery.
The defendant should therefore not be required to serve Ms Basmajian’s affidavit of 18 October 2012, and the plaintiffs should not be entitled to inspect the documents exhibited to that affidavit until the close of their case at trial.
As to costs: the defendant comes to the court seeking the exercise of a discretion in its favour, to the disadvantage to the plaintiffs. Unavoidably the plaintiffs are not aware of the evidence in support of the application. In these circumstances it will generally be seen as perfectly proper for the plaintiffs to test the position of the defendants and to oppose the application without penalty as to costs. This is not a conventional application where costs should follow the event.
The costs of the application will be costs in the cause.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Master Harper.
Associate:
Date: 18 July 2013
Counsel for the plaintiff: Mr GP Walker
Solicitor for the plaintiff: Chamberlains Law Firm
Counsel for the defendant: Ms L Mullins
Solicitor for the defendant: William Roberts Lawyers
Date of hearing: 13 December 2012
Date of judgment: 18 July 2013
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