Australia and New Zealand Banking Group Limited v ANZCover Insurance Pty Ltd (No 2)

[2005] VSC 21

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL LIST

No. 2073 of 2003
F5600

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
(ACN 005 357 522)

Plaintiff

v

ANZCOVER INSURANCE PTY LTD
(ACN 082 275 125) and ORS

Defendants

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JUDGE:	Byrne J
WHERE HELD:	Melbourne
DATE OF HEARING:	6 December 2004
DATE OF JUDGMENT:	11 February 2005
CASE MAY BE CITED AS:	ANZ Bank v ANZCover Insurance Pty Ltd (No. 2)
MEDIUM NEUTRAL CITATION:	[2005] VSC 21

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Practice and procedure – discovery – documents relating to state of mind – privilege - waiver of legal professional privilege.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr AC Archibald QC and Ms C Kenny	Clayton Utz
For the Defendants	Ms Wendy Harris	Ebsworth & Ebsworth

HIS HONOUR:

1. A further matter which was argued before me on 6 December concerned certain claims for privilege made by the plaintiff, Australia and New Zealand Banking Group Ltd (“the Bank”), in its discovery.  The relevant circumstances which give rise to this dispute are, in brief, that the National Home Bank of India (“NHB”) made a claim against ANZ Grindlays Bank Plc (“ANZ Grindlays”) for a very substantial sum arising out of the payment to ANZ Grindlays of certain cheques drawn by NHB.  ANZ Grindlays submitted the claim to the defendant, ANZCover Insurance Pty Ltd (“ANZCover”), for indemnity under a Banker’s Blanket Bond Policy.  On 14 December 2001, the NHB claim was compromised by ANZ Grindlays and the latter now sues ANZCover for the amount which it paid under the compromise.

1. The proceeding is defended by ANZCover on a number of grounds including that the compromise was not a reasonable one[1] and, further, that the insured was, by reason of that fact, in breach of a duty of good faith owed to ANZCover[2].  The insurer also raises other aspects of the compromise which it says have the consequence that it is not liable under the policy.  The Bank seeks to pre-empt these contentions by alleging in paragraphs 64-73 of its further amended statement of claim that ANZCover made certain representations in the period leading to the compromise to the effect that the entering into of the compromise would not jeopardise the claim under the policy.  In paragraph 77 of the statement of claim the Bank says that, in reliance upon the conduct of ANZCover and these representations, it entered into the compromise in the way that it did.

   [1]Defence, para 38(e)

   [2]Defence, para 44(h)

1. The first point before me concerned the assertion of ANZCover that the Bank has waived any privilege attaching to documents recording or concerning advice received by it prior to the entering into of the compromise with respect to the impact of the proposed settlement between ANZ Grindlays and NHB upon its claim for indemnity under the policy. 

1. The contention of ANZCover is that, by pleading its case in the way that it has, the Bank has put in issue its state of mind as to the impact of the compromise upon its insurance claim and has, therefore, waived privilege attaching to documents which bear upon that state of mind.  It was said that this consequence flows from my judgment in Liquorland v Anghie[3].

   [3](2003) 7 VR 27

1. The question of waiver in this context ultimately comes down to a matter of unfairness or inconsistency.  Is it unfair that the Bank, in this case, should assert its ignorance of the fact or of the legal consequence of the fact and, at the same time, resist disclosure of communications which it has received from its lawyers which contradict this?  Is such an assertion inconsistent with the maintenance of the privilege?

1. It is, of course, not known whether any such communications exist in this case so that my consideration of the point has about it an air of abstraction.  The state of mind of the Bank, as pleaded, is that its decision to enter into the compromise was, to some extent, influenced by the representations which it alleged have been made to it.  It is obviously not a case where it is put that the representations were the only reason or even a substantial reason for the entering into of the compromise, for this was doubtless driven by forensic or commercial considerations.  It may be, therefore, more correct to characterise the Bank’s state of mind in negative terms.  The Bank proceeded with the compromise in the belief that ANZCover would not deny liability for the Bank’s claim under the policy by reason only of the entering into of the compromise. 

1. The argument for waiver must persuade me that the content of the privileged communications could have had or, perhaps, was likely to have had an impact upon that state of mind.  It is not possible to answer this in the affirmative without knowing a good deal more than I do about the content of the communications.  I will go further than that.  It is difficult from my perspective to suppose that the sort of letter which a legal advisor might have written to the Bank or ANZ  Grindlays prior to the compromise could have had a bearing upon this state of mind.  I reject the waiver argument.

1. The second point concerns claims to privilege for what are described in the Ebsworth & Ebsworth letter of 23 November 2004 as “many examples of internal documents including those passing between David Abell, Elmer Funke Kupper, Peter Marriott and Tim Paine.  The dates of various of the documents some of which seemed to coincide generally with court listings in India, allow for the possibility that documents are primarily concerned with reporting or recording events rather than comprising confidential documents prepared for the purpose of obtaining legal advice or in connection with any (anticipated) proceeding”. 

1. What was put was that, since these claims for privilege have been challenged in the correspondence, the Bank must now either set out the facts relied upon as warranting the claims to privilege so that they may be evaluated by the solicitors for ANZCover and, if necessary, passed upon by the Court.  If this is not done then the claim should be rejected as baseless.

1. I agree.  Furthermore, it behoves the solicitors for ANZCover to identify with some precision which documents they challenge.  If this be done I will direct that the Bank file and serve an affidavit dealing with these matters.

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