Crawley v Vero Insurance Ltd (No 7)

[2014] NSWSC 80

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Crawley v Vero Insurance Ltd (No 7) [2014] NSWSC 80
Hearing dates:	14 February 2014
Decision date:	14 February 2014
Jurisdiction:	Common Law
Before:	Beech-Jones J
Decision:	Tender of letter dated 7 February 2006 rejected - tender of reasons in Short v Crawley (No 30) [2007] NSWSC 1322 allowed.
Catchwords:	EVIDENCE - without prejudice correspondence between party and insurer about indemnity for settlement offer - tender of reasons for judgment - Evidence Act - s 44, s 91 s and 131(1).
Legislation Cited:	Evidence Act 1995 (NSW), s 44, s 60, s 91, s 93, s 131
Cases Cited:	- Ainsworth v Burden [2005] NSWCA 174 - Short v Crawley (No 30) [2007] NSWSC 1322 - VACC Insurance Co Ltd v BP Australia Ltd [1999] NSWCA 427; 47 NSWLR 716
Category:	Interlocutory applications
Parties:	- Christopher William Crawley (Plaintiff) - Vero Insurance Ltd (First Defendant) - HDI-Gerling Australia Insurance Company Pty Ltd (Second Defendant) - Gordian Runoff Ltd (Third Defendant) - Westport Insurance Corporation (Fourth Defendant) - Zurich Specialities London Ltd (Fifth Defendant) - LawCover Pty Ltd (Sixth Defendant)
Representation:	Counsel: M. Green (Plaintiff) D.L. Williams SC, Ms L. Chan (Defendants) Solicitors: Bruce & Stewart (Plaintiff) Colin Biggers & Paisley (Defendants)
File Number(s):	2010/397627

ex tempore Judgment

Objection to tender of letter dated 07/02/06; see transcript p 101

1. Objection is taken by senior counsel for the defendants to the tender of a letter dated 7 February 2006 from the firm of solicitors then acting on behalf of LawCover to the plaintiff, Mr Crawley.

1. I have described the issues in these proceedings elsewhere, though to some extent, by reason of recent amendments, they are something of a moveable feast.

1. At least from LawCover's perspective, it has always maintained that it is not obliged to meet any aspect of the plaintiff's claim if it can be established that his conduct in relation to the matters for which indemnity is sought fall within a dishonesty exclusion in the approved insurance policy respecting his practice as a solicitor.

1. In 2003, the parties entered into a deed which governed the funding of the future costs of the principal litigation against Mr Crawley. The deed contained a clause which, at least on one party's case, amounts to a reservation of LawCover's position in the event that the dishonesty exception was invoked.

1. The letter to which objection is taken appears to arise out of consideration being given by Mr Crawley and his legal advisors in the principal proceedings to the making of an offer of settlement. The letter appears to be a response to an inquiry by Mr Crawley as to what contribution LawCover would be prepared to make if he, that is Mr Crawley, was to make an offer of settlement in the principal proceedings. The letter is entitled "without prejudice common interest privilege". The reference to common interest privilege can be put aside as it appears to be common ground between the parties that the common interest being referred to was one as between Mr Crawley and LawCover.

1. Two bases of objection to the tender of the letter were put forward. The first is relevance.

1. Counsel for Mr Crawley, Mr Green, contended that the letter contained a representation to Mr Crawley. It is unnecessary to dwell on this as no representation arising out of this letter is pleaded. However, the letter also includes the following statement:

"LawCover does not maintain that you were dishonest. However, it is fair to say that at the mediation held in December last year, senior counsel for the plaintiffs stated that, in his opinion, the plaintiffs would clearly establish dishonesty. While LawCover's review of the plaintiffs' opening submissions served on 3 February 2006 is not complete, the submissions contained numerous allegations of dishonest conduct on your part."

1. As I understand it, Mr Crawley will seek to make much of the first sentence of this extract. If the document is admitted, I would expect the defendants to make much of the balance of this extract.

1. The objection on relevance is to the effect that this letter really adds nothing to the plaintiff's case, in that LawCover's position was that it always maintained a reservation on providing cover if the dishonesty exception was made out and that this statement is consistent with that. There is considerable force in that, but I am just persuaded that the statement is at least capable of assisting the plaintiff at least in rebutting the allegation of dishonesty on the material that was known to LawCover as at the date of the letter.

1. In short, I think that this statement renders the document relevant, although it may be more of assistance to the party opposing its tender than the party seeking its tender.

1. The other basis of objection to the document is that it is excluded by s 131(1) of the Evidence Act 1995 (NSW) being evidence of settlement negotiations. To fall within s 131, it needs to be a communication made between persons in dispute or between one or more persons in dispute and a third party in connection with an attempt to negotiate a settlement of the dispute, or a document that has been prepared in connection with an attempt to negotiate the settlement of a dispute.

1. I am not satisfied that the document amounts to, relevantly, a communication made between persons in dispute. While in a broad sense there was significant potential for disagreement about the extent of cover between Mr Crawley and LawCover, as at this point they had reached some sort of interim arrangement concerning their affairs as reflected in the deed. The letter can be best characterised as, in effect, some advice being given to Mr Crawley by LawCover to assist him in connection with his attempt to resolve the dispute with the plaintiffs in the substantive proceedings.

1. However, the letter does appear to be a communication between a person in dispute, namely Mr Crawley, and a third party, namely LawCover, in connection with an attempt to negotiate a settlement of dispute, namely the dispute as I have mentioned between Mr Crawley and the principal parties to the proceedings.

1. In those circumstances, I am satisfied that the tender is excluded by s 131(1) of the Evidence Act and I reject it.

Re admissibility of Short v Crawley (No 30) [2007] NSWSC 1322: see transcript p 117

1. During the course of cross examination of the plaintiff, senior counsel for the defendants took the plaintiff to the judgment of White J in Short v Crawley (No 30) 2007 NSWSC 1322. As this issue had been floating about for some time, but nevertheless somewhat prematurely, both counsel for the plaintiff and I anticipated that questions were to be asked of the witness about the substance of his Honour's judgment. Senior counsel for the defendants indicated he had not yet reached that point, but that nevertheless it was likely he would do so, so that the question of principle that would be raised should be debated.

1. Cross examining a witness about a judgment is questioning a witness about a previous representation alleged to have been made by a person other than the witness. It is thus precluded by s 44(1) of the Evidence Act, unless one of the exceptions in s 44 applies. One of those exceptions is set out in s 44(2)(b), which enables such cross examination, if the Court is satisfied that the representation, in this case the judgment, will be admitted. Thus this gave rise to a debate about whether the judgment would be admitted.

1. Section 91 of the Evidence Act provides:

"91 Exclusion of evidence of judgments and convictions

(1) Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.

(2) Evidence that, under this Part, is not admissible to prove the existence of a fact may not be used to prove that fact even if it is relevant for another purpose.

1. The detailed submissions provided to me by senior counsel for the defendants raise a substantial issue about the breadth of the phrase "the existence of a fact that was in issue in that proceeding", as used in s 91(1) of the Evidence Act.

1. The short answer to whether the judgment of White J is admissible at this point can be resolved, however, without determining the width of that phrase. One issue in these proceedings concerns whether the liabilities that Mr Crawley seeks indemnity in respect of, were incurred "in connection with" his practice as a solicitor. Another set of issues concern whether, in respect of any such liability, they either arose from a contract other than a contract to provide services within the definition of the phrase "the practice" in the relevant insurance policy, whether they involve a claim to repay any moneys charged as fees or disbursements or for costs incurred in relation to any dispute as to fees and disbursements, and whether they were brought about by the dishonest or fraudulent act or omission of Mr Crawley.

1. There has already been tendered the orders made by White J after the handing down of Short v Crawley (No 30). Those orders form the basis of the liabilities for which Mr Crawley seeks indemnity. In my view, it is clear that the reasons in Short v Crawley (No 30) are relevant to ascertaining and characterising the nature of those liabilities. Amongst other matters, it is likely that they will assist in determining whether any such liability occurred in connection with Mr Crawley's practice as a solicitor, arose from a contract other than a contract to provide services within the definition of the practice, and/or was otherwise to repay any moneys charged as fees, disbursements or for costs incurred in relation to any dispute as to fees and disbursements. It is not necessary at this point for me to say anything about whether the judgment is also relevant to whether any such liability was "brought about by the dishonest or fraudulent act or omission" of Mr Crawley.

1. The admission into evidence of the reasons in Short v Crawley (No 30) will not of course override the effect of s 91. In particular, the judgment will not be admissible to prove the existence of a fact that was in issue in Short v Crawley (No 30) and sub-section 91(2) confirms that s 60 of the Evidence Act will not have that effect either (see Ainsworth v Burden [2005] NSWCA 174 at [109]).

1. At this point I mention two further matters. First, during the debate over the tender of this document, Senior Counsel for the defendants confirmed that he did not seek to rely on s 93(c) of the Evidence Act, which exempts from the operation of Part 3.5, which includes s 91, the law relating to res judicata or issue estoppel.

1. This concession needs to be placed in context. One of the contentions of the defendants in this case is that, in seeking to rely on the policy, to the extent he does, for indemnity in respect of the orders made by White J, Mr Crawley must accept the reasons given by White J for the making of those orders. This has been expressed as Mr Crawley cannot approbate or reprobate, in the sense of approbating by relying on the orders, but reprobating by rejecting the reasons on which they are based.

1. The defendants have flagged that they will rely upon the principle expressed in the judgment of VACC Insurance Co Ltd v BP Australia Ltd [1999] NSWCA 427; 47 NSWLR 716. That principle, according to the defendants, is not one that invokes any principle of res judicata or issue estoppel, but is instead a wider estoppel that invokes unconscionability grounds.

1. Second, the complexity of the proceedings and the orders that arose out of Short v Crawley (No 30) is such that at this point I am not being invited, and nor do I suggest that it is possible, to review the entirety of the judgment for the purpose of restricting or excluding some part of it as being irrelevant to the characterisation of the liabilities for which Mr Crawley seeks indemnity. It is open to the plaintiff to make some targeted application in that respect during the balance of the hearing of the proceedings.

1. Finally, if it is not otherwise obvious, the effect of the admission into evidence of the judgment means the parties will need to be in a position to address on the scope of s 91(1) if they seek to either invoke some part of the judgment concerning the proof of some fact said to be evidenced by the judgment which was not a fact in issue in the other proceedings, or deflect a submission to that effect.

1. The judgment in Short v Crawley (No 30), to be found at pages 1423 to 1694 of volume 4 of the court book, will be admitted as exhibit 1.

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Amendments

19 February 2014 - Replace the words "Whether prejudice in" with the words "Without prejudice".

Amended paragraphs: Catchwords

Decision last updated: 19 February 2014