Giovanni Veltri and Saveria Veltri v QBE Insurance Limited No. Scgrg-95-1560 Judgment No. 6166 Number of Pages 5 Evidence

[1997] SASC 6166

IN THE SUPREME COURT OF SOUTH AUSTRALIA

OLSSON, J

Evidence - facts excluded from proof - on grounds of privilege - claim for legal professional privilege by the defendants in relation to documentation generated, by insurance assessors and investigators, as a consequence of instructions given to the defendant's solicitors - whether documentation was brought into existence for the sole purpose of being submitted to legal advisors, or actual use in relation to legal proceedings - discussion of appellants' assertion that privilege was being relied upon as a device or sham; and as a conduit for information which would have been created for insurance purposes in any event - claim to legal professional privilege in respect of documentation made out. Grant v Downs (1976) 135 CLR 674; Nickmar Pty Ltd and Anor v Preservatrice Skandia Insurance Limited (1985) 3 NSWLR 44, applied. National Employers' Mutual General Insurance Association Limited v Waind and Anor (1979) 141 CLR 648, distinguished.

ADELAIDE, 7 May 1997 (hearing), 7 May 1997 (decision)

#DATE 7:5:1997

#ADD 10:6:1997

Plaintiffs:

Counsel: Mr C Kourakis with Mr S Abbott

Solicitors: Armour & Allen

Defendant:

Counsel: Mr D Lovell

Solicitors: Thomsons

Order: plaintiffs' claim rejected.

OLSSON J

1. In these proceedings an issue has arisen between the parties as to whether or not certain documentation generated by insurance assessors and investigators is properly the subject of a claim to legal professional privilege, which has been advanced on behalf of the defendant.

2. In this action the plaintiffs sue the defendant (an insurance company) for indemnity, pursuant to a policy of insurance said to have been issued by the defendant to the plaintiffs, in respect of premises which were situated at 302 The Parade, Kensington. Those premises and the contents of them were substantially damaged or destroyed by a fire which occurred in the early hours of the morning of 6 January 1994. The defendant seeks to avoid liability under the relevant policy on the ground that the fire which caused the damage and destruction was lit by, or at the instance of, one of the plaintiffs and that the policy was obtained by fraud.

3. According to the evidence of the witness Williams, who was the commercial claims controller of the defendant at the relevant time, the defendant was advised of the occurrence of the fire, by telephone, at about 10am on 6 January 1994. Notification was received from the plaintiffs' insurance broker, who had, personally, driven past the premises when he heard that a fire had occurred within them. As a consequence of that notification a claims officer of the defendant (Crosier) and an insurance assessor (from Laidlaw Young) retained by the defendant attended at the premises later the same day.

4. It is not clear precisely when these two persons went to the premises. However the claims officer reported to his manager during the day that there were clear signs of arson at the premises and that an issue potentially arose as to whether or not the defendant should accept liability under the relevant insurance cover. This was particularly so as the cover had only been effected by the plaintiffs with the defendant a short time prior to the occurrence of the fire.

5. The evidence reveals that, acting on the instructions of his manager, Williams contacted Mr Herriman, a partner of the firm of solicitors who customarily acted for the defendant, with a view to instructing him to look into the matter and, ultimately, advise the defendant as to whether it ought to accept or deny liability under the insurance cover.

6. There is no doubt that Mr Herriman was specifically instructed to cause enquiries to be pursued as to the relevant facts and circumstances as a prelude to tendering firm advice; and, in particular, to instruct certain specified loss assessors and inquiry agents for the purpose. According to the evidence given by Williams, these were persons known to the defendant as having expertise in relation to arson situations. He also testified to the effect that it was almost standard procedure on the part of the defendant to retain Mr Herriman and the relevant investigators for suspected arson cases.

7. I am quite satisfied that Mr Herriman was instructed to act in the matter on 6 January 1994 and that his instructions were to the effect that the defendant was intending to reserve rights against the plaintiffs. He was requested to cause investigations to be carried out by the nominated insurance assessor and investigators with a view to those persons reporting to him, so that he could advise the company on its liability to indemnify the plaintiffs.

8. I pause to record that there is some question as to whether, on the initial instructions, Mr Herriman was to instruct both Laidlaw Young and certain other nominated investigators, or as to whether the latter persons were retained subsequently. However, I do not think that anything particularly turns upon it.

9. The evidence indicates that, following receipt of his instructions Mr Herriman duly issued the necessary instructions to the separate investigators (including the insurance assessor) and, thereafter directed and superintended their activities. It is further clear that, as he received reports from the investigators, he sent copies to Williams and discussed the significance of them with him. There were also several conferences held, over time, during the course of which Mr Herriman gave legal advice to the defendant as to what further steps ought to be taken and as to its legal position under the relevant insurance cover.

10. Ultimately, in light of advice tendered by him to the defendant, Mr Herriman drafted a formal letter of rejection of liability under the policy, which he sent to the defendant on or about 22 April 1994. A letter, in substantially that form, was in fact sent by the defendant to the plaintiffs on or about 27 April 1994.

11. In the course of his evidence Williams quite frankly had this to say concerning the initial retainer to Mr Herriman -

"we took that approach because we wished to preserve legal and professional privilege in the event that we did deny liability and we were at arms length with our client." 12. He also accepted that it would have been open to the defendant either to retain the investigating personnel itself and then transmit the relevant reports to Mr Herriman, or simply hand over the whole operation to Mr Herriman for him to orchestrate. In the event it was the latter course which was adopted.

13. In the foregoing circumstances the defendant asserts that the various reports received by Mr Herriman from the investigating personnel and the documentation upon which those reports were based are properly the subject of legal professional privilege; and that, accordingly, the plaintiffs are not entitled to inspect them.

14. Mr Kourakis, of counsel for the plaintiffs, contends that, on the facts as I have above outlined them, the claim to legal professional privilege cannot be sustained - because the relevant reports and supporting documentation were raised for dual purposes, one of which was to enable the defendant simply to make a decision, in the ordinary course of its business, as to whether or not it would accept liability under the applicable insurance cover. That being so, he submitted, no privilege could attach.

15. It is common ground that the commencement point for a consideration of this matter is the principle established by the majority of the High Court in Grant v Downs (1976) 135 CLR 674. In that case it was held that legal professional privilege is confined to documents which are brought into existence for the sole purpose of them being submitted to legal advisers for advice, or actual use in relation to legal proceedings. It was further held, in that case, that a document which would, in any event, have been brought into existence for another purpose, is not privileged from production for inspection.

16. In the course of their decision the majority had this to say -

"All that we have said so far indicates that unless the law confines legal professional privilege to those documents which are brought into existence for the sole purpose of submission to legal advisers for advice or for use in legal proceedings the privilege will travel beyond the underlying rationale to which it is intended to give expression and will confer an advantage and immunity on a corporation which is not enjoyed by the ordinary individual. It is not right that the privilege can attach to documents which, quite apart from the purpose of submission to a solicitor, would have been brought into existence for other purposes in any event, and then without attracting any attendant privilege." 17. The Court also pointed out that it is for the party claiming privilege to show that the documents for which the claim is made are in fact privileged. The party may succeed in achieving such an objective by pointing to the nature of the documents, or by evidence describing the circumstances in which they were brought into existence. It is, of course, the latter step which was taken by the defendant in the instant proceedings.

18. In promoting his contention in this matter Mr Lovell, of counsel for the defendant, sought to draw a clear distinction between the facts revealed by the evidence in the instant case and those which were the subject of the decision of the High Court in National Employers' Mutual General Insurance Association Limited v Waind & Another (1979) 141 CLR 648. That case directed attention to a class of documents which had, initially, been called into existence to enable the appellant to make a decision, in the ordinary course of its business, as to whether or not to discontinue weekly payments of workers compensation. The documents had been brought into being at a point prior to the taking of any decision to seek legal advice. It was held, within the principle of Grant v Downs, that no privilege arose in relation to such documents.

19. Mr Lovell submitted that, in conceptual terms, the present case fell fairly and squarely within the conceptual reasoning of Wood J in Nickmar Pty Ltd & Anor v Preservatrice Skandia Insurance Limited (1985) 3 NSWLR 44 at 56 where His Honour, apropos the facts in that case, said:

"I have no difficulty in accepting that it was because of the contemplation of litigation that the solicitors were retained to act in the matter. Although it was argued that the retainer of the solicitors was a device and that they were interposed between the defendant and the loss adjustor to present an appearance in the form of a relationship of privilege, but in substance to act merely as a conduit for information, I reject that submission. While I have no doubt that the defendant and the solicitor were well aware of the benefits of privilege, that is not a sufficient reason for concluding that the retainer was a sham, or that the solicitors were not retained to deliver an advice to the defendant. I have no doubt that it was understood and expected by the defendant and the solicitors, that the latter would deliver an advice, would direct and coordinate the enquiries needed for this purpose and would act throughout in a relationship of confidence." 20. Having carefully considered the evidence led before me, in light of the arguments which have been advanced by counsel, I have come to the clear conclusion that the above dictum of Wood J is apt to describe what occurred in the instant case.

21. Indeed, I did not really take Mr Kourakis to seek to contend to the contrary. Rather, it was his argument that, nevertheless, the reports in question and the documents upon which they were based were documents which would have been prepared, in any event, for the purpose of providing information to the defendant in the ordinary course of its business, to enable it to make a decision as to whether or not to accept or reject the plaintiffs' claim under the relevant policy of insurance.

22. I have no doubt that, in deciding whether or not to accept the advice tendered to them, the officers of the defendant would, in the normal course, have required to have seen and considered the reports of appropriate investigators as to the facts. However, in my view, that is not to gainsay the fact that such perusal was no more than part and parcel of the core process of considering and appreciating legal advice as to what stance ought to be adopted by the defendant. It is, in my view, nothing to the point to suggest that, had liability been accepted, then that material would, necessarily, have been used in relation to the processing of the plaintiffs' claim. No doubt that would have been the situation, but that was not why it was procured.

23. On the evidence before me I am satisfied that the sole purpose of orchestrating investigations and preparation of the relevant reports was to elicit a full and accurate factual basis upon which Mr Herriman could tender firm legal advice to the defendant as to whether or not it ought to reject the claim; and that, at the time when the documentation was raised, the sole purpose for generating it was to provide a foundation for the giving of legal advice. In no sense was the material brought into existence, at the time, for the more general purposes of the defendant.

24. True it is that the officers of the defendant explicitly studied the relevant material, but they obviously did so solely in order to appreciate the substance of the advice tendered and as a basis for considering whether or not that advice ought to be acted upon. It was, at all material times, quite clearly in contemplation that the defendant had in mind the strong possibility of contentious legal issues arising between itself and the plaintiffs, on the facts as initially reported.

25. As in the case of Nickmar, what occurred was not a sham or device at any stage. On the contrary, there was a genuine concern on the part of the defendant, from the outset, that arson was the likely cause of the fire and that the claim under the policy might well be fraudulent.

26. That being so, I am compelled to the conclusion that the defendant has made out its claim to legal professional privilege in respect of all reports and supporting documentation raised as a consequence of instructions given by Mr Herriman between 6 January 1994 and 29 March 1994. The claim of the plaintiffs to an entitlement to inspect such documentation is, accordingly, rejected.

27. In indicating that conclusion I should, however, make it clear that, on the evidence, no privilege attaches to any documentation which may have been raised prior to the instruction of Mr Herriman.

28. I should, nevertheless, make the point that I have not inspected any of the documents referred to in the lists which have been exchanged between the parties. It is possible that some of the documentation may, in fact, contain material which is relevant only to quantum of the plaintiffs' claim and which was raised incidentally, in the course of the preparation of privileged material. If that were to be the situation, then further considerations may arise. This is an aspect as to which I invite counsel to confer.