Halpin v Lumley General Insurance Ltd - [2009] NSWCA 372

No judgment structure available for this case.

Reported Decision: 78 NSWLR 265261 ALR 741[2010] ALMD 5301

New South Wales

Court of Appeal

CITATION: Halpin & Ors v Lumley General Insurance Ltd [2009] NSWCA 372
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 15 September 2009

JUDGMENT DATE:
23 November 2009

JUDGMENT OF: Tobias JA at 1; Basten JA at 2; Sackville AJA at 38

DECISION: 1. Leave to appeal granted.
2. Appeal dismissed.
3. Appellant to pay Respondent’s costs of appeal, including the application for leave to appeal.

CATCHWORDS: PROCEDURE – application by defendant insurer to waive direction that all affidavit evidence be served before trial – application of discretionary power said to be established by Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1 – source of power to make orders sought by insurer – whether the power exists under the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules – whether primary judge erred in the exercise of discretion in making the order sought by the insurer

LEGISLATION CITED: Access to Justice (Civil Litigation Reforms) Amendment Bill 2009 (Cth), cl 37M(3)
Administrative Appeals Tribunals Act 1975 (Cth), s 2A
Insurance Contracts Act 1984 (Cth), s 56
Civil Procedure Act 2005 (NSW), s 14, s 15, Pt 6
Supreme Court Act 1970 (NSW), s 76A
Supreme Court Rules 1970 (NSW), Pt 23 r 10(1), Pt 26 r 1, Pt 37 r 10
Uniform Civil Procedure Rules 2005 (NSW), r 2.1, r 2.3, r 21.7, r 31.1, r 33.9
Practice Note SC CL 5
Court Procedures Rules 2006 (ACT), r 21(1)
Uniform Civil Procedure Rules 1999 (Qld), r 5
Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 1.14
Rules of the Supreme Court 1971 (WA), O 36 r 4
Civil Procedure Act 1997 (UK), r 1.1
Civil Procedure Rules 1998 (UK)

CATEGORY: Principal judgment

CASES CITED: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 258 ALR 14
Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243
Boyes v Collins [2000] WASCA 344; 23 WAR 123
Broadwater Taxation and Investment Services Pty Ltd v Hendriks (Supreme Court of New South Wales, Santow J, 9 September 1993, unreported)
Commissioner of Police (NSW) v Industrial Relations Commission (NSW) [2009] NSWCA 198
Dennis v Australian Broadcasting Corporation [2008] NSWCA 37
Evans v Marmont (1997) 42 NSWLR 70
Griffin v Sogelease Australia Ltd [2003] NSWCA 158; 57 NSWLR 257
Halpin v Lumley General Insurance Ltd [2009] NSWSC 644
Hammoud Brothers Pty Ltd v NRMA Insurance Ltd [2004] NSWCA 1
Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230
House v The King [1936] HCA 40; 55 CLR 499
Kimberley Mineral Holdings Ltd (In liq) v McEwan [1980] 1 NSWLR 210
Kon v AMP Life Ltd [2006] NSWSC 957
Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1
Marsden v Amalgamated Television Services Pty Ltd [1999] NSWSC 428
National Employers’ Mutual General Insurance Association Ltd v Waind and Hill [1978] 1 NSWLR 372
Ng v Goldberg (Supreme Court of New South Wales, Young J, 17 August 1993, unreported)
Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346; 53 NSWLR 116
Queensland v JL Holdings Pty Ltd [1997] HCA 1; 189 CLR 146
Simon v NRMA Insurance Ltd, (Court of Appeal, 12 October 1999, unreported)
State of New South Wales v Mulcahy [2006] NSWCA 303
The Queen v Hunt; Ex parte Sean Investments Pty Ltd [1979] HCA 32; 180 CLR 322
The Queen v Toohey; ex parte Meneling Station [1982] HCA 69; 158 CLR 327
White v Overland [2001] FCA 1333
Zhang v Canterbury City Council [2001] NSWCA 167; 51 NSWLR 589

PARTIES: Loretta Halpin - First Applicant
Michael Halpin - Second Applicant
Haljen Pty Limited - Third Applicant
Lumley General Insurance Ltd - Respondent

FILE NUMBER(S): CA 040250/09

COUNSEL: D Pritchard SC; J Emmett - Applicants
R Seton SC - Respondent

SOLICITORS: Henry Davis York - Applicants
TurksLegal - Respondent

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 20345/07

LOWER COURT JUDICIAL OFFICER: Hoeben J

LOWER COURT DATE OF DECISION: 10 July 2009

LOWER COURT MEDIUM NEUTRAL CITATION: Halpin & Ors v Lumley General Insurance Ltd [2009] NSWSC 644

CA 40250/09

TOBIAS JA
BASTEN JA
SACKVILLE AJA
23 November 2009

HALPIN & ORS v LUMLEY GENERAL INSURANCE LTD

Judgment

1 TOBIAS JA: I agree with Sackville AJA.

In circumstances described by Sackville AJA, the respondent obtained an order from the primary judge excluding certain affidavits and other potential evidence from the scope of an order requiring each party to serve upon the other the evidence on which it intended to rely at the trial. The applicant seeks to challenge that order, and thus obtain access to the evidence sought to be relied upon by the respondent.

Issues

3 The proceedings arose out of the refusal by the respondent to pay an insurance claim made by the applicants. The refusal was in part based upon concerns that the applicants had been untruthful in the making of the claim. The respondent, in investigating the claims, obtained certain materials and information with respect to which they sought to maintain confidentiality, until they were deployed in the course of the proceedings and, no doubt, initially in the cross-examination of the applicants. Hoeben J directed that the respondent not be required to serve certain affidavits: Halpin v Lumley General Insurance Ltd [2009] NSWSC 644.

4 Because the direction was interlocutory, the applicants need leave to appeal. They seek to do so on three bases, namely:

5 In relation to the first issue, while accepting that the power to protect confidential information from inappropriate disclosure in the course of litigation was well-established (see, eg, Kimberley Mineral Holdings Ltd (In liq) v McEwan [1980] 1 NSWLR 210) and had been applied in circumstances where the purpose of maintaining confidentiality was a forensic purpose in the context of the particular litigation (see, eg, Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1) the applicants nevertheless contended that such a power no longer existed because it pre-dated procedural changes which were expressly designed to overcome those characteristics of civil litigation which rendered it liable to be “trial by ambush”.

6 In relation to the second issue, the applicants submitted that there was no authority to support the proposition that material could be excluded from pre-trial disclosure where it necessarily formed evidence upon which a defendant would seek to rely in support of a pleaded defence. The fact that the material might also be used in cross-examination of the plaintiffs, or their witnesses, did not justify maintaining pre-trial confidentiality.

7 The third issue required a review of his Honour’s exercise of a discretionary power. To the extent that the applicants did not succeed on either of the first two issues, it was unclear how the application of those principles gave rise to an error of the kind identified in House v The King [1936] HCA 40; 55 CLR 499.

Leave to appeal

8 The applicants found themselves on the horns of a double dilemma. The first dilemma was one commonly encountered in such cases whereby, if the applicants had not relied upon particular circumstances before the primary judge, they could hardly be heard to complain that his Honour had failed to take them into account, whilst, if they had relied upon such circumstances, they might have difficulty demonstrating that his Honour had not taken those matters into account.

9 The applicants might have been able to avoid the first dilemma by showing that matters had been presented to his Honour for consideration but, through a close examination of his reasons, had not been properly taken into account. In the present case, that gave rise to the second dilemma. The applicants did not know (and do not know) precisely what material was not being disclosed. Not only does their ignorance prevent them demonstrating why the result itself may demonstrate an error of principle, but, because the maintenance of confidentiality limited the explanation which could be given by the primary judge in rejecting their arguments, they are given only limited assistance by the reasons. If some particular matter is not given appropriate attention in the reasons, the explanation may be (although the applicants cannot know for sure) that his Honour was treading carefully to avoid disclosing the content of the material which he directed should not be disclosed.

10 The difficulty in which the applicants are placed by the direction made, is a factor which should be taken into account in formulating the principles to be applied in such cases. It is therefore relevant to the first two issues raised by the applicants. Absent error of principle, the applicants have not been able to demonstrate a case which would have sufficient prospects of success, given the constraints which apply in respect of pre-trial rulings with respect to practice and procedure, and, were it not for the fact that the arguments were intertwined, leave should be refused in respect of the third issue.

11 In the event, leave to appeal should be granted to allow the issues to be addressed, but, for the reasons given by Sackville AJA and those set out below, the appeal should be dismissed.

Power to permit pre-trial withholding of evidence

12 The course of argument, both in this Court and below, commenced with the proposition that this case was similar to that determined by Clarke J in Markus (at [5] above), in that it involved documents recording investigations undertaken by an insurer casting doubt upon the genuineness of the plaintiffs’ claims under an insurance policy. It was then submitted that the changes in rules and statutory provisions and rules since 1983 had cast doubt upon the existence or scope of the power.

13 As a matter of principle, that approach misconceives the proper exercise. The first question raised by the applicants is whether the primary judge had power to give the impugned direction. The starting point in answering that question is to identify the power under which his Honour acted. The source of the power is now to be found in Part 6 of the Civil Procedure Act 2005 (NSW), “Case management and interlocutory matters”. In particular, s 61 provides:

61 Directions as to practice and procedure generally

14 As will be seen shortly, the phrase “for the speedy determination of the real issues” is not a limitation on the scope of the power, but a reiteration of an underlying purpose or object which should inform the content of any relevant direction. The fact that a direction may be inconsistent with rules of court underlines the pre-eminence given to the Civil Procedure Act and the principles it identifies. That conclusion is reflected in the power of the Court to dispense with any requirement imposed by rules of court (s 14) and the power conferred on the Court to give directions with respect to practice or procedure for which the rules of court, or practice notes, do not provide. The power to issue practice notes is stated to be “[s]ubject to rules of court”: s 15(1). As a matter of principle, a practice note is subservient to the Civil Procedure Act and cannot be inconsistent with it.

15 Given the breadth of the powers conferred upon the Court, it is difficult to formulate any arguable basis upon which it could be said that the primary judge did not have the power to give the impugned direction.

16 The Uniform Civil Procedure Rules 2005 (NSW) (“the UCPR”) confer power on a judge in the following terms:

“2.1 The court may, at any time and from time to time, give such directions and make such orders for the conduct of any proceedings as appear convenient (whether or not inconsistent with these rules or any other rules of court) for the just, quick and cheap disposal of the proceedings.”

17 The direction given by the primary judge constituted a variation of a direction given by the Registrar on 27 March 2009, requiring the defendant to serve “all lay and expert affidavits, statements or reports” on or before a specified date. That direction was made routinely pursuant to Practice Note No 5 in the Common Law Division, cl 27.

18 The fact that the rules and the relevant practice note permitted a direction of the kind made by the Registrar suggests that the Act and rules would have permitted a direction which imposed a qualification or limitation on the standard form of direction provided by the practice note. If that were so, the power of the primary judge to impose such an exception or qualification was beyond argument.

19 Indeed, the power of the primary judge to vary the direction with respect to the service of affidavits may be derived from the same source as the power of the Registrar to make the direction in the first place, a power which, needless to say, the applicant does not challenge.

20 The applicants’ contention was, in substance, that the rules permitted only a one-way direction, providing for disclosure, not for withholding of material. That was said to follow from the general principles applied in current forms of civil litigation requiring that the parties place their “cards on the table”. The source of this somewhat colourful phrase was identified as ss 56-58 of the Civil Procedure Act.

21 Although it is necessary to consider the terminology adopted by these provisions more carefully, it may be said at the outset that the proposition is contrary to common understanding as to the purpose of the provisions. Whatever their precise meaning, they have heretofore been understood to expand, rather than contract, the case management powers of a judge of the Court. Thus, soon after the commencement of the Civil Procedure Act, this Court expressed the view that there had been a significant change in the statutory regime from that which underlay the decision of the High Court in Queensland v JL Holdings Pty Ltd [1997] HCA 1; 189 CLR 146: see State of New South Wales v Mulcahy [2006] NSWCA 303 at [26]-[30] (Bryson JA, Hodgson and Tobias JJ agreeing); Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 at [28]-[29] (Spigelman CJ, Campbell JA and I agreeing). Although in the latter case (Dennis) s 56 was treated as “a significant qualification of the power to grant leave to amend a pleading”, it also constituted an expansion of the power which, on one view, had been limited by JL Holdings, to refuse an amendment. In any event, it is appropriate to consider the precise effect of provisions of the Civil Procedure Act relevant to the current point of principle.

22 Section 56 of the Civil Procedure Act, so far as relevant, provides:

56 Overriding purpose

23 Section 56 cannot be read in isolation. It is necessary to read it in a statutory context which includes at least the following two sections, which relevantly provide:

57 Objects of case management

58 Court to follow dictates of justice

24 Sections 56, 57 and 58(1) and (2)(a) have an appearance of clarity and rigour, based on simplicity and repetition. As the Court (Allsop P, Campbell and Young JJA agreeing) noted in Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 at [38] both ss 56 and 57 are “statutorily compulsory” considerations. A court will act erroneously in law if it fails to take them into account. Furthermore, as explained by the Court in Commissioner of Police (NSW) v Industrial Relations Commission (NSW) [2009] NSWCA 198 at [73] (Spigelman CJ, Macfarlan and Young JJA agreeing):

R v Hunt; Ex parte Sean Investments Pty Ltd

R v Toohey; Ex parte Meneling Station Pty Ltd

Zhang v Canterbury City Council

Evans v Marmont

Zhang

25 It may be remarked by way of exegesis that a statutory requirement to “have regard to” a particular matter will obtain its force and effect from its context. The particular matter will become a fundamental element or focal point where it is the only matter, or one of a small number of identified matters, to be taken into account. Thus, in The Queen v Toohey; ex parte Meneling Station [1982] HCA 69; 158 CLR 327, a matter, namely the “strength or otherwise of the traditional attachment by the claimants to the land claimed” was the sole matter to which the Commissioner was obliged to “have regard”, four other matters being identified as matters for comment, at 336 and 338 (Mason J). Similarly, in The Queen v Hunt; Ex parte Sean Investments Pty Ltd [1979] HCA 32; 180 CLR 322 at 329, Mason J explained in relation to the operation of s 40AA(7) of the National Health Act 1953 (Cth), dealing with the fixing of fees charged for nursing home care:

“When sub-s (7) directs the Permanent Head to ‘have regard to’ the costs, it requires him to take those costs into account and to give weight to them as a fundamental element in making his determination. There are two reasons for saying that the costs are a fundamental element in the making of the determination. First, they are the only matter explicitly mentioned as a matter to be taken into account. Secondly, the scheme of the provisions is that, once the premises of the proprietor are approved as a nursing home, he is bound by the conditions of approval not to exceed the scale of fees fixed by the Permanent Head in relation to the nursing home. In many cases it is to be expected that the scale of fees will be fixed by ascertaining the costs necessarily incurred and adding to them a profit factor. In the very nature of things, the costs necessarily incurred by the proprietor in providing nursing home care in the nursing home are a fundamental matter for consideration.

However, the sub-section does not direct the Permanent Head to fix the scale of fees exclusively by reference to costs necessarily incurred and profit.”

26 Similarly, the point made by Gleeson CJ and McClelland CJ in Eq in Evans v Marmont (1997) 42 NSWLR 70 was that a particular provision of the De Facto Relationships Act 1984 (NSW) permitting the Court to adjust interest with respect to property of the de facto partners, identified two factors which were “not merely two matters, or groups of matters, which take their place amongst any other relevant considerations”: at 79-80; applied in Zhang v Canterbury City Council [2001] NSWCA 167; 51 NSWLR 589 at [73].

27 Those principles have a clear operation in relation to s 57(1) which identify four specific objects to which regard shall be had. How such a mandatory obligation operates in relation to s 56 is less clear.

28 Section 56 purports to identify a single “overriding purpose”, namely to facilitate “the just, quick and cheap resolution of the real issues in” civil proceedings. It is self-evident that what will be required in most cases is the resolution of a tension between speed (including avoidance of delay), reduction of costs and the proper consideration of the issues raised by the parties, especially in cases of complexity. Other provisions which appear to be intended to have a similar effect are more explicit in their recognition of the need to resolve such tensions: see, eg, Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 1.14; Uniform Civil Procedure Rules 1999 (Qld), r 5; Administrative Appeals Tribunals Act 1975 (Cth), s 2A; Access to Justice (Civil Litigation Reforms) Amendment Bill 2009 (Cth), Sch 1, item 6, inserting new s 37M(3) in the Federal Court of Australia Act 1976 (Cth). In the explanatory memorandum accompanying the Commonwealth Bill, it is noted at paragraph 21:

Civil Procedure Act 2005

29 This remark appears to take a different view of the effect of s 56 to that suggested above. The purpose of the Act and rules, and the purpose to which the Court is required to give effect in the exercise of a power given by the rules, is to facilitate an outcome which fulfils, by an appropriate resolution of conflicting tensions, the attributes of being just, quick and cheap. The real question is how should the Court go about this exercise?

30 In part, the answer to that question must be found in s 57. The changes which are brought to pass by these provisions, taken in tandem, are primarily two-fold. The first change from traditional practice is that the Court is required to have regard to questions of cost and delay, and not merely the resolution of the issues in the manner and at a time sought by one or other party. As explained by the High Court in the context of the exercise of the power of amendment, a party seeking an indulgence cannot assume that an offer to pay the costs incurred will necessarily be sufficient either to overcome the potential prejudice to the other party, or to entitle it to a favourable exercise of a power of amendment: see Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 83 ALJR 951 at [25] (French CJ) and [98] (Gummow, Hayne, Crennan, Kiefel and Bell JJ). Secondly, the Court is not only entitled but required now to take into account the effect of any exercise of power on the efficient disposal of the business of the Court and the use of available judicial and administrative resources in other proceedings. To give effect to that object, it is clear that the parties cannot determine the management of their own cases in their own way and at their own speed. The Court is entitled, and in appropriate cases obliged, to interfere and give directions to ensure that the broader objects of case management within the Court are effected.

Application of principles

31 In one sense, the principles contained in the new statutory provisions and rules do not affect the issue in the present application. The reasonable entitlement of a defendant to preserve pre-trial confidentiality in the results of its investigations, in the face of suspected fraud, remains a legitimate interest. The provisions do not give rise to an obligation on the part of all parties in all circumstances to place all their cards on the table before the trial commences. If that were so, cross-examination would need to be conducted by questions on notice. In some cases the uncovering of deceit or fraud might become significantly more difficult. There is no suggestion that the provisions relied upon were intended in any sense to be a fraudsters charter.

32 Acknowledging these limitations, the applicants sought to put their case on a more limited basis. It invoked three principles. The first was that to allow the defendants to avoid pre-trial disclosure of information which might undermine the plaintiffs’ credibility or case, would almost inevitably reduce the likelihood of settlement. Secondly, they argued that if there were material withheld which might be capable of answering evidence, the pre-trial failure to disclose would give rise to a significant risk, or even probability, of an adjournment to allow the applicants to reply. Thirdly, it had never been the rule that a party bearing an onus of proof in a particular respect should be allowed to withhold disclosure of material necessary for it to make good its case on those issues on which it bore the onus. In relation to the third factor, the applicants went so far as to assert that there was no authority supporting withholding of material in such circumstances.

33 So far as the question of settlement is concerned, it was a matter to which the primary judge gave attention. He found himself unable to assess the possible consequences in respect of settlement. There is no reason to doubt that his Honour gave appropriate consideration to that factor and, indeed, his conclusion is one which this Court might well share, were that the appropriate test. In any event, it was not unreasonable.

34 In relation to the second matter, it is true to say that the risk of an adjournment would be increased by the withholding of the evidence. However, it is by no means certain that the defendants would ultimately need to rely upon the evidence. Matters put to the applicants in cross-examination might either be accepted, plausibly denied, or explained away. The fear that they might tailor their evidence by forewarning of what was to come would be avoided, possibly giving their answers a greater degree of credibility. In any event, the matter was clearly one to which the primary judge was alert, and it was a factor which did not necessarily resolve the application one way or the other.

35 In relation to the third matter, the fact that some of the material may be relied upon by the defendant in support of its defence, is relevant but again, not decisive.

36 Finally, the applicants raised a separate objection, not based upon recent procedural change, namely that the withholding of material involves an assumption that the applicants had been deceitful in some respect in making the claim, which was not a presumption properly to be made in advance of the hearing.

37 That objection should also be rejected. As explained by Santow J in Broadwater Taxation and Investment Services Pty Ltd v Hendriks (NSWSC, 9 September 1993, unrep) it is necessary to resolve such matters at a pre-trial stage without making assumptions one way or the other. The first assessment likely to be made of the credibility of the applicants can only be undertaken when they are in the witness box. There is no reason to require a judge at a pre-trial stage to assume either that their claims are good or that they are not. Certainly it is not a pre-condition for an order withholding material from disclosure that a prima facie case of untruthfulness, fraud or deceit must be demonstrated by the party seeking to maintain confidentiality. No doubt a judge hearing such an application will need to be satisfied that there is some real basis for suspicion, just as the judge will need to be satisfied that withholding the material is legitimate in all the circumstances. Again, there is no reason to doubt that the primary judge approached the matter in that way, which was appropriate.

38 SACKVILLE AJA: This is an application for leave to appeal from an interlocutory decision of a Judge of the Supreme Court (Hoeben J). The Court has heard full argument on the appeal and is therefore in a position to dispose of the appeal should leave be granted.

39 The primary Judge’s decision was made in the course of proceedings in the Common Law Division of the Supreme Court instituted by the claimants (“the Insured”) against the opponent, their home and contents insurer (“the Insurer”). In those proceedings, which have not yet been heard, the Insured seek an indemnity from the Insurer in respect of the alleged theft of a large quantity of valuable sporting memorabilia from their home.

40 The Insurer applied by motion in the proceedings for an order that:

Markus v Provincial Insurance Company Ltd

41 The primary Judge delivered judgment on 10 July 2009 in which he directed that the Insurer:

“not be required to serve on [the Insured] the affidavits referred to in the affidavit of [Ms] Wallis [a solicitor acting for the Insurer] of 6 July 2009”.

42 Ms Wallis identified four affidavits, two by lay witnesses and two by loss assessors, that the Insurer wished not to serve on the Insured. The primary Judge explained in his judgment that the affidavits by the loss assessors, insofar as the Insurer wished to withhold them, concerned inquiries and actions taken by the loss assessors following conversations between them and the Insured. Ms Wallis said in her affidavit that a report from a forensic accountant also fell into the same category and that the Insurer should be entitled to withhold that report from the Insured. It appears that his Honour’s direction was intended to include the forensic accountant’s report.

MARKUS v PROVINCIAL INSURANCE

43 Hoeben J relied on the so-called “Markus discretion” to support the direction that the Insurer not be required to serve the affidavits and report identified by Ms Wallis. This is a reference to the decision of Clarke J in Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1 (“Markus”).

44 In that case, the plaintiffs sought an order for inspection of subpoenaed documents, comprising three reports by a loss assessor. The defendant insurer claimed privilege in respect of each of the reports, but Clarke J held that privilege could be claimed for only two of the reports. His Honour then considered whether he should order the third report to be produced for inspection by the plaintiffs.

45 Clarke J declined to make the order sought by the plaintiffs. He reasoned as follows (at 2-3 [5]-[8]):

“[5] … The defendant has submitted the interests of justice would not be served by producing the document because it contains material which does not advance the plaintiffs’ case but which on the other hand would, if the plaintiffs are not genuine, put the plaintiffs on notice of some allegedly suspicious circumstances and enable them to tailor or endeavour to tailor their evidence to meet the circumstances.

Kimberley Mineral Holdings Ltd (In Liq) v McEwan

[7] In my opinion the document, which contains in the main results of discussions with police officers and other persons together with hypotheses based on those discussions, is of such a nature that its material would not enable the plaintiffs to be in a better position from the point of view of presentation of the case at trial. On the other hand it is clear that the only purpose in my view to be served by letting the plaintiffs see this documentation would be to put them on notice of the allegedly suspicious circumstances.

[8] Subject to one matter, I am of the view that the interests of justice are against the requirement that there be production. The one matter which has been urged by counsel for the plaintiffs is that [sic] the facilitation of settlement. It is said that, if the plaintiffs could assess these matters, which are advanced as reasons in part, at least, why the claim is rejected, then the prospect of settlement might be stronger. Bearing in mind the view that I have that the ultimate question is going to be as to the genuineness or otherwise of the plaintiffs, and again in the interests of justice that they may be put on notice at an earlier date of the allegedly suspicious circumstances, I think this factor, to the extent to which it is entitled to consideration, is outweighed by the greater interest of ensuring that the Court gives justice between the parties.”

LEGISLATION

Insurance Contracts Act

46 The Insured’s claim in the present case requires reference to be made to s 56 of the Insurance Contracts Act 1984 (Cth) (“Insurance Contracts Act”). Section 56 is headed “Fraudulent Claims” and provides as follows:

“(1) Where a claim under a contract of insurance, or a claim made under this Act against an insurer by a person who is not the insured under a contract of insurance, is made fraudulently, the insurer may not avoid the contract but may refuse payment of the claim.

(2) In any proceedings in relation to such a claim, the court may, if only a minimal or insignificant part of the claim is made fraudulently and non-payment of the remainder of the claim would be harsh and unfair, order the insurer to pay, in relation to the claim, such amount (if any) as is just and equitable in the circumstances.

Civil Procedure Act

47 Sections 56-60 of the Civil Procedure Act 2005 (“CP Act”) are important in considering the power of the Court to make an order of the kind made by the primary Judge in the present case. Sections 56-60 provide as follows:

56

(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.

57 (1) For the purpose of furthering the overriding purpose referred to in section 56(1), proceedings in any court are to be managed having regard to the following objects:

(b) the efficient disposal of the business of the court,

(c) the efficient use of available judicial and administrative resources,

(2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1).

58

(a) whether to make any order or direction for the management of proceedings, including:

(i) any order for the amendment of a document, and

(iii) any other order of a procedural nature, and

the court must seek to act in accordance with the dictates of justice.

(2) For the purpose of determining what are the dictates of justice in a particular case, the court:

(b) may have regard to the following matters to the extent to which it considers them relevant:

(i) the degree of difficulty or complexity to which the issues in the proceedings give rise,

(ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities,

(iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties,

(iv) the degree to which the respective parties have fulfilled their duties under section 56(3),

(vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction,

59

60

48 Section 61(1) of the CP Act empowers the court to give such directions as it thinks fit, whether or not inconsistent with rules of court, for the speedy determination of the real issues between the parties. The power includes giving such directions with respect to the conduct of the proceedings as the court considers appropriate: s 61(2)(c).

49 Section 62(1) empowers the court to give directions as to the conduct of any hearing. A direction given under s 62(1) must not detract from the principle that each party is entitled to a fair hearing: s 62(4).

Uniform Civil Procedure Rules 2005

50 The Uniform Civil Procedure Rules 2005 (“UCPR”) are also relevant to determining the nature and extent of the Court’s power to make orders of the kind made here. UCPR, r 2.1 provides that:

“[t]he court may, at any time and from time to time, give such directions and make such orders for the conduct of any proceedings as appear convenient (whether or not inconsistent with these rules or any other rules of court) for the just, quick and cheap disposal of the proceedings.”

51 Rule 2.3 provides that, without limiting the generality of r 2.1, directions and orders may relate to a number of matters including:

“(g) the delivery or exchange of experts’ reports

…

(j) the service and filing of affidavits, witness statements or other documents to be relied on,

…”

52 Rule 31.1 of the UCPR applies to a trial of proceedings in which a statement of claim has been filed. Subject (relevantly) to subrule (3) and the provisions of the Evidence Act 1995, a witness’s evidence at a trial must be given orally before the court: r 31.1(2). Subrule (3) provides that the court may order that all or any of a witness’s evidence at a trial must be given by affidavit or by witness statement.

Practice Note

53 Practice Note SC CL 5 explains the operation of the General Case Management (“GCM”) List in the Common Law Division of the Supreme Court. Subject to presently irrelevant exceptions, GCM applies to all active proceedings in the Common Law Division commenced by statement of claim: Practice Note SC CL 5, par 5. Accordingly, GCM applies to the present proceedings.

54 The purpose of a Directions Hearing in the GCM List is to ensure the just, quick and cheap disposition of proceedings in accordance with the overriding purpose set out in s 56 of the CP Act: par 26. The tasks at a Directions Hearing include, but are not limited to:

“directing that a party or all parties serve or file and serve witness statements – the purpose of such a direction being to facilitate clarification of issues and realistic negotiations for settlement” (par 27).

BACKGROUND

55 The Insured allege in their statement of claim that a theft occurred from their home at Orchard Park, near Penrith, on 10 August 2006. They say that the sporting memorabilia stolen included valuable rugby league jerseys and cricket bats, which were the subject of a specified contents cover with the Insurer under Policy No SYLS 0362 7705 (“the Policy”), the sum insured being $1 million. The Insured made a claim under the Policy on 13 August 2006.

56 Hoeben J summarised the respective positions taken by the parties as follows:

“6. On 30 March 2007 the claim was denied by the [Insurer] under the policy and under s 56(1) of the Insurance Contracts Act … In its particulars and Defence the [Insurer] does not admit the existence of the goods or that the theft occurred as alleged. It does not plead fraud in respect of the theft. The [Insurer] has alleged fraud “in the claim”. In other words, the [Insurer] maintains that the [Insured] have deliberately provided false information to the [Insurer] for the purposes of inducing the [Insurer] to pay their claim. The [Insurer] says that the false information relates to the (a) existence, (b) ownership; (c) payment; (d) purchase; (e) authenticity and (f) value of the goods.

7 The [Insured] claim the value of the items under the Specified Contents cover, as well as consequential damages concerning a subsequent uninsured theft. The [Insured] acknowledge the onus upon them of establishing that the items under the Specified Contents cover were lost and the value of those items. It is clear, however, that the onus of establishing a fraudulent claim for the purposes of s 56(1) of the Act is upon the [Insurer].

8 In their Reply the [Insured] rely upon s 56(2) of the Act and will as necessary and if appropriate, adduce evidence of what amounts the [Insurer] should pay, being what is just and equitable in the circumstances. The parties agree that that is an issue in relation to which both sides would be entitled to lead evidence for the purposes of s 56(2).

9 The chronology of these proceedings is as follows: The [Insured] commenced proceedings on 8 October 2007 by way of Statement of Claim. An Amended Statement of Claim was filed on 28 October 2008. A Defence to that Amended Statement of Claim was filed on 21 November 2008. The [Insured’s] Reply was filed on 2 July 2009. Pursuant to orders of the court in relation to the service of evidence, the [Insured] have served 40 affidavits in chief. The [Insurer] has served the following evidence:

(a) Mr Phippen, a valuer;

(b) Mr Phippen’s son, his assistant.

(c) Mr Moon, a loss adjuster.

(e) Mr Heidenreich, a valuer giving his opinion as to the value of the goods; and

(f) Mr Pailthorpe, a textiles expert giving his opinion on the remnants and recovered jerseys produced by the [Insured].

The [Insurer] is currently finalising the balance of evidence to be served by it and the court was advised that these affidavits would be served within seven days of the hearing of the motion.”

57 In par 6 of the judgment, reproduced in the previous paragraph, Hoeben J summarises the grounds of the Insurer’s allegation that the Insured provided false information to support their claim to indemnity under the Policy. The grounds are set out at some length in par 18 of the Insurer’s defence, as follows:

“In pursuit of payment of the amount sought in the Amended Statement of Claim by the [Insurer] the [Insured] deliberately and with intent to deceive the [Insurer]:

(a) Provided false information as to the nature and type of the goods which were stolen;

(b) Informed the [Insurer] that the goods were purchased by the [female Insured] from Blazed in Glory Pty Limited when they were not;

(c) Provided receipts to the [Insurer] purporting to substantiate the purchases made by the [female Insured] of the goods when no such purchases were made;

(d) Provided receipts to the [Insurer] purporting to substantiate the value of the goods when the goods did not have such a value;

(e) Provided a valuation report and certificates of authenticity to the [Insurer] purporting to substantiate the existence and value of the goods when they did not do so;

(f) Provided a valuation report with documents attached to the valuation report, purporting to form part of the valuation report, when such documents did not form part of the valuer’s opinion and were prepared and annexed by the [male Insured];

58 The primary Judge’s chronology does not include a reference to a direction made on 27 March 2009 by a Registrar of the Court, requiring the Insurer:

“to serve all lay and expert affidavits, statements or reports (other than those over which it claims privilege) on or before 5 June 2009”.

59 The Insurer filed its motion ([5] above) on 17 June 2009. In effect, the motion sought to modify the Registrar’s order by exempting from it the affidavits and report identified by Ms Wallis. His Honour heard the motion on 6 July 2009 and, as I have noted, delivered judgment on 10 July 2009.

PRIMARY JUDGMENT

60 The primary Judge noted that the evidence the Insurer wished to hold back fell into four categories:

Category 1: an affidavit of one of the lay witnesses;

Category 2: an affidavit of the second lay witness;

Category 3: a report by a forensic accountant; and

61 The Insurer submitted before Hoeben J that the statement of principle in Markus applied to all four categories of evidence. The material, so it was argued, was not of a kind which could assist the Insured’s case. However, the affidavits, if disclosed to the Insured, would tempt the Insured to adjust their evidence at the trial to meet the matters raised by the deponents.

62 His Honour acknowledged that the Insured were under a “considerable disadvantage” in relation to the motion. Apart from the loss assessors’ reports, which were known to have been prepared, the Insured were unaware of the nature and extent of the other evidence sought to be withheld by the Insurer. His Honour said at [17] that he took “into account this very real disadvantage”.

63 The primary Judge identified (at [18]) three primary submissions made by the Insured, as follows:

“(a) The Markus discretion no longer exists or if it does, it only exists in a very limited and presently irrelevant circumstance.

(b) The Markus discretion has never had any application in circumstances where, as here, the [Insurer] seeking the order is raising a positive defence, namely a fraudulent claim.

64 In support of the first submission, the Insured argued that the Markus discretion no longer had a place in the litigation conducted under the CP Act. The Markus discretion, so it was argued, was part of the practice known as “trial by ambush”. That practice was incompatible with the “cards on the table approach” to litigation embodied in ss 56-58 of the CP Act and the various rules and Practice Notes associated with these provisions.

65 The primary Judge rejected (at [32]-[33]) the Insured’s first submission:

Markus

The same rationale lies behind [ss 56-58 of the CP Act ]. While the sections emphasise the quick and cheap resolution of the real issues in a case, they also place emphasis upon “the just determination of the proceedings”. A just result is, of course, the prime consideration in s 58. Accordingly, I see nothing inconsistent in a court deciding a Markus application in accordance with established principle and [ss 56-58]. This is because the basis for the exercise of a Markus discretion is that the interests of justice would not be served by producing documents of the necessary kind.

66 In support of the second submission, the Insured argued that the Insurer had failed to establish a proper basis for the making of the orders. It was submitted that the Markus discretion had never been exercised in favour of a party seeking to withhold evidence where that party bore an onus in respect of the evidence contained within the documents. In this case, the Insurer had the onus of establishing that the claim by the Insured had been made fraudulently.

67 The primary Judge considered (at [37]) that in a case where each side carried an onus of proof “the sort of rigid distinction sought by the [Insured] has no place”. Such an approach was quite contrary to the principle underlying the exercise of the Markus discretion, which was to allow a party to hold back documents if the interests of justice so dictated.

68 In his Honour’s view, the material in Categories 1-3 had been prepared specifically to challenge the Insured’s case on particular issues and could not advance the Insured’s case. The assessors’ reports comprising the Category 4 evidence were primarily directed to the same object:

“Without being specific, what they do is to identify what the authors regard as inconsistencies in the information provided by the [Insured] and to suggest lines of inquiry which should be followed. It is the following of those lines of inquiry which has produced the material which forms much of the Category 1 – 3 evidence” (at [38]).

69 The primary Judge observed (at [40]) that the difficulty faced by the Insured in relation to the third submission was that they had not seen the documents and thus could only argue hypothetically as to what the documents might contain. His Honour had, however, seen the documents. His assessment (at [41]) was that:

“they fairly and squarely comprise the sort of evidence described in the authorities as coming within the Markus discretion. The evidence has been specifically prepared to challenge important parts of the [Insured’s] case and the credit of [each of them]. Were the affidavits to be made available to the [Insured], there would be an inevitable risk of the [Insured] being tempted to tailor their evidence to meet this evidence. In my opinion, the elements for the exercise of the discretion have been made out by the [Insurer]”.

70 His Honour considered (at [43]) that the:

“question of whether the withholding of these affidavits will lengthen the trial and discourage settlement is at best equivocal. On the [Insurer’s] case the [Insured] have been dishonest and if this evidence is produced to them that dishonesty will lead to their claim being adjusted to meet it. This would certainly not shorten the trial or promote settlement. On the other hand, if the [Insured] have been dishonest and they are aware that the [Insurer] has evidence which it believes would establish that proposition, that of itself may be a positive incentive to settlement.

It follows that I have not been persuaded that as a matter of discretion the [Insurer] ought not have the order which it seeks.”

SUBMISSIONS

71 The Insured contend that the primary Judge erred in holding that:

(i) the Markus discretion still exists as a matter of the practice and procedure of the Supreme Court;

(ii) the Markus discretion could apply to evidence or material relevant to a matter in respect of which the party resisting access bears the onus of proof;

(iii) the Markus discretion could apply to evidence or material relevant to a positive case to be made by the party seeking access; and

Markus

72 Mr Pritchard SC, who appeared with Mr Emmett for the Insured, supported the first three contentions by essentially restating the arguments put to the primary Judge. However, Mr Pritchard identified three policy reasons why the parties to litigation should serve all witness statements in advance of the trial and why the Markus discretion as applied by the primary Judge “should not exist or should be overruled”. The policy reasons were:

efficiency in the listing and hearing of cases, which would be imperilled by the risk, if all evidence was not served in advance, that the trial would have to be adjourned because the party denied access to the documents required time to prepare evidence in reply;

fairness to parties and witnesses, which requires that they should know the full scope of any case to which they are required to respond; and

73 Mr Pritchard submitted that, assuming the discretion exists, a party should not be permitted to withhold material upon which it relies to make out a positive case. In this case, so he argued, the Insurer bears the onus of proving fraud under s 56(1) of the Insurance Contracts Act. It was an error for the primary Judge to allow the Insurer to withhold material supporting its fraud case without, at the very least, being satisfied that this was an exceptional case.

74 Mr Pritchard further submitted that the Markus discretion should not be used to withhold material that might be used by the deprived party in making out his or her own case. Although the Insured’s representatives had not had access to the material withheld under the directions made by the primary Judge, Mr Pritchard submitted that the material would be likely to be relevant to the Insured’s reliance on s 56(2) of the Insurance Contracts Act – that is, the Insured’s claim that, if the claim had been made fraudulently, any fraud was “only a minimal or insignificant part of the claim”.

75 Mr Pritchard next contended that the exercise of any discretion by the primary Judge miscarried because his Honour wrongly regarded the finding that there was a risk that the Insured might tailor their evidence as creating a presumption that the discretion should be exercised in favour of the Insurer. According to Mr Pritchard, his Honour should have considered other matters, such as:

“● whether the material is of the unusual kind where a legitimate explanation, if one exists, is unlikely to cause a trial to be postponed;

● whether it would be fair on the relevant witness and/or party to leave any legitimate explanation to be advanced without notice in cross-examination; and

76 Mr Pritchard argued that leave to appeal should be granted because the existence and scope of the Markus discretion are important matters of general principle. If leave is granted and the appeal allowed, the Insured seek orders setting aside the directions made by the primary Judge and, in lieu thereof, directing the Insurer to serve on the Insured all the affidavit evidence on which the Insurer intends to rely.

REASONING

Power of the Court

The “

Markus Discretion”

77 Some care must be exercised in using an expression such as the “Markus discretion”, since it may suggest a free-standing discretion divorced in some way from the terms of the relevant legislation and rules. In Markus itself, a party applied to inspect documents produced on subpoena. Clarke J exercised the discretion he “undoubtedly” had to deny the application “in the interests of justice”.

78 Clarke J did not identify the source of the discretionary power, beyond referring to the decision of the Court of Appeal in Kimberley Mineral Holdings v McEwan. In that case, the issue was whether the plaintiffs should be ordered to give inspection of discovered documents without an undertaking from each defendant, the effect of which would have been to impose confidentiality upon the documents so far as their use for any purpose other than the conduct of proceedings was concerned (at 214 [6]). Hope and Glass JJA (with whom Moffitt P agreed) held that Supreme Court Rules 1970 (“SCR”), Pt 23 r 10(1) conferred a discretion on the Court as to whether to order a party to produce a discovered document for inspection by the other party to the litigation (at 215 [11]). On that construction of r 10(1), there was no difficulty in holding that the power could be exercised so as to require appropriate confidentiality undertakings as a condition of permitting inspection of the documents (at 216 [14]). Hope and Glass JJA thought that the Court might have an inherent power to impose such a requirement even if there was some apparent inflexibility in the SCR (at 216 [14]). However, their Honours considered it unnecessary to examine the scope of any inherent power.

concerned the inspection of subpoenaed documents, rather than discovered documents. Clarke J did not refer to SCR, Pt 37 r 10, which (at the time) provided that a party could not, except with the leave of the Court, inspect any document produced in compliance with a subpoena and not admitted into evidence. However, it is clear that Pt 37 r 10 conferred a discretion on the Court, similar to that conferred by the rule considered in Kimberley: see National Employers’ Mutual General Insurance Association Ltd v Waind and Hill [1978] 1 NSWLR 372, at 383, per Glass JA (Moffit P and Hutley JA agreeing). Both Markus and Kimberley were decided before the enactment of the CP Act and before the promulgation of the rule that was the forerunner to s 56 of the CP Act: see SCR Pt 1 r 3 (introduced in 1995); cf SCR Pt 26 r 1 (empowering the Court to make directions for the “just, quick and cheap disposal of the proceedings”, introduced in 1984); Supreme Court Act 1970 (NSW), s 76A (to the same effect, inserted in 1985).

Subsequent Authorities

has been referred to with approval in subsequent cases. In Ng v Goldberg (Supreme Court of New South Wales, Young J, 17 August 1993, unreported), the question was whether the plaintiffs should be granted access to documents produced on subpoena by the Law Society of New South Wales. The documents included statements made by the defendant to the Law Society in respect of which Young J held that privilege had been waived. His Honour observed that Markus suggested that:

“the [principal] reason for denying access to a document which is otherwise relevant is if it would deprive a litigant of a legitimate forensic advantage. This will occur, for instance, in a case where the material only goes to the case of the person on the receiving end of the subpoena and not to making the case of the person who issued it …

The kernel of the documents that fall into this category are those where the defendant has taken pains to prepare material to attack the credit of the plaintiff and had prepared films or other reports on the plaintiff’s activities, which if the plaintiff were able to cite [sic] them before the trial would deprive the defendant of a legitimate advantage of testing the plaintiff’s story using that material.”

Goldberg v Ng

81 In Broadwater Taxation and Investment Services Pty Ltd v Hendriks (Supreme Court of New South Wales, Santow J, 9 September 1993, unreported), Santow J applied the reasoning in Markus and Ng v Goldberg. His Honour directed that the plaintiff not serve affidavits on the defendants until the conclusion of the defendants’ cross-examination. As the parties accepted that Santow J had a discretion whether or not to accede to the plaintiff’s submission, his Honour did not consider it necessary to identify the source of the discretionary power to direct the withholding of the plaintiff’s affidavit. However, his Honour said that:

“the test is whether the material would, if known in advance by the other side – being in this case material designed to test the other side’s evidence – enable the other side to tailor or endeavour to tailor their evidence to meet the circumstances. This is always on the hypothesis that the other side is not genuine”.

82 In Marsden v Amalgamated Television Services Pty Ltd [1999] NSWSC 428, a jury found that the plaintiff had been defamed. The defendant sought to justify the imputations, which alleged criminality. The allegations depended largely on the credibility of the defendant’s witnesses. Levine J declined to grant the defendant access to confidential documents produced on subpoena that related to the credibility of the allegations against the plaintiff. His Honour denied access on the ground (at [57]) that:

‘”any advantage to the defendant by receiving this information in advance will overwhelmingly be outweighed by the impediment its reception will constitute to the purity of the stream of evidence that normally should be given in … so serious [a] case.”

context

Markus

Broadwater v Hendriks

NEM v Waind and Hill

83 Kon v AMP Life Ltd [2006] NSWSC 957, was similar to the present case, in that the issue was whether the defendant insurer should be relieved from a direction requiring all affidavit evidence to be served in advance of the trial. The material on which the defendant wished to rely was said to go to the plaintiff’s credit. The plaintiff did not dispute that there was power to grant the dispensation.

84 In that case, Barrett J identified two main reasons for the decisions reached in Markus and Broadwater v Hendricks. The first was that the material sought to be withheld was not of a kind that could assist the other party in the formulation and presentation of its own case. The material was of such a nature that it could be of assistance only to the withholding party in meeting the case made by the deprived party and, depending on the outcome of cross-examination, might not even be used for that purpose (at [10]). The second reason was that the material, if made available, would “tend to tempt the deprived party to tailor its evidence or at least to consider doing so” (at [11]).

85 Having examined the documents, Barrett J was satisfied that both elements were present in the case before him (at [13]). His only hesitation was the possibility that disclosure of the evidence at the pre-trial stage might enhance the prospects for settlement. However, he did not consider that any real weight should be given to that possibility. The main concern was to facilitate the processes by which the plaintiff’s claim was:

“advanced in an orderly way, best calculated to see the issues brought before the court free from possible distortion” (at [14]).

and the four later cases to which I have referred, with the exception of Kon v AMP (where the source of power was not explored), each raised the question of whether a party to litigation should have pre-trial access to non-privileged documents discovered by a party or produced to the Court on subpoena. In each instance, other than Kon v AMP, a specific rule of court conferred a discretion on the Court to determine whether an order for access should be made. The judgments considered the circumstances in which access might be denied, culminating in Barrett J’s identification in Kon v AMP of two criteria which, if satisfied, suggest that denial of access is an appropriate exercise of the discretionary power vested in the Court.

Sources of Power

87 The present case does not involve an application to grant or deny access to documents that have been discovered by a party or produced on subpoena. The issue is whether the primary Judge erred by partially exempting the Insurer from the Registrar’s direction that all lay and expert evidence and reports be served prior to the trial. His Honour’s direction permits the Insurer to withhold the affidavits (including the report) identified by Ms Wallis in her affidavit. Although the direction does not say so expressly, presumably his Honour intended that the Insurer should be free to read the affidavits in its case at the trial (assuming the affidavits to be otherwise admissible), if it decided to take this course in the light of cross-examination of the Insured.

88 The primary Judge did not expressly advert to the source of the power to make the direction. Since the order does not concern access to documents produced on subpoena, the source cannot be the requirement in the rules that a party obtain the leave of the Court to inspect a document produced in response to the subpoena: see now UCPR, r 33.9(3). Similarly, since the order does not concern access to discovered documents, the source of the power cannot be the equivalent of SCR, Pt 37 r 10(1), that was discussed in Kimberley: cf UCPR, r 21.7.

89 However, the CP Act and the UCPR confer extensive powers on the court to make orders for the pre-trial management of proceedings. The two most significant for present purposes are the following:

such other directions with respect to the conduct of the proceedings as it considers appropriate

CP Act

Nature of the Power

90 These powers are not unlimited. The powers conferred by s 61 of the CP Act, for example, must be exercised “for the speedy determination of the real issues between the parties”. (It would seem that the “real issues” are those in existence at the time the power is to be exercised: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 258 ALR 14, at 36 [71], per Gummow, Hayne, Crennan, Kiefel and Bell JJ.) Section 61 would not appear to authorise a direction that could not advance the objective of permitting the speedy determination of the true dispute between the parties.

91 The power conferred by UCPR, r 2.1 to make directions is expressed more broadly. However, the power is conditioned by the requirement that the directions be made “for the just, quick and cheap disposal of the proceedings”. Rule 2.1 would not authorise, for example, an order effectively abrogating substantive rights, such as the privilege against self-incrimination: Griffin v Sogelease Australia Ltd [2003] NSWCA 158; 57 NSWLR 257, at [26], per Tobias JA (with whom Meagher and McColl JJA agreed) (a case concerned with s 76A of the Supreme Court Act, the predecessor to s 61(1) of the CP Act).

92 The Court, in exercising its power to make directions, must seek to give effect to the “overriding purpose” stated in s 56(1) of the CP Act: that is “to facilitate the just, quick and cheap resolution of the real issues in the proceedings”: s 56(2). Moreover, s 57(2) of the CP Act requires the Act and the UCPR be construed and applied so as best to ensure the attainment of the objects set out in s 57(1). As has been seen (at [47] above) those objects, in order, are:

the just determination of the proceedings;

the efficient disposal of the business of the court;

the efficient use of available judicial and administrative resources; and

the timely disposal of the proceedings at a cost affordable to the parties.

CP Act

for the management of proceedings

dictates of justice

,

93 The application of the criteria laid down by ss 56-58 is not without difficulty. There is, or at least may be, a tension between the just resolution of the real issues in proceedings and the quick and cheap resolution of those issues. A reasonable opportunity to lead evidence, cross-examine witnesses and present a case (cf CP Act, s 62(4)), depending on the nature of the claim, may be very difficult to achieve quickly and cheaply. Similarly, the “just determination of the proceedings” (s 57(1)(a)) may detract from “the efficient use of available judicial … resources” (s 57(1)(c)), if the latter expression means minimising the judicial resources required to resolve a given number of cases. To some extent the tension is ameliorated by the concept of proportionality, introduced by ss 57(1)(d) and 60 of the CP Act. Nonetheless, the exercise of powers in conformity with the “overriding purpose” is likely to involve some balancing of competing objectives.

94 The CP Act does not expressly accord paramountcy to the just determination of the proceedings, although this is the first object stated in s 57(1) of the CP Act. In contrast, for example, the rule considered by the High Court in Aon Risk Services (Court Procedures Rules 2006 (ACT), r 21(1)) states that the purpose of the Rules is:

“to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense.”

Civil Procedure Act 1997

“Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly”.

deal with cases justly

so far as practicable

“(a) ensuring that the parties are on an equal footing;

(b) saving expense;

(c) dealing with the case in ways which are proportionate -

(i) to the amount of money involved;

(ii) to the importance of the case;

(iii) to the complexity of the issues; and

(iv) to the financial position of each party;

(d) ensuring that it is dealt with expeditiously and fairly; and

(e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases.”

95 Whatever difficulties there may be in reconciling the objectives embodied in the overriding purpose stated in s 56(1) of the CP Act, it is clear that the court has wide powers to make directions for the conduct of proceedings, including the directions relating to the disclosure or withholding of affidavits or reports on which a party intends to rely at a hearing. It is necessary, in the exercise of such powers for the court to take into account the mandatory considerations identified in the CP Act and the UCPR. Those considerations may suggest the exercise of caution before one party is given an apparent forensic advantage by being partially exempted from a requirement to exchange affidavits and reports prior to the trial. But it is impossible to say, irrespective of the justice of the particular case or the issues at stake, that the court’s powers can never be wide enough to make orders of the kind made in the present case.

96 Specifically, if the court considers that an order permitting one party to withhold affidavit or other material from the other party pending the trial is likely to assist in the speedy determination of the real issues between the parties (CP Act, s 61(1)) or is likely to advance the just, quick and cheap disposal of the proceedings (UCPR, r 2.1), it has power to make the order. Whether the order is appropriate in a particular case will depend on a number of considerations, including the application to the circumstances of the case of the criteria stated in CP Act, s 57(1) and the “dictates of justice” as defined in s 58(2).

Policy Issues and Exercise of the Power

97 The policy reasons identified by Mr Pritchard in his submissions are likely to be relevant to the exercise of the powers conferred by the CP Act or the UCPR, where one party seeks an order of the kind made in the present case. The first of the matters identified by Mr Pritchard, the risk of an adjournment of the trial, would ordinarily be a matter relevant to the “overriding purpose” stated in s 56(1) of the CP Act. The risk of an adjournment, if realised, might diminish the likelihood of a “quick and cheap resolution of the real issues”. The risk might also be thought, depending on the circumstances, to jeopardise the efficient disposal of the business of the court and the efficient use of available judicial resources (ss 57(1)(b), (c), 58).

98 The second matter identified by Mr Pritchard, namely fairness to the party denied access to the material until after the trial has commenced, clearly must be taken into account before an order is made. Fairness to a party is, at the very least, important to the just resolution or determination of the proceedings (CP Act, ss 57(1)(a), 58(1); see too, s 58(2)(b)(v)). The likely impact of the order upon prospects for settlement (the third policy issue identified by Mr Pritchard) is likely to be relevant to the efficient use of available judicial resources and to the timely disposal of the proceedings (s 57(1)(b), (d)).

99 It is, however, one thing to say that these “policy” considerations may have to be taken into account in determining whether a power conferred by the CP Act or the UCPR should be exercised in a particular case. It is another to suggest that they lead to the conclusion that the court lacks power, regardless of the circumstances, to make directions authorising one party to withhold affidavits or reports from the other party until after the trial has commenced. There is nothing in the language of the relevant provisions of the CP Act or the UCPR that supports any such conclusion.

100 Mr Pritchard referred to authorities which emphasise the need for “clarity, precision and openness in the conduct of litigation” and the importance of a “cards on the table approach” which leads to the delineation and illumination of the real issues in dispute: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243, at [160]–[162], per Allsop P (with whom Beazley and Campbell JJA agreed); Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346; 53 NSWLR 116, at [26]-[31] per Heydon JA (with whom Mason P and Young CJ in Eq agreed) (rejecting the “ambush theory of litigation” and endorsing the observations of Allsop J in White v Overland [2001] FCA 1333, at [4]:

“in the efficient and proper conduct of civil litigation, even civil litigation hard fought between parties, it should always be recognised that in the propounding of issues for trial the parties should take steps to ensure that all relevant parties to the dispute are cognisant of what the issues are”.

101 There is no inconsistency between these statements of principle and the existence of a power, exercisable for good cause in appropriate circumstances, to direct that a party may withhold affidavits until trial. The making of such a direction does not imply that the trial is to be conducted “by ambush”, nor that the party seeking the direction has failed to co-operate in identifying and elucidating the issues in dispute. On the contrary, the statutory criteria that must be taken into account for a direction to be made should ensure that the issues are clearly defined and that the party seeking the directions demonstrates that the “dictates of justice” will be served by the direction.

Boyer v Collins

102 Mr Pritchard relied on the decision of the Court of Appeal of the Supreme Court of Western Australia in Boyes v Collins [2000] WASCA 344; 23 WAR 123, a personal injuries case. The issue in that case was whether the trial judge erred in making an order, pursuant to O 36 r 4 of the Rules of the Supreme Court 1971 (WA), granting leave to the respondent to adduce video film evidence at trial and excusing the respondent from producing the film to the appellant. Order 36 r 4 provided that, unless otherwise ordered, no photograph was receivable in evidence unless the party not relying on the photograph was given the opportunity to inspect it and to agree to the admission without further proof.

103 Ipp J (with whom Pidgeon and Wallwork JJ agreed) held that the trial judge erred in failing to adopt the correct approach to an application under O 36 r 4. His Honour said (at 141 [60]) that in determining an application under O 36 r 4:

“the court should be biased towards disclosure, subject to there being persuasive grounds by reason of the particular circumstances of the individual case to make an order in terms of the rule”.

104 A number of points should be made about Boyes v Collins. First, it was a decision on an application under a particular rule of court. Secondly, Ipp J’s statement of principle recognised that the rule itself expressly contemplated that an order could be made in appropriate circumstances excusing a party from compliance with the disclosure requirements. Thirdly, the respondent made it plain that there was no allegation of malingering or conscious presentation of a fraudulent claim (at 139 [53]). The only allegation was that the appellant was not suffering a physical disability in consequence of the accident he had sustained. Fourthly, the trial judge had acted in accordance with an almost uniform approach that had been adopted in the District Court to applications of this kind. That approach assumed that it was essential for the doing of justice, even in the absence of an allegation of malingering, to allow a defendant to take a plaintiff and the plaintiff’s doctors by surprise by confronting them with a video that they had not previously seen (at 140 [54]-[55]).

105 Ipp J characterised the District Court’s practice as virtually identical to the refusal of the nineteenth century common law courts to countenance pre-trial discovery of documents. His Honour rejected the practice as “based on a pessimistic view of the standards of honesty of litigating parties” (at 140 ([56])). The practice was also inconsistent with the “cards on the table” approach to litigation adopted in Western Australia (at 143 [64]).

does not support the proposition that a court in New South Wales has no power to make a direction authorising a party to withhold material that might be adduced in evidence from the other party until the trial. Nor does the judgment identify the “persuasive grounds” that would be necessary to displace the “bias” towards disclosure underlying O 36 r 4. It was enough for the Court in Boyes v Collins to point to circumstances, such as the fact that there was “every chance” that the trial would have to be adjourned and that the plaintiff had already committed herself as to the nature and extent of her disabilities (at 142 [62], 145 [73]), suggesting that a departure from the general rule was not warranted.

Conclusion on Power

107 For these reasons I conclude that courts in New South Wales have power under the CP Act and the UCPR to make orders relieving one party to civil litigation from complying, in whole or in part, with directions that would otherwise require that party to disclose to the other in advance of the trial all affidavits and reports to be adduced in evidence at the trial. The sources of such a power include, (although they are not necessarily limited to) CP Act, s 61(1), (2)(c) and UCPR, rr 2.1, 2.3. In exercising the power, a court is required to take into account the overriding purpose of the CP Act and the UCPR stated in s 56(1) of the CP Act and the objects identified in s 57(1). It is also necessary to take into account, insofar as relevant, the object of minimising delay, within the limitations outlined in s 59 of the CP Act and the principle of proportionality embodied in s 60. The court may also have regard to the matters specified in s 58(2), to the extent it considers those matters relevant. As I have explained, a decision in a particular case is likely to require a weighing of considerations that will not always be easy to reconcile.

The Question of Onus

108 There is no dispute between the parties as to where the onus of proof will lie at the trial. The Insurer has not admitted the theft pleaded by the Insured, but has not pleaded fraud on the part of the Insured in relation to the alleged theft. In these circumstances, the Insured bears the onus of proving on the balance of probabilities that the theft, as alleged, occurred: Simon v NRMA Insurance Ltd, (Court of Appeal, 12 October 1999, unreported) and Hammoud Brothers Pty Ltd v NRMA Insurance Ltd [2004] NSWCA 1.

109 The Insurer bears the onus of establishing, as pleaded in its defence to the amended statement of claim (“ASC”), that the Insured acted fraudulently in pursuit of payment of the amount sought in the ASC: cf Insurance Contracts Act, s 56(1). As the primary Judge pointed out, both parties will be entitled to lead evidence on the question of whether the terms of s 56(2) of the Insurance Contracts Act are satisfied. The parties seem to accept that the Insured bear the burden of showing that, for the purposes of s 56(2), “only a minimal or insignificant part of the claim is made fraudulently”.

110 The Insured seek to circumscribe the powers conferred by the CP Act and the UCPR to make directions for the withholding of material before trial. They contend that the powers cannot be exercised where the material withheld may support the withholding party’s case on a factual issue (in this case whether the Insured made a fraudulent claim) on which it bears the onus. The Insured’s submission is somewhat weakened by the qualification expressed by Mr Pritchard that the primary Judge should at least have been satisfied that the case was “exceptional” before making a direction that allowed the Insurer to withhold specified material until the trial.

111 Mr Pritchard relied on Ng v Goldberg and Broadwater v Hendricks as supporting this submission. Leaving to one side the fact that these cases were decided before the enactment of the CP Act, neither propounds a rule that documents can be withheld pending a trial only where their potential effect is limited to undermining the case of the opposing party on an issue on which that party bears the onus.

112 Clearly enough, in the present case the material withheld, if adduced in evidence, might adversely affect the credit of each of the Insured and, to that extent, undermine their case that the items identified in the ASC were stolen in the manner alleged (on which the onus of proof lies on them). However, the material might also advance the Insurer’s case in relation to the pleaded defence that the claim was made fraudulently (on which the Insurer bears the onus). In other words, the material could have a dual forensic purpose.

113 Where a party seeks a direction withholding material until the trial, a court will need to take into account the mandatory considerations identified in the CP Act, including the object of achieving the just determination of the proceedings and the need to facilitate the just, quick and cheap resolution of the real issues. Depending on the circumstances, these considerations may require the court to pay particular attention to questions of onus of proof. For example, if one party is permitted to withhold material that is central to a critical issue on which it bears the onus of proof, but has little or no significance on other issues, there may be a serious risk of disruption to the trial and of unfairness to the other party. But the court’s power to direct that a party be permitted to withhold certain material from the other party until after the trial has commenced is not constrained by any principle of the kind propounded by the Insured in the present case. Thus merely because the material withheld from the Insured might have some relevance to an issue on which the Insurer bears the onus does not mean that the direction should not have been made.

The Insured’s Affirmative Case

114 If one party to litigation is permitted to withhold material that otherwise would have to be divulged before trial, and the material supports the affirmative case the opposing party seeks to make, the opposing party may suffer injustice. That party’s inability to examine the material before the trial may well impair the preparation and presentation of its case. Withholding pre-trial access to the material might also prevent the opposing party from evaluating accurately its prospects of success in the litigation and thus reduce the chances of the proceedings settling before or at the trial.

115 It is no doubt for these reasons that courts considering the so-called “Markus discretion” have taken into account whether the withheld material could advance the opposing party’s affirmative case. By parity of reasoning, matters identified in ss 56 and 57 of the CP Act are likely to require a court dealing with an application to withhold material pending trial, to give consideration to whether the material supports the affirmative case of the party denied access and, if so, whether acceding to the application will cause injustice.

116 The primary Judge in the present case read the material that the Insurer proposed should be withheld from production pending the trial, as have members of this Court. His Honour pointed out (at [38]) that the material identified what the authors regarded as inconsistencies in the information provided by the Insured and challenged important parts of their case. It is difficult to imagine, without making any judgment as to the probative value of the material, that it could actually advance the Insured’s pleaded case that any fraud committed by them constituted only a “minimal or insignificant part of the claim” under the Policy. Accordingly, no issue arises as to whether the direction sought by the Insurer will deny the Insured access to material that could advance their case.

Exercise of Discretion

117 The Insured submit that even if all their other contentions fail, the primary Judge’s exercise of his discretionary power to make a direction authorising the Insurer to withhold the affidavits and report until the trial miscarried. They argue that the discretion miscarried because his Honour erroneously approached the exercise of discretion by inappropriately assuming that the Insured were dishonest and hence likely to tailor their evidence if they had access to the relevant material prior to the trial.

118 I do not read the primary Judgment as proceeding on the basis of any such assumption. His Honour said (at [41]) that if the material was made available in advance of the trial, there would be:

risk

tempted

119 He also referred to the possibility that the Insured had been dishonest in the course of considering whether the direction sought by the Insurer would lengthen the trial or harm the prospects for settlement. In the passage quoted in the previous paragraph, his Honour was doing no more than indicating that, if the material was provided to the Insured before the trial, there was a risk that the Insurer might be deprived of a legitimate forensic advantage in relation to issues going to the credit of each of the Insured. When referring to the possibility of dishonesty, his Honour was considering the effect of the proposed direction on the proceedings, having regard to the issues identified by the parties in the pleadings. Unless there are unusual circumstances (such as admissions of fraud in relation to a claim by an insured), it is inappropriate for a court considering an application of the kind made by the Insurer in this case to assume, prior to the trial, that a party against whom fraudulent conduct is alleged, or whose credit is clearly in issue, has or has not acted dishonestly. But it is equally inappropriate for the court, in assessing the justice of the case, to ignore the nature of the allegations or the issues in dispute and the manner in which it is proposed to test the evidence of the party whose credit is challenged.

120 Nor do I think that the primary Judge’s exercise of power miscarried because of a failure to take into account mandatory considerations. His Honour referred to and clearly took into account the matters stated in ss 56-58 of the CP Act. He accepted (at [33]) that the primary consideration was to facilitate the just determination of the proceedings. He clearly appreciated that the making of the direction sought by the Insurer would be disadvantageous to the Insured, in that they would be deprived of an opportunity to consider the material in advance of the hearing and to provide any available innocent explanation in their own affidavits. Nonetheless, his Honour thought that there were good reasons, founded in the justice of the case, for making the direction.

121 His Honour considered the likely impact of the direction on the conduct of the trial and on the prospects for settlement. His judgment (at [43]) was that the evidence on these issues was “equivocal”. No doubt there is always a risk that allowing some, but not all, evidence relevant to credit or alleged fraud to be withheld until the trial, will necessitate an adjournment of the trial to ensure that all parties are accorded procedural fairness. His Honour had to balance that risk against the justice of the case and the other factors identified in the CP Act. In my view, he performed that task.

122 Other judges may have taken a different view of the weight to be accorded to the competing considerations. Some, for example, might have thought that the risks of adjourning the trial, in order to ensure that the Insured have a fair opportunity to meet any material adverse to their credibility, outweighed the advantages, in the interests of justice, of not forewarning the Insured of the detail of the challenges to their credibility. But the fact that there is room for differences of opinion on the evaluative judgment the primary Judge was required to make does not demonstrate any error of principle or any other basis for intervention by an appellate Court.

ORDERS

123 The Insured’s application for leave to appeal has raised some questions of principle. Accordingly, it is appropriate that leave be granted. However, the appeal must be dismissed. The Insured should pay the Insurer’s costs of the appeal, including the application for leave to appeal.

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07/12/2009 - Respondent's counsel's name incorrect - Paragraph(s) Coversheet

11/11/2011 - Amending reference to Bill - Paragraph(s) 28

Citations

Halpin v Lumley General Insurance Ltd [2009] NSWCA 372

Most Recent Citation

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124

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21

Statutory Material Cited

14

Halpin v Lumley General Insurance Ltd [2009] NSWSC 644

Markus v Provincial Insurance Co Ltd [2012] NSWSC 1076

Queensland v JL holdings Pty Ltd [1997] HCA 1

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CITATION:	Halpin & Ors v Lumley General Insurance Ltd [2009] NSWCA 372 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	15 September 2009
JUDGMENT DATE:	23 November 2009
JUDGMENT OF:	Tobias JA at 1; Basten JA at 2; Sackville AJA at 38
DECISION:	1. Leave to appeal granted. 2. Appeal dismissed. 3. Appellant to pay Respondent’s costs of appeal, including the application for leave to appeal.
CATCHWORDS:	PROCEDURE – application by defendant insurer to waive direction that all affidavit evidence be served before trial – application of discretionary power said to be established by Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1 – source of power to make orders sought by insurer – whether the power exists under the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules – whether primary judge erred in the exercise of discretion in making the order sought by the insurer
LEGISLATION CITED:	Access to Justice (Civil Litigation Reforms) Amendment Bill 2009 (Cth), cl 37M(3) Administrative Appeals Tribunals Act 1975 (Cth), s 2A Insurance Contracts Act 1984 (Cth), s 56 Civil Procedure Act 2005 (NSW), s 14, s 15, Pt 6 Supreme Court Act 1970 (NSW), s 76A Supreme Court Rules 1970 (NSW), Pt 23 r 10(1), Pt 26 r 1, Pt 37 r 10 Uniform Civil Procedure Rules 2005 (NSW), r 2.1, r 2.3, r 21.7, r 31.1, r 33.9 Practice Note SC CL 5 Court Procedures Rules 2006 (ACT), r 21(1) Uniform Civil Procedure Rules 1999 (Qld), r 5 Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 1.14 Rules of the Supreme Court 1971 (WA), O 36 r 4 Civil Procedure Act 1997 (UK), r 1.1 Civil Procedure Rules 1998 (UK)
CATEGORY:	Principal judgment
CASES CITED:	Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 258 ALR 14 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 Boyes v Collins [2000] WASCA 344; 23 WAR 123 Broadwater Taxation and Investment Services Pty Ltd v Hendriks (Supreme Court of New South Wales, Santow J, 9 September 1993, unreported) Commissioner of Police (NSW) v Industrial Relations Commission (NSW) [2009] NSWCA 198 Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 Evans v Marmont (1997) 42 NSWLR 70 Griffin v Sogelease Australia Ltd [2003] NSWCA 158; 57 NSWLR 257 Halpin v Lumley General Insurance Ltd [2009] NSWSC 644 Hammoud Brothers Pty Ltd v NRMA Insurance Ltd [2004] NSWCA 1 Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 House v The King [1936] HCA 40; 55 CLR 499 Kimberley Mineral Holdings Ltd (In liq) v McEwan [1980] 1 NSWLR 210 Kon v AMP Life Ltd [2006] NSWSC 957 Markus v Provincial Insurance Co Ltd (1983) 25 NSWCCR 1 Marsden v Amalgamated Television Services Pty Ltd [1999] NSWSC 428 National Employers’ Mutual General Insurance Association Ltd v Waind and Hill [1978] 1 NSWLR 372 Ng v Goldberg (Supreme Court of New South Wales, Young J, 17 August 1993, unreported) Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346; 53 NSWLR 116 Queensland v JL Holdings Pty Ltd [1997] HCA 1; 189 CLR 146 Simon v NRMA Insurance Ltd, (Court of Appeal, 12 October 1999, unreported) State of New South Wales v Mulcahy [2006] NSWCA 303 The Queen v Hunt; Ex parte Sean Investments Pty Ltd [1979] HCA 32; 180 CLR 322 The Queen v Toohey; ex parte Meneling Station [1982] HCA 69; 158 CLR 327 White v Overland [2001] FCA 1333 Zhang v Canterbury City Council [2001] NSWCA 167; 51 NSWLR 589
PARTIES:	Loretta Halpin - First Applicant Michael Halpin - Second Applicant Haljen Pty Limited - Third Applicant Lumley General Insurance Ltd - Respondent
FILE NUMBER(S):	CA 040250/09
COUNSEL:	D Pritchard SC; J Emmett - Applicants R Seton SC - Respondent
SOLICITORS:	Henry Davis York - Applicants TurksLegal - Respondent
LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	SC 20345/07
LOWER COURT JUDICIAL OFFICER:	Hoeben J
LOWER COURT DATE OF DECISION:	10 July 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	Halpin & Ors v Lumley General Insurance Ltd [2009] NSWSC 644