HDI-Global SE v Zurich Australian Insurance Limited

[2020] NSWSC 1384

Supreme Court

New South Wales

Medium Neutral Citation:

HDI-Global SE v Zurich Australian Insurance Limited [2020] NSWSC 1384

Hearing dates:

9 October 2020 – On the Papers

Decision date:

09 October 2020

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

(1)   Order that within 21 days of today’s date, the first defendant give verified discovery to the plaintiff of the Umbrella Liability Policy issued by it to Origin Energy Limited (and/or Origin Energy LPG Limited) in respect of liabilities ranging between $20,000,000 and $130,000,000 (as to 70%) for the period 30 June 2002 to 30 June 2003 including the Policy Schedule and all endorsements;

(2)   The costs of the motion filed on 28 August 2020 be costs in the cause.

Catchwords:

CIVIL PROCEDURE – Discovery – Whether circumstances exceptional under Practice Note SC Eq 11 – Where documents reveal information solely within the knowledge of the party from whom discovery is sought

Legislation Cited:

Practice Note SC Eq 11 – Disclosure in the Equity Division

Cases Cited:

Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407

Leighton International v Hodges; Thiess v Reinforced Earth [2012] NSWSC 458

Naiman Clarke Pty Limited atf Naiman Clarke Trust v Marianna Tuccia [2012] NSWSC 314

Category:

Procedural and other rulings

Parties:

HDI-Global SE (Plaintiff)
Zurich Australian Insurance Limited (First Defendant)
AIG Europe (Services) Limited (Second Defendant)

Representation:

Counsel:
DA Lloyd SC (Plaintiff)
D Williams SC with N Riordan (First Defendant)

Solicitors:
Meridian Lawyers (Plaintiff)
HBA Legal (First Defendant)

File Number(s):

2019/358536

Publication restriction:

None

Judgment

1. The Plaintiff provided primary layer and the defendants provided first excess layer liability insurance to Origin Energy Limited for the period 30 June 2002 to 30 June 2003. The limit of liability under the primary layer was $20 million. In addition, the plaintiff agreed to pay defence costs incurred in defending any claim against Origin on the basis that if a payment was made in satisfaction of a claim against Origin in excess of the policy limit, the plaintiff’s liability for defence costs would be limited to that proportion of the defence costs as the limit of liability bore to the payment made to the third party. The limit of liability under the first excess layer cover was $130 million. Seventy percent of that cover was provided by the first defendant, Zurich Australia Insurance Limited. The remaining 30 percent was provided by the second defendant, AIG Europe (Services) Limited.

2. In June 2003, Best Care Foods Pty Limited commenced proceedings against Origin in connection with an explosion at its premises in Gunnedah, New South Wales. The plaintiff assumed the conduct of the defence of the proceedings against Origin and paid $11,945,000 in defence costs and disbursements before the defendants took over defence of the claim.

3. On 14 November 2013, judgment was entered in favour of Best Care against Origin in the sum of $67,126,499 plus costs. Further orders were made requiring Origin to indemnify Best Care for any tax liability arising from the judgment.

4. On or around 31 January 2014, the plaintiff paid $20 million in part satisfaction of the judgment in favour of Best Care with the balance being paid by Zurich and AIG.

5. In these proceedings, the plaintiff seeks to recoup from the defendants the defence costs it paid in excess of its liability under the primary policy or alternatively seeks contribution. In order to make out its claim, the plaintiff must establish that the payment it seeks to recover related to a liability falling on both it and the defendants (in the case of recoupment) or that the plaintiff and the defendants were under a coordinate liability to indemnify Origin up to their respective limits of liability (in the case of contribution). The defendants deny liability on the basis that the amount claimed was not covered by their respective policies.

6. By a notice of motion filed on 28 August 2020, the plaintiff seeks from Zurich discovery in advance of evidence of the following documents:

(a)   The Umbrella Liability Policy issued by it to Origin Energy Limited (and/or Origin Energy LPG Limited) (jointly Origin Energy) in respect of liabilities ranging between $20,000,000 and $130,000,000 (as to 70%) (Zurich Excess Policy) for the period 30 June 2002 to 30 June 2003 including the Policy Schedule and all endorsements; and

(b)   Its underwriting file in respect of Origin Energy and its subsidiaries in respect of Umbrella Liability Policies issued to Origin for the period 2001 to 2005; and

(c)   All documents evidencing the payment of legal costs by it relating to the defence of Supreme Court Proceedings No: SC 2005/270917 from around June 2012 when the First and Second Defendants assumed conduct of the defence of the proceedings against Origin Energy.

7. Discovery in the Equity Division is governed by Supreme Court Practice Note SC Eq 11 – Disclosure in the Equity Division. It relevantly provides:

4.   The Court will not make an order for disclosure of documents (disclosure) until the parties to the proceedings have served their evidence, unless there are exceptional circumstances necessitating disclosure.

5.   There will be no order for disclosure in any proceedings in the Equity Division unless it is necessary for the resolution of the real issues in dispute in the proceedings.

8. In this context, “exceptional” means out of the ordinary: Leighton International v Hodges; Thiess v Reinforced Earth [2012] NSWSC 458 at [20] per McDougall J. It includes cases where the documents reveal information solely within the knowledge of the party from whom disclosure is sought and that information is necessary for the party seeking disclosure to file its evidence: Naiman Clarke Pty Limited atf Naiman Clarke Trust v Marianna Tuccia [2012] NSWSC 314 at [26] per Ball J.

9. Zurich resists disclosure of the policy on the basis that, according to an affidavit sworn by its solicitor, Zurich has been unable, after extensive searches, to locate a copy of the document. It resists disclosure of the other categories on the basis that they are of marginal or no relevance to the issues in the case and are not necessary in order for the plaintiff to file its evidence.

10. In my opinion, Zurich should be required to give discovery of the policy. The terms of the policy are central to the issues in this case. Indeed, Zurich’s response refers to it extensively. The terms of the policy are something peculiarly within the knowledge of Zurich. For those reasons, in the normal course of events, Zurich would be ordered to discover it. The fact that Zurich’s solicitor says on information and belief that Zurich has been unable to locate the policy does not alter the position. If the true position is that after proper searches Zurich is unable to locate a copy of the policy, then evidence to that effect should be given by an appropriate officer of Zurich.

11. On the other hand, I do not think that Zurich should be required to disclose the other categories of documents sought by the plaintiff. Category 2 is said to be relevant to a possible claim for rectification of Zurich’s policy. However, the plaintiff is not a party to that contract and would not have standing to bring a claim for rectification.

12. The documents falling within Category 3 are said to be relevant to the correct construction of the Zurich policy because they form part of the surrounding circumstances against which the words of the policy are to be interpreted. However, documents evidencing the payment of legal costs by Zurich are unlikely to shed any light on the surrounding circumstances as they existed at the time the policy was issued. The subsequent conduct of the parties is not itself relevant surrounding circumstances: Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35] per Gummow, Hayne and Kiefel JJ; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407.

13. Each party has enjoyed a degree of success in relation to the motion. In those circumstances, the costs of the motion should be costs in the cause.

14. The orders of the Court, therefore, are:

1. Order that within 21 days of today’s date, the first defendant give verified discovery to the plaintiff of the Umbrella Liability Policy issued by it to Origin Energy Limited (and/or Origin Energy LPG Limited) in respect of liabilities ranging between $20,000,000 and $130,000,000 (as to 70%) for the period 30 June 2002 to 30 June 2003 including the Policy Schedule and all endorsements;

2. The costs of the motion filed on 28 August 2020 be costs in the cause.

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Decision last updated: 12 October 2020