Poole v Chubb Insurance Company of Australia Limited
[2014] NSWSC 986
•21 July 2014
Supreme Court
New South Wales
Medium Neutral Citation: Poole v Chubb Insurance Company of Australia Limited [2014] NSWSC 986 Hearing dates: 21/07/2014 Decision date: 21 July 2014 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Grant leave further to amend the Commercial List Response. Grant leave to administer limited interrogatories. Direct defendant to serve statement linking documents it proposes to tender to issues of fact that it contends those documents will prove.
Catchwords: PROCEDURE - whether to allow amendments to commercial list response - whether prejudice to the plaintiff where effect of amendments is to include non-fraudulent non-disclosure as well as fraudulent non-disclosure
PROCEDURE - whether to grant leave to administer interrogatories - whether interrogatories must be "necessary" for leave to be granted - whether interrogatories would bring about the just, quick and cheap resolution of the real issues in dispute - whether leave to administer interrogatories in relation to information given in an Independent Commission Against Corruption inquiry ought be granted - Independent Commission Against Corruption Act 1988 (NSW) s 37(3)
PROCEDURE - Application for order that defendant produce a narrative statement of facts showing how facts would be proved by documents in the court book - where such order is not a direction usually given - whether alternative course of annotating the commercial list response to refer to relevant documents ought be granted - where difficult for plaintiff to give proper consideration of whether to put on evidence in replyLegislation Cited: Civil Procedure Act 2005 (NSW)
Insurance Contracts Act 1984 (Cth)
Independent Commission Against Corruption Act 1988 (NSW)Cases Cited: Tooth and Company Ltd v Lane Cove Municipal Council (No 4) [1968] 2 NSWR 17
Sealby v Obelisk Securities Pty Ltd (SC of NSW, 18 April 1997, unreported; BC9701847)Category: Procedural and other rulings Parties: Andrew John Poole (Plaintiff)
Chubb Insurance Company of Australia Limited (Defendant)Representation: Counsel:
AP Coleman SC / JE Curtin (Plaintiff)
TM Mehigan (Defendant)
Solicitors:
Horton Rhodes (Plaintiff)
Clyde & Co Australia (Defendant)
File Number(s): 2013/336778
Judgment (ex tempore - revised 22 July 2014)
HIS HONOUR: The plaintiff sues the defendant on two D&O insurance policies, one known as the Doyles Creek policy and the other known as the NuCoal policy. The plaintiff seeks to recover legal fees incurred by him in connection with an inquiry conducted by the Independent Commission Against Corruption (the Commission) into what it called Operation Acacia.
The defendant insurer wishes further to amend its commercial list response. One category of amendments, which is relevant really only to the Doyles Creek policy, is based on cl 6 of that policy. Clause 6 is a rather unusual provision. On one view of its proper construction, it may mean that the rights available to the insurer for fraudulent non-disclosure are limited to denying cover to the insured. Further, on that view, it preserves the rights of the insurer under s 28(3) of the Insurance Contracts Act 1984 (Cth) in the event that the non-disclosures are proved, but not proved to have been fraudulent.
Hitherto, the insurer's defence has been that the relevant non-disclosures were consciously made, to the knowledge of the plaintiff, and were false to the plaintiff's knowledge. It now wishes to contend that it is open to it to rely, in the alternative, on s 28(3).
There is no real explanation as to why this position has suddenly become apparent to the insurer. On the contrary, it is open to infer that the insurer
thought that its case was one of fraud or nothing, and proceeded accordingly.
However, the issue really turns on the proper construction of cl 6 of the policy and on the characterisation of such non-disclosures as are proved. It is difficult to see how there can be any real prejudice to the plaintiff. I accept that his approach so far has been that he was facing a defence which was fraud, and only fraud. He was entitled to take all proper steps in answer to that, including requiring the insurer to prove its fraud case, as to every element, and testing that proof as strenuously as might properly be done.
Permitting the insurer to say, in the alternative, that the non-disclosures, to the extent that they are proved but not proved to have been fraudulent, nonetheless entitle it to reduce its liability to nil will not raise any different factual case from the insurer's perspective.
Mr Mehigan, of counsel, for the insurer, has made it clear that the underwriting evidence which has already been served will be relied upon on the s 28(3) case if leave is given to make the relevant amendments.
So far as the plaintiff is concerned, he is faced with the legal issue of the alternative characterisation of such non-disclosures as are found to have been made and with the consequences, in terms of clause 6 of the policy. But it does not seem to me that this produces any really different evidentiary landscape.
Mr Coleman of Senior Counsel, who appeared with Ms Curtin of Counsel for the plaintiff, submitted that a case based on innocent non-disclosures was something different, and involved different forensic choices - for example, as to whether or not to go into evidence.
If the insurer were abandoning its fraud case, there would be something to be said for this. But it is not doing so. On the contrary, other amendments that are sought (and which I will deal with later, after hearing further argument) seek to buttress the fraud case. True it is that at least some of those amendments (if leave to make them is granted) could also bear on the alternative s 28(3) case. However, when one considers what it is that the insurer wishes to contend, it seems to be plain almost beyond question that fraud lies at the heart of its defence.
I accept that it may be a matter of some inconvenience to the plaintiff that he now has to face a defence which does not necessarily require the insurer to establish fraud. However, looking at the matter realistically, it seems to me that the case really does still remain one of fraud, and that the alternative characterisation is more by way of precaution than by way of primary reliance.
I accept that the failure to advance any real reason for the apparently late decision to add the s 28(3) case is a matter to be taken into account. But as I indicated in the course of argument, I think that the real question is one of prejudice. In relation to this particular category of amendment, it does not seem to me that the grant of leave would of itself challenge the hearing date. To the extent that there is other prejudice, in terms of costs, that can be dealt with.
In the result, I would grant leave to make the amendments sought in respect of s 28(3). As I understand it, they are the amendments in paras 5(b), 15 and 17(dA) of the draft Further Amended Commercial List Response annexed to the notice of motion. If I am correct in that, then leave to make those amendments should be granted.
I should note that there are a number of other amendments that are signified that are non-contentious. The leave that I will in due course grant should be taken to encompass those. The only reason for pointing this out is that it will be incumbent on the parties to identify with precision the contentious amendments, so that the leave which is finally granted goes no further than I intend it to do.
[Counsel addressed on interrogatories.]
I now turn to the question of interrogatories. The insurer seeks to interrogate the plaintiff as to various documents which relate to the matters that are said to be bound up in the alleged fraudulent non-disclosures (or underlying the fraudulent non-disclosure case), and on the plaintiff's knowledge of various matters at various times.
The starting point is that the insurer has pleaded a case of fraudulent non-disclosure and the plaintiff has put the insurer to proof of that case. It may be assumed that those who advise the insurer have formed the view that there is an appropriate basis for the serious allegations in question to be pleaded. As I understand the affidavit evidence, that basis comes largely if not completely from material that was before the Commission.
The effect of s 37(3) of the Independent Commission Against Corruption Act 1988 (NSW) (the ICAC Act) is that the evidence given by the plaintiff in the course of his examination before the Commission is not admissible in these proceedings. There are some exceptions, but they are of no present relevance.
Thus, although the insurer can do as it has done, and get hold of the relevant documents (by subpoenas and other means), it still needs in some way to connect the plaintiff to some of those documents. It cannot do this simply by tendering his evidence given at the Commission's hearing.
Mr Mehigan took the position, understandably enough, that his client could prove the allegations that it had pleaded by the tender of documents. Thus, in the strict sense, "necessity" is not in issue. However, Mr Mehigan submitted, necessity in the strict sense did not need to be shown. He submitted that, particularly having regard to the dictates of s 56 and following of the Civil Procedure Act 2005 (NSW), it was necessary to show only that, first, the interrogatories went to relevant matters and, secondly, that proof of the matters through interrogatories would be quicker and cheaper than the process presently contemplated.
To my mind, the Court approaches the question, of leave to administer interrogatories, by acknowledging that the guiding principle is the just, quick and cheap resolution of the real issues in dispute. In this case, the real issues in dispute, on the fraud case, include the various factual matters pleaded (or that will be pleaded, if leave to amend is given) and the plaintiff's knowledge of them. They include also, of course, the question of whether, taking all those matters into account, the answers given by the company in the D&O proposal form were innocently incomplete, or whether they were falsely incomplete in the sense that they were either made knowing they were incomplete or with reckless indifference as to their content; and the plaintiff's knowledge of those matters.
It does seem to me that there is a limited category of interrogatories where leave should be granted. Some of those interrogatories do no more than direct the plaintiff's attention to an identified document and ask him whether he had it at a particular time (or before a particular time) and read it. A related category asks the plaintiff whether he was at a meeting which appears to be evidenced by a document. Another related category (I think, only one document) asks the plaintiff whether a particular document is in his handwriting and, if so, whether it is a note of a board meeting of a particular company.
If leave is given to administer those interrogatories, and the answers demonstrate that the plaintiff did have the document, and did read it; or did attend the meeting; or did make the note; then the formalities of proof (which might otherwise consist of inviting the Court to draw inferences from a great number of documents) would be simplified. Whether or not the documents have the consequence attributed to them, or the significance attributed to them (in each case, either alone or in conjunction with other documents) is a matter for argument.
By contrast, there is a separate category of draft interrogatories which enquires of the plaintiff's state of mind or understanding, or knowledge of various matters. I accept that answers to those interrogatories might make the insurer's proof of its fraud case easier. But it must be remembered that this is a case where the insurer has chosen to plead fraud and the plaintiff has chosen to put the insurer to proof. It must also be remembered that the time for the plaintiff to serve any evidence in reply has not yet expired. Hence, at present, it is not known what (if anything) the plaintiff may say about the various matters apparently to be raised in the insurer's evidence.
In relation to this second category of documents, I do not think that the just, quick and cheap resolution of the real issues in dispute requires that the plaintiff should answer them. The interrogatories are quite distinguishable from those in the first category. Those in the first category seek to establish, one way or another, the formalities of the plaintiff's attendance at a meeting, or preparation of a document, or receipt of a document. By contrast, the interrogatories in the present category go to the plaintiff's state of mind and understanding at various times. They are not prepatory to the revelation and discussion of the real issues. They are, by contrast, central to those issues.
If the insurer can prove its case on those issues, well and good. But the plaintiff has an entitlement to give, or not to give, evidence. He may take the view that he can prove his case in chief through the tender of documents alone, and that he need not give evidence in reply. The interrogatories in the present category, going as they seem to do to the heart of the factual allegations, effectively require him to give evidence on matters, as to which he has the right to remain silent should he wish (in using this formulation, I do not wish it to be thought that I am adverting to the criminal law).
There are other interrogatories which seek to enquire of the plaintiff's knowledge of various matters said to be in the public arena through news media. It does not seem to me that they have any great relevance, and in any event I do not think that the plaintiff should be compelled to revisit his recollection of the news media at the times in question, some five or six years ago.
Those reasons deal with most of the interrogatories. I should note, for the purposes of the record, that the interrogatories with which I am concerned and the documents to which they refer are contained in a bundle which I will mark for identification A and keep with the papers.
There were other objections taken to the interrogatories, including as to their form and subject matter. Some of those objections seem to me to be well founded; for example, at least one of the interrogatories effectively seeks to interrogate the plaintiff as to a corporation's state of mind. For the reasons given by Street J in Tooth and Company Ltd v Lane Cove Municipal Council (No 4) [1968] 2 NSWR 17 at 19-20, that does not seem to me in any event to be an appropriate subject for interrogatories.
Before I descend to the detail of the rulings, and before I deal with a particular interrogatory which is somewhat more problematic because it cannot be slotted easily into one category or another, I should note that Mr Coleman objected to a large number of the interrogatories on the basis that they effectively contravened s 37(3) of the ICAC Act. He referred to the decision of Santow J in Sealby v Obelisk Securities Pty Ltd (SC of NSW, 18 April 1997, unreported; BC9701847).
To my mind the questions with which Santow J was concerned were quite distinguishable from the present interrogatories. First, his Honour's reasons relate to questions proposed to be asked in cross-examination. That distinction of itself does not seem to me to be significant, because the only purpose for asking interrogatories is to tender the answers, and thus, if answered, the same position would apply.
However, one of the categories of question the subject of the ruling given by Santow J "would ask of a witness, being the plaintiff, who has given evidence in an inquiry under the [ICAC] Act ... whether he gave a particular answer, quoting that answer previously given at the relevant ICAC inquiry". For reasons that seem to me, if I may say so with respect, to be entirely correct, Santow J held that to compel the plaintiff to answer that category of question would put into evidence the very answer given by the plaintiff on that subject matter at the Commission's inquiry. His Honour held that this would be exactly the same as tendering the transcript to prove the answers.
The second category of question was apparently somewhat different. It was proposed to read a quotation from the Commission's transcript and then ask whether "on oath" the witness was asked the questions read out and gave the answers read out. Santow J said that this would "by implication" identify the source of the questions as the Commission's inquiry and thus would have the effect of putting the answers into evidence in the hearing before him.
His Honour concluded, on balance, that this too was forbidden by s 37(3) of the ICAC Act.
It is not necessary for me to express a view on the second category of questions with which Santow J was concerned. That is because nothing that is proposed in the present interrogatories seeks to extract from the plaintiff his evidence at the ICAC hearing. Certainly, in all the cases identified by Mr Coleman, the subject matter of the interrogatory had been put to the plaintiff in the course of his evidence before the Commission. Likewise, the documents identified had been put to the plaintiff in his evidence before the Commission. However, the interrogatories seek to ask the plaintiff whether he had seen the document, or whether he knew of various things. They make no reference to his evidence before the Commission. That is a long way removed from the factual situation with which Santow J was concerned. In my view, there is nothing in his Honour's reasons which compels the conclusion that the interrogatories in question fall foul of s 37(3) of the ICAC Act.
I should add that if Mr Coleman's submission were correct, it would mean not only that the interrogatories could not be administered, but also that, if the plaintiff chose to give evidence, he could not be cross-examined on those matters. I cannot believe that this was the intention underlying s 37(3). Certainly, that intention does not appear from language so intractable that it must be given effect regardless of its surprising consequences.
I return to the interrogatories. Essentially for the reasons I have given, and adopting the numbering in MFI A (and acknowledging, in the case of interrogatories numbered 7 and 8, that the referenced documents have been transposed) I would permit interrogatories in the form of 1(a) and 1(b), 7, 8, 9 and 12(a), 13, 14 and 19.
The second part of the first interrogatory (starting with the words "prior to") and the interrogatories numbered 2 to 6 fall outside the first category that I have identified, in respect of which leave should be given. Interrogatories 15, 16 and 17 refer to media reports and likewise fall outside that category.
Interrogatory 10 falls apparently within the first category. It refers to a Westpac document which in turn refers to an application made by "the principals of Doyles Creek Mining Pty Ltd". It seeks to ask the plaintiff whether he had discussions with the author of the document about the proposed mining exploration licence.
In my view, that interrogatory goes beyond the mere formal identification matters that effectively characterise the first of the categories that I have referred to. Accordingly, it seems to me, if the insurer wishes to have the benefit of the Westpac memorandum, it will have to demonstrate its connection with the plaintiff in ways other than the plaintiff's answer to the interrogatory.
It follows that I would not allow an interrogatory in the form of 10.
Interrogatory 11 is another to which I have not referred. It does not ask the plaintiff whether he was given a copy of the document and read it. It asks, rather, whether he commented on one or more drafts. Again, that seems to me to fall outside the rationale of the first category (and the rationale requiring those interrogatories to be answered) and I do not allow it.
Finally, I think I may have overlooked interrogatory 18. I would permit interrogatory 18(a) (which inquires whether the plaintiff received and read an identified email) but not para (b), which inquires as to the plaintiff's understanding.
I direct that the plaintiff answer the interrogatories, to the extent indicated, on oath within seven days, and otherwise disallow the interrogatories.
[Counsel addressed further, on leave to amend.]
I return to the question of leave further to amend the Commercial List Response. I have dealt hitherto with what had been a contentious amendment relating to s 28(3) of the Insurance Contracts Act. I now deal with contentious amendments to paras 10 and 10A of the Commercial List Response. In effect, the proposed amendments seek to set out more clearly, and in some ways expand, the factual matrix against which and from which the non-disclosure case (however it may be characterised) arises.
This raises other issues. One is that the insurer has indicated that it proposes to prove its case through documents. I have been told, without objection, that there are more than 700 documents, which when printed out, occupy more than 7,000 pages and 18 lever arch folders. Those documents have been listed in three ways: by source (who produced them); chronologically; and alphabetically by title.
I have been referred to what was no doubt a thoughtfully selected subset of those documents, comprising two lever arch folders. Mr Coleman submitted, with some force and some justification, that the relevance of those documents to the pleaded issues (either as they stand or as they would stand, were leave to amend to be given) was not apparent. He submitted that the insurer should be directed to produce a narrative statement of the facts it intended to prove, showing, among other things, how it was that it intended to prove the individual facts through the various documents.
Mr Mehigan opposed that course. He submitted, again with some force and some justification, that it was not a direction usually given even in the Commercial List.
I am prepared to assume, in favour of the insurer, that some degree of intellectual rigour has been applied to the selection of documents that are in the proposed court book. It must follow that someone has come to the view, in respect of each document, that in some way it will facilitate proof of a pleaded issue in the case. On that basis, there is a middle course between simply granting leave to amend and later allowing the judge hearing the case to deal with the question of objections, and ordering the statement that Mr Coleman seeks.
That middle course seems to me to be as follows. Once the insurer is given leave to amend, and files and serves its Further Amended Commercial List Response, it should produce what might be (but in form need not be) an annotated version of that Further Amended Commercial List Response, stating for each allegation of fact in it (whether that allegation is already there or introduced by amendment), what are the documents relied upon in support of the proof of that fact. Some of the documents are lengthy and their relevance may be minimal. In that event, I would expect that the application of common sense to the direction would require not only the identification of the document as relevant to (for example) para 10(dA), but also a specification of the particular parts of the document that are said to be relevant. This appears to be understood and thus should not necessarily be something to be incorporated clumsily in the direction that I propose to give.
That may leave some documents, in those proposed to be tendered, that are not referred to. If that is the case, the insurer should identify the fact or facts towards the proof of which it is intended to rely on those documents.
It may be that there will need to be some further iteration of this process. However, if it is carried out faithfully, I would hope that the relevance of most (if not all) of the documents proposed to be tendered will be demonstrated, as will the facts which they are said to prove (individually rather than collectively).
If some course such as this is not taken then it will be difficult, if not impossible, for the plaintiff to give proper consideration to the question of evidence in reply. Further, if some course such as this is not taken, it is likely that much time will be taken up with objections to the tender of documents. It may be that the Court would deal with that by declining to admit the court book as a whole and, rather, directing the insurer (who I think propounds the tender of most of the documents) to tender individually, and justify as it does so, each document that, ultimately, will be relied upon.
If possible, the Court should do what it can now to try and minimise the waste of hearing time.
Further, and as part of this process, the present direction for the plaintiff's evidence in reply should be postponed until after he has had a reasonable opportunity to consider the insurer's justification for the tender of the documents on which it proposes to rely.
It may be that, as this process works out, the parties or the Court will come to realise that the hearing date cannot be maintained. That would be unfortunate, but it is not the worst disaster ever to befall a party in litigation, particularly bearing in mind the swift track along which this case has passed from filing to hearing date. It has not been suggested, for example, that to keep the plaintiff out of his money for a further nine months or so (which would be the effect of vacating the hearing date) would cause him insuperable hardship.
Each party says that he or it wishes to keep the hearing date. I accept that they have that intention. Thus, as I have said, I think that the Court should do what it can to help them by giving directions intended to facilitate the achievement of that objective.
For those reasons, in addition to those given earlier today, I make an order in accordance with para 1 of the notice of motion filed on 16 July 2014, substituting for the date "18 July" the date "22 July".
I make an order in accordance with para 2.
I direct that the defendant file and serve by 5pm on 30 July 2014 a document which, for each of the allegations of fact in its Further Amended Commercial List Response, identifies the document or documents proposed to be tendered (and, where necessary, the part or parts of those documents) that it intends to rely upon in proof of that allegation of fact.
In respect of any of the documents proposed to be tendered that is not covered by the direction just given, I direct the defendant to file and serve by the same time a statement of the facts in issue or other matters relied upon to justify the tender of that document.
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Decision last updated: 25 July 2014
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