Taylor v Asteron Life Limited

The plaintiff, Mr Taylor, commenced proceedings in the High Court of New Zealand seeking a declaration that Asteron Life Ltd was not entitled to cease paying benefits under a total disability insurance policy. Asteron Life Ltd had ceased paying benefits on the basis that it had not received information from Mr Taylor as to his condition, which it claimed was a breach of the policy terms. The defendant sought discovery of documentation related to the sale of Mr Taylor’s insurance broking business, arguing that the sale might have included a restraint of trade, which could have contributed to Mr Taylor’s incapacity. Mr Taylor opposed the application, arguing that the documents were irrelevant.

The legal issues before the court were whether the documents sought by Asteron Life Ltd were relevant to the current proceedings and, if so, whether there were any grounds to compel Mr Taylor to provide them. Asteron Life Ltd argued that the documents were relevant, as they might indicate whether Mr Taylor’s incapacity was due to his medical condition or the restraint of trade agreement. The court had to consider whether the principles in Blanshard v National Mutual Life Association of Australasia Ltd applied in this case and whether the sale of the business could be a defence to Mr Taylor’s claim.

The court found that while the Blanshard case provided some guidance, there were significant differences between the cases that might affect its applicability. The court noted that Blanshard had entered into the restraint of trade agreement before making the insurance claim, whereas Mr Taylor sold his business years after making his claim. The court also considered whether it would be fair to prevent Mr Taylor from selling his business years later, potentially jeopardising his insurance entitlements. The court concluded that it was difficult to imagine that the law would permit such an outcome. However, the court noted that it was not its role to determine the merits of the arguments. Instead, it had to decide whether the documents were relevant to the current pleadings. Since the sale of the business was not pleaded, the court found that Mr Taylor was entitled to argue that it was not before the court. Nevertheless, the court found that Asteron Life Ltd needed the documents to determine whether there was any foundation for a new defence. The court also noted that Mr Taylor, as a shareholder and director of the broking business, was likely to have possession or control of the documentation sought. Finally, the court considered the commercial sensitivity of the transaction and directed that the parties to the agreement be notified of the application and the orders made.

The court granted the application for further and better discovery, directing that Mr Taylor, if in possession of the documentation, must provide it to Asteron Life Ltd’s solicitors and counsel only, without copying or discussing it with any other party. The court also directed that Asteron Life Ltd notify the parties to the agreement of the application and the orders made. If Asteron Life Ltd’s advisers determined that there was a basis for persisting with the proposed new defence, an application for further directions could be made. At that point, the parties to the agreement could seek ongoing confidentiality orders if necessary.