In Commonwealth Bank of Australia v ACN 076 848 112 Pty Limited  NSWSC 666, the NSW Supreme Court has gone against the tide of other recent case law by refusing the Bank applicant access to the respondent's professional indemnity insurance policy.
The case is a reminder that applicants must demonstrate the basis of the court's power to grant access before an order will be made. An argument that it is in the interest of "just, quick and cheap" resolution of the proceedings will not be sufficient on its own, at least in NSW.
The Bank alleged professional negligence and misleading and deceptive conduct in connection with the valuation of a residential development for which the Bank advanced funds. The Bank had already obtained leave to proceed under s 444E(3) of the Corporations Act 2001 (Cth) against the first defendant, which was a company subject to a deed of company arrangement (DOCA).
This decision concerned the question of whether the Bank should be granted access to the first defendant's professional indemnity insurance documents in the interests of a "just, quick and cheap" resolution of the matter. The Bank submitted the documents were required to determine whether or not to pursue the proceedings.
Historically, courts have been reluctant to grant access to insurance documents, mainly on the basis that they are not documents relevant to issues in dispute between the parties. More recently we have seen access being granted on several bases, including:
- Cases where the terms of the insurance policy were relevant to the exercise of judicial discretion including applications for leave to proceed against an insolvent respondent under s 471B of the Corporations Act or s 58(3)(b) of the Bankruptcy Act 1966 (Cth);
- Cases where the insurance policy is in dispute including applications for a declaration of a priority charge under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW);
- In Queensland, where order 35 r 14(4) of the Rules of the Supreme Court of Queensland (No r 223 of the Uniform Civil Procedure Rules 1999 (Qld)) empowers the court to order the disclosure of particular documents where "there are special circumstances and the interest of justice require it, even where the documents are not "directly relevant to an allegation in issue in the cause."
The court distinguished the Queensland cases on the basis that the Uniform Civil Procedure Rules (NSW) contain no similar provision. In fact, UCPR r 21.2(4) specifically provides that an order for discovery "may not be made in respect of a document unless the document is relevant to a fact in issue." Moreover, the court rejected the submission that an order for production might be justified by modern case management principles such as the facilitation of a "just, quick and cheap" resolution of the real issues in the proceedings. Justice Ball stated:
"It is difficult to see how an order in effect requiring discovery of material that the rules specifically say is not discoverable will bring about a speedy or "just, quick and cheap" resolution of the proceedings through the Court's processes."1.
The Bank's application rested on the submission that the production of the documents was in the interest of justice because the Bank could not know whether the claim was worth pursuing without knowing the first defendant's insurance position.
The court rejected the application for the following reasons:
- The bank failed to demonstrate the insurance documents were relevant to a fact in issue (the basis for discovery under NSW UCPR), and once the court rejected case management principles as a basis for granting access, the Bank failed to show any other basis justifying access under NSW law. The court found that the submission confused the question of leave with the exercise of that leave. The purpose behind the requirement for leave is to protect the company, and derivatively, its creditors, from unnecessary court proceedings. It is not to assist the plaintiff to determine whether it should pursue the proceedings or to protect the plaintiff from unwisely doing so.
- The court considered that it was not obviously in the interests of justice that the Bank should know the extent of the first defendant’s insurance for the purpose of determining whether or not to pursue the proceedings. The court found that the knowledge of how much the defendant would be willing or able to pay in relation the proceedings was of considerable tactical advantage to the plaintiff (and of a corresponding disadvantage to the defendant). It was not in the interests of justice to grant such an advantage. The fact that such disclosure may bring about an earlier settlement alone does not mean that it is in the interests of justice.
- Related to the third point, the court doubted that the Bank's principal motive was to know whether it was worth pursuing the claim at all. The court considered that the real motive was for the Bank to determine at what point it should seek to settle the claim and for how much. The court did not accept that it was in the interests of justice for the documents to be disclosed for this purpose.
Accordingly, the court dismissed the notice of motion and set aside the notice to produce and subpoena.
So in NSW at least, it appears that an applicant will generally need to demonstrate a basis for access beyond an argument that it is in the interest of "just, quick and cheap" resolution of proceedings, despite recent Queensland case law to the contrary.
1 At .