Latest on privilege of loss assessors’ reports

Update: What do you know! Here’s another one, hot off the press of the Supreme Court of Queensland: Charleville RSL Memorial Club Inc v Sheapalm Pty Ltd [2009] QSC 193.

Original post: What insurers do when they get a public liability claim is hire a loss assessor to find out the facts,  hopefully get to the witnesses before anyone else does, and put the insured under surveillance before they get lawyers to warn them of the tricks of insurers’ lawyers.  It is a rare form of institutionalised use of non-lawyers where that is sensible, insurers being in some ways the most sophisticated purchasers of legal services (which is why the insurance wings of large firms, less profitable by virtue of clever bargaining by insurers, split off and become boutique insurance law firms).  So a hoary old chestnut is whether the report generated by the loss adjuster’s retainer is covered by legal professional privilege, and whether it makes any (and if so what) difference if the insurer uses a stooge solicitor to effect the retainer.  Long the leading case on legal professional privilege, Grant v. Downs [1976] HCA 63; (1976) 135 CLR 674 was in fact more or less such a case.

Harden Shire Council v Curtis [2009] NSWCA 179 is worth tucking away for several reasons. First, it is obviously a case of unusually high authority on this particular question. Second, none of the loss assessor reports authorities are considered, so this decision will not turn up in regular research which takes as its starting point earlier authorities on point.  Third, it was decided under the Evidence Act, 1995 (NSW) an analogue of the soon to commence Evidence Act, 2008 (Vic) which we Victorians are going to have to get used to.  Fourth, it’s short, and so capable of being handed up usefully as clear authority for a number of propositions, including that:

  • privilege attaches to communications, not documents per se;
  • a document which contains relevant non-privileged information and irrelevant and/or privileged information will be redacted so as to leave only the relevant non-privileged information;
  • a communication which would not be a privileged communication but for the fact that it discloses parts of or the substance of another privileged communication may be privileged — a kind of ‘derivative privilege’, ignorance of which is probably the thing which poses the biggest problems for some solicitors when ‘doing discovery’ (the next best citation being Justice Lockhart’s brilliantly user-friendly decision in Trade Practices Commission v Sterling [1979] FCA 33; (1979) 36 FLR 244).

The facts were that a woman driving alone had an accident on a stretch of road the Council was resurfacing.  Loose gravel remained on it.  The previous day, there had been another single vehicle accident, and Council workers had knocked over a warning device which had not been reinstated at the time of the second accident.  In due course, the woman died.  Less than 3 weeks later, someone within the insurance brokers which administered the scheme hired a loss assessor to investigate.  The resulting report was sent to the Council and to the London reinsurers who underwrote the scheme.  The Council’s General Manager reviewed it and prepared and sent a memorandum based on the report to the Council’s two project managers for the roadworks at which the accident had occurred.

The broker’s evidence was that he anticipated litigation against the Council and retained the assessors to gather evidence to provide to lawyers who would be retained to defend that litigation.  That evidence was accepted:

’14 The facts known to [the broker when he commissioned the report] included that Ms Paterson was first taken to Young Hospital but was “later airlifted to Canberra Hospital in a serious condition”, that “by the … damage to the vehicle and the force needed to KO the tree her injuries would be fairly serious” and the facts in Mr Ellis’s communication of 25 August. The latter referred to the presence of loose gravel on the bend from unfinished roadworks being carried out by the Council, another single vehicle accident nearby shortly before, and the loss of a warning device on a guard post before the bend which had been knocked over by the Council’s crew the day before and not repaired or replaced. Mr Barber was also aware of the earlier case against the Council in the Supreme Court arising from an accident on 22 March 2001 associated with unfinished roadworks. Given that knowledge the finding that litigation was anticipated was inevitable.’

The Court accepted at [15] to [17] that the forwarding of the report to London underwriters did not mean that the dominant purpose was not to provide information for defence lawyers.  There was no discussion of the possibility of the privilege over the report having been waived thereby, and at common law at least, such a finding would be prevented by the badly named doctrine of common interest privilege.

The General Manager said she would have prepared her memorandum regardless of whether she anticipated litigation, and so its dominant purpose was not a privileged purpose.  Prima facie, the communication of the General Manager’s memo did not attract legal professional privilege.  The real point of the case was whether the fact that her memo would disclose the confidential contents of another document which was privileged, namely the report, was sufficient to give her memo the protection of the privilege.  The Court said that it did.  Justice of Appeal Handley, with whom Justices of Appeal Hodgson and Campbell agreed, pointed out that s. 119(b) said (omitting irrelevant bits):

‘Evidence is not to be adduced if, on objection by a client, the Court finds that adducing the evidence would result in disclosure of (b) the contents of a confidential document that was prepared for the dominant purpose of the client being provided with professional legal services relating to an anticipated proceeding’.

His Honour said:

’21 The section, and the rules of court which incorporate it, prevent “disclosure of … the contents of a confidential document”. This protection extends, not only to the document itself, but also to other “evidence” which, if produced, “would result in disclosure” of the contents of a confidential document.’

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