Getting documents out of insurers

If I recall correctly, one of my first contested hearings as a young solicitor was about whether the claim for privilege over a loss adjuster’s report in an affidavit of documents drafted by me was kosher.  I went on to write an article on the subject in that august journal, the newsletter of Women in Insurance’s Victorian chapter.  The law was all over the place.  Now Wotton & Kearney have put out a note of a substantial decision on the same issues: privilege of documents in the hands of an insurer brought into existence at a time when proceedings were merely anticipated.  The case is Southland Coal Pty Ltd (Receivers & Managers Appointed) (In Liquidation) [2006] NSWSC 899.  It is a decision which is favourable towards insurers and takes an expansive rather than restrictive approach to the question.  The article appears in the firm’s inaugural annual insurance review, but its author, Sydney senior associate Brendan Hammond has given me permission to reproduce it.

This is one of the points made:

‘some of the disputed documents were emails exchanged between officers of the insurer, or between an officer of the insurer and a third party. It was held that the issue was not whether those emails were privileged but whether granting access to them would result in disclosure of privileged communications such as the provision of legal advice by the insurer’s lawyers.’

That is consistent with Justice Chernov’s majority view of waiver in Spotless Group Ltd v Premier Building & Consulting Pty Ltd [2006] VSCA 201, and inconsistent with Neave JA’s minority view.  Now, here’s the article in full:

Privilege: the last bastion

As lawyers acting for the insurance industry, we have noticed a definite trend for insurers to come under pressure to release documents to third party claimants and liquidators. A common (and concerning) theme emerging in Australia is for insurers to be served with subpoenas to produce documents from claim files where the insured is a party (or a potential party) in litigation. Yet the more alarming trend is for insurers to come under attack from liquidators of failed companies pursuant to the very broad document production and examination powers afforded by s596 of the Corporations Act 2001 (Cth) (the Act). Section 596 allows liquidators and administrators to seek orders for the production of documents and to examine a person (including officers of an insurance company) who may have information about the ‘examinable affairs’ of the company. The powers of examination are extremely broad. From the perspective of an insurer that can include information:

+ necessary to assess the justification or otherwise of a denial of indemnity;
+ relevant to the decision as to whether to commence proceedings against the insurer(s); and
+ as to the worth of a potential defendant.

Wotton & Kearney acted for insurers in proceedings commenced in the Supreme Court of NSW by the Receivers & Managers (R&M) of an insured mining company Southland Coal Pty Limited (In Liquidation) (Receivers & Managers Appointed) (Southland) for orders under s596 of the Act. The validity of the process and the breadth of the orders sought by the R&M have already been the subject of a substantive Court of Appeal judgment (Meteyard & Ors v Love & Ors [2005] NSWCA 444) where the R&M’s Orders for Production were rejected. The R&M pursued fresh Orders for Production earlier this year (the revised Orders). Documents were produced by the insurers in compliance with the revised Orders. Documents (in fact the majority of the documents) over which claims for privilege were made were not produced. The R&M contested the privilege claimed by the insurers and sought access to the documents. The R&M’s challenge led to a substantive hearing and judgment in the matter of Southland Coal Pty Ltd (Receivers & Managers Appointed) (In Liquidation) [2006] NSWSC 899.

The relevant background is as follows:

+ December 2003 – A “spontaneous combustion incident” occurred at the Southland mine. Insurers were notified of the incident. Several days later the Department of Mineral Resources made orders to seal the mine and within days Southland was placed into receivership.

+ January 2004 – Insurers instructed lawyers to advise on the investigation of the incident and the (apparently controversial) indemnity issues likely to arise under the policy. Lawyers on behalf of the insurers instructed loss assessors and mining consultants on behalf of the insurers. There followed a lengthy period of gathering information and investigation.

+ December 2004 – The insured’s JV partner (and co-insured) commenced proceedings against the insurers.

+ January 2005 – The R&M issued Summonses for Examination pursuant to s596B of the Act to officers of the insurers, loss assessors and mining consultants.

+ February 2005 – The insurers denied indemnity.

In the judgment Justice Austin found that each of the insurers’ claims for privilege (made over the whole or part of the relevant documents) was valid and denied the R&M access to the documents. In particular he made the following observations:

+ S118 Evidence Act: “Legal Advice” Privilege – “Legal advice” must be understood in a pragmatic sense. Established English authorities approved in Australia in General Manager, WorkCover Authority of NSW v Law Society of NSW [2006] NSWCA 84 make it clear that legal advice is not confined to “telling the client the law; it must include advice as to what should prudentlyand sensibly be done in the relevant legal context”. Legal advice is a broad rather thannarrow notion.

+ S119 Evidence Act: “Anticipated Proceedings” Privilege – Justice Austin took into account the catastrophic nature of the incident and its serious economic consequences, the size of the claim, the early recognition that indemnity/liability issues were bound to be controversial, the structuring of the advisory relationships (so that mining engineers were retained to report to the lawyers) and the claims submissions made on behalf of the insured. His Honour inferred that legal proceedings between the insured and the insurers were “anticipated” as from February 2004, some 12 months prior to the date when indemnity was formally denied.

+ Communications or Documents? – Legal professional privilege attaches to the information/ communications in the documents rather than documents themselves. The significance of the distinction was that some of the disputed documents were emails exchanged between officers of the insurer, or between an officer of the insurer and a third party. It was held that the issue was not whether those emails were privileged but whether granting access to them would result in disclosure of privileged communications such as the provision of legal advice by the insurer’s lawyers. Here there would be such a disclosure.

+ Final / Interlocutory Determination – Determining matters of privilege raised in response to the revised Orders (ancillary to examinations under the Act) amounted to an interlocutory rather than a final decision. As a result the Court was able to receive (and accept) hearsay ‘information and belief’ evidence.

+ Lawyer’s evidence – There was a rejection of the R&M’s blanket assertion that dominant purpose could not be proved by evidence from a lawyer rather than the author of the document, and the assertion that an adverse inference should be drawn from the absence of direct evidence from the authors of the various documents. The judge noted that “the process of [adducing evidence in that form] would….unduly complicate, extend, and render unacceptably expensive, the process of determining privilege issues in connection with the liquidator’s examinations”.


This decision reinforces the primary immunity of privilege, even against the backdrop of the broad examinations powers afforded by the Act. The judgment offers useful guidance on the areas where the Court is likely to permit (or not permit) examinations under the Act. If the information sought is ‘privileged’ it is not information which the examinee is “able to give”. Although each case is determined on its own facts the decision is a useful reminder that where insurers face a large and possibly complex and controversial claim there is merit in attempting to manage the claim from the outset by instructing lawyers to provide legal advice and retain consultants on behalf of the insurer. In those circumstances, legitimate claims for privilege can be maintained, even when insurers are faced with pressure to release documents pursuant to subpoenas and the more onerous examination and ancillary powers under the Act.’

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