The Discoverability of Insurance Policies

Angello v Heritage Care Pty Ltd [2023] VSC 653

1. Group proceedings are sometimes commenced against defendants when there is uncertainty as to their financial capacity to meet any judgment award, or to make any substantial offer to settle the proceeding. The recent decision of Justice Keogh in Agnello v Heritage Care Pty Ltd [2023] VSC 653 (Angello) is a salient reminder that a plaintiff who commences such a proceeding on behalf of group members ought not expect that a defendant will be required to produce copies of any policies of insurance that might answer the claims made against them in such proceedings.

2. In Agnello, Justice Keogh determined that neither the discovery powers in the Supreme Court (General Civil Procedure) Rules 2015 (Rules), nor those in the Civil Procedure Act 2010 (CPA), provide power to order production of such policies if the existence or terms of such a policy is not a fact in issue in the proceeding between the plaintiff and defendant. The applications for discovery were dismissed.

A.            The proceeding

3. The substantive proceedings[1] in Agnello concern the death of residents in two aged care facilities as a result of having contracted COVID-19. The aged care facilities were operated on premises occupied by the defendants. The plaintiffs brought claims in negligence, breach of contract, and breach of the Australian Consumer Law against the defendants on behalf of residents, family members and the personal representatives of deceased residents of the facilities: [1]. Before the Court was evidence of enquiries made by the plaintiffs that led them to be “concerned about the capacity of the defendants to pay the amount of any settlement or judgment obtained in the proceeding”: [2]. The plaintiffs therefore applied for discovery of insurance policies that may indemnify the defendants, and in the case of one of the proceedings, the financial records of the defendant. A judicial registrar dismissed that application. The plaintiffs appealed the order of the judicial registrar. Under r 84.05 of the Rules, Justice Keogh heard the application by way of a hearing de novo.

B.             The plaintiffs’ submissions

4. The plaintiffs submitted that the Court had the power to order disclosure of insurance documents under what they characterised as the “extremely broad powers” in the CPA, in particular those in section 55: [22]. They submitted that those powers ought to be “exercised in a manner which facilitate[s] the early, efficient and timely resolution of disputes, including by having regard to the ‘public interest in the early settlement of disputes by agreement between the parties.’”: [22]. They said that it is a proper exercise of the power contained in the CPA to order “discovery calculated to facilitate mediation”: [23]. In that respect, the plaintiffs relied on the observations of the Court of Appeal in Regent Holdings Pty Ltd v State of Victoria (2012) 36 VR 424, in which that Court dismissed an appeal against orders made in a “closed” group proceeding requiring certain group members to make discovery of documents relevant to the quantum of their claims. The plaintiffs in Agnello submitted that, by parity of reasoning with the view of the Court of Appeal in Regent Holdings that “information as to quantum” of the claims of group members should be available at mediation to allow rational settlements to be achieved, information that “sheds light on whether a defendant is able to satisfy any award of damages should also be made available”:  [24].

C.            Does the Supreme Court have power to order discovery of insurance documents?

5. The starting proposition of Keogh J’s analysis in Agnello was that the authorities support the principle that discovery is of documents that relate to a question or fact in issue on pleadings between the parties: [31]. His Honour cited Volunteer Fire Brigades Victoria v CFA (Discovery Ruling) [2016] VSC 573 in which J Forrest J, while recognising the broad scope of the Court’s powers in relation to discovery provided by sections 7 and 55 of the CPA, and r 29 of the Rules, referred to the decision of the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303, [57] in which the Court stated that the “powers of the Court [with respect to discovery] are not at large and are not to be exercised according to a judge’s individualistic idea of what is fair in a given circumstance.” The plaintiffs in Agnello did not submit that the insurance policies were relevant to a fact in issue in the substantive proceeding.

6. Importantly for Keogh J, the plaintiffs in Agnello were “unable to identify any authority that addressed the scope of discovery under Part 4.3 of the CPA (which concerns discovery and disclosure) or r 29 of the Rules that supported their contention that there is power to order discovery of documents that are not relevant to the facts in issue in the proceeding”: [35]. Instead, the plaintiffs “relied heavily” on the Court of Appeal’s decision in Regent Holdings. Keogh J drew a distinction between the matters in issue in Regent Holdings, in which orders were made for the discovery of documents relevant to a fact in issue in the proceeding (namely quantification of the claim for damages made by the group members), and the plaintiffs’ application in Agnello, which his Honour characterised as seeking “to have imposed on the defendants an obligation to discover documents that are not related to any fact in issue in the proceeding”:  [39]. His Honour ultimately doubted that either rule 29.05.2 of the Rules or section 55 of the Act expanded the power to require discovery beyond documents relevant to a fact in issue in the proceeding: [46] and [55].

7. In any event, his Honour determined that, had he been satisfied that such a power existed, he would not have ordered discovery of the policies because: they were not relevant to facts in issue in the proceeding, were confidential to the insurer, and the plaintiff had not articulated any principled basis to order discovery of such information; disclosure would cause an “asymmetry in bargaining positions” (which his Honour described as an asymmetry that would arise “because documents and information relevant to the motivation to settle would become known in respect of one party but not the other”); an order was not appropriate just because information in the policies would become relevant on an application for approval of any settlement of the proceeding; the plaintiffs had overstated the difficulty they faced in assessing any offer made at mediation and advising group members in the absence of the policies; the insurer was not a party to the proceeding; the plaintiff in one proceeding had obtained some information regarding the defendant’s financial position, and the defendant whose information the plaintiff sought in the other was only one of four defendants in that proceeding. His Honour’s approach to those discretionary factors was consistent with that of Justice Beach in Evans v Davantage Group Pty Ltd (No 2) [2020] FCA 473, in which his Honour determined that, while the Federal Court had power to order disclosure of insurance documents under section 23 of the Federal Court of Australia Act 1976 (Federal Court Act), he refused to exercise his discretion to do so, for essentially equivalent reasons to those adopted by Justice Keogh in Agnello.

8. The results in Agnello and Evans v Davantage suggest that a plaintiff in a group proceeding ought not expect that they will persuade a court to order disclosure of policies of insurance held by a defendant.

9. Two circumstances exist, however, in which a plaintiff might secure an order requiring production of policies of insurance held by a defendant. The first is where an insurer has already been joined to the proceeding, and its liability to indemnify a defendant is in issue. So much was the case in Simpson v Thorn Australia Pty Ltd [2019] FCA 1229, in which Gleeson J (prior to her Honour’s ascension to the High Court) ordered production of policies of insurance by an insurer that was already a party to the proceeding, pursuant to section 33ZF of the Federal Court Act (Simpson was decided prior to the High Court’s decision in Brewster v BMW Australia Ltd (2019) 269 CLR 574, following which it is arguable section 33ZF would not provide that power). While her Honour stated that she did not consider that the documents were “relevant to an issue in the proceeding”, Justice Keogh in Agnello surmised that it was possible that what her Honour meant by that observation was that they were not relevant to matters in issue in the principal claim by the plaintiff against the defendant: [49]. On its face, it seems that the policy documents were relevant to whether the insurer was liable to indemnify the defendant, which from her Honour’s decision it appears was a fact in issue in the proceeding.

10. The second is a situation in which a defendant is in some form of external administration, and a plaintiff has commenced proceedings against that defendant, and seeks leave to proceed against it nunc pro tunc. A “factor of importance” in determining whether such leave should be granted is whether the company was insured against the liability in respect to which the plaintiff is suing (see Rushleigh Services Pty Ltd v Forge Group Ltd (In liq)(receivers and managers appointed) [2016] FCA 1471, [18]). Because that is the case, a plaintiff might seek the production of the policy of insurance by issuing a notice to produce in the application for leave.

[1]              The judgment was delivered in two separate proceedings: Agnello v Heritage Care Pty Ltd S ECI 2020 03282 and Efstathia Fotiadis v St Basil’s Hone for the Aged in Victoria S ECI 2020 03339.

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