AIG Australia Limited v Sudale & Anor [2022] QCA 160

SUPREME COURT OF QUEENSLAND CITATION: AIG Australia Limited v Sudale & Anor [2022] QCA 160 PARTIES: AIG AUSTRALIA LIMITED ABN 93 004 727 753 (applicant) v ALLAN SUDALE (first respondent) COMMUNITY BROKER NETWORK PTY LTD (ACN 096 916 184) t/as COMMUNITY BROKER NETWORK (second respondent) FILE NO/S: Appeal No 4682 of 2022 DC No 52 of 2021 DIVISION: Court of Appeal PROCEEDING: Miscellaneous Application – Civil ORIGINATING COURT: District Court at Brisbane – Unreported, 4 April 2022 (Jarro DCJ) DELIVERED ON: 30 August 2022 DELIVERED AT: Brisbane HEARING DATE: 17 August 2022 JUDGES: McMurdo and Bond and Dalton JJA ORDERS: 1. Leave to appeal is granted. 2. Appeal allowed. 3. Order that: (a) the stay on the notice of non-party disclosure filed 24 February 2022 is lifted to the extent necessary for compliance with the following orders; (b) AIG Australia Limited produce to the respondents the documents specified in items 2 and 7 of the schedule to the notice of non-party disclosure filed on 24 February 2022, within 14 days of this order; (c) the notice of non-party disclosure filed 24 February 2022 is varied so that items 3, 5 and 6 in the schedule read as they do at [31] of these reasons for judgment; (d) AIG Australia Limited produce to the respondents the documents described in items 3, 5 and 6 of the schedule to the notice of non-party disclosure filed -- 1 of 8 -- 2 on 24 February 2022, as varied, within 14 days of this order; (e) no order as to costs. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DISCOVERY AND INTERROGATORIES – PRODUCTION AND INSPECTION OF DOCUMENTS – GENERAL MATTERS – DOCUMENTS IN POSSESSION OF NON-PARTY – where the respondents served a notice of non-party disclosure on the applicant – where the applicant filed an objection to the notice pursuant to r 245 of the Uniform Civil Procedure Rules 1999 (Qld) – where the operation of the notice was stayed pursuant to r 246 – where the respondents brought an application to lift the stay – where the primary judge ordered that the applicant provide documents to the respondents – where the applicant claimed legal professional privilege over certain letters between itself and its solicitors – whether the letters attracted a claim of privilege – whether the schedule to the notice comprehended the letters PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DISCOVERY AND INTERROGATORIES – PRODUCTION AND INSPECTION OF DOCUMENTS – GENERAL MATTERS – DOCUMENTS IN POSSESSION OF NON-PARTY – where r 242(1)(a) only allows a notice of non-party disclosure to require production of documents that are directly relevant to allegations in issue – where the applicant asserted that the primary judge’s order required it to produce documents that were not directly relevant to any matter in issue – whether the categories of documents in the schedule to the notice of non-party disclosure were relevant to issues on the pleadings Uniform Civil Procedure Rules 1999 (Qld), rr 242, 246, 247 AWB Ltd v Cole (No 5) (2006) 155 FCR 30; [2006] FCA 1234, cited Commissioner of Taxation (Cth) v Pratt Holdings Pty Ltd (2005) 225 ALR 266; [2005] FCA 1247, cited COUNSEL: K J Horsley for the applicant J E FitzGerald and M H Daley for the first and second respondents SOLICITORS: Carter Newell Lawyers for the applicant Thynne & Macartney for the first and second respondents [1] McMURDO JA: I agree with Dalton JA. [2] BOND JA: I agree with the reasons for judgment of Dalton JA and with the orders proposed by her Honour. -- 2 of 8 -- 3 [3] DALTON JA: This is an application for leave to appeal pursuant to s 118(3) of the District Court of Queensland Act 1967 (Qld). The applicant insurer wishes to appeal from a decision given on an application to lift a stay on the operation of a notice of non-party disclosure served by the respondents. The decision obliges the insurer to provide documents to the respondents under the notice of non-party disclosure. The proceeding in the District Court [4] The proceeding in the District Court is brought by a Ms Marr. She sues the respondents alleging that they were insurance brokers who had undertaken to secure adequate building and contents insurance for her house at Kingsthorpe in the State of Queensland. The retainer was said to be on 21 September 2018. The email the plaintiff pleads as establishing the retainer told the brokers that the house “is unoccupied and is awaiting renovation”. [5] On 5 October 2018, the brokers emailed Ms Marr attaching: (1) a quotation; (2) the wording of AIG’s home and contents insurance, and (3) a document entitled, “Confirmation of what you told us”. The policy wording contained a clause that excluded cover if no one occupied the insured premises for a continuous period of 100 days or more. The confirmation document contained a statement that the property to be insured was not currently unoccupied, and was not expected to be unoccupied for more than 90 continuous days during the period of cover. [6] Ms Marr replied to the brokers’ communication saying that there were three things that needed changing (her date of birth, the house being on two levels, and the house being timber with a tin roof). Ms Marr did not correct the information regarding the property being unoccupied. In her reply she pleads that she did not notice this material, and that it was the brokers’ obligation to have enquired further of her about the fact that this material was inconsistent with her initial instructions to them. [7] The insurance policy was effected on 6 October 2018 on the terms of the draft wording attached to the email of 5 October 2018. The house remained unoccupied. [8] Ms Marr pleads that on 29 November 2018 she spoke to the respondents and queried whether or not there had been wrong information provided to the insurer in respect of occupation. Ms Marr pleads that she was told by the respondents that the policy meant she had 90 days to move into the property, that is, she had until 6 January 2019 to move in. Ms Marr pleads that she then asked what would occur if she had not moved in by then, and was told that if that were to occur, the policy could be changed, although it would cost more. That conversation is not denied by the respondents. The pleading is not admitted because the respondents “remain uncertain as to the truth or otherwise of those allegations”. [9] Ms Marr pleads that on 22 December 2018 there was a fire at the property which caused extensive damage to her house. Further, that at the time of the fire, stock belonging to a business (JT Drilling) owned by Ms Marr’s son was stored in the house, and was destroyed in the fire. The respondents admit that on 23 December 2018, Ms Marr advised them that there had been a fire at the property the previous day, but otherwise do not admit the allegations, because they are “uncertain as to the truth or otherwise” of them. -- 3 of 8 -- 4 [10] Ms Marr pleads that she made a claim on the policy. The respondents do not admit that allegation. [11] Ms Marr pleads that on 3 April 2019 the insurer refused to pay for damage caused by the fire on the basis that the property had been unoccupied since 13 September 2018. The pleading particularised that the refusal was made by a letter from the insurer dated 3 April 2019. The respondents plead that a letter from the insurer dated 3 April 2019 and addressed to Ms Marr care of them, was received by them and was “forwarded on” to Ms Marr, but otherwise do not admit the allegation because “they remain uncertain as to the truth or otherwise of” it. [12] Ms Marr claims that, but for contractual and tortious breaches of duty by the respondents, she would have been indemnified under a policy of insurance in respect of the loss she suffered in the fire, namely: site remediation; contents; building reinstatement and a claim from JT Drilling for its stock. So far as these allegations concern the quantum of Ms Marr’s loss, the respondents do not admit the allegations because they “remain uncertain as to the truth or otherwise” of them. Notice of non-party disclosure [13] On or about 17 June 2021 the respondent brokers served the insurer with a notice of non-party disclosure. The schedule to the notice itemised seven different categories of documents sought from the insurer. The insurer objected to produce all the documents sought and thus, pursuant to r 246 of the Uniform Civil Procedure Rules 1999, the operation of the notice of non-party disclosure was stayed. The brokers applied to the primary judge asking that the stay be lifted, and that the insurer be ordered to produce the documents sought. [14] The primary judge ordered the insurer to produce to the brokers the documents in five of the seven items in the schedule. There is no cross-appeal, so this Court is concerned with only five of the seven categories of documents in the schedule to the notice of non-party disclosure. These are: “No. Description Date … 2. The Plaintiff’s notification of circumstances to AIG in respect of loss caused by the Fire On or about 23 December 2018 3. Any document recording or which evidences AIG’s investigations into the Fire at the Property Any date … 5. Any loss adjuster or other investigators reports in respect of the Fire at the Property and the damage caused Various 6. Any document recording or which evidences any assessment or consideration and/or instruction or recommendation by AIG or any claims manager or internal or external consultant regarding whether to indemnify the Plaintiff under the Policy for damage caused by the Fire, or whether to refuse to pay the Plaintiff for the damage cause and cancel the Policy. September 2018 to May 2019 -- 4 of 8 -- 5 7. Any correspondence between the Plaintiff and AIG in respect of the Fire and/or AIG’s decision to refuse to pay the Plaintiff’s claim for damage caused by the Fire. September 2018 to May 2019. The reference above to ‘any document’ includes but is not limited to correspondence, emails, memoranda, attendance notes, advices and file notes, whether originals or copies, typed or handwritten, and to and from any person or entity.” Proposed grounds of appeal [15] The applicant says it should have leave to appeal the decision of the primary judge because his order would compel them to disclose documents to which legal professional privilege attaches; which were not directly relevant to any matter in issue in the District Court proceeding, and to produce documents in response to a notice which did not sufficiently particularise the documents sought. Disclosure of privileged documents [16] Before the primary judge it was argued that the insurer could not be compelled to produce privileged documents pursuant to the notice. This was said to be implicit in r 242(1)(c): “242 Notice requiring non-party disclosure (1) A party (the applicant) to a proceeding may by notice of non-party disclosure require a person who is not a party to the proceeding (the respondent) to produce to the applicant, within 14 days after service of the notice on the respondent, a document – (a) directly relevant to an allegation in issue in the proceeding; and (b) in the possession or under the control of the respondent; and (c) that is a document the respondent could be required to produce at the trial of the matter.” [17] I accept that argument as correct. [18] The issue of privilege as argued before the primary judge lacked the focus given to it on appeal. Before the primary judge the insurer relied upon a letter its solicitors had sent to the brokers’ solicitors which identified numerous documents as privileged. The letter was written by a firm of solicitors who had identified themselves as acting for the insurer in relation to the notice of non-party disclosure. The letter disclaimed an obligation to “state the facts, matters and circumstances” upon which that firm relied to claim privilege. It simply listed a series of documents over which it did claim privilege. It must be said that some of the documents listed did not on the face of the description appear to attract a claim of privilege. -- 5 of 8 -- 6 [19] However, before this Court only three of those documents are relied upon; they are all letters from the same firm of solicitors as is acting for the insurer in relation to the notice of non-party disclosure to the insurer. The dates of those letters are 11 March 2019, 1 April 2019 and 23 April 2019. The dates were closely contiguous to the insurer’s denial of liability under the policy, pleaded to be 3 April 2019. I think this was sufficient evidence for the primary judge to recognise that legal professional privilege prima facie inhered in the three letters. It is true that the assertion was made in correspondence exhibited to an affidavit, rather than in an affidavit itself. Further, the affidavit material could have given more about the circumstances in which the letters were written. Nonetheless, there was nothing put forward by the brokers as to why these letters may not have been what they appeared to be. In those circumstances I think the claim to privilege was sufficiently proved on the balance of probabilities.1 [20] Having said that, I find it difficult to see that the three privileged letters are comprehended by the itemised descriptions in the schedule to the notice of non-party disclosure. They could not be within the words of item 2 in the schedule; the same can be said for item 7. I interpret item 3 as dealing with the insurer’s investigation into the fire itself, not legal aspects of its policy response to the fire. Similarly, I interpret item 5 as dealing with reports of a factual investigator in respect of the physical circumstances of the fire, not legal issues. [21] Item 6 of the schedule is poorly worded. It is primarily concerned with documents which record or evidence the insurer’s consideration of Ms Marr’s claim. It was argued on behalf of the broker that the description “external consultant” was sufficient to include a solicitor. That is not the natural reading of the expression. In any case, if the words “external consultant” are read as including a solicitor, item 6 calls for production of documents which evidence a solicitor’s assessment, consideration or recommendation as to whether the insurer should indemnify Ms Marr under the insurance policy. That is, it calls for production of a document which must be privileged. As already explained, see [17] above, a notice of non-party disclosure may not call for production of a privileged document. [22] In these circumstances I cannot see any basis for allowing the insurer to appeal to ventilate concerns about legal professional privilege. It remains to note only that the solicitors for the respondents were wrong to insist that the wording of the primary judge’s order was such as to require disclosure of the three privileged letters. They need not be disclosed. Relevance and precision [23] The insurer argued that it should be given leave to appeal so that it could argue that the primary judge’s order meant that it was obliged to produce documents pursuant to the notice even though they were not directly relevant to any matter in issue in the District Court proceeding. It also wished to argue that the items in the schedule describing documents to be produced lacked precision. These matters can be dealt with together. [24] As noted above, r 242(1)(a) only allows a notice of non-party disclosure to require production of documents which are directly relevant to allegations in issue in the Court proceeding. 1 AWB Ltd v Cole (No 5) (2006) 155 FCR 30, 44 [44] and Commissioner of Taxation (Cth) v Pratt Holdings Pty Ltd (2005) 225 ALR 266, 278 [30](1). -- 6 of 8 -- 7 [25] Ms Marr pleads that she made a claim to the insurer under the policy for damage caused by the fire at the property on or about 23 December 2018, and the brokers do not admit that. It seems to me therefore that the document specified in item 2 to the schedule of documents is directly relevant to an issue in the proceeding. [26] Ms Marr pleads that on 3 April 2019, the insurer refused to pay her claim for damage caused by the fire at the property on the basis that the property had been unoccupied since 13 September 2018. The allegation as particularised conveys an assertion that the insurer acted in a particular way, namely that it conveyed to the insured that it refused the claim for a particular reason. That is not admitted by the brokers, and is therefore in issue on the pleadings in the District Court proceeding. In my view then item 7 of the schedule to the notice of non-party disclosure describes documents which are directly relevant to an issue on the pleadings. [27] I note that in the initial letter sent by the solicitors for the insurer, a question was raised whether or not some of the documents requested in the notice of non-party disclosure could be obtained on disclosure from the plaintiff in the District Court proceeding – see r 242(2). However, this was not argued before the primary judge, and I am disinclined to allow the insurer to depart from the way the matter was run below. [28] That leaves items 3, 5 and 6 of the schedule. As discussed above, the issue of the quantum of Ms Marr’s loss as a result of not having insurance is live on the pleadings in the District Court. Each of items 3, 5 and 6 is wide enough to comprehend documents which show the extent of destruction by fire of the house, contents and property of JT Drilling, and thus bear on the quantum, or likely quantum, of the loss Ms Marr claims in the District Court. To that extent I think that the primary judge was correct in ordering production of the documents. [29] The difficulty is that each of items 3, 5 and 6 are drawn widely so that they comprehend more than just these “quantum documents”. I cannot see that documents comprehended by items 3, 5 and 6 of the schedule, and which do not relate to the quantum of Ms Marr’s loss, are directly relevant to any issue on the pleadings. The cause of the fire is not in issue on the pleadings. Because the brokers do not advance any positive case by way of defence, but merely plead non-admissions, there is no issue as to whether the insurer acted properly in declining indemnity; all that is in issue is whether or not the insurer did decline indemnity as pleaded. [30] In the result, I think that a qualification ought to have been introduced into the order so as to vary the notice of non-party disclosure – see r 247(2)(a) and (b). [31] I think that items 3, 5 and 6 in the schedule to the notice of non-party disclosure should be varied so that they read: • “3. Any document evidencing AIG’s investigations into the Fire at the Property which contains information about the nature and extent of the loss and damage to the house, contents, and property of JT Drilling in the Fire.” • “5. Any loss adjusters’ or investigators’ report in respect of the Fire at the Property which contains information about the nature and extent of the loss and damage in the Fire to the house, contents, and property of JT Drilling.” -- 7 of 8 -- 8 • “6. Any document containing any assessment, consideration, instruction or recommendation by AIG, any claims manager of AIG, or any consultant to AIG, which contains information about the nature and extent of the loss and damage in the Fire to the house, contents, and property of JT Drilling.” [32] I would: 1. grant leave to appeal; 2. allow the appeal; 3. order that: (a) the stay on the notice of non-party disclosure filed 24 February 2022 is lifted to the extent necessary for compliance with the following orders; (b) AIG Australia Limited produce to the respondents the documents specified in items 2 and 7 of the schedule to the notice of non-party disclosure filed on 24 February 2022, within 14 days of this order; (c) the notice of non-party disclosure filed 24 February 2022 is varied so that items 3, 5 and 6 in the schedule read as they do at [31] above; (d) AIG Australia Limited produce to the respondents the documents described in items 3, 5 and 6 of the schedule to the notice of non-party disclosure filed on 24 February 2022, as varied, within 14 days of this order; (e) no order as to costs. [33] So far as costs are concerned, it seems to me that both parties have had mixed success both below and on appeal. It also seems to me that the issues disputed before the primary judge, and on this appeal, could have been settled sensibly between the parties by agreement. -- 8 of 8 --