Preliminary discovery of insurance documents not granted by the Supreme Court of Victoria

This case review was co-authored by Terence Wong, Graduate, Sydney.

In the recent decision of Agnello v Heritage Care Pty Ltd; Fotiadis v St Basil’s Homes for the Aged in Victoria (No 2) [2023] VSC 653 (Agnello/Fotiadis), the Supreme Court of Victoria further clarified the court’s power to order preliminary discovery of insurance policies held by defendants that are not in administration or liquidation.

Key findings

The Supreme Court of Victoria:

• Held that insurance documents are not available for preliminary discovery unless they are relevant to a fact in issue.
• Affirmed the findings in Evans v Davantage Group Pty Ltd (No 2) [2020] FCA 473 (Davantage), which held that the discovery of insurance documents were not relevant to the determination of any fact in issue in the proceeding and their discovery would prejudice the defendant and the insurer.

Facts

Background

The underlying class actions concern the death of residents at two aged care facilities caused by COVID-19. The plaintiffs brought claims in negligence, breach of contract, and breach of the Australian Consumer Law, on behalf of the residents, family members and personal representatives of deceased residents of the facilities.

Preliminary discovery

The aged care facilities were not in liquidation but the plaintiffs had concerns about their capacity to satisfy a settlement or judgment. The plaintiffs therefore applied for discovery of the defendants’ insurance policies that may provide indemnity (Documents). The relevant insurer is not a party to the proceedings but was granted leave to intervene. The insurer and the defendants in Agnello opposed the application. The application was refused by the Judicial Registrar. The applicants appealed. Keogh J of the Supreme Court of Victoria heard the application.

The parties' submissions

The plaintiffs contended that the court should exercise its broad discretion granted under section 55 of the Civil Procedure Act 2010 (Vic) (the Act), in order to “facilitate the early, efficient and timely resolution of disputes” and order discovery. The plaintiffs submitted that discovery would enable:

1. The plaintiffs to assess the extent to which the defendants can meet any judgment.
2. The plaintiffs legal representatives to be satisfied that any future settlement is “fair and reasonable”.
3. Increased prospects of settlement.
4. The plaintiffs to ensure that any insurance policy is properly enlivened, should it become necessary.

The defendants and the insurer opposed the application on the basis that:

• The Documents are not relevant to the plaintiffs’ pleaded case, and there is no power that enables the court to order discovery of the Documents.
• It would be inappropriate for the court to exercise its discretion to order discovery of the Documents.

Judgment

The Supreme Court of Victoria dismissed the appeal. Keogh J found that there were no Victorian authorities which supported the discovery of the Documents. Keogh J found that even if the power existed it was not appropriate in this case to make such an order.

Whilst acknowledging that the Federal Court authorities relied upon by the parties are based on a statutory discovery regime that differs from that in Victoria, Keogh J agreed with Beach J in Davantage, where the plaintiff sought production of the insurance documents to facilitate the mediation, for the purposes of an application for approval of any settlement that was achieved, and to advise group members about whether other proceedings should be brought against the insurers.

Keogh J therefore held that it is not appropriate to order discovery of the Documents for the following reasons:

1. The Supreme Court (General Civil Procedure) Rules 2015 (Vic) and the relevant authorities, clearly set out the scope of discovery which is limited to documents that relate to a question or fact in issue on pleadings between parties. The Documents are not relevant to the determination of any fact in issue in the proceedings, a matter agreed by the parties.
2. The Documents are confidential to the defendants and the insurer.
3. There is no right to discovery of insurance documents simply for the purpose of examining a defendant’s means in order to assess whether to settle or proceed with a case.
4. Requiring discovery of the Documents would cause “an asymmetry of bargaining position” which would prejudice the defendants and likely the insurer.
5. It is not appropriate to order discovery because information contained in the Documents may ultimately be relevant to whether approval is given under section 33v of the Supreme Court Act 1986 (Vic) for settlement of the proceedings.
6. If the plaintiffs application for discovery of insurance documents were successful, it would be difficult to assess what limits would be placed on the right to discovery.
7. The plaintiffs have overstated the difficulties they face in assessing any offer made at mediation.
8. The insurer is not a party to the class action.

Keogh J's reasoning is consistent with the reasoning of Beach J in Davantage.

Keogh J also left the door open for applications for discovery of insurance documents to facilitate settlement approvals, commenting:

Comment

This is a welcome decision for insurers and insureds. It is important to note, however, that the decision in Agnello/Fotiadis is specific to the State of Victoria, whose statutory regime differs to those of other States (and Territories) and the Federal Jurisdiction. However, it is a highly persuasive decision. It also does not change the limited circumstances in which the Federal Courts and the Supreme Court of Victoria has held that insurance policies may be discoverable, that is: (a) when the defendant is insolvent; or (b) when the relevant insurer is joined to the proceedings and it may be contended that the discovery is relevant to a fact in issue.

Related item: Guidance on the extent of the Court's powers to order preliminary discovery of insurance documents