Access to insurance policy documents, notifications and
relevant correspondence denied.
Consideration of power of the Court to order a party to produce
insurance documents under section 23 of the Federal Court Act
Lehman Brothers (Lehman) is the defendant in proceedings brought
by the Wingecarribee Shire Council (Council) for alleged misleading
and deceptive conduct.
Before proceedings were commenced, Lehman went into voluntary
administration. A meeting of creditors was scheduled to be held on
9 October 2008. Before the meeting, the Council requested that the
administrators produce a copy of Lehman's professional
indemnity insurance policy. The request was declined.
The Council then applied to the Federal Court for an order
requiring Lehman to produce its insurance policy. The Council did
not contend that the documents were relevant to any matter in the
proceedings. Instead, the Council relied on section of the
Federal Court of Australia Act (Act) which provides:
"The Court has power, in
relation to matters in which it has jurisdiction, to make orders of
such kinds, including interlocutory orders, and to issue, or direct
the issue of, writs of such kinds, as the Court thinks
At first instance, Rares J ordered Lehman to produce copies of
its insurance policies to the Council. His Honour relied on the
principle in Jackson v Sterling Industries Limited (1987)
162 CLR 612, that the power under section 23 of the Act permits the
court to make orders to prevent the abuse or frustration of its
processes. Rares J thought that the potential abuse of process, or
the event which might frustrate the process of the Court, was that
at the forthcoming creditors' meeting, the administrators could
propose a deed of company arrangement which would extinguish the
Council's entitlement to claim damages from Lehman and its
directors. His Honour stated:
"In my opinion, the question
whether there is insurance that, in fact, responds or there may be
a charge that the council is entitled to under s.6 of the Law
Reform (Miscellaneous Provisions) Act are matters which it is
entitled, as a litigant in this Court, to know in the interests of
justice before it has to determine what it will do in Lehman
Brothers' second creditors meeting."
Lehman appealed Rares J's decision.
The Full Court's Decision
The Full Court (Jacobson, Middleton and Perram JJ) found in
favour of Lehman, denying the Council access to Lehman's
The parties did not dispute that the principles involving
exercising the powers under section 23 of the Act were outlined by
the High Court in Jackson v Sterling. The Full Court
commented that there is no doubt that the Court has power to
prevent and remedy abuses of its process and that this can extend
to an order requiring a respondent in proceedings to state its
asset position. However the Court stated that:
"... it is to be kept
steadily in mind that the power arises from the existence of an
apprehended or antecedent abuse of process. It is not a free
ranging power to compel respondents to produce evidence as to their
assets where it might be convenient to the other party to the
litigation so to order."
The Full Court reasoned that where a step that might otherwise
be an abuse of process was permitted by statute, that generally
suggested that the step was not, per se, an abuse of
process. In this case Parliament intended, by Part 5.3 of
Corporations Act, that a deed of company arrangement might
extinguish a plaintiff's rights against a company under
administration. On that basis, the ordinary operation of that Part
could not, of itself, constitute an interference with the
Council's proceedings which could be remedied pursuant to
section 23 of the Act.
The Full Court held that it was necessary to establish a link
between the conduct said to constitute the abuse of process (in
this case, the failure by Lehman to produce its insurance
documents) and the impact upon the proceedings. There was no
evidence to suggest that a majority of Lehman's creditors would
vote against the deed of company arrangement if the insurance
documents were produced.
The Full Court also indicated it was then necessary to establish
that the remedy sought would provide a solution to the identified
abuse. It was at this point, the Full Court reasoned that the
Council's case failed. The Full Court stated:
"There is, as far as we can
see, no connection between the provision to the Council of the
respondent's insurance arrangements and the prevention of the
termination of the Council's proceedings in this Court should
the [deed of company arrangement] be passed."
It is frequent for plaintiffs, particularly in cases against
companies in administration, to attempt to ascertain details of the
defendant's insurance entitlements. It is clear that the court
can require a defendant to disclose insurance material, even if it
is not relevant to a matter in issue in the proceedings. However,
this case suggests that there must be a real risk of an abuse of
process or the frustration of the court's processes before the
court will order production of an insurance policy.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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