Halpin & Ors v Lumley General Insurance Ltd  NSWSC 644
- The Supreme Court confirmed that the Markus discretion is alive and well in litigation and its operation is consistent with current case law and the statutory objectives of litigation – namely the "just, quick and cheap resolution" of proceedings.
- When evidence has been specifically prepared to challenge important parts of the other side's case, and if that evidence is to be produced to the other side resulting in the other side being tempted to tailor their evidence, the elements for the exercise of the Markus discretion are satisfied.
The New South Wales Supreme Court handed down its decision in Halpin & Ors v Lumley General Insurance Ltd  NSWSC 644 on 10 July 2009.
The substantive proceedings before the court concerned a claim brought by the plaintiffs against their former home and contents insurer (the defendant), in respect of a theft that occurred at their home on 10 August 2006.
The plaintiffs alleged that a large amount of sporting memorabilia was stolen in the insured sum of one million dollars. The plaintiffs made a claim against the defendant under their insurance policy.
The defendant denied the claim and alleged that the plaintiffs deliberately provided false information for the purposes of inducing them to pay the claim.
The defendant engaged a firm of loss assessors to examine and assess the plaintiff's claim. In order to do this, the loss assessors had several conversations with the first and second plaintiffs.
Affidavits were prepared by the defendant, which related to the subsequent inquiries and actions undertaken by the loss assessors, following their conversations with the plaintiffs. It was these affidavits which the defendant wished to hold back from serving in accordance with the court imposed timetable.
The defendant filed a Notice of Motion, seeking that the requirement of all affidavit evidence to be relied upon by the defendant be served upon the plaintiff be waived in respect of the above mentioned affidavits on the basis of the discretion in Markus v Provincial Insurance Company Limited (1983) 25 NSWCCR 1.
The Markus Discretion
In Markus, the document under consideration was an investigation report from a loss assessor. The principle was discussed by Justice Clarke;
"In my opinion the document which contains in the main results of discussions with police officers and other persons together with hypotheses based on those discussions, is of such a nature that its material would not enable the plaintiffs to be in a better position from the point of view of presentation of the case at trial. On the other hand it is clear that the only purpose in my view to be served by letting the plaintiffs see this documentation would be to put them on notice of the allegedly suspicious circumstances. I am of the view that the interests of justice are against the requirement that there be production".
Therefore, in determining whether or not the Markus discretion applies, one must satisfy a two step test, namely;
- Is the relevant document which the party wishes to withhold, specifically prepared to challenge important parts of the plaintiff's case; and
- If the relevant document is produced to the other side, would there be an inevitable risk that the other side would tailor its evidence to meet the issues raised in the document?
The plaintiff opposed the orders sought in the Notice of Motion by the defendant on three grounds,
- The Markus discretion no longer exists or if it does, it only exists in a very limited and presently irrelevant circumstance;
- The Markus discretion has never had any application in circumstances where, as here, the defendant seeking the order is raising a positive defence, namely a fraudulent claim; and
- Even if the discretion otherwise continues, the necessary elements have not been made out by the defendant and this Court would not in its discretion make the orders sought, even if the elements were present. Justice Hoeben ultimately held that the plaintiff failed on all three grounds.
1. Whether Or Not The Markus Discretion Exists, Or If It Does, It Operates In Very Limited Circumstances.
The plaintiffs argued that case law and the objectives of the Civil Procedure Act 2005 (NSW), ("the Act") contradict the operation of the Markus discretion.
In support of this submission, the plaintiffs specifically referred to ss56 – 58 of the Act which deal with the overriding purpose in relation to civil litigation - namely that the courts uphold the "just, quick and cheap resolution" of proceedings.
The plaintiffs submitted that if the orders sought by the defendant were made, it would result in a more expensive trial and frustrate any "just, quick and cheap resolution" of the proceedings.
The plaintiffs also relied upon the decision in Nowlan v Marson Transport Pty Limited (2001) 53 NSWLR 116 at 28, where Justice Heydon refers to the decision of Justice Allsop in White v Overland  FCA 1333 at ;
"...it should always be recognized that in the propounding of issues for trial the parties should take steps to ensure that all relevant parties to the dispute are cognisant of what the issues are. Any practice of quietly leaving footprints in correspondence or directions hearing to be uncovered some time later in an attempt to reveal that a matter was always in issue should be discouraged firmly."
Justice Hoeben did not accept the plaintiffs' submission that the Markus discretion no longer existed. Justice Hoeben stated that the case law relied upon by the plaintiffs dealt with the issue of "trial by ambush".
Justice Hoeben stated that the Markus discretion does not apply to trials by ambush, rather the contrary, as it allows one side to signal to the other that they have information which will not advance the other side's case and which is of such a character that if it were disclosed to them, it may tempt them to tailor their evidence.
In relation to the statutory provisions of the Act, Justice Hoeben held that the Markus discretion was in keeping with the statutory framework, notably s 58 of the Act which deals with the interests of justice.
2. The Markus Discretion Has Never Had Any Application In Circumstances Where The Party Seeking The Order Is Raising A Positive Defence.
The plaintiffs submitted that the onus of establishing a basis for making the orders sought in the Notice of Motion was upon the defendant. The plaintiff submitted that the Markus discretion did not apply in circumstances where the party resisting the production of the documentation, had a relevant onus in respect of the evidence contained within the documents. Justice Hoeben found that such a rigid distinction was not applicable. In this particular case, fraud had been raised by the defendant and s 56 of the Act, therefore each side carried an onus of proof.
Any such approach is contrary to the principle underlying the exercise of the Markus discretion, that is a party may hold back documents if the interests of justice so dictate.
3. Even If The Markus Discretion Exists, The Necessary Elements Have Not Been Made Out By The Defendant And The Court Is Unable To Exercise Their Discretion To Make The Orders Sought.
Justice Hoeben held that the documents which the defendant did not wish to produce, constituted evidence which attracted the Markus discretion and therefore the discretion was able to be exercised. His Honour held at paragraph 41;
"...my assessment of the affidavits which the defendant seeks to hold back is that they fairly and squarely comprise the sort of evidence described in the authorities as coming within the Markus discretion. The evidence has been specifically prepared to challenge important parts of the plaintiff's case and the credit of the first and second plaintiffs. Were the affidavits to be made available to the plaintiffs, there would be an inevitable risk of the plaintiffs being tempted to tailor their evidence to meet this evidence. In my opinion, the elements for the exercise of the discretion have been made out by the defendant."
The major point of interest in Halpin & Ors v Lumley General Insurance Ltd is that the Markus discretion remains alive and well.
When insurers have received a subpoena to produce documents from their claim file, or have been ordered by the court to serve all affidavit evidence by a certain date, it is important that insurers turn their mind to whether or not documents or affidavits to be produced would attract the Markus discretion. Insurer's need to ask themselves two questions;
- Are the documents that I wish to withhold, specifically prepared to challenge important parts of the plaintiff's case; and
- If the documents were produced to the other side, would there be an inevitable risk that the other party would tailor its evidence to meet the circumstances?
A good example of such documents may be surveillance reports or film in litigated matters, where the defendant has prepared material to attack the credit of the plaintiff, and which, if the plaintiff was able to sight those reports and film prior to the hearing, it would deprive the insurer of a legitimate forensic advantage in testing the plaintiff's story.
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.