PRACTICE AND PROCEDURE - disclosure of documents - personal injury - statutory provisions permitting withholding of documents if fraud suspected - meaning of "reasonable grounds to suspect a claimant of fraud" - Civil Law (Wrongs) Act 2002 (ACT), s 73.

PRACTICE AND PROCEDURE - disclosure of documents - application to withhold disclosure because fraud suspected - non-disclosure order - general order - accountability conditions burdening the applicant - non-disclosure of court proceedings - Civil Law (Wrongs) Act 2002 (ACT), s 73.

Civil Law (Wrongs) Act 2002 (ACT), Ch 5, ss 68, 72, 73, 73(1)(a)-(b)

Road Transport (General) Act 1999 (ACT), Pt 10

Human Rights Act 2004 (ACT), ss 12, 21

Court Procedures Rules 2006 (ACT), Pt 2.8, r 6200

Casey v Alcock [2009] ACTCA 1

Re an Application pursuant to s 73 of the Civil Law (Wrongs) Act 2002 (ACT) (2006) 203 FLR 154

Young v Nominal Defendant (2000) 31 MVR 81

George v Rockett [1990] HCA 26; (1990) 170 CLR 104

Craig v the State of South Australia [1995] HCA 58; (1995) 184 CLR 163

R v Clement (1821) 4 B & Ald 218; 106 ER 918

National Companies and Securities Commission v Bankers Trust Australia Ltd and Ors [1989] FCA 530; (1989) 24 FCR 217

IN THE MATTER OF AN APPLICATION UNDER S 73 OF THE CIVIL LAW (WRONGS ACT 2002 (ACT_)_

1. When enacted, the Civil Law (Wrongs) Act 2002 (ACT) (the Wrongs Act), which, inter alia, regulates the resolution of personal injury disputes about claims for damages so arising, prescribed a regime of full and frank disclosure and negotiation prior to the commencement of legal proceedings: Casey v Alcock [2009] ACTCA 1. Such pre-action protocols are designed to encourage resolution of such disputes over claims for damages without the expense and delay inherent in litigation.

2. The Wrongs Act as enacted, however, showed that the legislature recognised that there were circumstances when disclosure might not be in the interests of justice. Thus, s 72 of the Wrongs Act exempted a party from disclosing a document that was protected by client professional privilege.

3. In this case, however, the applicant has sought the court's approval for non-disclosure of documents and information under a different provision, namely s 73 of the Wrongs Act, which provides:

Non-disclosure of documents etc - suspected fraud

(1) If a respondent has reasonable grounds to suspect a claimant of fraud, the respondent may apply to the court for approval to withhold from disclosure under this chapter documents or information that -

(a) would alert the claimant to the suspicion; or

(b) could help further the fraud.

(2) The application may be made without notice to the claimant.

(3) If the court gives approval on application under subsection (1), the respondent may withhold from disclosure the documents or information in accordance with the approval.

4. The applicant is an insurer for motor vehicles in the Australian Capital Territory under the scheme for compulsory third party insurance: see Pt 10 Road Transport (General) Act 1999 (ACT).

5. On 22 April 2008, I made orders permitting the applicant to withhold disclosure and associated matters. They are of such a nature that it appeared appropriate for me to publish the orders actually made, suitably "anonymised", and to give reasons for making them. These are my reasons.

6. The application was brought in respect of a claim made by a person (the claimant) seeking damages from the applicant for injuries claimed to have been suffered in a motor vehicle accident. For obvious reasons, I directed that the proceedings be conducted in camera and that no person be admitted to the courtroom, save for court staff and the applicant's lawyers, without leave of the court. This was the course taken by Connolly J in Re an Application pursuant to s 73 of the Civil Law (Wrongs) Act 2002 (ACT), (2006) 203 FLR 154 at 155. This appears to be the first and only other application and order under s 73 of the Wrongs Act; I shall hereafter refer to it as the First s 73 Application.

7. In the First s 73 Application, Connolly J considered the approach that a court should take to the test propounded by the section: that the insurer "has reasonable grounds to suspect a claimant of fraud". Relying on Young v Nominal Defendant (2000) 31 MVR 81, his Honour accepted that a mere conflict of evidence was not enough.

8. His Honour then considered what the phrase might mean and cited the following passage from George v Rockett [1990] HCA 26; (1990) 170 CLR 104 where the High Court unanimously held that (at 112):

When a statute prescribes that there must be 'reasonable grounds' for a state of mind - including suspicion and belief - it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person.

9. His Honour there cited further from George v Rockett where the High Court described the facts necessary to establish reasonable grounds for suspicion. The Court said (at 115):

Suspicion, as Lord Devlin said in Hussien v Chong Food Kam [1970] AC 942 at 948, 'in its ordinary meaning is a state of conjecture or surmise where proof is lacking: 'I suspect but I cannot prove''. The facts which can reasonably ground a suspicion may be quite insufficient reasonably to ground a belief, yet some factual basis for the suspicion must be shown. In Queensland Bacon Pty Ltd v Rees [1966] HCA 21; (1966) 115 CLR 266, a question was raised as to whether a payee had reason to suspect that the payer, a debtor, 'was unable to pay [its] debts as they became due' as that phrase was used in s 95(4) of the Bankruptcy Act 1924 (Cth). Kitto J said (at 303):

A suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to a 'slight opinion, but without sufficient evidence' as Chamber's Dictionary expresses it. Consequently, a reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence. The notion which "reason to suspect" expresses in subs (4) is, I think, of something which in all the circumstances would create in the mind of a reasonable person in the position of the payee an actual apprehension or fear that the situation of the payer is in actual fact that which the sub-section describes - a mistrust of the payer's ability to pay his debts as they become due and of the effect which acceptance of the payment would have as between the payee and the other creditors.

10. This passage is not entirely easy to read, but it seems to me that what is suggested is that the facts must be sufficient to show to a reasonable person more than idle wondering or mere speculation. There must be some rational basis for holding that there could be fraud involved. It must, too, be more than a reason to investigate further or ask the question of whether there could be fraud. It must create in the mind of a reasonable person a mistrust that the claim is fraudulent. It is not necessary, however, for the insurer to believe that there is fraud, and certainly not to prove it beyond reasonable doubt or even on the balance of probabilities. As counsel put it to me, it is necessary to tip the scales but at the lightweight end of tipping the scales.

11. In this case, it would obviously be inappropriate in these reasons to describe the circumstances of the alleged accident or the facts which are said to give rise to the reasonable suspicion that the claimant's claim is fraudulent. The application was supported by affidavits, two affidavits by the applicant's lawyer annexing material that had been produced in investigating the claim, an affidavit of an authorised officer of the applicant deposing to the applicant's suspicion of fraud and an affidavit of the person other than the claimant said to be involved in the accident and alleged by the claimant to be legally responsible for the injuries which are the subject of the claim.

12. Having read these carefully and been taken thoroughly through the material by counsel, I formed the view that the applicant had reasonable grounds to suspect that the claimant was making a fraudulent claim.

13. The issue then became the terms of the order that should be made and it is for this reason that these reasons are published, so that some guidance may be given about the matters that need to be considered when making the orders upon granting such an application and how they were resolved, at least in this application.

14. This application has been made to a judge. The Master would also have jurisdiction to hear and determine it: r 6200 of the Court Procedures Rules 2006 (ACT). It would clearly be at least undesirable, however, if not inappropriate, for the judicial officer who hears the application also to hear any trial of the claimant's claims were they to become litigated proceedings. While the Master has concurrent jurisdiction with the judges in personal injuries litigation, he hears and determines the vast bulk of damages claims arising out of motor vehicle accidents. He also deals with many of the interlocutory applications in such cases. It may be sensible for applications under s 73 of the Wrongs Act, rare though they currently appear to be, to be heard by a judge so as to leave the Master free to engage in any necessary case management that the litigation may require and then any hearing.

15. The next question is whether the applicant has satisfied the test for an order to be made. It may be said that this is a question of jurisdiction: see Craig v the State of South Australia [1995] HCA 58; (1995) 184 CLR 163 at 177.

16. Accordingly, it is highly desirable that the court make an express finding regarding jurisdiction. In this case, I made a declaration that the applicant had the relevant reasonable grounds.

17. The terms of a substantive order made under statutory power should ordinarily follow the terms of the section. The alternative to an order made following the precise terms of the section in this case would be an order which specified documents or information which the applicant was permitted not to disclose, the court having itself made a decision about whether the documents or information satisfied the statutory criteria, namely that they would alert the complainant to the applicant's suspicion or would help further the complainant's fraud.

18. Initially, I was attracted to the making of a specific order, given that the order was an interference with the statutory obligation of disclosure which has clearly been required for good policy reasons. I had, too, access to the documents so far created during the applicant's investigation. To make an order in general terms would make the insurer the initial decider of which information could be withheld from disclosure. An order should not be wider than is necessary for the case, especially where it potentially trespasses on the interests of others.

19. On further reflection, however, it seemed to me better to follow the words of s 73 of the Wrongs Act and to make a more general order, but in circumstances where there was appropriate accountability to ensure that the applicant did not unconsciously or otherwise misuse that power. There were four reasons for this conclusion.

20. In the first place, the legislature did not evince an intention that the order be specific. That is to say, it did not express the court's power as to approve the applicant withholding specified documents or information.

21. Secondly, those are the terms in which Connolly J made the order in the First s 73 Application, namely a general order following the terms of that section.

22. Thirdly, a specified order could create practical difficulties which could be resolved by making a more general order which was properly supervised. It would appear that an insurer, and indeed a complainant, has a continuing obligation of disclosure. Section 68 of the Wrongs Act does not make that express, but in my view the proper construction of that provision (which sets out the obligations of disclosure) is that it is an ongoing obligation. The section does not limit the time beyond which disclosure is no longer required. The text of the section, for example, by referring to reports (plural) about the claimant's medical condition, which would not be expected to come into existence all at one time, supports that interpretation.

23. This ongoing obligation would require the applicant to approach the court every time it became aware of any information or any document, which was created and came within the class of material for which approval may be sought to withhold. This could result in frequent applications to be made at short notice that is likely to involve the court in too great an involvement in the applicant's investigations.

24. Fourthly, general orders are not unknown to courts. It is not infrequent that courts will make non-publication orders along the lines of prohibiting publication of "anything that would disclose the identity of", for example, a complainant in a sexual assault case. There is perhaps a distinction, however, in that a breach of a non-publication order is fairly easy to detect, namely by the breaching publication. In this case, however, since no-one will know what information has been withheld, detection of a breach would be almost impossible to detect.

25. It seemed to me, and it still seems to me, that a general order with appropriate accountability is the preferred option. Thus, I considered, following the precedent of Connolly J in the First s 73 Application, that the applicant should return to court every three or four months, at least initially, and report on the documents and information withheld. In that way, the court would be able to supervise the disclosure (or, rather, non-disclosure) regime and ensure that the applicant is held accountable.

26. Accordingly, I made orders along those lines. It enabled the court in effect to dialogue with the applicant and to ensure that it goes no further than the orders allowed.

27. A further issue that this could address was that the order should not prevent the disclosure of information that was already in the public domain. To take an example, the complainant could discover through knowledge of the registration number of the other car the identity of the owner and their insurer. While such information would not ordinarily be information likely to be entitled to be withheld under s 73 of the Wrongs Act, information should not be withheld where it could be discovered through normal search channels or where it is otherwise in the public domain. The state of such information, whether it is in the public domain or not, can change over time and regular supervision by the court as proposed and, in this case ordered, can address that issue as it arises.

28. There were other questions of disclosure that clearly needed to be addressed outside the express provisions of s 73 of the Wrongs Act if an order under that section were to be effective. One of these was the direction already referred to, that the proceedings be held in camera. To do this is an extraordinary step and should not be done lightly. Nevertheless, it is clear that the court has an inherent jurisdiction to do so for good cause. See R v Clement (1821) 4 B & Ald 218; 106 ER 918; National Companies and Securities Commission v Bankers Trust Australia Ltd and Ors [1989] FCA 530; (1989) 24 FCR 217 at 219.

29. The subject matter of the application would clearly be destroyed were there to be any publication of the hearing, the order made, the contents of the court file or the transcript. Nevertheless, there are some limits beyond which it is inappropriate for the court to go. I did, however, consider that the order should not be published.

30. The file of the proceedings ought also be protected. The title of the proceedings should remain "In the matter of an application" so that no court database might inadvertently disclose that an application in the particular matter had been made. Similarly, the file should be restricted in its access.

31. Access to the transcript of the proceedings should also be restricted.

32. Finally, witnesses from whom the applicant had obtained statements expressed a concern about disclosure of their names. Although I could not, of course, make a positive finding, especially on an ex parte application, there was credible material from which I could find that there was a reasonable basis for the witnesses' expressed concern, that they may be subject to intimidation if their names were disclosed.

33. Clearly intimidation of witnesses in these circumstances could reasonably be considered to constitute a furtherance of the fraud by the complainant. I was prepared to make an order protecting the names of the witnesses. It may be that this is more readily able to be made because of the right to privacy protected under s 12 of the Human Rights Act 2004 (ACT) (Human Rights Act).

34. Before making the orders, it was necessary to ensure that they did not extend so far as to interfere unreasonably with the claimant's right to take proceedings in court for the damages claimed. Notwithstanding the applicant's suspicions, which I had found were reasonably grounded, no finding of fraud has yet been made and none may ever be proved. The claimant has a right of access to the courts as recognised in s 21 of the Human Rights Act and this is to be respected.

35. It is also to be remembered that there may come a time when all this material should no longer be withheld. Section 73 appears in Ch 5 of the Wrongs Act which deals with pre-hearing procedures. The section refers itself to "disclosure under this chapter". At least arguably the orders I have made should not last beyond the commencement of proceedings so as, for example, to prevent them from being discovered under Part 2.8 of the Court Procedures Rules 2006 (ACT). Section 68 of the Wrongs Act clearly does not apply once proceedings have been instituted. No arguments were presented about this issue, though it was raised. I have made no finding about it. It was important however that the position of the court proceedings not be compromised by any order I make.

36. Relying on these principles and considerations, then, I made the following orders, but in setting them out, I have removed matters identifying the precise facts and circumstances and the people and events involved.

1. It be declared that the applicant has reasonable grounds to suspect that [the complainant] has, by making and pursuing a claim for damages for personal injuries claimed to have been caused by a motor vehicle accident alleged to have occurred on [the relevant date], engaged in fraud.

2. Under s 73 of the Civil Law (Wrongs) Act 2002 (ACT), until further order, the applicant, Insurance Australia Limited, trading as NRMA Insurance, be permitted to withhold from disclosure under Ch 5 of the Civil Law (Wrongs) Act 2002 (ACT) documents or information that:

(a) would alert [the claimant] to the applicant's suspicions; or

3. Subject to further orders, the order permitting the applicant to withhold disclosure also permits the applicant to withhold under this order documents or information that would disclose the names, addresses or identities of [the relevant witnesses].

4. The application be adjourned to 9.30 a.m. on 20 June 2008.

5. At the adjourned hearing, the applicant provide a list of documents and information withheld under this order and make any submissions it may be advised to make as to whether this order should be discharged.

6. The terms of this order are not to be published or disclosed to any person save for any employees of or lawyers for the applicant, except by order of this court.

7. The court file in this matter be held in the office of the Registrar and be only accessible to other court staff by consent of the Registrar.

8. No transcript from the taped recording of these proceedings be prepared except by order of this Court.

38. While not part of the order, I took the unusual step of making available a copy of these reasons to counsel before actually publishing them. This, I understand, is done in some other jurisdictions. Where confidentiality is at the core of the matter, it is helpful to have the parties (or, in this case, the applicant) be given an opportunity to draw to my attention any matter in the reasons which might compromise the confidentiality which the orders were designed so comprehensively to protect.

39. No matters having been raised, I now publish my reasons.

I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.

Solicitor for the applicant: Moray & Agnew Solicitors