Sagacious Legal Pty Ltd v Wesfarmers General Insurance Limited

Preparations for the trial 2 One of the issues is the effect of an exclusion in the policy from the insurer being liable for loss or damage caused while the vehicle was being driven by, or was in the charge of, any person whose blood alcohol content was in excess of the legal limit as prescribed by law, based on a breath test taken within two hours of the occurrence of the accident. Another, more critical, term was an exclusion of liability where loss or damage was caused while the vehicle was being driven by, or was in the charge of, any person under the influence of intoxicating liquor. 3 At all times, as I had understood the issues tendered for trial when giving directions after the matter was remitted to this Court, the critical question was whether Mrs Lana O'Shannassy could be shown by the insurer to have been under the influence of intoxicating liquor at the time of the accident, causing a write-off of the car which she was driving, the subject of the policy. 4 On 23 October 2009 I made directions, after counsel consulted with one another to identify appropriate directions to have the matter ready for a hearing that I had fixed to commence for five days on 8 March 2010. Those directions extended the time for the respondent insurer, to serve its proofs of evidence until 1 December 2009, and directed the applicant insured, car owner, to serve any proofs of evidence in reply by 18 December 2009. The parties were to serve objections to a proposed joint tender bundle by the same date. During the directions phase, there were other discussions about issues concerning a considerable number of subpoenas which the insurer wished to issue in order to assist it in establishing that it was entitled to rely upon the exclusions of liability. 5 The insurer served some of its proofs of lay evidence just prior to 1 December 2009, served one expert report on 4 December and a further export report on 14 December 2009. The insured served no proofs of evidence in reply until 1 March 2010 when a proof from Mrs O'Shannassy was served, followed yesterday by a proof from her husband, Paul O'Shannassy.

A new document 6 However, on 24 December 2009, the applicant's solicitors served a revised version of the tender bundle. For the first time the bundle included behind tab 9 an expert report by Robert Hampshire, a consultant psychiatrist. That report was dated 18 March 2009 and consisted of 18 numbered, typed pages. However, by an apparent accident, as I would presently infer, three pages with a typewritten number at the foot of pages 13, 14 and 15 were not in the bundle that was served on the insurer's solicitors. That bundle, however, contained consecutively handwritten numbered pages, which skipped from Dr Hampshire's page 12, which was hand‑numbered "51", to Dr Hampshire's page 16, which was hand‑numbered "52". The index noted that the document commencing behind tab 10 commenced at page 55. On 3 February 2010, the insurer responded with its version of the tender bundle and served its objections to the insured's version. 7 On 26 February 2010, the insured served a joint tender bundle on the insurer as a finalised bundle. This version of the bundle contained the full version of Dr Hampshire's report, which included the missing pages that now bore their consecutive handwritten numbers correctly at the top. Thus, the first page of the document commencing behind tab 10 was numbered 58, albeit it that in the unaltered index prepared by the insured's solicitors it retained page 55 as its number. 8 The missing pages were critical, for on page 15 of Dr Hampshire's report, he opined that the police and ambulance officers' observations of the behaviour of Mrs O'Shannassy at the scene of the accident were, in his view, entirely consistent with the behaviour of a disassociated person who had an altered state of consciousness of both themselves and their surroundings. He then proceeded to give a medical explanation of that condition. In other words, his report provided an explanation for behaviour at the time of the accident which I assume will be relied on by the insured, as being consistent with behaviour demonstrated by persons with a medical condition connected to their being disassociated and with an altered state of consciousness, rather behaviour being consistent with the effect of alcohol. 9 The medical report of Dr Hampshire was prepared and dated 18 March 2009, and referred to a long interview he had had with Mr and Mrs O'Shannassy two days beforehand. It was given to solicitors different to those who appear for Sagacious Legal Pty Limited, the insured in these proceedings. 10 The insurer, understandably, has been concerned about the issue raised in the missing pages of Dr Hampshire's report coming to light so late, one week before the hearing, and in the circumstances in which they did.

The present dispute 11 Counsel for the insured argued that a principal issue in the proceedings was whether Mrs O'Shannassy was, in fact, under the influence of alcohol at the time of the accident, and that it would be necessary to lead evidence to rebut inferences or opinions adduced by the insurer's witnesses to that effect. Dr Hampshire's report went some way towards establishing such a rebuttal. He said that there would be severe prejudice if the insured were not allowed to rely upon Dr Hampshire's report for this purpose. 12 When I inquired as to why this had not been raised for the purposes of providing adequate directions, including directions for the filing of experts' reports and the opportunity for the insurer to reply to Dr Hampshire's report, counsel for the insured said that it was considered that, at the time of the directions hearing on 23 October, some or all parts of the report might be privileged at that time. He said that it was proposed to adduce the doctor's evidence by putting it in the tender bundle to see whether or not it would be admitted by consent. In the event that consent was not forthcoming, then, he said, the plan was to rely upon Dr Hampshire's report as a proof of his oral evidence and to adduce that evidence orally from him and others. 13 When I indicated that I was not likely to be favourably disposed to allowing Dr Hampshire's report to be relied on in the circumstances, the insured applied for an adjournment on the ground that there would be severe prejudice to its case if it could not adduce Dr Hampshire's evidence, and the evidence of primary fact from Mr and Mrs O'Shannassy to support the opinions he expressed. The insurer opposed the adjournment. It referred to the fact that the litigation had been extremely hard fought, and that the insured had adopted a deliberate strategy of providing as little material as possible while putting the insurer to proof that it could make out the applicability of the exclusions to the policy on which it relied. The insurer argued that, in order to prove the alternate explanation for which Dr Hampshire's report was put forward, Mrs O'Shannassy, at least, would have to give evidence to support the history that she gave to him as the foundation of his opinion.

Consideration 14 In light of the history of the way in which the parties have conducted these proceedings, I do not accept that the insured for one minute believed that Dr Hampshire's report would be admitted by consent. Clearly, it was not a business record, having been prepared for proceedings in the Local Court of New South Wales. And, it would not be available to be relied on unless it were used as a proof of evidence. In the ordinary course of litigation, expert medical evidence of this kind would be the subject of a proper report. Then, first of all, the insurer would be permitted to seek to obtain evidence in relation to it and also to seek to have Mrs O'Shannassy medically examined, if it wished, by its own psychiatrist or other medical or psychological qualified professional. 15 The insurer has indicated that it is likely to object to the admissibility of Dr Hampshire's report in any event next week, but has suggested that it may be able to meet the prejudice that has been caused by what, I accept, was the inadvertent lateness of the full report of Dr Hampshire coming to light only last week, by having the insured procure and provide to its solicitors by 5 o'clock tomorrow, all records of all medical treatment received by Mrs O'Shannassy from the date of the accident on 16 January 2008 until today. Depending on how that is answered, the insurer will be able to assess its position and may wish to deal at the trial with whether or not the evidence proposed to be adduced in reply should be admitted, or whether there is prejudice from the failure to adhere to the Court's directions. 16 On 1 January 2010, Pt VB of the Federal Court of Australia Act 1976 (Cth) commenced. In s 37M, the overarching purpose of the civil practice and procedure provisions of the Act are stated to be the just resolution of disputes according to law and as quickly, inexpensively and as efficiently as possible. The Act now codifies the duty, not only of the Court, but of the parties and their lawyers, to cooperate in the achievement of the overarching objective. 17 But it should not be thought that that overarching objective and those ends of justice have not been prominently a part of this Court's practice and procedure for many years. In White v Overland [2001] FCA 1333 [4], Allsop J eloquently demonstrated that this is so. I drew on his remarks and those of others in Intel Corporation v Unwired Group Limited [2008] FCA 1927 [63]-[64], to identify that: "… the purpose of case management and the docket system adopted by this Court was to enable both the parties and the Court to be informed, from the outset of the case each of the parties intends to advance and to identify the real issues in dispute. This is so that directions can be crafted to enable the efficient management of the litigation, with a view to focusing on and allowing those issues to be tried, and, at the same time, eliminating irrelevant matters quickly and efficiently: White v Overland [2001] FCA 1333 at [3]-[4] per Allsop J (applied by Heydon JA in Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 at 128-129 [28]-[32], Mason P and Young CJ in Eq agreeing); Visible Results Properties Inc v Sushi Train (Australia) Pty Ltd [2005] FCA 1159 at [29] per Allsop J; Snowy Mountains Organic Dairy Products Pty Ltd v Wholefoods Pty [2006] FCA 1361 at [15] per myself; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[162] per Allsop P, with whom Beazley and Campbell JJA agreed." 18 In Maniotis v JH Lever & Co Pty Limited [2006] FCAFC 7 at [72], Finn, Emmett and Bennett JJ said: "In the efficient and proper conduct of civil litigation, even civil litigation hard fought between parties, it should always be recognised 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. Quietly leaving footprints in correspondence or directions hearings to be uncovered some time later in an attempt to reveal that a matter was always in issue is a practice that must be firmly discouraged. Where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, common sense will, as a general rule, mandate that a party ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said. No one's interests are advanced by litigation proceeding on assumptions which are seen or suspected to be false. The only consequence of keeping issues hidden or not clearly identifying them is to disrupt the business of the court leading to the waste of valuable public resources and to lead to the incurring of unnecessary costs by the parties, costs which ultimately have to be borne by someone: see White v Overland [2001] FCA 1333 at [4]." 19 These principles apply even in personal injury litigation where, as Heydon JA observed in Nowlan v Marson Transport Pty Limited (2001) 53 NSWLR 116 at [30], the ambush theory of life has been abandoned. In Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (2008) NSWCA 243 [160]-[162], Allsop P, with whom Beazley and Campbell JJA agreed, reiterated his earlier views. He said that the need for clarity, precision and openness in the conduct of litigation and the responsibility of parties and their legal representatives clearly flowed from the statutory duty in New South Wales that is now similar to that in Pt VB of the Federal Court of Australia Act. He traced these to having then developed in Australia and England from at least the early 1990s and in the context of the "cards on the table approach" that had been identified by Ipp J in Boys v Colins (2000) 23 WAR 123. 20 In my opinion, the insured has demonstrably failed to identify properly the important new issue which it now seeks to rely on at the trial commencing next week. 21 In my view, it could not reasonably have been thought, having regard to the degree of contest evident between the parties, that the insurer would simply consent to the admission of Dr Hampshire's report, unheralded and unflagged as it was, even if the full version had been served on 24 December. In Aon Risk Services Australia Limited v The Australian National University (2009) 239 CLR 175 at 211 [92]-[93], Gummow, Hayne, Crennan, Kiefel and Bell JJ observed that the principles of case management are now an accepted aspect of the system of civil justice administer by courts in Australia. They said that it had been recognised some time ago by courts in this country and elsewhere in the common law world that a different approach was required to tackle the problems of delay and cost in the litigation process. They observed that the achievement of a just, but timely, and cost-effective resolution of dispute has an effect upon the court and upon other litigants. 22 The explanation that there was a psychiatric reason why Mrs O'Shannassy behaved in the way she did that could be possibly inconsistent with the inference which I apprehend the insurer will seek to have drawn, that she was manifesting evidence of intoxication, was clearly a part of the insured's case since, at least, by the time of the directions hearing on 23 October 2009. Because the insured intended to rely on that report then, it should have been made clear that was to happen and proper directions should have been prepared to enable the insurer to have had the opportunity to obtain its own medical evidence to deal with that issue. It is a matter of considerable concern that the Court was not properly informed of this issue being on the table. In my opinion, this was an inappropriate departure from the principles that apply to proper case management and should never have happened. It is a matter that should not be repeated. 23 In the light of what the insurer has put as its preferred course of action, it seems to me that I should make an order in relation to the production of the medical records that it seeks and refuse the adjournment application, leaving it to the trial to determine whether, and to what extent, any evidence of the kind raised by Dr Hampshire's report may be deployed in evidence. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.