Privilege and investigation reports: Case study of Douglas v Morgan [2019] SASCFC 76

A recent decision of the Full Court of the Supreme Court of South Australia examines when a CTP insurer can claim litigation privilege over investigation reports. The reports were, in this case, obtained prior to the institution of legal proceedings and appointment of solicitors.

Background

Facts

On 9 December 2012, a vehicle being driven by Amy Douglas (the defendant) struck Laura Morgan (the plaintiff) who was a pedestrian crossing a major road in Adelaide. The plaintiff lodged a claim for personal injuries with Allianz, the claims agent for the defendant’s CTP insurer on 14 December 2012. The following timeline of events ensued:

• 17 December 2012 – Allianz received the police report which noted that the defendant returned a positive alcotest.
• 20 December 2012 – solicitors instructed by the plaintiff provided details of the accident to Allianz.
• 27 December 2012 – Allianz’s claims consultant engaged an external firm of investigators to obtain a detailed account of the accident from the defendant, witnesses and plaintiff, and requesting comment on the credibility of each. On the same day, the claims consultant wrote to the plaintiff’s solicitors advising that Allianz was attempting to obtain details of the accident.
• 26 February 2013 – Allianz received the report from the investigators.
• June 2013 – Allianz advised the plaintiff’s solicitors that Allianz considered that the plaintiff had been negligent.

The plaintiff commenced legal proceedings in the District Court of South Australia. During the course of making disclosure the defendant claimed privilege over the investigation report. The claim for privilege was challenged by the plaintiff on the basis that litigation was not and could not have been reasonably anticipated at the time that the report was commissioned.

Interlocutory decision

A Master of the District Court initially ruled that the report was subject to legal professional privilege. The factors that were relevant to the Master’s decision were:

• The role of the defendant as a compulsory statutory insurer;
• Judicial notice of the fact that injury is a motivator to bringing a claim which not infrequently leads to litigation;
• Early retention of solicitors by the plaintiff;
• The fact that the plaintiff’s contributory negligence was in issue;
• Consumption of alcohol by the defendant which raised complex issues of apportionment;
• The location, date and time of the collision; and
• The time of the request for the report by Allianz was between Christmas and New Year which indicated a sense of urgency in obtaining the report.

Appeal

The Master’s decision was appealed by the plaintiff to a judge of the District Court of South Australia who allowed the appeal and held that the defendant had not discharged the onus of showing that legal professional privilege attached to the report.

Full Court appeal

Allianz subsequently appealed to the Full Court of the Supreme Court of South Australia.

Findings

The key issue for consideration was whether the investigation report had been obtained for the “dominant” purpose of use in reasonably anticipated litigation so that it would attract legal professional privilege.

The Full Court (Kelly, Blue and Nicholson JJ) unanimously held that the document did not attract legal professional privilege. The Full Court concluded:

• The investigation report had been obtained for two purposes, namely:
  • to allow Allianz to make a determination as to liability, which was the primary purpose; and
  • to provide to its solicitors for use in litigation, if the claim could not be resolved, which was the secondary purpose.
• There was no evidence that the secondary purpose was the dominant purpose and the document could not then be privileged.

In considering the facts, the Full Court noted:

• The request for the investigation report did not mention any intention to provide the information requested to solicitors or that the information was being obtained to provide to solicitors;
• The conduct of the claims consultant clearly demonstrated that her purpose in obtaining the investigation report was to make a determination in relation to liability. The letter sent to the plaintiff’s solicitors at the time of making the request to investigators clearly indicated that the purpose of Allianz undertaking investigations was to consider and make a determination concerning liability;
• The content of the investigation report would likely allow Allianz to either admit liability, negotiate the claim, or deny liability;
• The subsequent conduct of the claims consultant confirmed the primary purpose, in particular the claims consultant had advised the plaintiff’s solicitors in February 2013 that liability investigations had not been completed and accordingly no determination of liability had been made;
• The claims consultant formulated a position in respect of liability subsequent to receipt of the investigation report which had been based on the findings within the investigation report; and
• Given the role of Allianz, the claims consultant must have anticipated that there was a significant prospect of legal proceedings being issued if the claim was not resolved, and therefore it could be accepted that a secondary purpose of obtaining the report was to provide it to solicitors in the event that the claim was not determined and resolved.

Practical considerations

The decision is a reminder to CTP insurers that prior to the institution of legal proceedings, privilege will only attach to documents obtained where the dominant purpose of obtaining that document is for use in litigation.

In the context of requesting investigator reports and loss adjuster reports prior to litigation, a Court will carefully evaluate the request for an investigation at the time the request was made to assess the dominant purpose of obtaining such reports.

From a practical perspective, this decision is a reminder to insurers to:

• Ensure requests to investigators clearly indicate an intention for use in legal proceedings; and
• Retain solicitors early where insurers are concerned to ensure that privilege attaches to documents.

This article was written by Richard Smith, Partner, Amanda Salleh, Special Counsel and Jessica Carnell, Associate.