Bilbarin Holdings Pty Ltd T/As David Smash Repairs v Nrma Insurance Limited [1996] ACTSC 95 (13 September 1996)

SUPREME COURT OF THE ACT

BILBARIN HOLDINGS PTY LTD t/as DAVID SMASH REPAIRS v. NRMA INSURANCE LIMITED
No. SC696 of 1996
Number of pages - 7
Practice and Procedure

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
MASTER T. CONNOLLY

CATCHWORDS

Practice and Procedure - Application for Preliminary Discovery - Possible Defamation Action for Allegations of Fraud - Applicant Seeking Identity of Informant - Public Interest - "Newspaper Rule"

Supreme Court Rules (ACT) O.34A, 61A

Williams, Civil Procedure Victoria

Herald and Weekly Times Ltd v Guide Dog Owners and Friends Association (1990) VR 451
D v National Society for the Prevention of Cruelty to Children [1977] UKHL 1; (1977) 1 All ER 589
Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (1974) AC 405
John Fairfax and Sons v Cojuangco [1988] HCA 54; (1988) 165 CLR 346

McGuinness v Attorney-General (VIC) [1940] HCA 6; (1946) 63 CLR 73
Stewart v Miller (1979) 2 NSWLR 128
Hordon House v Arnold (1989) VR 402
Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (unreported, Federal Court,

11 June 1996)

HEARING

CANBERRA, 30 August 1996
13:9:1996

Counsel for the Plaintiff: Mr B. Meagher

Instructing Solicitors: Colquhoun Murphy

Counsel for the Defendant: Mr G. Stretton

Instructing Solicitors: Abbott Tout Harper Blain

ORDER

THE COURT ORDERS THAT:
1. Pursuant to Order 34A rule 3, that the respondent
(i) produce to the Court all letters, memoranda, vouchers, dockets, file notes, notes of telephone conversations, reports or any other documents referred to by the respondent in a letter dated 12 July 1996 to Messrs Colquhoun Murphy Solicitors, as constituting "clear evidence that (the applicant) has encouraged the lodgement of fraudulent claims with NRMA Insurance Limited", provided that the identity of the author of the letter to NRMA Insurance Limited dated 23 November 1995 is not required to be divulged;
(ii) produce for inspection by the applicant the documents referred to in (i) above.
2. Pursuant to Order 34A rule 5, that the respondent produce to the applicant all documents constituting the respondent's file concerning a claim by Bronwyn Lee Kennedy arising from an accident on 17 April 1996 in which her Toyota motor vehicle was damaged, including without limitation notes of any telephone conversation between Ms Kennedy and staff of the respondent including Mr Rod Douglas.
3. The question of costs is reserved.

DECISION

MASTER T. CONNOLLY This matter came before me by way of originating notice of motion seeking orders pursuant to Order 34A of the Supreme Court Rules for the preliminary discovery of certain documents. This is a matter properly within my jurisdiction pursuant to Order 61A of the Supreme Court Rules. An order for preliminary discovery pursuant to O.34A is an interlocutory order: Herald and Weekly Times Ltd v Guide Dog Owners and Friends Association (1990) VR 451.

2. In order to understand the nature of the application, and the reasons for its strenuous resistance by the respondent, it is important to set out the factual background. The applicant, a corporation, trades as David Smash Repairs, and operates a panel beating and automotive repair business in Queanbeyan. The respondent is a major insurer, and conducts a very substantial volume of business in the comprehensive motor vehicle insurance market. Indeed, so substantial is its volume of business, and so established is its reputation, that the sign "approved NRMA repairer" is a well known and recognised symbol in the broader community.

3. The respondent maintains a "panel" of authorised repairers. These repairers are able to accept work from persons insured by the respondent. The commercial advantage of being on such a panel is obvious.

4. On 15 December 1995 the respondent wrote to the applicant advising it

"...of the result of a review carried out by a panel of Senior
Managers on a report received relating to a series of incidents
involving your company. The information contained in the report
has been discussed with you by Mr Rob Douglas, the ACT Branch
Assessing Manager. The decision of the panel was to suspend
authorising repairs with your company due to the serious nature
of the work practices of your business as identified by the
report."

5. The applicant has sought to have this decision reviewed by the respondent, and has involved its solicitors. In a letter of 12 July 1996 to the applicant's solicitors, the respondent said:

"I have reviewed the file relating to David Smash Repairs. We have
clear evidence that your client has encouraged the lodgement of
fraudulent claims with NRMA Insurance Limited. This was identified
as an issue in discussions between your client and NRMA staff
prior to your client's removal from the panel of authorised
repairers. In the circumstances I believe that the removal was
appropriate."

6. By letter of 24 July 1996 the applicant's solicitors took strong issue with the allegation that it had "encouraged the lodgement of fraudulent claims". This was strongly denied, and the applicant's solicitors advised that, in their view, the claim was defamatory. In this letter the applicant's solicitors foreshadowed an application to this Court for preliminary discovery of all documents which relate to such allegations.

7. In a further letter of 29 July 1996 the applicant's solicitors advised the respondent that it was considering instituting proceedings:

"1. Against any person who has supplied to NRMA defamatory
material which is described in your letter of 12 July 1996 as
'clear evidence' that our client has encouraged the lodgement
of fraudulent claims with NRMA Insurance Limited.
2. Against NRMA in respect of statements defamatory of our client
made by telephone to Bronwyn Lee Kennedy on or about 24 May 1996,
in connection with Ms Kennedy's motor vehicle damage claim."

8. A signed statement of Ms Kennedy dated 11 June 1996 was tendered as an exhibit. In this statement she claims that she was told by a person on the NRMA HELP Line that she could not have her car repaired by the applicant, and that when she protested, she was told:

"I have heard that David's work is not up to scratch. He does
bad work."

She claims that she rang again and after speaking with a number of persons, had a conversation with an NRMA Manager identified as Mr Rod Douglas. She claims that he said:

"You must realise one thing Bronwyn. A person would have to do
something real bad to lose his right to do NRMA work. I am not
at liberty to discuss what David did, but it was bad."

9. This was the information which the applicant had when it made this application. Order 34A of the Supreme Court Rules were introduced in 1992, and they contained a novel procedure. The ACT provision is modelled on the 1986 Victorian Order 32. The purpose of the order is set out in Williams, Civil Procedure Victoria as follows:

"Order 32 is entirely new. It broadens the circumstances in which
discovery of documents is available....... Previously, apart from
one case, discovery of documents was limited to the parties to a
proceeding which had already commenced. The exception was the
equity procedure by bill of discovery under which a prospective
plaintiff, prevented from suing through ignorance of the identity
of the correct defendant, could compel a person with information
as to that identity to disclose the information. The circumstances
in which the remedy was available were somewhat restricted. Order
32 establishes a procedure to enable a person to ascertain the
identity of the proper defendant that is free of the limitations
of the equity procedure. Discovery is preliminary in the sense
that it is obtained before a proceeding for the substantive relief
sought is commenced: it is obtained to enable a proceeding to be
commenced."

10. The ACT Rules provide, on the Victorian model, both for preliminary discovery to identify a defendant, that is to obtain information relating to who ought to be sued (O.34A r.3), and for preliminary discovery from a known potential defendant, in order to allow prospective plaintiffs to more properly inform themselves as to their right to obtain relief (O.34A r.5).

11. This application expressly seeks orders under both orders. The application under O.34A r.3 seeks all documents constituting "clear evidence of fraud" as outlined in the letter of 12 July 1996. At the hearing the respondent produced an affidavit of Mr Allan Gaukroger, the Regional Manager of the NRMA, to which was annexed a handwritten report dated 23 November 1995 from an unnamed person, who is identified in the affidavit only as "the insured person".

12. This handwritten report claims that the author took a motor vehicle, which had been damaged while driven by the author's son, to the applicant's repair business. Under the respondent's, and indeed most insurer's, arrangements an excess is payable if a car is damaged by a young driver. The report states that the applicant suggested that the author claim to the NRMA that the author, rather than the author's son, was driving the car, in order to avoid this excess payment.

13. This constitutes the claim of fraud. While the statement has been produced, the respondent strongly objects to the identification of the author Mr Gaukroger's affidavit states:

"NRMA is reliant on receiving information from its policy holders
and members of the public about claims with a fraudulent element,
in order to ensure so far as possible that claims are paid only
when the policy holder is entitled to cover under the policy and
that payments are limited to the amount to which the policy holder
is entitled. NRMA regards it as very important to be able to
assure persons providing such information that their anonymity
will be respected. If it were known that NRMA might disclose,
whether pursuant to Court order or otherwise, the identity of an
informant to the person to whom the information relates, I fear
that this would discourage the reporting of fraudulent behaviour
and would increase the likelihood that such fraud would go
undetected, resulting in increased fraud and ultimately increased
premiums."

14. Counsel for the respondent urged strongly that this amounts to a public interest ground for non disclosure of the name of the informant. While no authority has been cited to support a doctrine of public interest immunity in the context of information supplied to a commercial organisation such as an insurer, it is clear that the power given by the rule is discretionary.

15. There is certainly no authority for a bald claim that information provided in confidence to a commercial organisation can be subject to a public interest privilege. While the House of Lords in D v National Society for the Prevention of Cruelty to Children [1977] UKHL 1; (1977) 1 All ER 589 has allowed a claim for privilege to protect an informer's identity in the case of a body other than a central department of government, to extend this privilege to the present facts would be a significant extension of the present law.

16. I was referred also to the remarks of Lord Cross in Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (1974) AC 405 where, in considering a public interest privilege claim made by the Customs Service, he said:

"The case is not, indeed, as strong as the case against disclosing
the name of an informer - for the result of doing that would be
that the source of information would dry up whereas here the
Commissioners will continue to have their power under section
24(6)."

But, as Counsel for the applicant stressed, this was in the context of a claim advanced by an agency of Government, not a private company.

17. I am however of the view that it is appropriate to take account of the public policy argument in exercising my discretion. In this context I have found useful passages in Williams Civil Procedure Victoria relating to newspaper libel, and the cases cited therein. The so-called "newspaper rule" - that a newspaper defendant to a defamation action will not be required to disclose its sources of information at the interlocutory stage, but only at trial if the issue is relevant, at least provided that the plaintiff has a cause of action against the newspaper - has been held by the High Court in John Fairfax and Sons v Cojuangco [1988] HCA 54; (1988) 165 CLR 346 not to apply directly to an application for pre trial discovery. This case was referred to in argument by Counsel for the respondent. But the Court (Mason CJ, Wilson, Deane, Toohey and Gaudron JJ) did say that

"On the other hand the policy considerations which underlie the
existence of the rule are unquestionably factors to be taken into
account in the exercise of the judicial discretion that (the
relevant NSW preliminary discovery provision) confers. ......What
an applicant must show is that the order sought is necessary in
the interests of justice; in other words, the making of the order
is necessary to provide him with an effective remedy in respect of
the actionable wrong, of which he complains"

(at 357).

18. The High Court has made it clear that the "newspaper rule" is not a new form of privilege:

"First, the rule is one of practice, not of evidence. Secondly,
although the rule rests on a recognition of the public interest
in the free flow of information, the law gives effect to that
recognition of the public interest by exercising a discretion
to refuse to order disclosure of sources of information in
interlocutory proceedings in defamation, and, perhaps, other
analogous actions, even though disclosure would be relevant to
the issues for trial in the action. The law does not protect that
public interest to the extent of conferring an immunity on the
media from disclosure of its sources"

(at 356).

19. The "newspaper rule" has been confined to actions seeking sources from media outlets, although in McGuinness v Attorney-General (VIC) [1940] HCA 6; (1946) 63 CLR 73, Starke J suggested that the rule was not so confined and that it was of general application (at 92).

20. I am of the opinion that it is appropriate to take the "newspaper rule" as a guide to the exercise of my discretion in an application for preliminary discovery. This should not be seen as an extension of the "newspaper rule", as suggested by Starke J, but rather as a matter of exercise of discretion in accordance with the principle set down by the High Court in Cojuangco. I note that in D v National Society for the Prevention of Cruelty to Children Lord Haisham referred to this rule of practice, and the cases decided under it, saying:

"Certainly they illustrate the use of the court of a discretion,
and its sensitiveness to public policy where discretion exists."

21. I decline to exercise my discretion to order the disclosure of the name of the person who informed the respondent of the allegations of fraud. In exercising this discretion, analogous to the "newspaper rule", I am mindful that it does not deprive the applicant of a remedy.

22. The statement of the NRMA officers to Ms Kennedy are prima facie actionable. I order the release by the respondent of the identities of persons who made these statements, although I note that the respondent has offered to do this in any event.

23. In relation to such other documentation sought by the applicant, other than the identity of the informant referred to in the affidavit of Mr Gaukroger, I order its release.

24. The respondent argued that I should decline to exercise my discretion to order any material to be discovered because there is no bona fide desire by the applicant to pursue a defamation action. The real motive, says the respondent, is to put pressure on the NRMA to restore the applicant to its panel of approved repairers. Certainly the applicant does not deny that it wishes to be restored, but it says that, the NRMA having made these statements, a defamation action is a legitimate process, indeed perhaps the only process, to resolve the matter. In any event, the order does not contemplate a fixed intention to proceed, rather, it is on its face designed to allow a prospective plaintiff to obtain further information in order to make a more informed decision as to whether or not to commence proceedings.

25. Counsel for the respondent urged that this was not a case where the discretion ought to be exercised at all, because the application related to merely speculative proceedings - Stewart v Miller (1979) 2 NSWLR 128 at 140 per Sheppard J; Hordon House v Arnold (1989) VR 402 per Gibbs J. I am satisfied, however, that there is a sufficient basis for an application.

26. An alternative ground for a complete rejection of the application was based on the recent decision of Lindgren J in Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (unreported, Federal Court, 11 June 1996). In that case His Honour declined to order preliminary discovery on the basis that the applicant already had sufficient material in its possession to make the appropriate informed decision in relation to proposed litigation. I am mindful that the NRMA has offered to release the names of the officers who spoke with Ms Kennedy, and that, in the course of this proceeding, it has released the text of an original complaint. The applicant points out that the original letter from the NRMA speaks of "a series of incidents involving your company". I am not satisfied that the applicant has all relevant material in its possession. It is undoubtedly correct, as Lindgren J points out, that the purpose of these provisions is not to

"...provide a means by which an applicant will be enabled to have
available to it every document which would assist it in deciding
whether to litigate."

But that is not the case here. It is entitled to discovery of the respondent to ascertain whether there are allegations in respect of "a series of incidents".

27. I therefore make orders generally in the terms sought, save that I do not order disclosure of the identity of the insured person who made allegations to the respondent.

28. I order:

1. Pursuant to Order 34A rule 3, that the respondent
(i) produce to the Court all letters, memoranda, vouchers,
dockets, file notes, notes of telephone conversations, reports or
any other documents referred to by the respondent in a letter
dated 12 July 1996 to Messrs Colquhoun Murphy Solicitors, as
constituting "clear evidence that (the applicant) has encouraged
the lodgement of fraudulent claims with NRMA Insurance Limited",
provided that the identity of the author of the letter to NRMA
Insurance Limited dated 23 November 1995 is not required to be
divulged;
(ii) produce for inspection by the applicant the documents
referred to in (i) above.
2. Pursuant to Order 34A rule 5, that the respondent produce to
the applicant all documents constituting the respondent's file
concerning a claim by Bronwyn Lee Kennedy arising from an accident
on 17 April 1996 in which her Toyota motor vehicle was damaged,
including without limitation notes of any telephone conversation
between Ms Kennedy and staff of the respondent including Mr Rod
Douglas.

29. I reserve the question of costs and will hear the parties on this.