Icepak Group Limited v QBE Insurance (International) Limited [2013] NZHC 3511 (20 December 2013)

Last Updated: 3 March 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-004-002704 [2013] NZHC 3511

BETWEEN ICEPAK GROUP LIMITED First Plaintiff

WAIKATO COLDSTORAGE LIMITED Second Plaintiff

AND QBE INSURANCE (INTERNATIONAL) LIMITED

Defendant

Hearing: 24 October 2013

Appearances: M D Branch/S J Rawcliffe for plaintiffs

M O Robertson/W J Robertson for defendant

Judgment: 20 December 2013

_{JUDGMENT OF ASSOCIATE JUDGE ABBOTT}

This judgment was delivered by me on 20 December 2013 at 12.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors:

Harkness Henry, Hamilton

Robertsons Auckland

ICEPAK GROUP LIMITED v QBE INSURANCE (INTERNATIONAL) LIMITED [2013] NZHC 3511 [20

December 2013]

[1] The plaintiffs (for convenience I will refer to them together as Icepak) are the owners and operators of a property at Tamahere, Hamilton. The property was run as a commercial cool store until destroyed by fire in about April 2008. They held various liability policies for the premises with the defendant (QBE). Icepak is seeking to recover premiums paid in respect of the liability policies after QBE avoided the policies for non-disclosure.

[2] QBE contends that it has a defence to Icepak’s claim for repayment of premiums on the ground of an alleged abuse of process by the second defendant, Waikato Coldstorage Ltd (WCL), when responding to criminal charges brought against it in relation to events leading up to and causing the fire, in which a fireman died and several others suffered injury.

[3] WCL provided the District Court with a declaration of financial means and through counsel made submissions as to its financial ability in the foreseeable future to pay fines or make reparation. In particular it said that a claim for insurance had been declined, it faced substantial claims for lost product but had no existing resources to meet them, and it would need voluntary payments from outside parties (the directors) to pay any fine or reparation. WCL later told the High Court, on an appeal against the sentence imposed by the District Court, that its financial position was unchanged.

[4] QBE maintains that Icepak misled both Courts in relation to its financial position in the foreseeable future: first, by not informing the District Court that it was entitled to a refund of premiums in the event that QBE was entitled to avoid the policies; and secondly, by failing to inform the High Court that it was pursuing a claim under the liability policies notwithstanding QBE’s purported avoidance (shortly afterwards the pursuit of that claim resulted in a payment to Icepak under a deed of settlement). QBE says that Icepak’s alleged misconduct should not be sanctioned by an order to repay the premiums, as to do so would bring the administration of justice into disrepute.

[5] QBE currently relies on the written submission made to the Court, and

information about WCL’s circumstances, and the significance of this information, as

recorded in the decisions of both Courts. It sought to establish, both through discovery and by issue of interrogatories, what decisions Icepak made about pursuing the claims for indemnity and seeking recovery of premiums ahead of the sentencing in the District Court and the hearing of the appeal (and release of that decision). It seeks, by its application, discovery of documents relating to the veracity of WCL’s disclosure to the Courts of its financial position, including insurance claims, and answers to interrogatories as to the communications that Icepak had with its legal advisors, both leading up to and after the High Court appeal, about WCL’s financial position and any decisions to approach QBE and pursue claims against it.

[6] Icepak has made general discovery of the documents requested, but has claimed privilege in respect of a number of them. It has objected to answering the interrogatories on the basis that the information sought is privileged.

[7] QBE applies for orders that Icepak provide answers to the interrogatories, and that its claims to privilege be set aside on the grounds that the documents and communications were made for the dishonest purpose of preventing the Courts from taking any indemnity payments or refund of premiums into account when calculating the fine to be imposed on WCL and determining the reparation to be ordered.

[8] Icepak opposes both applications on the grounds that the information cannot be relevant to its straight-forward claim for refund of premiums, and that QBE cannot meet the high threshold for disallowing a claim for privilege.

Background

[9] Icepak took out liability insurance policies with QBE for four successive years from September 2004.

[10] In April 2008 Icepak notified QBE of claims under the policies, following a

fire at Icepak’s Tamahere premises.

[11] In August 2009, QBE gave notice to Icepak that it was avoiding the policies on the grounds that Icepak had breached its duty of disclosure regarding its use of a highly inflammable refrigerant stored and used at the premises.

[12] The Department of Labour investigated the fire, and a major explosion that killed one fire fighter and injured others. It established that the explosion was caused by the leaking of a hydrocarbon-based refrigerant that ignited. It charged WCL, one of its directors (Mr Grattan), and an unrelated company engaged to maintain refrigeration equipment that had contributed to the blast (Mobile Registration Specialists Ltd (MRS)) with offences against the Health and Safety in Employment Act 1992.

[13] All defendants eventually entered guilty pleas, and were sentenced in the District Court in Hamilton on 15 December 2009. WCL was fined $37,200 and ordered to pay reparation totalling $95,000; Mr Grattan was fined $30,000; and MRS was fined $56,200 and ordered to pay reparation totalling $175,000.

[14] On 23 December 2009 Icepak responded to QBE’s advice of avoidance of the policies, disputing QBE’s entitlement to do so and demanding an indemnity payment of $441,716.13. QBE responded immediately rejecting the demand for indemnity.

[15] WCL and MRS appealed the sentences imposed in the District Court. Their appeals were heard in the High Court at Hamilton on 10 March 2010. The Court reserved its decision.

[16] On the same day, 10 March 2010, Mr Grattan and Icepak’s insurance broker attended a meeting with QBE, pre-arranged by the broker. In that meeting Icepak put a proposal to QBE that QBE pay Icepak the sum it had sought on 23 December

2009, together with Icepak’s costs in defending the charges against WCL, in exchange for Icepak withdrawing all claims for indemnity and making no further claim against QBE in respect of the fire, prior to that Icepak had raised the prospect of claims under a bailee’s liability policy in respect of goods held in the Tamahere premises for third parties. Icepak requested that QBE provide its response by 31

March 2010.

[17] On 29 March 2010 the High Court released its reserved decision, dismissing both sentence appeals.

[18] Icepak and QBE had negotiations on Icepak’s proposal until 10 June 2010 when they entered into a deed of settlement. As a consequence of that deed of settlement, QBE advanced Icepak $450,000 on 29 June 2010. It was a term of the deed of settlement and that advance that the advance would be repayable if and to the extent that any claims were made against QBE by third parties under s 9 of the

Law Reform Act 1936. Subsequently¹ the first plaintiff (Icepak Group Ltd) settled

all third party claims so that no third party had recourse to QBE under s 9 of the Law

Reform Act.

[19] On 29 September 2011,² Icepak wrote to QBE demanding repayment of premiums paid for the avoided policies, totalling $187,229.26. When QBE declined to make that repayment, Icepak issued the present proceedings, claiming repayment on the basis that consideration for the premiums had failed due to the policies being avoided.

[20] QBE has filed a defence to that claim alleging that Icepak made fraudulent misstatements and non-disclosures in relation to the refrigerant and the refrigeration plant which were material to the policies, and, of particular significance for the present applications, that Icepak had misled both the District Court and the High Court about WCL’s ability to pay fines and reparation, such that it would be contrary to public policy to award a refund of the premiums or an abuse of the processes of

_{the Court to allow it to enforce payment.}³

¹ _{The evidence is that this did not happen until November 2012.}

² Eighteen months after the High Court’s decision on the appeal and fifteen months after QBE’s

_{payment under the deed of settlement.}

³ Relying on the Court’s inherent jurisdiction to prevent misuse of its procedure: Reid v New Zealand Trotting Conference [1984] 1 NZLR 8, in turn adopting comments of the House of Lords in Hunter v Chief Constable of the West Midland Police [1981] UKHL 13; [1982] AC 529, 536 about misuse of procedure which brings the administration of justice into disrepute among right-thinking people.

The substantive contentions

[21] QBE contends that Icepak misled both the District Court and the High Court

as to WCL’s financial ability to meet a fine or pay reparation, in the following ways:

(a) WCL (and indirectly its parent Icepak Group Ltd) failed to inform the District Court that QBE had avoided the policies (as distinct from declining the claim for cover), that Icepak intended to pursue a claim under the policies, and that if QBE was entitled to avoid them, WCL/Icepak were entitled to refund of the premiums;

(b) Icepak/WCL refrained from responding to QBE’s notice of avoidance of the policies until after WCL was sentenced in the District Court, and made submissions that it had no financial ability to pay fines or reparation, but then proceeded to contest the avoidance and make a claim for indemnity in respect of the fine, reparation and costs;

(c) WCL made submissions to the High Court on the appeal to the effect that WCL’s financial circumstances had not changed, without disclosing either that Icepak was still pursuing a claim for indemnity or, again, that it had a claim for refund of premiums in the event that QBE’s avoidance of the policies was established.⁴

[22] QBE says that it would be contrary to public policy or an abuse of the process of the Court to allow Icepak to recover the premiums (assuming that it is entitled to them) because WCL would have been ordered to pay any recovery, or a substantial part of it, towards the fines or reparation that were imposed had the Court been informed that Icepak was pursuing the claims.

[23] Icepak contends that there is no evidence to show, or even suggest, that the

_{Courts were misled because:}

⁴ In particular, QBE says that Icepak/WCL had already decided to pursue the indemnity claim, notwithstanding that QBE had rejected it in December, and had arranged a meeting for that purpose the same day as the hearing of the appeal.

(a) Icepak’s intention to pursue QBE was known to the District Court, and the Court took that into account when finding that WCL had limited funds to meet fines and reparation “today and in the foreseeable future”; ⁵

(b) there was no requirement for it to disclose the claim it made on QBE on 23 December 2009, given QBE’s immediate rejection of that claim (which position had not changed by the time of the hearing of the appeal);

(c) the High Court was not misled in any event because the only matter before it was WCL’s appeal against the fine, there was no cross- appeal, and any disclosure that it was still pursuing QBE could only have resulted in a reduction of the fine, which did not occur; and

(d) there was no agreement on any figure for the indemnity claim until June 2010, and even the figure settled at that time was contingent until the third party bailment claims were settled in November 2012; and

(e) the claim for refund of premiums was not made until well after the indemnity claim was settled so again there was nothing to disclose to the Courts at the relevant times.

[24] More significantly for the purposes of the present applications, Icepak says that even if there was an argument that it did not disclose its intention to pursue claims against QBE in the prosecution proceedings, that fact cannot be relevant to a civil claim for refund of premiums. Rather, it is a matter for other parties to pursue as and when there is any recovery. Counsel for Icepak submits that the reality is that QBE entered into a settlement with Icepak but omitted to exclude from that settlement a claim for recovery of premiums and is now trying to correct that

_{oversight with an unsustainable claim.}

⁵ District Court Judge Spear’s Sentencing Notes at [54].

The applications

(i) Further and better discovery

[25] QBE initially applied for further and better discovery of the following (on the grounds that the documents were relevant and had not been discovered):

(a) Documentation (including all correspondence between the plaintiffs and their solicitors, emails, minutes of meetings and file notes) relating to the plaintiffs’ disclosure of their financial position to the District Court and High Court on sentencing.

(b) Documentation (including all correspondence between the plaintiffs and their solicitors, emails, minutes of meetings and file notes) relating to the plaintiffs’ disclosure of their insurance position to the District Court and High Court on sentencing.

[26] Icepak opposed that application on the grounds that the documents were not relevant, and alternatively on the grounds that they had already been discovered and a claim had been made that they were legally privileged.

(ii) Answers to interrogatories

[27] QBE also sought to obtain information by issuing notices to answer interrogatories to Icepak’s directors, Mr Grattan and Mr van Eden. In their responses to the notices, Mr Grattan and Mr van Eden declined to answer certain questions on the grounds of privilege.

[28] The interrogatories that Mr Grattan and Mr van Eden declined to answer are

(using the lettering in QBE’s notice):

(h) Did Icepak discuss approaching QBE with its legal advisors after 10

March 2010? If the answer is “yes”:

(i) Who did Icepak discuss approaching QBE with? (ii) Who represented Icepak during the discussions? (iii) What was discussed?

(iv) What questions were asked of Icepak’s legal advisors?

(v) What was the legal advisors’ response to each question

asked?

(vi) On what date(s) did the discussion with the legal advisors take place?

(i) Did Icepak discuss approaching QBE with Crombie Lockwood before 10 March 2010? If the answer is “yes”:

(i) Who at Crombie Lockwood did Icepak discuss approaching

QBE with?

(ii) Who represented Icepak during the discussions? (iii) What was discussed?

(iv) What questions were asked of Crombie Lockwood?

(v) What was Crombie Lockwood’s response to each question asked?

(vi) On what date(s) did the discussion with Crombie Lockwood take place?

(l) Did Icepak inform its legal advisors that Waikato Cold Storage

Limited was insolvent? If the answer is “yes” then:

(i) Who represented Icepak during the discussions?

(ii) Who did Icepak discuss Waikato Cold Storage Limited’s

insolvency with?

(iii) What was discussed?

(iv) On what date(s) did the discussion with the legal advisors take place?

[29] Mr Grattan and Mr van Eden responded as follows:

(a) Mr Grattan responded to each question:

I object to answering these interrogatories on the ground that the information sought is privileged.

(b) Mr van Eden responded to the first two questions ((h) and (i)):

I do not know and in any event I object to answering these questions on the ground that the information sought is privileged.

(c) Mr van Eden responded to the third question (l):

I was not involved in any discussions regarding this but in any event these interrogatories are objected to on the basis that the information sought is privileged.

[30] Upon receipt of Icepak’s initial response, QBE applied for an order that Mr Grattan and Mr van Eden answer several interrogatories, including those still in issue. It contended that some answers were insufficient, and that Icepak was not entitled to refuse to answer on the ground that information was privileged.

[31] Icepak initially opposed the application on the ground that the answers sought are privileged. In the case of Mr van Eden it also said that the answers he had given satisfy r 8.39 of the High Court Rules. It has since waived any claim to privilege in relation to some communications with its broker and has answered those interrogatories (I will return later to a possible issue as to whether it has answered all interrogatories in respect of the broker for which legal privilege is not available). In addition, Mr Grattan and Mr van Eden have provided further responses to the answers that were challenged on the grounds of sufficiency, and QBE has accepted that these further answers are sufficient.

[32] The specific grounds QBE advances for seeking an order that answer the remaining interrogatories (h) and (l) are:⁶

(a) The information is relevant to the defendant’s defence to the plaintiffs’

claim, namely:

(i) The plaintiffs misled the District Court and the High Court about Waikato Cold Storage Limited’s financial ability in the foreseeable future to pay a greater level of fine and/or reparation; and

(ii) It would be contrary to public policy and/or an abuse of Court process to award the plaintiffs the refund of premiums

_claimed;

⁶ They are the same in each case.

(b) The answers are necessary, are not oppressive, and will not delay the trial date of 24 March 2013; and

(c) The information is not privileged.

[33] Icepak continues to dispute the relevance of the information to its claim and maintains an entitlement to privilege in the information.

Setting aside claims to privilege

[34] After the issue over privilege emerged on both discovery and interrogatories, the parties agreed that it should be brought before the Court by QBE making an application to set aside Icepak’s claim to privilege. This application is instead of QBE’s earlier application for further and better discovery.

[35] QBE contends the claim should be set aside because the communications were made or received, or the information was compiled or prepared, for a dishonest purpose, namely to minimise the fine or reparation that WCL had to pay.

[36] Icepak contends that there is no basis for the claim that privilege should be disallowed due to dishonest conduct. It says that QBE’s case is based on an unjustified assumption that if the Court was not told about Icepak’s intention to pursue claims against QBE (which Icepak denies), and that information is relevant, this comprises “dishonest conduct” involving the plaintiffs and their legal advisors, as that term is applied under s 67(1) of the Evidence Act 2006,. It maintains that QBE has done no more than make a bare allegation of dishonest conduct and much more is necessary before privilege will be disallowed.

The issues for determination

[37] The applications turn on a determination of the following issues: (a) Whether the information sought is relevant; and

(b) Whether Icepak’s conduct disentitles it to a claim to privilege.

Is the information relevant?

[38] The Court has power under r 8.38 to order a party to answer interrogatories. A central purpose to interrogatories is to enable a relevant issue to be proved where proof would otherwise be difficult (for example where information is entirely or substantially within the knowledge of the party being interrogated). The Court must be satisfied that an order is necessary and that the questions to be answered are proper and reasonable. The interrogatories do not need to prove a key fact directly. It is sufficient that the interrogatory elicits a fact which forms a step in establishing

the central allegations.⁷ Whether an interrogatory is sufficiently germane to material

facts turns on an analysis of the relevant issues, the importance of the questions, and the degree of connection to the core facts to be proven.⁸

[39] The interrogatories sought by QBE seek to elicit information to establish its defence that Icepak deliberately withheld information about its intention to pursue both a claim for indemnity under the policies, and a claim for refund of premiums in the event that QBE was entitled to avoid the policy. The interrogatories seek to establish when Icepak made these decisions, and what it communicated to its solicitors about them before the sentencing in the District Court or the appeal in the High Court. These matters are germane to QBE’s pleading that Icepak’s failure to pass this information to the Court was for the dishonest purpose of minimising a fine or order for reparation, which is an essential element in any conclusion as to an abuse of process.

[40] Icepak argues that QBE has failed to lay an evidential foundation for its contention that the Courts were misled, and says that even if it is arguable that Icepak did not fully inform the Court about its intentions, that fact cannot be relevant

_{as a matter of fact, or as a matter of law in a civil claim between different parties.}⁹

⁷ _{Commerce Commission v Air New Zealand (No. 6) [2012] NZHC 2113 at [18].}

⁸ _{At [20].}

9. Arguing that all the cases on which QBE relies had a commonality of parties in relation to the abuse and the claim, and relying on comments by this Court in Gemini Personnel Ltd v Morgan

& Banks Ltd [2001] 1 NZLR 14 (HC) at [68] the disentitling conduct had to be prejudicial to the interests of another, sufficient to attract a civil remedy, as well as being attended by dishonesty. On appeal the Court of Appeal used a slightly different test.

[41] I am not persuaded that this is a sufficient answer to the present applications for the following reasons:

(a) The interrogatories are germane to an issue raised by QBE’s

pleadings.

(b) The facts are not unequivocally in Icepak’s favour, as it suggests.

Icepak contends that the District Court knew that it had an ongoing claim. The District Court Judge’s sentencing notes do not go that far. It is clear from them that WCL informed the Court that it had made a claim, but it did not go further than saying that that claim had been declined. Icepak argued that there was a necessary inference that the Court was aware that the claim was continuing. I do not consider it appropriate to draw that inference at this stage. The reference in the District Court Judge’s sentencing notes to “another claim [WCL] has initiated” does not necessarily refer to anything other than the claim Icepak had made under the policy, which was declined. Further, Icepak’s reliance on the District Court Judge’s comments that WCL had limited funds available to meet fines and reparation “today and in the foreseeable future” does not take the matter any further. The reference to “foreseeable future” in my view is a reference to the potential directors’ contributions towards reparation.

(c) Icepak’s arguments that the High Court was not misled by the statement that circumstances had not changed (because the claim had been declined), and could not have been misled in any event because the High Court did not allow the appeal, both ignore the central point to QBE’s case. This point is that that the alleged dishonest purpose that should be sanctioned by refusal of a civil remedy will turn on the intention underlying the alleged conduct rather than its actual consequence. Whether QBE can establish that dishonest purpose is a matter for trial based on all admissible evidence rather than for determination on this application.

(d) The view I have reached on the last point is equally relevant to Icepak’s contention that there is no link between Icepak’s conduct in the prosecution of WCL and Icepak’s present civil case. QBE contends that there is a link between the two, arising out of Icepak’s conduct. It is a matter for trial whether that conduct was such that it would bring the administration of justice into disrepute to grant Icepak’s claim in this proceeding.

(e) Counsel for Icepak also argued that its claim was not precluded by the settlement agreement, and any conduct which offends the law (or amounts to a breach of professional conduct) could be pursued in other ways. He suggested that QBE should have to pay, and it was then a matter for anyone directly affected to make a claim for the money received by Icepak. That may well be a compelling argument at trial, but I do not regard it as a matter on which to determine the present application. This is not a strike out application, and relevance is determined primarily on issues raised in the pleading.

Is Icepak entitled to its claim to privilege?

[42] QBE’s application to disallow Icepak’s claim to privilege relies on s 67(1) of

the Evidence Act 2006:

(1) A Judge must disallow a claim of privilege conferred by any of sections 54 to 59 and 64 in respect of a communication or information if satisfied there is a prima facie case that the communication was made or received, or the information was compiled or prepared, for a dishonest purpose or to enable or aid anyone to commit or plan to commit what the person claiming the privilege knew, or reasonably should have known, to be an offence.

[43] This section reflects the earlier common law that an objection to answer interrogatories on the grounds of legal professional privilege will not be upheld where fraud has been alleged and a proper foundation has been laid in the pleadings

_{for that allegation.}¹⁰

¹⁰ Public Trustee v Mahar HC Wellington CP818/88, 7 February 1990.

[44] QBE accepts that as the party challenging the claim to privilege, it must establish a prima facie case that the communications between Icepak and its legal advisors were made or received for a dishonest purpose. The phrase “dishonest purpose” is not defined in the Evidence Act, and it is necessary to go to case law for guidance. This exception to an entitlement to privilege is a codification of long-

standing common law authority¹¹ that the claim will not be allowed where privilege

has been abused to assist an act of dishonesty. It is a high threshold, requiring the party challenging the claim to show “fraud, sham or trickery”.¹² The continuation of this high threshold under s 67 has been confirmed in several cases.¹³

[45] The legal advice in question merely has to be part of the instrumentation of the illegal purpose to lose its ordinary protection: the lawyer does not need to be a witting participant.¹⁴

[46] The decisive question is whether the conduct is dishonest (rather than the specific cause of action to which the information was relevant).¹⁵ This requires more than mere proof of a civil wrong:¹⁶

... Although the case law refers to crime or fraud or dishonesty (such as fraudulent breach of trust, fraudulent conspiracy, trickery or sham contrivances) it is plain that the term ‘fraud’ is used in a relatively wide sense ... In each of these cases the wrongdoer has gone beyond conduct which merely amounts to a civil wrong; he has indulged in sharp practice, something of an underhand nature where the circumstances required good faith, something which commercial [people] would say was a fraud or which the law treats as entirely contrary to public policy. (my emphasis added).

[47] The party seeking to have the claim to privilege disallowed must do more

than merely assert dishonest conduct by establishing “something to give colour to the charge”.¹⁷ In Morgan & Banks Ltd v Gemini Personnel Ltd,¹⁸ the Court of

¹¹ _{O’Rourke v Derbyshire [1920] AC 581 (HL).}

¹² Crescent Farm (Sidcup) Sports Ltd v Sterling Offices [1972] Ch 553 and Morgan & Banks Ltd v

_{Gemini Personnel Ltd [2001] 1 NZLR 672 (CA).}

13. Red Bull Gmbh v Manhaas Industries Ltd HC Wellington CIV-2010-485-1866, 29 July 2011 (albeit obiter); Manifest Capital Management Pty Ltd v Lawrence HC Auckland CIV-2010-404-

7741, 20 December 2011 and Rollex Group (2010) Ltd v Chaffers Group Ltd [2012] NZAR 746 (HC) [Rollex].

¹⁴ _{Rollex at [45], adopting Morgan & Banks Ltd v Gemini Personnel Ltd, above n 11, at [51].}

¹⁵ _{Rollex, above n 12, at [41].}

16. BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2011] 2 All ER 297 (ChD) at [62], endorsed in Rolex, above n 12, at [41].

¹⁷ O’Rourke v Derbyshire, above n 10, at 604.

Appeal held that the dishonest conduct must be stated in clear and definite terms, and be supported by prima facie evidence that the alleged conduct has some foundation in fact.

[48] In the present case QBE alleges:¹⁹

(a) Before the sentencing process had started, or at the very least, before it was completed, Icepak intended to seek the payments from QBE but did not inform its legal advisors. This would mean that Icepak caused their legal advisors to unwittingly mislead the Courts in order to minimise its fines and reparation liability.

[49] In support of this contention, QBE points to the following facts:

(a) It gave notice to Icepak that it was avoiding the policies in August

2009.

(b) Icepak did not respond to that notice before its lawyers made submissions to the District Court on sentencing of WCL on 15

December 2009.

(c) Icepak challenged QBE’s notice of avoidance on 23 December 2009 by presenting a claim for indemnity in respect of its costs and the fines and reparation that had been awarded on 15 December 2009.

(d) Although QBE immediately responded rejecting the claim to indemnity, Icepak decided to pursue the claim before WCL’s appeal came back before the High Court on 10 March 2010 (by having its broker arrange a meeting with QBE the same day).

(e) The parties had negotiations over the claim leading to a settlement in

June 2010 under which QBE agreed to pay Icepak $450,000 for settlement of all direct claims for indemnity, but subject to abatement

¹⁸ _{Morgan & Banks Ltd v Gemini Personnel Ltd, above n 11, at [26].}

¹⁹ From paragraph 34(a) of counsel’s submissions.

in respect of any indirect claim for indemnity made on QBE by third parties.

(f) Icepak had discussions with its insurance agent from about February

2011 onwards (disclosed in Icepak’s answers to interrogatories) about the timing of a claim for refund of premiums, and ultimately brought the present proceeding.

[50] Counsel for QBE submitted that these matters (which were not disclosed to the Courts) provide a sufficient evidential basis upon which the Court can draw an inference that Icepak intentionally refrained from mentioning its intention to pursue the claims for the dishonest purpose of minimising the fine or reparation.

[51] The question for the Court is whether these facts are sufficient, if not displaced at trial,²⁰ to meet the high threshold of fraud or trickery required for a finding that privilege is being abused with a view to assisting an act of dishonesty.²¹

[52] I am not satisfied that these facts necessarily give rise to a deliberate decision to withhold information to minimise the fine or reparation. Icepak disclosed the existence of the liability policies, and the fact that they had been declined. Even if it made a decision to challenge avoidance²² prior to the District Court sentencing, its omission to inform the Court of that intention falls short of intentional dishonesty in the sentencing process. The same can be said of its decision to pursue the claim prior to the High Court appeal. At both times there was nothing to indicate that QBE might change its mind, and the settlement eventually agreed in June 2010 was

contingent for a long period. There is no evidential foundation for QBE’s contention that Icepak was aware of the potential claim for refund of premiums before the Court hearings, although that entitlement would follow if the claim for indemnity did not succeed. However, that is still short, in my view, of a sufficient foundation for saying that Icepak intentionally omitted any reference to such an entitlement in its

_{submissions so as to minimise the fine or reparation. QBE’s case is entirely reliant}

²⁰ _{Public Trustee v Mahar, above n 9, at [34].}

²¹ _{Rollex, above n 12, at [35].}

²² Icepak referred to its claim having been declined, rather than the policies being avoided.

on inference in that respect. I find that it is inappropriate to draw that inference on the facts before the Court.

[53] Counsel for QBE placed importance on the fact that QBE had avoided the policies rather than declined the claims under them. He relied on that fact to support an argument that Icepak would have known from the outset that it had a claim to refund of the premiums.

[54] I have already held that a decision to challenge QBE’s avoidance does not meet the high threshold for dishonest conduct. I would also add that there is nothing in the evidence before the Court to indicate that Icepak had identified the difference between avoidance and declinature before its submissions to either Court. The contemporary documents generated by or on behalf of Icepak only referred to claims having been declined. It is not clear on the evidence when Icepak first focussed on avoidance. The only evidence as to the time of Icepak’s knowledge is the statement in answer to interrogatory (k)(vi) that Icepak raised the matter of refund of premiums with the broker in early 2011.

[55] Counsel for Icepak also advanced an argument that Icepak Group Ltd was a joint holder of the privilege, and it should be upheld on that basis. Given the conclusion I have reached as to the insufficiency of the evidence to support QBE’s claim of dishonest conduct, I will not address this point at length. However, I do not see it as a significant factor. Section 67(1) looks to the nature and purpose of a communication or document rather than addressing the holder of the privilege. Moreover, Icepak Group Ltd, as WCL’s parent company, can be taken to have been complicit in any decision that WCL took.

Further issue over interrogatories – privilege regarding broker

[56] Although the central issues on QBE’s application to answer interrogatories were relevance and whether Icepak’s conduct has entitled it to its claim for privilege, QBE also sought an order that Mr Grattan and Mr van Eden answer interrogatories as to its communications with its broker (interrogatory (i)).

[57] Although QBE’s application for further and better discovery was not pursued, counsel for QBE argued that to the extent documents in issue on the application to set aside privilege included documents passing between Icepak and its broker, privilege for those documents was not available. It could not be said that they attracted litigation privilege, as it would be inconsistent with Icepak’s over all argument for it to say that they were made for the dominant purpose of preparing for a proceeding or an apprehended proceeding. Furthermore, Icepak could not rely on s

54 of the Evidence Act 2006 in respect of documents that were passing purely between Icepak and the broker. Counsel submitted that it was apparent from Mr Grattan’s answers to interrogatories that such documents existed (Mr Grattan appears to have quoted from at least one), and they were potentially relevant to showing whether Icepak deliberately misled the Court by not disclosing its decision to pursue the indemnity claim, or when it first turned its mind to the potential claim for refund of premiums.

[58] Counsel also argued that the whole of the broker’s file was discoverable and

did not attract privilege.

[59] I accept that there is no basis for a claim to privilege in respect of documents purely passing between Icepak and its broker and purely recording communications between the two up to the date of release of the decision on Icepak’s appeal (as the latest possible date by which it could be said that Icepak arguably misled the Courts). However, if any communication between Icepak and its broker was recorded as part of the obtaining of legal advice (for which Icepak’s claim to privilege stands) the claim for privilege extends to that document, although not to the information in the underlying communication. To the extent that that information has been sought in interrogatory (i) and has not been answered on the grounds of privilege, I find that it should be answered.

[60] As QBE has not brought an application for further discovery in relation to the broker’s file, or at least in relation to any relevant documents in it that are not already disclosed, I make no order in that respect. However, I trust that Icepak will heed the comments I have made about discovery and review the files to ensure that it

has disclosed all documents other than those for which its claim for legal professional privilege has been upheld.

Inspection

[61] The Court is entitled to inspect the documents for which privilege is claimed if it has any concern as to whether or not the claim is properly made. Counsel for Icepak has made a copy of the documents available for inspection, without prejudice to Icepak’s position that there was no need for the Court to inspect them. Although I have decided the applications on the basis that QBE has not provided a sufficient evidential basis for its applications, I also considered it appropriate to view the documents. Having done so, I am satisfied that there is nothing in them to warrant a departure from the view that I have taken of the evidence before the Court.

Decision

[62] QBE’s applications both depend on a finding that Icepak is not entitled to claim privilege in documents identified in its discovery, or information in the course of communications with its solicitors. For the reasons I have given I find that QBE has not made out a sufficient basis for that claim. The applications are dismissed accordingly.

[63] Icepak is to answer any part of interrogatory (i) which it has not answered purely on the grounds of a privilege existing as between it and the broker, in respect of communications up to 29 March 2010.

[64] The Registrar is to arrange for the privileged documents that were made available for inspection to be returned to Icepak’s solicitors. The solicitors are to contact the Registrar to arrange the manner of their return.

[65] Icepak is entitled to costs on both applications. I see no reason to award costs other than on a 2B basis. As they were dealt with in the one hearing, and the same issues were essentially addressed on both, a single award of costs seems to be appropriate, save for the cost of preparing separate notices of opposition and any disbursements incurred on the separate application. If the parties are unable to agree

on the quantum of costs, they are to file memoranda. Icepak is to file and serve any memorandum by 24 January 2014. QBE is to file and serve any memorandum by 31

_{January 2014.}

Associate Judge Abbott