Samenic Ltd v APM Group (Aust) Pty Ltd [2011] VSC 194 - privilege in an investigator's report

The matter of Samenic Ltd v APM Group (Aust) Pty Ltd [2011] VSC 194 (Samenic) concerned an objection to a subpoena before Mukhtar AsJ of the Supreme Court of Victoria. I have included a summary of Samenic below.

At [1] Mukhtar AsJ set out the question being considered by the Court:

The Prothonotary has referred to the Court for hearing and determination an objection to a subpoena for production of documents. The objection involves something which is not uncommon in litigation where insurers are involved, that is, a litigant trying to get hold of an insurance investigator’s report after an insured incident has occurred. The question on this objection concerns legal advice privilege ― not litigation privilege ― under s 118 of the Evidence Act. Does this subpoena result in the disclosure of the contents of a confidential document prepared by another person (the subpoenaed party) for the dominant purpose of the lawyer providing legal advice to the client (the insurer)?

Samenic concerns a fire in the redeveloped Melbourne Central cinema complex on 3 November 2004. The plaintiff sues the builder who performed the fit-out, the subcontractor who did the electrical installation and the project manager for the redevelopment. The plaintiff alleges that their work was performed negligently and caused the fire.

The second defendant issued a subpoena for the production of an investigator's report by Mr Barnes, a fire investigation expert, who was retained by the third defendant. The third defendant objected to the subpoena claiming legal professional privilege over the report.

The evidence showed that when the fire occurred the insurer of the third defendant immediately retained a loss adjuster, and that loss adjuster immediately retained Mr Barnes to investigate the cause of the fire. The retention of Mr Barnes was so immediate that he attended at the scene on 3 November 2004, the day of the fire. On 4 November 2004 the loss adjuster told the insurer that the expert attended the site and the insurer told the loss adjuster that it would be retaining Deacons lawyers to advise in relation to the third defendant's potential liabilities, and Deacons would formally retain the loss adjuster and the expert.

Mr Barnes produced his report on 5 November 2004 giving his opinion on the cause of the fire. Deacons retained the loss adjuster and the expert on 5 November 2004, and the investigator's report was not delivered to Deacons until 15 November 2004.

The third defendant said that the report was prepared for the dominant purpose of the client receiving legal advice for the purposes of s118(c) of the Evidence Act 2008 (Vic). The second defendant claimed that it was unclear what advice was being sought and that the report would have come into existence irrespective of the intention to obtain professional legal services as the report was made in the ordinary course of an insurer's business of investigating the cause of the fire.

Mukhtar AsJ set out 5 propositions from authorities concerning privilege in expert reports (at [20]):

(a) The doctrine of legal professional privilege has to be adapted to ensure that the rationale or policy underlying the doctrine is not sabotaged by rigid adherence to form that does not reflect the practical realities surrounding the application of privilege. The complexity of present day commerce means that it is increasingly necessary for a client to have the assistance of experts, in formulating a request for legal advice and in providing legal advisers with sufficient understanding of the facts to enable that advice to be given.

(b) The concept of legal advice is fairly wide. It is understood in a pragmatic sense, and not confined to telling the client the law. It includes advising the client what should be done prudently and sensibly in a relevant legal context.

(c) The existence of legal professional privilege is not established merely by the use of verbal formula or by mere conclusionary assertion that the privilege applies. Such assertions can make it unclear what advice was really being sought or the topics to which the instructions or advice were directed. In the ordinary case of a client consulting a lawyer about a legal problem in uncontroversial circumstances, proof of those facts alone will provide a basis for concluding that legal advice was being sought.

(d) In its ordinary meaning dominant means the purpose which was the ruling, prevailing or most influential purpose. An appropriate starting point when applying the dominant purpose test is to ask what was the intended use or uses of the document which accounted for it being brought into existence. This is a question of fact, to be determined objectively.

(e) A claim for privilege will not succeed if all that emerges is that the document is a commercial document or has been brought into existence in the ordinary course of business. In the insurance context, there is no privilege if the document was to allow an insurer to make a decision in the ordinary course of its insurance business as to whether or not to grant indemnity.

Mukhtar AsJ said (at [23]) that in these circumstances the Court is wary of the purpose of retaining a lawyer:

The occurrence of insured events and the use of loss adjusters and preparation of expert reports is a very common experience. What activates the Court’s scrutiny of any claim for privilege in circumstances such as the present is the natural apprehension that an investigation report is a normal or routine step that an insurer may take as soon as a claim is made or notified. As I said in Brunswick Hill Apartments Pty Ltd v CGU Insurance Limited documents are not privileged merely because one of their intended destinations is the desk of a lawyer. Nor is it enough that reports are commissioned or steps are taken because of established corporate or bureaucratic procedures and the report is made as a result of instructions being followed. What the Court is particularly alert to is whether a solicitor has been retained as a device to be interposed between the insurer and the loss adjuster and expert to present an appearance in form of a relationship of privilege, but in substance using the solicitor as nothing more than as a conduit for information: see Nickmar (note: footnotes omitted).

Mukhtar AsJ upheld the objection and said that the dominant purpose of Mr Barnes' report was for legal advice. A summary of the reasons follow:

1. The document was confidential by its nature and the private interests for which it was commissioned (at [22]).
2. The urgency of the situation required the expert to be retained before the lawyers (at [24]).
3. The lawyers were engaged genuinely and not as a device. When the report was made there was not yet a legal problem, but the concept of legal advice does not require the stipulation of the problem and the subject matter of the advice (at [25]).
4. Although the sole purpose of the report was not to obtain legal advice, Mukhtar AsJ considered that the insurer sought the report because it required legal guidance. The Court must preserve the importance of full and unreserved communication between client and lawyer and the freedom to make investigations without being required to divulge the outcome (at [26]).

The outcome in Samenic appears to have depended on the fact that the matter is a 'fire case', and there was special urgency involved in retaining the expert. For that reason, if a party retains an expert before it retains lawyers and the circumstances do not involve a fire case or special urgency, then the outcome and reasoning of Samenic may not be applicable to those circumstances. However the reasoning in Samenic is useful when a party is confronted with a request to produce, or adduce evidence from, a confidential report made prior to litigation.