INVESTIGATIONS AND LEGAL PROFESSIONAL PRIVILEGE: RECENT LESSONS IN WA
May 25, 2016
The early investigation of claims is often critical to the preservation of evidence. However, of equal importance is ensuring that the product of these investigations is protected from disclosure.
The recent decision in Ziverts v City of Albany  WASC 94 highlights the need for proactive steps in claims management, so that factual investigations undertaken by non-legal providers can attract the protection of legal professional privilege.
On 6 December 2007, Catherine Ziverts (‘Ziverts’) threatened to sue the City of Albany (‘City’) for flooding which it allegedly caused to her property. The City sought indemnity for Ziverts’ claim under the local government insurance scheme.
Before it instructed solicitors, the City’s insurer appointed a third party provider to conduct a factual investigation. After Ziverts commenced proceedings, the City claimed privilege over three categories of documents relating to the investigation:
- Category 1 – Claim Documents
- Category 2 – Documents pre October 2009 – investigation documents created prior to a decision to appoint solicitors (including the investigation report itself)
- Category 3 – Documents post October 2009 – investigation documents created after a decision to appoint solicitors
Ziverts disputed the City’s claim for privilege.
A refresher on litigation privilege
At the outset of his judgment, Justice Beech canvassed the principles which applied to the category of legal professional privilege claimed by the City. His Honour noted that:
- legal professional privilege protects the confidentiality of certain communications made in connection with the giving or obtaining of legal advice (advice privilege), and representation in legal proceedings (litigation privilege);
- litigation privilege applies to confidential communications passing between a client, its solicitor and third parties for the dominant purpose of use in litigation which is either pending or in contemplation;
- communications passing between a client and a third party for the purpose of being put before a solicitor to obtain legal advice, or enable the solicitor to represent the client in legal proceedings, will be privileged;
- when no legal action is pending, a claim for litigation privilege requires evidence which establishes that there was a real prospect of litigation;
- a dominant purpose is one that predominates over all others. Where two purposes are of equal weight, neither can be said to be dominant; and
- the purpose of assisting an insurer to decide, in the course of its business, how to deal with an insured’s claim under a policy of insurance is not a purpose that attracts legal professional privilege.
Category 1 included a letter from the City to its insurer regarding the circumstances of Ziverts’ claim. It also included a completed public liability claim form. The City asserted that these documents were created ‘solely to collate information for use in defending or potentially settling the anticipated litigation’.
Justice Beech did not accept this proposition.
His Honour considered that the inherent nature of the documents was such that their purpose was to notify the City’s insurer of Ziverts’ claim, and enable it to make a decision about whether to grant indemnity. Since the purpose argued by the City was not seen to be predominant, the claim for privilege could not be sustained.
Documents pre October 2009
Category 2 included email correspondence between the factual investigator and the City, and, most importantly, the factual investigation report.
The City argued that the factual investigator was engaged by its insurer so that information could be collected, with a view to:
- Briefing solicitors
- Collating information for use in defending or settling Ziverts’ claim, and
- Informing the insurer’s decision-making regarding the claim (such as whether or not attempts should be made for settlement).
The City also led evidence from its insurer to the effect that, when a claim is made, it would ‘often’ appoint solicitors. However (as with most insurers), some claims were managed to completion without obtaining legal advice. Thus, as the insurer ultimately did retain solicitors, all of the documents ultimately pertaining to obtaining advice (including the documents pre-dating the retainer) attracted privilege.
Justice Beech inspected the documents and concluded that the City’s insurer first decided to retain solicitors in October 2009. Prior to that time, the inference which followed was that the insurer pursued the prospect of resolving Ziverts’ claim without taking legal advice – a situation which does not attract the quality of privilege.
Again, because the purpose argued by the City was not seen to be predominant, the claim for privilege on the documents created prior to solicitors being retained could not be sustained.
Documents post October 2009
Category 3 included various emails between the City and its insurer regarding the circumstances of Ziverts’ claim, the appointment of solicitors and further inquiries arising out of the factual investigation.
Justice Beech was satisfied that these documents were privileged.
His Honour held that, although a number of the emails appeared to pre-date the actual involvement of solicitors, they contained communications for the dominant purpose of obtaining information from the City to be provided to its solicitors to facilitate advice as to defence of the claim. His Honour was also satisfied that none of the emails was created for the purpose, even in part, of assisting the City’s insurer to decide whether to grant indemnity.
What are the take away points from this decision?
Insurers often seek to investigate an insured’s entitlement to policy indemnity immediately after receiving a claim. However, it is important to bear in mind that an investigation assisting a decision on indemnity is not a purpose which, of itself, attracts legal professional privilege.
A legitimate claim for privilege requires that the purpose of providing the investigation documents to a solicitor to enable provision of legal advice predominates over all other purposes.
Accordingly, where there appear to be real prospects of a claim being litigated, defendants and/or insurers seeking to claim privilege over investigations would be well advised to instruct solicitors prior to the appointment of a factual investigator and/or external claims manager. This is particularly important if the proposed investigation will address both the issue of policy indemnity and gathering of evidence for the potential defence of the claim.
If this is not possible, claims teams can enhance the prospects of sustaining a claim for privilege by documenting their intention to appoint solicitors as early as possible, such as in:
- Their claim notes; and/or
- The confidential brief to the factual investigator.
While this approach is by no means as foolproof as instructing solicitors, it can bolster a claim for privilege, particularly if legal advice is obtained shortly after the conclusion of the investigations.
Authored by Kerry Wood, Partner and Douglas Johnson, Lawyer, Perth
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