In brief - Insurer loses benefit of legal professional privilege over investigation report because it fails to establish that the report's primary purpose was for use in litigation
The Full Court of the Supreme Court of South Australia in Douglas v Morgan  SASCFC 76 recently held that there was no legal professional privilege over an investigation report prepared for an insurer on the basis that it was not prepared for the dominant purpose of submission to lawyers for use in any legal proceedings. Rather, the Full Court determined that it was prepared for the purpose of assessing liability of the insurer in the ordinary course of its business.
The decision highlights the necessity for insurers to balance the commercial desire to settle matters as early as possible, without the involvement of solicitors, with the risks of being unable to rely on any purported legal professional privilege over information, documents or correspondence which may be critical if proceedings are issued at a later date.
CTP insurer seeks legal professional privilege over motor vehicle accident investigation report once respondent commences proceedings
On 9 December 2012, the Respondent (and plaintiff) was crossing the road when a motor vehicle driven by the Appellant (and defendant) collided with the Respondent. On or around 20 December 2012, the Respondent's solicitor contacted the Appellant's Compulsory Third Party Insurer (CTP Insurer) providing details of the collision and requesting a claim number. The Respondent sought payment of medical expenses arising out of the collision.
On or around 27 December 2012, the CTP Insurer's claims consultant prepared a standard form request to an investigation organisation (Investigator), requesting that an investigation be undertaken, including the interviewing of witnesses. The standard form included a heading "Reason for Investigation" in which the Claims Consultant wrote "We wish to obtain a detailed account of the accident from the insured, witnesses and claimant if possible in order to confirm the accident circumstances and ascertain the insured and claimant’s awareness prior to the accident." There was no reference to the CTP Insurer seeking advice from solicitors arising from the Investigator's report.
Following the Investigator's engagement, there were several email exchanges between the Respondent's solicitors and the Claims Consultant regarding the outcome of investigations into liability for the claim.
On or around 12 June 2013, the Claims Consultant informed the Respondent's solicitor that the CTP Insurer denied liability for the Respondent's injuries on the basis that the Respondent had crossed into the path of the Appellant's oncoming vehicle.
In November 2015, the Respondent commenced proceedings in the District Court of South Australia against the Appellant for damages for personal injuries caused by negligent driving (which was only served in May 2016). In September 2016, the CTP Insurer instructed solicitors to defend the Proceeding. When completing its discovery, the CTP Insurer sought legal professional privilege over the report produced by the Investigator (Investigation Report). The Respondent sought access to the Investigation Report.
No legal professional privilege over investigation report as dominant purpose of report was to determine respondent's liability, Full Court finds
The Master of the District Court of South Australia at first instance upheld the Appellant's claim for privilege over the Investigation Report, finding that although there were two purposes to obtaining the Investigation Report, the dominant purpose was for advice and use in reasonably anticipated litigation (at ). The Judge, on appeal, overturned the Master's decision and found in favour of the Respondent, noting that the dominant purpose was to obtain an account of the accident from those involved and to allow the CTP Insurer to consider the Respondent's claim (at ).
The Full Court on appeal upheld the decision of the Judge, finding that there was no legal professional privilege over the Investigation Report on the basis that the dominant purpose of requesting the Investigation Report was to determine liability to the Respondent, while the secondary (or contingent purpose) of requesting the Investigation Report was for the CTP insurer to provide it to its solicitors if the matter proceeded to litigation.
The Full Court reached this conclusion because, at the time of requesting the Investigation Report, it found that the Claims Consultant had evidenced an intention to gather the facts surrounding the Collision so that the CTP Insurer could reach a decision on liability to the Respondent and to determine any quantum payable. There was no indication at the time of the engagement that the Investigation Report was going to be provided to solicitors to advise on the Respondent's claim or for use in litigation.
The Full Court held that legal professional privilege is "a rule of substantive law which may be availed of by a person to resist the giving of information or the production of documents which would reveal communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings" (at  citing Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at  per Gleeson CJ, Gaudron, Gummow and Hayne JJ).
When is legal professional privilege available?
The Full Court provided a helpful summary and made the following relevant points when considering the availability of legal professional privilege:
The privilege protects communications between a client and lawyers rather than information or documents per se (at ).
In order to obtain the benefit of legal professional privilege, "the communication must be made or the information must be obtained or recorded or the document must be created for the dominant purpose of the provision of legal services by the lawyer to the client" (at , emphasis added).
The legal services may include the provision of advice or legal representation. However, it is not limited to those two categories (nor are these two categories necessarily mutually exclusive). Further, litigation need not be on foot at that time. Privilege is available where a client creates a document to provide to a lawyer in connection with threatened or anticipated litigation (at ).
Privilege is available for information provided or documents created by a third party for the dominant purpose of being used by a lawyer in litigation. As an aside, the Full Court noted that it is not as clear that privilege is available in this circumstance, outside of the context of legal representation in litigation (at ).
The first step in determining privilege is to identify the purpose of creating the information or communication. This is a subjective test, which is to be assessed at the time of creating the document or the communication in question. However, objective information can also be relevant to assessing purpose. If there are two purposes, a Court must identify which purpose was the dominant purpose (at  - ).
The onus of establishing the existence of legal professional privilege over information, a document or a communication lies with the party claiming privilege (at ).
What insurers can learn from the decision in Douglas v Morgan
The decision highlights the difficulties which insurers face when briefing investigators to assist with reaching conclusions on liability for a claim. The investigation report may be necessary in order to determine whether there is any liability for a claim. However, it may also bring to light information in respect of an insured which would not be favourable if the matter were to result in litigation at a later date.
In the circumstances, insurers should undertake a conscious assessment, at the time when investigators are briefed, regarding what is in fact the dominant purpose of the investigation. If it is to seek legal advice based on the report which is prepared, then this should be properly recorded on the file. Otherwise, insurers run the risk of losing the benefit of any legal professional privilege which it may later argue exists in the investigation report, if it is not able to establish the dominant purpose.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2021.