By Louise Cantrill, Partner and Tamara James, Solicitor

The Harman undertaking, or implied undertaking, is a long-established principle minimising the use of documents produced in litigation for alternative purposes.  The recent judgment of Price v Clearview Life Nominees Pty Limited provides guidance on when special circumstances may, or may not, exist to provide relief from the obligations of the implied undertaking in an insurance context.

Background

Mr Price held two policies with Clearview Life Nominees Pty Limited (Clearview), an Income Protection Policy (IP Policy) and a Total and Permanent Disability Policy (TPD Policy).

Due to a major depressive condition, Mr Price lodged claims under both policies.  The claim under the IP Policy was accepted and paid out (and continued to be paid out).  The claim under the TPD Policy was denied, giving rise to the proceedings against Clearview.  Clearview wanted to use documents served in the TPD policy coverage litigation in relation to the claim under the IP Policy.

Over the course of the litigation, various medical reports, affidavits and documents had been served.  Clearview sought relief from the implied undertaking to use those documents for the purposes of “assessing” Mr Price’s ongoing entitlements under the IP Policy.  Clearview’s counsel clarified that “assessing” included using the documents to verify the information provided by Mr Price as part of Clearview’s entitlement to information under the IP Policy.

In Clearview’s submission, there was sufficient similarity between the parties and the issues considered under both policies to allow the Court to conclude that use of the documents by Clearview would not be a breach of the implied undertaking.  In the alternative, if the Court took the view that it would be a breach of the implied undertaking, Clearview sought relief from the implied undertaking on the basis that special circumstances existed.

The Court gave consideration to authorities on the implied undertaking and when special circumstances exist before denying Clearview’s request. The Court identified three reasons why the implied undertaking should be upheld:

1. Firstly, there was no public interest in providing relief from the implied undertaking in the circumstances. In particular, there is no dispute in relation to cover under the IP Policy. On the contrary, the Court found that there was insufficient reason in this case that “the need for complete evidence, disclosure and compliance with subpoenas…should be put at risk by reason of the party being compelled…having a concern that the unnecessary invasion of privacy and confidentiality will be extended to uses unrelated to the proceedings…”;
2. Secondly, while Clearview submitted a “plea for efficiency in the insurance industry”, the Court considered that the opportunity and convenience that arose was not sufficient to justify relieving Clearview of its obligations under the implied undertaking.  The Court also gave consideration to the likelihood that the material would be used adversely to Mr Price’s interests and considered that “it would be naïve to think there was no risk that Clearview might seek to deploy the material in a way adverse to Mr Price’s interests under the IP Policy” noting that such an outcome is expressly disapproved of in the authorities; and
3. Thirdly, while the implied undertaking could not prevent Clearview having access to information that it was entitled to under the contract of insurance with Mr Price for the purposes of assessing entitlement under the IP Policy, giving relief to Clearview from its obligations under the implied undertaking would “work an injustice on Mr Price…to give an opportunity to Clearview to have access to material…to which it would not be entitled under the terms of the IP Policy”.

Conclusion

While the similarity between the parties to the two policies, and the similar circumstances giving rise to Mr Price’s claim under each policy, may have given rise to special circumstances, the fact that there was no dispute over the IP Policy was sufficient to persuade the Court to continue to uphold the implied undertaking and not to give the relief sought by Clearview, in part due to the potential that such information could be used adversely against Mr Price.  In essence, the implied undertaking was upheld to prevent the risk that Clearview may use the information to find a dispute where there was none.