Sphere Healthcare Pty Ltd v Allianz Australia Insurance Ltd (No 2)

Between 2013 and 2020, the plaintiffs, Sphere Healthcare Pty Ltd and Yes Family Pty Ltd, held an Industrial Special Risks Policy (the “Policy”) with the defendant, Allianz Australia Insurance Ltd, in relation to a business conducted by Sphere Healthcare on premises owned by Yes Family at Moorebank.

The Policy was incepted on 23 March 2020.

On 9 July 2020, there was a fire at the Moorebank premises.

The plaintiffs have made a claim under the Policy in relation to the fire.

Allianz has denied liability to indemnify the plaintiffs on the basis of an alleged material alteration of the risk, being the acquisition and storage of some 60,000 litres of ethanol in plastic barrels at the Moorebank premises and a failure to notify Allianz of that alteration of risk.

The claim under the Policy is for a significant amount. I was informed that the amount claimed is in the order of $20 million.

On 7 June 2024, after a contested application, Nixon J ordered that Allianz give discovery of the following categories of documents:

Allianz gave discovery verified by an affidavit of Ms Ubaldine Lobo, the Senior Property Underwriter writing the risk in 2020.

The nature of the documents that Allianz has discovered was summarised in a letter sent by the plaintiffs’ solicitor to Allianz’s solicitor on 11 February 2025:

On 2 April 2025, the plaintiffs filed a motion seeking the following orders:

The plaintiffs also sought an order that Allianz give further discovery in accordance with the following categories:

In written submissions, Ms Steer, who appeared for the plaintiffs, identified a number of “apparent defects” in the nature of the discovery given by Allianz.

During oral submissions, Ms Steer focused on the small number of emails that Allianz has discovered and, in particular, on the fact that, outside the policy year in which the fire took place, 2020, only two emails have been produced.

Ms Steer submitted that emails generated within Allianz, and between Allianz and any insurance broker, concerning the nature of the risk of the activities being undertaken by Sphere Healthcare at the Moorebank premises are likely to be relevant to the assessment that Allianz has now made that there has been a material alteration of the risk of the activities being undertaken at the Moorebank premises.

Ms Steer pointed out that the two emails that have been discovered outside the policy year, dated 1 June 2017 and 2 August 2017, appear to be only part of a more extensive email exchange.

The solicitors for the plaintiffs and Allianz have exchanged extensive correspondence about the adequacy of Allianz’s discovery.

Paragraph 12 of a letter from Allianz’s solicitors to the plaintiffs’ solicitors of 28 January 2025, referred to in order [4] in the plaintiffs’ motion, stated:

As can be seen, Allianz’s solicitors, on instructions, stated that emails of Allianz employees not saved into the “Teamworks” file were “automatically deleted”.

However, in an affidavit read by Allianz on this application, one of its Senior Property Underwriters, Mr Sean McCaffrey, deposed that he was familiar with “the way documents are saved in the [Teamworks] Database and how to search for and access documents” and that:

Thus, contrary to what Allianz’s solicitors had said in their letter of 28 January 2025, the inboxes of Allianz’s employees are not “automatically deleted” unless saved to the “Teamworks” file but, rather, “are automatically archived” to an IT system after three years.

It emerged during argument that there was no evidence that anyone from Allianz had ascertained the identity of persons who hitherto assessed the risk of insuring the plaintiffs’ business or conducted any search of the “archives” to which Mr McCaffrey referred to see if there are any documents relevant to the issues in these proceedings.

Mr O’Neill, who appeared for Allianz, agreed to get instructions as to the nature of Allianz’s “archives” and on 26 May 2025 circulated this email:

Mr O’Neill has informed me that Mr Turnock will in fact make such an affidavit. The debate between the parties is now whether I should permit cross examination of Mr Turnock on that affidavit.

The general rule is that an affidavit verifying discovery is conclusive on the question of whether there has been proper discovery and that cross-examination of the deponent will not be allowed except in three circumstances:

Mr O’Neill accepted that Allianz has not conducted a search of the Enterprise Vault to ascertain whether it contains any documents, in particular emails, relevant to the issues in these proceedings. Mr O’Neill accepted that there has been an “abject lack of emails” discovered but submitted that it was “simply supposition … without any real focus on why anyone could be fairly certain [whether] any further [relevant] documents exist”. But any lack of certainty about that matter is because Allianz has not interrogated its Enterprise Vault.

That provides a sufficient reason to permit cross examination of Mr Turnock. Such cross examination is to be confined to the questions concerning the Enterprise Vault and on the basis that the plaintiffs first circulate a list of the particular topics of the proposed cross examination.

That cross examination will be in lieu of any cross examination of Ms Lobo.

As to the further discovery sought, I allow Category 3 and allow Category 4 deleting the words “about the placement of policies of insurance for the plaintiffs” and substituting “trade or process of manufacture carried out at the Premises by the first plaintiff, and the nature of the occupation of the premises by the first plaintiff”.

I will list the plaintiff’s motion for directions in the motions list on 6 June 2025 and grant liberty to apply on short notice so far as concerns the proposed cross examination of Mr Turnock.

Thus, I make the following orders: