Introduction

The rules governing civil procedure in the Western Australian Supreme and District Courts were recently amended by adopting a new Order 9A (Order 9A)1. Order 9A imposes an obligation on parties to disclose the identity of persons who have control over, and who are funding the party's involvement in a court proceeding (Interested Non-Party).

At first glance this appears to be aimed at litigation funders, but the net is wide enough to extend to insurers (and perhaps reinsurers).

After being gazetted on 12 June 2012, Order 9A came into effect 2 weeks later on 26 June 2012 and compels parties to notify the Principal Registrar and each other party of the identity of any person who:

  • provides funding or other financial assistance to the party for the purposes of conducting the case; and
  • exercises direct or indirect control or influence over the way in which the party conducts the case.2

There seem to have been no parliamentary discussion or published policy as to the rationale supporting Order 9A's enactment, and practitioners and insurers alike currently find themselves in a maze of uncertainty brought about by this novel development. We explore below a few of the most prominent issues arising from the new order.

Who has a notifiable interest?

The Courts have not yet provided any guidance or explanatory memoranda and until a practice direction is published the parties are burdened with having to assess whether there are external interests which must be disclosed. Notwithstanding this, it is paramount that both the elements of funding and control must be present to meet the threshold of an interest being considered notifiable.

Order 9A seems to be couched widely enough to apply to insurers who have assumed the defence of their members after granting indemnity under policies of insurance. In simple scenarios where there is a single underwriter notification will be a straightforward process. However, in scenarios with a more complex matrix of interests of insurance, reinsurance and co-insurance structures, the identification of notifiable interests might prove challenging, and involve commercial sensitivities and reluctance to notify.

Whilst an insurer might have assumed the conduct of a case, if a costs inclusive excess is yet to be exhausted it cannot be said to be funding it. Underwriters' interest will only become subject to disclosure when the deductible has been eroded fully.

Duties owed by Interested Non-Parties

Interested Non-Parties now owe duties to the Court:

  • neither to engage in conduct which is misleading or deceptive, nor to aid, abet or induce such conduct, in connection with the conduct of the case;
  • to cooperate with the parties and the Court in connection with the conduct of the case; and
  • to use reasonable endeavours to ensure the goals in relation to eliminating delays and the use and objects of case flow management are attained.3

Enforceability

The issue of non-compliance with disclosure obligations by parties has not yet been addressed in rules or regulations underlying Order 9A. However, we suspect that non-compliance is likely to incur the imposition of usual sanctions such as adverse costs orders or even injunctive relief.

Timing of Notice

Parties need to discharge their disclosure obligations in accordance with the rules as soon as is reasonably practicable after the person becomes an Interested Non-Party in relation to the party to a proceeding4. This means that within the limits of reasonable practicability, Interested Non-Parties need to be identified in relation to litigation presently on foot. There is no suggestion or reference to Order 9A having any retrospective effect.

Implications of Order 9A

The introduction of the new order will invariably cause underwriters' interest in the subject matter to be exposed. This, in turn, might pave the way for the 'deep pockets' perception of defendants to come to fruition to the likely detriment of underwriters. It also follows that in deciding whether to settle matters prior to proceedings becoming litigious underwriters should bear in mind the real likelihood of having to disclose members of a following market in excess layer arrangements.

Fortunately, nothing in the current wording of Order 9A compels Interested Non-Parties to disclose the basis upon which they operate as such. Consequently, issues such as policy wording, extent of indemnity and limits of cover do not fall within the ambit of the disclosure obligations.

This is the first of such rules to be formally promulgated in Australia and it is yet to be seen if other states and territories will follow suit. We suppose one has to watch this space to see what benefits are conceivably to be achieved by this development, and whether there is a case which should be put for limitation of its application to insurers.

Footnotes

1Rules of the Supreme Court (WA) 1971

2 Order 9A Rule 1

3 Order 9A Rule 3

4 Order 9A Rule 2(b)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.