| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : ALL THINGS ENTERPRISES PTY LTD -v- WELL CONNECTED BUSINESS SYSTEMS PTY LTD [2013] WADC 165 CORAM : KEEN DCJ HEARD : 18 OCTOBER 2013 DELIVERED : 19 NOVEMBER 2013 FILE NO/S : CIVO 125 of 2013 BETWEEN : ALL THINGS ENTERPRISES PTY LTD First applicant
WESTMAN NOMINEES PTY LTD
Second applicant
PEARD & ASSOCIATES PTY LTD
Third applicant
PEARD LAWRENCE & ASSOCIATES PTY LTD
Fourth applicant
AND
WELL CONNECTED BUSINESS SYSTEMS PTY LTD
Respondent
Catchwords: Procedure - Pre-action discovery - Order 26A r 4
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Legislation: Rules of the Supreme Court 1971 Result: Application dismissed
Representation: Counsel:
First applicant : Mr J Hammond
Second applicant : Mr J Hammond
Third applicant : Mr J Hammond
Fourth applicant : Mr J Hammond
Respondent : Mr S J Davis
Solicitors:
First applicant : Hammond Legal
Second applicant : Hammond Legal
Third applicant : Hammond Legal
Fourth applicant : Hammond Legal
Respondent : Feinauer Commercial Lawyers
Case(s) referred to in judgment(s):
McCarthy v Dolpag Pty Ltd [2000] WASCA 106
Paxus Services Ltd v People Bank Pty Ltd [1990] FCA 500
Waller v Waller [2009] WASCA 61
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1 KEEN DCJ: This is an application for pre-action discovery pursuant to O 26A r 4 Rules of the Supreme Court 1971. That rule provides:
2 The applicants in these proceedings, which I will, for the sake of convenience, refer to as the Peard Group, seek such discovery in relation to potential proceedings for misleading or deceptive conduct arising from a Proposal as to photocopying requirements of the Peard Group given by the respondent. 3 The application relies upon affidavits sworn by Khoi Van Ngo on 11 July 2013 (July affidavit) and 10 October 2013 (October affidavit). 4 In the July affidavit he deposed that in about December 2011 the respondent was engaged by the Peard Group to provide advice as to Peard Group's photocopying requirements. (Page 4)
5 In December 2011 a meeting was held between a Mr Chris Anderson of the respondent and representatives of the Peard Group, being Peter Peard and Maree Overton, at which Mr Anderson produced the Proposal. The affidavit at par 12 sets out the content of the Proposal as being: 12.1 The savings that the Peard Group would obtain on an annual basis if it proceeded with the Proposal; 12.2 Estimates of the black and white and colour copies consumed by the various Peard Group offices for the periods ending July 2011 and December 2011; 12.3 The cost of the various Peard Group offices of each page of photocopying for black and white and colour copies for the periods ending July 2011 and December 2011; and 12.4 The actual number of black and white photocopies and colour photocopies that the Peard Group Offices were making in the periods ending July 2011 and December 2011. 6 It was further deposed that as a result of the Proposal and various oral statements made to Ms Overton and Mr Peard the Peard Group proceeded with the recommendations contained in the Proposal. 7 Mr Ngo then went on to depose that in about February 2012 he became concerned about photocopying costs being incurred by the Peard Group after reviewing its expense accounts in relation to the photocopying. As a result he sent an email on 4 December 2012 to a Mr Dolzan, said to be the respondent's sales manager. In that email he noted the minimum contracted volumes were increasing substantially and set out details for a number of entities within the Peard Group. 8 In that email, for each of the relevant entities in the Peard Group, he sought supporting documents. It would appear from the email that those documents were sought in an attempt to explain the position shown in the Proposal. The email also expressed a need to vary the contract in order to bring down the volumes to reflect actual usage. 9 No response was received to that email and follow-up emails were sent. 10 Mr Ngo then deposed that in 2013 he requested a Mr Cliff Jackson from Konica Minolta to conduct an audit of the Peard Group's photocopying costs in conjunction with a review of the Proposal. In the affidavit he said that Mr Jackson had expressed serious reservations about the validity of the figures provided by the respondent in the Proposal. (Page 5)
He also deposed that he obtained advice from Toshiba Copyworld, Magenta Office, Scope Business Imaging as well as Konica Minolta regarding his concerns as to the Peard Group's photocopying costs and 'all of the companies representatives to whom I spoke informed me that the photocopying costs being incurred by the Peard Group were too high'. 11 On 12 February 2012 Mr Ngo wrote to the respondent setting out details of a damages claim. In that letter he said: • Inflated minimum contracted volumes on new agreements when evidence does not exist of the volumes being achieved. • Payout amounts were unnecessarily rolled over into another contract without advice or notification. • Contracts were renewed prior to their expiry, increasing our cost. • Equipment costs were over charged, larger than required machines supplied. • Representation from you, in writing, that expenditure made was significantly higher than our actual costs, inducing us to enter into a higher commitment on a new contract. We have supporting evidence and calculations to substantiate our damage claim of $132,303 plus GST. A summary of the total of damages claim to date is as follows; Westman Nominees Pty Ltd, $60,142.08 All Things Enterprises Pty Ltd, $59,264.32 Evolution Settlements Pty Ltd, $12,896.60 Our expectation is your response with a resolution to the above matter within 7 days. Please do not hesitate to contact me to discuss this further. (Page 6)
12 On 11 March 2013 the solicitors for the Peard Group wrote to the respondent's solicitors in relation to these matters. Specifically, that letter noted: I am instructed as follows: 1. The Company was engaged by the Peard Group to provide advice as to the Peard Group's photocopying requirements. 2. The Peard Group's photocopying requirements included providing cost estimates as to the photocopying that had been undertaken and was likely to undertaken by the various Peard Group offices situated at Mindarie, Joondalup, Hillarys, Scarborough, West Coast, Rockingham, Mandurah and its head office situated in Endeavour Road, Hillarys. The Company's Proposal: 3. In December 2011 or thereabouts the Company's Director, Mr Chris Anderson spoke with the Peard Group's Chief Executive Officer Mr Peter Peard and Managing Director Ms Maree Overton. Mr Chris Anderson advised Mr Peter Peard and Ms Maree Overton that the Company could save the Peard Group considerable amounts of money providing the Peard Group adopted the Company's proposal in relation to the Peard Group's photocopying. 4. The Company's proposal was contained in a 9 page document (the Proposal) which set out the likely savings to the Peard Group in adopting the Proposal at each of the Peard Group's offices. 5. The Proposal purported to set out the average number of black and white and colour photocopies made by the Peard Group at its various offices over 3 month periods ending in July 2011 and December 2011. 6. The Proposal also set out the savings that would accrue to the Peard Group if the Proposal was adopted. In total the Company claimed that Peard Group could save $78,912 per annum in photocopying costs. 13 The letter then set out a case example relating to the Scarborough office as 'indicative of the issues that occurred at most, if not all, of Peard Group's offices by reason of the Proposal and the misleading advice provided to Peard Group by the Company'. 14 The letter then went on to set out for the Scarborough office various statistics for expenditure for the three months ending December 2011 alleging that it was incorrect and bore no relationship to actual (Page 7)
consumption. The letter then carried out an assessment of the expenditure for the period. 15 The letter then went on to state the number of copies made by the group at July 2011 and December 2011 with the exercise being conducted for both black and white copies and colour copies. 16 In the letter the solicitors on behalf of the Peard Group went on to assert a claim for loss and damage arising from misleading advice concluding with a calculation of the loss and damage. That claim was in the following terms: 11. The effect of providing erroneous figures in the Proposal led to the Peard Group paying significantly more for photocopying than what it should have. 12. The erroneous information caused Peard Group Scarborough to enter into contracts to hire photocopiers from Leasing Centre (Aust) Pty Ltd. 13. In the case of the Scarborough Office the Peard Group, through its Company All Things Enterprises Pty Ltd, agreed to hire 2 new Konica Minolta Bizhub C652s. The hire of the 2 Konica Minolta Bizhub C652s was unnecessary. 14. The rental agreements with the Lease Centre (Aust) Pty Ltd refer to the minimum units, both black and white and colour, per month that the Peard Group would make. This information was wrong as it was based on the erroneous figures contained in the Company's Proposal. 15. My client has established that the figures provided by the Company in its Proposal are wrong by reference to the meter readings of the photocopying machines. 16. My client has also established that it had been charged for photocopying that it never undertook. This arises by reason of the erroneous figures. The Proposal stipulated that the Peard Group was making specific numbers of photocopies, when it was not. Failure to Notify of Price Increases: 17. The Company also purported to increase the cost of photocopying during the terms of the various hire and maintenance contracts. 18. Contrary to Clause 9 of its Service Agreement the Company was not entitled to increase any costs without providing 30 days' notice to the Peard Group of such increase. A notice was never provided to the Peard Group of the increase in photocopying charges. (Page 8)
Acquisition of Unnecessary Photocopiers; 19. Peard Group have prepared a detailed summary of the various contracts for the Scarborough Office (as well as all other offices) which discloses amongst other things that: 19.1 The first contract from September 2008 to July 2010 involved the hire and maintenance of a Konica Minolta C253 and involved finance of $14,760 being carried over to the second contract in relation to the Konica Minolta C253; 19.2 The second contract from August 2010 to March 2012 involved the hire and maintenance of the same Konica Minolta C253. Notwithstanding the fact that the Konica Minolta had already been paid, Peard Group's figures disclose that the Company claimed $8,432 of finance was owing at the end of the second contract period. The sum of $8,432 was rolled over into the third contract. 19.3 The third contract from April 2010 to December 2012 involved the hire of two new photocopies, two Konica Minolta Bizhub 652. The new Konica 652s were hired on the basis of the Proposal's Scarborough figures. The hire of the machines was totally unnecessary as the Scarborough Figures were false. Damages Sustained by Peard Group: 20. By reason of the misleading advice as to the Peard Group's photocopying requirements and the Proposal containing erroneous (either deliberately and or negligently) figures the Peard Group's Scarborough office has suffered loss and damage. 21. The Peard Group's Scarborough office has, to date, calculated its loss and damage as follows: 22. Excess photocopying charges: $60,142.08 23. Unnecessary hire charges and finance charges in relation to the hire of photocopying machines that were far in excess of the capacity required by the Peard Group's Scarborough Office: $59,264.32 24. Peard Group's Scarborough office loss, as at the time of writing this letter stands at $119,406.40 25. Peard Group has mitigated its loss by contacting the Leasing Centre (Aust) Pty Ltd and advising that the numbers in the rental agreement are far in excess of what the Peard Group's Scarborough Office is actually undertaking. The Leasing Centre (Aust) Pty Ltd (Page 9)
has now revised downwards the photocopying numbers for both black and colour photocopies. 17 There then followed a meeting between the parties and their lawyers which resulted in further correspondence. Mr Ngo annexed that correspondence as Annexures KVN7 and 8. In the first of those letters there was, in effect, a joinder of issue and a request for the respondent to provide the data from the software provider upon which it had based the usage figures for the Peard Group including all meter readings and invoices for each contract period. Information was also sought as to the number of photocopies the respondent claimed that the Peard Group was making before the respondent presented its Proposal. 18 KVN8 was a further request for information from Peard Group's lawyers in which it was said (relevantly): 1. Your client provide the usage figures upon which it based its proposal to the Peard Group of Companies (the Proposal). … 2. To date your client has provided no supporting data upon which hit has based the proposals other than document 'FAD 3' attached to your without prejudice letter dated 2 April 2013. 3. Document 'FAD 3' provides the meter readings for the period 16 April 2011 to 30 June 2011 for the Scarborough office only. The Proposal purports to present the three month average for photocopying for the period of the various contracts that the Peard Group had in relation to the various machines listed in the Proposal. 4. The Peard Group's contracts for Scarborough, by way example, commenced on 16 August 2010 in relation to machines KMC252 and KMC203. 5. Document 'FAD 3' only relates to a two and a half month period and is of no use in my client assessing whether or not the three month average usage was as stated in the Proposal. 6. Document 'FAD 3' does not provide any verification for any other figure than the minimum usage for black and colour copies. The Proposal, by way of example, does not provide the three month average prior to December 2011 for colour photocopies being $32,000. 7. During the period that my client was said to have exceeded the black and colour minimum number of photocopies my client never received one invoice for excess photocopying both for the three month period prior to July 2011 and December 2011. As you will be aware the position is that if my client exceeded the minimum (Page 10)
number of black and white and or colour copies allowable it would receive an invoice for the excess photocopying from the lessor of the photocopiers. This did not happen in the periods prior to July or December 2011. 8. It is also noted that all the figures are rounded to sums such as 7,500 or 13,000 or 19,000. This does not accord with document 'FAD 3' where the numbers are not rounded figures. 19 Those requests concluded with notification that failure to provide the information would result in an application being made under 'Order 26A Rule 3 [sic]'. 20 By letter dated 15 May 2013 (KVN9) the respondent's solicitors responded denying the right to such documentation and any application under O 26A. 21 To conclude his affidavit Mr Ngo deposed at pars 31 to 39 as follows: 31. At this point in time the Peard Group have not made a decision t [sic] commence proceedings. 32. The Peard Group have been unable to decide whether to commence proceedings against Well Connected without having access to the meter readings or other documents upon which Well Connected may have based its Proposal. 33. If the meter readings support the Peard Group's contention that the photocopying charges are excessive then the Peard Group would initiate proceedings against Well Connected and any other party that took part in misleading the Peard Group as to its photocopying requirements. 34. Peard Group also wishes to ascertain what defences may be available to Well Connected should it commence proceedings against Well Connected. 35. It is also important for the purpose of Peard Group making a decision as to whether to commence litigation against Well Connected to determine the quantum of damages to which the Peard Group may be entitled. 36. This is impossible to do without the figures upon which Well Connected relied to submit the Proposal to the Peard Group. 37. The Peard Group does not have the information upon which Well Connected relied upon to prepare the Proposal. (Page 11)
22 In the October affidavit Mr Ngo deposed that the Peard Group did not have and never had the meter readings relating to the photocopiers used by them for the period covered by the Proposal. That statement was made by reference to Annexure KVN6 to the July affidavit in which, at par 15, it was said: My client has established that the figures provided by the Company in its Proposal are wrong by reference to the meter readings of the photocopying machines. 23 Mr Ngo went on in the October affidavit to depose that he was unable to obtain meter readings for Scarborough for the period to which the Proposal related. 24 He also went on to say that the losses set out in that letter (KVN6) are his best estimates based on information available to him but without access to meter readings during the period covered by the Proposal. 25 In his affidavit he deposed that production of the meter readings would allow Peard Group to ascertain the strength of any cause of action and what losses may have been caused by the Proposal.
The applicants' submissions 26 It is said that the Peard Group does not have sufficient information to enable a decision to be made whether to commence proceedings by reason of not having access to the documents used by the respondent as to the costs and volumes of photocopying. It is also submitted that there are reasonable grounds for believing that the respondent was likely to have such documents. 27 It is argued that Peard Group has established that it may have a cause of action against the respondent and that it wishes to take proceedings but requires the missing information to support its claim 'in order that proceedings may be commenced'. (Page 12)
The respondent's submissions 28 The defendant has taken issue with certain aspects of the affidavits of Mr Ngo but it is not necessary for me to decide this for the purposes of deciding this application. Further, the respondent has argued that there has not been conferral and memorandum of conferral. Again, at this level, it is not necessary for me to decide the point. 29 The respondent submits that Peard Group has asserted its claim in Annexure KVN6 to the July affidavit which asserts specific misrepresentations as to Scarborough office and in considerable detail. 30 The written submissions, which were provided prior to the October affidavit being sworn, observed that KVN6 indicated that Peard Group had established that the figures in the Proposal were wrong and attached evidence to support the proposition. However that appears to be countered by the October affidavit in that whilst KVN6 asserts that the Peard Group has established figures in the Proposal were wrong and attached meter readings, Mr Ngo says that they are not the meter readings for the proposed period and the losses are 'best estimates'. In oral submissions the respondent argues that this latest affidavit clearly shows that the Peard Group does not have a cause of action and therefore it does not meet the threshold test of the application under O 26A and that the claim is baseless. I will come to this further in due course. 31 It is also said by the respondent that the Peard Group does not need discovery to decide whether or not to commence proceedings. Again relying on the written submissions, the respondent noted that as at the time of the July affidavit Mr Ngo was demonstrating that the Peard Group made it clear it already had information as to its photocopying usage and based on that it was able to assert not only that the Proposal was misleading but to identify with precision the loss said to have been suffered by reason of the alleged misleading conduct. In oral submissions it was asserted that the October affidavit demonstrates, if accepted, the falsity of the matters contained in KVN6. 32 In its written submissions the respondent also relied on KVN5 in which the Peard Group had set out its damages claim in detail. 33 The respondent's argument is two-pronged: first, that the Peard Group has failed to establish that it may have a cause of action but, if it does, KVN6 demonstrates that it had sufficient information to make a decision whether or not to sue. Indeed, KVN5 asserted that the Peard (Page 13)
Group 'have supporting evidence and calculations to substantiate our damages claim of $132,303 plus GST'.
Legal principles 34 The principles underlying an application under O 26A r 4 are well set out in Waller v Waller [2009] WASCA 61. 35 In Waller at [72] Le Miere AJA noted that r 4 defined the three necessary conditions for the exercise of the power conferred by the rule. He went on to say that the exercise of the power was discretionary. 36 At [75] his Honour said: Nevertheless, O 26A r 4(1) should … be interpreted to require an objective test. The court must form an opinion as to whether there is sufficient evidence before it that the applicant may have a cause of action against the potential party. The court must make its own evaluation of the circumstances which ground the applicant's belief that he may have a cause of action against the potential party. The test is objective in the sense that it is not sufficient that the applicant believes that he may have a cause of action against a potential party; the court might determine this belief be unfounded. It is not necessary that the applicant have a prima facie case. However there must be material to establish that the applicant may have a cause of action against the potential party. There must be some tangible backing, or objective foundation, that takes the existence of the cause of action beyond a mere allegation, suspicion or assertion. 37 In the same case his Honour Martin CJ noted at [2] that: The nature of the jurisdictional threshold which an applicant is required to cross under that rule (O 26A r 4) is illuminated by its evident purpose, which is to enable a prospective litigant to obtain discovery of documents that may assist in making a decision as to whether to commence proceedings. It would entirely defeat the purpose of the rule to require an applicant to demonstrate the present existence of a cause of action as a condition to the exercise of the court's jurisdiction. 38 Having considered observations made by Burchett J in Paxus Services Ltd v People Bank Pty Ltd [1990] FCA 500, his Honour the chief justice said at [4]: It would be contrary to the evident purpose of such a rule to require an applicant to demonstrate the elements of a good cause of action as a condition of the exercise of a power which is intended to enable the applicant to assess whether or not he or she does in fact have a good cause of action. It would therefore be wrong in principle to approach the rule (Page 14)
with an undue focus or emphasis upon the demonstration of the prospective cause of action. Thus the jurisdictional question is whether there might be a cause of action which could be demonstrated by the provision of the documents sought. However something more than mere assertion, conjecture or suspicion is required to enable the court to conclude that there might be such a cause of action. 39 In McCarthy & Ors v Dolpag Pty Ltd [2000] WASCA 106 Anderson and Scott JJ commented that an expression such as the threshold being 'low' must take its meaning from the context of a particular case. Their Honours also noted that caution should be exercised before making an order and that such orders should not be made as a matter of course and only when reasonably necessary to achieve the proper administration of justice. Their Honours further noted that such discovery 'constitutes a very serious invasion of privacy and confidentiality and the process should not be allowed to place upon a litigant any harsher or more oppressive burden than is strictly required'. Counsel for the respondent disavowed any claim to harsh or oppressive burden in the present case.
Discussion 40 To the point of the July affidavit, and having regard to the need to consider whether there was sufficient evidence to show that the applicant may have a cause of action on an objective test, I may have been satisfied. 41 It is tolerably clear from that affidavit and the documents annexed to it that the respondent did provide a Proposal to the Peard Group as to the photocopying requirements of the group. Annexure KVN3 is that Proposal and, in respect of certain offices within the Peard Group, it demonstrated certain savings that could be achieved by following the recommendations contained in that Proposal. 42 It is not necessary for me to go into detail in these reasons but it clearly sets out various equipment and volumes and costings for various offices and the recommendations and savings that could be achieved. 43 Further, the July affidavit asserted that, as a result of the Proposal, Peard Group proceeded with the recommendation or, put another way, it proceeded in reliance upon the Proposal. 44 In annexure KVN7 it asserted that the advice was wrong and in KVN6 and elsewhere it asserted that it has suffered loss and damage. (Page 15)
45 As was noted in Waller at [2], it was not necessary for the plaintiff to demonstrate the present existence of a cause of action as a condition to the exercise of the court's jurisdiction. What it had to demonstrate was that it may have a cause of action which is a lower threshold for the exercise of the jurisdiction given by O 26A. However there is the caveat noted by the chief justice in Waller and by Le Miere AJA that it had to be something more than mere assertion, conjecture or suspicion. 46 At the point of the July affidavit the material did demonstrate that necessary foundation for the jurisdictional threshold to be reached and that the cause of action would be against the respondent. 47 Before proceeding further it is necessary that I also deal with some of the other requirements of the order. From that July affidavit it was also clear that Peard Group wanted to commence proceedings. So much is abundantly clear from that affidavit and its annexures. When Peard Group had no response to its initial email of 4 December 2012 in annexure KVN4 it sent an email on 24 December 2012 to the effect 'If you cannot substantiate with supporting documents we may have to seek compensation'. 48 In annexure KVN5 on 12 February 2013 Peard Group also set out details of its damages claim and required a resolution in seven days. 49 That was followed by KVN6 on 11 March 2013 which set out details of the claim and the loss and damage with a view to without prejudice discussions to take place. I have been through the content of this letter previously. 50 In KVN8 it was asserted that the Peard Group had suffered substantial losses as a result of the respondent supplying erroneous data and it is against all that background the present application is brought. The only conclusion that can be drawn from all of those assertions in the July affidavit is that the Peard Group does want to commence proceedings. 51 It was further asserted in the July affidavit that the Peard Group had not made a decision to commence proceedings (par 31) and wished to ascertain potential defences should it do so (par 34) and to make a decision to determine the quantum of the damages. 52 In further support of these findings that the Peard Group did want to commence proceedings, in the July affidavit it had asserted that it had taken steps to obtain advice from others as to potential claims. (Page 16)
53 I return to the jurisdictional threshold. Things did not remain as set out in the July affidavit. The October affidavit undermined to a very large extent the positive assertions made in the July affidavit. It is on this basis that the respondent submits that the October affidavit demonstrates, if accepted, the falsity of the matters contained in the July affidavit and in particular annexure KVN6. That being the case the respondent argues that the Peard Group has failed to establish that it may have a cause of action. It argues that what is now put forward is, in the words of Waller v Waller, mere assertion, conjecture or suspicion when looked at objectively and the claim is baseless. 54 The October affidavit now demonstrates that the Peard Group did not and never had the meter readings relative to the photocopiers for the period covered by the Proposal (par 6). It is also apparent that the Peard Group has been unable to obtain any meter readings for the Scarborough office, being the office which was given as the indicative claim, for the period to which the Proposal relates (par 8). 55 In oral submissions, counsel for Peard Group said '… without the meter readings we'll be casting or framing a statement of claim raised on pure speculation' (ts 28). Later at (ts 33), when referring to the annexures to the July affidavit, counsel said 'and the reason it was marked without prejudice at the time, your Honour, and I think it's safe to infer this, is the plaintiff did not know and does not know whether those figures were right because it is based on, as Mr Ngo said, assumptions and calculations made by…'. At that point I interjected, 'Well, in that case do you get over the threshold?'. Counsel responded, 'Based on – with respect, we say we do, because of the information provided so far in terms of we say based on what we have. We don't believe it is adequate but based on what we do have we believe there is a case to answer'. Counsel went on to say 'but we don't know that the information we have is entirely adequate and it may be that when the information is supplied no action will be brought'. He concluded with the words 'it was thought prudent to apply for the documentation and it may be that there will be no litigation if the meter readings support Well Connected's position'. 56 The affidavit in pars 12 and 13 clearly shows that the calculations, which in the July affidavit were asserted in positive terms, are merely estimates without access to any other documents. 57 The proposed cause of action for misleading or deceptive conduct is one which relies upon the falsity of the recommendations and information contained in the Proposal. The October affidavit undermines the July (Page 17)
affidavit to the extent that the cause of action is one which is merely assertion, conjecture or suspicion. That being the case it does not reach, objectively, the required level of proof so as to form the basis of an order under O 24A. 58 That being the case, the application must be dismissed. However, if I am wrong on that and that the October affidavit does not entirely undermine the claim as expressed in the July affidavit, it seems to me that the application should still fail. 59 An order under O 26A r 4 is predicated on the applicant, after reasonable inquiries, not being able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings. Proof of reasonable inquiries may be advanced by a request for access to the documents sought and this has clearly occurred. However, the rule qualifies the reasonable inquiry requirement such that the potential plaintiff, after reasonable inquiry, has not been able to obtain sufficient information to enable a decision whether to commence the proceedings. I am of the view that the unsuccessful inquiry of the defendant does not found an inability to make such a decision. It is obvious from the July affidavit (pars 20 – 23) that Mr Ngo had sought independent advice which had, apparently, confirmed his concerns as to the photocopying costs set out in par 14. 60 That being the case I am not satisfied having regard to all of the evidence before me that the Peard Group requires the information to make its decision to commence proceedings. As I have noted, if I am wrong about the cause of action and the July affidavit still carries weight, then all of the ingredients of the cause of action (if established at trial) would appear to be there; representation, reliance, falsity and loss. 61 In the July affidavit Mr Ngo also wished to ascertain what defences may be open to the respondent. However the question as to the existence or strength of a possible defence is a common feature of litigation and not one addressed by the need for pre-action discovery. 62 Issues also arise as to whether or not there are reasonable grounds for believing that the respondent had the relevant documents in its possession. In dealing with this aspect it is sufficient to note that the respondent was hardly likely to have been able to prepare the Proposal without some data from the Peard Group or its then current equipment. However whether that would assist in the decision whether to commence proceedings is to my mind unclear having regard to the matters addressed previously. (Page 18)
63 Even if the July affidavit retains some integrity for the purposes of demonstrating the threshold test, I am not satisfied that pre-action discovery is reasonably necessary to achieve the proper administration of justice. All of the matters to which I have referred demonstrate that it is not necessary for the Peard Group to have the documents sought to enable it to decide whether to commence proceedings. To the extent that it operates to inform the quantum of a potential claim, it would appear that, generally, that is not a sufficient reason to order such discovery and in any event it would appear from the material before the court comprised in the July affidavit that estimates and calculations of losses have been able to be made.
Conclusion 64 In conclusion I am not satisfied that the Peard Group has satisfied the jurisdictional test and the application should be refused on this ground. 65 If I am wrong on that and that the material does disclose that the Peard Group may have a cause of action, I am not satisfied, in the exercise of my discretion, that the order for pre-action discovery should be made. 66 The applicants' claim should be dismissed and I will hear the parties as to costs.
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