HBF House Pty Ltd as trustee for HBF House Unit Trust v Kings Square Pty Ltd
[2025] WASC 12
•17 JANUARY 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: HBF HOUSE PTY LTD as trustee for HBF HOUSE UNIT TRUST -v- KINGS SQUARE PTY LTD [2025] WASC 12
CORAM: HILL J
HEARD: 31 AUGUST 2023
DELIVERED : 17 JANUARY 2025
FILE NO/S: CIV 1548 of 2020
BETWEEN: HBF HOUSE PTY LTD as trustee for HBF HOUSE UNIT TRUST
Plaintiff
AND
KINGS SQUARE PTY LTD
First Defendant
CIMIC GROUP LIMITED
Second Defendant
BROAD CONSTRUCTION SERVICES (WA) PTY LTD
Third Defendant
LEIGHTON PROPERTIES (WA) PTY LTD
Fourth Defendant
INHABIT AUSTRALASIA PTY LTD
Fifth Defendant
Catchwords:
Practice and procedure - Application for further discovery - Whether documents sought are relevant to issues in proceedings - Claim for breach of contract and negligence - Cause of defects unknown - Reliance on principle of res ipsa loquitur - Whether court should exercise discretion to order discovery - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA) O 4A r 2, O 26 r 1, O 26 r 7
Result:
Further discovery to be given on categories to be refined before orders are made
Category: B
Representation:
Counsel:
| Plaintiff | : | S Penglis SC |
| First Defendant | : | T J Porter |
| Second Defendant | : | T J Porter |
| Third Defendant | : | T J Porter |
| Fourth Defendant | : | T J Porter |
| Fifth Defendant | : | R O'Brien |
Solicitors:
| Plaintiff | : | Clayton Utz |
| First Defendant | : | Minter Ellison |
| Second Defendant | : | Minter Ellison |
| Third Defendant | : | Minter Ellison |
| Fourth Defendant | : | Minter Ellison |
| Fifth Defendant | : | Kennedys |
Case(s) referred to in decision(s):
Atlas Copco Australia Pty Ltd v Oxair Gases Pty Ltd [2013] WASCA 43
Compagnie Financiere et Commercial du Pacifique v Peruvian Guano Co (1882) 52 LJQB 181
Green v Fairfax Media Publications Pty Ltd [No 2] [2020] WASC 485
Hongkong Xinhe International Investment Company Ltd v Bullseye Mining Ltd [No 3] [2021] WASC 260
Lanco Resources Australia Pty Ltd v Griffin Energy Group Pty Ltd [2016] WASC 322
Roe v Western Australia [2013] WASC 130
Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; (2000) 200 CLR 121
Singh v Friedman [2013] WASC 78
Swick Nominees Pty Ltd v LeRoi International Inc [No 2] [2015] WASCA 35
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218
Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 6] [2016] WASC 218
HILL J:
The dispute between the parties arises out of the construction by the first to fourth defendants (the CIMIC Entities) of a new 'A Grade' building, HBF House (Building), for the plaintiff (HBF). The fifth defendant (Inhabit) was retained by the third defendant (Builder) to design and certify the construction of the façade of the Building.
HBF says there are two defects with the façade of the Building. First, the façade intermittently and suddenly emits noises of up to 77 decibels when its components move under conditions of thermal expansion and/or contraction. Second, water ingresses the building when the façade is exposed to wet weather (and water testing). To date, neither HBF nor the defendants (or their experts) have been able to identify the cause of at least the first of these issues.
By letter dated 2 June 2023, HBF seeks orders requiring the defendants to provide discovery of 40 categories of documents, which essentially concern the quality control or quality assurance systems in relation to the construction of the Building and are set out in the schedule to their minute. A copy of this schedule is annexed to these reasons at Annexure 'A'.
The application is opposed by the CIMIC Entities on two grounds. First, they say the categories of documents are not relevant to any issue in the proceedings. Second, they say that in any event, the court should not exercise its discretion to order discovery because the allegations relied upon by HBF to support the application are defectively pleaded, the statement of claim does not correspond with HBF's expert evidence and should be amended prior to consideration of any application for discovery, and the costs of production of these documents is disproportionate to their materiality.
Inhabit did not actively oppose HBF's application and did not file any submissions or affidavits in opposition to the application.
For the reasons that follow, it is my view that the first, third, and fifth defendants are required to give discovery of documents relevant to their quality control and quality assurance systems that were used in the design and construction of the façade of the Building. However, I consider the categories of documents sought by HBF in their current form are too broad and require significant refinement before any orders are made.
Evidence on the application
At the hearing, HBF sought to read two affidavits of Giuseppe Zagari, a solicitor employed by HBF's solicitors, filed 2 June 2023 and 18 August 2023. As raised with senior counsel for HBF at the hearing,[1] these affidavits annexed a considerable volume of correspondence between the parties' solicitors, and it was unclear as to the purpose that was sought to be achieved from this.
[1] ts 96 - 97.
Ultimately, senior counsel for HBF only read and relied on the body of Mr Zagari's affidavit filed 2 June 2023, exhibits 'GZ‑1' to 'GZ‑6' to that affidavit (which comprise the contractual documents between the parties), and attachments 'GZ‑7' and 'GZ‑8'.
In opposing the application, the CIMIC Entities read an affidavit of Charles David Clifton, a solicitor employed by the CIMIC Entities' solicitors, filed 2 August 2023. This affidavit also annexed correspondence between the parties' solicitors.
Most of the correspondence that was sought to be adduced was communications between the solicitors about the adequacy of the statement of claim and whether the CIMIC Entities intended to bring a strike out application. Ultimately, no application to strike out the statement of claim was maintained by these parties.[2] It was clear from the submissions by the parties that these were the primary matters that each sought to rely upon on this application. Given this, it was and is my view that the adducing of the actual correspondence between the parties (which exceeded more than 150 pages) was unnecessary. It was the fact of the exchange of this correspondence that was relevant, as opposed to its content.
[2] The first and third defendants filed a chamber summons to strike out parts of the amended statement of claim on 8 July 2021, which was amended on 9 July 2021. The first and third defendant's strike out application was withdrawn on 1 September 2021, and the hearing of the application listed for 14 September 2021 vacated.
Legal principles
The legal principles that govern this application were not in dispute and are well‑known.
HBF's application is made pursuant to O 4A r 2 of the Rules of the Supreme Court 1971 (WA) (Rules), alternatively, O 26 r 1 and O 26 r 7 of the Rules and/or in the court's inherent power.
An application for an order for discovery under O 26 r 7 of the Rules may be made at any time by a party whose request under O 26 r 6 of the Rules for discovery has not been satisfied. It is not necessary for a party to file an affidavit in support of the application. The court also has inherent power to order a party to give further discovery.[3]
[3] See, for example, Green v Fairfax Media Publications Pty Ltd [No 2] [2020] WASC 485 [22].
The obligation of general discovery requires parties to discover all documents which are, or have been, in their possession, custody, or power, and relate to any matter in question in the proceedings. The matters which are in issue must be determined by reference to the pleadings, including the admissions of the parties and the nature of the action.[4]
[4] Atlas Copco Australia Pty Ltd v Oxair Gases Pty Ltd [2013] WASCA 43 [20] (Pullin JA & Newnes JA).
Traditionally in this court, the obligation of general discovery applied the Peruvian Guano test, namely that a document is discoverable if it is reasonable to suppose that it contains information which may, either directly or indirectly, enable the party seeking discovery to either advance their case or damage their adversary's position. This includes documents which may fairly lead to a chain of inquiry which has either of these consequences.[5]
[5] Compagnie Financiere et Commercial du Pacifique v Peruvian Guano Co (1882) 52 LJQB 181; Lanco Resources Australia Pty Ltd v Griffin Energy Group Pty Ltd[2016] WASC 322 [14].
The court has emphasised that for matters in the commercial and managed cases list (CMC List), the obligation of general discovery must be tempered by the principles set out in the Rules, particularly those set out in O 1 r 4A and O 1 r 4B.[6] For this reason, it is usual for discovery for matters in the CMC List to be restricted to documents that are directly relevant to an issue in the proceedings.
[6] See, for example, Roe v Western Australia [2013] WASC 130 [10] ‑ [13]; Singh v Friedman [2013] WASC 78 [3] ‑ [7]. These cases were cited with approval in Hongkong Xinhe International Investment Company Ltd v Bullseye Mining Ltd [No 3] [2021] WASC 260 [23].
Where the court has reasonable grounds for being fairly certain that the documents are or have been in the possession of the defendant, and the documents relate to a matter in question in the action, the court may make an order for further discovery under the Rules or in its inherent jurisdiction.[7]
[7] Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 6] [2016] WASC 218 [48].
There are limitations on the court's inherent power to order further discovery. An affidavit of discovery filed by a party is conclusive as to the sufficiency of discovery of the documents in its possession, custody, or power unless:[8]
(a)an insufficiency appears from the pleadings;
(b)an insufficiency appears from the affidavit itself;
(c)an insufficiency appears from the documents themselves, which are referred to in the affidavit or are subsequently disclosed by the party as relevant;
(d)an insufficiency appears as a result of an admission; and
(e)an insufficiency appears because documents have been excluded by a misapprehension of its own case.
[8] Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218 [3] ‑ [8].
In considering whether or not to make an order for discovery, it is necessary to consider the broad overriding objective of positive case flow management as set out in O 1 r 4B of the Rules.
The court's discretionary power to order discovery is to be exercised having regard to:[9]
(a)the principles in O 1 r 4A and O 1 r 4B of the Rules;
(b)the timely and cost-effective disposal of litigation, including whether the categories of discovery are necessary for fairly disposing of the proceedings;
(c)relevance; and
(d)the notion of proportionality.
[9] Roe v Western Australia [10] - [13] (Martin CJ); Singh v Friedman [3] - [7]; Hongkong Xinhe International Investment Company Ltd v Bullseye Mining Ltd [No 3] [28].
Are any or all of the categories relevant to the issues in the proceedings?
Orders requiring the defendants to discover the documents sought by HBF will only be made if the documents sought are directly relevant to the issues in dispute. These issues are defined by the pleadings filed by each of the parties.
Statement of claim
The current statement of claim is an amended statement of claim filed 26 May 2021 (statement of claim). The CIMIC Entities requested further and better particulars of the statement of claim, which were filed by HBF on 27 August 2021.[10] In these reasons, I have adopted the defined terms used in the statement of claim without reproducing their definitions. My references to these terms have the meanings attributed to them in the pleadings.
[10] Two documents were filed by HBF on 27 August 2021: amended answers to CIMIC Entities' request for further and better particulars (Particulars) and further and better particulars of [31(e)] of the statement of claim (Particulars of [31(e)]).
HBF pleads two separate causes of action against the CIMIC Entities. First, a breach of contractual obligations said to be owed by each of the CIMIC Entities to HBF. These arise from a sale contract entered into between HBF and the first defendant (Developer) dated 24 July 2013 (Sale Agreement); the guarantee and indemnity given by the second defendant (Developer Parent) on 18 June 2013; and warranties given by the Builder dated 25 January 2017 and fourth defendant (Developer's Representative) dated 14 February 2017 and 20 March 2017. The second is a negligence claim.
The claim against Inhabit is solely based in negligence.
In relation to the contractual claims, HBF pleads that pursuant to the express terms of the Sale Agreement, the Developer agreed to construct the Building in accordance with the Construction Project Brief and the Sale Agreement, and that there were implied terms of the Sale Agreement, including that the Developer would procure the performance of the Development Services (which included the construction of the Building) with due care and skill.
By deed dated 18 June 2013, the Developer Parent guaranteed the Developer's performance of the Sale Agreement and provided an indemnity to HBF.
HBF says that the Construction Project Brief included reference to Design Documentation, which in turn included a performance specification for the Building's façade. The performance specification included a requirement that the façade and its components be designed and installed to provide for:
(a)noiseless movement of all components caused by thermal expansion and/or contraction; and
(b)a watertight and weatherproof enclosure for the Building.
HBF says that both the Builder and the Developer's Representative warranted that the façade would meet these requirements (Façade Warranty).
HBF contends that the façade has been designed and/or installed in such a manner that:
(a)elevations of the façade intermittently and suddenly emit self‑generated noises of up to 77 decibels when unidentified components of the façade move under conditions of thermal expansion and/or contraction; and
(b)water ingresses the building when the façade is exposed to wet weather (and water testing).
These defects are defined in the statement of claim as the 'Façade Defects'.
HBF says that by reason of the Façade Defects, the Developer has breached a number of terms of the Sale Agreement (including both express and implied terms), and the Builder and the Developer's Representative have breached the Façade Warranty. As a consequence of the Developer's breach and failure to rectify the Façade Defects, HBF says that the Developer Parent has breached the Performance Guarantee.
Further particulars were sought and given as to the particular services of which the Developer failed to procure with due care and skill. In the context of this application, the Particulars refer to two relevant failures.
The first (in 7(a) of the Particulars) is the failure by the Developer to establish, implement, and maintain an adequate system to ensure that the 'Development' (which includes the Building) was constructed in accordance with the Construction Project Brief and Sale Agreement. Six matters are listed which are said to be examples of this, being a failure to: comply with the document standards set by Australian Standard ISO 9001; undertake a quality control audit within four weeks of site commencement; undertake routine quality control audits every three months; obtain Monthly Quality Assurance Certificates of Compliance from Inhabit; obtain a certificate of Practical Completion from Inhabit certifying periodic inspection of the Project and that the façade had been constructed in accordance with applicable drawings and specifications; and, audit compliance with the standards and quality requirements of the Construction Project Brief.
The second (in 7(c) of the Particulars) is the failure by the Developer to establish, implement, and maintain an adequate system to ensure the Base Building Works for the Building were completed by the Builder and sub‑contractors in a proper and workmanlike manner using good quality materials of merchantable quality, and that were of at least the standard and quality specified in the Construction Project Brief. Seven separate matters are listed which are said to be examples of this including: the absence of documented compliance with the quality control matters set out at [33] above; Inhabit's failure to prepare a detailed Trade Specific Plan; the Product Inspection Procedure being not fit for purpose; a lack of adherence to the quality control and quality assurance processes in the Product Inspection Procedure; the absence of an appropriate system of procurement; the absence of an adequate storage system for the storage, packing, and assembly of components of the façade; and, in relation to the façade, the failure to provide documentation demonstrating that the requirements of the project brief and Design Documentation were met.
The Particulars also refer (in 'Response 4(b)' at [8]) to similar alleged failures by the Builder.
In addition to the contractual claims, HBF also pleads that the Builder and Inhabit were negligent.
In relation to the Builder, the duty of care is set out at [26] of the statement of claim. HBF says the duty of care arose as a consequence of the Builder's engagement by the Developer to perform the Development Services and carry out the Works (as that term is defined in the statement of claim). HBF says that the Builder owed it a duty of care to ensure that:
(a)the Development Services were performed and the Works relating to the Façade were carried out with due care and skill;
(b)the Façade was designed, engineered, tested, fabricated, delivered and installed so as to meet and comply with the functional and performance requirements of the Design Documentation including the Façade Performance Specification; and
(c)upon completion, the Façade was fit and suitable for its purpose and of merchantable quality.
The duty of care is said to arise from the facts and matters set out in sub‑paragraphs (i) to (ix) of [26] of the statement of claim. These sub‑paragraphs include a reference (at (viii)) to the establishment and maintenance of a quality control system, and that:
the Façade was one of the critical elements for quality assurance that was required to be given particulars emphasis and which required objective evidence to record that contractual requirements had been met (section 13(b), Appendix A and Appendix A1).
HBF says that the Builder acted negligently and in breach of the duty of care in carrying out the works so that the Façade Defects arose and persist.
At [31] of the statement of claim, HBF pleads that:
(a)neither the Developer nor the Builder has been able to determine the cause of the Façade Defects;
(b)none of the rectification measures that have been undertaken have remedied the Façade Defects;
(c)the design, construction, and installation of the façade was under the control of the Builder or its sub-contractors for whom it was responsible;
(d)the Façade Defects would not occur in a newly constructed A‑Grade commercial building without a failure to take due care and skill in the 'design, engineering, testing, fabrication, delivery and installation of that system'; and
(e)on this basis, it should be inferred that the Builder breached its duty of care owed to HBF, including in negligently failing to:
establish, maintain and adhere to process and systems sufficient to ensure that:
A.all of the requirements of the Façade Performance Brief and Façade Performance Specification were met by the Façade Contractor when designing, engineering, testing, fabricating, delivering and installing the Façade;
B.each of the Facade Engineer and Façade Contractor had fully discharged its obligations including those of a Consultant under the Construction Project Brief;
C.the Works relating to the Façade were carried out by the Façade Contractor with due care and skill; and
D.the Façade was fit and suitable for its intended purpose.
Further particulars were sought and provided of the matters set out in [40(d)] above. The answers provided by HBF repeat the matters set out at [33], although these obligations are said to be obligations of the Builder and not the Developer. HBF also says that the Builder failed to properly manage and complete the design development process, or the design and construction of the Building (including by reference to the absence of compliance with quality control measures).
CIMIC Entities' defence
In response to the statement of claim, the CIMIC Entities filed a further amended defence on 22 February 2022.
Relevantly, in respect of the contractual claim by HBF, the Developer denies that the Façade Performance Specification is Design Documentation or forms any part of its contractual obligations to HBF. Both the Builder and Developer's Representative deny that they gave any contractual warranty to HBF.
In relation to the Façade Defects, the CIMIC Entities accept that at certain points in time, noises have been recorded as emanating from a part of the Building. They also say that all reported instances of water ingress have been rectified.
In response to a number of the allegations contained in the statement of claim, the CIMIC Entities' defence pleads that HBF has failed to plead a number of matters on which it relies, including:
(a)the 'standard or quality' alleged to be specified in the Construction Project Brief; and
(b)the goods or materials alleged not to be of 'merchantable quality' or 'fit for purpose'.
The CIMIC Entities say that Practical Completion was achieved on 8 September 2015 and the defect liability period under the Sale Agreement commenced on that date.
The CIMIC Entities deny that they have breached any obligations to HBF, and plead that they are continuing to perform their obligations under the Sale Agreement to rectify any defects with the Building.
In relation to the negligence claim, the CIMIC Entities deny that the Builder owed the pleaded duty of care to HBF. While the CIMIC Entities accept that, as at the date of the pleading, they (and their experts) have been unable to identify the case of the Façade Defects, they deny that the Builder has acted negligently. They specifically deny that any inference can be drawn as to the Builder's negligence as pleaded by HBF.
Inhabit's defence
Inhabit filed an amended defence on 8 July 2021, responding to the statement of claim. Inhabit denies that it owed any duty of care to HBF, or that it had any exclusive or non‑exclusive responsibility for or control over the design, engineering, testing, fabrication, delivery, and installation of the façade.
Inhabit denies it is liable to HBF in the terms pleaded or at all.
Are the documents sought relevant?
In its breach of contract claim, HBF raises a failure by the Developer and Builder to establish, implement, and maintain an adequate quality control system. Similar issues are pleaded in its negligence claim against the Builder, as HBF alleges that negligence is one of the matters that can be inferred from the fact of the Façade Defects. These allegations are denied by the CIMIC Entities.
Most of the CIMIC Entities' submissions (both oral and written) focussed on whether the categories of documents sought by HBF were relevant to the negligence claim advanced against them. In this regard, it is accepted by HBF that its negligence claim is advanced on the common law principle of res ipsa loquitur.
There was no dispute between the parties that this principle is not a distinct, substantive rule of law but instead a process of reasoning which enables an inference of negligence to be drawn from the occurrence of an event. This inference is only available if:[11]
(a)there is an absence of explanation of the occurrence that caused the injury;
(b)the occurrence was of a kind that, in the ordinary course of things, does not happen without negligence; and
(c)the instrument or agency that caused the injury was under the defendant's control.
[11] Swick Nominees Pty Ltd v LeRoi International Inc [No 2] [2015] WASCA 35 [159] ‑ [160] (Buss JA).
The principle has no application if there is an explanation as to the cause of the occurrence. If a cause is identified, the question is whether that cause arose because of the defendant's negligence. Where a cause has been established, the plaintiff may rely on inferential reasoning to prove negligence.[12]
[12] Swick Nominees Pty Ltd v LeRoi International Inc [No 2] [164] (Buss JA).
The principle does not apply if the occurrence is outside the knowledge and experience of a lay person and the evidence (including any expert evidence) does not establish that the occurrence ordinarily does not occur without negligence.[13] While the principle has developed in the context of negligence claims in personal injuries, it may apply to negligence claims of pure economic loss.[14]
[13] Swick Nominees Pty Ltd v LeRoi International Inc [No 2] [167] (Buss JA).
[14] Swick Nominees Pty Ltd v LeRoi International Inc [No 2] [170] (Buss JA).
Even where a plaintiff has pleaded particular acts or omissions of negligence, the plaintiff may still rely on the principle if the court draws the inferences set out at [53].[15]
[15] Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; (2000) 200 CLR 121 [25] (Gleeson CJ & McHugh J); Swick Nominees Pty Ltd v LeRoi International Inc [No 2] [449] (Murphy JA & Edelman J).
Expert evidence is admissible at trial in the context of a claim based on the principle of res ipsa loquitur. In this case, it is my view that expert evidence will need to be adduced for such a claim, as I do not consider that the construction of a façade and its components are within common knowledge and experience. In this situation, as stated by Gleeson CJ and McHugh J in Schellenberg v Tunnel Holdings:[16]
[E]xpert evidence may be adduced to suggest that an unexplained occurrence would not ordinarily occur without negligence. Moreover, the expert evidence may be unable to isolate a single hypothesis suggestive of negligence. Nevertheless, the expert evidence may suggest a number of hypotheses, all of which indicate negligence but none of which indicate a greater likelihood of having occurred than any other of them. As is pointed out in The Liability of Employers in Damages for Personal Injury, it is no more than a dispute about terminology to determine whether that sort of case is an instance of expert evidence facilitating the doctrine or a case of unspecified negligence based on affirmative evidence. In our opinion, however, if the expert evidence suggests a number of causes that enjoy an equal probability of occurrence and all involve negligence, the occurrence should be regarded as an unexplained occurrence to which the doctrine applies. It is only when the expert evidence assigns a particular cause as the most probable cause of the occurrence that the case should be regarded as outside the doctrine of res ipsa loquitur.
[16] Schellenberg v Tunnel Holdings Pty Ltd [42] (footnotes omitted).
In respect of the negligence claim against the Builder, HBF has pleaded (in [31(e)] of the statement of claim) four specific negligent acts or omissions by the Builder which are said to be inferred from, among other things, the Façade Defects.
Counsel for the CIMIC Entities submitted that on its present pleading, HBF does not plead alternative explanations for, or causes of, the Façade Defects.[17] I accept this submission.
[17] ts 124 - 125.
However, at trial and consistent with the authorities summarised above, it will be open to HBF to adduce expert evidence to contend that the Façade Defects would not ordinarily occur without negligence and rely on each or all of the matters set out in [31(e)] of the statement of claim as to why the Façade Defects have occurred. If none of these acts or omissions (either individually or collectively) provide an explanation for these defects, it will be open to HBF to rely on the principle of res ipsa loquitur.
While the matters at [31(e)] of the statement of claim include references to several quality control and quality assurance systems, this does not, of itself, mean that this pleading creates an obligation for the CIMIC Entities to provide discovery of these subjects. This is because, as presently pleaded, each of the matters in [31(e)] is said to be inferred from the material facts pleaded at [31(a)] to [31(d)] of the statement of claim. My preliminary view is that this does not give rise to any obligation of discovery in relation to the matters in [31(e)].
Ultimately, it is not necessary to reach a concluded view in relation to this issue. This is because, in my view, the contractual claim against the Developer (summarised at [31] - [34] above) raises an issue in the proceedings as to the adequacy of the quality control and quality assurance systems of the Developer and the Builder in relation to the construction of the Façade.
In relation to the claim against Inhabit, HBF has pleaded (in [33(d)] of the statement of claim) that Inhabit acted negligently in failing to take sufficient steps to ensure the three matters set out in the same paragraph. If none of these matters (either individually or collectively) provide an explanation for the Façade Defects, HBF will be entitled to rely on the principle of res ipsa loquitur (as pleaded in [33(c)] of the statement of claim) to prove its claim.
Given these conclusions, I accept that the statement of claim raises an issue as to:
(a)the adequacy of the quality control and quality assurance systems established by the Developer and the Builder; and
(b)what steps Inhabit took to ensure that the designs met the requirements of the Design Documentation, that the construction work was carried out in accordance with the design intent, and that all requirements of the Façade Performance Brief and Façade Performance Specification were met by the Façade Contractor.
On this basis, I accept that the documents in the possession, custody, or control of the first, third, and fifth defendants in relation to their quality control and quality assurance systems governing the design and construction of the façade of the Building (including compliance with these systems) are relevant to the issues in the proceedings.
In reaching this conclusion, I have not taken into account the relevance (if any) of the joint minute of expert evidence filed on 30 September 2022 (Minute). This is for two reasons. First, I consider the issues in the proceedings to be defined by the pleadings, and not the questions proposed to be posed to the experts. Second, I accept the CIMIC Entities' submission that the Minute does not reflect any agreement as to the relevance of any questions relating to paragraphs 22 to 33 of the Minute. As set out in the Minute, the CIMIC Entities did not object to HBF obtaining such expert evidence as it thought fit to prove its claim.
Should the CIMIC Entities be ordered to give discovery at this time?
At this stage, the parties have only provided preliminary discovery of six categories of documents as set out in the orders of 18 August 2021. That discovery was to facilitate an early mediation and was not intended to limit the categories of discovery that might subsequently be ordered. On this basis, I am satisfied the application is appropriately brought under O 26 r 7 of the Rules and not O 26 r 6.
The CIMIC Entities submitted that even if the court accepted the categories of documents sought by HBF were relevant to the issues as pleaded, it should not exercise its discretion to order discovery at this stage. This was for three separate reasons, which I address below.
Is HBF's pleading defective?
The CIMIC Entities raised two issues with the statement of claim as a basis on which they said the court should decline to exercise its discretion to order the discovery sought by HBF. First, the statement of claim does not properly plead a duty of care. Second, it does not properly plead a res ipsa loquitur case.
In my view, the CIMIC Entities have correctly identified two specific challenges that HBF is likely to face in prosecuting its case at trial. The first is whether HBF can establish a duty of care and the scope of that duty of care, particularly on the basis pleaded. HBF contends that the Builder owed a duty of care to 'ensure' certain things happened. These terms suggest that the obligation is one of strict liability, rather than negligence. The second challenge is whether HBF can prove that the Builder was in control of the design, construction, and installation of the Façade, in circumstances where it makes a similar allegation against Inhabit.
However, in my view, it is not necessary nor appropriate to resolve either of these issues in deciding this application. For the following reasons, I do not consider these alleged defects to be a sufficient reason to decline to exercise my discretion to order discovery of appropriate categories of documents.
First, it is important to emphasise that the application before me was not an application to strike out the statement of claim. These issues were raised in response to HBF's application for discovery. The application to strike out the statement of claim filed by the Developer and the Builder was withdrawn prior to hearing. While the withdrawal of the strike out application does not prevent these parties from raising these issues (particularly at trial), it is my view that these issues should not determine the outcome of the discovery application. I consider that the application for discovery needs to be determined on the state of the pleadings as they currently stand, and whether the documents sought are directly relevant to an issue raised by these pleadings.
Second, these defects were raised only in relation to the negligence claim advanced by HBF. For the reasons that are set out above, I accept that on the pleadings as they presently stand, HBF's contractual claims put in issue the adequacy of the quality control and quality assurance systems established by the Developer, the Builder, and Inhabit separately, and that these claims provide a basis for the categories of discovery sought. On this basis, I consider it necessary for these parties to provide discovery in relation to these systems and their compliance with these systems.
Do the allegations correspond with HBF's expert evidence filed to date?
The CIMIC Entities say that they should not be ordered to provide discovery at this stage, as the statement of claim does not reflect the expert evidence filed by HBF. They contend that before any orders are made, HBF should be required to amend its statement of claim to reflect the conclusions of Mr Salz's expert report filed 3 July 2023.
HBF says that this submission misunderstands both its case and the evidence of Mr Salz.
Part of the difficulty in assessing this argument is that Mr Salz's report was not in evidence at the time of the application, although a copy had been filed. Without evidence that a definitive cause has been identified for the Façade Defects and that any failure with quality control and quality assurance systems has been ruled out, I do not consider it necessary for the statement of claim to be amended before I decide whether discovery of these categories should be ordered.
Is the cost of production disproportionate to the materiality of these documents?
HBF says that it requires discovery of the 40 categories of documents to enable it to brief its expert, Professor Carmichael. The evidence of Mr Zagari is that he has been informed by Professor Carmichael that the materials for which discovery has been sought are 'necessary' to enable him to properly express a considered opinion on the questions proposed to be asked of him. No further explanation or detail has been provided as to why this is the case.
HBF proposes that three specific questions be asked of Professor Carmichael in relation to quality control, being:
(a)What are the features of a quality control system that would be adequate to ensure compliance with the contractual obligations, the requirements of Australian Standard ISO 9001 and to document all elements of the system?
(b)Was a quality control system established, implemented, and maintained that was adequate to comply with these matters?
(c)Did any inadequacies in the establishment, implementation, or maintenance of a quality control system contribute to each of the Façade Defects?
Self-evidently, it is only the second and third questions that give rise to any examination of what quality control systems were in fact established, implemented, and maintained by the Developer, Builder, and Inhabit.
Given my conclusions at out at [62] - [65] above, I accept that the answers to these questions are relevant to the issues in the proceedings.
The evidence before the court is that:
(a)the legal technology consulting team of the CIMIC Entities' solicitors has undertaken preliminary searches in respect of the documents and believes that the number of responsive documents to these categories of documents is 866,690 (including families);
(b)it will be necessary to undertake a manual review of the documents in a two-level review process;
(c)it is likely that continuous active learning will be utilised to facilitate the review of documents, which may reduce the number of documents by up to 25%; and
(d)the estimated cost of reviewing 100,000 documents is approximately $500,000, and will take 2 – 3 months. This estimate is consistent with the cost and time of the work that has been done to date.
HBF accepts that the categories of discovery sought by them are relatively broad and may be expensive and time‑consuming. However, as senior counsel for HBF emphasised, their quantum expert has expressed the opinion that HBF's damages claim is in excess of $70 million. Any assessment of the time and cost of discovery, in HBF's submission, must be assessed in that context.
On the basis of the evidence of Mr Clifton, I accept that there will be significant costs associated with the discovery of the documents sought by HBF. However, I do not accept, on the fairly general evidence of Mr Clifton (extrapolated to account for the number of documents that may need to be reviewed) that these costs will exceed $4 million and take more than one year. With appropriate refinement of the categories and use of technology assisted review (or continuous active learning), it is my view that the costs and time involved in the discovery of these categories of documents could be significantly reduced.
Given the amount in dispute between the parties, I consider that discovery of appropriate categories of quality control and quality assurance documents is required.
The CIMIC Entities submitted that the categories of documents have been drafted by reference to the contractual documents (as opposed to the pleadings) and that most of the categories (apart from categories 3, 18, and 19) are extremely broad. I accept both of these submissions.
The ultimate objective of the court is to achieve a just, efficient, and expeditious determination of the dispute between the parties before it. In considering what orders should be made that are most likely to achieve this object, I have had regard to the fact that I consider these categories of documents to be relevant to the issues in the proceedings, the broad nature of the categories of documents sought, and the likely time and costs in providing discovery.
In my view, the appropriate balance is that the defendants should be required to give discovery of the categories of documents limited in the manner set out below.
Category 1 seeks discovery of documents comprising or recording the Quality Control System. Subject to the general amendment that I consider should be made to all of the categories (set out at [96]), I consider that discovery should be ordered of this category.
In relation to category 2, HBF seeks 'correspondence, memoranda, notes and advice prepared for the purpose of recording or reporting matters required by the Quality Control System insofar as they related to the Façade' and as required by the provisions of the Project Quality Plan. In its present terms, I accept that this category is drafted too broadly and requires substantial refinement. For example, it is not clear from the category's current description what matters were required to be recorded or reported. As presently drafted, I am not prepared to order discovery of this category.
A similar observation can be made about category 40, which seeks 'documents comprising or recording submissions and quality standards referred to in section 2.3.1 of the Façade Performance Specification'. This category is drafted very broadly, and it is not clear what pleaded issue this is relevant to. As presently drafted, I am not prepared to order discovery of this category.
It is not apparent from the pleadings as to why the documents in categories 3 and 5 are relevant to the issues in the proceedings. On this basis, I am not prepared to order discovery of these categories.
In respect of categories 4, 6, 34, and 37, the only reference in the pleadings to quality control and assurance plans is the reference in [7(c)(iv)] of the Particulars. This refers to the failure by the Developer to establish an adequate system which allowed the Building to be constructed in the absence of Inhabit preparing, submitting, and implementing a detailed project-specific Trade Quality Plan. My preliminary view is that any obligation of discovery should be limited to any Trade Quality Plans submitted by Inhabit to the Builder.
A number of categories concern the inspection of materials and factory visits that have been undertaken (categories 7, 9 ‑ 17, 36, and 38 ‑ 39). Subject to my comments at [96] below, I accept that the adequacy of these inspections is raised as an issue in the proceedings. However, these categories will need to be redrafted so that it is clear what documents are being sought. By way of example, category 17 refers to a specific document, and then to the 'inspections referred to therein'. In my view, these inspections should be clearly identified.
Category 8 seeks provision of documents in relation to materials testing and quality control and/or quality system of procurement packages. The only reference in the Particulars to procurement is the contention there was an absence of a procurement system with adequate lead time for the fabrication and shipping of components of the Façade. In my view, discovery should be limited to this issue.
Many of the remaining categories seek discovery of specific reports, monthly reports, or minutes of particular groups (the Project Control Group, the Works Control Group, the Development Control Group, and façade design meetings) (categories 23 ‑ 33), specific documents (categories 18 and 19), or certificates that have been issued (categories 20 ‑ 22, and 35). My preliminary view is that subject to these categories being limited to production of the specific reports, documents or certificates, the discovery of these documents should not be burdensome, and that discovery should be ordered. However, I will hear from the parties before ordering discovery of these categories.
In almost all of the categories sought by HBF, discovery is sought in respect of 'Documents comprising or recording'. I consider that the description of the categories of discovery in this manner is too broad and not sufficiently focussed, particularly given this is a matter in the CMC List of this court. In my view, these words should be deleted from each of the categories sought.
Conclusion
For these reasons, I consider that the quality control and quality assurance systems of the first, third, and fifth defendants in relation to the design and construction of the Building are relevant to the issues in the proceedings, and that it is appropriate to exercise my discretion to order discovery.
That said, as presently drafted, the categories of documents sought are too broad and require significant refinement. I will hear from the parties as to the precise orders that should be made to reflect these reasons and the timing of the provision of discovery, as well as the costs of the application.
Annexure 'A'
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KS
Associate to the Hon Justice Hill
17 JANUARY 2025
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