Henderson v Fenwick - [2014] WASC 176

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: HENDERSON -v- FENWICK [2014] WASC 176

CORAM: ACTING MASTER GETHING

HEARD: 29 APRIL 2014

DELIVERED : 23 MAY 2014

FILE NO/S: CIV 2817 of 2013

BETWEEN: GREGORY MICHAEL HENDERSON
Applicant
AND
ROBERT HENRY FENWICK
MARYLYN JEAN FENWICK
Respondents

Catchwords:

Civil procedure - Pre-action discovery

Legislation:

Rules of the Supreme Court 1971 (WA), O 26A r 4

Result:

Application granted

Category: B

Representation:

Counsel:

Applicant: Mr N E Gvozdin
Respondents : Mr J N D'Angelo

Solicitors:

Applicant: Frichot & Frichot
Respondents : D'Angelo & Partners

Case(s) referred to in judgment(s):

Airberg Pty Ltd v Cut Price Deli Pty Ltd [1998] FCA 893
Bradford Third Equitable Benefit Building Society v Borders (1941) 2 All ER 205
Central Exchange Nickel Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33
Davis v Sagar (Unreported, WASC, Library No 980443, 10 August 1998)
Glencore International AG v Selwyn Mines Ltd [2005] FCA 801; (2006) 223 ALR 238
Goodman v the State of Western Australia [2013] WASC 316
GTR Injection Technologies Pty Ltd v Fortron Automotive Treatments Pty Ltd [2009] WASC 131
Magill v Magill [2006] HCA 51; (2006) 231 ALR 277; (2006) 81 ALJR 254
McCarthy v Dolpag Pty Ltd [2000] WASCA 106
The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147
The New South Wales Solicitors Indemnity Fund v The Hancock Family Memorial Foundation Ltd [No 2] [2009] WASCA 146
Waller v Waller [2009] WASCA 61
Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514
ACTING MASTER GETHING:

Background

In October 2008, Gregory Henderson (the applicant) lent $340,000 to two sisters, Peta Ruhen and Veronica Ruhen. The loan was secured by equitable mortgages over three properties. He subsequently lent them an additional $15,000. The money was to be used for the renovation and resale of one of the properties, being a property on Roberts Road in Bayswater. When the Roberts Road property was sold, Mr Henderson was to receive a profit share, or at least repayment of all his costs. The sale proceeds of the Roberts Road property were not sufficient to repay the loan. Nor were the proceeds of the sale of a second of the properties on King William Street, Bayswater. Mr Henderson states that the outstanding balance is currently $122,808.23, including interest and legal costs.
In July 2013 Mr Henderson commenced an action in the District Court against the Ruhens seeking recovery of the outstanding loan balance. He applied for summary judgment. Before this application was heard, each of the Ruhens became bankrupt, with the consequence that the District Court action was stayed.
Three days after the loan agreement was entered into Robert Fenwick and Marylyn Fenwick became registered proprietors of the third property, being one in Wendron Street, Cloverdale (Cloverdale Property). The Fenwicks are the Ruhens' stepfather and mother respectively. A caveat which the Ruhens were supposed to lodge over the Cloverdale Property to secure the mortgage to Mr Henderson was never lodged.
In this application, Mr Henderson seeks pre‑action discovery from the Fenwicks pursuant to Rules of the Supreme Court 1971 (WA) (RSO) O 26A r 4. Specifically, he seeks documents relating to the transfer of the Cloverdale Property. He wishes to use these documents to assist in making a decision as to whether to commence an action against the Fenwicks.

What issues arise for determination?

RSC O 26A r 4 empowers the court to make order for pre-action discovery to require a potential party give discovery of documents which are or have been in the potential party's possession and that might assist the applicant to decide whether to institute proceedings against the potential party. Specifically, it provides:
4.Discovery from potential party
(1)This rule applies if a person who may have a cause of action against a person whose description has been ascertained (the potential party) wants ‑
(a)to commence proceedings against the potential party; or
(b)to take proceedings against the potential party in the course of an action to which the person is a party, but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings.
(2)If there are reasonable grounds for believing that the potential party had, has, or is likely to have had or to have, possession of documents that may assist in making the decision, the person may apply for an order under this rule.
(3)The application shall be supported by an affidavit and a copy of both shall be served on the potential party.
(4)On the application the Court may order the potential party to give discovery of all documents that are or have been in the potential party's possession and that may assist the applicant in making the decision.
Mr Henderson filed and served two affidavits in support of the application, being his affidavits sworn 3 December 2013 and 24 April 2014. The requirement in RSC O 24A r 4(3) is thus complied with.
Applying RSC O 26A r 4 to the present application, to succeed Mr Henderson must establish that:
(a)he 'may have a cause of action';
(b)the potential cause of action is against a person whose description has been ascertained;
(c)he wants to commence proceedings against the potential party;
(d)he has made 'reasonable inquiries';
(e)after making 'reasonable enquiries' he has not been able to obtain sufficient information to decide whether or not to commence proceedings;
(f)as a necessary concomitant to (e), at the time of making the application, he has not reached a decision about whether or not to take proceedings;
(g)there are reasonable grounds for believing that the potential party has in its possession documents that may assist in making the decision.
See generally: Goodman v the State of Western Australia [2013] WASC 316 [23] (Master Sanderson); GTR Injection Technologies Pty Ltd v Fortron Automotive Treatments Pty Ltd [2009] WASC 131 [2] (Master Sanderson); The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147 [19] (Le Miere J); The New South Wales Solicitors Indemnity Fund v The Hancock Family Memorial Foundation Ltd [No 2] [2009] WASCA 146 [12] (McLure JA, with whom Miller JA agreed [28]).
The description of the people against whom Mr Henderson states a cause of action may exist has been ascertained, namely the Fenwicks. It is also clear from the material before me, including a letter of demand, that Mr Henderson wants to commence proceedings against the Fenwicks. The remaining criteria are in issue.
There are two further issues that arise for determination. The first stems from the fact that the power in RSC O 26A r 4 is discretionary. Mr Henderson must establish that it is appropriate for the Court to exercise its discretion to make the order for pre-action discovery: Waller v Waller [2009] WASCA 61[72] (Le Miere AJA, with whom Martin CJ [1] and Pullin JA [24] ‑ [25] generally agreed).
Finally, any order made is to be limited to documents 'in the potential party's possession … that may assist the applicant in making the decision': RSC O 26A r 4(4). The order made should be no wider than is necessary: GTR Injection Technologies [4]; McCarthy v Dolpag Pty Ltd [2000] WASCA 106 [15] (Reasons of the Court).
Within this framework, and on the materials and submissions before me, six issues arise for determination:
•Does Mr Henderson have a potential cause of action against the Fenwicks?
•Has Mr Henderson made 'reasonable inquiries'?
•Has Mr Henderson been able to obtain sufficient information to decide whether or not to commence proceedings?
•Are there reasonable grounds for believing that the Fenwicks have in their possession documents that may assist in making the decision?
•Ought the discretion be exercised in favour of Mr Henderson?
•If so, what documents ought to be discovered?

Does Mr Henderson have a potential cause of action against the Fenwicks?

Counsel for Mr Henderson identified two potential causes of action: deceit and misleading conduct. In Magill v Magill [2006] HCA 51; (2006) 231 ALR 277; (2006) 81 ALJR 254 [37] Gleeson CJ summarised the elements of the tort of deceit by reference to the statement of Viscount Maugham, in Bradford Third Equitable Benefit Building Society v Borders (1941) 2 All ER 205, 211, as follows (omitting his Lordship's citation of authority):
First, there must be a representation of fact made by words, or, it may be, by conduct. The phrase will include a case where the defendant has manifestly approved and adopted a representation made by some third person. On the other hand, mere silence, however morally wrong, will not support an action of deceit. Secondly, the representation must be made with a knowledge that it is false. It must be wilfully false, or at least made in the absence of any genuine belief that it is true. Thirdly, it must be made with the intention that it should be acted upon by the plaintiff, or by a class of persons which will include the plaintiff, in the manner which resulted in damage to him. If, however, fraud be established, it is immaterial that there was no intention to cheat or injure the person to whom the false statement was made. Fourthly, it must be proved that the plaintiff has acted upon the false statement and has sustained damage by so doing.
The second potential cause of action is against the Fenwicks as persons 'involved in' a contravention of Fair Trading Act 1987 (WA) (FTA) s 10. As the relevant conduct by the Ruhens, the making of the statements said to be misleading, occurred in October 2008 it is this Act, and not the Fair Trading Act 2010 (WA) which applies: FTA s 3D. FTA s 10 provides that a 'person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive'. A person who suffers loss or damage by conduct of another person that was done in contravention of FTA s 10 'may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention': FTA s 79(1). FTA s 68 defines when a person is involved in a contravention in the following terms:
68.Interpretation (TPA s 75B)
A reference in this Part to a person involved in a contravention of a provision of this Act shall be read as a reference to a person who ‑
(a)has aided, abetted, counselled or procured the contravention;
(b)has induced, whether by threats or promises or otherwise, the contravention;
(c)has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention;
(d)has conspired with others to effect the contravention; or
(e)has attempted to contravene the provision, or to do any Act of a kind referred to in paragraph (a), (b), (c) or (d).
Counsel for the Fenwicks argued that it was 'drawing too long a bow' to suggest that the evidence available to the court showed a potential cause of action against the Fenwicks. On the evidence before the Court, all Mr Henderson's dealings were with Peta Ruhen and there is no evidence of him dealing directly with either Mr or Mrs Fenwick.
From the documents in evidence before me, it appears that the Ruhens were involved in two transactions at the same time in relation to the Cloverdale Property. The first was the mortgage to Mr Henderson. The mortgage was recorded in Deed of Acknowledgment of Loan dated 10 October 2008. The Deed is in evidence. The Deed has handwritten amendments to clauses 2 and 3. The Deed provided that the money lent was repayable on demand on 2 months' notice, but only after the sale and settlement of the Roberts' Road property. Mr Henderson was not to receive interest, but instead 65% of the equity and profit share upon the sale of the property.
The Deed specifically identifies the Cloverdale Property in the schedule. The charge and default provisions in clauses 8 and 9 provide:
8.CHARGE
The Borrower charges their interest in the lands described in the Schedule ('the land') with due compliance with all of the terms hereof and with payment of the principal sum and authorises the Lender to lodge a separate Caveat against each Certificate of Title pertaining to the land, claiming an interest in the land as equitable mortgagee.
9.DEFAULT
In the event of default occurring in the performance or observance of any of the covenants or agreements by the Borrower contained in this Acknowledgement of Loan the parties HEREBY AGREE AS FOLLOWS:-
(a)the Lender shall be entitled to issue legal proceedings forthwith without further notice for the recovery of the principal sum;
(b)The Borrower will pay the legal costs incurred by the Lender as a result of the default by the Borrower under this Acknowledgement of Loan;
(c)The Lender shall be entitled to register a security charge over the land for the full amount of the principal sum until the whole of the principal sum has been repaid in full. The Lender will pay all legal fees, registration fees and stamp duty (if any) payable by the Lender in relation to this security charge; and
(d)For the purposes of clause (c) above the Borrower undertakes to execute all necessary documentation to enable the Lender to register a security charge including but not limited to, arranging for the production of the Certificate of Title at Landgate, the consent of any prior registered security holders and the execution of any Deed of [text missing in original]
Mr Henderson's evidence is that:
(a)Peta Ruhen told him that the Deed was prepared by HHG Legal Group on the instructions of her and her sister;
(b)Peta brought the Deed to his home on 10 October 2008 and he signed it;
(c)at that time, Peta told him that the handwritten amendments to clauses 2 and 3 of the Deed were inserted by Mr Fenwick;
(d)he recalled Peta telling him that Mr Fenwick was involved in arranging the preparation of the Deed;
(e)at the same time as signing the Deed, Peta gave him three caveats, being one for each of the properties, which he signed;
(f)he did not keep copies of the caveats;
(g)he recalls that each of the caveats stated that the Ruhens were the registered proprietors of the property;
(h)at the time of signing the Deed, Peta told him that they would arrange for lodgement of the caveats, the 'they' being the Ruhens and Mr Fenwick.
There is also some evidence from the principal of St James Conveyancing (who appears to have acted in relation to the lodgement of the caveats) which suggests that Mr Fenwick had some involvement in this process.
The second transaction that the Ruhens were involved in in October 2008 was one to transfer the Cloverdale Property to the Fenwicks. The evidence in relation to this transaction before me is:
(a)an executed transfer of land for the Cloverdale Property dated 10 October 2008 and signed by the Ruhens as transferors and the Fenwicks as transferees; and
(b)a stamp duty indorsement on the transfer referring to duty being paid on a transaction dated 18 August 2008 ('18 August Transaction'); and
(c)a certificate of title for the Cloverdale Property recording the Fenwicks as joint tenants as from 13 October 2008, and subject to a mortgage to the Commonwealth Bank registered 13 October 2008.
The nature of the threshold which Mr Henderson must cross to establish that he 'may have a cause of action' for the purposes of RSC O 26A r 4 is drawn from the purpose of the rule. As Martin CJ observed in Waller [2]:
The nature of the jurisdictional threshold which an applicant is required to cross under that rule 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.
The test is objective, as to which Le Miere AJA observed in Waller [75]:
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 to 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.
This approach was affirmed in New South Wales Solicitors Indemnity Fund [13], [28].
Mr Henderson submits that clause 8 of the Deed contained a representation that the three properties (including the Cloverdale Property) were owned by the Ruhens and that each would be available to him for security for the lodgement of a caveat. This is clearly an arguable position. The representation does not appear to have been true as:
(a)by the 18 August transaction, the Ruhens appear to have contracted to sell the Cloverdale Property to the Fenwicks; and
(b)within days of the Deed being executed, the Cloverdale Property was transferred to the Fenwicks and Mr Henderson was not able to lodge a caveat against the property to secure his mortgage.
For both an action for deceit and knowing involvement in misleading conduct, the knowledge of the Fenwicks will be critical. There is cogent evidence that the Fenwicks had knowledge of the transaction by which they were to become the registered proprietors of the Cloverdale Property as they appear to have each signed the transfer document on or about 10 October 2008. The issue will be whether they had knowledge of the mortgage to Mr Henderson being executed apparently on the same day.
Given:
(a)the objective evidence of the two transactions proceeding simultaneously for the Cloverdale Property;
(b)the evidence of Mr Henderson of what he was told about Mr Fenwick's involvement in the preparation of the Deed; and
(c)the family relationship between the Ruhens and the Fenwicks,
I am satisfied that Mr Henderson 'may have a cause of action' in deceit or knowing involvement in misleading conduct against the Fenwicks. There is an objective foundation to the potential causes of action which takes their existence beyond a mere allegation, suspicion or assertion.
There is one further consideration. An action under FTA s 79 must be commenced 'within 3 years after the date on which the cause of action accrued': FTA s 79(2). A cause of action pursuant to FTA s 79 does not accrue until the applicant suffers ascertained or reasonably ascertainable loss or damage: Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, 526 ‑ 533 (Mason CJ, Dawson, Gaudron and McHugh JJ), 537 ‑ 538 (Brennan J); Airberg Pty Ltd v Cut Price Deli Pty Ltd [1998] FCA 893 (Lindgren J). 'Since an applicant is required to satisfy the court that he may have a cause of action against the potential party, the court could take a limitation defence into account as a matter relevant either to its power under O 26A r 4 or the exercise of its discretion although it should not normally do so, given the limited nature of the material available at that stage': Waller [87]. The observation by the plurality in Wardley that 'it is undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases' applies with particular force to an application pursuant to RSC O 26A r 4 ((533), see also Waller [87]).

In any event, counsel for Mr Henderson submitted that it was only upon the sale of the King William Street property in October 2013 that a loss was crystallised in respect of the alleged misleading conduct and became ascertainable. This position is clearly arguable. I am therefore satisfied that Mr Henderson may have a cause of action against the Fenwicks for either deceit or involvement in misleading conduct by the Ruhens.

Has Mr Henderson made 'reasonable inquiries'?

Mr Henderson has made two inquiries to seek relevant documents. The first was to the Fenwicks, through their solicitors. Mr Henderson's solicitors wrote a letter of demand to the Fenwicks' solicitors dated 14 October 2013 raising allegations in similar terms to those set out above. The Fenwicks' solicitors responded by letter dated 28 October 2013 denying the allegations. The letter included the following:
We are instructed your client was aware of the transfer of the Cloverdale property as part of the lead up to the simultaneous transactions affecting the properties in question. Those instructions are supported by documents in our possession.
By letter dated 4 November 2013, Mr Henderson's solicitors sought copies of the documents in terms of the present application. By letter dated 18 November 2013 the Fenwicks advised through their solicitors that they declined to provide the documents requested.
Mr Henderson has also made inquiries of St James Conveyancing, which as I have noted, appears to have acted in relation to the lodgement of the caveats.
Counsel for the Fenwicks argued that Mr Henderson could have also obtained discovery in the District Court action. However, discovery is not due in an action in the District Court until 60 days after the date on which the first defence is filed: District Court Rules 2005 (WA) r 46(4). As it transpired, the Ruhens became bankrupt, staying the action, prior to discovery being provided. Moreover, it is self-evident that Mr Henderson considered that he had sufficient information to make a summary judgment application against the Ruhens without obtaining discovery, for that is what occurred. I do not consider this to be an unreasonable position to have taken. The Fenwicks were not a party to the District Court action, which was a simple debt recovery action.
What are reasonable inquiries will depend on the circumstances: Davis v Sagar (Unreported, WASC, Library No 980443, 10 August 1998) (Master Sanderson, (7)). There is a low threshold in establishing that reasonable inquiries have been made: Davis (7).
I consider that Mr Henderson has made reasonable inquiries to obtain the documents the subject of the present application.

Has Mr Henderson been able to obtain sufficient information to decide whether or not to commence proceedings?

RSC O 26A r 4(1) in effect prohibits the court from exercising the power to grant pre‑action discovery if the applicant already has sufficient information to enable a decision to be made as to whether to commence or take proceedings: The Hancock Family Memorial Foundation Ltd [40]; The New South Wales Solicitors Mutual Indemnity Fund [61]. There is an inherent tension between the requirement that an applicant 'may have a cause of action' and the requirement that the applicant 'after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings'. The stronger the relevant evidence already available to an applicant, the stronger its position under the former, but the weaker its position under the latter. On the other hand, the weaker the evidence, the weaker the applicant's position that he may have a potential cause of action, yet the stronger the position that there is insufficient information to make a decision: The Hancock Family Memorial Foundation Ltd [39]; Glencore International AG v Selwyn Mines Ltd [2005] FCA 801; (2006) 223 ALR 238 [14] (Lindgren J).
Whether an applicant under O 26A r 4 has sufficient information to enable a decision to be made to commence proceedings of the nature it wants to bring is to be determined objectively: The New South Wales Solicitors Mutual Indemnity Fund [60]. Sufficient information means 'no more than that which is reasonably necessary to enable the person to decide whether to commence or take proceedings': The New South Wales Solicitors Mutual Indemnity Fund [15], [28]. 'Ordinarily, what is reasonably necessary is unlikely to extend beyond documents constituting or contemporaneously recording the material facts or information necessary to determine the material facts': The New South Wales Solicitors Mutual Indemnity Fund [15], [28].
Counsel for the Fenwicks submitted that Mr Henderson has sufficient information to make a decision as to whether or not to commence proceedings. The letter of demand dated 14 October 2013 may be relied on in this regard, as it includes an unqualified reservation of the right to litigate should the payment demanded not be made.
By bringing this application, it is self-evident that Mr Henderson considers that he has not been able to obtain sufficient information to decide whether or not to commence proceedings. However, it is for the Court to review the sufficiency of the information. A significant point here is that the Fenwicks' solicitors have expressly stated that they are in possession of documents which suggest that Mr Henderson was aware that the simultaneous transactions were going to occur, and which they have refused to provide. This assertion appears to have been the catalyst for Mr Henderson deciding not to proceed with the threat to commence proceedings in the letter of demand, but to commence this application.
In Davis, which was decided shortly after O 26A was inserted into the RSC, Master Sanderson observed (page 5):
Order 26A was inserted into the Rules of the Supreme Court in October 1996. It was designed to rectify what was seen as a significant problem in litigation - that is, the inability to obtain discovery from anyone other than a party to an action. At the same time that this rule was introduced, provision was made for the early return of subpoenas: see O 36 r 16A. The introduction of O 26A was part of the raft of amendments associated with a move to full caseflow management. It also represented a change in philosophy. The aim was to ensure that a party that commenced litigation did so after careful consideration, rather than proceeding in the hope that something might turn up during the discovery process. With respect to discovery from a non-party, the aim was to ensure that all relevant documents were available to all parties to ensure no relevant fact remained hidden. It is against this policy background that O 26A must be applied.
As I have mentioned, in both an action for deceit or for knowing involvement in misleading conduct, the knowledge of the Fenwicks will be critical. The injunction to only commence litigation after careful consideration applies with more force than usual to a proceeding in which allegations of this kind are to be made. In drafting the statement of claim in the proceedings foreshadowed, Mr Fenwick's solicitors will be required to provide particulars of each allegation of fraud or misrepresentation, and particulars of knowledge: RSC O 20 r 13(1). Courts have 'insisted on specificity and particularly in pleading allegations of fraud': McGill [37]. Further, the information before me in relation to the involvement of Mrs Fenwick is more limited than for Mr Fenwick.
I am satisfied that, even after having made reasonable inquiries, Mr Henderson has not been able to obtain sufficient information to enable a decision to be made as to whether to commence the proceedings.

Are there reasonable grounds for believing that the Fenwicks have in their possession documents that may assist in making the decision?

There are two types of documents for which there are reasonable grounds for believing the Fenwicks have in their possession. The first type are the documents referred to in the letter from Fenwicks' solicitors dated 28 October 2013 which I have quoted above [28].
The second type are documents recording or evidencing the transaction by which the Cloverdale Property was to be transferred. This would include the documents recording or evidencing the 18 August 2008 Transaction referred to in the stamp duty endorsement on the transfer of land document.
I am satisfied that there are reasonable grounds for believing that the Fenwicks have in their possession documents that may assist Mr Henderson in making a decision as to whether or not to litigate against them.

Ought the discretion be exercised in favour of Mr Henderson?

The Court will exercise caution before making an order under O 26A r 4 and will only do so where it is reasonably necessary to achieve the proper administration of justice: McCarthy [13]; Central Exchange Nickel Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33 [82] (Steytler J, with whom Malcolm CJ [1] and Wallwork J [24] agreed); Mullins [20]. In Central ExchangeSteytler J identified a number of factors relevant to the exercise of this discretion [83]:
A Court, in considering whether or not to exercise the discretion afforded it by the section, or, to put it differently, in considering whether or not the order is reasonably necessary to achieve the proper administration of justice, will ordinarily take into account a range of factors. Without attempting to be exhaustive, these will usually include such things as the likelihood that a cause of action of the kind suggested will be found to exist, the nature and significance of that potential cause of action, the likely effect, on the person against whom discovery is sought, of the making of an order of the kind contended for, whether there is any other adequate means, available to the intending plaintiff, of obtaining the information which it seeks, the nature and confidentiality of the documents proposed to be obtained, the possible significance of the information contained within those documents to the decision whether or not to commence the contemplated proceedings, whether the applicant is able to compensate the potential party for its cost of complying with the order and whether there is any evidence of bad faith on the part of the applicant.
This approach was adopted by Le Miere J in Waller [106].
A significant factor in favour of the exercise of the discretion is the assertion by the Fenwicks' solicitors in their letter dated 28 October 2013 ‑ see [28]. I consider it both reasonable and appropriate for Mr Henderson to want copies of these documents as part of the decision making process. There are no other obvious means of obtaining the documents sought, especially now that proceedings against the Ruhens in the District Court are stayed due to their bankruptcy. Further, the proposed proceeding involves an allegation of fraud. Such an allegation should not be made lightly. As I have already mentioned, the cause of action will be required to be particularised at an early stage in the proceedings. This factor also weighs heavily in favour of the exercise of the discretion. Likewise, the existence of simultaneous, inconsistent, transactions on the Cloverdale Property calls for an explanation.
The Fenwicks did not place any evidence before the Court of any prejudice which they will, or might, experience if an order for discovery were made. The order proposed is on the terms that Mr Henderson pay the Fenwicks' reasonable costs of complying with the orders made.
I am satisfied that an order for pre‑action discovery against the Fenwicks is reasonably necessary to achieve the proper administration of justice. It is therefore an appropriate exercise of the discretion in RSC O 26A r 4 to make orders on the present application.

What documents ought to be discovered?

As I have already observed, any order made is to be limited to documents 'in the potential party's possession … that may assist the applicant in making the decision': RSC O 26A r 4(4). The order made should be no wider than is necessary: GTR Injection Technologies [4]; McCarthy [15].
Mr Henderson seeks discovery of the following classes of documents:
1.All documents, records, contracts and any other information in relation to:
(a)the transfer of the property at 8 Wendron Street, Cloverdale, in the State of Western Australia being the whole of the land comprised in Certificate of Title Volume 1315 Folio 461 ('Property') from Veronica Elayne Ruhen and Peta Leanne Ruhen ('Ruhens') to the respondents.
(b)the actual lending of moneys by the Applicant to the Ruhens in or about October 2008 and any matters ancillary thereto or in respect of correspondence or negotiations in respect thereof; and
(c)the role of the respondents as agents or representatives of the Ruhens in respect of (a) and (b) above, or otherwise.
This would include the documents referred to at [41] and [42] above. I am conscious that it would also include emails between the Ruhens and the Fenwicks. Given the significance of the knowledge issue in the proposed litigation I consider this to be appropriate.
I am satisfied that the class of documents sought would assist Mr Henderson in deciding whether to commence the proceedings identified, and is no wider than is necessary.
The application should be granted in the terms sought.
I will hear from counsel as to the precise form of the orders and any costs issues. If either party seeks costs, they should be in a position to make submissions to the Court as to the appropriate amount so that they might be fixed as part of the orders finalising the application.