Hornsby Shire Council v Valuer General of NSW

[2008] NSWSC 1179

CITATION:	Hornsby Shire Council v Valuer General of NSW [2008] NSWSC 1179
HEARING DATE(S):	25 & 26 August 2008
JUDGMENT DATE :	6 November 2008
JURISDICTION:	Common Law
JUDGMENT OF:	Adams J at 1
DECISION:	1. The plaintiff has leave to obtain access to the documents produced on subpoena in New South Wales Supreme Court proceedings No 30051/2003 by the second defendant in these proceedings. 2. The first defendant is to give the plaintiff discovery of all documents falling within paragraph 1 in Schedule 1 to the summons that are or have been in his possession, or the possession of his office. 3. The second defendant is to give the plaintiff discovery of all documents falling within Schedule 1 to the summons that are or have been in his possession. 4. The third defendant is to give the plaintiff discovery of all documents falling within Schedule 1 to the summons that are or have been in its possession. 5. The fourth defendant give the plaintiff discovery of all documents falling within Schedule 2 to the summons that are or have been in its possession. 6. Liberty to the parties to apply on 3 days notice. 7. The parties to file written submissions on the question of costs within 14 days.
CATCHWORDS:	Procedure -subpoenaed documents - use for collateral purpose - implied obligation - need for leave - preliminary discovery - application of r 5.3 UCPR.
LEGISLATION CITED:	Civil Liability Act 2002 s 5 O Land Acquisition (Just Terms Compensation) Act 1991 s37 Trade Practices Act 1974 Uniform Civil Procedure Rules R 5.3 Valuation of Land Act 1916
CATEGORY:	Principal judgment
CASES CITED:	Australian Trade Commission v McMahon (1997) 73 FCR 211 Griffiths & Beerens Pty Limited v Duggan [2008] VSC 230 Hearne v Street [2008] HCA 36 Liberty Funding Pty Limited v Phoenix Capital Limited (2005) 218 ALR 283 Morton v Nylex Limited [2007] NSWSC 562 Panasonic Australia Pty Limited v Ngage Pty Limited [2006] NSWSC 399 at [20], [27]; 69 IPR 595 St George Bank Limited v Rabo Australia [2004] FCA 1360 Woolcock Street Investments Pty Limited v CDG Pty Limited [2003] 216 CLR 515
TEXTS CITED:	NSW Government Gazette 25 October 2002
PARTIES:	Hornsby Shire Council (Plaintiff) Valuer General of New South Wales (First defendant) Brian Nicholson (Second defendant) Alcorn Corbin Nicholson Pty Ltd (Third defendant) CSR Ltd (Fourth defendant)
FILE NUMBER(S):	SC 11458/2008
COUNSEL:	Mr I M Jackman SC with Mr J E Lazarus (Plaintiff) Mr M J Leeming SC with Mr R Weinstein (First defendant) Mr R Potter (Second and third defendants) Mr R Beasley (Fourth defendant)
SOLICITORS:	Storey & Gough Solicitors (Plaintiff) I V Knight (First defendant) DLA Phillips Fox (Second and third defendants) Minter Ellison (Fourth defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

ADAMS J

6 November 2008

2008/11458 HORNSBY SHIRE COUNCIL v VALUER GENERAL

JUDGMENT

His Honour:

Introduction

1 CSR Limited was the owner of certain land in Hornsby. That land was zoned “open space A (Public Recreation – Local)” under the Hornsby Shire Local Environmental Plan 1994 (LEP). On part of the land CSR had quarried breccia, a form of somewhat unstable sedimentary rock conglomerate. The LEP gave CSR the right to oblige the Council to acquire the land, in effect, at a price to be determined by the Valuer General. That notice was given on 22 March 2001. When the Council declined to acquire the land, CSR commenced proceedings in the Land and Environment Court seeking a declaration that the Council was obliged to do so. Eventually, an order was made by consent requiring the Council to acquire the land and notice of the acquisition which had the effect of passing ownership of it to the Council was given in the NSW Government Gazette on 25 October 2002.

2 When the land had been acquired, by virtue of s 37 of the Land Acquisition (Just Terms Compensation) Act 1991, CSR was entitled to compensation, in substance, in the amount determined by the Valuer General. Once the Valuer General has determined the amount of compensation and the dispossessed owner accepts an offer to pay that sum, it must be paid. The acquiring authority has no right of appeal from the Valuer General’s determination. The Valuer General engaged Alcorn Corbin Nicholson Pty Limited to provide an assessment of the value of the land. The valuer was Mr Brian Nicholson. (For simplicity I use the term “valuers” to describe both these parties.) Based on Mr Nicholson’s report, the Valuer General determined the compensation payable to CSR as $25,000,000 market value plus $99,500 for disturbance, a total of $25,099,500. Amongst the materials provided to the Valuer General and the valuers was a report of Mr Don Reed, a quarry expert and, annexed to his report, one of Dr Charles Gerrard, a geotechnical expert who had previously been engaged by CSR. Dr Gerrard referred to problems of land instability on the site. Mr Nicholson did not.

3 The Act required the Council, within a specified period, to give to CSR written notice of the compulsory acquisition, its entitlement to compensation and the amount of compensation offered as determined by the Valuer General. Once CSR accepted (as it did) the amount of compensation offered, payment was to be made within a specified time period. The Council refused to provide CSR with the notice of entitlement and, accordingly, in May 2003 CSR commenced proceedings against the Council in this Court seeking an order requiring the Council to provide a notice of entitlement to compensation in the amount determined by the Valuer General. As it happened, a day or two earlier the Council had commenced its own proceedings in the Supreme Court seeking declarations that the Valuer General’s determination did not accord with the statutory requirements and was invalid and of no effect. CSR was subsequently joined as a defendant to the Council’s proceedings and, in mid-July 2003, the two proceedings were consolidated. In due course the Council subpoenaed from Mr Nicholson all of the expert reports provided to him by CSR for the purpose of the valuation. These documents were, in due course, produced and access obtained. Copies were made by the Council’s solicitors (now known as HWL Ebsworth (incorporating Abbott Tout Lawyers) (HWL)), who still retain them.

4 In November 2003, prior to the hearing of the consolidated proceedings, the Council discontinued its action and agreed to pay the costs of the Valuer General and CSR. On the same day the Council consented to an order in CSR’s proceedings that it would give to CSR a written notice of compensation in accordance with the amount determined by the Valuer General and to pay CSR’s costs. On 4 December 2003 the Council gave to CSR a compensation notice offering to pay the sum of $25,099,500 conditional, however, upon CSR supplying the Council with a “tax invoice to be produced in an amount of $2,509,950 prior to payment of compensation”. On 10 December 2003 CSR accepted the amount of compensation offered in the compensation notice. However, instead of paying to CSR the amount specified by the Valuer General, it withheld an amount of about $2.5 million, paying only the balance. CSR then commenced further proceedings against the Council in the Supreme Court for a money judgment for the amount withheld. Those proceedings were completed on 14 October 2004 by judgment in favour of CSR for the amount claimed plus costs.

5 The documents produced under subpoena were never received into evidence. It is unfortunate, though irrelevant, that the original documents cannot be located in the Court’s registry and there is no record of their delivery to any person.

6 The Council contends that the valuation was grossly inflated. The Council is considering whether to commence proceedings against CSR under the Trade Practices Act 1974, and the Valuer General and the valuers for negligence. The Council wishes, for the purpose of assessing whether such actions could and should be undertaken, to have access to the documents that had earlier been provided on subpoena. The approach of the Valuer General is that it does not oppose provision of the documents. On the other hand, CSR and the valuers do oppose provision of the documents.

7 The Council seeks an order for the release of the so-called implied undertaking in respect of the documents and, further or alternatively, the Council seeks preliminary discovery of the documents.

Factual background

8 Although there is a debate over the likelihood of the Council’s contentions being informed, let alone supported, by the documents it seeks, there is no controversy about the essential character of the controversy.

9 The total area of the land is 28.46 hectares of which an area was identified by the valuer as capable of urban development equating to approximately seventeen per cent of the total. This area is described as “contained within the disturbed area of the site” which I think means a part of the site which was subjected, one way or other, to the quarrying operations. The identification and description of this zone in the valuers’ report does not mention any question of site stability. Indeed there is nothing in the report that suggests that the question of stability was an issue requiring consideration.

10 A planning report from a Mr Malcolm Drummond and a valuation from Kent Wood were supplied by the Council to the Valuer General (and obviously passed on to the valuers), which concluded that the land had limited developmental potential. Amongst the problems that Mr Drummond identified as constraints to development was land instability. In particular, Mr Drummond noted that the sides of the quarry, over one hundred metres deep, were very steep and, although benched, showed clear evidence of wall collapse. He noted “geotechnical study concerns on stability of overburden dumped on Council’s land to the east”. He pointed out that overburden dumping needed to be identified and stability and sediment leakage issues investigated. Mr Wood’s valuation applied Mr Drummond’s conclusion that the underlying zoning was Environmental Protection (Water Catchment) but with a dwelling entitlement on that part of the land excluding the quarry void. So considered, the value of the land was something over $2 million. As I have already mentioned. the Council had also obtained a report by Mr Don Reed, a quarry consultant, to which was annexed a report by Dr Charles Gerrard on geotechnical aspects of the quarry. It may be that these reports were obtained in response to Mr Drummond’s recommendation for further geotechnical study, to which I have referred. This report deals with the viability and value of further quarry or landfill operations on the site and is not specifically directed to residential development. The report does, however, refer to land stability – pointing out that “the stability of existing quarry faces and the ramifications of future development have been the subject of intensive and ongoing geotechnical analysis since at least 1982”. The report attaches as an appendix a report by Dr Gerrard who had direct responsibility for most of the work undertaken by Golder Associates (geotechnical engineers) in relation to the quarry between February 1991 and April 1994. Dr Gerrard’s report, dated 21 June 2002 then referred not only to the need to take short and longer term stabilising measures but to the possibility of future instability being increased by further quarry development and, even in the absence of such development, Dr Gerrard thought “there was an increased chance of slope instability because of weathering and weakening processes and changes to ground water regimes”. Dr Gerrard noted that whilst “many occurrences of slope instability are local in nature, any large scale instability that developed could be devastating in its effect”. Although, not surprisingly, the report focuses on the area in the immediate vicinity of the quarry faces, I do not think (of course as a lay person) that there is a basis, so far as interpreting the report is concerned, for concluding that Dr Gerrard’s concerns in relation to instability were limited to the immediate vicinity of the quarry. If Dr Gerrard’s report was the only material before Mr Nicholson that dealt with this question it is somewhat surprising (to attempt a neutral term) that he did not refer to it. Even if the potential problem had adequately answered by other material provided to him, one would have expected that the issue would at least have been briefly addressed and resolved. Of course, whether there was other material that did resolve the issue is, in substance, the very question which the Council wishes to explore by obtaining all the information that was supplied to Mr Nicholson by CSR. Mr Wood’s valuation, describing the topography, notes that from visual observation “the walls of the quarry, although benched in parts, appear unstable and in need of remedial measures to improve slope stability” but does not deal with this issue in the context of potential residential development.

11 In a report prepared for the Council on 2 November 2003 by Mr Kevin Gothard, which analyses Mr Nicholson’s valuation, he stated –

“It is noted that the southern face to which Dr Gerrard [in the report appended to Mr Don Reed’s report] refers immediately adjoins the developable land which is considered suitable for the development of 443 home units. Whilst the plan provides for the nearest residential buildings to be between 30 and 50 metres away from the face, the ring road appears to be virtually on the edge at some points.”

12 Mr Gothard goes on to say -

“In my view, the proximity of a quarry of this depth and the instability as reported by Dr Gerrard should have been addressed in the valuation by either including a significant allowance for stabilising the face, if this is possible, or incorporating a sizeable buffer zone thus reducing the amount of land suitable for development. In my limited experience of exhausted quarries, stabilisation is best achieved by cutting back the face so as to reduce its angle and by incorporating benches. Both of these actions extend the quarry laterally and erode the land available for development.”

13 The valuation of Mr Nicholson was based upon the opinion that the highest and best use of the land would, in a significant part at least, be for residential development. If the land, in fact, is unsuitable for residential development or the residential development able to take place is significantly less, the land is obviously less valuable. Accordingly, the extent to which, if at all, the land is suitable for residential development was a key factor in the valuation. In turn, this question depends upon the effect of the quarrying undertaken by CSR and the extent to which these operations adversely affected the stability of the quarry walls and nearby geological structures such as to render building near this area risky or unsafe. The crucial area is to the south of the quarry. If the valuer was misled by CSR as to the adverse effect of the quarrying on ground stability, then the Council contends it has a right of action against CSR whilst, if the valuers negligently failed to make proper enquiries about the issue or was negligent in assessing the material provided, an action might be maintained against them. If the question of potential and relevant land instability was not resolved but remained a real risk, then this also would have adversely affected the valuation.

14 Council obtained in February 2006 an advice from Mr T F Robertson SC on whether there was material available that might demonstrate that indeed the valuation was excessive and, if so, what were the prospects of suing CSR, the valuers and the Valuer General. Following what seems to me to be a thorough and careful review of the facts, including the valuation issues, Mr Robertson concluded that the material which it was known had been provided to the valuers disclosed there was a risk of land instability caused by the quarrying adversely affecting the proposed residential development and that the valuers were arguably negligent in failing to obtain from CSR additional reports concerning the geotechnical issues so that the risk could be assessed and factored into the valuation.

15 I should also mention that it appears that in 2006 the Council obtained a report from a geotechnical engineering consultant who, amongst other things, calculated that, if a failure did occur in the northern face of the quarry, it would not extend to anywhere near the “existing residential developments and roads to the north of the quarry”. The proposed development site, however, is to the south of the quarry.

16 Mr Robertson considered that he was able only to give a provisional conclusion in the absence of a report from an experienced valuer assessing the valuation process in light of the standard of care specified in s 5O of the Civil Liability Act 2002, in short, whether Mr Nicholson acted in accordance with what peer professional opinion regarded as competent professional practice. Mr Robertson pointed out that this assessment would “necessarily be hampered” by not knowing what had been actually submitted to the valuers by CSR.

17 So far as the prospects of a possible action against CSR is concerned, the crucial question identified by Mr Robertson was whether CSR’s communications with the valuers suggested that there were no significant geotechnical problems for the residential development of part of the quarry land. That there were some geotechnical problems is evident from the mere existence of the quarry and the geotechnical report submitted to the Valuer General by the Council but the question is whether other parts of the land apparently unaffected by the quarry on which a substantial residential development was thought to be its best use might indeed contain geotechnical problems limiting or prohibiting residential development. If the geotechnical problems were insuperable that of course was the end of the matter. If, on the other hand, they were significant but capable of reparation, the reparation would constitute a cost of development that might be very considerable. Mr Robertson concluded from Mr Nicholson’s report that it was reasonable to infer that CSR represented that there was no unsurmountable geotechnical difficulty obstructing residential development. Mr Robertson again pointed to the difficulty facing any assessment of the likely success of an action against CSR without first knowing what representations by it, including the content of any reports, were made to Mr Nicholson concerning land stability.

18 Whilst I am dealing with this issue I might as well point out that Mr Beasley of counsel for CSR relied on a document published by the Council for the purpose of seeking expressions of interest in development which suggests that the only area of slope instability is to the northern side of the quarry and a considerable distance from the proposed hypothetical development and on the other side of the quarry. Indeed, the document suggests that at the relevant part the substratum is sandstone and not the breccia conglomerate which is the source of instability. However, I am not a geologist and no geotechnical evidence has been submitted as to the significance, if any, of the suggestion. Mr Beasley submitted that the brochure amounted to a concession by the Council that there was no material instability affecting the area of the potential development. I do not see how a marketing document can be so regarded. Moreover, there is other material also made public by the Council that refers to land stability issues on the southern side of the quarry.

Access to the subpoenaed material

19 In a recent consideration of the rule applying to use of documents provided by compulsory process in litigation (Hearne v Street [2008] HCA 36), Hayne, Heydon and Crennan JJ said –

“[96] Where one party to litigation is compelled…to disclose documents or information, the party obtaining the disclosure cannot, without the leave of the court, use it for any purpose other than that for which it was given unless it is received into evidence.”

20 The documents in this case were produced pursuant to a subpoena and hence leave is required before the documents in the hands of the Council’s solicitors can be used by the Council for the purpose it has identified. Leave is not required for the Valuer General to disclose the documents in his possession to the Council, since those documents came into his possession as a result of voluntary delivery by CSR in the valuation process and the mere fact that they might have later been produced pursuant to a subpoena is immaterial. Whether or not the Valuer General gives access to those documents to the Council has nothing to do with any implied obligation and does not need leave. Indeed, Mr Leeming SC for the Valuer General does not seek to be heard against leave being granted. This is not surprising, since it is difficult to see how the Valuer General has any substantive interest in the matter. The Valuer General has adopted the stance that, there being a dispute between the Council and CSR as to making the material available, it would not provide the CSR documents without a Court order, upon which it does not seek to be heard, in a sense interpleading. This is all very well so far as the documents in the possession of HWL are concerned, but I do not see how CSR’s opposition to leave being given to the Council to use those documents has anything to do with the documents in the hands of the Valuer General.

21 What makes this case unusual, I think, is that the Council has already had full access to the documents and a complete copy is in the possession of its solicitors and access is sought for the purpose of considering whether to bring an action against the very party or parties which produced the documents in connection with conduct that is closely related with the dispute that was the subject of the earlier litigation. It seems to be (rightly) conceded that, if the Council had used the documents for the purpose of assessing, at the time that litigation was still on foot, whether it had other causes of action against CSR or the other parties, this would not have been in breach of its implied obligation and would not have required leave.

22 In the joint judgment to which I have referred their Honours restated the well-established rule that leave will only be given where special circumstances appear: Hearne at [107]. Dealing with this consideration, the Full Court of the Federal Court in Liberty Funding Pty Limited v Phoenix Capital Limited (2005) 218 ALR 283 stated –

“[31] In order to be released from the implied undertaking it has been said that a party…must show ‘special circumstances’: see, for example, Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 38 FCR 217; 110 ALR 685…The notion of ‘special circumstances’ does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes. The discretion is a broad one and all the circumstances of the case must be examined. In Springfield Nominees , Wilcox J identified a number of considerations which may, depending upon the circumstances, be relevant to the exercise of the discretion. These were:

· The nature of the document;

· The circumstances under which the document came into existence;

· The attitude of the author of the document and any prejudice the author may sustain;

· Whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain;

· The nature of the information in the document (in particular whether it contains personal data or commercially sensitive information);

· The circumstances in which the document came into the hands of the applicant; and

· Most importantly of all, the likely contribution of the document to achieving justice in the other proceedings.”

23 In Australian Trade Commission v McMahon (1997) 73 FCR 211, Lehane J expressed the view that where the documents are “reasonably required for the purpose of doing justice between the parties in the other proceedings” this is likely to amount to “special circumstances”. An alternative way of looking at the problem is to ask whether the proposed use of the documents could fairly be described as a misuse of the information provided by way of the court’s powers of compulsion: see Griffiths & Beerens Pty Limited v Duggan [2008] VSC 230 per Pagone J at [11].

24 It is, I think, relevant that the documents of which use is sought to be made were provided to the party who produced them to the Court for the purposes of a valuation being undertaken by a public authority as part of a process of statutory compensation. Except in a relatively trivial sense (to which I will return) the documents are not confidential or, at least, confidential as against the Council which, I think, would have been entitled to have had access to them directly from the Valuer General in order to make any response that it might have wished to make to their purport or otherwise to be properly informed about the basis of the valuation. Whether this is a matter of entitlement or mere reasonable administration does not matter: it is obvious that it would have been proper for the Valuer General to have disclosed the material to the Council either before making the valuation or by way of explaining how the valuation was arrived at. In this respect, it seems to me that the attitude of CSR in refusing to give its permission to the Valuer General for disclosure of the documents is not only unreasonable but could and should have been ignored by the Valuer General – subject only to the need to obtain undertakings to ensure confidentiality.

25 It should be noted that, when the documents were produced to the Court pursuant to the subpoena, there was no suggestion that access should not have been given to the Council for confidentiality or any other reasons. The assertion of this requirement has come rather late in the piece to be taken altogether seriously. Neither CSR nor the valuers have pointed to any unfairness to them that would arise from production of the documents.

26 The principal argument relied on by CSR is that there is no real basis for any action that might be taken by the Council against it, the valuers or the Valuer General. It is first argued that, so far as the material before me is concerned, such land instability as is disclosed does not involve the site of the proposed residential development and hence does not affect the correctness of the valuation. It is clear from what I have set out above that there is a real basis for this contention. However, to my mind, the material is insufficiently precise to enable this argument to be accepted. It is also argued by Mr Beasley that there is no basis for the suggestion that CSR misled the valuers in any respect. I deal with this contention below. Of course, even if CSR did not mislead the valuers, that would not dispose of the question whether the valuers were negligent.

27 Looking at the matter overall, it seems to me that, in principle, it is reasonable to permit the Council to have access once more to documents that it was once allowed to see for the purpose of considering whether it is reasonably able to sustain any legal action against any of the defendants. CSR does not – and indeed cannot – suggest that the Council’s application is not bona fide. Its case that any land instability is, as it happens, immaterial to the valuation since it is present only in an irrelevant part of the site may well prove to be right but the evidence before me is susceptible of some real uncertainty in that regard, which the Council contends it should be permitted to evaluate.

28 CSR also submits that one of the Council’s difficulties in mounting further litigation is the possible application of Anshun estoppel and calls in aid the principle of finality of litigation. No doubt this is an important principle but it it is of limited significance in the present circumstances: there was no trial and the legal and factual issues raised in the litigation were fundamentally different to those presently contemplated. Also relied on is the delay in making this application. Firstly, although there has been delay, no prejudicial consequences are suggested to have occurred as a result; secondly, all in all, the delay in making this application has been adequately explained in my view by the Council, in short by its having waited for legal advice and attempted by other quite appropriate means to obtain the documents. I think that the Council has acted with reasonable despatch. To this I add the additional factor that plainly it is unnecessary for CSR to undertake any work of its own for the purpose of gathering the material to which access is now sought.

29 Even accepting that, having considered the documents, the Council might well decide that it will not undertake the envisaged litigation, this does not suggest that disclosure is unreasonable or potentially amounts to a misuse of the fact of earlier production.

30 It follows that access to the material earlier subpoenaed and in the possession of both the Valuer General and HWL should be given to the Council. The Council must pay any costs applicable to production or access.

31 I have mentioned that the documents are also in the possession of the Valuer General. The Valuer General takes the view that the documents were provided under cover of confidentiality, including confidentiality against the Council. I appreciate that confidentially has been asserted both by the valuers and CSR. It appears that the only basis for CSR’s claim of confidentiality is the suggested commercial value of its copyright in the material that might give a developer useful geotechnical information which it might otherwise need to acquire by retaining its own specialist, plainly at some, possibly significant, expense. However, undertakings could have been required of the Council in relation to disclosure of the information that would, as a practical matter, remove the risk claimed to exist. Moreover, in view of the public character of the process which led to initial production, it is at least doubtful whether the Council could, let alone should, properly be required not to make full public disclosure. It is, on the face of it at least, an absurd position that CSR, which required the Council to purchase the land and for that reason provided to a public body documents that were directly relevant to the valuation and hence to the price which it wished the forced purchaser to pay at public expense, can maintain the position that those documents, vital to an assessment of the value and hence the price, should not be disclosed to the public body whose money it is, in effect, demanding. I am frankly at a loss to understand how it can be entitled to insist that the Valuer General not pass on to the Council the material supplied by it to justify its extraction of public money. Of course, this is not to suggest that the valuation was not entirely reasonable or that CSR was seeking one cent more than the land was worth. After all, the Valuer General accepted, in large part, CSR’s valuation and the basis for it. But it cannot be right that the process by which such a valuation is reached and the material upon which it is based should be kept a secret from the public body, accountable to the public, which is to pay the compulsory purchase price. CSR is asserting its rights of ownership of material which was voluntarily provided to a public body undertaking public responsibilities, the agent of which produced that material in answer to a subpoena. It is maintained that some of the documents are commercially confidential but it is self evident that, if necessary, undertakings can be given that dispose what, in the circumstances, is a rather trivial obstacle. However, as I have at all events determined that this is a case where leave should be granted to the Council to have access to the documents in the possession of its solicitors for the purpose it has identified, it is not necessary for me to further consider this point.

Preliminary discovery

32 The Council also seeks an order for preliminary discovery of all reports or submissions provided by CSR to the defendants between specified dates, records of communications between CSR and the defendants relating to the valuation, documents noting any site inspections undertaken by or on behalf of the valuers or the Valuer General, any material recording geotechnical advice obtained by them between specified dates and the documents recording the terms of appointment of the valuers. This application is made pursuant to Rule 5.3 of the Uniform Civil Procedure Rules. That rule, so far as is presently relevant, is as follows:

“5.3 Discovery of documents from prospective defendant
(cf Federal Court Rules , Order 15A, rules 6, 7 and 9)
(1) If it appears to the court that:
(a) the applicant may be entitled to make a claim for relief from the court against a person ( the prospective defendant ) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and
(b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and
(c) inspection of such a document would assist the applicant to make the decision concerned,
the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person’s possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief.”

33 The gateways specified by the Rule are quite easily opened. It is necessary only that the elements “appear”, a much less stringent test than proving or establishing. The requirements that the plaintiff “may be entitled” to “make a claim” as distinct from obtaining relief of one kind or another are, will usually be easily satisfied in any genuine case. I respectfully agree with Young CJ in Eq that it is not necessary for a plaintiff to show more than that “the contemplated proceedings are likely to rest on some recognised legal ground and does not necessarily have to show a prima facie or pleadable case, though mere assertion that there is such a case is insufficient”: Panasonic Australia Pty Limited v Ngage Pty Limited [2006] NSWSC 399 at [20], [27]; 69 IPR 595; and see Morton v Nylex Limited [2007] NSWSC 562, White J at [26]. It is important, I think, to note that the documents need only to bear the character that they “could assist in determining whether or not the plaintiff is entitled to make such a claim for relief” (emphasis added).

34 It is obvious from what I have already said about the way in which the Council puts its potential cases against the defendants that, so far as the Valuer General and the valuers are concerned, the real question is whether para 1(a) is satisfied. As to the first element, so far as the valuers are concerned, the opinion of Mr Robertson SC concluded, after a careful and detailed discussion of the material available to him (and which is, one way or another, available to me) as follows –

“[96] … I consider that a failure by the valuer to obtain from CSR the reports from its geotechnical consultants concerning the stability of the faces of the quarry was arguably in breach of a standard of care expected of valuers when considering the market value of any en globo land which has obvious physical impediments to urban development.”

35 Mr Robertson SC goes on to discuss further factual issues relevant to that conclusion, noting that it “is provisional” and hampered by not knowing what CSR actually submitted. In short, the case is that the valuer had available to him information that suggested, as a real possibility, that substratum instability affected significant parts of the land, that such instability would significantly limit the nature and extent of residential development and hence the value of the land but, having been placed on notice of these matters, failed to investigate or appreciate whether the area said to be available by CSR for urban development was in fact so available. The difficulty facing the Council in making such a case, of course, is that there is no actual evidence that instability did significantly reduce the area available for urban development. It is this point that counsel for CSR and the valuers emphasised. However, the material which has been supplied does, to my mind, suggest that there was a significant degree of uncertainty about the extent of the instability and hence a doubt about the available area for urban development. Any such doubt must, unless removed, have a significantly adverse effect on the value of the land. It is possible, of course, that the valuers enquired about and were given further information upon the matter by CSR or else that CSR made representations about it. However, this is, I should think, unlikely since Mr Nicholson does not advert to the problem at all in his report. Counsel for CSR and the valuers have sought to prove, from the documents provided, that the likelihood that there might be any such problematic instability was so low as to enable the conclusion that even the undemanding test of the rule is not satisfied. It is sufficiently shown by what I have already said about the reports in question that there is a live issue about the extent of the instability as described in the reports. It may be that further information could clarify this matter but that material has not been tendered; it may be that it is in the material actually submitted to the valuers, access to which the Council is seeking. Nevertheless, the fundamental question must be what information did the valuers have upon this point. If that information left it as a real possibility that site instability could significantly reduce the area available for urban development, then the valuation was, to say the least, questionable. The issue therefore is, upon this view, whether the valuers had sufficient information to have satisfied a competent valuer exercising proper professional standards that there was little or no risk of ground instability adversely affecting the proposed area of urban development. Determination of this issue obviously requires a consideration of the whole of the material submitted to the valuers by CSR. Subject to the question whether the valuer owed the Council a duty of care in the matter, this raises with sufficient arguable force the prospect that the plaintiff may be entitled to make a claim for relief against the valuer.

36 What then, of the duty of care? In Woolcock Street Investments Pty Limited v CDG Pty Limited [2003] 216 CLR 515 an engineering company which designed foundations of a building was sued following the settlement of its foundations by an owner who had purchased the land from the company which had employed the engineer. Gleeson CJ, Gummow, Hayne and Heydon JJ said –

“[22] In Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529, the Court held that there were circumstances in which damages for economic loss were recoverable. In Caltex Oil , cases for recovery of economic loss were seen as being exceptions to a general rule, said to have been established in Cattle v Stockton Waterworks (1875) LR 10 QB 453, that even if the loss was foreseeable, damages are not recoverable for economic loss which was not consequential upon injury to person or property. In Caltex Oil , Stephen J isolated a number of "salient features" which combined to constitute a sufficiently close relationship to give rise to a duty of care owed to Caltex for breach of which it might recover its purely economic loss. Chief among those features was the defendant's knowledge that to damage the pipeline which was damaged was inherently likely to produce economic loss.

[23] Since Caltex Oil , and most notably in Perre v Apand Pty Ltd (1999) 198 CLR 180 the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. "Vulnerability", in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, "vulnerability" is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant So, in Perre , the plaintiffs could do nothing to protect themselves from the economic consequences to them of the defendant's negligence in sowing a crop which caused the quarantining of the plaintiffs' land. In Hill v Van Erp , the intended beneficiary depended entirely upon the solicitor performing the client's retainer properly and the beneficiary could do nothing to ensure that this was done. But in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords , the financier could itself have made inquiries about the financial position of the company to which it was to lend money, rather than depend upon the auditor's certification of the accounts of the company.
[24] In other cases of pure economic loss ( Bryan v Maloney is an example) reference has been made to notions of assumption of responsibility and known reliance. The negligent misstatement cases like Mutual Life & Citizens' Assurance Co Ltd v Evatt and Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] can be seen as cases in which a central plank in the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided. And it may be, as Professor Stapleton has suggested, that these cases, too, can be explained by reference to notions of vulnerability. (The reference in Caltex Oil to economic loss being "inherently likely" can also be seen as consistent with the importance of notions of vulnerability.) It is not necessary in this case, however, to attempt to identify or articulate the breadth of any general proposition about the importance of vulnerability. This case can be decided without doing so.”

37 In the circumstances of the case, the majority in the High Court held that there was no relevant vulnerability. Here, there is at least arguable vulnerability in the sense to which the majority in Wilcock Street Investments referred. The Council was bound to accept the Valuer General’s valuation and necessarily relied on the Valuer General to conduct the valuation competently. There is real force in the submission of Mr Beasley that the Council was not vulnerable in the same sense as the plaintiffs in Perre. It could have obtained its own geotechnical information and sought access to the CSR submission from the valuers to which it might have been able to make an answer. It appears that the Council made a tactical decision that it would approach the valuation question in a way which did not involve any focus on the instability issue. Even if the Council had not understood the potential significance of the instability question, so that its decision not to address it was not calculated, it was present and sufficiently obvious, so the argument goes, to have alerted the Council to the need to deal with it. Accordingly, it was not in the hapless situation of the plaintiffs in Perre; it could have inspected the seeds before use and complained about them if it wished. However, to mix metaphors a little, the legislative scheme required it to swallow them if the Valuer general insisted. The difference between Perre and the circumstances here may, in the result, be decisive in favour of CSR. But it is not so certain as to close the gate on para r 5.1(a)

38 It is at least arguable that both the valuers and the Valuer General owed a duty of care to the Council to investigate and resolve (in the sense of taking it properly into account for valuation purposes) the instability issue disclosed in the reports submitted by the Council and (it may well be) CSR and also that, in failing adequately to accommodate the risk, the valuation was grossly excessive. Of course, if as CSR argues, there was no material risk, then the Council has suffered no damage.

39 The Valuer General at first argued that cl 9 of Schedule 1 to the Valuation of Land Act 1916 gives statutory immunity from the action contemplated by the Council. That provision is as follows –

“9 Protection from liability
(1) No matter or thing done by the Valuer-General or by any other person acting under the direction or as delegate of the Valuer-General shall, if the matter or thing was done in good faith for the purposes of executing this Act, subject the Valuer-General or person personally to any action, liability, claim or demand.
(2) A contract valuer who exercises functions under this Act pursuant to a valuation service contract is not to be taken to be doing so as a delegate of, or under the direction of, the Valuer-General unless the valuation service contract expressly so provides.”

40 It is not, as I understand it, proposed to litigate against the Valuer General as an individual. This interpretation of the clause derives from the use of the phrase “subject the Valuer-General… personally to any action…”. It would seem to be unnecessary to use the word “personally” unless in the context of an assumption that there was a distinction between the Valuer General as an individual and the Valuer General as an agent of the State of New South Wales. In oral submissions, Mr Leeming SC said that the Valuer General did not seek to have me decide this question and did not oppose the making of an order for preliminary discovery in respect of the documents not so far produced to the Council. At all events, I am satisfied that the undemanding test of the rule is satisfied.

41 To revert to the language of the Rule, I am satisfied that it appears that the Council may have a claim to relief against the valuers and the Valuer General.

42 The action proposed against CSR is, as I have mentioned, under the Trade Practices Act 1974. Mr Beasley submitted that the representations made by CSR in the course of the valuation process “in trade and commerce” but amounted giving information to a public body for the purpose of permitting a statutory function to be properly exercised. The crucial question is the trading or commercial character of the communication (see Concrete Constructions (NSW) Pty Limited v Nelson (1990) 169 CLR 594 at 604). I think that, in reality, CSR was making representations in the course of bargaining about the price it would obtain for the disposition of a commercial asset. I do not see how the sale by the compulsory statutory process differs in substance from any sale by CSR of any of its assets or products. The only real difference is that there was a mechanism which identified a purchaser and required that purchaser to acquire the land at a price determined by an independent third party. It was, in commercial reality, a put option at a price to be determined by a specific process. This case is markedly different from Village Building Pty Limited v Canberra International Airport Pty Limited 210 ALR 114, where the defendant’s reports of prospective noise and flight paths published under a statutory obligation to inform the public were held not to be communicated “in trade and commerce”.

43 The documents sought to be discovered are not only, of course, the geotechnical reports but also all the communications made to the valuer pertinent to the valuation of the land and, in particular, in connection with the risks of ground instability. Such communications must be realistically considered as attempts by CSR to secure the best price available for its asset, which it was perfectly entitled to do; and the suggestion that it was merely disinterestedly providing information to enable the Valuer General to undertake his statutory obligation is absurd. There are many commercial contracts which provide for the price of one kind or another to be agreed and, in failure of agreement, the appointment of some independent arbitrator to determine the price. I do not think it can be sensibly suggested that communications to such an arbitrator are not in trade and commerce where what is to be determined is the price at which an asset or product is to be sold, rented or otherwise disposed of at a fair valuation. The mere fact that here the process was statutory and the arbitrator was appointed by legislation does not change the essential character of the transaction.

44 Mr Beasley also submitted on CSR’s behalf that an obstacle facing the proposed action is Anshun estoppel, arguing that the potential action could and should have been raised in the earlier proceedings. The availability of such a defence to the envisaged action depends upon a careful analysis of the issues in the earlier proceedings, issues which did not in the end descend into fact since the proceedings were terminated by consent orders. The simple answer, though, as it seems to me, to the contention is that in the earlier proceedings the Council sought to challenge the propriety of the valuation. In the present proceedings against CSR the issues are fundamentally and substantially different. They concern, rather, the extent to which CSR made explicit or implicit representations of the relevant kind in the course of procuring the valuation. It is not contended that the same or substantially the same facts would be relevant to determining the issues in each set of proceedings, that is those settled and those contemplated. Although, it may be that I am not in a position to positively state that an Anshun type estoppel is not available to CSR, I do not need to do so in order to conclude that the first element of the Rule is satisfied.

45 So far as whether the defendants have possession of a relevant document is concerned, in the circumstances here – having passed through the first gateway – I think it must follow that CSR and the valuers have such possession. It is less certain whether the Valuer General still has possession of relevant documents although it seems almost certain that he once did. (As I understand it, the Valuer General has at all events agreed with the plaintiff as to the documents to be discovered if an order is made.)

46 It also follows from satisfaction of the first element that inspection of the relevant documents would assist the plaintiff to determine whether or not to commence the envisaged proceedings. Mr Beasley submits that, since the Council’s instructing solicitors had access to all of the material during the former litigation and could then have made the decision as to whether to bring any claim for misleading and deceptive conduct against CSR, it does not actually need the order sought in the present summons to determine whether or not to commence proceedings now. One merely needs to state the proposition to refute it. It needs the order now precisely because it did not consider at the earlier stage whether or not to bring an action such as presently envisaged. Mr Beasley also points out that there is no evidence from the Council’s instructing solicitors at the time of the earlier proceedings as to what was done with the material. However, I accept the evidence of the Council’s present solicitor, Mr Woodward, that the Council does not know – except in a general, incomplete and indistinct sense – what information was submitted by CSR to the other defendants and that this information is essential to enable a responsible decision to be made about commencing the proposed litigation. There is, as Mr Beasley points out, no evidence that CSR did not send to the valuer all relevant reports concerning the area of land upon which the hypothetical development was to be built. However, what is also sought are notes of all communications made with the valuers and the Valuer General. Lastly, Mr Beasley refers to the delay since the earlier proceedings were settled and the making of the present application. I have already mentioned that I do not think the delay is unreasonable. No actual prejudice is alleged by any of the defendants and, in this circumstance, it is difficult to see why delay is relevant: Optiver Australia Pty Limited v Tibra Trading Pty Limited 169 FCR 435 at [41].

47 In my view it is important to approach the question of preliminary discovery in a practical and realistic way lest such applications, designed to facilitate the efficient conduct of litigation and permit a possibly wronged party to ascertain sufficient facts to decide whether it will undertake the increasingly expensive and inconvenient path of suing, become bedevilled with complicated hypotheses, nice distinctions and technical points. To use the language of Hely J in St George Bank Limited v Rabo Australia [2004] FCA 1360 at 153, “The rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with a proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case”.

48 In the circumstances here, I can see no real unfairness to any of the defendants in requiring them to produce the documents that the applicant seeks nor has any such unfairness been articulated, let alone made the subject of evidence.

49 Accordingly, I make the following orders:

1. The plaintiff has leave to obtain access to the documents produced on subpoena in New South Wales Supreme Court proceedings No 30051/2003 by the second defendant in these proceedings.

2. The first defendant is to give the plaintiff discovery of all documents falling within paragraph 1 in Schedule 1 to the summons that are or have been in his possession, or the possession of his office.

3. The second defendant is to give the plaintiff discovery of all documents falling within Schedule 1 to the summons that are or have been in his possession.

4. The third defendant is to give the plaintiff discovery of all documents falling within Schedule 1 to the summons that are or have been in its possession.

5. The fourth defendant give the plaintiff discovery of all documents falling within Schedule 2 to the summons that are or have been in its possession.

6. Liberty to the parties to apply on 3 days notice.

7. The parties to file written submissions on the question of costs within 14 days.

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