Minerva (Aust) Pty Ltd v Suburban Land Agency
[2018] ACTSC 103
•20 April 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Minerva (Aust) Pty Ltd v Suburban Land Agency |
Citation: | [2018] ACTSC 103 |
Hearing Dates: | 29 August, 19 December 2017 |
Date last submissions received: | 2 March 2018 |
DecisionDate: | 20 April 2018 |
Before: | McWilliam AsJ |
Decision: | See [60] |
Catchwords: | PRACTICE AND PROCEDURE – DISCOVERY AND INTERROGATORIES – application for discovery to identify right to claim relief |
Legislation Cited: | Financial Management Act 1996 (ACT) s 115 Court Procedures Rules 2006 (ACT) rr 651, 653 Financial Management (Land Development Agency transfer to Suburban Land Agency) Declaration 2017 (ACT) |
Cases Cited: | ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; 224 FCR 1 Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209 Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515 |
Parties: | Minerva (Aust) Pty Ltd ACN 147 791 462 (Plaintiff) Suburban Land Agency (First Defendant) B.M.D. Constructions Pty Limited ACN 010 126 100 (Second Defendant) Australian Capital Territory (Third Defendant) |
Representation: | Counsel P Walker SC and K Katavic (Plaintiff) R Clynes (First and Third Defendant) G Blank (Second Defendant) |
| Solicitors Trinity Law (Plaintiff) ACT Government Solicitor (First and Third Defendant) Mills Oakley (Second Defendant) | |
File Number: | SC 161 of 2017 |
By Originating Application filed 16 May 2017, the plaintiff in these proceedings seeks orders pursuant to r 651 of the Court Procedures Rules 2006 (ACT) (Rules) requiring the defendants to give preliminary discovery of certain documents.
The matter has been hotly contested until recently, and protracted for a number of reasons, being that the matter was adjourned part-heard in August 2017, in order for the parties to carry out an interim regime for very limited discovery, by which it was hoped the entire preliminary issue between the parties would be resolved. It did not resolve however, and the conclusion of the hearing was required, although unanticipated counsel unavailability meant that this did not occur until after the close of the Court term in 2017. Following the plaintiff’s refinement at that hearing of both the argument and the documents now sought to be discovered, leave was then granted for the parties to each file further submissions, with the final communications being received on 2 March 2018.
Ultimately, through that process, the issue has resolved as between the plaintiff and the first and third defendants, with an agreement that certain categories of documents be produced subject to protections of confidentiality being resolved either as between the parties or with liberty to apply to the Court to resolve that question, and with each party paying its own costs. It remains for the Court to give effect to the orders they have proposed by consent, which have been incorporated into the orders set out at the conclusion of these reasons.
The only outstanding issue for resolution on the present application is whether any order for discovery by the second defendant ought be made, and if so, what documents should be produced.
However, as the documents sought from the second defendant refer to those now being provided by the first and third defendants, it is necessary to have some understanding of the broader factual matrix, before assessing the merit of why the plaintiff says it needs the further documents from the second defendant.
The parties
The plaintiff is the Crown lessee of Block 2 Section 22 Lawson in the Australian Capital Territory (affected block), which it purchased on 3 June 2014 at auction.
The government authority that sold the affected block was the Land Development Agency. It was extinguished on 11 October 2017. The first defendant, the Suburban Land Authority, is the successor in law to the seller of the affected block, as the agent for the Australian Capital Territory, pursuant to s 115 of the Financial Management Act 1996 (ACT) (FM Act), and the subsequent Financial Management (Land Development Agency transfer to Suburban Land Agency) Declaration 2017 (ACT).
The second defendant carried out the subdivision and civil site works for an area of land described as the Lawson Estate, which included the affected block.
The third defendant, joined by consent on 19 December 2017, is in the same interest as the first defendant. It was joined because there is some uncertainty, arising from the extinction of the Land Development Agency, and the wording of the FM Act, as to whether the cause of action rests in part against the Suburban Land Authority or against the Australian Capital Territory as principal.
The facts
Part of the contract for sale executed by the plaintiff and the first defendant on 3 June 2014 (Contract) included ‘Lawson – Stage 1 Housing Development Guidelines, November 2013’ (Guidelines), published by the first defendant.
The Guidelines stated that the soil classification for the affected block was Class H. The Guidelines also stated that the price of the affected block was based on a valuation assuming Class H soil classification.
Under the Guidelines, the first defendant was required to carry out a subdivision and civil site works over the Lawson Estate, including the affected block. This involved the removal of contaminated material and replacement with controlled fill to raise the surface of the affected block to a certain level, which the plaintiff says was specified in drawing number 11003-HDG 203 (the Works).
The first defendant engaged the second defendant to carry out the civil site works for the subdivision of the Lawson Estate, including the Works.
As at 3 June 2014 when the Contract was exchanged, the Works were not complete. Between 3 June 2014 and some time before 19 February 2016, the second defendant continued to carry out the Works on the affected block.
On or about 26 May 2016, upon receipt of a report from ACT Geotechnical Engineers Pty Ltd, the plaintiff learned that the soil classification for the affected block was Class P. This was a lower quality classification than Class H and is considered a problem site.
As a consequence of the Class P soil classification for the affected block, the plaintiff was required to make design and construction modifications regarding the structural components of the building and remove unsuitable fill from the affected block, all of which caused the plaintiff to incur significant additional costs beyond those anticipated had the soil classification been Class H.
The present application
The plaintiff is considering bringing proceedings against the second defendant in tort, both in negligence (that is, negligent infliction of economic loss) and in trespass. The plaintiff has reason to believe that the second defendant dumped wholly unsuitable fill on the affected block after the plaintiff had exchanged the Contract for sale, or alternatively, after the sale had been completed, without the plaintiff’s permission.
However, the activities of the second defendant in relation to the Works, and their timing, are matters that the plaintiff contends are known only to the second defendant.
The plaintiff thus seeks documents from the second defendant to enable the plaintiff to work out what was done by the second defendant and to determine the strength of any defences that may be available to the second defendant, including the extent of the second defendant’s possible contravening conduct.
The limited documents that the first and third defendants have agreed to produce are as follows:
(a)Documents relating to the affected block from the date the second defendant commenced on site, being:
(i)all or any payment caims as referred to at sub-cl 42.1(2)(a) to (d) of the General Conditions of Contract contained within the contract between the Land Development Agency and the second defendant (BMD contract); and
(ii)all documentation accompanying the said payment claims, as referred to above or otherwise in the BMD contract, as each payment claim was submitted (progressively) by the second defendant.
In relation to the second defendant, the plaintiff seeks the ‘working documents associated’ with the documents produced by the first and third defendants. It is this category of documents that remains in dispute.
The Court’s power
Rule 651 of the Rules is in the following terms:
R 651 Discovery to identify right to claim relief
(1)This rule applies if –
(a) a person (the applicant) has, or may have, a cause of action against someone (the potential defendant); and
(b) either –
(i) the applicant, after making reasonable inquiries, cannot obtain sufficient to decide whether to start a proceeding in the court against the potential defendant for the cause of action; or
(ii) the following provisions apply:
(A)the applicant is a party to a proceeding in the court;
(B)the potential defendant is not a party to the proceeding;
(C)the applicant, after making reasonable inquiries, cannot obtain sufficient information to decide whether to make a claim for relief in the proceeding against the potential defendant for the cause of action;
(D)the claim for relief could properly have been made in the proceeding against the potential defendant if the potential defendant were a party; and
(E)the applicant has reasonable grounds for believing that the potential defendant has or has had possession of a document or thing that can assist in deciding whether to start the proceeding, or make the claim for relief, against the potential defendant; and
(F)inspection of the document or thing by the applicant would help in making the decision.
(2)If subrule (1) (b) (i) applies, the applicant may apply to the court by originating application for an order under this rule (and, if relevant, an order under rule 715 (Inspection, detention, custody and preservation of property – orders etc.)) against the potential defendant.
(3)If subrule (1) (b) (ii) applies, the applicant may apply to the court for an order under this rule (and, if relevant, an order under rule 715) against the potential defendant.
…
(4)The application must be supported by an affidavit stating the facts on which the applicant relies, and stating the kinds of documents or things in relation to which the application is made.
…
(5)The court may order the potential defendant to produce the document or thing to the applicant.
(6)An order under this rule in relation to any document or thing held by a corporation may be addressed to any appropriate officer or former officer of the corporation.
As to the exercise of the Court’s discretion under r 651(5) of the Rules in the present case, the parties were generally agreed that the plaintiff must show:
(a)It may have a cause of action;
(b)It has made reasonable inquiries and has been unable to obtain sufficient information to decide whether to start a proceeding against the second defendant;
(c)It has reasonable grounds for believing the potential defendant has or had possession of a document or thing that can assist in deciding whether to start the proceedings; and
(d)Inspection of the document or thing would help in making the decision.
Consideration
Identification of a prospective cause of action
In the recent decision of Hall v The Commonwealth of Australia [2018] ACTSC 79 (Hall) Elkaim J stated at [10]:
Rule 651 refers to “a cause of action” (emphasis added), not an open inquiry as to whether any cause of action might exist. The purpose of preliminary discovery is to discover material to support a possible cause of action, not to hopefully discover if any, as yet unidentified, cause of action might exist. It is true that the plaintiff does not have to show a prima facie case on a cause of action but, in my view, it must identify what that cause of action might be.
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: Waller v Waller [2009] WASCA 61 at [75]; cited in Hall at [18].
The plaintiff relied on the affidavits of its instructing solicitor, Mr Maurice Falcetta, sworn 16 May 2017 and 14 December 2017, who deposes to the specific causes of action identified above.
The second defendant submitted that trespass is an injury to possession, which is constituted by an unjustified entry directly by a person on land in the possession of another: Halliday v Nevill (1984) 155 CLR 1 (Halliday v Nevill) at 10, adopting Entick v Carrington (1765) 19 St. Tr 1029 at 1066.
The second defendant contends that either the plaintiff did not have a right to possession when the second defendant was on the land (presumably because it had not yet completed the purchase) or, if the plaintiff did have a right to possession, the Contract impliedly granted a licence to the first defendant and its servants or agents, which included the second defendant, to enter onto the affected block to complete the Works.
While that may be a legal argument for the context of a substantive trial, it does not defeat at this preliminary stage the possible existence of a claim in trespass. There may well be a live issue, for example, that the second defendant entered the affected land for a purpose that was outside the scope of any implied licence, as can be seen from cases such as Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd (1968) 121 CLR 584; Plenty v Dillon (1991) 171 CLR 635; Halliday v Nevill; and Barker v The Queen (1983) 153 CLR 338, especially at 364-365.
As to the claim in negligence for pure economic loss (although it is by no means clear to me that the action is a case for purely economic loss, given that arguably the land itself has been damaged), the second defendant submitted that ‘the requisite elements for a claim in negligence for pure economic loss are not established at all and certainly not to the extent to warrant the invasive process of preliminary discovery’, relying on the principle in Perre v Apand [1999] HCA 36; 198 CLR 180 (Perre) at [10], [11], [118] and [216], and Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515 (Woolcock) at [23], to the effect that vulnerability was an ‘important requirement’ of such a claim.
The second defendant submitted that there was no evidence to suggest any vulnerability of the plaintiff, nor any assumption of responsibility by the second defendant or known reliance.
I have taken that submission to be based on the principle that if there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action: John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679at [13], [14], [17] and [73].
However, subsequent intermediate appellate Courts have not interpreted the statements in Perre and in Woolcock in terms of vulnerability being a separate requisite element: see, for example, Fugro Spatial Solutions Pty Ltd v Cifuentes [2011] WASCA 102 at [102] and [106], the effect of which was that there is no single or fixed control mechanism for narrowing the liability for negligently caused pure economic loss, nor are there different or additional rules that must be satisfied in order for liability for pure economic loss to attach, as was succinctly put (if I may respectfully say so) by Le Miere J In Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209 at [46].
In Western Districts Developments Pty Ltd and Turnpike Land Pty Ltd v Baulkham Hills Shire Council [2009] NSWCA 283; 75 NSWLR 706 Giles JA stated at [10]:
…while vulnerabilityis an important factor in whether or not a duty of care to guard against economic loss is owed, it is not the sole consideration. On current jurisprudence, the decision that a duty of care is owed or is not owed is arrived at in novel circumstances upon a 'multifactorial' approach, with a close analysis of the facts bearing on the relationship between the plaintiff and the defendant and regard to 'salient features': see most recently Caltex Refineries (Qld) Pty Ltd v Stavar[2009] NSWCA 258; (2009) 75 NSWLR 649 at 675 [101] [108], per Allsop P.
The suggestion that vulnerability was a separate requisite element was also expressly rejected by the Full Court of the Federal Court of Australia in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; 224 FCR 1 at [598], a case admittedly concerning negligent misstatement, but highlighting, to my mind at least, that the factor of vulnerability and what is required to establish a duty of care in cases involving purely economic loss is very much fact specific.
What these authorities serve to demonstrate is that ‘vulnerability’ or known reliance cannot be considered in isolation. How that matter may feed into the broader consideration of whether or not a duty of care was owed in a particular case is to be assessed as part of the complete factual matrix. The lack of evidence as to that matter alone, on an application for preliminary discovery, does not mean that there is no reasonable cause to believe that a duty of care exists, such as to defeat any threshold test.
In any event (and contrary to the second defendant’s submission), the very fact that the plaintiff did not have a contract with the second defendant, and alleges that it did not have sufficient access to the affected block prior to settlement, and therefore lacked the ability to control and even observe what the second defendant was doing on land it had contracted to purchase, suggests a degree of vulnerability or known reliance.
I am satisfied that on the facts of this case, the two causes of action being considered against the second defendant have an objective foundation. They are not purely hypothetical, because there is the known existence of the Class P fill on the affected block, which I accept (for the purposes of this application only) has the potential to cause or has already caused at least economic loss for the plaintiff, who purchased the affected block on the basis of a different state of affairs.
However, there is the uncertainty about who placed such fill there and when, and there is a further issue of what the second defendant told the first defendant it had done in terms of completion of the Works (intention being relevant to an action in trespass). Due to this uncertainty, I accept that this is not a case of the plaintiff having already decided to sue the second defendant.
Reasonable inquiries
The plaintiff bears the onus to satisfy the Court that, having made reasonable inquiries, it has unable to obtain sufficient information to decide whether or not to commence proceedings against any or all of the defendants: Morton & Ors v Nylex & Anor [2007] NSWSC 562 at [33]; cited in Hall at [22].
Whether reasonable inquiries have been made is a question of fact, to be considered in all the circumstances of the case, including the relationship between the plaintiff and the potential defendant/s: Steffen v ANZ Banking Group Ltd [2009] NSWSC 666 at [15].
The affidavits of Mr Falcetta disclose the significant inquiries that have been undertaken to date, including correspondence with the second defendant directly and other parties. Many responses relied on commercial in confidence provisions in contractual documents or on receiving permission from the second defendant as a basis for refusing to provide documents.
On 6 October 2016, the second defendant indicated that it would not provide the requested documents on the basis of oppression, given the large number of documents sought. The second defendant further indicated that it would comply with any legal obligation to disclose documentation, but sought that it be tailored to specific documents required, rather than a broad list.
The plaintiff has subsequently limited the documents it seeks to one category, and yet the second defendant still opposes the order sought. Accordingly, I am satisfied on the history of correspondence in evidence that reasonable inquiries have been made to obtain the necessary information from both the second defendant and other sources.
Possession of the documents sought
It cannot be disputed that the second defendant is the relevant entity who has in its possession, or had in its possession, the working documents associated with payment claims made by it to the predecessor of the first defendant.
The relevance of the documents to the decision to commence proceedings
The plaintiff submitted that it seeks the working documents of the second defendant because the payment claim documents held by either the first or third defendant (and being produced by them) may be in a final or summarised form, whereas the working documents leading to the payment claims submitted might shed light on what things were done by the second defendant, and which might then inform the parties as to when the earthworks work was being carried out.
The plaintiff further submits that production of the working documents would enable consideration of the possible strength of any defence by the second defendant, a matter which is relevant to any decision whether to commence proceedings: St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; 211 ALR 147 at [26].
The second defendant argues that the plaintiff’s reasons are speculative and travel beyond what should be provided on a preliminary discovery basis. Further, the category of documents sought is too wide. It effectively encapsulates any document prepared by the second defendant which had an association with the payment claims. The preliminary discovery procedure is not designed to secure for a prospective plaintiff all the documents and other information that would be discoverable if a proceeding were commenced against the defendant: SmithKline Beecham v Alphapharm [2001] FCA 271 at [19].
I generally accept the force of that submission, having regard to the extraordinary nature of the relief being sought and the cautious approach that a court takes when considering making an order against a party not yet involved in litigation: Elmaraazey v The Law Society of the Australian Capital Territory [2006] ACTSC 124; 205 FLR 445 at [18], cited in Hall at [7].
However, knowing what the second defendant actually did, as opposed to what the second defendant told the first defendant it did when it submitted a payment claim, will be relevant to the causes of action currently in contemplation. On one view, it may be critical to which of the causes of action will be pleaded – negligence or trespass.
If the documents discovered were limited to the documents that record the nature and/or quantity of any fill placed on the affected block, for which a payment claim was then submitted by the second defendant pursuant to the BMD Contract over the period 3 June 2014 to 19 February 2016, that would reduce the speculative nature of the relevance of the documents sought, as well as somewhat reducing the burden of production that would have resulted by discovery of any document ‘associated’ with the payment claims made.
Exercise of discretion
As the plaintiff has established that it may have a cause of action against the second defendant, that it has made reasonable inquiries but has been unable to obtain sufficient information so as to make a decision whether to commence proceedings, that there are reasonable grounds for believing that the second defendant has certain documents that will assist with that decision and that inspecting those documents would in fact assist with the decision, I am satisfied that an order for the limited discovery referred to against the second defendant is reasonably necessary to achieve the proper administration of justice.
Costs
The second defendant seeks the costs of production pursuant to r 653 of the Rules. Among other things, that rule permits the Court to make an order for the costs of producing any documents for inspection. The second defendant estimated such costs at $6,000, however that was in the context of submissions addressing a larger scope of material than that which I have found ought be produced.
As these proceedings are properly seen as an indulgence to the plaintiff, I will order that the plaintiff pay the second defendant’s reasonable costs of production. However, because the documents produced in pre-trial discovery may well have been produced in the course of any future legal proceedings against the second defendant, if the plaintiff does in fact commence proceedings against the second defendant and is ultimately successful, any costs order in the plaintiff’s favour will enable it to also recoup the costs of the pre-trial discovery.
As to the costs of the application itself, the second defendant submitted that if an order for discovery was made against it, the parties ought bear their own costs, as the scope of the original request made by the plaintiff has dramatically changed and now reduced.
The plaintiff submitted that the issue of costs ought be reserved until the plaintiff’s overall success or failure against the second defendant was ascertained, as there may be further submissions as to the reasonableness of the parties’ conduct.
Given the lengthy history of this preliminary application, it is now in no party’s interests to leave the question of costs unresolved. I accept that the application as it finally landed as against the second defendant was significantly different to the application that was commenced against it. The final form of the order is limited further from what was sought by the plaintiff even as late as March 2018.
Costs being in the discretion of the Court, although the plaintiff has been successful in obtaining discovery of a category of documents against the second defendant, in light of the history of the proceedings, I consider the just outcome is to order that each party pay its own costs, as was submitted by the second defendant.
I indicated at the final hearing of the application that I would stay the operation of any costs order for seven days, to enable any party to make an application to vary the order, once the reasons for decision were known.
Orders
The Court orders that:
1. Within 28 days the first and third defendants are to produce to the plaintiff such documents in their possession or power enumerated below, relating to Block 2 Section 22 Lawson in the Australian Capital Territory, from the date BMD Constructions Pty Ltd (BMD) commenced on site, being:
(a) all or any payment claims as referred to in sub-clause 42.1(2)(a) to (d) of the General Conditions of Contract contained within the contract between the Land Development Agency and BMD (BMD Contract), a true copy of which is exhibit MSF-1 to the affidavit of Maurice Falcetta of 14 December 2017; and
(b) all documentation accompanying the payment claims as is referred to in subclause 42.1.(2)(a) to (d) above or otherwise in the contract, as each payment claim was progressively submitted by BMD under the BMD Contract.
2. Within 28 days the second defendant is to produce to the plaintiff such documents in their possession that record the nature and/or quantity of any fill placed on the affected block for which a payment claim, as referred to in order 1 above, was then submitted by the second defendant, pursuant to the BMD Contract over the period 3 June 2014 to 19 February 2016.
3. In complying with orders 1 and 2 above, the defendants may take such steps as may be necessary to protect the confidential terms of any of the materials so produced.
4. The plaintiff is to pay the second defendant’s reasonable costs of production.
5. The plaintiff is at liberty to relist the matter on three days’ notice to have the Court resolve any issue or claim arising out of orders 3 and 4.
6. The parties are to bear their own costs of the application.
7. Order 6 is stayed for 7 days from the date of these orders.
| I certify that the preceding sixty [60] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam Associate: Date: |
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