The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2]
[2008] WASC 147
•25 JULY 2008
THE HANCOCK FAMILY MEMORIAL FOUNDATION LTD -v- FIELDHOUSE [No 2] [2008] WASC 147
| Link to Appeal : | [2008] WASCA 197 [2009] WASCA 146 |
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASC 147 | |
| Case No: | CIV:1802/1995 | 9 JUNE 2008 | |
| Coram: | LE MIERE J | 25/07/08 | |
| 18 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed | ||
| B | |||
| PDF Version |
| Parties: | THE HANCOCK FAMILY MEMORIAL FOUNDATION LTD CARNEGIE RICHMOND HALLETT FIELDHOUSE Potential Parties |
Catchwords: | Civil procedure Discovery Application for preliminary discovery to identify a potential party Whether the plaintiff, after reasonable enquiries, has not been able to ascertain a description of the potential party sufficient for the purposes of taking proceedings against that potential party Turns on own facts Rules of the Supreme Court 1971 (WA) O 26A r 3 Civil procedure Discovery Application for preliminary discovery from a potential party Whether the plaintiff, after reasonable enquiries, ahs not been able to obtain sufficient information to enable the decision to be made as to whether to commence or take proceedings against the potential party Turns on own facts Rules of the Supreme Court 1971 (WA) O 26A r 4 |
Legislation: | Federal Court Rules 1979 (Cth), O 15A r 6 Insurance Contracts Act 1984 (Cth), s 51 Rules of the Supreme Court 1971 (WA), O 26A r 3, O 26A r 4 |
Case References: | Glencore International AG v Selwyn Mines Ltd [2005] FCA 801; (2006) 223 ALR 238 Hooper v Kirella (1999) 96 FCR 1 John Fairfax & Sons Ltd v Cojuangco (1988) 165 CLR 346 Lee v Phair (Unreported, NSWSC, 31 October 1996) Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 2065 Stewart v Miller [1979] 2 NSWLR 128 Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy [2008] FCAFC 7; (2008) 166 FCR 64 The Hancock Family Memorial Foundation Ltd v Fieldhouse [2005] WASCA 93; (2005) 30 WAR 398 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
CARNEGIE RICHMOND HALLETT FIELDHOUSE
Defendant
Catchwords:
Civil procedure - Discovery - Application for preliminary discovery to identify a potential party - Whether the plaintiff, after reasonable enquiries, has not been able to ascertain a description of the potential party sufficient for the purposes of taking proceedings against that potential party - Turns on own facts - Rules of the Supreme Court 1971 (WA) O 26A r 3
Civil procedure - Discovery - Application for preliminary discovery from a potential party - Whether the plaintiff, after reasonable enquiries, ahs not been able to obtain sufficient information to enable the decision to be made as to whether to commence or take proceedings against the potential party - Turns on own facts - Rules of the Supreme Court 1971 (WA) O 26A r 4
(Page 2)
Legislation:
Federal Court Rules 1979 (Cth), O 15A r 6
Insurance Contracts Act 1984 (Cth), s 51
Rules of the Supreme Court 1971 (WA), O 26A r 3, O 26A r 4
Result:
Application allowed
Category: B
Representation:
Counsel:
Plaintiff : Mr C G Colvin SC & Mr A P Hershowitz
Defendant : Mr G R Donaldson SC & Ms F C E Davis
Potential Parties : Mr G R Donaldson SC & Ms F C E Davis
Solicitors:
Plaintiff : Salter Power Pty Ltd
Defendant : DLA Phillips Fox
Potential Parties : DLA Phillips Fox
Case(s) referred to in judgment(s):
Glencore International AG v Selwyn Mines Ltd [2005] FCA 801; (2006) 223 ALR 238
Hooper v Kirella (1999) 96 FCR 1
John Fairfax & Sons Ltd v Cojuangco (1988) 165 CLR 346
Lee v Phair (Unreported, NSWSC, 31 October 1996)
Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 2065
Stewart v Miller [1979] 2 NSWLR 128
Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy [2008] FCAFC 7; (2008) 166 FCR 64
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The Hancock Family Memorial Foundation Ltd v Fieldhouse [2005] WASCA 93; (2005) 30 WAR 398
(Page 4)
- LE MIERE J:
Background
1 In March 1992 Mr Lang Hancock died. Prior to his death Mr Hancock effectively controlled a group of companies including The Hancock Family Memorial Foundation Ltd (HFMF) (the present plaintiff) and Hancock Prospecting Pty Ltd (HPPL).
2 HPPL was incorporated in 1955 by Mr Hancock. Its principal revenue producing asset was the right to receive royalties from the iron ore miner, Hamersley Iron Pty Ltd. At all material times HPPL was highly profitable and had substantial reserves, out of which it could properly pay dividends. From the inception of the company, and until not long before his death, Mr Hancock held a share called the Life Governor's share no 1. This share gave him extraordinary powers and entitlements, which effectively meant that Mr Hancock had total control of the company and its Board, and the power to distribute dividends to himself, as long as the power was exercised bona fide for the purpose of obtaining a dividend and not for some ulterior purpose: The Hancock Family Memorial Foundation Ltd v Fieldhouse [2005] WASCA 93; (2005) 30 WAR 398.
3 As at August 1991, and since 15 March 1989 (following the sale of Mr Hancock's one third shareholding in HPPL to HFMF) HFMF held a combination of 'A' Class and ordinary shares amounting to one third of the shareholding in HPPL. Also by August 1991 Mr Hancock owed substantial amounts to HFMF.
4 In order to repay this debt, Mr Hancock sold to HFMF his Life Governor's share in HPPL for $20 million. HFMF alleges that the price paid by it for the share was far in excess of its actual worth.
5 The defendant, Mr Fieldhouse, was a solicitor who had been employed by and worked for the late Mr Hancock and his group of companies from around 1972. On 21 August 1995 the plaintiff commenced this action. HFMF alleges that Mr Fieldhouse stood in a position of conflict whilst acting as solicitor for both Mr Hancock and HFMF when negotiating and procuring the sale of the Life Governor's share to HFMF. Accordingly, HFMF asserts that Mr Fieldhouse breached his fiduciary and common law duties owed to it, acted negligently in advising it, and consequently claims damages for the loss suffered.
(Page 5)
6 On 22 September 1998 HPPL, HFMF and Mr Fieldhouse entered into a Deed of Release and Indemnity (the Deed of Release). The document covers a number of matters. Clause 2.1 provides that Mr Fieldhouse will make himself available to HPPL, HFMF and other companies in the Hancock group, at such times as they may reasonably require, to provide evidence on matters relating to the affairs of Mr Hancock and other things. Clause 2.5 expressly preserves the plaintiff's rights in the present action. In cl 2.6 the plaintiff says that it will not make any claim of fraud against Mr Fieldhouse. Clause 2.7 limits the recovery the plaintiff might make under any judgment it obtains. HFMF agreed that in the event of obtaining judgment it shall not seek to enforce any judgment and any costs order that may be made against Mr Fieldhouse to recover moneys beyond that paid or payable by Mr Fieldhouse's professional indemnity insurers (including LawCover) in respect of that judgment.
7 The action has proceeded slowly. In May 2002 Mr Fieldhouse gave notice of intention to apply to strike out the action for want of prosecution. On 6 April 2004 a Master of this court ordered that the action be dismissed for want of prosecution. On 26 May 2005 the Court of Appeal allowed an appeal from that order and ordered that the defendant's application to strike out the action for want of prosecution be dismissed. Since then the action has again proceeded slowly.
8 Mr Fieldhouse passed away on or about 16 November 2007.
Plaintiff makes enquiries
9 On 18 March 2008 the plaintiff's solicitor wrote to the defendant's solicitor and stated, amongst other things:
As we understand it, these proceedings are being defended by Mr Fieldhouse's insurers, and that your firm obtains instructions from Yeldham Price O'Brien Lusk, a Sydney firm of solicitors, who act on behalf of those insurers.
The identity of those insurers, and the extent of the cover provided by the policy (or policies) of insurances from those insurers, has never been disclosed to our client. Our predecessors, Cocks MacNish, sought on a number of occasions to obtain the identity of Mr Fieldhouse's professional indemnity insurers and the scope of the cover afforded by the policy or policies of insurance by which that indemnity is given. All such attempts were objected to and resisted by your client.
The basis behind those objections was revealed in a letter to Cocks MacNish dated 8 December 2005, in which it was claimed that
(Page 6)
- Mr Fieldhouse had no obligation to discover his insurance details to a stranger to his insurance contract, particularly where there was no issue between Mr Fieldhouse and his insurers, and where there was no direct claim against those insurers and no direct claim to be paid such insurance moneys as might be payable under the policy (or policies). The letter also claimed that the identity of Mr Fieldhouse's insurers and the scope of cover afforded by the policy (or policies) could have no effect on the resolution of the issues likely to arise upon the presentation of our client's case or the consideration of any defence to be advanced by Mr Fieldhouse.
Irrespective of whether those previous assertions were correct, now that Mr Fieldhouse is deceased the extent of cover under his insurance policy (or policies) is directly relevant to our client's position.
As you aware, s 51 of the Insurance Contracts Act 1984 (the Act) provides third parties, such as our client, with a statutory right to recover directly from an insurer in circumstances where the insured has died and that the insurer is liable under the contract of insurance to cover the insured's liability in damages to the third party …
In particular, subsection 51(1) of the Act provides:
'Where:
(a) the insured under a contract of liability insurance is liable in damages to a person (in this section called the third party);
(b) the insured has died or cannot, after reasonable enquiry, be found; and
(c) the contract provides insurance cover in respect of the liability;
the third party may recover from the insurer an amount equal to the insurer's liability under the contract in respect of the insured's liability in damages.'
…
Prior to electing whether to join the insurers to these proceedings our client wishes to seek discovery of the contract (or contracts) of insurance between Mr Fieldhouse and his insurers so that it can be satisfied that cover is provided in respect of the liability that is owed to our client (s 51(1)(c) of the Act). As you would appreciate, without having reviewed the policy (or policies), our client is effectively in the dark on this issue. Given that the amount of damages claimed against Mr Fieldhouse is well in excess of $20 million, it is appropriate that this issue be addressed at this interval.
(Page 7)
- The plaintiff's solicitor went on to request details concerning the identity of Mr Fieldhouse's insurers.
10 At a directions hearing before me on 1 April 2008, Mr Edwards, on behalf of the late Mr Fieldhouse, informed the court that the defendant's solicitors were instructed by LawCover 'but LawCover itself is not an insurer and is unlikely to be swept up in any joinder application'. Mr Edwards said that as he understood it there was 'an HIH - FAI component which sits at the primary layer of insurance'. Mr Edwards said that there were excess layers of insurance held by a number of Lloyds' syndicates and there were five names associated with those syndicates (ts 246).
11 On the hearing of the present application senior counsel for the defendant informed the court that the statement by Mr Edwards concerning HIH - FAI was a mistake and Mr Fieldhouse did not have any insurance or relevant relationship with HIH - FAI in the relevant period (ts 300). It is not necessary to make any further reference to HIH - FAI.
12 By letter dated 30 April 2008 to the plaintiff's solicitors, Mr Edwards provided further details about the identity of the defendant's insurers. Mr Edwards stated:
1. At all material times Mr Fieldhouse held a Certificate of Insurance issued by the Solicitors Mutual Indemnity Fund pursuant to the compulsory requirements of the Legal Profession Act 1987 (NSW).
2. Mr Fieldhouse held excess insurance policies through Underwriters at Lloyds. We're instructed that the full market participation in the relevant policies was as follows:
2.1 Syndicate 657 D R Lowe 47.618%;
2.2 Syndicate 683 R J Wallace 23.810%;
2.3 Syndicate 839 A M Sharpe 19.048%;
2.4 Syndicate 376 J H Benton 4.762%;
2.5 Syndicate 510 R J Kiln 4.762%.
3. Service of any process on the Solicitors Mutual Indemnity Fund in the context of these proceedings may be effected by service on Mr Simon Lusk, [of] Yeldham Price O'Brien Lusk …
4. Process on all excess insurers in the context of these proceedings may be addressed to their nominee: D R Lowe, Canopius Syndicate 839/Trenwick Underwriting Ltd … However, Mr Lusk is
- authorised to accept service on behalf of the D R Lowe and accordingly excess insurers.
13 On 1 May 2008 Mr Nicholas Brown, a solicitor with the firm of solicitors representing the plaintiff, spoke with Mr Simon Lusk. Mr Lusk told Mr Brown that his clients would not be prepared to disclose to HFMF details of the contracts of insurance between the late Mr Fieldhouse and those insurers.
14 Following further telephone conversations, Mr Edwards wrote to Mr Brown on 6 June 2008. Mr Edwards stated:
I understand you seek to:
1. Clarify the status of the Solicitor's Mutual Indemnity Fund (SMIF) and LawCover in relation to the insurance held by Mr Fieldhouse that is relevant to this proceeding.
2. Confirm that SMIF is the correct potential party for the purposes of your client's pre-action discovery application.
We respond as follows (adopting your numbering for reference purposes):
1. As you may know, in relation to professional indemnity insurance, Mr Fieldhouse was required to comply with the requirements of the Legal Profession Act 1987 (NSW). In relation to the role of SMIF and LawCover in Mr Fieldhouse's professional indemnity insurance we refer you to pt IXA of the Legal Profession Act.
2. It is for your client to decide from which potential parties it wishes to seek pre-action discovery. We have already identified the parties relevant to the insurance held by Mr Fieldhouse in our letter of 30 April 2008.
15 On the same day the plaintiff's solicitors replied to the defendant's solicitors stating that Mr Edwards' letter of 6 June had failed to identify the legal entities who are the parties relevant to the insurance held by Mr Fieldhouse, that the LawCover website identifies three corporate entities which are all wholly-owned subsidiaries of the Law Society of New South Wales and that s 40 of the Legal Profession Act 1987 (NSW) simply refers to a 'company' managing the New South Wales Solicitors Mutual Indemnity Fund (SMIF) without identifying that legal entity.
The present application for discovery
16 The plaintiff now applies for discovery to identify a potential party and discovery from a potential party pursuant to O 26A r 3 and r 4. The plaintiff's application is contained in a minute of proposed amended
(Page 9)
- application for pre-action discovery pursuant to O 26A r 3 and r 4 of the Rules of the Supreme Court 1971 (WA)dated 9 June 2008. The application refers to the SMIF as the first potential party and the following as the second potential parties: Syndicate 657 D R Lowe, Syndicate 683 R J Wallace, Syndicate 839 A M Sharpe, Syndicate 376 J H Benton and Syndicate 510 R J Kiln.
17 The plaintiff seeks orders to the following effect.
1. The first potential party and the second potential parties give discovery of the following documents:
(a) the documents that constitute the contract of insurance between Mr Fieldhouse and the first potential party and between Mr Fieldhouse and the second potential parties in respect of the liability of Mr Fieldhouse;
(b) any documents relating to whether the said contract of insurance between Mr Fieldhouse and the first potential party and between Mr Fieldhouse and the second potential parties provides cover in respect of the liability of Mr Fieldhouse including any document containing any admission or denial of cover either in full or part;
(c) any schedules or annexure forming part of the contract of insurance referred to in subparagraphs (a) and (b);
(d) the Certificate of Insurance in relation to the said contract of insurance between Mr Fieldhouse and the first potential party and between Mr Fieldhouse and the second potential party;
(e) documents that identify the full name of the legal entity that is the party to any contract of insurance in respect of the liability of Mr Fieldhouse.
Discovery to identify a potential party - the legal principles
19 Order 26A r 3 empowers the Court to order a non-party to give discovery to identify a potential party to an existing action where the following conditions are satisfied:
(Page 10)
- 1. The applicant wants to take proceedings against the potential party in the course of the action to which the applicant is a party;
2. The applicant has made reasonable enquiries;
3. The applicant has not been able to ascertain a description of the potential party sufficient for the purposes of taking proceedings against that potential party;
4. There are reasonable grounds for believing that the non-party had, has or is likely to have had or to have, possession of information, documents or any object that may assist in ascertaining the description of the potential party.
I am satisfied that conditions 1 and 2 have been met.
20 An order for discovery to identify a potential party is not made unless it would be reasonable for the applicant to bring a proceeding against the prospective defendant. A prima facie case need not be shown, but there must be some indication that the applicant has a cause of action. An order for discovery will not be made if the prospective action is merely speculative: Stewart v Miller [1979] 2 NSWLR 128.
21 I am satisfied that condition 4 is met. The evidence establishes reasonable grounds for believing that LawCover Pty Ltd and SMIF is each likely to have possession of information and documents that may assist in ascertaining the description of insurers against whom the plaintiff wants to take proceedings.
22 The plaintiff's claims against the insurers arise, if at all, under s 51 of the Insurance Contracts Act 1984 (Cth). The solicitors for the defendant, the first potential party and the second potential parties have informed the plaintiff's solicitors that at all material times Mr Fieldhouse held a certificate of insurance issued by SMIF and held excess insurance policies with the second potential parties and that LawCover has granted indemnity in relation to the plaintiff's claim subject to an express reservation in respect of any liability brought about by a fraudulent act or omission of Mr Fieldhouse.
23 There is, or may be, an issue as to the nature of the relationship between Mr Fieldhouse and LawCover and SMIF. In Lee v Phair (Unreported, NSWSC, 31 October 1996) Cohen J held that LawCover, SMIF and the New South Wales Law Society were not insurers under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) because there was no contract of insurance between the relevant solicitor and the Law Society, LawCover or SMIF.
(Page 11)
24 The relevant questions under s 51 of the Insurance Contracts Act are whether Mr Fieldhouse had a contract of liability insurance that provides insurance cover in respect of his alleged liability to the plaintiff. Section 10(1) provides that a reference in the Act to a contract of insurance includes a reference to a contract that would ordinarily be regarded as a contract of insurance although some of its provisions are not by way of insurance.
25 In view of the statements by the solicitors for the defendant, the first potential party and the second potential parties that Mr Fieldhouse held a certificate of insurance issued by SMIF, that LawCover has granted indemnity in relation to the plaintiff's claim subject to the reservation referred to and that Mr Fieldhouse held excess insurance policies with the second potential parties there is sufficient substance to a claim by the plaintiff against the potential parties under s 51 of the Insurance Contracts Act to make it proper to make a discovery order.
26 The defendant and the potential parties submit that condition 3 has not been satisfied. The defendant and potential parties submit that the plaintiff has a sufficient description of the potential parties to enable it to take proceedings against them.
27 I find that the plaintiff, after reasonable enquiries, has not been able to ascertain a description of the potential parties sufficient for the purposes of taking proceedings against them. It appears from the information provided by the solicitors for SMIF and LawCover that SMIF and LawCover provided some form of insurance cover in respect of Mr Fieldhouse's alleged liability to the plaintiff. However, the identity of the insurer is not clear. On the one hand the solicitors for SMIF and LawCover have stated that SMIF issued a certificate of insurance. On the other hand, it is said that it is LawCover that has granted indemnity in relation to the plaintiff's claim.
28 In oral submissions, senior counsel for the potential parties submitted, in effect, that LawCover is the manager of the compulsory indemnity insurance scheme. SMIF does not appear to be a separate legal entity but rather a fund managed by LawCover. Notwithstanding that, senior counsel appeared for SMIF and, as I have said, his instructing solicitors say that they act for SMIF and that SMIF has issued a certificate of insurance. In those circumstances there are reasonable grounds for believing that SMIF has or is likely to have documents that may assist in ascertaining the description of the relevant potential party or parties - that
(Page 12)
- is, the person or entity that has provided the primary level of insurance cover.
29 The solicitors for the potential parties have identified five excess insurers. The first is described as 'Syndicate 657 D R Lowe'. The others are described in a similar fashion. 'Syndicate 657 D R Lowe' does not appear to be a legal entity capable of being sued. Senior counsel for the second potential parties did not submit otherwise. Senior counsel submitted that 'Syndicate 657 D R Lowe' was a sufficient description of the relevant potential party sufficient for the plaintiff to take proceedings against that party because the excess insurers have given instructions that proceedings may be addressed to their nominee, 'D R Lowe, Canopius Syndicate 839' and that a solicitor, Mr Lusk, is authorised to accept service on behalf of the excess insurers.
30 I infer that 'Syndicate 657 D R Lowe' is a syndicate of Lloyds' names who have agreed to insure a proportion of the relevant excess liability. There is no evidence that the syndicate has any legal identity separate from its members. A syndicate description which has no separate legal identity is not a description sufficient for a party to take proceedings against the members of the syndicate. The fact that a solicitor is willing to accept service of proceedings taken against the syndicate in the name of the syndicate does not render the syndicate name a sufficient description of the potential parties against whom the plaintiff wants to commence proceedings.
31 The court's power to order discovery to identify a potential party is discretionary. An applicant must show that the order sought is necessary in the interests of justice: that is, the applicant must show that the making of the order is necessary to provide him with an effective remedy in respect of the actionable wrong of which the applicant complains: John Fairfax & Sons Ltd v Cojuangco (1988) 165 CLR 346, 357; Hooper v Kirella (1999) 96 FCR 1 [34].
32 I have found that the plaintiff, after reasonable enquiries, has not been able to ascertain a description of the potential parties sufficient for the purposes of taking proceedings against them. I have also found that the plaintiff's claim against the potential parties is not merely speculative and it would be reasonable for the plaintiff to take proceedings against them. The action has been on foot since 1995 but the plaintiff's claim against the potential parties arose only upon the death of Mr Fieldhouse on or about 16 November 2007. The plaintiff's solicitors wrote to the defendant making enquiries to ascertain a description of the potential
(Page 13)
- parties on 18 March 2008. There has been no material delay by the plaintiff in seeking discovery to identify the potential parties. In all the circumstances, the court should exercise its discretion to order the potential parties to give discovery to the plaintiff of documents that are or have been in their possession relating to the description of the potential parties.
Discovery from a potential party - Legal principles
33 Order 26A r 4 provides that the court may order a potential party to give discovery of documents that are or have been in the potential party's possession and that may assist the applicant in deciding whether to take proceedings against the potential party if the following conditions are satisfied:
1. The applicant wants to take proceedings against the potential party;
2. The applicant has made reasonable enquiries;
3. The applicant has not been able to obtain sufficient information to enable the decision to be made as to whether to commence or take the proceedings;
4. 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 whether to take the proceedings.
34 It is common ground that condition 1 is met. I am satisfied that the plaintiff has made reasonable enquiries to obtain information to enable it to decide whether to take the proceedings.
35 The plaintiff must show that it may have a cause of action against the potential party. That condition is similar to, but not the same as, the condition in O 15A r 6(a) of the Federal Court Rules 1979 (Cth) (FCR). The latter condition was discussed by the Full Court of the Federal Court in Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy [2008] FCAFC 7; (2008) 166 FCR 64 [58] where the court said:
Under the first condition in O 15A r 6(a) an applicant must show that there is 'reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained'. The criterion as framed does not require that any person actually hold the requisite belief. Its objective character requires the court to be satisfied that a reasonable person could form a belief on the basis of
(Page 14)
- the material before the court that the applicant 'has or may have the right to obtain relief'. The word 'may' indicates that the putative belief does not have to amount to a firm view that there is a right to relief … However, mere assertion of a case against a prospective respondent is not enough … On the other hand a prima facie case for relief does not have to be demonstrated. As Emmett J said in Austrac Operations Pty Ltd v New South Wales (2003) ATPR 41-960 [10]:
'The words "where there is reasonable cause to believe that the applicant has or may have the right to obtain relief" are not satisfied by mere assertion. The belief requires more than mere suspicion or conjecture. On the other hand, it is not necessary for an applicant to establish even a prima facie case. It is necessary, however, for the applicant to show objectively that there is reasonable cause for the relevant belief. It is not necessary to demonstrate whether or not the applicant has the belief.'
In Glencore International AG v Selwyn Mines Ltd (2006) 223 ALR 238 [16] Lindgren J said:
'[W]hile the notion of "reasonable cause to believe that the applicant … may have the right to obtain relief" … may be seen to set the threshold "at quite a low level"… there must be some tangible support that takes the existence of the alleged right beyond mere "belief" or "assertion" by the applicant.'
37 The second condition under FCR O 15A r 6 is:
(b) after making all reasonable enquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the court to obtain that relief.
38 That condition is similar to the third condition of O 26A r 4: that is, 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. In Telstra Corporation v Minister for Broadband [59], the Federal Court said:
The second condition upon the exercise of the power is that the applicant has made all reasonable enquiries and yet has not sufficient information to
(Page 15)
- enable a decision to be made whether to commence a proceeding to obtain that relief. The question of what constitutes all reasonable enquiries is evaluative, albeit objective. The question whether the applicant has sufficient information to enable a decision to be made whether to commence the proceeding also necessarily involves evaluative, albeit objective, considerations. There is some tension in the cases about the generosity of the criteria by which sufficiency is to be assessed. Absent a contradicter this case is not a vehicle for resolving that tension. We would simply observe that if the criteria are too generously interpreted, preliminary discovery could be available in advance of the commencement of virtually any proceeding. What is 'sufficient' must be read by reference to Order 15A r 6(c) which directs the application of the rule to documents relating to the question whether the applicant 'has the right to obtain the relief'. In the ordinary course it would be expected that such documents would go to issues of liability. Even within that limitation O 15A r 6(b) does not enliven the power to order preliminary discovery so that the applicant may acquire all documents in a prospective respondent's possession which are relevant to its prospective cause of action.
The boundaries of the sufficiency criterion have been discussed in various cases. In Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391, Lindgren J held that O 15A r 6 was not necessarily rendered unavailable by the fact that the applicant already had available evidence establishing a prima facie case for the granting of relief. There might be matters of defence which could defeat a prima facie case. In C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864, Gyles J took the view, for the purposes of O 15A r 6(b) that a party was entitled to have more than a 'bare pleadable case' before deciding whether to undertake lengthy and expensive litigation of the kind contemplated in that case. Tamberlin J appears to have misstated this aspect of the reasons of Gyles J in Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 2065 when he suggested that O 15A r 6 was 'no longer appropriate' when an applicant had enough information to meet the threshold of a bare pleadable case. However, as his Honour said, the purpose of preliminary discovery is not to procure documents that would strengthen an applicant's decision to commence proceedings but rather to furnish it with information which is reasonably necessary to enable that decision to be made. In that connection he referred to his earlier decision in Matrix Film Investment One Pty Ltd v Alameda Films LLC [2006] FCA 591.
It is not necessary to resolve such tensions as there are in the decided cases in order to accept that on existing authority an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to a respondent and their possible strengths or to determine the extent of the respondent's breach and the likely quantum of any damages award: St Georges Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147.
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39 In Glencore International AG v Selwyn Mines Ltd [2005] FCA 801; (2006) 223 ALR 238 [14], Lindgren J said that there is a tension between O 15A r 6(a) and (c). Order 15A r 6(c) is that there is reasonable cause to believe that the person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision. Lindgren J said that the stronger the relevant evidence already available to an applicant of its right to obtain relief, the stronger its position under O 15A r 6(a), but the weaker its position under O 15A r 6(c). On the other hand, the weaker that evidence, the weaker the applicant's position under O 15A r 6(a) and the stronger its position under O 15A r 6(c).
40 Order 26A r 4(1) prohibits the court exercising the power to grant preliminary discovery where the court finds that the applicant has already sufficient information to enable a decision to be made as to whether to commence or take the proceedings - as was the case in Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 2065.
41 The plaintiff says that the purpose of its application is to obtain documents to enable it to determine whether there are insurers that might be the subject of proceedings under s 51 of the Insurance Contracts Act on the basis that they have insured the defendant under a contract of insurance. As I have said, the solicitors for the defendant and the potential parties have stated that SMIF has issued a certificate of insurance to Mr Fieldhouse and that there are excess insurance policies with the second potential parties. I find that that is sufficient to satisfy the condition that the plaintiff may have a cause of action against each of the potential parties.
42 The plaintiff seeks documents so that it can consider whether the first potential party is an insurer for the purposes of s 51 of the Insurance Contracts Act. The plaintiff submits that SMIF, by it conduct, may have been acting as an insurer, particularly if it has been issuing certificates of insurance. The plaintiff needs to establish the claims that are covered by the terms of insurance and the extent of cover provided under the contract of insurance. I find that the plaintiff does not have sufficient information to enable a decision to be made as to whether to take proceedings against SMIF.
43 There is no evidence that the second potential parties have agreed to indemnify Mr Fieldhouse. There is no information about the nature and extent of the liabilities for which insurance cover has been provided by
(Page 17)
- those 'excess insurers'. I find that the plaintiff does not have sufficient information to enable a decision to be made as to whether to take proceedings against the excess insurers.
44 I find that the conditions for the exercise of the power under O 26A r 4 are satisfied. The conditions for the exercise of the power having been met, the exercise of the power is discretionary.
45 The defendant and the potential parties submit that the court should not order discovery from the potential parties. Those parties make the following submissions. The plaintiff commenced this action in 1995 knowing, as evidenced in cl 2.7 of the Deed of Release, that it may not recover the whole of the damages it may be entitled to if it succeeds in the action and agreeing that it will not enforce any judgment and costs order beyond that payable by the defendant's insurers. In those circumstances, knowledge of the extent of the defendant's insurance cover would not assist the plaintiff in deciding whether to take proceedings against the potential parties. It is also submitted that the plaintiff has already made the decision to join the potential parties to the action. What the plaintiff is seeking by this application is evidence which it hopes will strengthen its decision to join the potential parties, rather than furnish it with information which is reasonably necessary to proceed against the potential parties.
46 Those matters do not persuade me that the court should not exercise its discretion to order preliminary discovery. The plaintiff commenced this action in 1995 without knowing the extent of the defendant's insurance coverage. In 1998 the plaintiff executed the Deed of Release which had the effect of limiting the recovery that it might make under any judgment it obtained to the amount of the defendant's insurance. The plaintiff then continued with the action for a further 12 years without knowing the extent of that insurance cover. However, things changed significantly when the defendant passed away on or about 16 November 2007. The plaintiff now contemplates taking proceedings directly against the insurers or putative insurers. If the plaintiff takes those proceedings then it will risk the legal costs of those proceedings. Those costs were not at risk whilst the plaintiff's action was against the defendant alone. Those costs are likely to be substantial. The evidence before me does not establish that the plaintiff has decided to take the proceedings against the potential parties in any event.
(Page 18)
47 The court must be satisfied that it is appropriate to exercise its discretion to make the order for preliminary discovery. In Optiver Australia Pty Ltd v Tibra Trading Pty Ltd Tamberlin J said:
Orders of preliminary discovery are not intended to convey a forensic or tactical advantage, but rather to clarify whether litigation is warranted. While preliminary discovery will be beneficial to an applicant to the extent it crystallises their cause of action, or in some cases the availability of a defence to an anticipated claim, it should not be oppressive to a prospective defendant. Preliminary discovery is a one-way transaction, in the sense that there is no reciprocal obligation to produce documents. Only the applicant receives documents, which is markedly different to ordinary discovery in the course of a legal proceeding. In practical terms, the handing over of information which may be highly sensitive can be commercially damaging to a business. It is appropriate to exercise caution not to unnecessarily burden a prospective defendant to the point where its unilateral disclosure of information in preliminary discovery injures its commercial position vis-à-vis a competitor, or confers an unfair advantage on that competitor [29].
48 The preliminary discovery sought in this case is to assist the plaintiff to decide whether it is warranted in taking proceedings against the potential parties. There is no evidence that the discovery sought would be oppressive to the potential defendants. There is no evidence that the handing over of the documents sought would cause any commercial or other prejudice to the potential parties. Furthermore, at least in the case of the first potential party, it is relevant that the defence of the defendant to date has been conducted on the instructions of LawCover. That is, LawCover is already involved and engaged in the proceedings. In all the circumstances it is appropriate to order that the potential parties give discovery to the plaintiff of documents that may assist the applicant in deciding whether or not to take the proceedings against the potential parties.
Conclusion
49 For the reasons stated, the potential parties must give discovery to the plaintiff of all documents that are or have been in their possession relating to the description of the potential parties and that may assist the plaintiff in deciding whether or not to take proceedings against the potential parties. The documents nominated in the plaintiff's minute of proposed amended application for pre-action discovery, as further orally amended, fall within those descriptions and it is appropriate to make orders in those terms.
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