Wadren Pty Ltd v Probuild Constructions (Aust) Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST

S ECI 2022 03803

BETWEEN:

WADREN PTY LTD (ACN 005 537 235) in its capacity as trustee for the HOPPERS CROSSING UNIT TRUST (ABN 83 405 769 465) & ANOR (according to the attached Schedule)	Plaintiffs
v
PROBUILD CONSTRUCTIONS (AUST) PTY LTD (ACN 095 250 945) (subject to Deed of Company Arrangement) & ORS (according to the attached Schedule)	Defendants

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JUDGE:	Barrett AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	25 November 2022, and further written submissions in reply filed by the Plaintiffs on 29 November 2022 and by the Second Defendant on 2 December 2022 16 March 2023, and further written submissions filed by the Second Defendant on 27 March 2023 and by the Plaintiffs on 30 March 2023
DATE OF RULING:	29 June 2023
CASE MAY BE CITED AS:	Wadren Pty Ltd & Anor v Probuild Constructions (Aust) Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2023] VSC 348

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PRACTICE AND PROCEDURE — Preliminary discovery pursuant to rule 32.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) — Discovery sought from prospective defendant of documents evidencing confirmation of indemnity or denial of indemnity under insurance policy and of documents relevant to whether insurance funds available if claim successful — Whether sufficient information to decide whether to commence proceedings— No reasonable cause to believe there is a right to relief for breach of contract where no privity between parties — Insufficient evidence for relief based on misrepresentation, misleading or deceptive conduct – Power to order preliminary discovery is limited by the words ‘right to obtain relief’ in rule 32.05 of the Rules, which do not extend to documents relating to likelihood of recovery if claim is successful — Australian Gift and Homewares Association Ltd v Melbourne Convention and Exhibition Trust (Ruling No 1) [2014] VSC 481 —Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435.

PRACTICE AND PROCEDURE — Preliminary discovery — General discretion — Confidentiality of insurance documents — Whether Court should decline to exercise discretion under rule 32.05 of the Rules due to confidentiality — Obligation of good faith — Documents beyond those agreed or ordered to be produced are confidential — Declined to order production of such documents — Ingram v Ardent Leisure Ltd [2020] FCA 1302.

PRACTICE AND PROCEDURE — Preliminary discovery — Discovery to identify a defendant — Whether sufficient information in relation to the identity of relevant co-insurers — Plaintiff entitled to know the identity of co-insurers — Unclear whether necessary to order production as discovery orders against other party likely to disclose the identity of relevant co-insurers — Real risk that communications are commercially sensitive or legally privileged — Rule 32.03 of the Rules.

PRACTICE AND PROCEDURE — Consent orders — Consent orders should only be made when ‘all parties to a proceeding are agreed’ — Declined to make orders —Rule 59.07 of the Rules — Collie v Merlaw Nominees Pty Ltd [2003] VSC 424.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr N Pane KC, with Mr R Chaile	Allens
No appearance for the First Defendant
For the Second Defendant	Mr J Slattery KC, with Ms G Crafti	Clyde & Co Australia
For the Third Defendant	Mr G McArthur KC	Clayton Utz

TABLE OF CONTENTS

Background......................................................................................................................................... 1

Relevant rules..................................................................................................................................... 6

Probuild’s position............................................................................................................................ 7

Plaintiffs’ position............................................................................................................................. 7

AIG’s position................................................................................................................................... 11

Plaintiffs’ position in reply............................................................................................................ 18

Leave to proceed against Probuild................................................................................................ 19

Application of r 32.05...................................................................................................................... 20

Legal principles........................................................................................................................... 20
Do the plaintiffs have reasonable cause to believe they may have a right to relief against the defendants?......................................................................................................................... 23
Have the plaintiffs established a reasonable cause to believe that they may have a right of action based on misrepresentations made by Probuild?......................................................... 24
Could the second plaintiff rely on any misrepresentations in any case?........................... 25
Have the plaintiffs made all reasonable inquiries?................................................................ 28
Do the plaintiffs have sufficient information to enable them to decide whether to commence proceedings?....................................................................................................................... 28
Do the plaintiffs have sufficient information in relation to the terms of relevant insurance policies?.............................................................................................................................................. 29
Do the plaintiffs have sufficient information in relation to the dates on which relevant notifications were made under the relevant insurance policies?...................................................... 30
Do the plaintiffs have sufficient information regarding whether AIG has made any unconditional grant of indemnity to Probuild under the Primary PI Policies?................................. 30
Are the plaintiffs entitled to disclosure of information in relation to whether the limits of indemnity available under the Primary PI Policies have been eroded?.................... 31
General Discretion...................................................................................................................... 44

Application of r 32.03...................................................................................................................... 47

Do the plaintiffs have sufficient information in relation to the identity of the relevant insurers?.............................................................................................................................................. 47

What is the effect of Probuild’s position?................................................................................... 49

HIS HONOUR:

This is an application by the plaintiffs for preliminary discovery pursuant to rr 32.03 and 32.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’).

The plaintiffs are co-owners of the Pacific Werribee Shopping Centre. The second plaintiff became the co-owner of the Pacific Werribee Shopping Centre with the first plaintiff on 15 June 2018, prior to which the first plaintiff was the sole owner.

On or about 21 March 2014, the first plaintiff and first defendant (‘Probuild’) entered into a contract pursuant to which Probuild was to undertake construction work for the Pacific Werribee Shopping Centre (‘Contract’). Probuild undertook that construction work between 2014 and 2017. Since the completion of the construction work, the plaintiffs have alleged that there are extensive structural and non-structural defects. The plaintiffs’ preliminary estimate of their loss and damage is at least between $331,800,000.00 and $356,800,000.00.

The second defendant (‘AIG’) is identified as an insurer in the certificates of currency for Probuild’s professional indemnity insurance policy (‘AIG Australia Policy’) for the policy years from 30 June 2019 to 30 June 2022.

The third defendant was a director of Probuild from 7 September 2012 to 23 March 2021. At the hearing on 25 November 2022, the Court was informed that the application as it relates to the third defendant had been resolved between the relevant parties. Accordingly, I will not deal with the aspects of the application that relate to the third defendant in these reasons.

Background

Probuild obtained the AIG Australia Policy from a panel of insurers led by AIG for the policy years from 2019 to 2022. The certificate of currency for the AIG Australia Policy for the 2019–20 policy year states:

Named Insured: Probuild Constructions (Aust) Pty Ltd [Probuild] and any subsidiary Companies as defined in the Policy Wording
Insurers:A Panel of Insurers led by AIG Australia Limited [the second defendant]
...
Covering:The Insurer agrees to indemnify the Named Insured against any Claim for civil liability first made against the Named Insured during the Period of Insurance and notified to the Insurer during the Period of Insurance arising from the performance of Professional Services.
Combined Limit of Indemnity: $50,000,000 any one occurrence and in the aggregate for all claims made during the Period of Insurance.

The certificates of currency for the AIG Australia Policy for the 2020–21 and 2021–22 policy years contain the same information as quoted in the preceding paragraph, however the ‘Named Insured’ in those policy years only refers to Probuild and does not include any subsidiary companies.

Although the certificates of currency stated that AIG led a panel of insurers, those insurers were not identified. Subsequently, in October 2022, AIG informed the plaintiffs that AIG’s co-insurers for the AIG Australia Policy, being Probuild’s primary professional indemnity insurance policy, for each of the 2019–2022 policy years (collectively, the ‘Primary PI Policies’) are: Starr Underwriting Agents Limited (‘Starr’) for and on behalf of Lloyd’s Underwriter Syndicate No 1919 CVS, and HCC International Insurance Company PLC (‘HCC’).

AIG has also clarified that AIG, Starr and HCC do not account for the full combined limit of indemnity of $50 million stated in the certificate of currency, but that that combined limit of indemnity also includes the amount insured by excess insurers.

On 10 October 2019, the plaintiffs notified Probuild of the alleged defects in its construction work of the Pacific Werribee Shopping Centre (‘Claim’). Probuild informed the plaintiffs that its insurers were notified of the Claim in 2019.

On 23 February 2022, Probuild went into voluntary administration. On 21 July 2022, a deed of company arrangement was executed.

In those circumstances, the questions of whether the plaintiffs are able to commence proceedings, who should be named as defendants, and what relief will be available will depend upon whether there are insurance policies which respond to the plaintiffs’ claims.

That being the case, the plaintiffs seek an order under r 32.05 of the Rules for preliminary discovery of documents to identify Probuild’s insurers and the nature and content of any insurance policy, and to determine whether any such policy provides coverage in the circumstances, including as to the extent of any claims that have been made and paid out on the policies. The plaintiffs also seek an order under r 32.03 of the Rules for preliminary discovery of documents which identify certain of Probuild’s insurers.

By its originating motion filed on 21 September 2022 as amended on 9 March 2023 (‘originating motion’), the plaintiffs seek the following orders:[1]
[1]Excluding orders sought in relation to the third defendant.

(a) an order pursuant to r 32.05 of the Rules that Probuild give discovery of all documents (including letters, emails, faxes, file notes and other written communications, whether electronic or hard copy) (‘Discoverable Documents’), that are or have been in the possession, custody or power of Probuild relating to the Policy Documents, as that term is defined in the affidavit of Corin Eileen Morcom affirmed on 14 September 2022 (‘First Morcom affidavit’), save that the reference to the ‘AIG Australia Policy’ in para 26 (and thereafter) should be read as covering the 2019–2022 policy years (inclusive);

(b) an order pursuant to r 32.05 of the Rules that AIG give discovery of all Discoverable Documents, that are or have been in the possession, custody or power of AIG relating to the AIG Australia Policy Documents and the Past Claim Documents, as those terms are defined in the First Morcom affidavit, save that the reference to the ‘AIG Australia Policy’ in para 26 (and thereafter) should be read as covering the 2019–2022 policy years (inclusive);

(c) an order pursuant to r 32.03 of the Rules that Probuild give discovery of all Discoverable Documents, that are or have been in the possession, custody or power of Probuild relating to the identity or description of the Other Insurers, as that term is defined in the First Morcom affidavit, save that the reference to the ‘AIG Australia Co-Insurers’ in para 61(a)(i) should be read as the other insurers on the panels for each of the AIG Australia Policies;

(d) an order pursuant to r 32.03 of the Rules that AIG give discovery of all Discoverable Documents, that are or have been in the possession, custody or power of AIG relating to the identity or description of the AIG Australia Co-Insurers, as that term is defined in the First Morcom affidavit, save that the reference to the ‘AIG Australia Co-Insurers’ in para 27 (and thereafter) should be read as the other insurers on the panels for each of the AIG Australia Policies.

The following sub-paragraphs of the First Morcom affidavit define the terms referred to in the originating motion, which are relevant to the current application, as follows (emphasis in original):
(a)in respect of the AIG Australia Policy (the AIG Australia Policy Documents):
(i)confirmation that the Co-Owners’ [the plaintiffs’] Claim was notified to the insurers in the 2019/2020 policy year;
(ii)a copy of Probuild’s [the first defendant’s] notification of the claim to its insurers;
(iii)a copy of any confirmation from the insurers of indemnity or any denial of indemnity (if that is the case);
(iv)the relevant professional indemnity policy itself; and
(v)      the details of all insurers under the policy;
(b)details of any excess professional indemnity insurance policies held by Probuild in the relevant year that respond to the Claim or pursuant to which indemnity has been denied (if that is the case), including the details of all insurers under those policy/ies and copies of (the Other Professional Indemnity Policy Documents):
(i)        certificate/s of currency;
(ii)Probuild’s notifications of the claim to its insurers;
(iii)confirmation from any insurer/s of indemnity or any denial of indemnity (if that is the case); and
(iv)     the relevant professional indemnity insurance policy/ies;
(c)confirmation of whether any other claims have been made upon the applicable professional indemnity insurance policy/ies, including details of any settlements of such claims (the Past Claim Documents); and …
(together, the Policy Documents).

Further, the reference to ‘Other Insurers’ in the originating motion includes reference to the AIG Australia Co-Insurers and any other Professional Indemnity Insurer. The term ‘AIG Australia Co-Insurers’ refers to the insurers on the panel of insurers led by AIG.

At the hearing on 25 November 2022, the plaintiffs sought leave to amend their originating motion as follows:

(a) in relation to the relief sought pursuant to r 32.05 of the Rules, expanding the definition of ‘AIG Australia Policy’ to cover the 2019–2022 policy years (inclusive) (the definition previously only covered the 2019–20 policy year); and

(b) in relation to the relief sought pursuant to r 32.03 of the Rules, expanding the reference to the ‘AIG Australia Co-Insurers’ to the other insurers on the panels of insurers for each of the policy years of the AIG Australia Policy.

I will use the above terms in these reasons as they are defined above.

I granted leave for the plaintiffs to file their proposed amended originating motion and made orders accordingly on 25 November 2022. The plaintiffs filed their amended originating motion on 9 March 2023.

The dispute in this application is in relation to AIG’s opposition to the plaintiffs’ application, including with respect to the proposed consent orders as between the plaintiffs and Probuild. AIG opposes the production of certain categories of documents in relation to the Primary PI Policies, but does not oppose the production of documents in relation to other professional indemnity insurance policies that may be held by Probuild.

Relevant rules

Rule 32.03 of the Rules sets out:

Discovery to identify a defendant
(1) The Court may make an order under paragraph (2) where—
(a) an applicant, having made reasonable inquiries, is unable to ascertain the description of a person sufficiently for the purpose of commencing a proceeding in the Court against that person (in this Rule called the person concerned); and
(b) it appears that some person has or is likely to have knowledge of facts, or has, or is likely to have or has had or is likely to have had in that person’s possession any document or thing, tending to assist in such ascertainment.

(2) The Court may order that the person, and in the case of a corporation, the corporation by an appropriate officer, shall—
…
(b) make discovery to the applicant of all documents which are or have been in his, her or its possession relating to the description of the person concerned.

…

Rule 32.05 of the Rules sets out:

Discovery from prospective defendant
Where—
(a) 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 the applicant has ascertained;
(b) after making all reasonable inquiries, the applicant has not sufficient information to enable the applicant to decide whether to commence a proceeding in the Court to obtain that relief; and
(c) there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had in that person’s possession 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 the applicant to make the decision—

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).

Probuild’s position

The plaintiffs submit that Probuild gave its consent for preliminary discovery as against it pursuant to rr 32.03 and 32.05 of the Rules on the condition that the plaintiffs make any payments to it as requested. Whether Probuild consents to, or does not oppose, the orders sought, and the consequences of any such consent or non-admission, are in dispute and discussed further below.

Plaintiffs’ position

The plaintiffs rely upon the following material:

(a) the affidavits affirmed by Corin Morcom, their solicitor, on 14 September 2022 (defined earlier as the ‘First Morcom affidavit’) and 14 November 2022;

(b) their written submissions filed on 27 October 2022;

(c) their written submissions in reply filed on 21 November 2022, and further written submissions filed on 30 March 2023.

At the conclusion of the hearing on 25 November 2022, I made orders for the plaintiffs to file any written submissions in reply to AIG’s oral submissions. The plaintiffs subsequently filed:

(a) further written submissions in reply on 29 November 2022; and

(b) an affidavit affirmed by Genevieve Lester, their solicitor, on 29 November 2022, for which the plaintiffs sought leave to rely upon, and for which AIG opposed such leave.

In response, on 2 December 2022, AIG filed further written submissions and an affidavit of Nicole Wearne sworn on 2 December 2022. AIG objected to the plaintiffs’ reliance on the affidavit of Genevieve Lester, but submitted that if the plaintiffs were given leave to rely on it, AIG should have leave to rely on the affidavit of Nicole Wearne.

The affidavits of Ms Lester and Ms Wearne and the further submissions are relevant to the question whether Probuild consents to the orders sought. The plaintiffs seek to rely on the affidavit of Ms Lester in support of their submission that Probuild consents to the orders sought. AIG opposes reliance on the affidavit of Ms Lester as no leave was given to file further affidavits, but if leave is granted to rely on Ms Lester’s affidavit, AIG seeks to rely on the affidavit of Ms Wearne. AIG submits that there is no evidence that Probuild consents to orders in their current form. I propose to give leave to each of the parties to rely on their respective further affidavits as they are relevant to questions in issue and I do not consider that there is any prejudice in either party relying on them. I address the evidence and consequences of Probuild’s position further below.

The plaintiffs submit that they satisfy the conditions set out in r 32.05 of the Rules, in relation to the preliminary discovery of documents sought against Probuild and AIG for the purpose of determining whether to commence proceedings, because:

(a) the plaintiffs have reasonable cause to believe that they may be entitled to relief as against:

(i) Probuild, in an action for breach of design and construction obligations and warranties under the Contract and under the indemnities in the Contract, and for misleading and deceptive conduct by Probuild; and

(ii) AIG, on the basis that the defects in the services provided by Probuild would be matters to which a professional indemnity insurance policy would respond, and that the plaintiffs are entitled to priority to such proceeds in any liquidation of Probuild, pursuant to s 562 of the Corporations Act 2001 (Cth) (‘Corporations Act’). If AIG, the AIG Australia Co-Insurers and any other Professional Indemnity Insurer has denied or failed to confirm indemnity, the plaintiffs have the right to obtain a declaration that those insurers must give indemnity.

(b) the plaintiffs have insufficient information to make a decision as to whether to commence a proceeding because:

(i) the plaintiffs would require leave of the Court pursuant to s 444E of the Corporations Act to commence proceedings against Probuild, and a factor strongly favouring the grant of leave is the capacity of an insurance company to pay any judgment obtained against Probuild. Accordingly, the existence and terms of any policies of insurance that would respond to the plaintiffs’ claim, and the timing and terms of any notification of the plaintiffs’ claim, are relevant to any decision the plaintiffs may make as to whether to apply for leave under s 444E and whether to commence proceedings against Probuild;

(ii) the existence and terms of any policies of insurance that would respond to the plaintiffs’ claim, the timing and terms of any notification of the plaintiffs’ claim, and the insurers’ position regarding indemnity are relevant to the plaintiffs’ determination of whether to commence proceedings against AIG. At the hearing, counsel for the plaintiffs submitted that while AIG has informed the plaintiffs that there has not been an unconditional grant of indemnity by AIG, that information only is not sufficient for the plaintiffs to assess the prospects of any action. Further, the plaintiffs submitted that the communications between Probuild and AIG concerning indemnity do not contain commercially sensitive information in circumstances where Probuild has consented to providing those documents;

(iii) the Past Claim Documents are required for the plaintiffs to make a decision as to whether to commence proceedings against Probuild and AIG because it is unknown as to the extent of any previous claims made on the insurance policies and the extent to which there are likely to be insurance proceeds available to satisfy any judgment debt. Further, if there are insufficient insurance proceeds to satisfy a claim, it may be relevant to the consideration of whether leave should be granted for the commencement of proceedings against Probuild;

(iv) accordingly, inspection of the documents sought would assist them in determining whether to commence a proceeding against Probuild and AIG; and

(v) despite attempts by the plaintiffs to obtain the documents sought from AIG, the plaintiffs do not have the information necessary for them to determine whether to commence proceedings against Probuild and/or AIG.

(c) Probuild and AIG likely have the documents sought by the plaintiffs in their possession because:

(i) Probuild agreed to provide the documents to the plaintiffs;

(ii) the documents sought from AIG should form part of the books and records of AIG and concern an agreement to which it is a party; and

(iii) Probuild and AIG have not suggested or stated that the documents sought by the plaintiffs do not exist or are not within their possession.

Further, the plaintiffs submit that the conditions in r 32.03 of the Rules are satisfied with respect to preliminary discovery of documents identifying prospective defendants because:

(a) the plaintiffs have a potential cause of action against the Other Insurers for the same reasons as that against AIG;

(b) the plaintiffs have made reasonable inquiries to ascertain the identity of the Other Insurers; and

(c) it is reasonably expected that:

(iv) Probuild has information or documents which would disclose the identity of the Other Insurers from whom it has obtained insurance policies; and

(v) AIG has information or documents which would disclose the identity of the AIG Australia Co-Insurers as they are part of a panel on which AIG is a participant.

The plaintiffs also submit that the plaintiffs and Probuild have provided consent orders to the Court for preliminary discovery, and that those consent orders ought to be made, particularly where Probuild is separately represented by qualified practitioners. The plaintiffs submit that the Court should exercise its discretion to order preliminary discovery and that confidentiality of the documents sought is not an impediment, particularly in circumstances where Probuild provided consent.

AIG’s position

AIG relied upon:

(a) the redacted version of the affidavit of Nicole Wearne, its solicitor, sworn on 10 November 2022; and

(b) its written submissions filed on 10 November 2022.

As noted above, after the conclusion of the hearing on 25 November 2022, the plaintiffs and AIG filed further submissions and affidavits. For AIG’s part, the submissions were filed on 2 December 2022 and the further affidavit was an affidavit sworn by Nicole Wearne on 2 December 2022.

AIG consents or does not object to the preliminary discovery of some categories of documents; however, it opposes the preliminary discovery of other categories of documents. The documents for which AIG consents to the preliminary discovery are those relating to:

(a) the Primary PI Policies, being the professional indemnity insurance policies that insure Probuild and are issued by AIG, Starr and HCC (collectively, the ‘Primary PI Insurers’) for the 2019–2022 policy years; and

(b) the written notifications made by Probuild to AIG under the professional indemnity insurance policies issued by AIG to Probuild for the 2019–2022 policy years in respect of the plaintiffs’ Claim, the Structural Defects (which are the structural defects identified in the reports prepared by MPN Group dated 25 September 2019 and 7 September 2021), and the Non-structural Defects (which are the non-structural defects identified in a report by Kusch Consulting Engineers dated 15 June 2021) (collectively, the ‘AIG Notifications’). At the hearing, counsel for AIG clarified that this category of documents for which AIG gives consent for preliminary discovery does not include written notifications in relation to ‘Other Defects’, as the term as defined in the First Morcom affidavit is devoid of content.[2]

[2]The affidavit of Corin Morcom affirmed 14 September 2022 first defined the term ‘Other Defects’ in the following sentence (emphasis in original): ‘In addition to the Structural Defects, MPN Group has also identified particular design and construction defects in the [construction work] (Other Defects)’.

Further, AIG does not object to Probuild making discovery of the documents relating to:

(a) the Other Professional Indemnity Policy Documents, which do not include the Primary PI Policies;

(b) the Past Claim Documents, except in respect of the Primary PI Policies; and

(c) the identity or description of the AIG Australia Co-Insurers to the extent that such documents do not involve communications with the Primary PI Insurers.

However, AIG opposes the preliminary discovery by either Probuild or AIG of:

(a) all documents relating to the Primary PI Policies other than those referred to above; and

(b) Past Claim Documents in relation to the Primary PI Policies,

(collectively, the ‘Disputed Documents’).

Specifically, the categories of documents for which AIG opposes preliminary discovery are:

(a) all documents relating to any confirmation from the Primary PI Insurers of indemnity or any denial of indemnity (‘Disputed Primary PI Indemnity Documents’), which are sought pursuant to r 32.05 of the Rules;

(b) all documents relating to the confirmation of other claims made upon the Primary PI Policies, including details of any settlements of such claims (‘Disputed Primary PI Past Claims Documents’), which are sought pursuant to r 32.05 of the Rules; and

(c) all documents relating to the identity or description of the AIG Australia Co-Insurers (‘Disputed AIG Australia Co-Insurer Documents’), which are sought from AIG pursuant to r 32.03 of the Rules.

With respect to the preliminary discovery under r 32.05 of the Rules, AIG submits the following:

(a) AIG does not dispute that the first plaintiff may have a right to obtain relief against Probuild for breach of its obligations and warranties under the Contract and under the indemnities in the Contract, in respect of the alleged defects in its construction work. However, AIG submits that the second plaintiff has failed to establish a reasonable cause to believe it may have a right to obtain relief against Probuild or AIG. The second plaintiff is not a party to the Contract and therefore does not have any claim against Probuild for breach of Contract or pursuant to any indemnities in the Contract. The second plaintiff acquired a 50% interest in the Pacific Werribee Shopping Centre in February 2018, which was after the completion of Probuild’s construction work in 2017. Further, the plaintiffs have not produced any evidence to support their assertion that the second plaintiff has reasonable cause to believe it may have the right to obtain relief against Probuild on the basis of any representations made by Probuild. AIG also submits that there is no evidence to support the assertion that any misrepresentations were made to the second plaintiff or relied on by it, and so it cannot be said that the second plaintiff has reasonable cause to believe it may have a right to obtain relief based on misleading and deceptive conduct. Accordingly, AIG opposes preliminary discovery of the Disputed Documents to the second plaintiff. However, AIG is prepared to consent to orders granting the second plaintiff access to other documents discovered in this proceeding, for the purpose of facilitating the just, efficient, timely and cost-effective resolution of this proceeding;

(b) at the hearing, counsel for AIG submitted that the plaintiffs have only established they may have a right to relief under the 2019–20 policy year, as sought in the original originating motion, but not for the 2020–21 and 2021–22 policy years. There is a reasonable basis for which the plaintiffs may have a right to obtain relief under the 2019–20 policy year because the Claim was first notified by the plaintiffs to Probuild in October 2019. The plaintiffs only sought further preliminary discovery of the Disputed Documents in the 2020-21 and 2021–22 policy years given that AIG had, in correspondence, advised the plaintiffs that they were prepared to provide preliminary discovery of those two additional policy years; which was advised to promote that overarching purpose of showing the plaintiffs the complete suite of policies and notifications to enable to the plaintiffs to determine which policies may apply. However, AIG submits that that is not a sound basis to infer that the policies of the two additional policy years may respond to the Claim;

(c) the plaintiffs have sufficient information to enable them to decide whether to commence proceedings against Probuild and/or the Primary PI Insurers, as the plaintiffs know, or will know after preliminary discovery consented to by AIG:

(vi) the identity of the Primary PI Insurers;

(vii) the terms of the potentially relevant Primary PI Policies;

(viii) the dates on which relevant notifications were made under the Primary PI Policies;

(ix)that AIG has not made any unconditional grant of indemnity to Probuild under the Primary PI Policies; and

(x) that the limits of indemnity under the Primary PI Policies have not been exhausted.

(d) preliminary discovery of the Disputed Documents would contain information that exceeds what is required to decide whether to commence proceedings and give the plaintiffs an unfair commercial advantage in any subsequent proceeding they may commence. An applicant for preliminary discovery is not entitled to all information that would enable it to assess a prospective defendant’s financial capacity to pay;

(e) it is not reasonably necessary for the plaintiffs to see all documents relating to any confirmation or denial of indemnity from the Primary PI Insurers in order to decide whether to commence proceedings against Probuild or the Primary PI Insurers. The plaintiffs will receive the terms of the Primary PI Policies and they know that the Primary PI Insurers have not unconditionally granted indemnity. Accordingly, the plaintiffs have sufficient information in relation to the Disputed Primary PI Indemnity Documents, and the exact terms of any indemnity decision will not advance the plaintiffs’ determination as to whether to commence proceedings;

(f) it is not reasonably necessary for the plaintiffs to have access to the Disputed Primary PI Past Claims Documents relating to the confirmation of other claims made upon the Primary PI Policies, including details of any settlements of such claims. AIG has told the plaintiffs that presently the limits of indemnity under the Primary PI Policies have not been exhausted. Further, even if there were other claims on the Primary PI Policies, those claims may not have succeeded or concluded before the plaintiffs obtain judgment in any substantive proceedings, and it will not provide conclusive information as to what amount of funds will likely remain at judgment. Accordingly, the Past Claim Documents cannot reasonably be of any use to the plaintiffs in determining whether to commence proceedings. AIG also submit that while the existence of a policy of insurance will be relevant to the question of whether leave should be granted under s 444E of the Corporations Act, the extent of that insurance is not. Prospective plaintiffs are not permitted to obtain discovery of documents about whether the prospective defendant will have the assets available to meet any judgment against them. That information is not relevant to the issues in dispute. Preliminary discovery of those documents would confer an unfair asymmetric commercial advantage to the plaintiffs at the expense of the Primary PI Insurers; and

(g) r 32.05 of the Rules does not give the Court the power to award discovery beyond what can be obtained by general discovery in the substantive proceeding if commenced. Preliminary discovery is a subset of general discovery, and the documents that can be ordered to be discovered pursuant to r 32.05 are documents relevant to the issues in the substantive proceeding if commenced. A plaintiff cannot obtain documents through preliminary discovery if the documents would not be discoverable in general discovery. Further, the language of r 32.05 permits discovery only of documents ‘relating to the question whether the applicant has the right to obtain … relief’,[3] as opposed to the broader category of ‘sufficient information to enable the applicant to decide whether to commence a proceeding’.[4] The plaintiffs are only seeking documents which go to the likely enforceability of any judgment they obtain in a substantive proceeding.

[3]Transcript of Proceedings, Wadren Pty Ltd v Probuild Construction (Aust) Pty Ltd (Supreme Court of Victoria, S ECI 2022 03803, Barrett AsJ, 25 November 2022) 98 (‘Transcript’).

[4]Ibid 98–99.

With respect to the preliminary discovery sought under r 32.03 of the Rules, AIG submits that it is unnecessary and unreasonable for AIG to give discovery of the Disputed AIG Australia Co-Insurer Documents because:

(a) the certificates of currency of the Primary PI Policies were not prepared by AIG, but by the insurance brokers for Probuild, and the Primary PI Insurers do not account for the full amount of the combined ‘limit of indemnity’ referred to in the certificate of currency. The additional amount is made up by excess insurers;

(b) to the extent that AIG has documents relating to the identity or description of the AIG Australia Co-Insurers, those documents are likely to comprise confidential communications between insurers regarding commercially sensitive matters such as claims information and indemnity issues; and

(c) the identity of the AIG Australia Co-Insurers will be provided by Probuild.

In any case, it appears AIG does not press the issue in relation to preliminary discovery of the Disputed AIG Australia Co-Insurer Documents after a review of the proposed orders provided by the plaintiffs prior to the hearing on 25 November 2022. Accordingly, this issue will not be discussed further in these reasons.

Further, AIG submits that even if the plaintiffs have established the conditions set out in rr 32.03 or 32.05 of the Rules, the Court has residual discretion not to order preliminary discovery. AIG submits that insurance arrangements are generally regarded as confidential as they contain commercially sensitive terms. Even if Probuild has consented to any orders for preliminary discovery, it does not mean the relevant documents lose their confidential and sensitive nature as the confidentiality and sensitivity arises from the nature of the insurance relationship which involves ‘heightened duties of frankness and confidentiality’.[5] Accordingly, the disclosure of the Disputed Documents ought not to be ordered.
[5]Watson & Co Superannuation Pty Ltd v Dixon Advisory and Superannuation Services Ltd [2022] FCA 1273, [65] (Thawley J) (‘Watson’); Ingram v Ardent Leisure Ltd [2020] FCA 1302, [98] (‘Ingram’).

AIG also submits that even though the plaintiffs and Probuild have agreed on proposed orders for preliminary discovery, AIG still has a right to be heard as its interests are directly affected by the proposed consent orders. The proposed consent orders include orders for the preliminary discovery of documents that involve correspondence and communications relating to the Primary PI Policies that AIG contends should not be discovered.

Plaintiffs’ position in reply

With respect to AIG’s submission that the second plaintiff has not established that it has a right to obtain relief, the plaintiffs submit that the second plaintiff is not required to establish that it has a right to relief against Probuild; the second plaintiff is only required to satisfy the Court that there is reasonable cause to believe that it may have the right to obtain relief. In any event, the second plaintiff has a right to obtain relief under the Australian Consumer Law[6] against Probuild on the basis that it has suffered loss due to Probuild’s representations, even if the relevant reliance were not its reliance.
[6]Competition and Consumer Act 2010 (Cth) sch 2.

With respect to AIG’s submission that the extent of the insurance is not relevant to the question of leave under s 444E of the Corporations Act, the plaintiffs submit that the availability and extent of the insurance policy is relevant.

With respect to AIG’s submission that the term ‘Other Defects’ is devoid of meaning, the plaintiffs submit that the definition in the First Morcom affidavit refers to the MPN Group report, which identified the ‘Other Defects’ in its Annexure E.

With respect to AIG’s submissions that the plaintiffs are not entitled to obtain documents through preliminary discovery which they would not be able to obtain through general discovery, the plaintiffs submit that that submission is wrong, and that preliminary discovery and general discovery are conceptually different. The scope of preliminary discovery is not limited to what may be obtained in general discovery. The purpose of preliminary discovery is to permit a prospective litigant to make an informed decision as to whether to commence proceedings. However, the plaintiffs accept that the documents sought in this application are unlikely to be available in general discovery as the documents will probably not be relevant to any issues requiring determination in any substantive proceeding.

Leave to proceed against Probuild

On 8 March 2023, the plaintiffs commenced a new proceeding seeking leave to proceed against Probuild pursuant to section 444E(3) of the Corporations Act. On 10 March 2023, orders were made granting leave and on 14 March 2023, the plaintiffs issued a proceeding against Probuild.

On 16 March 2023, I heard the parties further as to the effect of leave on the application for preliminary discovery, and made orders granting leave for the plaintiffs to withdraw paragraph three of the relief sought in the amended originating motion and for the filing of further submissions as to the effect of such withdrawal on the plaintiffs’ application. AIG filed further submissions on 27 March 2023, and the plaintiffs filed further submissions in reply on 30 March 2023.

AIG submitted that:

(a) the plaintiffs originally submitted that the Disputed Primary PI Indemnity Documents are ‘relevant to any decision which the plaintiffs may make as to whether to apply for the Court’s leave under s 444E (and, indeed, to the Court’s consideration of whether leave should be granted) and whether to commence proceedings against Probuild’. As the plaintiffs have now obtained leave to issue a proceeding against Probuild, and have in fact issued a proceeding against Probuild, the plaintiffs’ original submission in relation to the Disputed Primary PI Indemnity Documents has been rendered redundant;

(b) the plaintiffs originally submitted that the Disputed Primary PI Past Claims Documents were relevant to, and indeed critical to, the plaintiffs’ ability to obtain leave under s 444E of the Corporations Act to commence proceedings against Probuild. AIG submitted that these arguments are nullified by the plaintiffs having obtained leave to issue a proceeding.

The plaintiffs take a different view and submitted that each of the Disputed Primary PI Indemnity Documents and the Disputed Primary PI Past Claims Documents have not been sought solely on the basis that they are relevant to the question of leave under s 444E but on the basis that they are ‘immediately and directly relevant to the question whether the plaintiffs should commence proceedings against AIG’.[7]
[7]Plaintiffs’ Submissions in Reply of Second Defendant’s Further Submissions filed 30 March 2023, 3 [7].

I agree with the plaintiffs. Their application was made on the basis that the documents sought are relevant to the question whether to bring proceedings against Probuild and AIG. The fact that proceedings have now been issued against Probuild does not resolve the issue regarding AIG. That is not to say that the application does not face further hurdles as discussed below, but I do not consider that the issuing of a proceeding against Probuild alone precludes AIG from pursuing its application against AIG.

Application of r 32.05
Legal principles

There are four conditions that need to be met before the discretion of the Court set out in r 32.05 of the Rules is enlivened.[8] Those conditions, from the language of r 32.05, are as follows.
[8]Australian Gift and Homewares Association Ltd v Melbourne Convention and Exhibition Trust (Ruling No 1) [2014] VSC 481, [41] (Derham AsJ) (‘Australian Gift’).

First, the plaintiffs must have a reasonable cause to believe it may have a right to relief in the Court against the defendants. In Australian Gift and Homewares Association Ltd v Melbourne Convention and Exhibition Trust (Ruling No 1) (‘Australian Gift’),[9] Derham AsJ summarised the applicable principles as follows:[10]

(a)[t]he plaintiff is not required to show it that [sic] has a prima facie case that it has a right to relief;
(b) [i]t is not necessary to show precisely what cause of action the plaintiff may have; such a requirement would defeat the object of the rule;
(c) [r]ather, it need only be shown that the facts are such that it may reasonably be believed that the plaintiff may have a right to obtain relief; and
(d) [t]he test for determining whether the plaintiff has ‘reasonable cause to believe’ is an objective test.

[9]Ibid.

[10]Ibid [42] (citations omitted).

Second, the plaintiffs must have made all reasonable inquiries, and third, having made those inquiries, the plaintiffs do not have sufficient information to enable them to decide whether to commence proceedings. In Australian Gift, Derham AsJ summarised the applicable principles as follows:[11]

(a) [t]he requirement is primarily concerned with whether, as an objective fact, the plaintiff has sufficient information to determine whether to commence proceedings;
(b) [i]t is for the court to determine whether the plaintiff has sufficient information available to it; the plaintiff’s own assertion that it does not is neither determinative nor strictly necessary;
(c) [a]ccordingly, an application cannot succeed if the plaintiff has sufficient information (objectively assessed) but is unable to determine whether to commence proceedings due to subjective factors, for example, an overly cautious nature;
(d) [c]ourts have, however, approved litigants taking a conservative or prudent approach by applying for preliminary discovery under the rule; and
(e) [i]f there is evidence that an applicant has in fact decided to commence proceedings, the application must fail.

[11]Ibid [43] (citations omitted).

Fourth, it must be reasonable for the plaintiffs to believe that the defendants have or have had or are likely to have been in possession of the documents sought.

Rule 32.05 provides that where those conditions are satisfied, ‘the Court may order that a person shall make discovery … of any document of the kind described in paragraph (c)’; that is, of any document ‘relating to the question whether the applicant has the right to obtain the relief’ (emphasis added). The extent to which these words constrain the exercise of the discretion once engaged is discussed in greater detail below.

The plaintiffs relied on two further authorities in support of the proposition that preliminary discovery is not limited to documents required to fill gaps, but extends to information required to make an informed decision about whether to bring a proceeding, including information relating to whether the cost and risk of litigation is worthwhile. The first decision is Beston Parks Management Pty Ltd v Sexton,[12] where Hollingworth J held:

The following general principles are not controversial. The rule should be construed benevolently, because it is intended to assist an applicant who does not have sufficient, precise information to commence a proceeding, and to prevent the bringing of speculative suits. It must be given the fullest scope its language will reasonably allow.
It is not necessary to show precisely what cause of action the applicant may have, merely that the facts are such from which it may reasonably be believed that the applicant may have a 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. Although some ‘fishing’ enquiry is permitted, a ‘flimsy foundation’ or ‘mere hunch’ will not be sufficient to constitute reasonable cause. An applicant does not have to prove that there will be, only that there may be, a real benefit from making the order. The benefit may be the drawing of an appropriate pleading with proper particulars and the avoidance of substantial amendment after discovery, or, alternatively, the possible avoidance of unnecessary and fruitless litigation.[13]

[12][2008] VSC 392 (‘Beston’).

[13]Ibid [52]–[53].

The second decision is B J Bearings Pty Ltd v Whitehead (‘B J Bearings’),[14] where Hargrave J referred to the liberal or benevolent construction and continued:

The fact that an applicant for preliminary discovery already has enough evidence to establish a prima facie case against a proposed defendant does not mean that the applicant has sufficient information to enable it to decide whether to commence a proceeding. An applicant in that position may nevertheless ‘need information to know whether the cost and risk of litigation is worthwhile.’ For example, an applicant with sufficient information to plead a prima facie case may prudently wish to obtain preliminary discovery about ‘what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent’s breach and the likely quantum of any damages award’.
An applicant for preliminary discovery is entitled to be cautious before making a decision to embark upon costly litigation. This approach is consistent with the policy underlying the rule. It is also, of course, consistent with the policy underlying the Civil Procedure Act 2010 generally, and the ‘proper basis certification’ requirements in s 42 of that Act in particular.[15]

Do the plaintiffs have reasonable cause to believe they may have a right to relief against the defendants?

[14][2016] VSC 44 (‘B J Bearings’).

[15]Ibid [19(2)]–[19(3)] (citations omitted).

The plaintiffs rely on the following propositions which were not disputed by the defendants and which I accept:

(a) the plaintiffs are not required to show that they have a prima facie case for relief or to identify the cause of action precisely,[16] rather, it is sufficient for the plaintiffs to identify factors that may reasonably give rise to a right to obtain relief (the ‘reasonable cause to believe’ being a belief that the plaintiffs may have a right to relief, not a conclusion that a prima facie case exists);[17]
[16] Australian Gift (n 8) [42]; Grocon Constructions (Vic) Pty Ltd v Biosciences Research Centre Pty Ltd [2014] VSC 204, [55] (Vickery J) (‘Grocon’); Plzen Pty Ltd v P&O Wharf Management Pty Ltd [2007] VSC 318, [17(e)] (Habersberger J) (‘Plzen’); Beston (n 12) [53].
[17]Australian Gift (n 8) [42]; Grocon (n 16) [55]; Plzen (n 16) [17(d)]; Beston (n 12) [53].

(b) whether there is a relevant ‘reasonable cause to believe’ must be determined objectively;[18]

(c) some fishing is permitted but a ‘flimsy foundation’ or ‘mere hunch’ is insufficient to constitute a reasonable cause of action;[19] and

(d) venturing too far into the merits of the existence of a possible cause of action may give rise to error.[20]

[18]Australian Gift (n 8) [42]; Grocon (n 16) [55]; Plzen (n 16) [17(c)]; Beston (n 12) [55].

[19]Grocon (n 16) [87]; Plzen (n 16) [17(f)]; Beston (n 12) [53].

[20] See, eg, Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64, 78 [53]–[54] (French, Weinberg and Greenwood JJ) (‘Telstra’).

AIG does not dispute that there is reasonable cause to believe that the first plaintiff has, or may have, the right to obtain relief against Probuild for breach of its obligations and warranties under the construction Contract in respect of the alleged defects in the Stage 7 works.

As noted above, AIG consents to orders granting the second plaintiff access to documents to be discovered by Probuild excluding the Disputed Documents. But AIG otherwise says that the second plaintiff has failed to establish it has a reasonable cause to believe it has or may have a right to obtain relief against Probuild or AIG. This submission is put on the basis that the second plaintiff is not a party to the construction Contract and so cannot have a breach of contract claim. In relation to the misleading or deceptive conduct claim, AIG submits in relation to claims by both plaintiffs, that there is insufficient evidence to support the bald assertions in relation to the misrepresentations. Further, even if there were such evidence, the plaintiffs have not produced any evidence of any representations made to the second plaintiff (which was not a party to the contract of sale) by Probuild which might support such a claim.

In response to AIG’s submission as to the right to relief based on breach of contract, the plaintiffs submitted in reply that the relevant test sets a low threshold and simply requires the second plaintiff to satisfy the Court that there is reasonable cause to believe they may have a right to obtain relief. That may be so, but in the present case there was no articulation of the nature of the contractual claim that the second plaintiff may have against the defendants in the absence of privity. In those circumstances, I am not satisfied that the second plaintiff has reasonable cause to believe that it may have a right to relief for breach of contract.

Have the plaintiffs established a reasonable cause to believe that they may have a right of action based on misrepresentations made by Probuild?

In the First Morcom affidavit, Ms Morcom states that:

[T]he co-owners consider that they may have the right to obtain relief against Probuild for misleading or deceptive conduct contrary to section 18 of Schedule 2 of the Competition and Consumer Act 2010 (Cth) … on the basis of representations made by Probuild.

Ms Morcom does not explain what the representations may have been, or when they were made, or by whom, or how they would give rise to a cause of action under the Australian Consumer Law. Similarly, in their submissions, the plaintiffs did not descend into detail as to what representations they say were made. The plaintiffs emphasise in their submissions that the test sets a low threshold which does not require the Court to form any concluded view about the legal merits of the claim.

AIG submits that it is not sufficient for the plaintiffs merely to say there is a possibility that they have a cause of action for misleading and deceptive conduct based on misrepresentations but that they must put forward facts that create ‘an inclination of the mind’ that the plaintiffs may have a right to obtain relief in Court.[21]
[21]St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360, [26(d)] (Hely J) (‘St George Bank’).

I agree with AIG’s submission. In my view, there is insufficient evidence before me to enable me to conclude that the plaintiffs may have the right to obtain relief against Probuild for misleading or deceptive conduct. As conceded by AIG, it is within the realms of possibility that such a claim may be made, or even ultimately succeed, but that is not sufficient for the purposes of the inquiry before me. Accordingly, the plaintiffs have not established that they have a reasonable cause to believe that they may have a right to relief against the defendants based on any misleading or deceptive conduct.

Could the second plaintiff rely on any misrepresentations in any case?

If I am wrong, and there is sufficient evidence to establish that the plaintiffs have a reasonable cause to believe that they might have a right of action based on misrepresentations, then the next question is whether the fact that the representations were not made to the second plaintiff means that the second plaintiff would have no claim in relation to them.

AIG submits that even if representations were made, the second plaintiff would have no cause of action in relation to them because the representations could not have been made to the second plaintiff as it only became a co-owner of the property after any relevant misrepresentations would have been made, and could not have relied on them. In response, the plaintiffs submit that they only need to satisfy the Court that there is a reasonable cause to believe that they may have a right to obtain relief in Court.[22] In that regard, in relation to the misleading and deceptive conduct claim, they submit that:

[T]he second plaintiff does have a right to obtain relief under the Australian Consumer Law against [Probuild] on the basis that it has suffered loss as a result of [Probuild’s] representations even if the relevant reliance was not its reliance.

[22]See Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435, 446–7 [48] (‘Optiver Appeal’).

The plaintiffs rely on decision of BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (‘BHP’) in which McMurdo J held:[23]
[23]BHP Coal Pty Ltd v O & K Orenstein & Koppel AG [2008] QSC 141, [216]–[218] (emphasis added).

I return to the position of the seventh plaintiff. As a part owner of the BWE when it collapsed, it undoubtedly suffered losses of the same kind as those suffered by its co-venturers and for which they are entitled to be compensated pursuant to s 82 of the Act. There was no argument by the defendants that the seventh plaintiff is not entitled to damages under s 82 if its co-venturers are so entitled but the point must be considered. The question is whether the seventh plaintiff is a person which suffered loss or damage by the conduct of O&K which breached s 52. That conduct was in the nature of a misrepresentation but the seventh plaintiff was not a representee. However that need not be fatal. In Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [(1997) 37 FCR 526, 529–530] Lockhart J said:
Section 82 is the vehicle for the recovery of loss or damage for multifarious forms of contravention of the provision of Pts IV and V of the Trade Practices Act. It is important that rules laid down by the courts to govern entitlements to damages under s 82 are not unduly rigid, since the ambit of activities that may cause contravention of the diverse provisions of Pts IV and V is large and the circumstances in which damage there from may arise will vary considerably from case to case.
What emerges from an analysis of the cases (and there are many of them) is that they do not impose some general requirement that damage can be recovered only where the applicant himself relies upon the conduct of the respondent constituting the contravention of the relevant provision.
Also, a perusal of the provisions of Pts IV and V, the contravention of which gives rise to an entitlement to an applicant for compensation for loss or damage, points to the conclusion that the applicants may claim compensation when the contravener’s conduct caused other persons to act in a way that led to loss or damage to the applicant.

This passage was cited with approval by Gummow J in Marks v GIO Australia Holdings Ltd [(1998) 196 CLR 494, 528 [101]] and has been applied in many cases: see e.g. Hampic Pty Ltd v Adams [(2000) ATPR 41–737; [1999] NSWCA 455, [35] (Mason P and Davies AJA)] and McCarthy v McIntyre [[1999] FCA 784, [48] (Hill, Sackville and Katz JJ)]. In Australia and New Zealand Banking Group Ltd v Pan Foods Company Importers and Distributors Pty Ltd [[1999] 1 VR 29, 41–42], Winneke P, referring to Janzen-Cilag, said that the burden of proving the causative link between the conduct and the loss is not as easily discharged where the claimant is not an entity which has relied to its detriment upon misleading representations made directly to it. In McCarthy v McIntyre, the Full Court of the Federal Court said that [[1999] FCA 784, [48]]:
All that is necessary, in our opinion, is that there be a sufficient and direct link (ie causation) between the loss or damage alleged to have been suffered by the claimant and the misleading or deceptive conduct.

The notion of causation within s 82 is ‘to be understood by reference to the statutory subject, scope and purpose’ as Gummow, Hayne and Heydon JJ said in Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [(2005) 221 CLR 568, 597 [99]]. An order under s 82 is made ‘in order to give effect to a statute with a discernible purpose; and that purpose provides a guide as to the requirements of justice and equity in the case’: per Gleeson CJ in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [(2002) 210 CLR 109, 119 [26]] cited in Allianz Australia Insurance Limited v GSF Australia Pty Limited [(2005) 221 CLR 568, 598 [100]].
In the case of the seventh plaintiff, it is unlikely that anyone on its behalf knew of the 1984 repairs or of O&K’s conduct in relation to them. Unlike the other plaintiffs, the seventh plaintiff does not claim to have acted in some way, or not acted in some way, in reliance upon the exercise of due care and skill in O&K’s design of the repair solution. Nevertheless the connection between the conduct and the loss suffered by the seventh plaintiff is relatively close. The immediate consequence of O&K’s misleading conduct was, as I have found, that the then owners did not procure a careful repair solution and the BWE thereafter had an undue structural weakness. It was susceptible to a sudden and catastrophic collapse which is exactly what happened in 2000. When that occurred, the nature of the seventh plaintiff’s loss was identical to that suffered by the other plaintiffs. It is difficult to see that the statutory purpose would be served by compensating those other plaintiffs but not the seventh plaintiff. It has suffered an identical loss because its co-owners relied upon advice which was misleading or deceptive. Its loss is thereby from a reliance upon that conduct, although the reliance was not its reliance. Accordingly, the seventh plaintiff is entitled to damages against O&K pursuant to s 82.

Having regard to the above passage from BHP and the authorities referred to in it, I agree with the plaintiffs’ submission that the second plaintiff’s reliance is not a necessary element of a misleading and deceptive conduct claim by the second plaintiff. It appears from that authority that reliance by the first plaintiff may be sufficient to support the second plaintiff’s misleading and deceptive conduct claim.

In light of my finding that there is insufficient evidence of the misrepresentations, it is unnecessary to express a view about the question of reliance. But if I am wrong, and there is sufficient evidence that the representations were made, I do not consider that the fact that the representations were not made to the second plaintiff would preclude it from having a reasonable cause to believe that it might have a right of action in respect of such representations.

Have the plaintiffs made all reasonable inquiries?

The defendants do not take issue with the plaintiffs’ submission that they have made all reasonable inquiries. Rather, the submission is that they already have sufficient information to decide whether to commence proceedings.

Do the plaintiffs have sufficient information to enable them to decide whether to commence proceedings?

As noted above, the plaintiffs say they do not have sufficient information to decide whether to commence proceedings and say they need to know:

(a) the existence and terms of any responsive policies of insurance;

(b) the timing and terms of any notification of the plaintiffs’ claim;

(c) whether the insurers have denied or failed to confirm indemnity; and

(d) the extent to which previous claims have been made or paid and therefore the extent to which there are likely to be proceeds available to satisfy any judgment debt.

Probuild submits that the plaintiffs have sufficient information to enable them to decide whether to commence proceedings against Probuild and/or the Primary PI Insurers, as the plaintiffs know, or will know after preliminary discovery consented to by AIG:

(a) the identity of the Primary PI Insurers;

(b) the terms of the potentially relevant Primary PI Policies;

(c) the dates on which relevant notifications were made under the Primary PI Policies;

(d) that AIG has not made any unconditional grant of indemnity to Probuild under the Primary PI Policies; and

(e) that the limits of indemnity under the Primary PI Policies have not been exhausted.

The specific documents in dispute appear to be the following:

(a) all documents relating to any confirmation from the Primary PI Insurers of indemnity or any denial of indemnity (defined earlier as ‘Disputed Primary PI Indemnity Documents’), which are sought pursuant to r 32.05 of the Rules;

(b) all documents relating to the confirmation of other claims made upon the Primary PI Policies, including details of any settlement of such claims (defined earlier as ‘Disputed Primary PI Past Claims Documents’), which are sought pursuant to r 32.05 of the Rules.

Do the plaintiffs have sufficient information in relation to the terms of relevant insurance policies?

It does not appear to be contested that the plaintiffs need to know the terms of the relevant insurance policies in order to determine whether to bring a proceeding. It appears that there is no dispute that relevant insurance policies with the Primary PI Insurers have been discovered or will be discovered in accordance with the terms of the consent orders.

As to the terms of policies with any excess insurers, there is no suggestion that the plaintiffs know the terms of excess insurance policies. If the identity of the excess insurers is relevant to the decision whether to bring a proceeding, then the terms of any policy of those excess insurers are also relevant.

Senior counsel for AIG submitted that upon receipt of the preliminary discovery to which AIG consents, the plaintiffs will know ‘the terms of any excess policies. So they’ll know the full amount of insurance potentially available’.[24] If that is so, then I consider it is not necessary or appropriate at this stage to order AIG to provide preliminary discovery identifying the excess insurers.

Do the plaintiffs have sufficient information in relation to the dates on which relevant notifications were made under the relevant insurance policies?

[24]Transcript (n 3) 61.

It does not appear to be contested that the plaintiffs need to know the dates on which relevant notifications were made under the relevant insurance policies in order to determine whether to bring a proceeding. It appears that the plaintiffs know, or will know upon discovery of consented documents, the dates on which relevant notifications were made under the insurance policies applicable to the 2019–2020 policy year. While AIG is prepared to provide or permit preliminary discovery of the Primary PI Policies for the 2020–2021 and 2021–2022 policy years, they submit that the plaintiffs have not established any reason to believe that they may have the right to obtain relief under those policy years. In particular, AIG relies on the First Morcom affidavit where Ms Morcombe defines the relevant policy as being the 2019–2020 policy and where she states that the claim was made in October 2019.

It is not sufficiently clear to me why documents relating to these later years are relevant. Accordingly, I am not satisfied that the plaintiffs lack sufficient information in this regard.

Do the plaintiffs have sufficient information regarding whether AIG has made any unconditional grant of indemnity to Probuild under the Primary PI Policies?

The plaintiffs seek any documents evidencing confirmation or denial of indemnity. The plaintiffs submitted that merely being informed that AIG has not made any unconditional grant of indemnity provides very little information to assist the plaintiffs to assess the prospects of any action. Such information does not inform the plaintiffs whether there has been an outright denial of indemnity or whether indemnity has been granted subject to conditions, and if so what those conditions are. For example, if indemnity has been granted subject to the condition of the excess being paid, then the plaintiffs may elect to pay the excess and seek to exercise the right of subrogation, thus potentially avoiding the very expensive and time-consuming exercise of issuing a proceeding against AIG.

AIG has informed the plaintiffs that the Primary PI Insurers have not made any unconditional grant of indemnity to Probuild under the Primary PI Policies, but opposes the production of further documentation in relation to this issue on the basis that the plaintiffs have, or will have upon production of consent categories of documents, sufficient information to decide whether to bring a proceeding or not. That is, the plaintiffs will be able to consider the terms of the policy, and decide for themselves whether the facts of the case respond to it. AIG submits that the plaintiffs, having been told that AIG has not made any unconditional grant of indemnity, have sufficient information to decide whether to bring a claim.

I agree with the plaintiffs. The class of documents sought arguably go to what defences may be available to AIG. In that sense, they are documents relating to the question whether the plaintiffs have ‘the right to obtain relief’ as discussed in Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (‘Optiver’).[25] If the reason an unconditional grant of indemnity has not been given is because a premium has not been paid, then the proceeding may be unnecessary. Other reasons may lead to other decisions by the plaintiffs. The observations by Hargrave J in B J Bearings are apposite:

An applicant for preliminary discovery is entitled to be cautious before making a decision to embark upon costly litigation. This approach is consistent with the policy underlying the rule. It is also, of course, consistent with the policy underlying the Civil Procedure Act 2010 generally, and the ‘proper basis certification’ requirements in s 42 of that Act in particular.[26]

[25][2007] FCA 2065; (2007) 247 ALD 199 (‘Optiver Preliminary Discovery Application’). For the Full Court decision on appeal, see Optiver Appeal (n 22). This case deals with O 15A, r 6(a) of the repealed Federal Court Rules (Cth), which mirrors s 32.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).

[26]B J Bearings (n 14) [19(3)] (citations omitted).

Accordingly, I consider that it is appropriate in the circumstances to order preliminary discovery of documents evidencing confirmation of indemnity or denial of indemnity.

Are the plaintiffs entitled to disclosure of information in relation to whether the limits of indemnity available under the Primary PI Policies have been eroded?

The plaintiffs submit that in order to decide whether it should commence a proceeding, it needs to know the extent to which there are likely to be proceeds available to satisfy any judgment debt; that is, there needs to be disclosure of any claims made and details of any settlements of such claims. AIG has informed the plaintiffs, and it seems not to be contested, that the limits of indemnity under the Primary PI Policies have not been exhausted. AIG says that the plaintiffs are not entitled to preliminary discovery of any information beyond that.

There is a distinction to be drawn between:

(a) what information is sufficient to enable the plaintiffs to decide whether to commence a proceeding; and

(b) documents relating to the question whether the plaintiffs have the right to obtain relief.

The former is a precondition (set out in r 32.05(b)) to the Court exercising its discretion to order preliminary discovery. I will refer to this as ‘the paragraph (b) precondition’. The latter is the description (in the final words of r 32.05) of the documents that may be ordered to be discovered in the exercise of that discretion. I will refer to this as ‘the power of the Court’. They are not, in their terms, necessarily the same thing, because a plaintiff may want to know information well beyond that relating to the question whether it has a ‘right to obtain relief’ before it makes a decision as to whether to commence a proceeding.[27]
[27]See BCI Media Group Pty Ltd v Corelogic Australia Pty Ltd [2020] FCA 1556, [61]–[69] (Charlesworth J) (‘BCI Media’).

The structure of the rule is such that the jurisdiction of the Court is limited to ordering production of ‘any document relating to the question whether the applicant has the right to obtain the relief’. If the documents sought do not meet that description, that is the end of the matter as the Court has no power to order production of any other types of documents.[28] Accordingly, a critical question is whether documents evidencing the proceeds available under insurance policies to satisfy a claim in the event judgment is obtained are documents ‘relating to the question whether the applicant has the right to obtain the relief’.
[28]See ibid.

It is sufficiently clear from the authorities on this point that the policy underlying the rule favours a broad interpretation of this power. As Hely J held in St George Bank Ltd v Rabo Australia Ltd (‘St George Bank’):

[T]he Rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the court, exercised in the particular circumstances of each case …[29]

[29]St George Bank (n 21) [26(a)] (citations omitted).

In Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy, the Federal Court observed that it would be expected that documents relating to the right to bring a claim ‘would go to issues of liability’.[30]
[30] Telstra (n 20) [59] (French, Weinberg and Greenwood JJ), cited in The Hancock Family Memorial Foundation Ltd v Fieldhouse (No 2) [2008] WASC 147, [38] (Le Miere J) (‘Hancock’). See also BCI Media (n 27) [61]– [69].

Optiver is a significant appellate decision on this aspect of preliminary discovery and it bears some close analysis. In Optiver, the applicant had sought preliminary discovery from former employees in relation to a business they had set up in competition. The applicant suspected they had misused confidential information. The critical issue was whether the applicant had sufficient information to decide whether to commence proceedings, or whether it was also entitled to documents going to the extent of relief that may ultimately be recovered.

At first instance, Tamberlin J emphasised that the purpose of preliminary discovery was limited, and was not intended to and did not extend to discovery of documents going to the extent of the relief that may ultimately be recovered.[31] His Honour proceeded on the basis that it was sufficient for the purposes of the rule that the applicant had sufficient information to plead ‘a bare pleadable case’.[32]
[31]Optiver Preliminary Discovery Application (n 25) [27]–[29].
[32]Ibid [27].

His Honour held that as the applicant knew of ‘the termination or resignation of the … respondents, their subsequent establishment of [the competing company] … the discovery of two emails … and Mr Shale’s calculations’,[33] the applicant had ‘substantially more than what is required to institute “a bare pleadable case”’ and therefore his Honour held there was no basis upon which to order preliminary discovery:[34]

In this case, there is real doubt about the extent of the relief to which Optiver may be entitled, particularly in relation to the amount of compensatory and additional damages it might receive under s 115 of the Copyright Act 1968 (Cth). However, there seems to be little doubt in the submissions and evidence of Optiver that it will seek compensatory damages under s 115(2), additional damages under s 115(4), equitable compensation for breach of confidence and injunctive relief restraining further breaches of copyright and confidence. Given that the type of relief which might be obtained is clear, and given that there is sufficient information to formulate the necessary pleadings, I do not accept that some uncertainty regarding the extent of relief renders Optiver unable to decide whether to commence proceedings to obtain that relief.[35]

[33]The emails contained key software information and codes of the applicant: see Optiver Appeal (n 22) [14].

[34]Optiver Preliminary Discovery Application (n 25) [31].

[35]Ibid [34].

Accordingly, the issue concerned preliminary discovery of documents going to the question of the extent of the loss and damage claimed, and not to their prospects of recovery if they were successful. That is a point of difference between Optiver and this case.

The decision at first instance was overturned on appeal. The focus of the decision was directed towards pleading requirements, and whether Tamberlin J was correct in proceeding on the basis that the appropriate test is whether the applicant has sufficient information to decide whether it has a ‘bare pleadable case’. The Full Court disagreed. In discussing the policy underlying the rule, it said:

The policy behind the rule is that even where there is a reasonable cause to believe that a person may have a right to relief, nevertheless that person may need information to know whether the cost and risk of litigation is worthwhile. As Hely J pointed out in St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147 at [26], the question does not concern the right to relief but rather ‘whether to commence proceedings’. Inspection of documents in the possession of the proposed defendant may enable a properly informed decision to be made whether to commence a proceeding to obtain the relief.[36]

[36]Optiver Appeal (n 22) [36] (Heerey, Gyles and Middleton JJ).

The full quote from the decision of Hely J in St George Bank is:

[T]he question posed by sub-paragraph (b) of the rule is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent. The question is whether the applicant has sufficient information to make a decision whether to commence proceedings in the Court: Quanta Software [International Pty Ltd v Computer Management Services Pty Ltd (2000) 175 ALR 536] at [33]–[34]; Alphapharm [Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391] at 24–6. Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent’s breach and the likely quantum of any damages award: CGU Insurance Ltd v Malaysia International Shipping Corp Berhad (2001) 187 ALR 279 at [21]; Quanta Software at [33]–[34]; Alphapharm at 24–26, Airservices Australia [v Transfield Pty Ltd (1999) 92 FCR 200; 164 ALR 330] at [5].[37]

[37]St George Bank (n 21) [26(f)] (emphasis in original).

The ‘question … whether to commence proceedings’ referred to by Hely J and the Full Court in Optiver, is the equivalent of the question set out in r 32.05(b). Undoubtedly, the inspection of such documents ‘may enable a properly informed decision to be made whether to commence a proceeding’. But as noted above, that state of knowledge is a precondition to the Court exercising its discretion to order preliminary discovery; it is in different terms to the description of the documents that the Court has power to order to be discovered in the exercise of that discretion. Whether or not the policy of the rule is as described, the language used by the legislature is that in certain circumstances (including satisfaction of the condition in r 32.05(b)), the Court may order preliminary discovery of documents ‘of the kind described in paragraph (c)’; that is of ‘any document relating to the question whether the applicant has the right to obtain the relief’. The legislature could have expressed the rule in terms that the Court may order preliminary discovery of all documents described in sub-para (b) — that is, relevant to the question whether the applicant should bring proceedings — but it chose (c).

Ultimately, the Full Court in Optiver held that:

[a]t present, as his Honour observed, the case that Optiver has is a purely circumstantial one relying upon inference. For all it knows, there may be facts and circumstances which make it equally likely, or more probable than not, that Tibra obtained its software in ways that did not infringe any of Optiver’[s] rights. In our opinion, Optiver has not sufficient information to enable a decision to be made whether to commence a proceeding.[38]

[38]Optiver Appeal (n 22) [35].

It appears from this quote that the class of information that the Full Court considered the applicant was entitled to, for the purposes of deciding whether to commence a proceeding, extended to information about the way in which the competitor (Tibra) obtained its software. That potentially goes to the sustainability of any claim. Such information could potentially be a complete answer to any claim, and in that sense, be sufficient to preclude any right to relief. In that sense, documents going to these questions could be said to ‘relate to’ the question ‘whether the applicant has a right to obtain the relief’. But I do not read the decision as expanding the class of documents that may be obtained by preliminary discovery beyond those relating to ‘whether it has a right to obtain relief’ to include documents relating to the financial viability of a potential defendant, or the plaintiff’s ability ultimately to recover such relief as may be ordered. In my opinion, the language of r 32.05 cannot sustain such an interpretation.

The Full Court in Optiver also expressed the broad principle that ‘there may be real uncertainty as to the quantum of provable damage, such as to throw doubt on the practical wisdom of issuing proceedings’.[39] In support of that proposition, it cited three cases. It is necessary to consider those cases more closely to determine the extent to which ‘practical wisdom’ can be taken into account. Does it mean the evidence, while supporting the existence of a right to obtain the relief, is not sufficiently compelling to warrant issuing a proceeding? Or does it extend to the questions around the practical likelihood of recovery, for example, whether a potential defendant is impecunious, or, as in this case, whether there is any insurance coverage?
[39]Ibid (emphasis added).

The first case is Hughes Aircraft Systems International v Civil Aviation Authority.[40] In that case, the applicant had tendered for a contract which it had lost. There was information that the tender process had been unfair, and the applicant had obtained advice from senior counsel that it had ‘good prospects of establishing that the [Civil Aviation Authority] was guilty of false or misleading conduct in breach of s 52 of the Trade Practices Act’ and ‘has reasonable prospects of establishing … breach of contract’.[41] Notwithstanding those matters, the applicant sought preliminary discovery of a suite of documents including tenders and any amended tenders, communications between the relevant parties, internal assessments of the tenders, agendas and minutes of meetings, the contract awarded and an auditors report of the procurement process.
[40](1995) 217 ALR 303.
[41]Ibid 307.

Davies J held as follows:

Notwithstanding those matters [senior counsel’s opinion], it seems to me that, on the present information available to it, Hughes would be unlikely to have sufficient information before it responsibly to commence a proceeding in this court.
I accept the evidence of Mr J J Higgins, general counsel and senior vice President of Hughes Electronics Corporation, the parent company, that, in his opinion, access to the documents is necessary to furnish him with the evidentiary facts he requires in order to reach a decision whether Hughes will proceed to institute a claim for damages. As Mr Higgins has pointed out in his affidavit, Hughes does not possess copies of the crucial documents or have actual knowledge of their contents.[42]

[42]Ibid.

It appears that the critical aspect of this application was the fact that the applicant ‘did not possess copies of the crucial documents or have actual knowledge of their contents’.[43] It is a similar decision to that in Optiver where there is some information, sufficient to support an inferential case, but further information is required to reach the requisite state of knowledge, and may be determinative of whether there is a right to claim.
[43]Ibid 303.

The next case is Western Bulk Carriers (Australia) Pty Ltd v Cosco Bulk Carrier Company Co Ltd.[44] In that case, the question was whether the fact that the applicant had access to an expert report from another party meant that it had ‘sufficient information’. Beaumont J held that the fact that a party has access to a single expert report from another party did not in the circumstances mean that it had sufficient information for the purposes of the rule. His Honour noted that:

[E]xperience also indicates that, until any expert is cross-examined in a forensic environment, there can be no sure guide as to the ultimate effect of evidence given. That being so, it seems to me that it is reasonable for the plaintiffs to wish to retain their own experts in this connection; that is to say, in connection with the making of a decision whether or not to commence proceedings in this Court for recovery of economic loss. It seems to me that, in principle, it would be wrong to restrict the plaintiffs to an expert or experts retained by other parties whose interests may, or may not, differ from those of the plaintiffs.
In other words, if it were the present case that the plaintiffs had not had the opportunity to obtain or to have access to any expert material of any kind, clearly the present application would not only have been justified, but it would have been necessary in any prudent decision-making process to institute proceedings. The mere fact that the report of an expert witness or potential expert witness retained by another party is available, does not, in my opinion, detract from what I would see as the right of any litigant to obtain assurance from an expert quarter before embarking upon an expensive litigious venture.[45]

[44][2002] FCA 1520.

[45]Ibid [20]–[21].

The case was decided on the basis that in determining whether it had a ‘right to obtain relief’ for the purposes of the rule, it was entitled to rely on independent, or at least sufficiently reliable, evidence.

The final case is Minister for Health and Aged Care v Harrington Associates Ltd.[46] That case concerned an application by the Minister for information in relation to the terms of an insurance policy and the entitlements of insured persons. The relevant reasoning is sufficiently set out in the following quote:

Plainly he lacked critical information, namely, the precise terms of the insured event and the precise entitlements of insured persons. That information is necessary to enable the Minister to determine whether the liability undertaken by way of insurance answers the description in either para(ab) or para(b) of the description of ‘health insurance business’, or is excluded from the definition by reason of the definition of ‘accident insurance business’ and the terms of reg47(1)(b) of the National Health Regulations.[47]

[46][1999] FCA 549.

[47]Ibid [45].

Each of these three cases focussed on whether the applicant had sufficient information relating to the availability or strength of the claim to enable a decision to be made whether to bring a claim. Consistently with those authorities, it has been held that documents ‘relating to the question whether the applicant has the right to obtain the relief’, being the only documents in relation to which the Court has power to order preliminary discovery, include documents going to:

(a) what defences are available to the respondent;

(b) the possible strength of those defences;

(c) the extent of the respondent’s breach; and

(d) the likely quantum of any damages award.[48]

[48]See BCI Media (n 27) [48]; ED Oates Pty Ltd v Edgar Edmondson Imports [2012] FCA 356, [26]; St George Bank (n 21) [26(f)], citing CGU Insurance Ltd v Malaysia International Shipping Corp Berhad (2001) 187 ALR 279, [21]; Quanta Software International Pty Ltd v Computer Management Services Pty Ltd (2000) 175 ALR 536, [33]–[34] (‘Quanta’); Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391, 24–6; Airservices Australia v Transfield Pty Ltd (1999) 92 FCR 200, [5].

The plaintiffs submit broadly that ‘rule [32.05] enables an applicant who believes that he or she may have a cause of action to obtain sufficient information to know whether the risk of litigation is worthwhile’.[49] In support of this proposition, the plaintiffs rely on the decision of Hargrave J in B J Bearings.[50] Read in isolation, that proposition may support very broad powers to order preliminary discovery going well beyond those particular matters identified in Optiver. But the decision in B J Bearings relies heavily on the decision in Optiver, and I do not read it as an extension of anything said in Optiver as summarised above.
[49]Plaintiffs’ Outline of Submissions In Support of Application for Preliminary Discovery filed on 27 October 2022, [14] (‘Plaintiffs’ First Outline of Submissions’).
[50]B J Bearings (n 14) [19].

In my opinion, documents relating to the extent to which there are likely to be proceeds available to satisfy judgment debt do not fall within the scope of documents relating to ‘the right to obtain relief’ even on the broad interpretation in Optiver.

The plaintiffs submit that as Probuild is in administration and leave to bring a proceeding is required, the question of what funds would be available to satisfy judgment debt is relevant to the question of whether leave should be granted to bring a proceeding, and indeed whether to bring the proceeding against Probuild and AIG, and is properly subject to an order for preliminary discovery. In support of that proposition, the plaintiffs rely on a number of decisions which are each considered below.

The first case is The Hancock Family Memorial Foundation Ltd v Fieldhouse (No 2) (‘Hancock’)[51] in which the plaintiff alleged that it had a claim against Mr Fieldhouse, a lawyer, in respect of legal services he had provided. Mr Fieldhouse was covered by professional indemnity insurance. Upon his death, the plaintiff sought to proceed under s 51 of the Insurance Contracts Act 1984 (Cth), which provided a statutory right directly against the insurer. The plaintiff asserted that it did not have sufficient information to bring a claim. It sought preliminary discovery broadly of insurance contracts, certificates, schedules, and documents relating to whether there had been an admission or denial of cover.[52] It does not appear that documents were sought relating to whether there had been any payments made on the policy or the amount that may be available for satisfaction of any judgment debt. Ultimately, the Court held:

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.[53]

[51]Hancock (n 30).

[52]Ibid [17].

[53]Ibid [42].

I consider that the ‘extent of cover’ referred to is a reference to the terms of the contract of insurance as to coverage provided by it, and not a reference to the amount that may in fact be available to satisfy any judgment debt, having regard to claims that have been made.

The next case is BCI Media Group Pty Ltd v Corelogic Australia Pty Ltd (‘BCI Media’)[54] in which the relevant question was whether r 7.23(2) of the Federal Court Rules 2011 (Cth) authorised the Court to make an order for preliminary discovery of documents relevant only to the quantum of monetary remedies. Charlesworth J expressed the opinion that such documents were not documents relating to the ‘right to obtain relief’,[55] and therefore the language of the rule suggested that the Court was not empowered to order preliminary discovery of them. But Charlesworth J considered herself bound by the decision in Quanta Software International Pty Ltd v Computer Management Services Pty Ltd,[56] which held otherwise and which has been followed, including in that regard, in Optiver.In my opinion, the decision in BCI Media does not assist the plaintiffs in the present case. Even accepting, as the authorities do, that documents relevant only to quantum may be subject to orders for preliminary discovery, such questions are distinct from questions of the ability to recover should judgment be obtained. And it is the latter type of documents that the plaintiffs seek.
[54]BCI Media (n 27).
[55]Ibid [67]–[68].
[56]Quanta (n 48). See ibid [69].

In Seven Network v Cricket Australia,[57] Anastassiou J quoted from the decision in BCI Media at length and held that preliminary discovery was appropriate because there was ‘uncertainty regarding both: (i) whether [the plaintiff] has a right to obtain relief … and (ii) the quantum of any relief that may be obtained’. The separation of these two suggests that questions of quantum are distinct from questions of the right to obtain relief. If that is what is meant, then I do not agree with that construction. As discussed above, the Court only has power to order preliminary discovery of documents relating to ‘the right to obtain relief’ and that question has been interpreted consistently with the policy underlying it, as including questions of quantum. In any case, I do not consider that this decision advances the plaintiffs’ submission that it should have preliminary discovery of documents relating to the prospects of recovery of any judgment debt ultimately obtained.
[57](2021) 393 ALR 53, 82–83 [142].

In Lopez v Star World Enterprises Pty Ltd (‘Lopez’),[58] Olney J held that the question whether or not there was any insurance indemnity available in the event of liability being established was a proper matter to take into account for the purposes of s 440D(1) of the Corporations Act in determining whether or not leave to proceed should be given to institute proceedings against a company in administration. In the result, he ordered that the company produce for inspection ‘any contract of insurance that is applicable to any liability the respondent may subsequently be found to have in respect of the claims made in this proceeding’. Olney J did not go so far as to order that evidence of prior claims be produced, nor apparently was that raised.
[58][1997] FCA 454 (‘Lopez’).

The next case relied on is Wingecarribee Shire Council v Lehman Brothers Australia Ltd (‘Wingecarribee’)[59] which involved a complex administration. The administrators of Lehman Brothers had indicated to the Council that they could only give limited advice as to what claims against Lehman Brothers were responded to by which insurance cover. In those circumstances, the Council was in doubt as to whether any claim it had was covered by any insurance policy. The creditors meeting voted to instruct solicitors to bring an application for leave to proceed against the company to the extent necessary for the Court to determine whether the Court should make an order for production of insurance policies and ‘correspondence … relating to claims notifications under the relevant policies or notification of circumstances giving rise to a claim’.[60] It appears that information sought related to ‘which claims were responded to by which insurance cover’.[61] More particularly, the information sought was ‘insurance policies’ and ‘ancillary correspondence between Lehman Brothers and insurance brokers or insurers relating to claims notifications under the relevant policies’.[62] It does not appear that the application was for preliminary discovery going to the extent of funds available to satisfy any judgment debt. Notwithstanding the limited discovery sought, Rares J expressed the principle broadly as follows:

In my opinion, the question whether a respondent or defendant has assets that are available to satisfy a judgment and whether there is another party who may be liable, such as an insurer the subject of a charge under s 6 of the Law Reform (Miscellaneous Provisions) Act are matters which are within the power of the Court to require to be disclosed in the proceedings themselves: see Jackson v Sterling Industries Limited [1987] HCA 23; (1987) 162 CLR 612 at 622–623 per Deane J, where he discussed the ambit of s 23 of the Federal Court of Australia Act and the power of the court to grant relief in the nature of Mareva orders, including the disclosure of assets by a defendant or respondent.[63]

[59][2009] FCA 503.

[60]Ibid [6].

[61]Ibid [2]–[3].

[62]Ibid [6].

[63]Ibid [10] (emphasis added).

The case of Jackson v Sterling Industries Ltd,[64] cited in the above extract from Wingecarribee, was a case involving a Mareva injunction to preserve assets as security for the satisfaction of any judgment. In that case, Deane J discusses the broad power to make orders, in the proceedings themselves, for the disclosure of assets available for the satisfaction of any judgment. The Court undoubtedly has broad powers in that context where the subject matter is the preservation of assets that may otherwise be dissipated, but it is a different inquiry to preliminary discovery where the power of the Court is constrained by the words ‘relating to … the right to obtain the relief’. That is particularly so where, should proceedings be instituted in the present case, the documents sought by way of preliminary discovery would not be discoverable in the proceeding because, as conceded by senior counsel for the plaintiffs, they would not be relevant to any issue in the proceeding.
[64](1987) 162 CLR 612.

I note also that AIG submits that the provision of information about what claims have been made in the past would not necessarily result in the plaintiffs having information as to how much would be available to satisfy judgment debt. The reason that is said is because the number of claims and the number of payments at any point in time are subject to change in the future, and the present situation says little about what may be the situation between now and execution on any judgment that may be obtained several years in the future. The plaintiffs accept that that is so, but say that does not mean there is no utility in knowing what the claims situation is at present for the purposes of deciding whether to bring a claim. Further, the plaintiffs submit that AIG’s argument that the disclosure of past claims would be of little utility is an answer to AIG’s submissions that the information would give the plaintiffs an unfair asymmetric advantage in settlement negotiations.

The plaintiffs responded that ‘it’s the difference between putting your toe into the water and the water being clear, and putting your toe into the water and there being ten sharks swimming around’.[65]
[65]Transcript (n 3) 32–33.

In my opinion, neither the language of the rule, nor the authorities that have considered it, support the proposition that documents ‘relating to the question whether the applicant has the right to obtain the relief’ include documents relevant to the question whether, if the claim is successful, there will be proceeds available to satisfy any judgment debt. The legislature could have extended the power to order preliminary discovery to documents ‘relating to whether a plaintiff should bring a claim’, or even documents ‘relating to the claim’ broadly, but it did not. It limited the power of the Court to order preliminary discovery to documents ‘relating to the question whether the applicant has the right to obtain the relief’. While the words ‘relating to’ are broad, and the provision is to be given a broad interpretation, I do not consider that the language can be extended to include the contested documents sought in this application. In those circumstances, I do not consider that the Court has power to order preliminary discovery of the contested documents.

That is sufficient to dispose of the application for discovery of the contested documents.

General Discretion

AIG also submits that even if the requirements of r 32.05 were satisfied and the Court’s jurisdiction properly invoked, the Court should decline to exercise the discretion because of: the confidential nature of the information; its irrelevance to issues in the proceeding; and because disclosure would confer an asymmetric advantage on the plaintiffs in the context of litigation by giving knowledge of the maximum extent of the financial capacity of the defendants to pay.[66]
[66] Commonwealth Bank of Australia v ACN 076 848 112 Pty Ltd [2015] NSWSC 666, [23]; Kirby v Centro Properties Ltd [2009] FCA 695, [24], as applied in Evans v Davantage Group Pty Ltd (No 2) [2020] FCA 473 (Beach J) (‘Davantage’).

AIG relies on the decision of Ingram v Ardent Leisure Ltd (‘Ingram’)[67] in which Derrington J explained that the rationale for keeping insurance documents confidential from third parties was based on the obligations of utmost good faith. His Honour concluded that:

It follows that, regardless of how the discretion might be exercised in relation to other documents, it is likely that a somewhat exceptional case might have to be advanced before the discretion exercised to permit inspection of correspondence between insured and insurer, even where proper purpose is established.[68]

[67]Ingram (n 5).

[68]Ibid [99].

AIG also relies on the decision of Watson & Co Superannuation Pty Ltd v Dixon Advisory and Superannuation Services Ltd (‘Watson’)[69] which AIG submitted followed Ingram.
[69]Watson (n 5).

The plaintiffs seek to distinguish the cases AIG relied on.

In relation to Ingram, they submit it ‘concerned the confidentiality attaching to communications between an insured and insurer under a director and officer policy and has no application in the context of the Disputed Documents’.[70] I do not agree that Ingram is relevantly distinguishable. I understood AIG to be relying on it for the general proposition that insurance policies involve heightened duties of frankness and confidentiality and that disclosure of confidential insurance documents to third parties involves an intrusion into that special relationship that requires an exceptional case.
[70]Plaintiffs’ Outline of Reply Submissions In Support of Application for Preliminary Discovery filed 21 November 2022, [11] (‘Plaintiffs’ First Reply Submissions’).

In relation to Evans v Davantage Group Pty Ltd (No 2) (‘Davantage’)[71] and Watson, the plaintiffs seek to distinguish them on the basis that each involved cases where issues of insolvency and leave were not extant. The plaintiffs observe that in Davantage, Beach J stated that ‘[i]t is trite to observe that insurance policies are not normally discoverable where they are not relevant to the determination of a fact in issue, save for under specific exceptions dealing with an insolvency scenario’.[72] Beach J continued that sentence: ‘see the type of scenario dealt with in [Lopez]’.[73] In Lopez, Olney J ordered discovery in an insolvency context, but it is clear from that decision that discovery was only ordered of the insurance policy, and not of other insurance documents. Olney J held:

I am of the opinion that it is in the interests of justice that the applicant have leave to proceed against the respondent and that there be an order to that effect pursuant to s 440D of the Corporations Law. I am also of the view that for the purposes of doing justice, and to progress the matter in an orderly fashion, the respondent should be required to produce for inspection evidence of any relevant insurance cover that it has. This would normally be done by producing its insurance policy. I am, accordingly, prepared to make orders as sought. I think that paragraph 3 of the minute should be amended so as to make it clear that the obligation to produce for inspection applies only to any contract of insurance that is applicable to any liability the respondent may subsequently be found to have in respect of the claims made in this proceeding.[74]

[71]Davantage (n 66).

[72]Ibid [46].

[73]Ibid.

[74]Lopez (n 58) (emphasis added).

Accordingly, it appears that Lopez did concern an insolvency context and questions of whether to grant leave, but the order made in that instance was only of the contract of insurance, and not other insurance documents which may have been considered confidential.

In relation to Watson, the plaintiffs submitted that ‘disclosure was ordered of insurance documents in relation to a foreshadowed application under s 440D on the basis, among others, that expensive and lengthy litigation, consuming significant public and private resources, should not occur if any resulting victory is likely to be “pyrrhic”’.[75] Watson was also a case in which the only documents that it appears were discovered were insurance policies, and not documents beyond that. Further, I note that Thawley J held:

In my view, the considerations which often lead to refusal of an order for production in other contexts can be managed by appropriate orders, for example orders requiring only partial production and by orders to protect confidentiality.[76]

Accordingly, it appears the Court was conscious of confidentiality issues.

[75]Plaintiffs’ First Reply Submissions (n 70) [11].

[76]Watson (n 5) [59].

I am satisfied that the insurance documents going beyond those that have been agreed to be produced, or that I have indicated should be produced above, are confidential and should not be produced merely for the purpose of determining the extent of claims that have been made on any particular policy or the amount of funds that may be available if the plaintiffs are ultimately successful in this proceeding. For those reasons, I would exercise my discretion to decline to order production of such documents.

Application of r 32.03

In relation to the application under r 32.03 for discovery of documents relating to the identity of the Other Insurers as prospective defendants, the issues are:

(a) do the plaintiffs have a potential cause of action against the Other Insurers for the same reasons as that against AIG?;

(b) have the plaintiffs have made reasonable inquiries to ascertain the identity of the Other Insurers?; and

(c) is it reasonably expected that:

(xi)Probuild would have information or documents that disclose the identity of the Other Insurers from whom it has obtained insurance policies?; and

(xii) AIG would have information or documents which would disclose the identity of the AIG Australia Co-Insurers as they are part of a panel on which AIG is a participant?

Do the plaintiffs have sufficient information in relation to the identity of the relevant insurers?

It is apparent from the material filed that the plaintiffs know, or will know upon discovery of agreed documents, the identity of the Primary PI Insurers (as defined earlier), being: AIG, Starr, and HCC for the 2019–2022 policy years. In my opinion, the plaintiffs have sufficient information as to the identity of these Primary PI Insurers.

The plaintiffs submit that they should have discovery of documents identifying any excess insurers. AIG resists that on the basis that:

(a) AIG does not have copies of the relevant excess policies or any notifications made under those policies; and

(b) AIG does not object to Probuild giving preliminary discovery of documents disclosing the identity or description of the AIG Australia Co-insurers. And to the extent that AIG has such documents, they are likely to comprise confidential communications between insurers regarding commercially sensitive matters such as claims information and indemnity issues.

In Hancock,[77] Le Miere J considered whether orders for preliminary discovery should be made to identify excess insurers. Le Miere J held:

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].
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 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.[78]

[77]Hancock (n 30).

[78]Ibid [31]–[32].

I consider that the plaintiffs are entitled to know the identity of the excess insurers, but it is at present unclear whether it is necessary to order AIG to produce documents identifying the excess insurers, and I consider there is a real risk that such communications will contain commercially sensitive and potentially legally privileged communications between joint insurers. In my opinion, the plaintiffs ought be given an opportunity to consider the discovery provided from Probuild. AIG says such discovery will disclose the identity of the excess insurers. If it does, then there will be no need for AIG to make discovery pursuant to r 32.03. If after such disclosure the plaintiffs still do not know who the excess insurers are, then it may be necessary to order discovery of this class of documents from AIG subject to any necessary limits to accommodate confidentiality. I consider it appropriate to proceed with the degree of caution, having regard to the potentially sensitive nature of the communications between AIG and any excess insurers.

What is the effect of Probuild’s position?

The plaintiffs submit that their application is supported by the consent of Probuild. As noted above, the plaintiffs rely on the affidavit of Ms Lester affirmed 29 November 2022. AIG submits that the most recent correspondence from Probuild’s administrators, dated 11 November 2022, is in terms that Probuild ‘does not oppose’ the orders sought, and further that there is no evidence that Probuild consents to the final form of amended Originating Motion which was proposed on 25 November 2022. The most recent correspondence exhibited to Ms Lester’s affidavit is an email dated 2 November 2022, which expresses consent.

There is some force to AIG’s submission. While the amendments to the Originating Motion merely extended the scope of discovery to further insurance policy years, and it might be thought that that would not be sufficient to cause Probuild to withdraw its consent, whether or not that is so is unclear. In light of what follows, it is unnecessary to determine the issue, although I note that in light of the evidence, AIG submitted that ‘the best that can properly be said of their position is that they do not oppose the application’.

AIG submits that in any case, Probuild’s consent would not assist the plaintiffs because AIG is a party to the proceeding to which the plaintiffs and Probuild seek to have those consent orders made, and by operation of r 59.07, consent orders cannot be made unless ‘all parties to a proceeding are agreed’.[79] AIG does not consent. AIG also relies on the decision of Nettle J in Collie v Merlaw Nominees Pty Ltd (‘Collie’),[80] where his Honour held that consent orders should only be made when all parties consent so as to avoid taking any steps that adversely affect a party without that party being heard. AIG submits that it would be adversely affected by the order for the reasons stated against discovery, including that AIG has a legal interest in the confidentiality of the insurance policies.[81]
[79]Second Defendant’s Outline of Submissions Opposing Plaintiffs’ Preliminary Discovery Application filed 10 November 2022, [46]. I note the word ‘all’ does not appear in the rule.
[80][2003] VSC 424, [35].
[81]Watson (n 5) [8]; Davantage (n 66) [21]–[22].

The plaintiffs submit[82] that as a ‘general principle fair and appropriate settlements are encouraged to reduce the burden of litigation on both public and private resources’,[83] and ‘[c]ourts are frequently asked to play their part by accepting formal undertakings or making orders by consent which prohibit parties from certain conduct or require them to do certain things’,[84] and ’parties to litigation are encouraged to resolve their differences wherever possible so that negotiated outcomes may be achieved and resources can be used in other directions’.[85] The plaintiffs submit that the consent orders should be made consistently with these principles, particularly where Probuild has been separately and competently represented by qualified practitioners.
[82]Plaintiffs’ First Outline of Submissions (n 49) [51].
[83]Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79, 80 [1] (French J).
[84]Ibid.
[85]Australian Securities & Investments v Edwards (2004) 51 ACSR 320, 323 [12] (Barrett J).

I do not consider it appropriate to make consent orders over the objection of AIG, particularly in light of the conclusions I have reached in relation to the application as between the plaintiffs and AIG. While the parties to litigation should always be encouraged to resolve disputes by consent, and the Court should assist them in that regard, I consider that Nettle J’s decision in Collie makes it clear that consent of one party to a multi-party dispute is not sufficient in the present circumstances and that the effect of such orders on AIG is an important consideration. I do not consider that Probuild’s consent to the orders would be sufficient to override the conclusions I have otherwise reached in relation to whether documents should be discovered as between the plaintiffs and AIG, and to the extent the consent orders between the plaintiffs and Probuild prejudice AIG in that regard, I would decline to make them.

I direct the parties to confer and provide appropriate orders reflecting these reasons.

SCHEDULE OF PARTIES

S ECI 2022 03803
BETWEEN:
WADREN PTY LTD (ACN 005 537 235) in its capacity as trustee for the HOPPERS CROSSING UNIT TRUST (ABN 83 405 769 465)	First Plaintiff
QIC WERRIBEE PTY LTD (ACN 624 121 204) in its capacity as trustee for the QIC WERRIBEE TRUST (ABN 76 994 021 211)	Second Plaintiff
- v -
PROBUILD CONSTRUCTIONS (AUST) PTY LTD (ACN 095 250 945) (subject to Deed of Company Arrangement)	First Defendant
AIG AUSTRALIA LIMITED (ACN 004 727 753)	Second Defendant
SIMON JAMES GRAY	Third Defendant

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[2023] VSC 348

29 June 2023