Preliminary Discovery - Wadren Pty Ltd v Anor Probuild Constructions (Aust) Pty Ltd & Ors
Owners Corporation, Litigation: 19 February 2024
Author: Deb Andronaco - Our People
The scope of preliminary discovery was contemplated in the recent Supreme Court decision Wadren Pty Ltd & Anor v Probuild Constructions (Aust) Pty Ltd & Ors [2023] VSC 348 (29 June 2023), wherein Wadren Pty Ltd and QIC Werribee Pty Ltd (Plaintiffs) made an application pursuant to rr 32.03 and 32.05 of the Supreme Court (General Civil Procedure) Rule 2015 (Vic) (Rules) against Probuild Constructions (Aust) Pty Ltd (Probuild) and AIG Australia Limited (AIG).
Preliminary discovery is a tool used by plaintiffs to decide whether to commence proceedings against a prospective defendant. In instances where a plaintiff does not have sufficient information to decide whether to commence proceedings, the Court may order discovery from a prospective defendant without initiating proceedings by virtue of order 32 of the Rules.
It’s important to note preliminary discovery does not operate to produce material that will strengthen or enhance a decision to commence proceedings, but rather to provide what is reasonably necessary to enable the decision to be made.
Background
The Plaintiffs are the co-owners of the Pacific Werribee Shopping Centre and contracted the first defendant, Probuild to undertake construction works for the shopping centre between 2014 and 2017. Since the completion of these works, the Plaintiffs alleged there are extensive structural and non-structural defects, estimating their loss and damage to be between $331,800,000 - $356,800,000.
As Probuild went into voluntary administration in 2022, the Plaintiffs sought to identify Probuild’s insurers and the nature and content of any professional indemnity insurance policies to determine what relief would be available if proceedings were commenced by way of preliminary discovery under rr 32.03 and 32.05 of the Rules.
The second defendant, AIG (the insurer for Probuild’s professional indemnity insurance policy) sought to oppose the production of certain categories of documents identified as ‘Primary PI Policies’. AIG submitted that:
- the discovery of these documents would contain information that exceeds what is required to decide whether to commence proceedings;
- the discovery of these documents would give the Plaintiffs an unfair commercial advantage in any subsequent proceeding commenced; and
- insurance arrangements are generally regarded as confidential as they contain commercially sensitive terms.
Discovery to Identify Defendant – Rule 32.03
Rule 32.03 of the Rules operates to permit a plaintiff to receive preliminary discovery to ascertain the identity of the prospective defendant for the purposes of commencing a proceeding against them.
The Plaintiffs asserted that Probuild and AIG have discoverable documents relating to the identification of AIG’s co-insurers and any other professional indemnity insurers whom Probuild obtained insurance policies from.
AIG did not object to Probuild providing preliminary discovery of documents disclosing the identity of AIG’s co-insurers, however, they objected to providing such documents themselves on the basis that they would likely comprise confidential communications between insurers regarding commercially sensitive matters.
The Court ruled the Plaintiffs are entitled to know the identity of the insurers but considered that there was a real risk that such communications between AIG and the joint insurers would contain commercially sensitive and potentially legally privileged communications.
On this basis, the Plaintiffs were entitled to receive preliminary discovery from Probuild, not AIG. In the event the excess insurers could not be identified by Probuild’s discovery, the Court noted it may be necessary to order discovery from AIG subject to any necessary limits to accommodate confidentiality.
This decision is consistent with the notion that preliminary discovery cannot be used as a tool to provide a plaintiff with an unfair commercial advantage. The invasion of a prospective defendant’s private affairs by way of discovery must not go beyond enabling the plaintiff to determine if they have a right to obtain relief.
Discovery from Prospective Defendant – Rule 32.05
There are four conditions that must be met before the discretion of the Court can be exercised to permit preliminary discovery under rule 32.05:
- The plaintiff must have a reasonable cause to believe it may have a right to relief in the Court against the defendants;
- The plaintiff must have made all reasonable inquiries;
- Having made such inquiries the plaintiff still does not have sufficient information to enable it to decide whether to commence proceedings; and
- It must be reasonable for the plaintiff to believe the defendants have, or are likely to have, possession of the documents sought.
The Plaintiffs argued that the scope of preliminary discovery is not limited to documents reasonably necessary to determine whether to commence proceedings, it also encompasses information required to make an informed decision. On this basis, the Plaintiffs argued information relating to whether the cost and risk of litigation are worthwhile should be disclosed, including whether the defendant has sufficient proceeds available to satisfy any judgment debt.
The Court rejected this argument, ruling that the scope of preliminary discovery does not extend to questions of the defendant’s financial capacity. Whilst the Court accepted that the provisions of preliminary discovery should be given a broad interpretation, the legislature did not intend for preliminary discovery to include questions of whether the plaintiff should bring a claim. The Court affirmed that their discretion is limited to only ordering preliminary discovery to documents relating to the question of whether the applicant has the right to obtain relief.
This judgment highlights the fact that preliminary discovery is intended to determine whether the applicant has the right to obtain the relief, not whether proceedings commenced would be commercially worthwhile.
How We Can Help
If you need legal assistance with respect to determining the parties you may have a right to make a claim against, please contact any of our experienced team to discuss today on 03 8600 6000.
- Paolo Tatti, Principal, ptatti@aitken.com.au
- Deborah Andronaco, Senior Associate, dandronaco@aitken.com.au
- Ralph Davies, Lawyer, rdavies@aitken.com.au