First defendant's application for discovery dismissed

First defendant's application to strike out allowed

Australian Dairy Corporation v Murray Goulburn Co-op [1990] VicRp 33; [1990] VR 355

Benjamin v Pulfer, unreported; SCt of WA; Library No 6618; 4 March 1987

Church of Scientology of California v Department of Health & Social Security [1979] 3 All ER 97

Dalgety Australia Ltd v Rubin, unreported; SCt of WA; Library No 5485; 24 August 1984

Dey v Victorian Railways Cmrs [1949] HCA 1; (1949) 78 CLR 62

Edmiston v British Transport Commission [1956] 1 QB 191

Harrington v Lowe (1996) 190 CLR 311

Howden v Truth & Sportsman Ltd [1937] HCA 74; (1937) 58 CLR 416

In the Marriage of Steel (1992) 107 FLR 143

Kimberley Downs Pty Ltd v Western Australia, unreported; SCt of WA; Library No 6414, 25 August 1986

Kimberley Mineral Holdings Ltd (In Liq) v McEwan [1980] 1 NSWLR 210

Lawrance v Lord Norreys (1890) 15 App Cas 210

Lukies v Ripley (No 2) (1994) 35 NSWLR 283

McKechnie v Campbell (1996) 17 WAR 62

Packard v Transport Trading Agency Co Ltd (1912) 14 WALR 191

Peruvian Guano Company v Bockwoldt (1883) 52 LJ Ch 714

T O'Connor & Sons Pty Ltd v Entact Clough Pty Ltd [2003] WASC 69

Young v Holloway [1895] P 87

1 HASLUCK J: The Water Corporation as first defendant has brought on for hearing at a special appointment an application for discovery of particular documents. It has brought on also an application to strike out the second-named fourth plaintiff's claim, that is, the claim of Rozalyn Veersma. I note in passing that the plaintiff in question is described in the heading to the action as Rozalyn Konstek. However, for the time being, I will use the appellation Rozalyn Veersma being the description given in the plaintiff's affidavit concerning the subject applications.

2 The applications were opposed by the fourth, fifth, ninth, sixteenth and seventeenth plaintiffs. It will be convenient to deal initially with the application for further discovery. However, I must commence by setting the applications in context.

3 The proceedings arise from the execution of certain works by the Water Corporation in and around Felspar Street, Welshpool, between May 1997 and December 1998.

4 The statement of claim reflects a claim for relief by way of damages brought by various plaintiffs in respect of the construction of certain sewerage works by the Water Corporation, such works being part of Section 5 of the Maida Vale Main Sewer Project. It seems that this involved the laying of sewer pipes and allegedly injured business enterprises conducted by the plaintiffs in the vicinity of the works.

5 The writ of summons in this matter was issued on 29 September 2000 with an indorsement of claim reflecting the causes of action relied upon by the plaintiffs. It is apparent from the statement of claim that the causes of action include an alleged breach of statutory duty and the common law torts of negligence and nuisance. It seems that the plaintiffs do not allege that there has been specific material damage to the property of the plaintiffs save for some allegations concerning the cause of action in nuisance. Essentially, the plaintiffs are advancing claims in tort for economic loss.

6 I understand that some of the claims have been settled. For present purposes, it will be convenient to refer to the plaintiffs who are represented before me with respect to the present applications as the "remaining plaintiffs". Each of the remaining plaintiffs claim to have had a proprietary interest in land affected by the works complained of. However, an issue has arisen as to whether the second-named fourth plaintiff, Mrs Veersma, has pleaded her claim with sufficient precision. This has given rise to the application to strike out which I will come to in due course.

7 It was common ground at the hearing before me that the remaining plaintiffs purport to have provided discovery to the first defendant. This has given rise to the first defendant's application for discovery of particular documents pursuant to a chamber summons dated 12 March 2004. The first defendant seeks orders that within 7 days from the date of the order the remaining plaintiffs do make and serve on the first defendant a list, verified by affidavit, of all of the documents which are or have been in their possession, custody or power relating to the funding arrangement entered into between the plaintiffs and all or any of the first, second and third plaintiffs.

8 The first defendant's application is supported by the affidavit of David William John sworn 12 March 2004, the affidavit of Leo John Erris Gallop sworn 27 April 2004 and an outline of submissions.

9 The remaining plaintiffs rely upon the affidavit of Rozalyn Veersma sworn 25 March 2004 and an outline of submissions dated 4 May 2004.

10 A list of documents verified by affidavit provided pursuant to the discovery process is generally treated as conclusive as to its contents unless one of the established exceptions applies.

11 Where it appears that a party may possess a document or class of documents which relate to a matter in question, the opposite party may apply to the Court for an order for particular discovery. This order requires the party against whom it is made to file an affidavit of discovery in respect of those documents. This order can be made where the existence of other documents appears from the evidence, the circumstances of the case or from another document filed.

12 It is apparent from O 26 r 6 of the Rules of the Supreme Court that an application for particular discovery must be supported by an affidavit from the applicant setting out a belief that relevant documents were omitted from the affidavit of documents. The facts in support of this belief must be stated in the affidavit in support of the application. It is possible by this means to challenge a list of documents verified by affidavit by a contentious affidavit. However, any further discovery the Court may order is limited to the documents to which the application relates. A further and better affidavit in general terms cannot be ordered: Cairns: Australian Civil Procedure (5th ed) at 290.

13 The contentious affidavit must offer substantial assistance in establishing whether the particular documents to which the application refers exist and relate to a matter in question. These issues will be determined by reference to admissions on the pleadings or otherwise by the party from whom the further discovery is sought or from the affidavit of documents or the documents disclosed: John Allan Ltd v Keegan [1968] WAR 125 at 128.

14 Documents which directly or indirectly enable a party to advance its own case or damage an adversary's case can be said to relate to a matter in question: Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55 at 63 per Brett LJ. Although the pleadings and particulars usually determine relevance to a matter in question, regard must also be had to the nature of the action: Schlam v WA Trustee Executor & Agency Co Ltd [1964] WAR 178 at 186.

15 I pause to say that in Schlam (supra) the Full Court held that discovery should generally not be ordered before the filing of a statement of defence unless the matters in question are then known or can be inferred from the conduct or admissions of the party concerned. Wolff CJ and Virtue J accepted that the obligation to provide discovery in respect of a matter in question does not necessarily mean matters on which issue has joined in the pleadings. If it did, discovery could not be ordered before defence, whereas it was apparent from the decided cases that in special circumstances discovery could be so ordered. Virtue J added at 186:

"They must, however, be matters as to which an inference can properly be drawn that they are the subject of controversy between the parties."

16 The decided cases indicate also that the Supreme Court has an inherent jurisdiction to supervise the conduct of litigation and to ensure that it is not being conducted in a manner which is against the public interest in the proper administration of justice. It has inherent power to order further discovery and O 26 r 6 of the Rules of the Supreme Court is thought to enlarge that power: Kent Cole Concessions Ltd v Duguid (1910) 1 KB 904 at 915.

17 In an application to the Court's inherent jurisdiction, the applicant, when seeking to displace the conclusive nature of the affidavit of discovery, is confined to information emanating from the opponent's affidavit and list, the documents the opponent discloses and the opponent's admissions. The applicant may not rely upon a contentious affidavit. Limited to those materials, the Court may make an order if, inter alia, it has reasonable grounds for being fairly certain that there are other documents which ought to have been disclosed: Mulley & Marney v Manifold [1959] HCA 23; (1959) 103 CLR 341 at 343.

18 I pause to observe that in the present case counsel for the first defendant, being the applicant for further discovery, sought to rely upon the inherent jurisdiction of the Court and upon the powers allowed to the Court under and by virtue of O 26 r 6. Accordingly, it will be useful to look at Mulley's case (supra) in more detail.

19 Mulley's case (supra) concerned an action to determine whether rulings adverse to the plaintiff could be made under by-law 37 of the Victoria Racing Club. The plaintiff had received a letter indicating that the committee had resolved to exclude him as not being a desirable person. The plaintiff was of the view that it should be inferred from a disparity between what was communicated and what was discovered that there was in existence some resolution additional to that discovered, and that accordingly further discovery should be ordered. Menzies J (sitting alone) said at 344 that he was not prepared "to draw such a fanciful inference". Further, in circumstances in which the discovered resolution spoke of the secretary being instructed to draft appropriate letters in reply, but no letters in reply were in fact received, Menzies J said that he was not prepared to infer that drafts ever came into existence.

20 Menzies J made certain observations in Mulley's case (supra) which are material in the circumstances of the present case. The rules to which he refers are consonant with the applicable rules in the present case in that O 32 r 13 contains a power to order discovery and r 18 contains a power to order discovery of particular documents.

" The present applications have been made by the plaintiff in each action under the Rules of Court, O 32, rr 13 and 18, for further discovery. The applications were heard together and can be disposed of together.

So far as O 32, r 13 is concerned, it cannot be shown by a contentious affidavit that the discovery made is insufficient. Before 1912, it was thought that the insufficiency had to appear from the pleadings, the affidavit of documents itself or the documents therein referred to. However, in British Association of Glass Bottle Manufacturers Ltd v Nettlefold (1912) 1 KB 369; (1912) AC 709, it was established that the insufficiency might appear not only from the documents but also from any other source that constituted an admission of the existence of a discoverable document. Furthermore, it is not necessary to infer the existence of a particular document; it is sufficient if it appears that a party has excluded documents under a misconception of the case. Beyond this, the affidavit of discovery is conclusive.

It was in order to relax this rule to some extent that O 32, r 18 was introduced; this rule does permit an application for further discovery based upon the filing of an affidavit that there have been particular undiscovered documents in the possession of the other party which relate to a matter in question in the proceeding.

Pursuant to this rule, the Court, however, can do no more than order an affidavit in respect of particular documents and there is no doubt that the mere existence of such documents does not provide the basis for ordering a further affidavit in general terms although, if a document discovered pursuant to such a particular order were to indicate the existence of other material documents, that would warrant an order under O 32, r 13: British Association of Glass Bottle Manufacturers Ltd v Nettlefold (1912) 1 KB 369; (1912) AC 709.

Where, as here, an application is made under both rules, the affidavit filed bears only upon the application under O 32, r 18, and it seems to me that where no more appears than that particular documents have not been discovered, the proper course is to make an order under O 32, r 18. The affidavit filed here, however, affords no substantial assistance upon what is the only important question, ie, whether certain documents, of which some do exist and some may or may not exist, do, or if they were to exist, would, relate to any matter in question in the actions. This is clearly something that must be determined from the pleadings, not from an argumentative affidavit."

"I now turn to the pleadings to determine what are the matters at issue between the parties, because discovery is a procedure directed towards obtaining a proper examination and determination of these issues - not towards assisting a party upon a fishing expedition. Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to a train of enquiry which would, either advance a party's own case or damage that of his adversary."

23 Put shortly, then, the reasoning of the learned Judge suggests that care must be exercised in relying upon inferences in order to determine whether documents exist which ought to be discovered. Further, notwithstanding exceptional circumstances of the kind addressed in Schlam's case (supra), the pleadings are the crucial point of reference in determining whether there are documents in existence which ought to be discovered because they relate to a matter in question between the parties.

24 Let me now return to the application in the present case.

25 It emerged from the materials before me that by May 2003 a number of the plaintiffs had been involved in negotiations with the first defendant and had managed to settle their claims. Some of the negotiations were conducted by direct discussion with the Water Corporation.

26 It seems that on or about 14 May 2003 Mrs Veersma telephoned an officer of the first defendant. She indicated that the remaining plaintiffs would like to meet with the first defendant, without lawyers being present, on a "without prejudice" basis with a view to trying to settle their claims. The officer suggested that she write to him requesting a meeting for settlement discussions and she would be advised in due course whether the first defendant would participate in such a meeting.

27 Mrs Veersma then wrote to the first defendant, by letter dated 14 May 2003, referring to the telephone conversation, and observing that since early 1999 the aim of the remaining plaintiffs had been to settle their claims out of Court. She asked for a meeting to be arranged "with the hope of coming to an equitable conclusion". She alluded to the possibility that the first defendant might settle with some claimants and not others and briefly described some of the documentary evidence that was said to underpin the various claims. She referred also to a plan whereby one of the claimants would provide funds to the remaining claimants if that claimant reached settlement first. Against this background, she proposed a meeting without legal representation present which was to be attended on a without prejudice basis. For ease of reference, I will call this "the Veersma letter".

28 According to the Veersma affidavit, over the following months, exchanges of correspondence took place between herself and the officer of the first defendant with a view to arranging the proposed meeting. The meeting did in fact then take place on a "without prejudice" basis and without the presence of lawyers. She said that the Veersma letter was written by her with a view to settling the action and on a without prejudice basis.

29 Mr John said at par 5 of his affidavit that the Veersma letter refers to a funding agreement entered into between the remaining plaintiffs and Highline by which Highline would, in certain circumstances, fund the remaining plaintiffs' claim to proceed to trial. It appears from the Veersma letter, Mr John contended, that the remaining plaintiffs either are in possession, custody or power, or have been in possession, custody or power of a document or a class of documents relating to the funding agreement entered into between the remaining plaintiffs and Highline. For ease of reference, he describes the documents which are said to be referred to in the Veersma letter (being the documents the subject of the present application) as the "funding documents".

30 Mr John went on to refer to exchanges of correspondence between the solicitors for the first defendant and the solicitors for the remaining plaintiffs in which the first defendant requested that the funding documents be discovered, but to no avail. The funding documents were said to be relevant to a matter in question between the parties as to whether the litigation was being improperly funded and, if so, as to the question of whether an application ought to be made by the first defendant seeking to have the proceedings stayed on the grounds that they are injurious to the public interest as being unlawfully maintained.

31 The solicitors for the remaining plaintiffs rejected the first defendant's request for discovery upon the basis that the Veersma letter, being the evidentiary matter principally relied upon by the first defendant to establish the existence of the so-called funding documents, could not be relied upon having regard to the without prejudice rule protecting settlement negotiations.

32 I pause here to note that the Veersma letter does not refer specifically to any document bearing upon funding arrangements. It refers to the formulation of a plan of action and says:

"...it was agreed that if Highline reached settlement first, that they would provide the funds to us remaining clients to proceed to trial."

33 There is nothing in the letter to suggest that the plan or that what was "agreed" was committed to writing. The letter does not point to or identify any document bearing upon such matters.

34 The position adopted by counsel for the first defendant at the hearing before me was that the existence of funding documents could be inferred from the indication in the letter that there was a plan or arrangement whereby the claimant Highline would make funds available to other claimants, even if Highline was able to settle its own claim. Counsel for the first defendant contended also that, properly construed, the Veersma letter established that the funds to be provided by Highline were funds drawn from any amount obtained by that party upon settlement. However, although the Veersma letter is open to this interpretation, in my view, the author's meaning in that regard is not entirely clear.

35 In order to understand the respective positions contended for by the parties, it will be useful at this point to look briefly at some of the legal principles bearing upon funding arrangements for litigation and without prejudice communications.

36 There is no doubt that the tort of maintenance and champerty remains part of the law of Western Australia: Freehill Hollingdale & Page v Bandwill Pty Ltd [2000] WASCA 150 at par 27. Maintenance is generally defined as the giving of assistance or encouragement, by a person who has neither an interest in the litigation nor any other motive recognised as justifying the interference, to a party to litigation. Champerty is a particular form of maintenance, namely, maintenance of an action in consideration of a promise to give the maintainor a share in the proceeds or subject matter of the action.

37 The law on this subject was recently reviewed by the Full Court in Clairs Keeley (a firm) v Treacy & Ors [2003] WASCA 299. That was a case in which the plaintiffs had entered into a funding arrangement with a commercial enterprise which stood to receive a share of the proceeds if the action succeeded. The Full Court held that it was appropriate for the action to be stayed until safeguards were put in place to ensure that the role of the funding enterprise was confined to funding, otherwise the normal processes of the litigation could be influenced or distorted by the funding agreement.

"I recognise that the mere fact that proceedings are financed by third parties with no interest in the outcome other than repayment and profit from the litigation, is not itself sufficient to invoke the jurisdiction of the courts. The court must be careful not to use its power to stay proceedings which will deny access to justice to a party who has sought to fund bona fide proceedings in a way which may be contrary to public policy, unless that which has been done amounts to an abuse of the court's own process: Elfic Ltd v Macks (supra) [67] per McMurdo P; Marston v Statewide (supra) at [52]. There are many commonplace, and now unobjectionable, circumstances in which modern litigation is funded by those who are not nominal parties to it. The courts have, by increment, created a category of persons who may permissibly maintain litigation. Obvious examples of persons within the category are insurers and trade unions. In my opinion, litigation funders unauthorised by legislation have not yet been admitted to the category. The question to be answered is whether the court's process is affected or threatened by the present arrangement, which provides for the maintenance of the respondents' litigation and for the division of spoils."

39 It is against this background that the first defendant in the present case contends that funding arrangements made by the remaining plaintiffs involving a party, such as Highline, which was no longer interested in the outcome of the action (because it had settled its claim), could be objectionable, and provide a basis for staying the action.

40 Counsel for the first defendant acknowledged that the funding documents which were thought to exist were not relevant to any issue presently arising on the pleadings, or which could be said to have a bearing upon the causes of action reflected in the statement of claim. However, the so-called funding documents were said to be discoverable pursuant to the reasoning in the Peruvian Guano Co case (supra) and Mulley's case (supra) because they might enable the first defendant to stay the action. They could be regarded as raising an issue that was damaging to the opposing case.

41 Counsel did not point to any authority directly substantiating these propositions but submitted that it was common practice for funding documents to be discovered pursuant to the legal principles concerning discovery. I will return to this point in due course.

42 Before leaving this aspect of the matter, I have to say that there appears to be a considerable difference between the circumstances of the present case and the circumstances being addressed in Clairs Keeley (supra). In the present case, even if the Veersma letter be received in evidence, the funding arrangements referred to are clearly not being entered into with a view to obtaining a share of the proceeds if the action succeeds or pursuant to some similar commercial objective. They appear to be arrangements entered into at a time when the party committing itself to provide funds had a legitimate interest in the outcome of the proceedings as a party to the action. Thus, on any view of the matter, I am unable to conclude, having regard to the reasoning of Pullin J in the Clairs Keeley case (supra), that there is a strong likelihood that the first defendant will be able to obtain a stay of the proceedings, even if it obtains access to funding documents of the kind that are thought to exist.

43 I noted in earlier discussion that an order for particular discovery cannot be obtained unless evidence is brought before the Court by affidavit establishing that the documents in question exist and are discoverable in that they relate to any matter in question in the action. This will generally be determined by reference to the pleading, but Schlam's case (supra) suggests that the pleadings are not necessarily decisive. In exceptional cases, the power to order discovery may extend to a matter of controversy between the parties. Nonetheless, the reasoning of Menzies J in Mulley's case (supra) seems to establish that it is not permissible for the party requesting discovery to embark upon a fishing expedition with a view to bringing up document of general interest or documents bearing upon some other or remote dispute between the parties. Having regard to the affidavits relied upon, the Court must have reasonable grounds for being fairly certain that the documents in question exist and that they relate to a matter in controversy between the parties of the kind reflected in the pleadings, or, at least, of the kind brought into issue by the cause of action the subject of the proceedings. Thus, discovery will not be ordered of documents which are not relevant to the actual issue in the proceedings but would go to no more than similar conduct or credit: Beecham Group Ltd v Bristol Myers Co [1979] VicRp 27; (1979) VR 273.

44 This brings me to the legal principles bearing upon without prejudice communications. As I have noted, the Veersma letter appears to be aimed at arranging a meeting to effect a settlement and refers expressly to the notion that those present would attend on a without prejudice basis.

45 The principles concerning statements made without prejudice are set out succinctly in Cross on Evidence (6th ed) at par 25350. The learned author notes that as part of an attempt to settle a dispute, the parties frequently make statements "without prejudice". When this is done, the contents of the statement cannot be put in evidence without the consent of both parties, the case being one of joint privilege. This is so whether the parties are endeavouring to settle the whole of the dispute or only particular aspects of it.

46 The rationale for such a rule is reflected in Field v Commissioner for Railways for NSW [1957] HCA 92; (1957) 99 CLR 285. Dixon CJ, Webb, Kitto and Taylor JJ said this at 291:

"The law relating to communications without prejudice is of course familiar. As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them. The law relieves them of this embarrassment so that their negotiations to avoid litigation or to settle it may go on unhampered. This form of privilege, however, is directed against the admission in evidence of express or implied admissions. It covers admissions by words or conduct. For example, neither party can use the readiness of the other to negotiate as an implied admission. It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission."

47 Counsel for the first defendant in the present case emphasised that the rule is concerned essentially with admissions. For example, in Field (supra), where the plaintiff sued the defendant for damages for personal injuries, the parties agreed to endeavour to settle the claim, and the plaintiff consented to be examined by the defendant's doctor. In the course of that medical examination, the plaintiff told the doctor how the accident had occurred. It was held that evidence of that explanation could be given by the defendant's doctor at the subsequent hearing of the claim, since the giving of the explanation was not reasonably incidental to the settling of the claim. The purpose of the medical examination was not to assess liability or the cause of the accident, but to verify the nature and extent of the plaintiff's injuries.

48 However, before leaving that case, I feel obliged to note in passing that such an approach cannot be easily translated to the circumstances of the present case. In that case, as the leading judgment noted at 291, the examination had a double aspect. Primarily it was to enable the defendant to obtain a medical report in order to form an estimate of his injuries for the purpose of making an offer of settlement. However, failing settlement, the purpose was to enable the defendant's medical expert to give evidence of what he saw. In the present case the Veersma letter appears to have had a single purpose, namely, to arrange a meeting with a view to coming to "an equitable conclusion".

49 In Unilever Plc v Procter & Gamble Co (2001) 1 All ER 783 Robert Walker LJ of the Court of Appeal observed at 796 that the decided cases make it clear that the without prejudice rule is founded partly in public policy and partly in the agreement of the parties. The precedents show that the protection of admissions against interest is the most important practical effect of the rule. But to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties, that is, protection to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts. Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence.

50 It seems that the learned author of Cross on Evidence (supra) relied upon reasoning of this kind in asserting (at par 25350) that the rule is not confined to admissions; it extends to all bona fide without prejudice statements which touch upon the strengths or weaknesses of the party's cases or place a valuation on a party's right. The learned author goes on to observe (at par 25355) that a letter is privileged when, although it is not headed "without prejudice", it is stated to be without prejudice to the writer's rights. Even where there is no such heading, privilege will attach to communications which are genuine negotiations with intent to compromise an existing dispute: Rodgers v Rodgers [1964] HCA 25; (1964) 114 CLR 608 at 614.

51 To my mind, these observations are consistent with the reasoning in Field (supra) which appears to recognise that in certain circumstances a party's readiness to negotiate could be regarded as an implied admission, with the result that certain statements, which might not easily be characterised as identifiable admissions, will nonetheless be protected. Accordingly, I am of the view that the summary of the relevant principles provided by Cross on Evidence (supra) at par 25350 and par 25355 can be relied upon with the result that the protection extends to all bona fide without prejudice statements which touch upon the strengths or weaknesses of the party's cases or place a valuation on a party's rights.

52 Against this background, let me now return to the circumstances of the present case.

53 It will be apparent from earlier discussion that I am not necessarily convinced that the so-called funding documents, if they do exist, can be regarded as discoverable, bearing in mind that they are not directly related to matters raised by the pleadings or to related evidentiary issues. However, for present purposes, I find that it is not necessary to rule upon that point. I will assume, without deciding, that if funding documents of the kind contended for do exist that they are discoverable, because, having regard to the rules concerning maintenance and champerty, documents of that kind relate to a matter in controversy between the parties, notwithstanding that the matter in controversy is not presently reflected in the pleadings. The documents in question might provide a basis for the first defendant to protect its position by applying for a stay of the proceedings. To that extent, the documents might be said to have a bearing upon the disposition of the relevant cause of action.

54 However, when I turn to the question of whether the first defendant is entitled to the order sought, I must begin by reminding myself that the applicant for particular discovery is required to satisfy the Court upon affidavit, and by admissible evidence, that there are reasonable grounds for being fairly certain that the documents in question exist.

55 In the present case, in my view, the Veersma letter is not admissible. The letter was aimed at effecting a settlement and contains an explicit reference to the without prejudice formula which is generally thought to protect communications concerning settlement so that the parties can communicate freely. I am of the view that the first defendant is seeking to use the letter as an admission that funding arrangements exist, possibly of an improper kind, with the result that protection should be afforded to the letter. However, in any event, even if the statements in question not be characterised as admissions, then, for the reasons I have given previously, I consider that the without prejudice rule is wide enough to encompass statements of the kind appearing in the letter. They are statements aimed at effecting a settlement which touch upon the strengths and weaknesses of the respective cases, and the capacity of the remaining plaintiffs to press their claims.

56 It is true that the Veersma letter does not contain a specific proposal for compromise. However, the letter contains assertions bearing upon the strength of the plaintiffs' case and is clearly directed to the plaintiffs' wish to settle along the lines adopted in settlement discussions with other plaintiffs. This gives a degree of specificity to the letter which is sufficient to attract the protection of the without prejudice rule.

57 If I be wrong in the view I have just expressed, I am nonetheless of the view that there is not sufficient particularity in the letter to justify the making of the proposed order for further discovery. No documents are mentioned in the letter. To my mind, it cannot be inferred from what is said in the letter that documents of the kind contended for actually exist. The affidavit relied upon does not leave me fairly certain that funding documents do exist.

58 Counsel for the first defendant endeavoured to persuade me that the plaintiffs' failure to deny that such documents existed in later exchanges between the parties could be used to support a finding that documents of the kind contended for did exist. However, in my view, the plaintiffs were not obliged to provide such a denial. They were entitled to adopt the position they in fact adopted, namely, that the first defendant was not entitled to rely upon without prejudice communications and a degree of speculation as a basis for insisting that further discovery be provided. It is apparent from the reasoning in Mulley's case (supra) that care must be exercised before inferring that documents actually exist simply because documents of the kind in question might exist.

59 Counsel for the first defendant sought to persuade me that the plaintiffs had waived any privilege they might have concerning without prejudice communications. However, I am not persuaded that there was such a waiver. It is the first defendant who sought to make use of the letter by annexing it to the John affidavit. In the various exchanges of correspondence the plaintiffs continued to assert that the Veersma letter was protected by privilege. Reference was made to that letter at various hearings prior to the special appointment but such references occurred out of a need to define the differences between the parties.

60 In summary, then, I consider that the Veersma letter is protected by privilege and is inadmissible. There are no other evidentiary materials before me which point to or permit me to infer that funding documents of the kind contended for exist, or leave me fairly certain that they do exist. The first defendant has therefore failed to establish by admissible evidence that such documents should be discovered. Accordingly, the first defendant's application for the discovery of particular documents will be dismissed.

The first defendant's application to strike out

61 By chamber summons dated 12 March 2004 the first defendant sought an order that the second-named fourth plaintiff's action be dismissed. The first defendant relied upon O 20 r 19 of the Rules of the Supreme Court whereby a pleading can be struck out on the grounds that it discloses no reasonable cause of action, is frivolous or vexatious, or is otherwise an abuse of the process of the Court.

62 On an application of this kind, not only must all the facts alleged in the statement of claim be accepted as true, but it must be taken for granted that on all other points the pleading is unassailable: Niven v Grant (1903) 29 VLR 102 at 16. However, great care must be exercised to ensure that the plaintiff is not improperly deprived of his or her opportunity for the trial of his or her case. The rule is intended to apply in cases which are not really arguable, even if extensive argument is required to demonstrate that the plaintiff's case is so clearly untenable that it cannot succeed: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125.

63 It was common ground at the hearing before me that on 9 October 2001, the remaining plaintiffs filed a minute of proposed substituted statement of claim in these proceedings. On 9 November 2001, the remaining plaintiffs were granted leave to amend their claims in terms of the substituted claim.

64 Pursuant to par 4 of the substituted claim, the plaintiffs pleaded that the fourth plaintiffs are, and at all material times were, the proprietors of a business trading as Welshpool Automatics. At all material times the fourth plaintiffs carried on business from and had a proprietary interest in premises at 1 Felspar Street, Welshpool. The fourth plaintiffs specialised in street and strip transmissions for high performance vehicles.

65 It seems that on 5 March 2002, the first defendant filed a request for further and better particulars of the substituted claim which included a request that particulars be provided of every fact, matter and circumstance in support of the allegation that the fourth plaintiffs had a proprietary interest in the premises at 1 Felspar Street, Welshpool.

66 On or about 8 December 2003, the remaining plaintiffs provided answers to the request to the effect that the second-named fourth plaintiff (Mrs Veersma) was the tenant of 1 Felspar Street, Welshpool. From 1 July 1999 she became a half-owner of the business and of all its assets including the tenancy.

67 I understand that exchanges between the solicitors led to the delivery of a partnership agreement which was said to support the particulars which had now been provided. A copy of the partnership agreement was exhibited to the affidavit of Mr John sworn 12 March 2004 in support of the application to strike out. That partnership agreement suggested that the partnership commenced on 1 July 1999 with the result that it could be said that Mrs Veersma did not obtain any interest in the relevant business or assets of the business until that date, being a date subsequent to the completion of the works which are alleged to have caused loss and damage to the remaining plaintiffs.

68 Against this background, the first defendant contended that it was self-evident on the face of the pleadings that the second-named fourth plaintiff (Mrs Veersma) had no standing to bring her claim, and the pleadings filed on her behalf should be struck out.

69 Shortly before the hearing commenced, counsel filed and served a minute of proposed amendment to answer number 3 of the further and better particulars of claim, such minute being dated 5 May 2004. The effect of the minute was to foreshadow a repleading of the particulars to make it clear that the fourth plaintiffs would assert at trial that in mid-1996 the fourth plaintiffs agreed that Mrs Veersma would thereafter be a half-owner with the first-named fourth plaintiff of the business Welshpool Automatics, and would work part-time in the business and would provide funding to the business.

70 I was not provided with any evidence by affidavit or otherwise that the assertions in the proposed repleading could be substantiated. However, it is important to remember that the statement of claim remains unaltered and continues to advance an assertion that both of the fourth plaintiffs had an interest in the premises at all material times. In effect, the plaintiffs, by their proposed amendment, are seeking to ensure that the particulars are brought into conformity with the statement of claim as the principal pleading. Accordingly, I am of the view, that the plaintiffs should be allowed leave to replead the particulars along the lines reflected in the minute dated 5 May 2004. This will bring the particulars into conformity with the claim as originally pleaded. I was informed by counsel that the discrepancy occurred as a result of a change of solicitors and a related oversight in formulating the particulars filed initially.

71 Against this background, and bearing in mind that parties should generally be allowed leave to amend their pleadings so that the matters truly in controversy will be brought forward, I find it unnecessary to explore the issues raised by the strike out application at length. It emerges, in strict analysis, that the second-named fourth plaintiff's particulars in their present form should be struck out because, as to the claim in nuisance, it is necessary to establish that Mrs Veersma had a proprietary interest in the land prior to the conclusion of the works in December 1998. This much was conceded by counsel for that plaintiff. However, for the reasons I have given, I consider that this plaintiff should be allowed leave to replead along the lines proposed, although, some comparatively minor adjustments to the proposed pleading may be required in the light of matters discussed at the hearing.

72 In summary, then, I consider that the Veersma letter is protected by privilege and is inadmissible. There are no other evidentiary materials before me which point to or permit me to infer that funding documents of the kind contended for exist, or leave me fairly certain that they do exist. The first defendant has therefore failed to establish by admissible evidence that such documents should be discovered. Accordingly, the first defendant's application for the discovery of particular documents will be dismissed.

73 The first defendant's application to strike out will be allowed but with leave to the second-named fourth plaintiff to replead within 14 days.

74 I will hear from the parties as to whether any further orders or directions are required, and as to costs.