Preliminary discovery
32 The Council also seeks an order for preliminary discovery of all reports or submissions provided by CSR to the defendants between specified dates, records of communications between CSR and the defendants relating to the valuation, documents noting any site inspections undertaken by or on behalf of the valuers or the Valuer General, any material recording geotechnical advice obtained by them between specified dates and the documents recording the terms of appointment of the valuers. This application is made pursuant to Rule 5.3 of the Uniform Civil Procedure Rules. That rule, so far as is presently relevant, is as follows:
"5.3 Discovery of documents from prospective defendant
(cf Federal Court Rules , Order 15A, rules 6, 7 and 9)
(1) If it appears to the court that:
(a) the applicant may be entitled to make a claim for relief from the court against a person ( the prospective defendant ) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and
(b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and
(c) inspection of such a document would assist the applicant to make the decision concerned,
the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief."
33 The gateways specified by the Rule are quite easily opened. It is necessary only that the elements "appear", a much less stringent test than proving or establishing. The requirements that the plaintiff "may be entitled" to "make a claim" as distinct from obtaining relief of one kind or another are, will usually be easily satisfied in any genuine case. I respectfully agree with Young CJ in Eq that it is not necessary for a plaintiff to show more than that "the contemplated proceedings are likely to rest on some recognised legal ground and does not necessarily have to show a prima facie or pleadable case, though mere assertion that there is such a case is insufficient": Panasonic Australia Pty Limited v Ngage Pty Limited [2006] NSWSC 399 at [20], [27]; 69 IPR 595; and see Morton v Nylex Limited [2007] NSWSC 562, White J at [26]. It is important, I think, to note that the documents need only to bear the character that they "could assist in determining whether or not the plaintiff is entitled to make such a claim for relief" (emphasis added).
34 It is obvious from what I have already said about the way in which the Council puts its potential cases against the defendants that, so far as the Valuer General and the valuers are concerned, the real question is whether para 1(a) is satisfied. As to the first element, so far as the valuers are concerned, the opinion of Mr Robertson SC concluded, after a careful and detailed discussion of the material available to him (and which is, one way or another, available to me) as follows -
"[96] … I consider that a failure by the valuer to obtain from CSR the reports from its geotechnical consultants concerning the stability of the faces of the quarry was arguably in breach of a standard of care expected of valuers when considering the market value of any en globo land which has obvious physical impediments to urban development."
35 Mr Robertson SC goes on to discuss further factual issues relevant to that conclusion, noting that it "is provisional" and hampered by not knowing what CSR actually submitted. In short, the case is that the valuer had available to him information that suggested, as a real possibility, that substratum instability affected significant parts of the land, that such instability would significantly limit the nature and extent of residential development and hence the value of the land but, having been placed on notice of these matters, failed to investigate or appreciate whether the area said to be available by CSR for urban development was in fact so available. The difficulty facing the Council in making such a case, of course, is that there is no actual evidence that instability did significantly reduce the area available for urban development. It is this point that counsel for CSR and the valuers emphasised. However, the material which has been supplied does, to my mind, suggest that there was a significant degree of uncertainty about the extent of the instability and hence a doubt about the available area for urban development. Any such doubt must, unless removed, have a significantly adverse effect on the value of the land. It is possible, of course, that the valuers enquired about and were given further information upon the matter by CSR or else that CSR made representations about it. However, this is, I should think, unlikely since Mr Nicholson does not advert to the problem at all in his report. Counsel for CSR and the valuers have sought to prove, from the documents provided, that the likelihood that there might be any such problematic instability was so low as to enable the conclusion that even the undemanding test of the rule is not satisfied. It is sufficiently shown by what I have already said about the reports in question that there is a live issue about the extent of the instability as described in the reports. It may be that further information could clarify this matter but that material has not been tendered; it may be that it is in the material actually submitted to the valuers, access to which the Council is seeking. Nevertheless, the fundamental question must be what information did the valuers have upon this point. If that information left it as a real possibility that site instability could significantly reduce the area available for urban development, then the valuation was, to say the least, questionable. The issue therefore is, upon this view, whether the valuers had sufficient information to have satisfied a competent valuer exercising proper professional standards that there was little or no risk of ground instability adversely affecting the proposed area of urban development. Determination of this issue obviously requires a consideration of the whole of the material submitted to the valuers by CSR. Subject to the question whether the valuer owed the Council a duty of care in the matter, this raises with sufficient arguable force the prospect that the plaintiff may be entitled to make a claim for relief against the valuer.
36 What then, of the duty of care? In Woolcock Street Investments Pty Limited v CDG Pty Limited [2003] 216 CLR 515 an engineering company which designed foundations of a building was sued following the settlement of its foundations by an owner who had purchased the land from the company which had employed the engineer. Gleeson CJ, Gummow, Hayne and Heydon JJ said -
"[22] In Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529, the Court held that there were circumstances in which damages for economic loss were recoverable. In Caltex Oil , cases for recovery of economic loss were seen as being exceptions to a general rule, said to have been established in Cattle v Stockton Waterworks (1875) LR 10 QB 453, that even if the loss was foreseeable, damages are not recoverable for economic loss which was not consequential upon injury to person or property. In Caltex Oil , Stephen J isolated a number of "salient features" which combined to constitute a sufficiently close relationship to give rise to a duty of care owed to Caltex for breach of which it might recover its purely economic loss. Chief among those features was the defendant's knowledge that to damage the pipeline which was damaged was inherently likely to produce economic loss.
[23] Since Caltex Oil , and most notably in Perre v Apand Pty Ltd (1999) 198 CLR 180 the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. "Vulnerability", in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, "vulnerability" is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant So, in Perre , the plaintiffs could do nothing to protect themselves from the economic consequences to them of the defendant's negligence in sowing a crop which caused the quarantining of the plaintiffs' land. In Hill v Van Erp , the intended beneficiary depended entirely upon the solicitor performing the client's retainer properly and the beneficiary could do nothing to ensure that this was done. But in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords , the financier could itself have made inquiries about the financial position of the company to which it was to lend money, rather than depend upon the auditor's certification of the accounts of the company.
[24] In other cases of pure economic loss ( Bryan v Maloney is an example) reference has been made to notions of assumption of responsibility and known reliance. The negligent misstatement cases like Mutual Life & Citizens' Assurance Co Ltd v Evatt and Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] can be seen as cases in which a central plank in the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided. And it may be, as Professor Stapleton has suggested, that these cases, too, can be explained by reference to notions of vulnerability. (The reference in Caltex Oil to economic loss being "inherently likely" can also be seen as consistent with the importance of notions of vulnerability.) It is not necessary in this case, however, to attempt to identify or articulate the breadth of any general proposition about the importance of vulnerability. This case can be decided without doing so."
37 In the circumstances of the case, the majority in the High Court held that there was no relevant vulnerability. Here, there is at least arguable vulnerability in the sense to which the majority in Wilcock Street Investments referred. The Council was bound to accept the Valuer General's valuation and necessarily relied on the Valuer General to conduct the valuation competently. There is real force in the submission of Mr Beasley that the Council was not vulnerable in the same sense as the plaintiffs in Perre. It could have obtained its own geotechnical information and sought access to the CSR submission from the valuers to which it might have been able to make an answer. It appears that the Council made a tactical decision that it would approach the valuation question in a way which did not involve any focus on the instability issue. Even if the Council had not understood the potential significance of the instability question, so that its decision not to address it was not calculated, it was present and sufficiently obvious, so the argument goes, to have alerted the Council to the need to deal with it. Accordingly, it was not in the hapless situation of the plaintiffs in Perre; it could have inspected the seeds before use and complained about them if it wished. However, to mix metaphors a little, the legislative scheme required it to swallow them if the Valuer general insisted. The difference between Perre and the circumstances here may, in the result, be decisive in favour of CSR. But it is not so certain as to close the gate on para r 5.1(a)
38 It is at least arguable that both the valuers and the Valuer General owed a duty of care to the Council to investigate and resolve (in the sense of taking it properly into account for valuation purposes) the instability issue disclosed in the reports submitted by the Council and (it may well be) CSR and also that, in failing adequately to accommodate the risk, the valuation was grossly excessive. Of course, if as CSR argues, there was no material risk, then the Council has suffered no damage.
39 The Valuer General at first argued that cl 9 of Schedule 1 to the Valuation of Land Act 1916 gives statutory immunity from the action contemplated by the Council. That provision is as follows -
"9 Protection from liability
(1) No matter or thing done by the Valuer-General or by any other person acting under the direction or as delegate of the Valuer-General shall, if the matter or thing was done in good faith for the purposes of executing this Act, subject the Valuer-General or person personally to any action, liability, claim or demand.
(2) A contract valuer who exercises functions under this Act pursuant to a valuation service contract is not to be taken to be doing so as a delegate of, or under the direction of, the Valuer-General unless the valuation service contract expressly so provides."
40 It is not, as I understand it, proposed to litigate against the Valuer General as an individual. This interpretation of the clause derives from the use of the phrase "subject the Valuer-General… personally to any action…". It would seem to be unnecessary to use the word "personally" unless in the context of an assumption that there was a distinction between the Valuer General as an individual and the Valuer General as an agent of the State of New South Wales. In oral submissions, Mr Leeming SC said that the Valuer General did not seek to have me decide this question and did not oppose the making of an order for preliminary discovery in respect of the documents not so far produced to the Council. At all events, I am satisfied that the undemanding test of the rule is satisfied.
41 To revert to the language of the Rule, I am satisfied that it appears that the Council may have a claim to relief against the valuers and the Valuer General.
42 The action proposed against CSR is, as I have mentioned, under the Trade Practices Act 1974. Mr Beasley submitted that the representations made by CSR in the course of the valuation process "in trade and commerce" but amounted giving information to a public body for the purpose of permitting a statutory function to be properly exercised. The crucial question is the trading or commercial character of the communication (see Concrete Constructions (NSW) Pty Limited v Nelson (1990) 169 CLR 594 at 604). I think that, in reality, CSR was making representations in the course of bargaining about the price it would obtain for the disposition of a commercial asset. I do not see how the sale by the compulsory statutory process differs in substance from any sale by CSR of any of its assets or products. The only real difference is that there was a mechanism which identified a purchaser and required that purchaser to acquire the land at a price determined by an independent third party. It was, in commercial reality, a put option at a price to be determined by a specific process. This case is markedly different from Village Building Pty Limited v Canberra International Airport Pty Limited 210 ALR 114, where the defendant's reports of prospective noise and flight paths published under a statutory obligation to inform the public were held not to be communicated "in trade and commerce".
43 The documents sought to be discovered are not only, of course, the geotechnical reports but also all the communications made to the valuer pertinent to the valuation of the land and, in particular, in connection with the risks of ground instability. Such communications must be realistically considered as attempts by CSR to secure the best price available for its asset, which it was perfectly entitled to do; and the suggestion that it was merely disinterestedly providing information to enable the Valuer General to undertake his statutory obligation is absurd. There are many commercial contracts which provide for the price of one kind or another to be agreed and, in failure of agreement, the appointment of some independent arbitrator to determine the price. I do not think it can be sensibly suggested that communications to such an arbitrator are not in trade and commerce where what is to be determined is the price at which an asset or product is to be sold, rented or otherwise disposed of at a fair valuation. The mere fact that here the process was statutory and the arbitrator was appointed by legislation does not change the essential character of the transaction.
44 Mr Beasley also submitted on CSR's behalf that an obstacle facing the proposed action is Anshun estoppel, arguing that the potential action could and should have been raised in the earlier proceedings. The availability of such a defence to the envisaged action depends upon a careful analysis of the issues in the earlier proceedings, issues which did not in the end descend into fact since the proceedings were terminated by consent orders. The simple answer, though, as it seems to me, to the contention is that in the earlier proceedings the Council sought to challenge the propriety of the valuation. In the present proceedings against CSR the issues are fundamentally and substantially different. They concern, rather, the extent to which CSR made explicit or implicit representations of the relevant kind in the course of procuring the valuation. It is not contended that the same or substantially the same facts would be relevant to determining the issues in each set of proceedings, that is those settled and those contemplated. Although, it may be that I am not in a position to positively state that an Anshun type estoppel is not available to CSR, I do not need to do so in order to conclude that the first element of the Rule is satisfied.
45 So far as whether the defendants have possession of a relevant document is concerned, in the circumstances here - having passed through the first gateway - I think it must follow that CSR and the valuers have such possession. It is less certain whether the Valuer General still has possession of relevant documents although it seems almost certain that he once did. (As I understand it, the Valuer General has at all events agreed with the plaintiff as to the documents to be discovered if an order is made.)
46 It also follows from satisfaction of the first element that inspection of the relevant documents would assist the plaintiff to determine whether or not to commence the envisaged proceedings. Mr Beasley submits that, since the Council's instructing solicitors had access to all of the material during the former litigation and could then have made the decision as to whether to bring any claim for misleading and deceptive conduct against CSR, it does not actually need the order sought in the present summons to determine whether or not to commence proceedings now. One merely needs to state the proposition to refute it. It needs the order now precisely because it did not consider at the earlier stage whether or not to bring an action such as presently envisaged. Mr Beasley also points out that there is no evidence from the Council's instructing solicitors at the time of the earlier proceedings as to what was done with the material. However, I accept the evidence of the Council's present solicitor, Mr Woodward, that the Council does not know - except in a general, incomplete and indistinct sense - what information was submitted by CSR to the other defendants and that this information is essential to enable a responsible decision to be made about commencing the proposed litigation. There is, as Mr Beasley points out, no evidence that CSR did not send to the valuer all relevant reports concerning the area of land upon which the hypothetical development was to be built. However, what is also sought are notes of all communications made with the valuers and the Valuer General. Lastly, Mr Beasley refers to the delay since the earlier proceedings were settled and the making of the present application. I have already mentioned that I do not think the delay is unreasonable. No actual prejudice is alleged by any of the defendants and, in this circumstance, it is difficult to see why delay is relevant: Optiver Australia Pty Limited v Tibra Trading Pty Limited 169 FCR 435 at [41].
47 In my view it is important to approach the question of preliminary discovery in a practical and realistic way lest such applications, designed to facilitate the efficient conduct of litigation and permit a possibly wronged party to ascertain sufficient facts to decide whether it will undertake the increasingly expensive and inconvenient path of suing, become bedevilled with complicated hypotheses, nice distinctions and technical points. To use the language of Hely J in St George Bank Limited v Rabo Australia [2004] FCA 1360 at 153, "The rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with a proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case".
48 In the circumstances here, I can see no real unfairness to any of the defendants in requiring them to produce the documents that the applicant seeks nor has any such unfairness been articulated, let alone made the subject of evidence.
49 Accordingly, I make the following orders:
1. The plaintiff has leave to obtain access to the documents produced on subpoena in New South Wales Supreme Court proceedings No 30051/2003 by the second defendant in these proceedings.