Open to Interpretation and Prone to Appeal: What you need to know about Pre-action Discovery Applications

The recent Supreme Court decision of McCormack v Trevor John Fairs as executor of the estate of Late Maxine Fairs1 (McCormack) contains a useful summary of the principles that must be satisfied to obtain an order for pre-action discovery.

It also clarifies how a court is likely to deal with applications seeking discovery from a potential party whose identity has been ascertained, but where there is insufficient information to be able to make an informed decision as to whether or not to commence proceedings against them.

There are several procedural requirements to obtain an order for pre-action discovery from a potential party whose identity has been ascertained; these are set out in the Rules2 and summarised here.

A key issue considered in McCormack is the jurisdictional requirement to establish that the applicant ‘may have a cause of action’ against a potential party and whether the discretion of the court to make an order for pre-action discovery ought to be exercised. In this case, the plaintiff seeks orders for pre-discovery from the potential defendant, who is the executor of the estate of the plaintiff’s deceased former de-facto spouse.  

May have a cause of action

An applicant seeking an order for pre-action discovery must satisfy the court that it 'may have a cause of action against' the potential party.3

The plaintiff claims that the basis for his potential cause of action against the proposed defendant lies in equity, arising from a constructive trust, principally based on a joint endeavour in which he and the potential defendant jointly held land in Mount Masura. The plaintiff says that:

  • he made disproportionate financial contributions to the joint endeavour for the purchase of, and improvements to, the jointly held land; by which he acted to his detriment; or4
  • alternatively, the potential defendant has acted unconscionably by maintaining for the benefit of others from the disproportionate financial contributions made by the plaintiff as referred to above.5

In support of his application, the plaintiff deposes to the nature of his relationship with his deceased de-facto spouse, their arrangement in relation to the property and documentary evidence of his financial contributions in relation to the property. He also adduced evidence that indicated he may have acted to his detriment.6

Significantly, Acting Master Strk (as she then was) noted that the plaintiff’s account was not without documentary foundation and, on balance, considered that the evidence adduced gave an objective foundation that takes the existence of the cause of action beyond a mere allegation, suspicion or assertion.7 The Master indicated that the plaintiff ‘may have a cause of action’ and that all facts necessary to give rise to a right to curial relief may well be established.8 It was not necessary for the plaintiff to have a prima facie cause of action.

As the plaintiff was able to satisfy the balance of the procedural requirements for an order for pre-action discovery, the court then turned to the question of whether it should exercise its discretion in making the order.

The court’s discretion to order pre-action discovery

The discretion to order pre-action discovery is not exercised as a matter of course. The court will exercise caution before making an order for pre-action discovery. An order will only be made where it is reasonably necessary to achieve the proper administration of justice.9

The Court of Appeal recently applied the following list of non-exhaustive factors as being relevant to the exercise of this discretion:10

  • The likelihood that a cause of action of the kind suggested will be found to exist.
  • The nature and significance of the potential cause of action.
  • The likely effect of an order of the kind contended for on the potential party.
  • Whether the applicant has any other adequate means of obtaining the information.
  • The nature and confidentiality of the documents proposed to be obtained.
  • The possible significance of the information in the documents to the decision whether to commence the contemplated proceedings.
  • Whether the applicant is able to compensate the potential party for its cost of complying with the order.
  • Whether there is any evidence of bad faith on the part of the applicant.
  • The extent to which the cost and effort involved in undertaking the proposed discovery and inspection is proportionate to the likely value of the claim if successful.

The court must make its own evaluation of the evidence and form an opinion as to whether, on the evidence, the applicant may have a cause of action against the potential party.11

In McCormack, the court weighed in the balance each of these factors on the evidence before it and was satisfied that the discretion ought to be exercised. Notably, with reference to the first factor, the likelihood that the cause of action of the kind suggested will be found to exist did not weigh heavily in the balance either for or against the application.12

Lavan comment

The test as to whether an applicant ‘may have a cause of action’ against a potential party is objective in the sense that it is not sufficient that the applicant believes that they may have a cause of action against a potential party; the court might determine this belief to be unfounded.13

Establishing that a party may have cause of action in a pre-action discovery application can be a challenging task. You need to objectively demonstrate that a cause of action may exist, but that you do not have sufficient information to form a view as to whether to commence proceedings.   

Further, the test of whether one ‘may have a cause of action’, is open to interpretation and, as a result, liable to challenge. In that regard, we note that McCormack is currently pending appeal, and it is likely that the application of the test in this case will be subject to challenge.

Given this, it is essential that the evidence prepared in support of the application enables the plaintiff to satisfy the court on an objective basis that they may have a cause of action against the potential defendant.

This is not to say that pre-action discovery does not have its advantages. It may be useful, prior to the commencement of proceedings, to learn how a court might assess the likelihood that a cause of action of the kind suggested in the application will be found to exist. Equally, by the time litigation is commenced, after pre-action discovery orders have been made, parties will already be aware of the critical documents upon which they intend to rely on at any trial and should be aware of any documents adverse to their case. If these critical documents are identified and exchanged in the initial stages of litigation, this will likely facilitate an early resolution in cases which are capable of settlement.

We recommend that you contact Lavan for specific advice on commencing or responding to pre-action discovery applications.

AUTHOR
Iain Freeman
Partner
AUTHOR
Cinzia Donald
Partner
AUTHOR
Millie Richmond-Scott
Special Counsel
AUTHOR
James Barrett
Associate
SERVICES
Corporate Disputes and Investigations
Litigation and Dispute Resolution


FOOTNOTES

[1] [2021] WASC 303.

[2] O 26A r 4 of the Rules of the Supreme Court 1971 (WA).

[3] O 26A r 4(1) of the Rules of the Supreme Court 1971 (WA).

[4] McCormack v Trevor John Fairs as executor of the estate of Late Maxine Fairs [2021] WASC 303 at [21].

[5] Ibid [21].

[6] Ibid [23] & [31].

[7] Ibid [29].

[8] Ibid [34]

[9] Ibid [92].

[10] BWS v ARV [No 2] [2021] WASCA 62 at [35]-[36] applying Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94 and Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14.

[11] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 at [67].

[12] McCormack v Trevor John Fairs as executor of the estate of Late Maxine Fairs [2021] WASC 303 at [96].

[13] Waller v Waller [2009] WASCA 61 at [75].