I think I have a claim, but I am not quite sure?
Sometimes things don’t go to plan in a commercial relationship leaving one or more parties disappointed and out of pocket.
It is hard to know what can be done where a transaction or relationship does not meet expectations if the participants do not have enough information to assess questions like ‘who is at fault?’ and ‘can we prove that?’.
Attempting to resolve questions of responsibility and liability in a vacuum of information can result in claims being abandoned that might have been made good, or legal proceedings being issued without enough information to know whether the prospects of success could justify the downside of legal proceedings including the risk of adverse costs orders.
The Supreme Court WA and the Federal Court both have a procedure that allows applicants to seek orders that one or more parties give pre-action discovery of documents that are relevant to their prospective claim.
In the Supreme Court WA, the applicant must show that:
(a) they may have a cause of action against a person; and
(b) they want to commence proceedings against the potential party or join them to an action; and
(c) after making reasonable enquiries, they have not been able to obtain sufficient information to enable a decision to be made as to whether to commence proceedings.
An applicant who already knows it has a good claim will fail in an application for pre-action discovery. An applicant who knows ‘a little, but not enough’, might succeed.
In the matter of Larocca v Alvarez & Marsal Australia and New Zealand Pty Ltd [1], his Honour Justice Meek of the Supreme Court of NSW, colourfully described that middle-ground of knowledge as ‘the Goldilocks Zone’. Larocca is decision on a similar discovery provision in the NSW rules, where no information would be too little, certain knowledge of a claim, too much, and some but not enough information, to be ‘just right’. His Honour went on to liken an applicant seeking more knowledge about their claim to Oliver Twist when he famously declared ‘Please sir, I want some more’.
If the court is satisfied the pre-conditions have been met, it has power to order a prospective defendant, or a third party, to give discovery of documents relevant to the potential claim if there are reasonable grounds for believing the party had, has, or is likely to have had possession of such documents.
The Federal Court sets the bar higher for an applicant for pre-action discovery and requires the applicant to satisfy the court they believe, on reasonable grounds, they may have a right to obtain relief from the court. An applicant that satisfies that test may be entitled to pre-action discovery.
The rules of both courts also contain provisions that allow pre-action discovery of documents for the purposes of identifying a prospective defendant.
The value of pre-action discovery is obvious. It allows someone assessing a prospective claim the chance to obtain more documents and information than would otherwise be available to them, so they can make an informed assessment of whether to pursue the claim or not. That opportunity might help avoid adverse costs orders being made, years after litigation is commenced, and it could equally assist in pleading the strongest possible case if a decision is made to pursue the claim, which in turn increases the prospects of an early outcome.
MPH Lawyers can assist your business to assess the viability of any claim including by use of procedures like pre-action discovery applications.
Please contact Greg O’Shannessy (goshannessy@mphlawyers.com.au) or Nigel Pakes (npakes@mphlawyers.com.au) on 08 9221 0033 if you would like to discuss the subject further.
[1] [2025] NSWSC 687