Supreme Court New South Wales Medium Neutral Citation: Bauen Constructions Pty Limited v New South Wales Land and Housing Corporation [2014] NSWSC 684 Hearing dates: 27/05/2014 Decision date: 29 May 2014 Before: Ball J Decision: Bauen Constructions' motion filed on 27 May 2014 be dismissed with costs. Catchwords: PROCEDURE - civil - disclosure - Practice Note SC Eq 11 - where party seeks an order for disclosure before service of evidence - whether "exceptional circumstances" necessitating disclosure - whether disclosure necessary for the resolution of the real issues in dispute Legislation Cited: Civil Procedure Act 2005 (NSW) Practice Note SC Eq 11 - Disclosure in the Equity Division Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Armstrong Strategic Management and Marketing Pty Limited v Expense Reduction Analysts Group Pty Ltd [2012] NSWSC 393 In the matter of Mempoll Pty Limited, Anakin Pty Limited and Gold Kings (Australia) Pty Limited [2012] NSWSC 1057 Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2012] NSWSC 913 Leighton International v Hodges [2012] NSWSC 458 Naiman Clarke Pty Ltd v Tuccia [2012] NSWSC 314 Owners Strata Plan SP 69567 v Baseline Constructions Pty Ltd [2012] NSWSC 502 Owners Strata Plan 70335 v Walsh Bay Finance Pty Ltd [2013] NSWSC 1623 Palavi v Radio 2UE Sydney Pty Ltd [2011] NSWCA 264 Category: Procedural and other rulings Parties: Bauen Constructions Pty Limited (Plaintiff) New South Wales Land and Housing Corporation (Defendant) Representation: Counsel: C Blackwell, Solicitor (Plaintiff) D Talintyre (Defendant) Solicitors: Bannermans Lawyers (Plaintiff) TressCox Lawyers (Defendant) File Number(s): 2013/333749 Publication restriction: Nil Judgment 1By a notice of motion filed in court on 27 May 2014, the plaintiff, Bauen Constructions, seeks disclosure by the defendant, New South Wales Land and Housing Corporation (the Housing Corporation), of certain documents in advance of the parties serving their evidence. Background 2In early 2010, Bauen Constructions entered into 4 building contracts with the Housing Corporation for the design and construction of seniors living units in various locations in Yagoona. The 4 contracts are referred to by the parties as "the Warringa Contract", "the Colechin Contract", "the Saltash Contract" and "the Dargan Contract". The Superintendent appointed by the Housing Corporation under each contract was McLachlan Lister Pty Limited. 3Work on the 4 projects proceeded concurrently. Practical completion was achieved in relation to the Warringa Contract, the Colechin Contract and the Saltash Contract. The project the subject of the Dargan Contract was damaged by fire and the contract was terminated for convenience by the Housing Corporation before practical completion. 4In these proceedings, Bauen Constructions makes various claims against the Housing Corporation arising out of the 4 contracts. Relevantly, it claims that the Housing Corporation engaged in acts of prevention including: (i) failing to ensure that there was an independent Superintendent engaged at all times as contemplated by Clauses 1 and 20 of Annexure F; (j) failing to ensure that the Superintendent fulfilled all aspects of its role reasonably and in good faith in accordance with Clause 20 of Annexure F; (k) interfering with the Superintendent's powers, duties and obligations with regard to independent assessment and decision making and instructions contemplated by the Construction Contracts, in breach of Clause 20 of Annexure F; 5Bauen Constructions contends that, as a result of those acts of prevention, time under each contract was set at large with the consequence that it is entitled to recover amounts wrongfully retained by the Housing Corporation as liquidated damages. Those liquidated damages are said to amount to $512,174. Bauen Constructions also claims interest of $102,238 on the amount that it is said has been wrongfully retained. 6It is apparent from the amended Technology and Construction List statement filed on 24 December 2013, and from particulars requested by the Housing Corporation and Bauen Constructions' response to that request, that Bauen Constructions does not have any direct evidence that the Housing Corporation interfered with the exercise by the Superintendent of its functions under the construction contracts. At present, Bauen Constructions says that those matters can be inferred from the conduct of the Superintendent about which Bauen Constructions complains. 7On 21 March 2014, the court gave directions by consent that Bauen Constructions file and serve its evidence on or before 16 May 2014. 8On 2 April 2014, Bauen Constructions served a subpoena on McLachlan Lister. The subpoena relevantly sought the production of the following documents: 6. All correspondence exchanged by the Corporation and McLachlan Lister and all documents relating to: a. the certification of practical completion of one or all of the Construction Contracts. b. the determination, approval, rejection and/or certification of Bauen's claims under one or more of the Construction Contracts for: i. extensions of time; ii. delay damages; and/or iii. variations. c. the termination of the Dargan Contract. d. the remedial works required as a result of the fire at the Dargan site on 26.4.2011 ('Dargan fire'); e. the insurer's requirements regarding the remediation of the Dargan site following the Dargan fire; and f. McLachlan Lister's performance of its role as Superintendent under the Construction Contracts. 7. All correspondence exchanged by Bauen and McLachlan Lister and all documents relating to: a. Extension of time claims: i. Number [6, 15, 16, 17, 18, 19] for the Warringa Contract; ii. Number [8, 15, 16] for the Saltash Contract; iii. Number [2, 6, 7, 8, 9, 10, 11, 12] for the Dargan Contract; iv. Number [4, 6, 7, 8, 12] for the Colechin Contract; b. Variation claims: v. Number [15, 16] for the Saltash Contract; vi. Number [15] for the Dargan Contract; vii. Number [15, 16, 17, 18, 19] for the Colechin Contract; ... 9Following correspondence between the solicitors for Bauen Constructions and the solicitors for McLachlan Lister which led to a narrowing of the scope of the subpoena, on 17 April 2014, the solicitors for McLachlan Lister wrote to the solicitors for Bauen Constructions estimating that it would still take between 6 to 8 weeks and cost $36,220 to produce the documents that were still sought by Bauen Constructions. 10Arrangements were then made for the solicitors for Bauen Constructions to inspect some of the documents that McLachlan Lister had in its possession. That inspection occurred but the documents that were made available were not those that were sought by Bauen Constructions. 11There was then further correspondence between the two firms of solicitors. Essentially, the solicitors for Bauen Constructions pressed for production of a number of categories of documents that it had originally sought. The solicitors for McLachlan Lister's position was that their client was willing to produce those documents. However, they maintained that it would take 6 to 8 weeks to produce the documents and the cost of doing so would be in the order of $36,220. They give a breakdown of that figure, in terms of hourly rates and time that the task of complying with the subpoena is expected to take, but they give no indication of what work would be involved in complying with the subpoena. They sought an undertaking that Bauen Constructions pay McLachlan Lister's reasonable costs associated with production of the documents and provide an initial payment on account of the costs of compliance. It was Bauen Constructions' position that the costs estimate was excessive. 12On 15 May 2014, Bauen Constructions' solicitors sent the Housing Corporation's solicitors a detailed letter explaining the history of the subpoena and stating that, in the circumstances, their client would not be in a position to serve its evidence in accordance with the agreed timetable. They proposed that the Housing Corporation give discovery of the documents that had been sought from McLachlan Lister. That application was listed before me on 27 May 2014. In the meantime, it appears that the subpoena has been stood over. 13On 26 May 2014, the Housing Corporation served an affidavit from Mr Gralton, who currently holds the position of "Delivery Director" with the Corporation. Mr Gralton gave evidence that, in order to give discovery in the terms sought, it would be necessary to restore the email accounts of approximately 62 employees of the Housing Corporation who may have corresponded with McLachlan Lister and that the costs of doing so were $1,116 for each email account, making a total of $69,192. In addition, Mr Gralton gave evidence that the Housing Corporation holds 267 lever-arch files in storage and 18 files in its offices which may contain relevant material. Mr Gralton estimates that it will cost approximately $5,000 to retrieve the hard copy files from storage. He gave evidence that it would then be necessary to go through the email accounts and hard copy files to search for documents falling within the categories sought by Bauen Constructions. He did not give an estimate of those costs. However, he gave evidence that the Housing Corporation did not have the resources to undertake that exercise itself and that it would be necessary for it to pay its solicitors to do that work. 14Following service of Mr Gralton's affidavit, on 26 May 2014, Bauen Constructions proposed, in a letter its solicitors sent to the solicitors for the Housing Corporation, a narrower form of disclosure. The notice of motion it filed in court reflects the narrower scope of disclosure sought in the letter. That notice of motion seeks documents between McLachlan Lister and each of 14 named employees of the Housing Corporation concerning: xv. The certification of practical completion of one or all of the construction contracts for 2 - 8 Warringa Street, 22 - 30 Colechin Street, 23 - 29 Saltash Street, and 54 - 62 Dargan Street, Yagoona; xvi. The determination, approval, rejection and/or certification of claims made by Bauen Constructions Pty Limited under one or more of the contracts for 2 - 8 Warringa Street, 22 - 30 Colechin Street, 23 - 29 Saltash Street, and 54 - 62 Dargan Street, Yagoona for: A. Extensions of time; B. Delay damages; and/or C. Variations; xvii. The termination of the contract for 54 - 62 Dargan Street, Yagoona; xviii. McLachlan Lister's performance of its role as Superintendent under the contracts for 2 - 8 Warringa Street, 22 - 30 Colechin Street, 23 - 29 Saltash Street, and 54 - 62 Dargan Street, Yagoona; xix. The insurer's requirements regarding the remediation of the site at 54 - 62 Dargan Street, Yagoona following the fire at 54 - 62 Dargan Street, Yagoona 15In addition, Bauen Constructions seeks discovery of the 18 lever-arch folders of documents that the Housing Corporation continues to hold in its office that possibly contain relevant documents. Consideration 16Practice Note SC Eq 11 - Disclosure in the Equity Division relevantly provides: 4. The Court will not make an order for disclosure of documents (disclosure) until the parties to the proceedings have served their evidence, unless there are exceptional circumstances necessitating disclosure. 5. There will be no order for disclosure in any proceedings in the Equity Division unless it is necessary for the resolution of the real issues in dispute in the proceedings. 17It is apparent from these paragraphs that, if a party wishes to obtain disclosure prior to serving its evidence, that party must establish: * That there are exceptional circumstances necessitating disclosure; * That disclosure is necessary for the resolution of the real issues in dispute in the proceedings. 18The Practice Note proceeds on the basis that a party will normally be able to serve the evidence on which it relies in support of its case without having to obtain discovery from the other party. But it recognises that, in some circumstances, that will not be the case and that it will be necessary to obtain discovery before a party is in a position to serve its evidence. Those circumstances are "exceptional" in the sense required by the Practice Note: see Leighton International v Hodges [2012] NSWSC 458; Owners Strata Plan SP 69567 v Baseline Constructions Pty Ltd [2012] NSWSC 502; Owners Strata Plan 70335 v Walsh Bay Finance [2013] NSWSC 1623. It is not possible to list in advance the categories of exceptional circumstances in this sense. Each case must be judged according to its own facts, but one case in which circumstances may be exceptional in the sense required is where the relevant facts are not in the knowledge of the party seeking disclosure: see, for example, Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2012] NSWSC 913; In the matter of Mempoll Pty Limited, Anakin Pty Limited and Gold Kings (Australia) Pty Limited [2012] NSWSC 1057; Naiman Clarke Pty Ltd v Tuccia [2012] NSWSC 314. 19The Practice Note lists conditions that must be satisfied before the court will order disclosure. It does not list conditions which are sufficient to obtain disclosure. The court still retains a discretion to require or limit discovery under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 21: see Palavi v Radio 2UE Sydney Pty Ltd [2011] NSWCA 264 at [101] per Allsop P. In exercising that discretion, the court will have regard to the overriding purpose set out in s 56 of the Civil Procedure Act 2005 (NSW) to facilitate "the just, quick and cheap resolution of the real issues in the proceedings" and the objects set out in s 57 of that Act, which are: (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. 20In the present case, there can be little doubt that, if there is a genuine dispute concerning whether the Housing Corporation interfered with the exercise by McLachlan Lister of its functions as Superintendent, then Bauen Constructions would be entitled to disclosure of correspondence between the Housing Corporation and McLachlan Lister concerning the exercise of those powers. That correspondence would go to the heart of the allegation and relates to facts which are not within the knowledge of Bauen Constructions. 21However, in my opinion, there are difficulties with Bauen Constructions' application for disclosure in this case. 22It is not apparent why documents falling within category (xix) (concerning the insurer's requirements regarding the remediation of the Dargan Street site) are relevant or, indeed, what the category means. Nor is it clear why the Housing Corporation should be required to produce the 18 lever-arch files that are not in storage simply because those files may contain relevant material. 23It is apparent that the documents concerning the relationship between the Housing Corporation and McLachlan Lister are available from two sources. One is McLachlan Lister. The other is the Housing Corporation. McLachlan Lister is willing to produce the documents sought, but has estimated that the costs of production are $36,220. The basis of that estimate is unclear. The Housing Corporation has not provided an estimate of the total costs it will incur in producing the documents that are sought from it. Mr Blackwell, who appeared for Bauen Constructions, submitted that the costs of obtaining the documents from the Housing Corporation rather than McLachlan Lister will be less because Bauen Constructions has agreed to reduce the scope of the disclosure it seeks and that the figures in Mr Gralton's affidavit are out of date. However, I do not think that conclusion can be reached on the material before me. According to Mr Gralton, it will cost approximately $15,000 to retrieve the relevant email accounts and a further $5,000 to retrieve hard copy files. In the form in which disclosure is still sought, it will be necessary to review those files to search for hard copy documents that fall within the description of the documents in respect of which disclosure is sought. In any event, once the email accounts are restored it will still be necessary for someone to go through those emails to identify relevant documents. Although no one has sought to estimate the costs of doing that work, it is likely to be significant. It is true that McLachlan Lister will be entitled to recover its own costs as well as legal costs in producing the documents. On the other hand, the Housing Corporation's costs are likely to be greater because much of the work will be done by its solicitors and it appears that it has more material to search through. 24There may be a degree of exaggeration in the estimates of costs given by McLachlan Lister and the Housing Corporation. Ultimately, if the costs cannot be agreed, they will have to be assessed in either case. What is clear is that, in either case, the costs are likely to be significant and there is no reason for thinking that it will be substantially more efficient for the Housing Corporation rather than McLachlan Lister to produce the documents. The real issue is where the costs of production should initially fall. If Bauen Constructions pursues the subpoena, it will have to pay McLachlan Lister's costs. If it is ultimately successful in the case, the likelihood is that it will be entitled to recover those costs from the Housing Corporation. If Bauen Constructions is entitled to obtain disclosure from the Housing Corporation, the Housing Corporation will have to bear the initial costs of disclosure, which it will likely be entitled to recover from Bauen Constructions if Bauen Constructions is unsuccessful. 25It is apparent that Bauen Constructions' claim that the Housing Corporation interfered with the discharge by McLachlan Lister of its functions as Superintendent is somewhat speculative. Mr Blackwell conceded that Bauen Constructions was not in the position to file evidence in relation to the claim at present and that production of the documents may reveal that there is no merit in the claim to which they are relevant. At present, the claim seems to be put on the basis that, because McLachlan Lister did the wrong thing, the Housing Corporation must have caused it to do so. It is obvious that, even if the premise can be established, the conclusion does not follow. 26One of the purposes of Practice Note SC Eq 11 is to force parties at an early stage of proceedings to confront the real issues in the case and to consider how they are going to prove their case: see Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue [2012] NSWSC 913 at [3]ff; Leighton International v Hodges [2012] NSWSC 458 at [14]ff; Armstrong Strategic Management and Marketing Pty Limited v Expense Reduction Analysts Group Pty Ltd [2012] NSWSC 393 at [66]. In the present case, Bauen Constructions must confront the question whether there really is merit in its claim that the Housing Corporation interfered with the exercise by McLachlan Lister of its functions as Superintendent. In circumstances where it has available to it little objective evidence that supports that claim, and where the claim appears to be speculative, in my opinion, it is reasonable to expect it to bear the costs of its speculation in the first instance. That is likely to focus its mind on the question whether its claim really ought to be pursued. 27For those reasons, Bauen Constructions' motion filed on 27 May 2014 should be dismissed with costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 June 2014