There is no doubt that litigation can be costly and time consuming for participants and the outcome can be difficult to predict in advance. In certain circumstances, however, it may be possible to ascertain the viability of issuing proceedings in advance via an application for preliminary discovery.

Preliminary discovery is a means whereby a party (usually the plaintiff) can apply to the Court prior to commencing proceedings in order to ascertain the identity or whereabouts of a prospective defendant and in order to obtain information to enable it to decide whether to commence proceedings against a prospective defendant.

Preliminary discovery is available to parties litigating in New South Wales via Rules 5.2 and 5.3 of the Uniform Civil Procedure Rules (NSW) 2005 (UCPR). The corresponding rule is Order 15Ar6 of the Federal Court Rules. In the Steffen decision, Justice McDougall compared the language used in the UCPR and under the Federal Court Rules and came to the conclusion that there did not seem to be any significant difference between the operation of the two tests on any given factual situation.

In the case of Steffen, the plaintiffs were investors in a fraudulent “Ponzi” scheme, operated through a company known as Strategic Alternative Investments Pty Limited (SAI), trading as SAI Finance. The court noted that the investors appeared unlikely to recover their losses from SAI or the fraudsters. The investors were therefore attempting to ascertain their prospects to success against other potential defendants. It should be noted that no assessment or ruling was made in respect of the merits of the potential claims against ANZ but merely that the claims may be able to be made (a low threshold test). They brought an application under Rules 5.2 and 5.3 seeking discovery of various categories of documents against ANZ Banking Group (ANZ).

 Reasonable enquiries

One of the pre-conditions of which an applicant for preliminary discovery must satisfy the Court is that it has itself made reasonable enquiries to obtain the relevant information or documents prior to seeking an order from the Court.

The Court noted that the failure of an applicant to make an obvious, significant and reasonable enquiry in relation to the documents or information sought prior to the application being made would be fatal to the application. In assessing the reasonableness of the enquiries, the Court considered the following matters might be taken into account:

  • whether there were other means of obtaining the information
  • if so, the cost and delay of resorting to those alternative means
  • the relationship between the applicant and the prospective defendant
  • the utility (or uncertainty) of obtaining necessary information by other means.

The Court referred to, and apparently approved, the decision of Justice Simpson in Papaconstuntinos v Holmes a Court, which held that the Court needed to be satisfied of five matters before it could make an order under Rule 5.3:

  1. that the plaintiff may be entitled to make a claim against that defendant
  2. that the plaintiff had made reasonable enquiries
  3. that notwithstanding that the plaintiff  has made reasonable enquiries, he or she is unable to obtain sufficient information to decide whether or not to commence proceedings against the defendant
  4. that that defendant may have,  or may have had, possession of a document or thing that could assist in determining whether or not the plaintiff was entitled to make such a claim for relief
  5. that inspection of that document would assist the plaintiff to make a decision (whether to commence proceedings)
  6. Even if all five hurdles were cleared, 6. her Honour noted that the grant of the order was still within the Court’s discretion.

Justice McDougall also approved the comments of Lindgren in Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd in relation to the corresponding Federal Court rule: [the rule] “does not provide a means by which the applicant will be enabled to have available to it every document which would assist it in deciding whether to litigate” and that the question posed by the Rule was whether the applicant had sufficient information “which it reasonably needs to enable it to decide whether to commence a proceeding” rather than information whereby “it hopes to be comforted in taking the decision which it already has sufficient information to enable it to take”.

 In assessing whether the plaintiffs were entitled to an order for preliminary discovery against ANZ, the Court first considered the potential causes of action suggested by the plaintiffs against ANZ. The Court concluded that the plaintiffs had discharged the onus of showing that they may be entitled to make a claim against ANZ in respect of the first three but not the fourth cause of action nominated by the plaintiffs.

The plaintiffs’ failure in respect of the fourth ground was in respect of a potential claim to be brought by the plaintiffs/ investors through the third party SAI against ANZ. The plaintiffs argued that SAI’s claim against ANZ was held on trust for the investors. The court rejected this argument. For the purposes of preliminary discovery, the test is that the applicant “may be entitled to make a claim for relief”. Justice McDougall noted that even if the investors commenced proceedings against SAI to compel it to litigate against ANZ, that would not give the investors a claim for relief against ANZ. There would be two claims for relief: one claim by the investors against SAI, and one by SAI against ANZ.

The plaintiffs’ failure in respect of the fourth ground was however not fatal to the application.

 Reasonable enquiries

In assessing whether the plaintiffs had made reasonable enquiries to discharge the statutory pre-condition of the exercise of the discretion, Justice McDougall concluded that although further enquiries could have been made, he did not consider that the failure to make them meant that the enquiries that were made were not “reasonable”.


Justice McDougall also considered each of the categories of documents sought in some detail. His Honour concluded that, with one exception in respect of documents relating to “any account held in the name of SAI”, each of the categories captured documents that would assist the plaintiffs to decide whether or not to commence proceedings against ANZ.

Justice McDougall was not convinced that there was any discretionary factor that should cause him not to make the order for preliminary discovery and the order was accordingly made.