Preliminary discovery – the neat trick that allows you to obtain another party's documents

In recent years, several cases have involved a party seeking preliminary discovery against another party to determine whether to commence proceedings against that party for conduct that breaches competition law.

This article summarises how to apply for preliminary discovery and examines two recent cases: Racing NSW and CSR Bradford.

What is preliminary discovery?

Preliminary discovery compels a prospective respondent to produce relevant documents that may assist a prospective applicant in determining whether there is merit in commencing legal action against the respondent.

Preliminary discovery is available if:

• the applicant reasonably believes that it may be able to make a claim for relief against a respondent;
• the applicant has already made reasonable inquiries to determine whether it has any claim for relief;
• following the reasonable inquiries, the applicant was not able to obtain sufficient information to decide whether it has any claim for relief;
• the respondent may have possession of documents that can allow the applicant to determine whether it can make any claim for relief; and
• inspecting the documents will allow the applicant to determine whether to commence proceedings.

Recent cases

Racing NSW and Consolidated Energy have successfully sought preliminary discovery orders against prospective respondents to determine whether they have a claim for relief for breaches of competition law by those respondents.

Racing NSW

Facts

Both Racing NSW and Racing Victoria are members of the national racing governance body, Racing Australia.

Racing NSW believed that Racing Australia’s new rules in relation to the scheduling and grading of races (Pattern) were designed to exclude The Everest, the richest horse race in Australia, from classification as a group one race (which attracts the greatest level of betting).

Racing NSW administers the running of The Everest. Racing Victoria used its veto power to prevent The Everest from gaining group one classification, and Racing NSW used its veto powers to prevent Racing Australia from adopting the Pattern.

Racing NSW received confidential documents which described a plan by Racing Victoria to set up an alternative racing body without Racing NSW. Racing NSW claimed that the plan showed a motivation by the other state bodies to create an arrangement between competitors to substantially lessen competition and engage in unconscionable conduct in breach of competition laws and the Australian Consumer Law.

After unsuccessfully requesting documents from the state bodies relating to the breakaway body, Racing NSW commenced proceedings in the NSW Supreme Court to seek preliminary discovery against Racing Victoria, its director and chairman and a former employee, as well as the other state racing bodies, to consider whether to commence proceedings.

Decision

Justice Ball granted the preliminary discovery orders and found that Racing NSW had presented evidence suggesting that Racing Victoria had developed a plan to create a new body and exclude Racing NSW.

While Racing Victoria argued that there was no anti-competitive behaviour as it had invited Racing NSW to be part of the new body, Justice Ball found that the evidence showed that the plan to create a breakaway body had not been abandoned altogether as the other state racing bodies were conducting CEO interviews for the new body without Racing NSW.

The preliminary discovery orders required the production of any documents relating to draft agreements concerning the creation of a new body that excludes Racing NSW as well as records of meetings or communications between Racing Victoria and any other person concerning the exclusion of Racing NSW from the racing industry or the creation of a new national body.

Documents evidencing any confidentiality agreement or draft confidentiality agreement between Racing Victoria and another state body relating to the exclusion of Racing NSW were also required for production.

The Court proceedings remain on foot.

CSR Bradford

Facts

CSR Bradford is a vertically integrated manufacturer of insulation products that supplies CSR Bradford-branded products to distributors while also selling direct to customers.

One of the distributors which CSR Bradford supplied is Consolidated Energy.

In June 2021 and June 2022, CSR Bradford implemented price increases on products supplied to Consolidated Energy. Consolidated Energy was concerned that the price increases would mean that it could not compete in the distribution market as the prices it charged customers would be well above prices CSR offered directly.

In July 2024, Consolidated Energy applied for preliminary discovery to determine whether CSR Bradford had misused its market power in breach of competition law when selling insulation products to Consolidated Energy.

Consolidated Energy presented letters from a CSR Bradford senior executive to the Consolidated Energy CEO evidencing two “extraordinary” price increases. Consolidated Energy claimed that CSR Bradford may have been limiting insulation supplies to its distributors and increased the price of those products for its own benefit. While the price increases occurred during the COVID-19 period, CSR Bradford reported increased volumes of insulation products to investors.

Decision

In September 2024, Justice Perram issued consent orders granting Consolidated Energy preliminary discovery of documents relating to the price increases of the insulation products, including board documents and internal emails between executives and regional managers relating to supply agreements and price increases, as well as volumes of insulation products requested and supplied by distributors and used by CSR Bradford.

CSR Bradford will complete its preliminary discovery in early December, and Consolidated Energy will then determine whether to bring proceedings against CSR Bradford for a breach of competition law.

The upshot

Commencing private proceedings against other parties for competition law breaches can be costly and uncertain, especially where there are significant information asymmetries between the parties and a lack of access to documents and information.

One way in which this can be addressed is through an application for preliminary discovery, which can allow a prospective applicant to gain clarity on the nature and extent of the relevant conduct to determine whether to bring a claim under the CCA.

The two cases above demonstrate that courts are prepared to grant preliminary discovery for breaches of competition law where the parties have satisfied the requirements for those orders.

Applicants are not required to establish reasonable prospects for success and the court only needs to be satisfied that the prospective respondent may have possession of the relevant documents. Applications for preliminary discovery will not be treated as a “mini trial” and the applicant need only provide some detail of the nature of the relief they may seek without precisely asserting a cause of action. However, it is important to note that the court ultimately retains the discretion as to whether to order preliminary discovery of the requested documents irrespective of whether the elements are satisfied.