Background
Anthony Denny sought preliminary discovery from solicitor Ilan Zimerman and his firm, Reid & Vesely, concerning advice given in connection with finance for a property development. Denny alleged that the defendants should have identified a conflict between an equitable mortgage securing a loan made by one of his companies and a condition of a third-party lender’s facility that the land be unencumbered.
The preliminary-discovery application was first heard on 26 August 2025. The Court considered that Denny had not yet made sufficient reasonable inquiries to obtain the documents without compulsory process, and adjourned the matter so he could approach identified persons and entities. After those further inquiries produced limited results, the Court granted preliminary discovery. The defendants then sought their costs of the first hearing.
The Court’s Holding
Harrison AsJ varied the earlier costs order. Although Denny ultimately succeeded and was therefore ordinarily entitled to his costs of the amended summons under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW), he would not have succeeded without the additional evidence obtained after the adjournment.
The opportunity to make and prove further inquiries was an indulgence. Accordingly, Denny was required to pay the defendants’ costs thrown away by the adjournment, including the hearing on 23 September 2025. Otherwise, the defendants remained liable for Denny’s costs of the amended summons. Because the parties had mixed success on the subsequent costs application, each was ordered to bear its own costs of that application.
Key Takeaways
- A successful applicant for preliminary discovery may still bear costs caused by an adjournment needed to cure an evidentiary deficiency.
- Reasonable inquiries under r 5.3 must be established before preliminary discovery is available.
- The ordinary rule that costs follow the event can be adjusted to reflect a party’s need for an indulgence.
Why It Matters
The decision illustrates the costs risk of bringing a preliminary-discovery application before completing reasonable efforts to obtain documents voluntarily. A party may secure the substantive order yet be liable for the opponent’s wasted costs if an adjournment was necessary to make the application viable.