Alcoa of Australia Ltd v Apache Energy Ltd [No 7]

[2016] WASC 370

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   ALCOA OF AUSTRALIA LTD -v- APACHE ENERGY LTD [No 7] [2016] WASC 370

CORAM:   LE MIERE J

HEARD:   ON THE PAPERS

DELIVERED          :   16 NOVEMBER 2016

FILE NO/S:   CIV 1481 of 2011

BETWEEN:   ALCOA OF AUSTRALIA LTD

Plaintiff

AND

APACHE ENERGY LTD
First Defendant

APACHE NORTHWEST PTY LTD
Second Defendant

TAP (HARRIET) PTY LTD
Third Defendant

KUFPEC AUSTRALIA PTY LTD
Fourth Defendant

Catchwords:

Costs - Costs of compliance with subpoena - Where some work undertaken was unreasonable - Turns on own facts

Costs - Where no meaningful conferral has taken place - Successful party not awarded their legal costs - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 36 r 11, O 59 r 9

Result:

Application successful in part

Category:    B

Representation:

Counsel:

Plaintiff:     No appearance

First Defendant              :     No appearance

Second Defendant         :     No appearance

Third Defendant            :     No appearance

Fourth Defendant           :     No appearance

Solicitors:

Plaintiff:     Tottle Partners as agents for Landers & Rogers

First Defendant              :     K & L Gates

Second Defendant         :     Clifford Chance

Third Defendant            :     Lavan Legal

Fourth Defendant           :     Allens Arthur Robinson

Case(s) referred to in judgment(s):

Beach Petroleum NL v Johnson [No 2] [1995] FCA 1250; (1995) 57 FCR 119

Brookvista Pty Ltd v Meloni [2009] WASCA 180

Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738

Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [No 11] [2013] WASC 92

Real Estate and Business Agents Supervisory Board v Espanol Holdings Pty Ltd (in liq) [2007] WASCA 67

Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161; (2006) 33 WAR 1

LE MIERE J: 

Background

1. On 16 January 2015 a subpoena to produce documents (subpoena) was issued by the plaintiff, Alcoa of Australia Limited, against the applicant, Tamboritha Consultants Pty Ltd (Tamboritha), in the Supreme Court of Western Australia.  On 4 February 2015, Tamboritha was subsequently served with the plaintiff's revised schedule of documents for production (revised schedule).  Tamboritha and Alcoa agreed to an extension of the date of production to 27 February 2015.  Tamboritha produced to the court the documents required by the revised schedule on 27 February 2015.

2. On that date Tamboritha also filed a chamber summons in support of an application for costs of complying with a subpoena pursuant to O 36B r 11 of the Rules of the Supreme Court 1971 (WA) (the Rules) on 27 February 2015 for an order that the plaintiff pay Tamboritha's reasonable costs incurred in complying with the subpoena and revised schedule. On 13 April 2015 I ordered that the main proceeding be dismissed save for this application. On 29 April 2015 I ordered that this application be dealt with on the papers.

Relevant Principles

1. Order 36B r 11 of the Rules is as follows:

   11.Costs and expenses of compliance

   (1)The Court may order the issuing party to pay the amount of any reasonable loss or expense incurred in complying with the subpoena.

   (2)If an order is made under subrule (1), the Court must fix the amount or direct that it be fixed in accordance with the Court's usual procedure in relation to costs.

   (3)An amount fixed under this rule is separate from and in addition to ‑

   (a)any conduct money paid to the addressee; and

   (b)any witness expenses payable to the addressee.

2. The court may generally fix the reasonable cost and expense of compliance with a subpoena provided that the judge is confident that it can be done in a logical, fair and reasonable manner:  Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [No 11] [2013] WASC 92 [22] (Edelman J) citing Beach Petroleum NL v Johnson [No 2] [1995] FCA 1250; (1995) 57 FCR 119, 123 (von Doussa J). To do so, the court must be convinced that it has before it 'sufficient material that it is confident it can arrive at an appropriate sum': Brookvista Pty Ltd v Meloni [2009] WASCA 180 [27] (Newnes JA); Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 [22]. Where the reasonable loss or expense is not great there is a strong impetus to fix that amount to spare the potentially disproportionate costs of taxation: Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [No 11] [27].

The dispute

1. The applicant argues that a costs order of $24,225.19 amount would be reasonable in the circumstances.  This includes a cost for compliance with the subpoena and revised schedule of $15,432.55 and legal costs of $8,792.64.

2. The plaintiff submits that Tamboritha's costs of compliance are unreasonable in two ways.  First, Tamboritha unreasonably continued work on the subpoena despite an agreement during a phone conversation on 29 January 2015 (the 29 January discussion) that Tamboritha would cease work on the subpoena until a revised schedule was provided.

3. Secondly, Tamboritha is claiming a disproportionate amount of work from the point at which the director of Tamboritha, Wayne Ham (Mr Ham), advised two solicitors for the plaintiff, Stuart Moore of Lander & Rogers (Mr Moore) and Ben Dowling of Lander & Rogers (Mr Dowling) that all but one of the reports had been located.  Mr Dowling says this was said in the 29 January discussion.  Alternatively, the plaintiff argues if Mr Ham's account is accepted the same thing was stated on 4 February 2015 in an email to Mr Dowling. 

4. Finally, the plaintiff argues that Tamboritha should have none of the legal costs involved in this application to the court.  The plaintiff argues that there was no proper conferral about costs of the subpoena.  The plaintiff states this contention is supported by the fact that the applicant did not provide the plaintiff a specific quantum or supporting documents until after the application had been issued.

Subpoena and revised schedule

1. The subpoena required the following documents to be produced:

   a.all working notes, field notes and other notes (whether in hard copy or electronic form) prepared in relation to the 12" &16" Sales Gas Pipelines at Varanus Island;

   b.all reports (whether in final form or draft, and whether in hard copy or electronic form) prepared in relation to the 12'' & 16" Sales Gas Pipelines at Varanus Island;

   c.all communications, including letters, facsimiles and e‑mails (whether in hard copy or electronic form) as sent by, or received from, representatives of Tamboritha in connection the 12" & 16" Sales Gas Pipelines at Varanus Island; and

   d.all notes of any conversations, meetings or conferences (whether in hard copy or electronic form) that representatives of Tamboritha had or attended in connection with the 12" & 16" Sales Gas Pipelines at Varanus Island.

2. Each of these categories also had extensive lists of documents which were required to be produced under them, although the subpoena was not limited to just those documents specified.

3. The revised schedule required the production of all reports prepared in relation to the 12" & 16" Sales Gas Pipelines at Varanus Island and all revisions, including but not limited to:  ROV pipeline inspections, field surveys, maintenance and the SGL stabilisation programme as well as at least 11 reports and revisions of those reports.

Phone call on 29 January 2015

1. Mr Ham, Mr Dowling and Mr Moore had a phone conversation on 29 January 2015.  In his affidavit, Mr Dowling, says that during the phone call on 29 January 2015 Mr Ham and Mr Dowling had a conversation in which the following occurred:

   a.Mr Dowling agreed to revise the scope of the subpoena;

   b.Mr Dowling advised Mr Ham to stop work on complying with the Subpoena until a revised schedule was provided and Mr Ham agreed;

   c.Mr Ham advised Mr Dowling that all except one of the reports the plaintiff would be requesting in the revised schedule were already located.

2. Mr Ham filed a further affidavit sworn on 13 May 2015.  In that affidavit he stated that he did not recall being advised by Mr Dowling that Tamboritha should cease work on the subpoena and await receipt of the revised schedule and does not accept that he agreed to this.  Mr Ham also stated that he said words to the effect that Tamboritha understood its obligations to respond to the subpoena and did not accept that Tamboritha was at liberty to cease work on the verbal whim of Lander & Rogers.  Mr Ham also states that it is incorrect that Tamboritha had retrieved all relevant documents save one or that he had suggested to Mr Dowling and Mr Moore during the conversation that Tamboritha had done so.

3. Mr Ham does not deny that Mr Dowling did advise him to cease work, although he does not accept that he agreed to do so.  The fact he said words to effect that Tamboritha understood its obligations to respond to the subpoena and did not accept that Tamboritha was at liberty to cease work on the verbal whim of Lander & Rogers indicates that Mr Ham was responding to verbal advice that Tamboritha should cease work.  Similarly Mr Ham does not deny that he told Mr Dowling that all but one of the reports identified in the schedule had been discovered.  Instead he denied that he told Mr Dowling that all but one of the documents identified in the subpoena had been retrieved.

4. It is therefore open to me to accept some of the evidence of Mr Dowling in relation to the conversation he and Mr Moore had with Mr Ham.  However, it I cannot be convinced that Mr Ham did agree that he would cease work.  In that respect Mr Dowling may be mistaken. 

The work done complying with the subpoena and revised schedule

1. The plaintiff does not dispute any of the costs claimed prior to 29 January 2015, nor do they contest the amount claimed for disbursements.  That is, $6,712.55 for work done and $1,337.55 for disbursements out of the total claim of $15,432.55 is accepted.

2. In all, the total work done by the employees of Tamboritha took 112.5 hours.  Mr Ham gave evidence that to comply with the subpoena significant administrative work including forensic document extraction needed to be completed.  Tamboritha has excellent records and projects dating back to its commencement in 1988.  The documents requested in the subpoena were reviewed against Tamboritha's electronic project registers and physical documents.  By 29 January 2015, 59 project files of approximately 25,000 pages had been extracted from Tamboritha's archives.  Not all of the files were relevant to the subpoena and they needed to be forensically examined to respond to the subpoena.  Mr Ham also notes that there was a forensic review of project files recovered from Tamboritha's compactus, extraction of documents from archive boxes and electronic records from the Tamboritha server.  The final cost does not include significant background review and administration costs.

3. The work was completed by Ms Barin as document controller, Mr Ham as project manager, Jane Wentzel who was Tamboritha's senior document controller and Mike Anderson who manages the engineering projects.  The timesheets of the Tamboritha employees record work done on the subpoena and revised schedule as 'Subpoena ‑ Alcoa vs AEL' or, alternatively as 'Report Review and Collating' for the client 'Alcoa/AEL'.

4. On 29 January Mr Dowling advised Mr Ham that Tamboritha should cease work on compiling the documents identified in the subpoena, and Mr Ham advised Mr Dowling that Tamboritha had retrieved all but one of the reports.

5. In an email to 4 February 2015 Mr Ham advised Mr Dowling that Tamboritha had located all but one of the documents identified in the revised schedule.  Those documents are relevantly the same reports that Mr Ham told Mr Dowling had been located in the 29 January discussion.  Given Mr Ham's evidence that he did not believe Tamboritha could cease work at the verbal whim of Lander & Rogers, it must be assumed that Tamboritha continued working on identifying and retrieving documents identified in the subpoena.  Further, the fact that on 4 February 2015 Mr Ham informed Mr Dowling there was still one report yet to be found, and it took a subsequent 46.17 hour search after that point to complete work on complying with the revised schedule it is unlikely that the 23.83 hours spent from 29 January 2015 to 4 February 2015 was spent solely searching for that report.  This view is supported by the fact that on 4 February 2015 Mr Ham instructed Ms Barin to discontinue work on the subpoena and proceed with locating documents in accordance with the revised schedule.  Therefore, it can be assumed that at least some of the 23.83 hours was spent working on locating documents identified in the subpoena despite the fact Mr Dowling had instructed Mr Ham to cease work on locating those documents.  It was not reasonable in the circumstances for Tamboritha to continue to attempt to locate the documents identified in the subpoena.

6. When Tamboritha received the revised schedule on 4 February 2015, Mr Ham instructed Ms Barin to cease work on the subpoena and proceed with locating documents in accordance with the revised schedule. Mr Ham states that the bulk of the work on the subpoena and revised schedule was completed after 6 February 2015.  This is inconsistent with the fact that of the 112.5 hours work only 46.17 hours came after 4 February 2015 at a cost of $6,042.  Irrespective, the costs were a substantial part of the costs claimed by Tamboritha.  It must be noted that the revised schedule included but was not necessarily limited to the 11 reports identified within it.  Mr Ham explained that substantial costs were involved with complying with the revised schedule which included the following:

   a.assessing the subpoena and revised schedule to determine what was required, available;

   b.extracting documents from archive boxes which had been relocated up to five times;

   c.reviewing and checking documents to ensure compliance;

   d.copying and compiling approximately 6,000 pages of aged documentation.

7. In complying with the revised schedule the applicant would necessarily have needed to sort documents that had been retrieved for the subpoena that were no longer relevant with the documents in the revised schedule.  This is evident from the fact that the documents collected by 29 January 2015 totalled around 25,000 pages, but the final number was only around 6,000 pages.  Some of the required sorting would have been a problem of Tamboritha's own making considering they continued to do work on the subpoena after being advised to stop by Mr Dowling.  However, the work would still have been substantial even if Tamboritha had ceased work on 29 January 2015.  For this reason, I do not agree that all of the time spent after 4 February 2015 on complying with the revised schedule is unreasonable.

The appropriate sum

1. To ensure that the approach of fixing the amount of costs is fair and reasonable I must have available before me sufficient material so that I can be confident that I can arrive at an appropriate sum.  I am of the opinion this is an appropriate case to fix the amount of costs due to Tamboritha for complying with the subpoena and revised schedule.  First, there is sufficient evidence before me to fix the costs.  The plaintiff in the matter did not argue to the contrary, instead the plaintiff argued the information showed that the amount of costs claimed by Tamboritha was unreasonable.  Secondly, the subpoena called for the production of a very substantial amount of documents and would have involved a large amount of work.  Acceptance of this by the plaintiff is indicated by the fact that they reduced the scope of the documents sought.  The revised schedule also required the production of significant numbers of documents.  Mr Ham has detailed the type of work that was completed and the hours spent on that work generally.  The applicant has also explained the different locations over which the documents could have been spread.

2. I have found that the cost of doing the work completed between 29 January and 4 February 2015 was unreasonable, and some of the later work would have also been created by the applicant's continuance of work in the face of Mr Dowling's advice to stop work on the subpoena.  The applicant has therefore done some unnecessary work to produce the documents.  It is therefore not just to order the plaintiff to pay all of the costs claimed by Tamboritha for complying with the subpoena and revised schedule.  The final order should reflect that some of the time spent was unreasonable.  In fixing costs, the court is not required to come to an amount with the kind of precision expected of a taxing officer.  In the circumstances of this case, I find that the reasonable cost and expense of compliance with the subpoena and revised schedule should be $12,000.  The applicant should have the costs of compliance with the subpoena and revised schedule fixed in the amount of $12,000.

The legal costs

1. The general rule is that costs should follow the event.  The plaintiff has argued that the applicant should not be awarded any legal expenses because the application to recover costs was made prematurely and prior to proper conferral.

2. This court has long recognised the importance of meaningful conferral taking place. This is reflected in O 59 r 9 of the Rules which is in the following terms:

   (1)No order shall be made on an application in chambers unless the application was filed with a memorandum stating ‑ 

   (a)that the parties have conferred to try to resolve the matters giving rise to the application; and

   (b)the matters that remain in issue between the parties.

   (2)The Court may waive the operation of subrule (1) in a case of urgency or for other good reason.

3. This rule was considered by Martin CJ in Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161; (2006) 33 WAR 1. In that decision his Honour said.

   Before dealing with this particular case, I would also like to make some general observations about O 59 r 9. As will be abundantly apparent from any sensible reading of its terms, its clear purpose is to reduce interlocutory disputes and avoid adverse consequences of the kind to which I have just referred by requiring the representatives of the parties to confer with a view to resolving the interlocutory dispute before the Court is called upon to entertain and resolve it.

   In far too many cases, the Rule is complied with in form rather than substance.  That is because too often the representatives of the parties consider that the exchange of furious correspondence is an adequate substitute for meaningful conferral in relation to the substance of the interlocutory dispute.  This case provides an unfortunate example of that phenomenon.

   For my part, I favour an approach to the construction of the Rule which would lead to the conclusion that it has not been substantively complied with unless and until legal representatives of the parties, with authority to resolve the particular interlocutory dispute in question, have orally conferred in respect of the substantive issues that arise in relation to that dispute, either by telephone or by meeting face to face. It follows that any legal representative who declines or refuses to participate in such a process of conferral, without good cause, is at risk of being ordered to pay the costs which flow from that refusal personally. There may, of course, be cases in which a departure from this approach to the application of O 59 r 9 is justified, but, in my view, those cases will be exceptional [3] ‑ [5].

4. Conferral in this regard must relate to the application itself and not simply the issue that is the subject of the application:  Real Estate and Business Agents Supervisory Board v Espanol Holdings Pty Ltd (in liq) [2007] WASCA 67 [11] (Buss JA). In this case, the following was listed in the memorandum of conferral: a letter was sent by Tamboritha to the plaintiff's solicitors and three emails were sent by Tamboritha to the plaintiff's solicitors. The plaintiff's solicitors sent a letter and an email to Tamboritha. All of this occurred before 26 February 2015. The parties also discussed the matter in phone calls on 27 January 2015 and in the 29 January discussion. In none of these communications was there any conferral about the application. Further, aggravating this failure, at no times did the applicant even attempt to confer with the plaintiff on the matter of the compliance costs after a particularised bill could have been supplied. The conferral about estimated bills was inadequate.

1. The applicant submits that the plaintiff was unwilling to discuss an agreement as to compensation.  This was not the case.  In a letter of 12 February 2015 from Lander & Rogers to Mr Ham, solicitors for the plaintiff stated that their initial impression of an estimate of costs provided to them was that it was not reasonable and that they remained available to discuss Tamboritha's reasonable costs of its compliance with the amended subpoena.  The next relevant conferral was a letter from Mr Ham to Mr Dowling on 26 February 2015.  That letter informed Mr Dowling that Tamboritha was seeking legal advice, but did not contain any mention of this application.  The application was filed with the court on 27 February 2015.  Furthermore, Practice Direction 4.3.2 at [5] states that conferral is required no matter how unlikely it is that the parties will reach an agreement or even narrow the issues between them.

2. The unreasonableness of the applicant is reflected by the fact that on the same day that the documents identified in the revised schedule were delivered to the court, they filed this application.  That was the first time at which the applicant was able to particularise its claim, but the applicant did not take this opportunity to confer with the plaintiff with a view to resolving this issue.  It was not until 30 March 2015 that the applicant provided the plaintiff with a particularised claim for costs, and that was in the form of an affidavit of Mr Ham.  The only remaining communications between the parties which could constitute conferral was an offer by the plaintiff on 24 April 2015 and a counteroffer from the applicant on 13 May 2015, which was filed on the same day as their submissions.

3. Applications of this kind consume substantial amounts of time and expense of both the court and the parties to the dispute.  The purpose of requiring conferral before an application is filed is to resolve or narrow the dispute before the court is called upon to entertain and resolve it:  Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [3]. Practice Direction 4.3.2 states at [12] that failure to confer may result in adverse costs orders being made against those parties or practitioners who are at fault.

4. By not engaging in meaningful conferral the applicant has caused the court to hear a matter which may have been resolved without the need to bring this application.  A lack of meaningful conferral, such as in this case, is unreasonable and should be actively discouraged. I am satisfied that this is a case where the court should depart from the ordinary rule that costs follow the event.  The proper order in this case is that the parties should bear their own legal costs.

Conclusion

1. I have found that the applicant should be awarded the costs of complying with the subpoena and revised schedule but that the parties should bear their own costs of litigating the application.  The plaintiff should pay the applicant's costs of complying with the subpoena and revised schedule fixed in the amount of $12,000.