Arraj v Sime Darby Motors Retail Australia Pty Ltd t/as Parramatta BMW (No. 2)

[2024] NSWDC 226

District Court

New South Wales

Medium Neutral Citation:

Arraj v Sime Darby Motors Retail Australia Pty Ltd t/as Parramatta BMW (No. 2) [2024] NSWDC 226

Hearing dates:

12 June 2024

Date of orders:

20 June 2024

Decision date:

20 June 2024

Jurisdiction:

Civil

Before:

Russell SC DCJ

Decision:

(1) Pursuant to r 33.11 of the Uniform Civil Procedure Rules 2005 (NSW) order the plaintiff to pay BMW Australia Ltd the amount of $14,601 for reasonable loss or expense incurred in complying with the subpoena issued by the plaintiff.

(2)   Order the plaintiff to pay the costs of BMW Australia Pty Ltd of and incidental to the Notice of Motion filed on 12 April 2024.

Catchwords:

COSTS – notice of motion by stranger to the litigation – costs of compliance with a subpoena – necessary and reasonable work to comply with subpoena – quantum dispute

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), r 33.11

Cases Cited:

A Pty Ltd v Z [2007] NSWSC 999

Arraj v Sime Darby Motors Retail Australia Pty Ltd trading as Parramatta BMW [2024] NSWDC 78

Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Ltd (No. 3) [2018] FCA 2101

Category:

Procedural rulings

Parties:

Simon Arraj (Plaintiff)
BMW Australia Ltd (Applicant on the Motion)

Representation:

Counsel:
E Ball (Plaintiff)
J Pokoney (Applicant on the Motion)

Solicitors:
Blackstone Waterhouse (Plaintiff)
Mills Oakley (Applicant on the Motion)

File Number(s):

2022/249559

Judgment

1. In this matter I delivered judgment on the case brought by the plaintiff against the defendant on 25 March 2024 – Arraj v Sime Darby Motors Retail Australia Pty Ltd trading as Parramatta BMW [2024] NSWDC 78. In preparation for that trial, a subpoena was issued by the plaintiff to BMW Australia Ltd (BMWA).

2. By a Notice of Motion filed on 12 April 2024 BMWA seeks:

1. An order for the plaintiff to pay the amount of any reasonable loss or expense incurred in complying with the subpoena.

2. A lump sum costs order in the amount of $18,601.

3. Costs of the motion itself.

3. The plaintiff did not resist the making of an order for costs in favour of BMWA, but it did challenge the quantum of the amount sought. The plaintiff submitted that an appropriate figure was $6,000. Apart from stating that figure, there was no submission made which analysed the evidence to justify such amount.

The Subpoena

4. The subpoena required production of the following documents:

“1.   All documents (including records of correspondence and communications) created on or between 5 March 2021 and 20 June 2022 referring to the Plaintiff, Defendant, and a BMW CSL model vehicle.

2.   All documents created on or after 5 March 2021 referring to [Mr X] and a BMW CSL model vehicle (or the potential release or sale of such a vehicle).

3.   All documents created after 5 March 2021 recording or comprising the submission by the Defendant to BMW Australia of:

a.   names of people (including but not limited to actual, potential, or prospective "VIPs") interested in;

b.   expressions of interest for; or

c.   or contracts of sale (whether executed or not) in respect of,

a BMW CSL model vehicle (which documents may be redacted so as to not disclose the name or any other personal identifying information of individuals who are not the Plaintiff, [Mr X], or employees and agents of the Defendant).

4.   All documents created on or after 5 March 2021 recording correspondence or other communications between the Defendant and BMW Australia referring to the Plaintiff (whether expressly by name or otherwise) and the BMW CSL model motor vehicle, including but not limited to:

a.   documents referring to any part of the email exchange referred to in paragraphs 26 and 27 of the Plaintiff's affidavit sworn 7 March 2023 (a copy of which email exchange is annexed to this subpoena); and

b.   documents referring to the proposed purchase of (including any contract of sale, whether finally executed or not}, expression of interest in, or application for a BMW CSL vehicle by the Plaintiff.

5.   All documents (including correspondence or other communications) recording or evidencing the receipt by, title of, or possession by the Defendant of an M4 CSL, including but not limited to:

a.   delivery receipts or delivery dockets for an M4 CSL;

b.   invoices or remittances addressed to the Defendant (or any of its employees or agents) in respect of an M4 CSL;

c.   records of insurance in respect of an M4 CSL;

d.   documents recording or referring to the financing, provision of security, transfer of title, or registration for an M4 CSL.

6.   All documents recording or referring to the provision or potential provision (including any offer) of an M4 CSL to the Defendant for the purpose of it being sold to a customer, but not including any of the following documents (which are already contained in Confidential Exhibit JS-2 to the affidavit of Joel Shashoua affirmed 22 September 2023 served in these proceedings):

a.   the dealership agreement between the Defendant and BMW Australia (or any supplementary agreement thereto);

b.   Dealer Bulletin B3-2022-05-09 (and the covering email thereto);

c.   Dealer Bulletin B3-2022-05-19 (and the covering email thereto); and

d.   Dealer Bulletin B3-2022-05-20a (and the covering email thereto).

7.   All documents recording or referring to any actual or anticipated benefit or compensation (whether monetary or non-monetary) provided by BMW Australia to the Defendant in connection with the sale of an M4 CSL to a customer.”

Evidence on the Motion

5. BMWA primarily relied upon the affidavit of Mr T Hall dated 9 April 2024 (Exh 1 on the motion). Mr Hall is the head of Legal, Risk and Strategy for BMWA.

6. The plaintiff relied upon the affidavit of its solicitor Ms G El-Kazzi dated 2 May 2024 (Exh 2 on the motion). The exhibits marked “GE-1” to the affidavit of Ms El-Kazzi became Exh 3 on this motion. These documents were copies of the documents produced by BMWA in response to the subpoena.

7. Counsel for BMWA relied upon Written Submissions filed on 9 May 2024 (MFI 1) and also made oral submissions. During those submissions counsel for BMWA handed up a marked-up version of the ledger of Mills Oakley, who provided advice to BMWA in relation to compliance with the subpoena (MFI 3).

8. Counsel for the plaintiff relied upon Written Submissions filed on 8 May 2024 (MFI 2) and also made oral submissions.

Power to Order Costs of Compliance with a Subpoena

9. The power to make an order for the costs of compliance with a subpoena is to be found in r 33.11 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) which provides as follows:

“Costs and expenses of compliance (cf SCR Part 37, rule 11)

(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.”

Applicable Principles

10. In A Pty Ltd v Z [2007] NSWSC 999 at [45] and [48] Justice Brereton stated the principles which apply to an application under r 33.11 UCPR as follows:

1. The expenses that may be allowed under this rule include time incurred in dealing with the subpoena.

2. Expenses also include legal advice reasonably incurred in relation to confidentiality and privilege issues pertaining to the subpoena, on a solicitor/client basis.

3. A subpoena is an invasive process which puts third parties to costs and trouble for the benefit of the parties to litigation, and in particular the issuing party.

4. The price that an issuing party pays for the privilege of being able to issue subpoenas more or less as of course is the liability to pay a recipient its reasonable costs of compliance.

11. In Money Max Int Pty Ltd (Trustee) v QBE Insurance Group Ltd (No. 3) [2018] FCA 2101, Justice Murphy of the Federal Court of Australia dealt with the cognate rule in that jurisdiction regarding the costs of compliance with a subpoena.

12. After discussing the benefits of a lump sum costs assessment, his Honour said at [10] and [11]:

1. In a lump sum costs assessment the costs are not subject to the detailed scrutiny which occurs in a taxation of costs, and to that extent a lump sum costs assessment provides speed and efficiency at the expense of accuracy.

2. It is appropriate for the court to adopt a broad-brush approach to assessing lump sum costs, and it should not approach the task as one of arithmetic calculation or precision.

3. Courts often apply a discount to the amounts claimed, but the amount assessed must depend on the particular circumstances and on the evidence adduced.

4. The evidence relating to costs must be sufficiently detailed and must identify the components of the costs incurred and how they have been calculated.

5. The court must be sufficiently confident that the approach taken to estimate costs is logical, fair and reasonable.

13. At [23] Justice Murphy said:

“In Taylor v Dixon Advisory Limited (2010) 5 ACTLR 136 at [47]-[48] after reviewing some of the relevant authorities, Reshauge J said:

‘[47]   Thus, the principles to be applied seem to be that the costs of compliance with a Notice for Non-Party Production, payable on an indemnity basis so long as they have been reasonably incurred, include:

•   if the matter is complex and more so than the ordinary case, the costs of advice about its validity and the extent of compliance required;

•   correspondence or attendances with the issuing party about its terms and whether they can be narrowed or production of the documents completed in a particular way;

•   advice about whether documents are confidential or subject to legal professional privilege;

•   correspondence and attendance to negotiate the terms of access to the documents sought, including the formulation of undertakings as to confidentiality;

•   attendances when the documents are produced, though this will be ordinarily by post;

•   any necessary attendances at court to ensure those arrangements are effected;

•   attendances to ensure undertakings have properly been given and compliance is secured; and

•   preparing, negotiating and having taxed a bill of costs for such costs and attending on such taxation.

Costs of work which is not to be characterised as compliance with the Notice, such as challenges to its validity, the filing of an affidavit under r 664, and correspondence on attendances in relation to other matters, with an enforcement of a costs order following taxation, should be paid on an ordinary party/party basis, unless the court considers in the particular circumstances that some other order is warranted.

[48]    In the ordinary case, however, it is unlikely that respondents to a notice would require advice or legal assistance and, if they did seek and receive it, the cost of it would not be recoverable.’”

14. At [26] Justice Murphy said that corresponding about the costs of compliance is not a cost incurred in compliance.

Evidence of Mr Hall

15. In his affidavit (Exh 1) Mr Hall said that BMWA retained Mills Oakley to provide advice in respect of the subpoena. The claim for $18,601 was for legal fees charged by Mills Oakley to BMWA. BMWA did not seek its internal costs of work done by Mr Hall, and by a law graduate, in relation to compliance with a subpoena.

16. In par 11 of his affidavit Mr Hall summarised the work done by Mills Oakley as follows:

“The Legal Fees incurred by BMWA related to the following work:

(a)   advising BMWA with respect to the Subpoena;

(b)   correspondence (set out in further detail below) with the solicitors for the Plaintiff (and the issuing party of the Subpoena), Blackstone Waterhouse, in relation to:

(i)   extending the return date of the Subpoena;

(ii)   the terms of the Subpoena with the view to narrowing or clarifying the scope of documents to be produced; and

(iii)   the items produced to the Court by BMWA in compliance with the Subpoena that are such to a claim for legal professional privilege,

(c)   reviewing documents identified in key term searches performed by BMWA to identify documents responsive to the categories contained in the Schedule to the Subpoena for production;

(d)   redacting documents responsive to category 3 of the Schedule to the Subpoena so as not to disclose the name or any other personal identifying information of individuals who are not the Plaintiff, [Mr X], or employees or agents of the Defendant in accordance with the terms of category 3 of the Schedule to the Subpoena; and

(e)   attending to the production of documents to the Court in compliance with the Subpoena.”

17. Mr Hall annexed to his affidavit a fee ledger from Mills Oakley recording the legal work performed for BMWA in relation to the subpoena. That ledger was also before the court in the form of MFI 3, which is the marked-up version. The yellow highlighting on MFI 3 identified the charges of Mills Oakley which related to preparing the motion to seek the costs of compliance. Those costs were not part of the $18,601 sought. In other words, the claim for costs of compliance related only to compliance and did not relate to the motion seeking the costs of compliance.

18. In pars 15-18 of the affidavit, Mr Hall referred to the work done by Mills Oakley to extend the time for the return of the subpoena. I find that this work was necessary to enable BMWA to have sufficient time to comply with the subpoena, which was quite broad in scope.

19. In pars 19-29 of the affidavit, Mr Hall gives details of the work done to identify the documents which could possibly be required under the subpoena, and to have Mills Oakley correspond with the solicitors for the plaintiff with a view to narrowing the categories and complying with the subpoena. I have read all of the annexures referred to in those paragraphs and I find that the work done was necessary and reasonable.

20. Criticism was made of BMWA for using its IT team to perform key term searches over BMWA’s entire database. In par 19 of the affidavit Mr Hall sets out the five key term searches and the date ranges. It is to be noted that the subpoena required production of documents from 5 March 2021 to the date of the subpoena. I reject the submission made by counsel for the plaintiff that because all of the events were in the recent past, it would have been quicker and cheaper for BMWA to simply go to its employees and ask them to identify the documents. There was a protracted process leading to the BMW CSL motor vehicle becoming available, which extended over many years. Thus, the subpoena called for several years worth of documents.

21. The search terms seem sensible, and the fact that they turned up a large number of documents could not be seen as a criticism that BMWA looked for documents which would not be relevant. For example, the search terms “Parramatta” combined with “CSL” yielded 3,753 documents.

22. The five key term searches yielded 6,268 documents. They all had to be assessed to find out whether they were required to be produced in accordance with the terms of the subpoena.

23. It is clear that all of the documents searched were either emails or electronic documents. It would have been a tiresome, cumbersome and very expensive task to have somebody physically look through all of the BMWA documents to find those which could respond to the subpoena. All the documents were in electronic form, and a key term search would very quickly turn up the potential documents required to respond to the subpoena. I find that it was necessary and reasonable to conduct the search for the documents in the way that BMWA did, even though a large number of documents were then identified.

24. It is clear that there was then a need to look at each document to see whether it answered one of the categories in the subpoena. In the end result, the 6,268 were whittled down to 58 documents, which were produced. Privilege was claimed over two of those documents.

25. In par 30 of his affidavit, Mr Hall said that on 24 January 2024 Mills Oakley commenced reviewing the 6,268 documents found by the BMWA searches, to identify documents responsive to the categories listed in the schedule to the subpoena. Once the 58 documents were identified, Mills Oakley was then involved in redacting confidential parts of the documents. It is to be noted that the subpoena itself acknowledged that it would be appropriate to redact documents for confidentiality.

26. I reject the submission made by counsel for the plaintiff that a redaction was performed on all 6,268 documents, and only then were the documents reviewed to see whether they were responsive to the subpoena. That did not happen. Instead, what did happen was that the documents were identified and reviewed, and then the responsive documents were redacted. The cost of redaction would have been a fairly minor component of this exercise. On p 4 of the BMWA ledger (see MFI 3) there is a charge on 24 January 2024 of $410.85 for redacting documents and on 25 January 2024 there is a charge of $1,278.20 for finalising the redaction of documents.

27. I reject the submission of counsel for the plaintiff that the work done by Mills Oakley in reviewing documents should not be allowed, as BMWA should not have “outsourced” the review to Mills Oakley. The subpoena called for a large number of categories of documents, of a commercial nature, created over several years. I find that BMWA was justified in seeking assistance from Mills Oakley in order to properly comply with the subpoena. BMWA was a stranger to the litigation, yet it became subject to a compulsory process which it had to get right, with the parties’ hearing rapidly approaching.

28. Paragraphs 30-34 of the affidavit of Mr Hall deal with correspondence in relation to costs. While BMWA is not entitled to recover the expenses of correspondence in relation to costs, I accept the submission of counsel for BMWA that this correspondence often had a joint purpose – to attempt to negotiate amendment and narrowing of the categories of documents required, as well as pointing out the costs which would be incurred. I will moderate the lump sum to be awarded accordingly to reflect the fact that some parts of the correspondence identified by Mr Hall related to costs.

29. Paragraphs 35-37 of the affidavit of Mr Hall deal with work done by Mills Oakley in relation to claiming legal professional privilege over two of the 58 items. This would have been a simple exercise for any lawyer to perform and the costs of dealing with privilege do not form a large component of the costs sought.

30. During oral submissions I indicated to counsel for the plaintiff that I proposed to mark MFI 3 in blue where counsel for the plaintiff challenged particular entries because they related to the costs of compliance.

31. On p 2 of the ledger there is one entry marked in blue.

32. On p 3 of the ledger there are four entries marked in blue. The last two entries relate to reviewing documents on 24 January 2024. They are in my view allowable, because they relate to a function being performed by Mills Oakley directly concerned with compliance with the subpoena rather than with costs.

33. On p 4 of the ledger, counsel for the plaintiff referred to six entries. The first two entries relate to reviewing documents, which has nothing to do with seeking costs of compliance. The other four entries do relate to the costs of compliance and will not be allowed.

34. On p 5 of the ledger counsel for the plaintiff referred to four entries which have been marked in blue. Those entries do appear to relate to the costs of compliance and will not be allowed. No entries were identified on p 6 of the ledger.

35. On p 7 of the ledger, counsel for the plaintiff identified six entries which have been marked in blue. All of those entries relate to costs of compliance or post-date the actual date on which production was given in compliance with the subpoena. They will not be allowed.

17. While I am not embarking on a taxation or an arithmetical exercise, since I have made findings about certain entries, I now indicate that the total charge for those items rendered by Mills Oakley was $4,505.25. To take account of the fact that some of the correspondence had a joint purpose, ie dealing with categories of documents as well as costs of compliance, I will make the reduction of $4,000 to the amount claimed.

Conclusion and Orders

37. Based upon the summary of the evidence and the reasons above, I find that there should be an order in favour of BMWA for the plaintiff to pay reasonable loss and expense incurred in complying with the subpoena in the amount of $14,601. There will also be an order for the plaintiff to pay the costs of BMWA of the Notice of Motion.

38. The orders of the court are:

1. Pursuant to r 33.11 of the Uniform Civil Procedure Rules 2005 (NSW) order the plaintiff to pay BMW Australia Ltd the amount of $14,601 for reasonable loss or expense incurred in complying with the subpoena issued by the plaintiff.

2. Order the plaintiff to pay the costs of BMW Australia Pty Ltd of and incidental to the Notice of Motion filed on 12 April 2024.

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Decision last updated: 20 June 2024