Beut Property Pty Ltd v Bunnings Group Ltd
[2023] VSC 31
•9 February 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST
S ECI 2020 02858
BETWEEN:
| BEUT PROPERTY PTY LTD (ACN 155 205 628) AS TRUSTEE FOR THE BUNNINGS EPSOM UNIT TRUST | Plaintiff/Defendant by Counterclaim |
| v | |
| BUNNINGS GROUP LTD (ACN 008 672 179) | Defendant/Plaintiff by Counterclaim |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 November 2022 |
DATE OF JUDGMENT: | 9 February 2023 |
CASE MAY BE CITED AS: | BEUT Property Pty Ltd v Bunnings Group Ltd |
MEDIUM NEUTRAL CITATION: | [2023] VSC 31 |
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PRACTICE AND PROCEDURE – Costs – Compliance with subpoena – Reasonable costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/Defendant by Counterclaim | Mr A Burnett | Petersen Westbrook Cameron Pty Ltd |
| No appearance for the Defendant/Plaintiff by Counterclaim | Lander & Rogers | |
| For the Applicant | Mr T Wodak | Heinz Law |
HIS HONOUR:
H Troon Pty Ltd (Troon) has applied for an order that the plaintiff pay its reasonable costs and expenses of complying with the plaintiff’s subpoena for production, served by the plaintiff on Troon on 10 November 2021 (subpoena).
Troon conducts a fabrication, design and construction business. Troon was not a party to the substantive proceeding, which the parties settled by agreement. Troon’s only involvement in the proceeding is in its capacity as a subpoenaed person. The plaintiff’s subpoena sought communications related to a project in which Troon designed and constructed a Bunnings Warehouse in Epsom, Victoria. Troon worked on the project between August 2014 and June 2015.
Troon seeks an order that the plaintiff pay Troon the sum of $49,542.23[1] comprising:
[1]Troon’s summons filed 29 July 2022 had sought a total of $55,691.66 however Troon revised that sum to $48,457.50 in its written submissions filed 14 October 2022 at [24]. Troon’s written submissions stated that the original sum sought included Troon’s costs of bringing the current application and that Troon had formed the view that the costs of bringing the application were more appropriately claimed as costs of the application. At the hearing of Troon’s application, Troon orally revised the sum sought to $49,542.23.
(a) $31,900 (inclusive of GST) that Troon has paid to Kaznetic Pty Ltd, its IT provider (IT provider);
(b) $4,800 in respect of internal costs incurred by Troon; and
(c) $12,842.23 being the legal fees of Heinz Law.
The plaintiff opposed Troon’s application, principally on the basis that the costs sought were unsubstantiated and unreasonable.
For the reasons that follow I have decided to grant Troon’s application in the amended sum of $44,428.73.
Material relied on by the parties
Troon relied on the affidavits of:
(a) Rodney Williamson dated 17 June 2022; and
(b) Simon French dated 7 July 2022.
In addition, Troon relied on written submissions dated 14 October 2021 (sic), filed on 14 October 2022.
The plaintiff relied upon the affidavits of:
(a) Nathan Holt dated 20 October 2022; and
(b) Nathan Holt dated 21 October 2022.
The plaintiff also relied on written submissions dated 4 November 2022.
Background
The background facts, as set out in Troon’s written submissions, were agreed.
The schedule to the original subpoena sought documents or communications between Troon and a number of individuals and entities between January 2011 and June 2015.
In 2018, Troon changed its IT system such that emails stored on the former system were no longer readily accessible by Troon.
Between 10 and 17 November 2021 Troon informed the plaintiff of its concerns about the breadth of the subpoena and that complying with the subpoena would require Troon to expend significant resources and use outside help for which Troon would expect to be reimbursed.
On 6 December 2021, Troon objected to the subpoena. That objection noted, among other things, that the emails sought had been archived by Troon’s previous IT provider and that its new IT provider would need to be engaged in order to retrieve the emails.
On 14 and 15 December 2021, Troon made inquiries of its IT provider to ascertain the work involved in complying with the subpoena, and on 15 December 2021, informed the plaintiff that:
(a) the relevant communications were located on archived servers which had been retrieved but that the cost of Troon’s IT provider to identify the documents captured by the subpoena would be $29,000; and
(b) further work would be required once the IT provider had undertaken their work, as their task would likely result in the identification of thousands of irrelevant documents.
On the same day the plaintiff agreed to narrow the scope of the subpoena to reduce the date range and proposed search terms in respect of any emails retrieved.
On 17 December 2021, following further consultation with its IT provider, Troon informed the plaintiff that the nature of the work required to retrieve the documents, unencrypt them and put them in searchable format would not be significantly reduced by the narrowed scope or proposed search terms. Accordingly, Troon advised the plaintiff that the IT provider’s estimate of costs was between $17,400 and $29,000 on the basis that the work would take 60 to 100 hours to complete. Troon also advised the plaintiff that once the documents were retrieved Troon would also have to go through them to identify any confidential documents found to be responsive to the subpoena.
Relevantly, Troon told the plaintiff that it could not estimate the time and cost involved in reviewing the documents to identify confidential documents but was prepared to proceed on the understanding that the plaintiff would reimburse the cost of senior staff within Troon who were required to conduct this task. Additionally, Troon advised the plaintiff that its IT provider was able to commence work retrieving the emails immediately but that:
In order for this to occur our client seeks confirmation that the plaintiff will agree to fully fund the work to be carried out by the IT provider based on the estimate provided… We will await your agreement to the same before taking any further steps regarding the archived emails.
The plaintiff’s solicitor responded the same day in the following terms:
Our client requests that your client immediately commences the works foreshadowed in your letter. We note that our client is aware of its obligations to pay the reasonable costs of your client complying with the subpoena. Our client intends to comply with this obligation but notes it is not required to agree to make payment of a fixed amount for steps in advance of those steps being performed.
On 20 December 2021, Troon received a quote from its IT provider for the work in the amount of $31,900 (inclusive of GST).
Also on 20 December 2021, Troon wrote to the plaintiff noting that:
(a) the plaintiff was not prepared to reach agreement in relation to costs of compliance with the subpoena at that time;
(b) the plaintiff had not responded to Troon’s advice that senior staff would be required to review the documents before production and that Troon would expect to be reimbursed for this work;
(c) Troon had provided an outline of the work its IT provider intended to undertake and the plaintiff had not objected to any of the proposed tasks; and
(d) Troon’s view was that the imprecision in the terms of the subpoena would likely lead to increased costs of compliance because of the unnecessarily large volume of documents that would be captured by the search terms which the plaintiff could narrow further.
On 21 December 2021, the Court made orders varying the terms of the subpoena to reflect the plaintiff’s proposed narrowed scope.
On 7 January 2022, Troon’s IT provider provided the results of the searches it had undertaken. Mr Williamson of Troon reviewed the emails to identify documents Troon would object to making available for inspection. This work took 22 hours.
On 20 January 2022, Troon produced the documents in compliance with the subpoena as varied.
On 1 February 2022, Troon sought payment of its costs of complying with the subpoena in the sum of $45,676. In response the plaintiff offered to pay Troon $8,000.
Relevant legal principles
Troon’s application is made pursuant to r 42.11 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic). That rule provides that the Court may order the issuing party to pay the amount of any reasonable loss or expense incurred in complying with the subpoena. The Court may fix the amount or direct that it be fixed in accordance with the Court’s usual procedure in relation to costs.
The parties were in agreement as to the legal principles relevant to the application of the rule.
The purpose of the rule is to prevent a non-party who acts reasonably from being out of pocket by reason of it complying with the compulsory process issued at the behest of a party to a dispute in which the subpoenaed party has no interest: ASADA v 34 Players and One Support Person (No 2).[2]
[2][2015] VSC 14, [19].
In Esposito v The Victorian Legal Services Board,[3] Gorton J stated of r 42.11 that:
Because the purpose is to prevent the non-party from being out of pocket to the extent that it has acted reasonably, in some cases a distinction may have to be drawn between the costs of compiling and producing the documents sought by a subpoena, any costs of obtaining legal advice in relation to the subpoena, and any costs of objecting to a subpoena or to the requirement to produce documents. The concept of ‘complying’ with a subpoena contained within r 42.11 extends to each of these steps. Ordinarily, the subpoenaed party’s costs of compiling the documents would be recoverable from the issuing party, and the cost of obtaining legal advice would be recoverable at least if it were reasonable to seek that advice. The costs of taking an objection may be recoverable if it were reasonable to take the objection, or perhaps not untenable to do so, rather than only if the objection is successful. The costs that may be recoverable are not limited to amounts that have to be paid to others such as lawyers. Where a subpoenaed party is a corporation, it may recover the internal costs associated with its employees who have to attend to the necessary tasks required for it to comply.
…
The word ‘reasonable’ [within the phrase ‘reasonable loss or expense incurred’] can refer to both the category of expense (or cost) and also to the amount of the cost.
[citations removed]
[3][2021] VSC 834, [25]-[26].
The Court has a broad power to determine both whether it was reasonable for a party to incur a particular category of expense and also whether the amount of that expense was reasonable. The decision whether to order that a reasonable loss or expense be paid is discretionary. The question of whether a particular category of costs is a reasonable loss or expense is a question of fact.[4] The addressee as the party applying for an order under r 42.11 bears the onus of proving that the expense was incurred in compliance with the subpoena and that the expense is reasonable.[5]
[4]Hera Project Pty Ltd v Bisognin (No 4) [2017] VSC 270, [46].
[5]Ibid [46]. Riordan J noted that this position was not to be understood as contrary to the statement of Croft J in ASAFA v 34 Players and One Support Person (No 2) [2015] VSC 14, [21].
On the question of the reasonableness of Troon’s claim for legal costs, the plaintiff referred me to the decision of McMillan J in Re Jabe; Kennedy v Schwarcz,[6] where her Honour noted the Court’s inherent and general jurisdiction to ensure that legal practitioners, as officers of the court are remunerated properly and no more than what is fair and reasonable.[7] McMillan J went on to note that s 172 of the Legal Profession Uniform Law (LPUL) and s 24 of the Civil Procedure Act 2010 (Vic) (CPA) both provide guidance as to the matters to be considered when determining whether legal costs are proportionate and reasonable. These factors include: complexity, difficulty, experience, novelty, public interest, quality, seniority, skill, specialisation and urgency. McMillan J also noted the obligations under the LPUL and the CPA to ensure that legal costs are reasonable and proportionate.
[6][2021] VSC 106.
[7]Ibid [44].
The submissions
The plaintiff submitted that Troon’s costs were not reasonable. The parties made submissions that can be conveniently considered under the headings, Troon’s IT provider’s costs, costs of Steve Troon and Rodney Williamson, and Troon’s legal costs.
The IT provider costs
Troon seeks its costs of engaging its IT provider in the amount of $31,900 (inclusive of GST).
The plaintiff’s submissions in relation to Troon’s IT provider’s costs were put on two bases.
First, Troon has not explained why, in circumstances where $29,000 was the upper limit of the IT provider’s estimate of 17 December 2021, Troon agreed to its IT provider’s fixed price of $31,900 (including GST) without consulting the plaintiff. The plaintiff submitted that the fixed price arrangement is opaque and not a reasonable loss or expense. When Troon provided its IT provider’s estimate of $17,400 to $29,000 to the plaintiff on 17 December 2021, there was no mention of GST or the basis of the calculation of these sums.
Further, the plaintiff submitted that when, on 17 December 2021, it acknowledged its obligation to pay reasonable costs of Troon’s compliance with the subpoena, the plaintiff did not agree to pay $29,000.
The plaintiff referred to the document provided by Troon’s IT provider to Troon on 20 December 2021, noting it is headed “estimate”. Additionally the plaintiff noted that in response, Troon advised its IT provider it would need to keep a record of the time spent on the job and the material items. The plaintiff submitted that this shows that Troon knew they would have to substantiate any expenses incurred.
The second aspect of the plaintiff’s complaint about the IT provider’s costs was that Troon had not provided sufficient evidence to the Court about what the IT provider actually did. The plaintiff noted the IT provider’s invoice merely reflected steps undertaken and uses the words “fixed fee”. The invoice does not set out the time taken on each step or the IT provider’s charge out rates for senior technicians. Additionally, the plaintiff noted that the invoice refers to the cost of purchasing a licence which Troon’s solicitor later stated was not purchased.
The plaintiff submitted that its requests for more detail in relation to the IT provider’s costs have been rebuffed by Troon.
According to the plaintiff the documents sought by its subpoena could have been identified by a reasonably literate computer user conducting a search for three search terms (Epsom, Bendigo and Midland) across five email addresses.
Consideration
The majority of the plaintiff’s submissions appear to be directed towards the reasonableness of the quantum of cost as opposed to whether it was reasonable for Troon to incur the costs of its IT provider in compliance with the subpoena. I say the majority because the plaintiff’s submission, summarised in [40] above, could be understood to be an attack on both the engagement by Troon of its IT provider and the quantum of costs incurred.
In my view it was reasonable for Troon to engage its IT provider in circumstances where the terms of the plaintiff’s subpoena required it to retrieve emails that were stored in encrypted form on servers under an email system Troon no longer used. The reasonableness of Troon engaging its IT provider is strengthened when one considers that between 10 and 17 November 2021, Troon informed the plaintiff of its concerns about the breadth of the subpoena and that complying with the subpoena would require Troon to expend significant resources and use outside help for which Troon would expect to be reimbursed. Additionally, Troon’s subpoena objection noted the emails sought had been archived by Troon’s previous IT provider and that its new IT provider would need to be engaged to retrieve and identify the documents.
I am also satisfied that the quantum of the IT provider’s costs incurred by Troon was reasonable. In my view Troon’s communications to the plaintiff, summarised at [15]-[21] above, establish that Troon acted reasonably in ensuring that the plaintiff was on notice of the potential costs of Troon’s IT provider in complying with the subpoena.
On the face of the material before the Court it appears that Troon’s legal representatives did what legal representatives have been exhorted to do by the authorities; to engage in direct and meaningful communication about the issues involved in complying with the subpoena, their likely external costs and to try to narrow the scope of the documents sought.
The plaintiff, on the other hand, engaged in communication to narrow the scope of the subpoena, but did not at any stage before Troon engaged its IT provider to carry out the work seek further information or clarification about the work to be carried out by the IT provider or query the estimate of costs. When explicitly told by Troon that it would not formally engage its IT provider to carry out the work until the plaintiff agreed to fully fund the work on the basis of the estimate provided, the plaintiff responded by requesting Troon to immediately commence the works foreshadowed in its correspondence and acknowledging its obligation to pay reasonable costs of compliance.
In my view the plaintiff had ample opportunity to engage with Troon to interrogate the estimate of its IT provider’s costs and the work the IT provider intended to carry out. It did not take up that opportunity but rather waited to agitate those issues until the work had been done and billed in an amount commensurate with the upper range of costs quoted. At no time prior to the work being carried out by the IT provider did the plaintiff say to Troon that the upper range of the estimate provided was unreasonable.
The plaintiff was on notice of the potential costs involved and did not squarely seek to challenge the costs estimate. The plaintiff, when told the work would not commence until the plaintiff agreed to the costs, requested Troon to commence the work immediately but still did not squarely challenge the costs estimate. In these circumstances, it is open to the Court to find that the quantum of Troon’s costs of its IT provider’s work in complying with the subpoena was reasonable and I make that finding. I will allow the sum of $31,900 (inclusive of GST) in relation to the costs of Troon’s IT provider.
Costs of Steven Troon and Rodney Williamson
The plaintiff objects to paying the costs of Mr Troon and Mr Williamson of Troon, in the amount of $4,800, for four reasons:
First, there is no evidence about the work Mr Troon conducted other than a reference to him taking three hours to review the documents. Troon has not produced a time log to substantiate this claim.
Second, there is no explanation why Mr Troon needed to review the documents given Mr Williamson was also reviewing the documents.
Third, there is no explanation of Mr Williamson’s estimate of 22 hours to review the emails. Again, Troon hasn’t provided log sheets recording the time actually spent.
Fourth, Troon has not provided an explanation for the rates adopted by Troon for Mr Troon and Mr Williamson’s work. It is unclear whether these rates include a profit component.
Consideration
Troon put the plaintiff on notice that Troon intended to employ senior staff to review the documents for confidentiality before producing them to the Court.
Mr Williamson is a Construction Services Manager employed by Troon and was involved in Troon’s compliance with the plaintiff’s subpoena. Mr Williamson deposed that, over the course of 22 hours across one week, he reviewed 174 emails that had been retrieved by the IT provider. Troon seeks the costs of Mr Williamson in the amount of $3,300.
Troon also seeks to recover $1,500 in relation to Mr Troon’s time.
I accept that Troon has not provided the charge out rates used to calculate Mr Williamson and Mr Troon’s costs.
I agree with the plaintiff that Troon has not explained why Mr Troon needed to review the documents when this task had already been carried out by Mr Williamson.
Using a broad brush approach and having regard to the task involved, I will allow $3,300 for Troon’s internal costs.
Troon’s legal expenses
Troon’s application for legal expenses was at times difficult to follow because the amount sought by Troon changed. The invoices that Troon put into evidence were dated 30 November 2021, 23 December 2021, 31 January 2022, 31 March 2022, 29 April 2022 and 31 May 2022. None of these versions of the invoices contained an itemisation of the work undertaken. The plaintiff however put in evidence versions of the invoices dated 30 November 2021, 23 December 2021 and 31 January 2022 that each contained an itemisation of the work conducted.
Troon’s letter to the plaintiff of 1 February 2022 sought legal costs of $8,976 for work including advising Troon about the scope of the subpoena and negotiating with the plaintiff’s lawyers about the truncated scope. I note that the sum sought by Troon did not include a sum of $252.73 the subject of an invoice from Troon’s solicitors dated 30 November 2021.
In its written submissions Troon sought legal costs in the revised amount of $11,757.50. It appeared that the figure of $11,757.50 comprised the amount of $8,976 sought by Troon in its letter of 1 February 2022 to the plaintiff, together with a sum of $1,782 for work completed after 1 February 2022 and contained in the invoice dated 31 March 2022 and a further sum of $1000 for legal work in progress.[8]
[8]These amounts in fact add up to $11,758.
At the hearing of Troon’s application Troon’s counsel submitted orally that the sum Troon sought for legal expenses was $12,842.23 being the sum of $11,758 and a further $831.50 and $252.73. The sum of $831.50 sought was part of the $1,831.50 invoice dated 29 April 2022, however $1,000 of the invoiced amount was the legal work in progress which formed part of the sum sought in Troon’s written submissions. The $252.73 was the amount represented in the invoice dated 30 November 2021.
Troon’s counsel conceded that there was some question about which costs were recoverable by Troon as subpoena compliance costs and which were more appropriately the subject of an application for Troon’s costs of this application.
Troon produced the documents to the Court in compliance with the plaintiff’s subpoena on 20 January 2022.
The plaintiff submitted that Troon had not disclosed an itemised bill nor records which evidence its claim despite the plaintiff’s request made on 15 March 2022.
The plaintiff submitted that in the absence of these records the appropriate order is for the Court to fix costs on a standard basis to be taxed by the Cost Court in default of agreement. Additionally, the plaintiff submitted that the Court should only allow Troon’s costs of complying with the subpoena up to 1 February 2022.
Consideration
I agree with the plaintiff’s submission that any legal costs incurred by Troon relating to work undertaken after it had produced documents in compliance with the subpoena are not properly characterised as part of Troon’s costs of complying with the subpoena. Whether those costs are sought by Troon as part of the costs of this application is a question for another day.
The evidence before the Court included:
(a) Troon’s solicitor’s letter of objection to the Prothonotary dated 6 December 2021;
(b) Troon’s solicitor’s letter to the plaintiff’s lawyer dated 15 December 2021 seeking clarification of the subpoena terms and informing the plaintiff of the estimated costs of the IT provider;
(c) a solicitor’s file note of discussions with the plaintiff’s counsel on 15 December 2021 about the scope of the subpoena;
(d) Troon’s solicitor’s letter dated 17 December 2021 to the plaintiff’s solicitor informing them of likely IT costs of between $17,400 and $29,000 and the need for Troon senior staff to review the documents;
(e) Troon’s solicitor’s letter dated 20 December 2021 to the plaintiff’s solicitor stating that costs are likely to be increased because of the imprecise terms of the subpoena;
(f) Troon’s solicitor’s letter dated 1 February 2022 to the plaintiff’s solicitor seeking payment of Troon’s subpoena compliance costs by reference to amounts charged in the invoices dated 23 December 2021 and 31 January 2022 but not including the invoice amount from 30 November 2021; and
(g) Itemised invoices dated 30 November 2021, 23 December 2021 and 31 January 2022.
The plaintiff does not dispute that it should pay at least some of Troon’s legal costs.
In my view, a taxation of Troon’s legal expenses to 1 February 2022 would incur more costs than is proportionate to the amount in dispute.
The Court has a broad discretion in relation to costs. Applying a broad brush approach I consider that Troon’s legal costs of compliance with the subpoena should be allowed in the sum of $9,228.73. This sum reflects Troon’s claim of $8,976 and the sum of $252.73 from the invoice dated 30 November 2021. It is clear from the itemised invoices that this legal work was undertaken as part of Troon’s compliance with the subpoena.
I will order that the plaintiff pay $44,428.73 to Troon, being its reasonable loss or expense incurred in complying with the subpoena. I will hear from the parties on the question of costs. The matter will be listed for an oral costs argument if the parties are unable to agree on the question of costs within seven days of the date of this judgment.
SCHEDULE OF PARTIES
| S ECI 2020 02858 | |
| BETWEEN: | |
| BEUT PROPERTY PTY LTD (ACN 155 205 628) AS TRUSTEE FOR THE BUNNINGS EPSOM UNIT TRUST | Plaintiff/Defendant by Counterclaim |
| - v - | |
| BUNNINGS GROUP LTD (ACN 008 672 179) | Defendant/Plaintiff by Counterclaim |
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