Brook and Brook and Anor

[2016] FamCA 322

FAMILY COURT OF AUSTRALIA

BROOK & BROOK AND ANOR [2016] FamCA 322

FAMILY LAW – COSTS – Where a subpoenaed party seeks costs of compliance – consideration of rule 15.23 of the Family Law Rules 2004 – where subpoenaed party asserts it incurred substantial loss or expense in complying – where costs incurred by subpoenaed party exceeded conduct money – where costs of compliance were not found to be reasonable – failure to establish substantial loss or expense as a result of compliance – interim orders made that the application for costs be dismissed.

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Markoska & Markoska and Anor [2011] FamCA 833
Moriarty & Moriarty [2009] FamCA 369
W Companies & George and Anor [2015] FamCA 31

APPLICANT: Ms Brook

RESPONDENT: Mr Brook

INTERVENOR: RR Pty Ltd

FILE NUMBER: MLC 11123 of 2013

DATE DELIVERED: 6 May 2016

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: 4 November 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Weil

SOLICITOR FOR THE APPLICANT: Williams Winter

COUNSEL FOR THE RESPONDENT: Ms Byrnes

SOLICITOR FOR THE RESPONDENT: Carew Counsel

COUNSEL FOR THE INTERVENOR: Mr Karalus

SOLICITOR FOR THE INTERVENOR: TurksLegal

Orders

IT IS ORDERED THAT:

1. The oral application made on behalf of the RR Pty Ltd seeking conduct costs of complying with the subpoena issued by the husband on 21 October 2015 be dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Brook & Brook and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 11123 of 2013

Ms Brook

Applicant

And

Mr Brook

Respondent

REASONS FOR JUDGMENT

1. On 19 October 2015  I made an order in chambers that the father have leave to issue a subpoena to produce documents directed to the Proper Officer of RR Pty Ltd (“the RR Pty Ltd”).  The subpoena which was issued on 21 October 2015 sought the production of the following documents:

   All files, notes, reports, records, communications and other documents pertaining to policy number … claim number … including but not limited to the insured party’s initial application for insurance.

2. The subpoena together with the required conduct money was received by Mr SS of the RR Pty Ltd on 26 October 2015 who thereafter instructed Mr Benjamin Karalus of TurksLegal to act on behalf of the RR Pty Ltd as deposed by Mr Karulus in his affidavit affirmed 4 November 2015 “in relation to their compliance with the subpoena and their obligations and rights under the subpoena and its scope.”

3. Mr Karalus deposed at paragraph 3 of his affidavit affirmed 4 November 2015 that on 26 October 2015 he reviewed the subpoena and his client’s file in order to advise his client as to its obligations with respect to the subpoena and the options open to it in relation to the production of documents pursuant to that subpoena. He also deposed that on that same day he telephoned the husband’s solicitor Mr Gordon Johns, he said, in order to identify the purpose of the subpoena noting that the schedule of the subpoena was unusually wide and that it would take a great deal of time and funds for his client to produce the documents in full, and advising Mr Johns that he would be seeking his clients costs of compliance including his professional costs. Mr Karalus deposed that Mr Johns acknowledged that the RR Pty Ltd would be entitled to its reasonable costs and that he would be entitled to seek and order to that effect.

4. During that telephone conversation with Mr Johns, Mr Karulus deposed that he advised Mr Johns that his client would not be able to comply with the subpoena the following day but that he anticipated that he would be able to organise the production of the documents, providing there was a narrowing of the scope of the subpoena. Following that telephone conversation Mr Johns wrote to my associate by email requesting the adjournment of the return date for the subpoena to 4 November 2015 when the hearing before me was to resume.

5. Mr Karalus deposed that on 29 October 2015 he received a letter from Mr Johns. In that letter which is annexed to Mr Karalus’s affidavit affirmed 4 November 2015 as “BRK-2”, Mr Johns referring to a telephone conversation with Mr Karulus that took place on that day identified the documents sought which he said were of particular interest and relevance as follows:

   1.   Documentation concerning the rejection of the claim by the Applicant Wife, [Ms Brook]. In this regard we are seeking for example a letter on your client’s letter head explaining the reason for rejection of the claim; and

   2.   The inception documents. In particular we seek a copy of the Application materials completed by the insured party at the time of entering into the policy.

6. Upon receipt of that letter Mr Karalus sent an email to Ms TT, copied to Mr Johns, requesting that the scope of the subpoena be formally narrowed so that his client would have some certainty as to its obligations pursuant to the subpoena.

7. Mr Karalus deposed that he telephoned Mr Johns the following day seeking a response to his email and at 1.10 pm that day he received an email from Mr Johns confirming that the only documents he required the RR Pty Ltd to produce was the letter rejecting the claim and the documents in relation to the inception of the policy.

8. Thereafter Mr Karalus forwarded a letter to Mr Johns setting out the costs he said his client had incurred. The costs were at that time $1,606 including GST. By letter dated 2 November 2015 to Mr Karalus, Mr Johns advised as follows:

   In our view the costs your client seeks for complying with the Subpoena are excessive. As you are aware the Subpoena was ordered by the Court. It is perfectly correct that the Court has power to order costs for compliance but those costs must be reasonable. In our view reasonable costs would extend to photocopying, courier costs and like expenses.

9. In reply to Mr Johns’s letter Mr Karalus deposed that he sent an email to Ms TT and Mr Johns at 2.27 pm on 2 November 2015 setting out the basis upon which he said his client considered itself entitled to costs. The same day he also forwarded a copy of his costs incurred by the RR Pty Ltd with respect to the subpoena.

10. At 2.55 pm on 2 November 2015 Mr Karalus sent a further email to Ms TT, copied to Mr Johns, in which he advised as follows:

    In a further demonstration of my clients (sic) reasonableness in attempting to resolve the issue of its costs in complying with the subpoena issued on behalf of your client I am instructed that it will accept the reduced amount of $1,200 in satisfaction of same. This is more than an $800 discount on its actual costs. This offer to accept a reduced amount is open for acceptance until 4.30pm today following which my client will incur, and seek from your client, the costs of preparing an application for its costs.  

11. At 3.00 pm the same day Mr Karalus deposed he spoke to Ms TT and requested that either Mr Johns or the father’s counsel contact him to discuss the matter as his client was keen to resolve the issue of costs without incurring the costs of an application or appearance at Court.

12. Shortly thereafter Mr Karalus deposed that he received an email from Ms TT advising that she had received both his emails and that she had referred the matter to  both Mr Johns and counsel for the father to which he replied at 3.15 pm that he would welcome either Mr Johns or the father’s counsel calling him to discuss the matter.  

13. At 3.28 pm the same day Mr Karalus deposed that he forwarded a further email to both Ms TT and Mr Johns annexing a copy of the invoice of the costs incurred by his client in complying with the subpoena dated 2 November 2015 totalling $2,047.65 including GST.

14. Finally Mr Karalus deposed that he again attempted to contact either Mr Johns or Ms TT, at approximately 5.00 pm on 2 November 2015 but was unable to reach either of them ultimately having to leave a message asking for a return call and including his mobile number should it be necessary to contact him after hours.

15. It is Mr Karalus’ evidence that his client incurred further costs of $876, in addition to the invoiced costs, making a total of $2923.65.

Legal Principles

1. Section 123(1) of the Family Law Act 1975 (Cth) (“the Act”) permits the judges of this Court to make Rules of Court. Relevantly in this case r 15.23(3)(1) of the Family Law Rules 2004 (Cth) (“the Rules”) provides that a “named person” is entitled to be paid conduct money by the party who issued the subpoena of an amount that is:

   (a) sufficient to meet the reasonable expenses of complying with the subpoena; and

   (b) at least equal to the minimum amount mentioned in Part 1 of Schedule 4

2. Rule 15.23(3) of the Rules provides that a named person may apply to be reimbursed if the named person incurs a substantial loss or expense that is greater than the amount of the conduct money or witness fee payable under this rule [emphasis added].  

3. A named person is defined as a person required by subpoena to produce a document or give evidence. The named person in this case is RR Pty Ltd.

4. The term substantial is not defined in the Rules. In Markoska & Markoska and Anor [2011] FamCA 833 Murphy J said at paragraph 127 that the word should be given its ordinary meaning “as “having real substance” or “of ample or considerable amount”. Substantial is defined in the Macquarie Dictionary as“of ample or considerable amount, quantity, size etc” (Macquarie Dictionary, 6^th ed, Macquarie, 2013). Murphy J also referred to the view expressed by Cronin J in Moriarty & Moriarty [2009] FamCA 369 (“Moriarty”). Cronin J said at paragraph 57 as follows:

   57.The rules refer to a “substantial” loss or expense.

   58.The determination of what is substantial is very subjective. In my view, it means that the expense must be large causing loss; it must be unusual in the sense of requiring normal activity to be stopped; or it must cause an unfair inconvenience having regard to the fact that the recipient has nothing to do with the litigation.

   59.Assessment of the reasonableness of burdens involved in complying with a subpoena must take account the capacity of a party to collect and produce the documents. That means that in a large organization, the capacity to cover the expense is greater than in a small organization (see Lucas Industries v Hewitt (1978) 18 ALR 555 and G and D & D (2005) FamCA 1429).

   60.Notwithstanding the administration of justice issue, the rules are not intended to put the individual presenting the documents in a position where they lose income or capital. The rule however refers to a substantial expense and each situation must be determined on its peculiar facts.

   61.However, if the subpoena is simple and clear, requiring the production of the recipient’s own documents, the inconvenience is intended and expected to be minimal.

   62.Thus, in a case where a professional fee is claimed or the bobcat driver claims significant hours of “downtime”, the question still remains whether the finding, collecting, collating, marshalling and producing the documents or materials required the attention of the owner, partner or professional or whether it could be done by a clerical person albeit with some ownership or professional oversight. It is that question that the judicial officer has to ask in every case.

   63.The outcome is determined by the exercise of a discretionary judgment guided by the rules of court.

5. As Cronin J also observed at paragraph 56 of Moriarty “…the subpoena process is an integral part of the administration of justice. If we are to enjoy the benefits of a justice system, the community must be prepared to bear that cost to some degree. For example, Bainton J referred to a legal firm losing the financial benefit of a partner or employee’s longer hours by non-income producing activity. The same could be said of the bobcat driver who has to work a little longer to make up for the time lost in collating and dealing with the subpoena. In my view, that is a facet of community responsibility”.

Discussion

1. Mr Karalus submitted that his client, the RR Pty Ltd, had incurred substantial expense in complying with the subpoena, in effect in this case the legal costs he said had been incurred in doing so. Mr Karalus referred me to the decision of Watts J in W Companies & George and Anor [2015] FamCA 31 in support of his submission that the RR Pty Ltd had incurred a substantial loss or expense in complying with the subpoena. In that case his Honour at paragraph 27 found that “the initial subpoenas were not simple and clear and that the finding, collecting, collating, marshalling and production of the documents and materials was a substantial exercise leading to a substantial loss or expense on behalf of the companies.” In my view the circumstances in this case are very different.

2. Mr Karalus submitted that the subpoena in this case had been unusually wide as demonstrated, he would say, by the fact that ultimately the scope of the subpoenae had been narrowed by agreement so that his client was only required to produce two documents. In my view the subpoena clearly identified the documents that the RR Pty Ltd was required to produce, subject of course to any claim that might be made for privilege. Nor in my view was it unnecessarily wide. Albeit the parties agreed upon the documents that would be produced it does not follow that the subpoena as drafted was too wide. The file of necessity was limited to the period of insurance and documents in relation to any claim made during the insured period. In this case the mother applied for insurance cover on 31 July 2013 and made a claim for damage to her Mercedes motor vehicle on 8 December 2013. That claim was formally rejected by letter to the mother dated 7 August 2014.

3. Mr Karalus also deposed in his affidavit affirmed 4 November 2015 that he had been provided with and reviewed his client’s file the same day the subpoena was served upon the RR Pty Ltd. Although Mr Karalus said he did not have the file with him in Court he described it as being a few inches thick which included investigators reports in relation to the mother’s accident. There is no evidence nor was it submitted that the RR Pty Ltd has had to collect, marshal or collate the documents or that it had incurred a substantial loss or expense in doing so.

4. Mr Karalus submitted that although there were no proceedings on foot the statute of limitations had not expired and hence there may have been documents in the file in relation to which his client might have claimed privilege. Apart from Mr Karalus’ general assertion there is no evidence based upon which I could conclude that the file contained any privileged documents.  In any event even if the RR Pty Ltd had a legitimate basis to claim privilege that in my view does not justify the legal costs that it is submitted have been incurred.

5. Although Mr Karalus deposed that “All costs incurred were absolutely necessary in order for my client to be abreast of its obligations under the subpoena and to ensure that it complied with such obligations. The work completed to comply with the subpoena is, in my view, the minimum steps required of a solicitor advising and taking steps to assist their client in complying with a subpoena to produce.” I do not agree. In Lucas Industries v Hewitt (1978) 18 ALR 555, Bowen CJ, Smithers and Nimmo JJ said at paragraphs 570-571) as follows:

   570. The purpose of the process of subpoena is to facilitate the proper administration of justice between parties. For that purpose it is the policy of the law that strangers who have documents may be put to certain trouble in searching for and gathering together relevant documents and bringing them to court. It is according to the same principle that persons who have knowledge of facts are put to the inconvenience of being brought to court and required to give evidence.

   571. Assessment of the reasonableness of burdens involved in complying with a subpoena must take account, inter alia, of the desirability that justice be administered effectively. The capacity of a party to collect and produce the documents referred to is a relevant circumstance. Large business entities may be thought to be highly organized and well staffed. What may be burdensome to lesser entities may be of small significance to a large one.

6. Although it seems likely that the whole file would have been caught by the terms of the subpoena given the length of the insured period and the claim being made by the mother less than six months after the inception of the policy, there is in my view no reason why, insofar as there may have been documents on the file not covered by the terms of the subpoena, the RR Pty Ltd could not have identified and collated those documents that were the subject of the subpoena.

7. In circumstances where the scope of the subpoena was clear and limited by the particular circumstances of the case and it would appear that the documents to be produced were readily available, I am not satisfied that the costs claimed by the RR Pty Ltd are reasonable. I have difficulty understanding why in these circumstances it should have taken Mr Karalus the time he says to open a file and review the subpoena and the file provided to him by the RR Pty Ltd or to collate the documents that were ultimately produced. I also note that as and from 2 November 2015 when there was agreement as to the two documents to be produced, the costs incurred were primarily in relation to the recovery of costs that I have found were not reasonable.

8. The evidence does not suggest nor has any reasonable explanation been given as to why the file was simply not produced subject to any objection to production of particular documents on the basis of privilege, if there was any.  Although the costs of the RR Pty Ltd to obtain advice as to the production of the documents generally and as to any claim to privilege with respect to particular documents might have been more than the conduct money, the evidence is not such that I can identify what those costs might be and in any event I am not satisfied that those costs would have amounted to a substantial loss or expense.

9. Whilst the costs incurred by the RR Pty Ltd far exceed the conduct money, I am not satisfied in all of the circumstances of this case that those costs were reasonably incurred. In those circumstances it cannot be said that the RR Pty Ltd has incurred a substantial loss or expense complying with the subpoena and I propose to dismiss the RR Pty Ltd’s oral application for costs.

I certify that the preceding twenty nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 6 May 2016.

Associate: 

Date:  6 May 2016