City of Swan v Lehman Bros Australia Ltd (No 3)

The case of City of Swan v Lehman Bros Australia Ltd (No 3) involved the City of Swan and several related entities (referred to collectively as "the Councils") bringing proceedings against multiple defendants, including Lehman Bros Australia Ltd ("Lehman Bros"). The Councils sought to challenge the validity and implementation of a deed of company arrangement executed by Lehman Australia. The primary legal issue before the court was whether Lehman Bros' liability for costs was limited to the additional costs incurred by the Councils from the date it was joined as a defendant or whether it was responsible for expenses related to a subpoena served prior to its formal involvement in the case. Additionally, Lehman Bros sought reimbursement for expenses incurred in responding to the subpoena.

The court considered the relevant provisions of the Federal Court (Corporations) Rules 2000 and the Corporations Act 2001 (Cth). It examined whether the subpoena expenses should be regarded as an incident of Lehman Bros' later involvement or if they should be attributed to the earlier service of the subpoena. The Councils contended that the documents sought by the subpoena would have been discoverable had Lehman Bros been a party at the time of service, whereas Lehman Bros argued that it should not be held responsible for expenses incurred before its formal joinder. After careful deliberation, the court concluded that Lehman Bros was not liable for the expenses incurred in response to the subpoena served before it was joined as a party. The court held that the subpoena expenses were not to be characterised as an incident of Lehman Bros’ later involvement as a defendant.

In its final orders, the court ruled that the plaintiffs' costs were to be paid jointly and severally by certain defendants, with specific allocations to the first and fourth defendants and 75% to the fifth defendant. It also determined that there should be no order as to the fifth defendant's costs or expenses in respect of its compliance with the subpoena. This decision clarified the extent of Lehman Bros' financial responsibilities and underscored the principle that a party's liability for costs should be assessed in light of the timing of its involvement in the proceedings.