Cook and Cook (No 4)
[2010] FamCA 786
•8 JANUARY 2010
FAMILY COURT OF AUSTRALIA
| COOK & COOK (NO. 4) | [2010] FamCA 786 |
| FAMILY LAW – COSTS – Application for costs by third parties – Accounts rendered for complying with production of documents sought on subpoena – Subpoenae wide and excessive in their scope – Just for a costs order to be made – Costs as claimed excessive – Court substituted appropriate quantum of costs |
| Family Law Act 1975 (Cth) Moriarty and Moriarty [2009] FamCA 369 | |
| APPLICANT: | MS COOK |
| RESPONDENT: | MR COOK |
| THIRD PARTIES: | MP BUSINESS CONSULTANTS PTY LTD and MR BT |
| FILE NUMBER: | MLF | 1997 | of | 2003 |
| DATE DELIVERED: | 8 JANUARY 2010 |
| PLACE DELIVERED: | MELBOURNE |
| PLACE HEARD: | MELBOURNE |
| JUDGMENT OF: | YOUNG J |
| HEARING DATE: | 22 DECEMBER 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | MR ST JOHN SC |
| SOLICITOR FOR THE APPLICANT: | MARSHALLS & DENT |
| COUNSEL FOR THE RESPONDENT: | MR SPICER |
| SOLICITOR FOR THE RESPONDENT: | KENNEDY WISEWOULDS |
| COUNSEL FOR THE THIRD PARTIES: | MR HARRISS |
| SOLICITOR FOR THE THIRD PARTIES: | MILLS OAKLEY |
Orders
IT IS ORDERED:
THAT within 180 days of the date hereof, and interest free for that period, the wife pay to the solicitors for the Third Parties costs of and incidental to the subpoenae caused to be issued on her behalf fixed in the sum of $4,450, plus GST.
THAT in default of payment within the 180 day period the wife then pay interest at the rate fixed from time to time by the Family Law Rules until the whole of the quantum of costs has been paid.
IT IS CERTIFIED
THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Senior Counsel and Counsel for each of the husband and wife and solicitor appearing as Counsel for the Third Parties.
IT IS NOTED that publication of this judgment under the pseudonym Cook & Cook is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLF 1997 of 2003
| MS COOK |
Applicant
And
| MR COOK |
Respondent
And
| MP BUSINESS CONSULTANTS PTY LTD and MR BT |
Third Parties
REASONS FOR JUDGMENT
This matter has a long, complex and continuing history before this Court. I have concluded a fourteen day defended hearing and have now reserved to write and deliver a Judgment on s.79 property and financial issues. Shortly after the conclusion of that defended hearing and prior to Judgment, the mortgagee of a substantial property development integral to the determination of the assets and liabilities of the husband and wife, BankWest, obtained a Court order for the appointment of a receiver / manager to the XC project. Thereafter the various trade creditors of that development obtained the appointment of a liquidator to the building project companies associated therewith.
The matter was listed before me on 5 October 2009 for Counsel’s final oral replies to written submissions in the primary hearing and at that time Senior Counsel for the wife foreshadowed an application on her behalf to seek a partial settlement of property in light of the expected and likely substantial delays in investigating and finalising all of the commercial / liquidation issues of that XC project.
Given the uncertainty and the wife’s legal practitioners’ limited and dated knowledge of commercial matters at that time I authorised the issuing, on behalf of the wife, of necessary and required subpoenae to assist in the information gathering process and to enable her solicitors to better prepare her ongoing legal submissions for that interim order foreshadowed.
Thereafter the wife issued a total of seven subpoenae to:
§Mr NN, Partner, J Firm, Accountants;
§The Managing Partner, Wisewould Mahony;
§The Manager, TG Accountants Limited;
§The Legal Department, Bank of Adelaide Ltd;
§The Managing Partner, FG Consultants Pty Ltd; (“FG”);
§The Managing Partner, MP Business Consultants; (“MP”);
§Transactional Banking Team, Bank of Western Australia Limited (“Bank West”).
All of these subpoenae were made returnable before a Registrar on 9 November 2009.
The solicitor appearing for the Third Parties objected before the Registrar to the breadth of the subpoenae on behalf of their clients and also insofar as they sought additional production of documents from some of the other recipients of the subpoenae (Adelaide Bank and FG Consultants) affecting Mr BT. In essence, and what subsequently has been developed in written submissions on behalf of the Third Parties application for costs in preparing for and responding to these subpoenae, is that the subpoenae purportedly impacted upon the many other companies and banking facilities of Mr BT said to be entirely separate from the XC development.
With that background, and prior to the return date before the Registrar, the wife’s solicitors, by letter and in response to concerns from the solicitor for the Third Parties, sought to limit the extent of material initially to be produced. That various correspondence from both solicitors is annexed to the written submissions of the Third Parties now filed with the Court. That issue is further dealt with in paragraphs 14 – 17 (inclusive) of the responding legal submissions of the wife, prepared by her Senior Counsel, and now filed with the Court.
It is identified therein that a letter was forwarded relieving the Third Parties of some required production of documents though at all times it remained the position of the wife’s solicitors that the documents sought pursuant to the various subpoenae were both proper and justified. It is further denied by the wife that she acted unreasonably.
The hearing before the Registrar did not resolve the various issues arising upon the subpoenae nor deal with any questions of costs as sought. All matters were therefore referred to me for hearing on 11 November 2009 on the basis that the costs of and incidental to the 9 November hearing were reserved.
When the matter was opened before me I was advised that agreement had been reached between legal practitioners to limit production of documents required pursuant to the subpoenae. The wife sought no further orders for production of any particular document. Mr Harriss, solicitor appearing as Counsel for the Third Parties, sought an order for the reimbursement of and payment of costs incurred by his clients. The husband, whilst represented by Mr Spicer of Counsel, sought no order and did not address the Court on any issue of the Third Parties. He did however oppose the order sought by the wife that if costs were awarded then they should be paid by him and not the wife.
It is the primary position of the wife that any and all reasonable costs of or incidental to the subpoenae should be paid by the husband and her submissions are drafted on that basis and in paragraph 22 thereof it is stated that “responsibility for payment of any such amount [of costs] as is determined to be appropriate to be paid to the subpoenaed parties be reserved for further argument between the husband and the wife in this matter”.
In the written submissions of the Third Parties the costs now sought are for the work and compliance by employees of each of the Third Parties in the sum of $2,120.25 and further legal costs of $7,268.80, a total of $9,389.05.
The oral response of Senior Counsel then appearing for the wife, Mr St John, before me on 11 November was that such sum as claimed was excessive and far beyond any reasonable or just order that could or should be made by the Court. Interestingly, and in his submission on that day, Senior Counsel indicated that the wife would seek a 50% contribution towards the payment of those costs from the husband, rather than now what appears in the written submissions of the wife where seemingly it is sought for the husband to pay all of those costs reasonably incurred by and on behalf of the Third Parties in responding to the subpoenae and in being represented at Court hearings.
Before evaluating each of the written submissions, which I directed be filed, and addressing the issue of costs payable, I first highlight that the wife concedes in paragraph 1 of her submissions that “a subpoenaed person is ordinarily entitled to their proper costs of compliance. Quantum is within the discretion of the Court and should be reasonable, not necessarily indemnity costs or costs assessed on a solicitor / client basis”.
Before I substantially evaluate each of the written submissions filed pursuant to my order it is important to first understand the breadth and scope of the three subpoenae issued to BankWest, PM and FG. I leave to one side the various subpoenae issued to the solicitors and accountants recently appointed to act for or on behalf of the liquidator and the receiver / manager. These three subpoenae sought substantial documents, records and other identified statements from 1 January 2006 to date and within the scope of the XC property development it must have been known that they would have identified a vast array and quantum of documents.
The subpoena issued to MP Consultants sought the production of all documents, records and things (including file notes, financial statements, taxation returns, agreements and correspondence) from 1 January 2006 to date in relation to:
a)XC Pty Ltd;
b)XC Developments Pty Ltd;
c)XC Resorts Pty Ltd;
d)Mr BT;
e)The husband, N Cook; and
f)XC Joint Venture.
The subpoena issued to BankWest sought the production of all documents, records and things (including manager’s diary notes, notes of interview, inter-branch memoranda, loan applications, guarantees, mortgagees, correspondence and bank file notes and bank statements for any cheque account, savings account, credit card account, investment account, deposit account, loan account or any other account (with statements only being required from 1 January 2008)) from 1 January 2006 to date in relation to:
a)XC Pty Ltd;
b)XC Developments Pty Ltd;
c)XC Resorts Pty Ltd;
d)X Developments;
e)X Land Pty Ltd;
f)Mr BT;
g)The husband; and
h)XC Joint Venture.
Finally, the subpoena issued to FG Consultants sought the production of all documents, records and things (including diary notes, notes of interview, inter-branch memoranda, loan applications, guarantees, mortgagees, correspondence and file notes and bank statements for any cheque account, savings account, credit card account, investment account, deposit account, loan account or any other account (with statements only being required from 1 January 2008)) from 1 January 2006 to date in relation to:
a)XC Pty Ltd;
b)X Developments Pty Ltd;
c)XC Developments Pty Ltd;
d)XC Resorts Pty Ltd;
e)Mr BT;
f)The husband; and
g)XC Joint Venture.
Written Submissions
The Third Parties identified the Family Law Rules 2004 (Cth), Rule 15.23 and claimed “an order for the expenses of finding, collating, collecting, marshalling and producing documents or material sought, and for the costs of attending at court”.
The Third Parties had objected to the breadth of the subpoenae by a Notice of Objection dated 5 November 2009 and it was claimed that they were entitled to seek legal advice and representation given the breadth of documents sought and being rightly concerned to ensure privacy and confidentiality of financial affairs unrelated to the XC development.
There were discussions between legal practitioners as identified in paragraphs 11, 12 and 13 of that submission and it does seem a matter of agreement that the preliminary written submissions were made available to the wife’s Senior Counsel on the morning of the hearing before the Registrar, albeit that Senior Counsel for the wife submits that they were largely misconceived. Those submissions form the basis of the more crafted document now lodged with the Court pursuant to my order of 11 November 2009.
It is said by the Third Parties that the outcome of the hearing before the Registrar was entirely predictable and that objections to the documents sought and all costs issues were adjourned over to the continuing interim partial property hearing before me. Paragraph 15 identifies continuing discussions between legal practitioners and a limit of production upon documents sought, particularly as to the separate and private banking affairs of Mr BT unrelated to the XC project.
The written submission of the Third Parties then considered the relevant legal position and seemingly that is now substantially an issue in the proceedings, save as to identification and quantum thereof and as to whether any costs and expenses should be paid, in whole or in part by the husband.
Annexed to the written submissions of the Third Parties and marked as annexures “A” and “B” are the calculated costs of compliance by staff of MP Consultants, totalling $2,120.25 including GST. I have carefully read and analysed that document.
Annexure “C” to those written submissions are a summary of the claimed costs and expenses of the solicitors acting for the Third Parties totalling $7,268.80 and likewise I have carefully read and evaluated those claimed costs, upon which appropriate GST is claimed.
The responding submissions filed on behalf of the wife highlight that the costs and expenses as claimed are “excessive, unreasonable and rendered on a scale well exceeding even the Schedule 3 rates appropriate for legal practitioners”.
There are particular and detailed claims made in paragraphs 2, 3 and 4 of those submissions as to the identifying and collating of work by the employees of MP and clearly a challenge is strongly launched at the fees of $1,927.50 (with the GST removed).
Likewise in respect of the legal costs and expenses associated with the subpoenae the wife’s written submissions in paragraphs 5 – 11 (inclusive) seek to substantially reduce or vary the particular items charged and claim that “the charge out rate claimed on some items is quite extraordinary and in all cases well exceeds that provided for within the Family Law Scales”.
I have again carefully read each of those further annexures both in the context of what would be a just fee and with reference to the Family Law Scale of Costs. There is a marked discrepancy, very much on the high side, of fees claimed and expenses incurred. As an example those items identified in paragraphs 7, 8 and 9 of the wife’s written submissions highlight excessive claims which I would not wholly allow, though I exclude from that general overview the fee on appearance charged by Mr Harriss for the attendance, discussion and afternoon appearance which with his experience I would accept as just and proper.
I otherwise have further evaluated the entirety of the wife’s written submission. I have no hesitation in concluding that the subpoenae were too broad and general and the detail and breadth of information sought from Mr BT was excessive and well beyond that required to update the commercial circumstances of the XC project, post the conclusion of the defended hearing. I do not accept paragraph 13 of the wife’s written submissions.
It is conceded in paragraph 19 thereof that the Third Parties solicitors have correctly stated the law which, on a discretionary basis could be indemnity costs or otherwise costs on a solicitor / client basis. It is conceded that the persons subpoenaed were not part of the litigation, albeit that they may have been in close commercial association with the husband. They were not witnesses in the proceedings.
Relevant Legal Principles
In Lucas Industries v Hewitt (1978) 18 ALR 555, Smithers J, with whom Bowen CJ and Nimmo J agreed said at 570-571:
“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.
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.”
In G and D and D (2005) FamCA 1429, Carmody J said at 24-25:
“In addition to any sum payable under the Rules for conduct money, travelling and accommodation expenses and witness fees, the Court has discretionary power to order that the issuing party pay a subpoenaed witness who incurs substantial additional expense or loss in complying with the subpoena the amount needed to compensation him or her for such expense or loss (Rule 15.23(3)) … this has been taken to include recovery of the cost of legal advice and representation in relation to documents under subpoena: See Fuelexpress Ltd v LM Erickson Pty Ltd (1987) 75 ALR 3284.
A person is not bound to comply with a subpoena which is oppressive because of late service or unreasonable requirements.
…the subpoena is a compulsory process to aid the proper administration of justice between litigating parties. For that purpose, the law imposes a legal duty on strangers to the action who have relevant knowledge or documents in their possession or control. The procedure interferes with the enjoyment of private rights by third parties and can put them to considerable expense and effort. Severe penalties are provided for non‑compliance yet they are available to litigants as of right and issued ex parte by an administrative officer without judicial supervision.
For these reasons, courts require the exercise of care and due diligence by the issuing party to take account of the recipient's legitimate rights and interests when framing the terms of a subpoena. In Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 572 for instance, Jordan CJ said:
"It is altogether improper that a pre-emptory order should be issued from the court commanding persons under a heavy penalty to do something which they are not or ought not be required to do".”
In Relationships Australia (Qld) v M [2006] FamCA 1265, Carmody J stated that an award for costs is not designed to impose a penalty upon the party issuing the subpoena but rather to pay a partial indemnity or compensation to the subpoenaed party for the legal and other professional costs incurred.
In a more recent case of Moriarty and Moriarty [2009] FamCA 369, Cronin J discussed what loss is to be compensated by the Family Law Rules. His Honour said, at 57-64:
“What is the loss to be compensated?
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.
Findings
The submissions of the wife identified in her submission that the costs and expenses of the subpoenae, or part thereof should be paid by the husband. I do not agree. To the knowledge of the Court and after 5 October 2009 these subpoenae were prepared and drafted by the solicitors for the wife without continuing legal consultation with the husband’s solicitors. More significantly the subpoenae were drafted in a manner that was simply too wide, extensive and generally fishing for information beyond that which should have been immediately required by the commercial development and the appointment of the receiver / manager and liquidator. These subpoenae were not focused and targeted to the issues that would have been a valid and proper line of inquiry.
The more difficult assessment for the Court is to carefully evaluate and identify, on the current evidence and submissions, what should be the appropriate sum payable, excluding GST. What could arguably be required is an item by item investigation of every expense identified in annexures “B” and “C” to the written submissions of the Third Parties. That in itself would be very time consuming and costly.
Having reflected on all of the legal and commercial issues related to the subpoenaed material I intend to take both a pragmatic and a common sense approach that is legally responsible and open to me in the exercise of my discretion. I intend to conclude a sum payable by the wife for each of the staff expenditure and the legal costs and expenditure on behalf of the Third Parties and require that sum to be paid within 180 days, plus GST, and without interest for that period as prescribed for in the Family Law Rules.
On the claim arising from the activities of staff of MP Consultants I allow a sum of $1,200 plus GST. I find that this sum will cover the costs reasonably incurred by MP in finding, collecting, collating and producing the subpoenaed documents. I will not allow the total amount sought of $2,120.25 as, having carefully analysed the calculated costs of compliance contained in annexures “A” and “B” to the written submissions of the Third Parties, I find that these costs are, on the whole, somewhat excessive and unreasonable. I find that, in all of the circumstances, the sum of $1,200 plus GST is just and proper.
On the claim for legal costs and expenses I allow a sum of $3,250, plus GST, and I likewise find that to be a just and proper sum. It was reasonable and appropriate for the Third Parties to engage legal representation to limit the scope of the various subpoenae, particularly in relation to the separate and private affairs of Mr BT. As I have already made clear, the subpoenae were too wide and went well beyond what was reasonably necessary to assist in the information gathering process. However, I will not allow the full sum of $7,268.80 as detailed in annexure “C” to the written submissions of the Third Parties. The costs detailed in that account are on the high side and in excess of the fees set out in Schedule 3 of the Family Law Rules 2004. I do not find it necessary that I individually analyse each separate item, as claimed, as they are across the board excessive in the context of the issues and complexity of matters in dispute. I have carefully, but generally, evaluated the work, time and effort involved and by substituting a sum of $3,250, plus GST, I find this to be a just and proper outcome.
Overall the wife is to pay the Third Party costs fixed in a sum of $4,450 plus GST. I will allow a period of 180 days, interest free, for that total sum to be paid in satisfaction of all claims made by the Third Parties for legal costs and all expenses of and incidental to the events considered in this Judgment.
I certify that the preceding paragraphs are
a true copy of the reasons for judgment herein
of The Honourable Justice Young
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