De Simone v Legal Services Board and Ors Ruling
[2015] VSC 286
•19 June 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2013 01485
| GUISEPPE DE SIMONE & OTHERS (according to the schedule attached) | Plaintiffs |
| v | |
| LEGAL SERVICES BOARD | Defendant |
| - and - | |
| MICHAEL RICHARD BRERETON & OTHERS (according to the schedule attached) | Third Parties |
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JUDGE: | DERHAM AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the Papers | |
DATE OF JUDGMENT: | 19 June 2015 | |
CASE MAY BE CITED AS: | De Simone v Legal Services Board & Ors Ruling | |
MEDIUM NEUTRAL CITATION: | [2015] VSC 286 | |
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PRACTICE AND PROCEDURE – Costs – Unsuccessful application by plaintiffs to examine a non-party before trial under r 40.12 and r 41.01 of the Supreme Court (General Civil Procedure) Rules2005 – Successful objection by defendant and Legal Services Commissioner to the plaintiffs inspecting subpoenaed documents – Applications made in an appeal from a decision of the Legal Services Board – General rule as to costs modified by Legal Profession Act2004, s 3.6.23(7) – No order for cost is to be made on an appeal unless the Court is satisfied that an order for costs should be made in the interests of justice – Whether costs should be awarded in favour of the Board – Whether costs should be ordered in favour of the Commissioner as an objector to the inspection of subpoenaed documents – Impact of the Civil Procedure Act 2010, ss 20 and 25 – The Solicitors’ Trust v Oxenbould [2013] TASFC 2.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr A Sandbach | Peter S Lustig, Solicitor |
| For the Defendant | Mr S R Senathirajah | Mr Ned Roche, Solicitor Legal Services Board |
| For the First Third Party | Mr J Waters, solicitor | John Waters, Solicitor |
| For the Legal Services Commissioner | Ms L Kirwan | Corrs Chambers Westgarth |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Submissions........................................................................................................................................ 1
The Board....................................................................................................................................... 1
The Plaintiffs.................................................................................................................................. 3
The Commissioner........................................................................................................................ 5
The First Third Party – Brereton................................................................................................. 6
Plaintiffs’ Response to Brereton.................................................................................................. 7
Applicable Law................................................................................................................................... 8
Consideration.................................................................................................................................... 12
General.......................................................................................................................................... 13
Commissioner’s Costs................................................................................................................ 15
Board’s Costs............................................................................................................................... 19
Brereton........................................................................................................................................ 21
Conclusion......................................................................................................................................... 22
HIS HONOUR:
Introduction
In this matter I delivered reasons for my decision on two questions on 30 January 2015. The questions were –
(a) Whether pursuant to r 40.12 and/or 41.01 of the Supreme Court (General Civil Procedure) Rules 2005 Mr Ronald Hall should be required to give evidence before trial for the purpose of discovery; and
(b) Whether objections to the inspection of documents produced by Mr Hall pursuant to a subpoena filed on 2 August 2013 by the plaintiff should be upheld.
The defendant (‘Board’) opposed both questions and the Legal Services Commissioner (‘Commissioner’) opposed inspection of the documents produced pursuant to the subpoena. I found in favour of the Board on both questions and upheld the Commissioner’s objections to inspection.
I reserved the question of costs. I did so primarily because the plaintiffs contended that because this proceeding is an appeal under s 3.6.23(7) of the Legal Profession Act 2004 (Vic) (‘LPA’) I should make no order as to costs.
That section provides:
No order for costs is to be made on an appeal under this section unless the appropriate Court is satisfied that an order for costs should be made in the interests of justice.
Submissions
The Board
The Board contends that an order for costs should be made in its favour, in respect of both questions, against the plaintiffs on a standard basis. It submits that the following circumstances warrant an order for costs in its favour ‘in the interests of justice’:
(a) That the Board offered to allow the plaintiffs’ lawyers to inspect the documents the subject of the subpoena before the hearing to enable them to advise the plaintiffs as to their relevance. Had the plaintiff taken up that offer, their lawyers would have been able to advise the plaintiffs of the merits of the objections and as to whether the documents were in any respect relevant to the claims made in the proceeding. That would have saved costs of all parties, or at least reduced the number of documents in dispute;
(b) The plaintiffs’ answer, that the lawyers were not able to assess the merits of the objections to inspection because they lacked the plaintiffs’ detailed knowledge of all aspects of the relationship between the various persons involved, is insufficient. The Court was in no better position than the plaintiff’s lawyer to do so;
(c) The plaintiffs have been on notice since 30 August 2013, when Associate Justice Mukhtar refused discovery against the Board of documents in the possession of the Commissioner, that the appropriate means of obtaining relevant documents was by way of an application for non-party discovery from the Commissioner or, possibly, the Law Institute of Victoria. The Commissioner’s solicitors invited such an application by letter dated 30 August 2013;
(d) The first plaintiff is an experienced litigator. In its written submission the Board referred to 16 separate judgments in respect of which the first and fourth plaintiffs, or other entities related to the first plaintiff, have been parties. It can reasonably be inferred that in consequence the first plaintiff was or ought to have been aware of the novel nature of the application to have Mr Hall give evidence before trial for the purpose of discovery. Further, the subpoena directed to Mr Hall was, on its face, for an improper purpose.[1] The first plaintiff should have appreciated that this was the case; and
(e) Making a costs order against the plaintiffs would promote the policy objectives contained in the Civil Procedure Act 2010 (Vic) (‘CPA’) (particularly sections 23-25) if the plaintiffs’ unreasonable stance were to be denounced and, as a consequence, other litigants deterred from taking a similar approach.
[1]See the Reasons for Judgment at [104(a)].
The Plaintiffs
By contrast, the plaintiffs submitted that:
(a) The plaintiffs did not select the documents that Mr Hall produced and were entitled to expect that Mr Hall would produce only relevant documents within the scope of the subpoena. There can be no improper purpose in the issue of the subpoena and its return, and in arguing for access to the documents;
(b) The Board and the Commissioner over time reduced the number of documents over which objection was taken and subsequently provided documents in redacted form;
(c) In the judgment of 30 January 2015, the Court did not make any finding that the plaintiffs’ conduct in relation to the subpoena objections was improper or inappropriate. Whilst the reduced list of redactions were upheld on the basis of irrelevance and in some cases client legal privilege, the plaintiffs were dealing with an indeterminate list of objections, and objections to release were withdrawn late in the proceeding;
(d) Given that the plaintiffs’ subpoena was issued to Mr Hall, an expert formerly retained by the Commissioner who was the leading witness in the disciplinary proceeding against Mr Brereton, the plaintiffs could not know without an inspection being conducted that the material produced was irrelevant or unsubstantiated opinion;
(e) The Full Court of the Supreme Court of Tasmania in The Solicitors’ Trust v Oxenbould[2] (‘Oxenbould’) upheld the learned trial judge’s decision not to award costs to a successful applicant under appeal. The provision in question was s 388(6) of the Legal Profession Act 2007 (Tas), which is in substance identical to s 3.6.23(7) of the LPA. The prima facie position is that there be no order as to costs,[3] and the subsection confers a discretionary power to depart from that rule in particular circumstances, namely when ‘the Supreme Court is satisfied that an order for costs should be made in the interests of justice’.[4] The plaintiffs’ Statement of Claim and original claim on the Fidelity Fund is based on a substantial alleged defalcation. Therefore, this proceeding is subject to the ‘no costs’ provision in s 3.6.23(7) of the LPA, and the same principles as set out in Oxenbould ought to apply;
[2][2013] TASFC 2.
[3][2013] TASFC 2, [106].
[4][2013] TASFC 2, [106].
(f) The experience or otherwise of the first plaintiff in litigation is insignificant when compared to the combined experience of the Board, the Commissioner and Mr Brereton. In any event, this is an irrelevant consideration raised by the Board;
(g) The plaintiffs’ costs would be unrecoverable even if they were ultimately successful. The objective in examining Mr Hall before mediation was to be ready to mediate in knowledge of all the information that was held by the Commissioner and the Board, and thus minimise all legal costs;
(h) Whilst the Commissioner and the Board have separate statutory functions, the interests of each were aligned and submissions of one were adopted by the other. The solicitor acting for the Board is an employee of the Commissioner and it would be inconceivable for there to be a difference in the instructions being provided. The question of costs on an ordinary basis is about whether the costs are necessarily incurred in the conduct of a proceeding. The presence of two lots of Counsel arguing essentially the same position prolonged the proceeding and increased the costs. As the disposition sought by the Board and the Commissioner was identical, that additional expense has not been explained;
(i) The plaintiffs conceded that the Commissioner had a sufficient interest in making the objections to disclosure in August 2013. The Board had a right as a party to make objections to disclosure of the subpoenaed documents. Both originally sought suppression of all documents, then following inspection modified their objections to a common sub-set, and made identical concessions from that sub-set and allowed disclosure of redacted versions from that sub-set of documents. There was no difference whatsoever in their approach; and
(j) In the circumstances where the plaintiffs have suffered a significant loss and are seeking compensation from the Fidelity Fund, faced with a litigant backed with all the resources of government, and are unlikely to recover their legal costs of this proceeding even if successful, then in the interests of justice no order as to costs in favour of the Board or the Commissioner should be made.
The Commissioner
The Commissioner adopted the Board’s submissions and added the following remarks:
(a) Section 3.6.23(7) of the LPA does not apply to the Commissioner in the current circumstances. On its face, the provision is between an appellant against a decision disallowing a claim against the Fidelity Fund, and the Board. The provision says nothing of the costs of a non-party drawn into the litigation by one of the parties;
(b) The Commissioner was a person having sufficient interest to object to the inspection of the documents produced pursuant to subpoena (r 42A.07(b) of the Rules). Accordingly, the Court’s general discretion under s 24 of the Supreme Court Act 1986 (Vic) and the Rules applies, unless an Act or Rule of Court otherwise expressly provides;
(c) The Commissioner was successful in all of its pressed claims for public interest immunity. Therefore costs should follow the event in this instance, as they would for a party which successfully prosecuted claims for public interest immunity opposed by another party;
(d) Alternatively, if s 3.6.23(7) of the LPA does apply to the Commissioner, then his status as a non-party drawn into the litigation by the plaintiffs, together with all of the matters raised by the Board, are all relevant factors the Court should take into account in deciding whether it is in the interests of justice to make a costs order in his favour; and
(e) Furthermore, any costs order ought to be made now, as the Commissioner will have no interest in the outcome of the proceeding such that he should wait until final judgment to obtain his costs.
The First Third Party – Brereton
The First Third Party (‘Brereton’) sought his costs of and incidental to appearing at the return of the two applications dealt with in my earlier reasons. It was submitted that the reasons why the interests of justice are served by making an order for costs in favour of the first third party are:
(a) The settled practice is that in the absence of special circumstances a successful litigant should receive his or her costs: Williams, Supreme Court Practice (2nd Ed) para 63.02.80);
(b) There is no compelling reason why the settled practice should not be followed here as Brereton has been dragged unwillingly to the dispute;
(c) The applications made by the plaintiff were critical as to how the matter before the Court would proceed;
(d) Brereton had to appear at the return of the matter and, although not in a position to make any substantive submissions at all (because the issues were between the plaintiffs, the Board and the Commissioner) he did not seek to be excused from the hearing of the applications. The plaintiffs did not suggest that Brereton be excused from attending the hearing of the applications;
(e) It is just and reasonable that the plaintiffs, being the parties who caused Brereton to incur the costs of the applications should reimburse him for the liability for the costs incurred (Williams, Supreme Court Practice (2nd Ed 63.02.55);
(f) The Court identified that the plaintiffs pursued the Order 42A procedure for an improper purpose: See paragraph 67(f) and (g) and 101(a) of the earlier reasons;
(g) It is in the interests of the administration of justice for other litigants to be discouraged; and
(h) The plaintiffs had other courses of action opened to them which should have been pursued: See reasons at para 67(d) and 75.
Plaintiffs’ Response to Brereton
In response to Brereton’s submissions, the plaintiffs made the following further submissions:
(a) Brereton made no submissions, oral or written, in relation to the applications even when invited to do so;
(b) The plaintiffs made no claim against Brereton in the proceeding;
(c) Brereton was not a party to the applications and cannot be regarded as a successful litigant;
(d) The settled practice to which Brereton referred is displaced by s 3.6.23(7) of the Legal Profession Act;
(e) Brereton has not identified how the matters the subject of the applications were critical to his interests and did not provide any material in relation to either application;
(f) Brereton could have asked to be excused but chose not to do so. As the plaintiffs are not the party who joined Brereton it was not for the plaintiffs to suggest he be excused;
(g) There is no nexus between Brereton incurring costs and the plaintiffs’ applications;
(h) The Court did not find that the applications were pursued for an improper purpose; and
(i) The plaintiffs’ application for the examination of Mr Hall was made, originally, concurrently with its application for the Board to make discovery by its Chief Executive Officer. In the latter application there was no order for costs and there was no finding by the Court that the plaintiff was engaged in a fishing expedition.
Applicable Law
The starting point is the Court’s general power as to costs. Unless otherwise expressly provided by any Act or by the Rules, the costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid: Supreme Court Act 1986 (Vic) s 24(1).
The discretion regarding costs has been described as absolute, unconfined or unfettered, although that discretion must be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation: see for example Latoudis v Casey.[5]In the exercise of the discretion, practices or guidelines have been developed: Oshlack v Richmond River Council.[6] These practices or guidelines are not legal rules that confine the exercise of the discretion: Norbis v Norbis;[7] Oshlack v Richmond River Council.[8]
[5](1990) 170 CLR 534, 537; cited with approval in Oshlack v Richmond River Council (1998) 193 CLR 72, 86.
[6](1998) 193 CLR 72, 86.
[7](1986) 161 CLR 513, 537.
[8](1998) 193 CLR 72, 86.
Section 3.6.23(7) of the LPA expressly operates as a restriction on the Court’s unfettered discretion in determining costs. It appears that the intent of Parliament was to reverse the usual starting position of the Court when determining costs. Instead of the ordinary position that, in the absence of good reason to the contrary, a successful litigant should receive his or her costs (Ritter v Godfrey;[9] Milne v Attorney-General for the State of Tasmania),[10] the LPA operates from the prima facie position that ‘on an appeal under’ the section (an appeal against a decision disallowing a claim against the Fidelity Fund) costs should not be awarded, unless the Court is satisfied that an order for costs should be made ‘in the interests of justice’.
[9][1920] 2 KB 47, 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732, 809.
[10]((1956) 95 CLR 460, 477.
In Oxenbould, the primary judge had not been satisfied that it was in the interest of justice that the successful claimants, the respondents to the appeal, should have an order for their costs of the appeal against the Trust. The respondents cross-appealed that decision.
At first instance,[11] Blow J referred to the decision of the New South Wales Court of Appeal in Hunter Development Brokerage Pty Ltd v Cessnock City Council (No 2),[12] where Basten JA (with whom Santow and Bryson JJA agreed) pointed to three different types of statutory powers to make orders for costs:
[11]Oxenbould v The Solicitors Trust (No 2) [2011] TASSC 63.
[12](2006) 68 NSWLR 177 at [16]-[19].
(a) The first is an unconstrained conferral of power without direction or limitation, such as that contained in s 24 of the Supreme Court Act 1986. The power is 'unconfined except in so far as "the subject matter and the scope and purpose" of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be "definitely extraneous to any objects the legislature could have had in view: Oshlack v Richmond River Council;[13]
(b) The second category of cases covers those which expressly identify the principle that the power to award costs is intended to permit the successful party to be compensated or indemnified for costs incurred in the litigation, by providing that 'the court is to order that the costs follow the event unless it appears to the court that some other order should be made: Uniform Civil Procedure Rules 2005, r 42.1;
(c) The third category of cases encompasses those which provide as a general rule that there shall be no order as to costs, with a discretionary power to depart from that rule in particular circumstances, including where the Court considers that it is fair and reasonable.
[13](1998) 193 CLR 72, 81 [22].
The statutory power conferred by s 3.6.23(7) of the LPA is one that falls within the third category. The subsection provides that, as a general rule, there is to be no order as to costs. It confers a discretionary power to depart from that rule in particular circumstances, namely where ‘the appropriate court is satisfied that an order for costs should be made in the interests of justice’.[14]
[14]Per Blow J in Oxenbould v The Solicitors Trust (No 2) [2011] TASSC 63 at [5].
Blow J also noted other statutes under which similar provisions are made, including:
(a) The Family Law Act 1975 (Cth), s117, as originally enacted, whereby each party was to "bear his own costs", subject to a power to order costs if "the court is of opinion in a particular case that there are circumstances that justify it in doing so": Penfold v Penfold (1980) 144 CLR 311;
(b) The Anti-Discrimination Act 1977 (NSW), s114, whereby each party to an inquiry before a tribunal was to "pay his own costs", subject to an exception whereby the tribunal had power to make an order for costs if it was "of the opinion in a particular case that there are circumstances that justify it doing so": Australian Postal Commission v Dao (No 2) (1986) 6 NSWLR 497;
(c) The Land and Environment Court Rules 1996 (NSW), Pt16, r4(2), whereby no order was to be made "unless the Court considers that the making of a costs order is, in the circumstances of the particular case, fair and reasonable": Hunter Development Brokerage Pty Ltd v Cessnock City Council (No 2) (above);
(d) The Victorian Civil and Administrative Appeal Tribunal Act 1998 (Vic), s109, under which "each party is to bear their own costs", subject to the tribunal having the power to make an order "only if satisfied that it is fair to do so" having regard to certain listed considerations: Vero Insurance Ltd v Gombac Group Pty Ltd [2007] VSC 117 (Gillard J);
(e) The Anti-Discrimination Act 1998 (Tas), ss95 and 99A, whereby "each party to an inquiry is to pay his or her own costs", subject to a power of the relevant tribunal to order costs if it "considers circumstances justify the order": State of Tasmania v Anti-Discrimination Tribunal (2008) 17 Tas R 227 (Evans J).
Blow J concluded his consideration of authority with the observation that there was nothing in the Act that required particular considerations to be taken into account or limited the considerations that may be taken into account. All relevant considerations may be taken into account.
Although the Full Court provided no particular guidance as to what ‘the interests of justice’ means, it made a number of relevant observations about the operation of the Tasmanian equivalent of s 3.6.23(7)[15] of the LPA. When read with the reasons of the primary judge (Blow J)[16] the following may be said:
[15]Section 388(6) of the Legal Profession Act 2007 (Tas). That sub-section is almost identical to s 3.6.23(7) of the LPA.
[16]Oxenbould v The Solicitors’ Trust(No 2) [2011] TASSC 63.
(a) The power to make an order under the section depends on the exercise of a discretion. The discretion is to depart from the general rule that there was to be no order as to costs, and the discretion is not to be exercised unless the Court is satisfied that the order should be made in the interests of justice;
(b) The section does not confine the matters which may be taken into account when determining whether an order for costs should be made in the interests of justice. All relevant circumstances may be taken into account in determining the interests of justice;
(c) The relevant circumstances included:
(i) It is highly likely that Parliament chose a less generous costs regime in order to protect the Fidelity Fund, to a degree, from depletion. It is difficult to think of any other reason for not leaving the question of costs entirely to the unfettered discretion of the judge hearing the appeal;[17]
[17][2013] TASFC 2 [103] and [107].
(ii) It is in the public interest that the Fund be conserved for the benefit of future claimants;
(d) The fact that the respondents were successful in their appeal is not unusual nor is the fact that they and the Trust conducted their appeal reasonably and properly.[18] Thus these were not circumstances in favour, or against, the exercise of the discretion.
[18]Oxenbould v The Solicitors’ Trust(No 2) [2011] TASSC 63 [16].
Accordingly, all the circumstances may be taken into account, including the scheme of the LPA and the circumstances of the case being considered. In this regard, the principles developed in exercising judicial discretion are relevant.
Consideration of the meaning, and use in other places, of the expression ‘the interests of justice’ points to the meaning in this context as importing notions of fairness,[19] of integrity and impartiality[20] and of even-handedness appropriate to the circumstances.[21] There is therefore little difference, in my view, in the requirements for the determination of what are in the interests of justice in this case from the requirements that arise, for example, under s109 of the Victorian Civil and Administrative Appeal Tribunal Act 1998 (Vic), where the expression used is “only if satisfied it is fair to do so,” which has been construed as meaning ‘just and appropriate in the circumstances’.[22] These considerations bring with them the requirement that discretion be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation or disputes in issue. In this context, it is well to remember that the notion of what is in the interests of justice is ‘not disembodied or divorced from practical reality’, as Gleeson CJ, Mchugh and Heydon JJ noted in BHP Billiton Ltd v Schulz[23] when considering the expression in the context of the Cross-vesting legislation.
[19]Butterworths Australian Legal Dictionary, 1997, definition of ‘interests of justice’.
[20]The New Shorter Oxford English Dictionary, definition of ‘justice’, meaning II.
[21]Per Gummow J in BHP Billiton Ltd v Schulz (2004) 221 CLR 400 at 445 [100].
[22]Filippou Managemant Pty Ltd v MREEF Project Company No 11 Pty Ltd [2010] VCAT 1261 at [20].
[23](2004) 221 CLR 400 at 421 [15].
General
No party, or the Commissioner, sought to draw any distinction between costs ‘in’ the appeal, on the one hand, and costs ‘on’ the appeal, bearing in mind the particular wording of the section. No-one made express reference to the fact that the plaintiffs’ applications were interlocutory as a relevant circumstance. Nor did any party refer to the possible distinction between the costs of an interlocutory application versus the costs of the appeal at its final hearing.
In my view they were correct to ignore these distinctions. The costs ‘on’ an appeal will ordinarily include all the costs incurred by the parties to the appeal in the several stages of preparing the proceeding for final hearing, including the making of orders for discovery and the determination of objections to the production of documents pursuant to subpoena. If there was intended to be a distinction between the costs of appeal overall and any interlocutory application, the general rule would be qualified in a way not evident from the words of the sub-section.
Further, the legislature was minded to alter the starting position for the Court’s consideration of costs orders in an appeal from a decision of the Board and did so generally. That is, despite a likely purpose including the protection of the Fidelity Fund from depletion, the rule established by the section applies both ways, in respect of the Fund’s position, if the Board is successful, and in respect of the appellant’s position, if it is successful.
The costs to which the sub-section refers are, implicitly, the costs of the parties to the appeal. That is the person or persons making claim on the Fidelity Fund and the Board as the body with the responsibility for that Fund. What then is the position with respect to the Commissioner? If the section is to be construed as not applying to a non-party’s costs, then on the application by the Commissioner for his costs (he being successful) he should obtain those costs, subject to discretionary factors militating against such an order. If the section is applicable to a non-party’s costs, it being expressed in bald and general terms, what then? In my view, the fact that the Commissioner is a non-party and a person entitled to appear and object to the production of documents under the subpoena is a relevant circumstance to be taken into account in the exercise of the discretion conferred by the sub-section.
It is clear that s 3.6.23 applies to appeals by a person who suffers pecuniary loss because of a default to which Part 3.6 of the LPA applies and who makes a claim against the Fidelity Fund to the Board about the default: s 3.6.7. This ‘claimant’ has a right of appeal under s 3.6.23 against a decision of the Board as described in that section. Thus, any appeal is between the claimant or claimants and the Board, and no-one else. A claim for recovery from a person liable to the claimant in respect of the loss pursuant to the Board’s statutory subrogation rights (under s 3.6.19 of the LPA) is not strictly a part of the appeal. It is, in the case of the claim over against the Third Parties, including Brereton, a convenient procedure where there is a connection between the questions in each proceeding for them to be tried at the same time, or successively. But the appeal is legally distinct from the third party claim.
Thus, in my view, the rule established by s 3.6.23(7) has no application to the position of the Commissioner, who participated only in the objection to the production of the subpoenaed documents for inspection by the plaintiffs; nor does it apply to Brereton as a third party.
Commissioner’s Costs
On the basis that the Commissioner is not a party to the appeal, and is thus not subject to s 3.6.23(7) of the LPA, then prima facie, he is entitled to his legal costs of successfully opposing the production of the subpoenaed documents (or those he objected to). This is because:
(a) The Commissioner was a person having sufficient interest to object to the inspection of the documents produced pursuant to subpoena (r 42A.07(b) of the Rules). That interest arose in order to protect both the client legal privilege and the public interest immunity attaching to the documents, at the least;
(b) Accordingly, the Court’s general discretion under s 24 of the Supreme Court Act 1986 (Vic) and the Rules applies;
(c) The Commissioner was mostly successful in its claims for the privileges (client legal privilege and public interest immunity);
(d) The plaintiffs have been on notice since 30 August 2013 that the appropriate means of obtaining relevant documents was by way of an application for non-party discovery from the Commissioner or, possibly, the Law Institute of Victoria. The Commissioner’s solicitors even invited such an application;
(e) The Commissioner offered to allow the plaintiffs’ lawyers to inspect the documents the subject of the subpoena before the hearing to enable them to advise the plaintiffs as to their relevance. Had the plaintiff taken up that offer, their lawyers would have been able to advise the plaintiffs of the merits of the objections and as to whether the documents were in any respect relevant to the claims made in the proceeding;
(f) The plaintiffs’ answer, that the lawyers were not able to assess the merits of the objections to inspection because they lacked the plaintiffs’ detailed knowledge of all aspects of the relationship between the various persons involved, is insufficient. The Court was in no better position than the plaintiff’s lawyer to do so; and
(g) Making a costs order against the plaintiffs would promote the policy objectives contained in the CPA (particularly sections 23-25). The recommendation that the plaintiffs proceed by way of non-party discovery application and the offer to enable the solicitor for the plaintiff to inspect the documents (on a confidential basis) both go to this point. In particular, to the obligation in s 23 of the CPA which require the parties to resolve by agreement any issues that can be resolved in that way.
In forming this conclusion I have had regard to the submissions of the plaintiffs. In particular, the following italicised matters identified by the plaintiffs do not persuade me that the Commissioner should not have his costs, for the reasons given after each italicised passage:
(a) The fact that the Court did not make any finding that the plaintiffs’ conduct in relation to the subpoena objections was improper or inappropriate. That is, in my view, a neutral factor. If a finding of improper purpose was found, or factors akin to those usually necessary for an indemnity costs order applied,[24] then they would be factors to be taken into account. They are generally not present here in relation to the Commissioner;
[24]For example see Ugly Tribe Co Pty Ltd v Sikola, [2001] VSC 189 [7].
(b) Whilst the reduced list of redactions were upheld on the basis of irrelevance and in some cases client legal privilege and public interest immunity, the plaintiffs were dealing with an indeterminate list of objections, and objections to release were withdrawn late in the proceeding. These matters are not, in my view, significant. The parties determined that a number of the subpoenaed documents were not privileged and were relevant, and proceeded in the ordinary way to fight only over a selection of the documents. It is the documents over which the debate was held that give rise to the bulk of the costs, and in relation to those, the plaintiffs lost the debate;
(c) The plaintiffs did not select the documents that Mr Hall produced and were entitled to expect that Mr Hall would produce only relevant documents within the scope of the subpoena. There can be no improper purpose in the issue of the subpoena and its return, and in arguing for access to the documents. The risk that documents produced by Mr Hall would be subject to the secrecy provision of the LPA, and thus to one of the privileges, was well known to the plaintiffs. That is why they had to use the Courts compulsory processes to obtain them. They take the risk in those circumstances that an objection to production of the documents will succeed;
(d) Given that the plaintiffs’ subpoena was issued to Mr Hall, an expert formerly retained by the Commissioner who was the leading witness in the disciplinary proceeding against Brereton, the plaintiffs could not know without an inspection being conducted that the material produced was irrelevant or unsubstantiated opinion. My comments on the last point are also applicable to this point;
(e) Whilst the Commissioner and the Board have separate statutory functions, the interests of each were aligned and submissions of one were adopted by the other. That is a product of the position of the person from whom the documents were subpoenaed and the nature of the documents. The Commissioner was the person with the primary interest to object on the ground of the privileges (public interest immunity and client legal privilege). It is the Commissioner who has the function of investigating trust accounts and the like under Part 3.3 of the LPA. It is the Commissioner who prosecutes the disciplinary offences in VCAT. It was important that he was present to assist the Court and protect the investigatory functions;
(f) The solicitor acting for the Board is an employee of the Commissioner and it would be inconceivable for there to be a difference in the instructions being provided. The presence of two lots of Counsel arguing essentially the same position prolonged the proceeding and increased the costs. As the disposition sought by the Board and the Commissioner was identical, that additional expense has not been explained. The comments made in relation to the last point apply here.
However, even if I am incorrect and the Commissioner is subject to the ‘no costs’ provision, then it is in the interests of justice to allow the Commissioner’s costs of the issue he appeared to oppose, namely the production of the subpoenaed documents. This is because the Commissioner’s position approximates any other interested non-party having sufficient interest to object to the inspection of the documents produced pursuant to subpoena under r 42A.07(b) of the Rules. For example, if a law firm were instead the objector, having successfully argued on grounds of irrelevance and client legal privilege, that firm ought to be entitled to its costs of defending its client’s legitimate interests.
It would also not be in the interests of justice to make such a party wait on the outcome of the proceeding, having to wait until final judgment to obtain his or her costs. The Commissioner also applies for an immediate costs order. Under r 63.20.1 it is provided that:
If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately.
In my view this provision does not apply, in any event, to the costs of a non-party. But if I am wrong in that conclusion, I turn to consider whether there are reasons to make such an order for an immediate taxation of the Commissioner’s costs.
Rule 63.20.1 establishes the default position that interlocutory costs orders are not to be taxed until the proceeding is concluded, unless the Court orders that the costs may be taxed immediately. This avoids multiple taxations and leaves the taxation of costs until all issues of costs between the parties have been resolved.[25] In Setka v Abbott (No.2),[26] the Court of Appeal summarised the factors that may warrant an order for immediate taxation of costs as one or more of the following:
[25]Dale v Clayton Utz (No.3) [2013] VSC 593 [58].
[26][2013] VSCA 376, at [27]; See also Dale v Clayton Utz (No.3) [2013] VSC 593 [65].
(a) There is a prospect of considerable delay in completion of the proceedings;
(b) The issue the subject of the interlocutory order is discrete from what will finally require determination; and/or
(c) The party against whom the order was made has been guilty of unsatisfactory conduct, that is conduct that was unreasonable, reprehensible or involving a want of competence and diligence.
So far as the Commissioner is concerned, the issue he addressed is discrete and separate from the appeal. There is also reason to think that it will be some time before there is a final resolution of the appeal. For these reasons it is appropriate to make an order for the costs to be taxed immediately, if that is necessary.
Board’s Costs
The Board, as a party to this proceeding, is subject to the ‘no costs’ jurisdiction imposed by s 3.6.23(7) of the LPA. Its costs are prima facie not recoverable. The Board asks, however, that the Court depart from what is mandated by that section and exercise its discretion in the interest of justice.
In my judgment of 30 January 2015 I concluded that the plaintiffs’ application under r 40.12 and/or 41.01 was not a proper use of the Rules. The plaintiffs were attempting to require Mr Hall to give evidence before trial for the purpose of discovery and to break through the secrecy provisions in both the 1996 and the 2004 Acts so as to enable Mr Hall to give the plaintiffs information about the nature of documents that exist or might exist that support the plaintiffs’ claims.
In that judgment, I also considered the ‘for evidence’ requirement of Order 42A of the Rules, in particular subpoenas should not be used as a substitute for discovery or non-party discovery, and must not be used as a ‘fishing expedition’. I concluded that for reasons of public interest immunity, client legal privilege, and relevance, the Board’s and Commissioner’s objections were valid. However, contrary to the submissions of some of the parties I did not find that the subpoena was issued for an improper purpose.
I am, nevertheless, persuaded that there should be an order for costs in favour of the Board in the interests of justice, but in relation to its opposition to the examination of Mr Hall only. The application to examine Mr Hall was misguided. Properly considered there was no real prospect of that application succeeding. In my earlier reasons I observed that it is not a proper purpose to use r 40.12 to obtain discovery of documents or to obtain information to enable the discovery of documents (See paragraph 67(f) and (g) of my earlier reasons). Nor was it a proper use of r 41.01 that it be used as a means of obtaining evidence for the purposes of discovery (See paragraph 69 of my earlier reasons). But that is what the applications under those rules were designed to do.
I am not persuaded that the Board’s costs of resisting production of the subpoenaed documents should be allowed. Although it was entitled to object to the production of those documents, the primary responsibility for that task rested with the Commissioner. He was the most interested person because of his statutory responsibilities for the investigatory functions under the LPA. He was the best equipped to address the questions that were raised. There was no need for the Board to address those matters. To the extent that there was duplication of effort by the Board and the Commissioner, the cost of that effort should not be visited on the plaintiffs.
I do not consider that the fact, if it be a fact, that the first plaintiff is an experienced litigator is any more relevant than the fact that the Board is a well-resourced statutory body, assuming that it is.
Further, I consider that it would be unfair to conclude that the plaintiffs ought to have known that the subpoena directed to Mr Hall was, on its face, for an improper purpose, as was submitted by the Board on the basis of my reasons for judgment at paragraph 104(a). That was a conclusion based on the hypothesis that if the purpose of the subpoena was, like the application to examine Mr Hall, for the purposes of seeking to ascertain if other documents exit or to otherwise fish for documents, then it was improper. The major debate before me concerned the claims for the privileges and the relevance of the documents subpoenaed.
Brereton
Brereton, although a third party, is not a party to the appeal under the LPA. The claim against him depends on the Boards subrogated rights under s 3.6.19 of the LPA. There is no reason to suppose that the legislature intended that costs in such a proceeding should be governed by the provision applicable to appeals from decisions of the Board to disallow a claim on the Fidelity Fund.
Thus the position of Brereton is to be assessed on the usual basis. It is to be noted, as the plaintiff submitted, that Brereton:
(a) Was not a party to the applications and was not dragged unwillingly into it;
(b) Filed no material and made no submissions in relation to in relation to either application, even when invited to do so;
(c) Has not identified how the matters the subject of the applications were critical to his interests, let alone relevant; and
(d) Could have been excused but chose not to do so. Indeed, there was no reason for his solicitor to attend at all.
For these reasons, at the least, Brereton cannot be regarded as a successful litigant in the applications and should not have the costs he seeks. The legal costs he has incurred are a product of a decision made by or on his behalf to attend a hearing in which he had no direct interest, was not made against him and only indirectly affected him in influencing how the appeal would later proceed. That could have been found out by other means than appearing and staying mute.
Conclusion
For these reasons I will order:
(a) The plaintiffs to pay the Board’s costs of the application to examine Mr Hall under r 40.12 or r 41.01; and
(b) The plaintiffs to pay the Commissioner’s costs of his objection to the inspection of the subpoenaed documents; and
(c) An immediate taxation in relation to the Commissioner’s costs.
I apprehend that it is necessary to fix the proportion of the costs of the hearing that are attributable to the two issues, as distinct from the costs involved in preparation for the hearing. In my opinion, with attempting any precise calculation, the majority of the time and effort concerned the disputes over the subpoenaed documents, and I would apportion the hearing 70% to the subpoenaed documents issue and 30% to the pre-trial examination of Mr Hall.
I will make no order as to the costs of the First Third Party in relation to the two matters.
I will therefore order that:
(a) The plaintiffs pay
(i) 30% of the costs of the defendant of the day of hearing the applications referred to in paragraph 1 of the reasons for judgment in De Simone v Legal Services Board [2015] VSC 9 on 16 May 2014; and
(ii) All of the costs of the defendant incidental to the preparation in opposing the plaintiffs’ application referred to in paragraph 1(a) of the reasons for judgment in De Simone v Legal Services Board [2015] VSC 9
on the standard basis as agreed or taxed.
(b) The plaintiffs pay
(i) 70% of the costs of the Legal Services Commissioner of the day of hearing the applications referred to in paragraph 1 of the reasons for judgment in De Simone v Legal Services Board [2015] VSC 9 on 16 May 2014; and
(ii) All of the costs of the Legal Services Commissioner of and incidental to the preparation for objecting to the plaintiffs’ application referred to in paragraph 1(b) of the reasons for judgment in De Simone v Legal Services Board [2015] VSC 9
on the standard basis, such costs to be taxed immediately.
SCHEDULE OF PARTIES
| S CI 2013 01485 | |
| BETWEEN: | |
| GIUSEPPE DE SIMONE | Firstnamed Plaintiff |
| SERAFINO DE SIMONE | Secondnamed Plaintiff |
| DE SIMONE NOMINEES PTY LTD (ACN 006 463 421) | Thirdnamed Plaintiff |
| SEACHANGE MANAGEMENT PTY LTD (ACN 091 443 211) | Fourthnamed Plaintiff |
| SEACHANGE PROJECT NOMNIEES PTY LTD (ACN 149 258 033) | Fifthnamed Plaintiff |
| SEACHANGE VILLAGE NOMINEES PTY LTD (ACN 091 526 215) | Sixthnamed Plaintiff |
| - and - | |
| LEGAL SERVICES BOARD | Defendant |
| - and - | |
| MICHAEL RICHARD BRERETON | First Third Party |
| - and - | |
| DAVID MCLEOD | Second Third Party |
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