Franklins Pty Ltd V Endeavour Holdings Pty Ltd

[2013] NSWSC 1204

Supreme Court

New South Wales

Medium Neutral Citation:	Franklins Pty Ltd v Endeavour Holdings Pty Ltd [2013] NSWSC 1204
Hearing dates:	23/08/2013
Decision date:	30 August 2013
Jurisdiction:	Equity Division - Expedition List
Before:	Pembroke J
Decision:	See paragraph [14]
Catchwords:	CIVIL PROCEDURE - costs of complying with a subpoena - parties must make a genuine attempt to agree as to the amount before approaching the court - failure to wait for a response not a genuine attempt CIVIL PROCEDURE - claims for loss incurred in compliance with a subpoena must be reasonable
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	A Pty Ltd v Z [2007] NSWSC 999 J Aron Corporation v Newmont Yandal Operations Pty Ltd [2004] NSWSC 996 Re Dovico; Ex Parte Mayne Wetherall [2012] NSWSC 822
Category:	Costs
Parties:	Mr Gaurang Parekh - non-party applicant Mr Salil Ray - non-party applicant Endeavour Holdings Pty Ltd - defendant
Representation:	P Rodionoff - for the applicants J Knackstredt - for the defendant Ai Strategic Lawyers - for the applicants Mooney & Kennedy - for the defendant
File Number(s):	2013/32025

Judgment

1. This is an application by the recipients of two subpoenas to recover their costs of production of documents from the issuing party, the defendant. The applicants, Mr Gaurang Parekh and Mr Salil Ray, claim $22,209 by notice of motion filed on 14 March 2013. The defendant resists the application on the grounds that the parties did not attempt to reach agreement on the amount of costs as required under the Uniform Civil Procedure Rules (UCPR). And in the alternative, that the amount claimed by the applicants is not reasonable.

The requirement to attempt agreement

1. Rule 33.11 of the UCPR empowers the court to order a party that issues a subpoena to pay the person subpoenaed 'the amount of any reasonable loss or expense incurred in complying with the subpoena'.

1. That power is qualified by Rule 42.33 of the UCPR, which provides that:

Unless the court otherwise orders, an order as to costs is not to be made under rule 21.13, 33.11 or 34.3 if the court is not satisfied that the parties concerned have attempted, but failed, to agree on the amount of costs to be paid in relation to the matter for which such an order may be made under that rule.

(emphasis added)

1. I am satisfied that the evidence is not sufficient to comply with Rule 42.33. The first time the applicants sought the amount set forth in prayers 1 and 2 of the motion was on 13 March 2013, when their solicitor submitted two invoices to the defendant's solicitor and asked for 'agreement . . . as to costs'. At midday on the following day (14 March) the defendant's solicitor responded stating that he had passed on the letter to his client and was awaiting instructions. Later that day, without further ado, the applicants peremptorily filed their motion. By doing so, they engaged the resources of the court, and committed themselves and the defendant to further expense, which might have been avoided.

1. I do not accept that such an incomplete, unresolved and inconclusive exchange could possibly amount to a failed 'attempt to agree' within the meaning of Rule 42.33. There must be a genuine bid to arrive at a figure that is satisfactory to both parties. The requirement of Rule 42.33 is not a mere formality. It is not satisfied when the party seeking to recover costs has not even waited for a response. Nor is it satisfied simply because it is suspected that the claim is so high that it is likely to be rejected. The court should not be troubled when the applicants have failed to wait. And the applicants should not be heard when they have flouted an important requirement which is intended to condition the power of the court to make a costs order.

1. In this case, 'an attempt to agree' would have required the applicants, at the very least, to afford the defendant a reasonable opportunity to respond to their letter that set out the costs sought. One day was insufficient, especially when the solicitor said that he had passed on the letter to his client and was awaiting instructions.

The quantum of costs claimed

1. Although the issue does not arise, I will nevertheless address the reasonableness of costs claimed by the applicants. The documents produced by the applicants were limited in number. They largely comprised three years of individual tax returns and notices of assessment and three years of tax returns and Business Activity Statements for two companies.

1. The applicants have sought to recover $6,051.50 in costs paid to their solicitor, $5,280 in costs paid to the barrister engaged on their behalf, $2,980 in compensation for their own time taken in dealing with the subpoenas, and $5,530 in costs paid to their accountant. I have reached the view that the costs claimed by the applicants are unreasonable given the nature and extent of the documents produced.

1. Turning first to legal costs. The costs of legal advice may be recoverable under Rule 33.11 but only where it is reasonable to seek that advice. A person who receives a straightforward demand to produce documents, to which no issues of privilege or confidentially attach, is not justified in recovering the costs of first going to a lawyer to obtain advice: Re Dovico; Ex Parte Mayne Wetherall [2012] NSWSC 822 at [54] (Young AJ); A Pty Ltd v Z [2007] NSWSC 999 at [45] (Brereton J).

1. In this case, the documents produced by the applicants were not subject to issues of privilege or confidentiality. They related primarily to financial information. The requests for production in each subpoena were straightforward and uncomplicated. The applicants may have been entitled to seek legal advice but they were not justified in seeking to recover the costs of doing so. None of the legal costs incurred by the applicants is reasonable or recoverable.

1. The applicants' claim to be compensated for their own time spent in complying with the subpoenas suffers from other difficulties. The applicants submit that they are entitled to compensation on the grounds that they are non-party business people. The basis on which the applicants have charged for their time has not been disclosed. It is difficult to see how the applicants can justify their claim for almost $3,000 in personal loss in complying with the subpoenas, particularly having regard to the substantial professional fees incurred by them for the same purpose.

1. While Rule 33.11 is not to be construed in 'any narrow fashion' (J Aron Corporation v Newmont Yandal Operations Pty Ltd [2004] NSWSC 996 at [22] (Campbell J); Re Dovico; Ex Parte Mayne Wetherall [2012] NSWSC 822 at [40] (Young AJ)) its function is to compensate applicants for actual loss or expense incurred. On the evidence I cannot be satisfied that the applicants have sustained any significant actual loss by diverting their own time to answer the subpoenas.

1. The only costs that might reasonably have been incurred by the applicants are the expenses involved in having their accountant locate and photocopy the documents produced. However the fees charged by the applicants' accountant, JAG Business Advisory, to collate these documents was excessive and amounted to a staggering $17,930. The applicants have acknowledged that the fees charged by their accountant are unreasonable and have not sought to recoup the full amount. The only amount claimed for accountant's fees is $5,530. Although significantly reduced, the figure remains unreasonable. In my view, it is out of all proportion with the number and character of the documents produced.

Conclusion

1. In the circumstances, I would have been prepared to allow a figure in the vicinity of $1,500 as a reasonable amount for the purpose of Rule 33.11. But the failure of the applicants to attempt to agree within the meaning of Rule 42.33 means that no order can, or should, be made. The notice of motion should therefore be dismissed with costs.

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Decision last updated: 30 August 2013