Frontier Assets Pty Ltd v Fishburn
[2011] NSWSC 334
•21 April 2011
Supreme Court
New South Wales
Medium Neutral Citation: Frontier Assets Pty Ltd v Fishburn [2011] NSWSC 334 Hearing dates: 31 March 2011 Decision date: 21 April 2011 Jurisdiction: Common Law Before: Harrison J Decision: 1. Order Frontier to pay Mr Wavish's reasonable loss and expense of complying with the subpoena issued to him dated 13 October 2010.
2. Make no order as to the costs of the motion filed 12 November 2010 to set aside the subpoena, including the costs of the hearings and argument before me.
3. Order Frontier to pay Mr Wavish his reasonable loss or expense incurred in complying with the subpoena issued to Milan Djekovic dated 13 October 2010.
Catchwords: PROCEDURE - costs - whether respondent ought to pay applicant's reasonable loss and expense incurred in complying with a subpoena issued to him by respondent - respondent ordered to pay applicant's costs - no order made as to costs of applicant's motion to set aside the subpoena Legislation Cited: Civil Procedure Act 2005 Cases Cited: A Pty Ltd v Z [2007] NSWSC 999
Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194; (1993) 11 ACSR 136
Charlick Trading Pty Ltd v Australian National Railways Commission (1997) 149 ALR 647
Danieletto v Khera (1995) 35 NSWLR 684
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Fuelxpress Ltd v LM Ericsson Pty Ltd (1987) 75 ALR 284
Hadid v Lenfest Communications Inc (1996) 144 ALR 73; (1996) 65 FCR 350
Harrison v Schipp [2001] NSWCA 13
Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242; (1995) 125 FLR 151
J Aron Corporation Pty Ltd v Newmont Yandal Operations Pty Ltd [2005] NSWSC 1280
NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480; (2001) 109 FCR 77
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Re Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 879; (2006) 67 NSWLR 289
Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; (2004) 48 ACSR 681Category: Consequential orders Parties: Frontier Assets Pty Ltd (Plaintiff)
Michael George Fishburn (First Defendant)
John James Watson (Second Defendant)
Christopher Martin O'Brien (Third Defendant)
Sam Couper (Fourth Defendant)
Stephen Campbell (Fifth Defendant)
Michael Bigelow (Sixth Defendant)
Todd Ritchie (Seventh Defendant)
Bernard Coles QC (Eighth Defendant)Representation: Counsel:
G George (Plaintiff)
I R Pike (Applicant)
Solicitors:
Kalfus Legal (Plaintiff)
Gilbert + Tobin (Applicant)
File Number(s): 2008/289361
Judgment
HIS HONOUR : I gave judgment in this matter on 22 March 2011 with respect to an amended notice of motion filed in Court on behalf of Mr Wavish on 21 March 2011: see [2011] NSWSC 187. These reasons assume a familiarity with that decision. It will be recalled that that notice of motion sought these orders:
1. [Frontier] pay Mr Wavish's costs of and incidental to this motion (Including his costs of and incidental to the subpoena issued at the request of [Frontier] to Mr Wavish dated 13 October 2010) on an indemnity basis in the amount of $84,179.87, or alternatively as assessed or agreed.
2. [Frontier] pay Mr Wavish's costs of and incidental to the subpoena issued to Mr Wavish's former solicitors Djekovic Hearne Walker by [Frontier] on 13 October 2010 in the amount of $15,418, or alternatively as assessed or agreed.
I invited the parties to bring in short minutes of order to give effect to my earlier reasons. The parties were unable to agree on what orders should be made for that purpose and they remain in dispute about it. That dispute is encapsulated in what have become four further issues (about the precise terms of which there also remains some debate) as follows:
1. Should Frontier pay Mr Wavish his reasonable loss or expense incurred in complying with the subpoena issued to him by Frontier and dated 13 October 2010? [Frontier contends, but Mr Wavish contests, that I must also determine the time from when and to when such costs are payable and if there are categories of such costs that ought not be allowed].
2. In relation to question 1, insofar as the loss or expense claimed by Mr Wavish includes amounts paid to his legal and other advisers, is the loss or expense to be determined on an indemnity basis or some other basis? [Frontier does not agree that this is an issue that I should decide].
3. Who should pay the costs of the notice of motion filed by Mr Wavish on 12 November 2011 and are those costs to be paid on an indemnity basis?
4. Should Frontier pay Mr Wavish his reasonable loss or expense incurred in complying with the subpoena issued to Milan Djekovic dated 13 October 2010?
Background
The parties each took me at considerable length and in helpful detail to correspondence and similar material that had not been germane to my original deliberations. It becomes necessary for present purposes to review that material.
Exhibited to the affidavit of Rani Sara John sworn 7 March 2011, upon which Mr Wavish relies, are letters passing between the solicitors for Frontier, as the party that issued the subpoenas to both Mr Wavish and Djekovic Hearne & Walker, and Mr Wavish's solicitors. The subpoena to Mr Wavish was the subject matter of his original notice of motion filed on 12 November 2010, by which Mr Wavish sought an order that it be set aside. It was originally returnable on 29 October 2010 and was ultimately set aside by consent on 11 February 2011. However, the considerable correspondence generated by the subpoena before that occurred serves starkly to frame both the respective positions adopted by the parties about whether the subpoena was too wide or otherwise vulnerable to attack on the one hand, as well as the arguments about how I should decide these four remaining issues on the other hand.
A week before the issue of the subpoena, Frontier's lawyers wrote to Mr Wavish on 6 October 2010. The letter informed Mr Wavish that Frontier was suing its former solicitors "in connection with proceedings instituted in the Supreme Court of New South Wales in 2006 against [you and others]". The letter explained that the claim was for professional negligence arising out of the alleged mishandling of that litigation by Frontier's solicitors and counsel. Mr Wavish had been sued as a guarantor of the obligations of a defaulting purchaser in a commercial conveyancing transaction. The allegation was that loss of bargain damages had not been claimed but should have been, so that the proceedings were settled at an undervalue. Mr Wavish had been released and the lawyers were allegedly liable for the loss thereby created. Frontier took the view that proof of its loss in the negligence claim included being able to demonstrate that Mr Wavish could have met a claim for damages if he had not been released. This was explained in the letter as follows:
"Frontier ... will require some information from you relevant to the purposes of its claim. Essentially, the information Frontier seeks is that your financial circumstances at the time of the conclusion of the Prior Proceedings in early 2008 were such that you would have been able to meet the amount of a judgment which the Court might have awarded to Frontier against you ... in the Prior Proceedings for loss of bargain damages, had those damages been claimed ...
It would be of great assistance to our client if you were prepared to meet with the writer and provide us with the information ... as to your financial circumstances at the time of conclusion of the Prior Proceedings ...
Of course, if you are not prepared to voluntarily assist, we will have no option but to serve you with a subpoena ..."
For reasons that will become all too apparent, it is regrettable that this offer was not accepted.
Mr Wavish's lawyers asked for a copy of the pleadings and these were provided. The letter enclosing them also enclosed a copy of the subpoena, which had by this time somewhat curiously, and not a little prematurely, already been issued. The terms of the subpoena are central to the current dispute. Mr Wavish contends that they were unduly wide and oppressive. Frontier originally disputed that assertion but ultimately did not persist with the subpoena. This is referred to in more detail later in these reasons, but emerges almost from the start of the correspondence.
By letter dated 25 October 2010, Mr Wavish's lawyers contended that the material that was sought was "not relevant to any pleaded issue in the proceedings". They went on to assert that Mr Wavish's "capacity or otherwise to meet a judgment in the order of the amount of damages sought by Frontier against its former legal advisers can have no bearing on whether Frontier's former legal advisers are liable to [it]... nor on the quantum of the damages claimed". The correctness of that assertion is doubtful, and must have been obviously so when it was made. It is unsurprising that Mr Wavish did not continue to embrace it, as the correspondence in due course reveals. The letter went on to say "regardless of whether it can be shown that the material sought under the subpoena is relevant to any fact in issue... the subpoena is on its face oppressive in its scope". The letter continued:
"We are instructed that our client's preliminary estimate is that compliance with the subpoena will involve several months of work, and require our client to enlist the assistance of his accounting advisers as well as obtaining legal advice. He presently anticipates that compliance with the subpoena would involve his incurring costs in excess of $100,000. You will be aware that your client is liable for our client's costs of compliance with the subpoena, on a solicitor-client basis.
Having regard to the above matters, we request that your client confirm by return that it consents to the withdrawal of the subpoena, or alternatively, provide a written undertaking that the subpoena will not be called upon."
The letter also went on to foreshadow an application to set aside the subpoena. That application was in due course filed on 12 November 2010. Before that occurred Frontier's lawyers continued to assert that the subpoena was good and that the material sought was relevant. Their letter of 27 October 2010 insisted that "in no way can [the subpoena] be regarded as oppressive, either in scope or in substance". The letter also said this:
"Both our client and ourselves find it difficult to understand, let alone believe, your client's estimate of costs he would incur in complying with the subpoena exceeds $100,000. We would have thought most of the information sought in the subpoena is readily and presently available to your client.
*****
... our client has no intention to withdraw the subpoena nor are we able to provide you with the written undertaking you seek."
The following day Mr Wavish's lawyers wrote a long letter in reply. It continued to assert that the subpoena sought documents that were irrelevant to matters in issue and that it was for that reason alone an abuse of process. The letter stated that it was "manifestly obvious [ sic ] that, even if your assertions as to the relevance of our client's capacity to meet a judgment in February 2008 were correct (which they are not), the documents in fact sought by the subpoena go far beyond any legitimate request for production of documents going to that issue". The letter reiterated that the cost of complying with the subpoena, as well as providing advice on questions of confidentiality and privilege, would be very high, involving Mr Wavish and his advisers in "many months of work".
It is noteworthy for present purposes that that letter also said this:
"On the basis of the matters raised above, we invite your client [to] reconsider its refusal to withdraw the subpoena. In the event that your client continues to so refuse, we hold instructions to make an application to ... have the subpoena set aside. Our client intends to seek his costs of any such application on an indemnity basis.
To the extent that any compliance with the subpoena is required following determination of that application, our client requires an undertaking from your client and the provision of verified evidence that it will be able to meet any costs order against it, taking into account the likely magnitude of the costs involved by reference to the matters referred to in this letter.
Your client should be under no misapprehension that our client intends to pursue your client to the fullest extent possible for all costs associated with the subpoena."
In their reply the next day, Frontier's lawyers said that there was "nothing technically deficient in the subpoena". The letter continued:
"We again invite your client to provide an affidavit that had he remained a contracting party to the transaction which was the subject of the prior proceedings in the Supreme Court, he would have been able to pay the purchase price or the general damages which could have been awarded to our client in those proceedings."
After an intervening letter, Frontier's lawyers "confirmed" that if Mr Wavish provided an affidavit of his financial position satisfactory to Frontier, the subpoena would be withdrawn. Then in a moment of apparent enlightenment, Mr Wavish's solicitors sent a letter dated 5 November 2010 saying that they were instructed that Mr Wavish was prepared to swear an affidavit in the proceedings verifying that at all times during the period 2006 to 2008 his net assets were in excess of two million dollars. The offer, however, was conditional upon the subpoena being first set aside, the affidavit not annexing documents sought by the subpoena and Frontier paying the costs incurred, including costs associated with any requirement for Mr Wavish to attend to be cross-examined on the affidavit.
By letter dated 10 November 2010 Frontier's lawyers notified that it was prepared "to give favourable consideration to the proposal" that an affidavit would be provided. That favourable consideration was itself not unconditional, however, and particulars of the costs involved were asked for as follows:
"3. Please provide us with an estimate of your costs in connection with the preparation of the affidavit and your fees ... for any necessary attendance on cross-examination by [ sic ] Mr Wavish on his affidavit. Our client does not consider it appropriate that it be obliged to reimburse your client for his costs incurred in connection with the subpoena as we had invited Mr Wavish, prior to the issue of the subpoena, to co-operate in voluntarily providing evidence on behalf of the plaintiff in the proceedings, which he clearly declined to do. You might note that when we wrote to Mr Wavish we informed him a subpoena would be issued if his co-operation were not forthcoming."
After Mr Wavish's lawyers filed the motion to set aside the subpoena, the parties then became embroiled in a dispute about short minutes of order and timetables. It is mercifully unnecessary presently to descend into the details of that dispute. On the bright side, however, the motion would appear at least to have provoked some progress concerning the subpoena, inasmuch as Frontier's lawyers wrote to Mr Wavish's lawyers in these terms on 18 November 2010:
"Although we do not believe the subpoena ... can be regarded in any way as oppressive or otherwise justifying it being set aside, we are instructed, so as to facilitate your client complying with the subpoena, to advise [that it will not be pressed in full]".
In that regard certain nominated paragraphs were modified, restricted in scope or simply not pressed. In a response by letter dated 24 November 2010 Mr Wavish's lawyers advised that he was prepared to swear an affidavit verifying that at all times during the period May 2006 to February 2008 his net assets were in excess of two million dollars. Other details of his financial position were also offered as part of the affidavit to be sworn by him. However, nothing in this case came without conditions and Mr Wavish's solicitors sought to impose the following, among others, as a condition of his co-operation with respect to the affidavit:
"(c) Your client pay all of the costs incurred by our client as a consequence of the proceedings, including, without limitation, costs incurred by him in connection with the subpoena, the preparation of the proposed affidavit and the proceedings, and any requests made for him to attend cross-examination on his affidavit. Our client's legal costs in this regard up to and including Friday 19 November 2010 are in the amount of $34,197.35 inclusive of GST. He has also incurred disbursements of $483.24 inclusive of GST as at 19 November 2010 and costs by virtue of making inquiries to his accountants in the amount of $2,241.80 inclusive of GST up to and including 22 November 2010."
The reply on 26 November 2010 from Frontier's lawyers somewhat predictably included the following:
"We note you advise your legal costs amount to date in excess of $34,000.00. To say the least, the writer finds this amount to be extraordinary and in the absence of a satisfactory explanation cannot, on any view of the matter, such an amount be regarded as reasonable. We would remind you that under Rule 33.11 of the Uniform Civil Procedure Rules , the Court may order payment by the issuing party of " any reasonable loss or expense " incurred in complying with a subpoena. Our client finds it difficult to understand that legal costs anywhere in the order of the amount advised has been reasonably incurred by your client in complying with the subpoena, to date. Perhaps you might wish to comment in this regard.
We reiterate our client is desirous of procuring an affidavit from your client provided that it contains evidence of relevance and weight. Furthermore, our client instructs it is willing to pay your client's reasonable costs, as approved by our client, of complying with the subpoena to date and furnishing an affidavit in the proceedings."
A long letter was written in response on 30 November 2010. It included an agreement to swear an affidavit verifying that at all times during the period from May 2006 to February 2008 Mr Wavish had net assets in excess of two million dollars and that his interest in his Neutral Bay residence also exceeded that amount. The conditions attaching to that agreement referred to in the 24 November 2010 letter were repeated. The affidavit was now also to be "confidential" and used for the purpose of the proceedings and not otherwise. Mr Wavish's lawyers continued to insist that his costs as advised had to be paid.
On 11 February 2011 the subpoena was ultimately set aside by consent. The matter was listed on 21 March 2011 for argument on costs. I heard that argument as earlier noted. Before those things occurred, the following letters were exchanged. Mr Wavish's lawyers wrote on 2 February 2011 in these relevant terms:
" 1 Our client is entitled to his costs of and incidental to complying with the subpoena, and his costs associated with the subpoena to his former solicitors Djekovic Hearne & Walker.
... Our client's entitlement to those costs arises by operation of [UCPR 33.11(1)]...
*****
2 Our client is entitled to his costs of the motion on an indemnity basis.
... You[r] letter dated 1 February 2011 is a concession that the subpoena is liable to be set aside, which is precisely what we identified to you in our letter dated 25 October 2010. Had you and your client acted reasonably or come to the realisation that you have now reached regarding the scope of the subpoena, almost none of the costs of the steps outlined in this letter relating to the subpoena or the motion would have been necessary.
Accordingly, we consider that any application our client may be required to make to have his costs of the motion paid on an indemnity basis would be successful.
3 Costs incurred by our client
... the total costs incurred by our client up to and including 31 January 2011, including accountant's costs and personal costs, is $50,430.84...
3.1 Offer by our client to resolve the subpoena and the motion
In the interests only of avoiding the further time and cost that would be involved in an application for a costs order and any subsequent costs assessment, our client is willing to accept $37,823.13 (being 75% of the fees paid plus disbursements, accountant's costs and personal costs), in full and final satisfaction of any entitlement of our client to costs of the DHW subpoena, the subpoena or the motion paid... within 14 days of acceptance.
We consider the offer to be eminently reasonable including because it is calculated in the way that solicitor-client costs orders are often calculated between parties to proceedings. That is, in making his offer, our client is not seeking the costs of the motion on an indemnity basis and has not made any allowance for the fact that any costs assessor required to assess our client's claim is likely to assess [it] more favourably than the costs of a party to litigation ...
Our client's offer remains open for acceptance until 5pm on ... 10 February 2011 and thereafter lapses ...
You will also be aware of course that our client continues to incur costs in corresponding with you about, and attending court in relation to, this matter, and that any such further costs will also be pursued should the matter proceed to assessment..."
On 3 February 2011 Frontier's lawyers asked for an itemised account from Mr Wavish's lawyers in order that they might properly consider the offer. That request was apparently complied with before 10 February 2011 when Frontier's lawyers wrote back in terms that included the following:
"1. At all times, our client sought your client's assistance to provide documents it required to prove facts in issue in the substantive proceedings. At no time did your client concede that the documents sought was [ sic ] part of a proper forensic exercise by our client (your letter of 25 October 2010 is an example). Your client's recent offers to swear an affidavit for use in the proceedings makes a nonsense of the assertion however.
2. At all times your client complained that the documents sought in the subpoena amounted to an oppressive and vexatious use of the Court's compulsion power because to comply, your client would be put to great expense and trouble. This was a fatuous claim as documents detailing your client's financial position at 2007 have now been obtained in these proceedings and reveal that your client was able to prepare a spreadsheet himself that listed his assets and liabilities and to verify the correctness of the documents. For the avoidance of doubt, it is because these documents have been obtained, that the subpoena was withdrawn.
3. The costs are excessive and in any event not recoverable by your client, because they were not incurred in complying with the subpoena as UCPR 33.11 requires. Further, approximately $18,000 of the costs relate to another subpoena, namely the subpoena served on Milan Djekovic, and no application was made for those costs to be paid and hence they may not be recovered."
The subpoena
A key to understanding these issues is to be found in the form of the subpoena itself. It was in these terms:
" The documents or things you must produce are as follows:
1. Copies of financial statements detailing assets owned by you and liabilities owed by you, in the period between May 2006 and 8 February 2008.
2. Copies of documents disclosing or indicating income derived by you in the period between May 2006 and 8 February 2008.
3. Copies of financial statements prepared for the period between May 2006 and 8 February 2008 for any company, trust, partnership or joint venture controlled by you or from which you derived income.
4. Copies of financial statements prepared for the period between May 2006 and 8 February 2008 for any company, trust, partnership or joint venture in which you were a shareholder, beneficiary, trustee, appointor or partner.
5. Copies of all credit facilities available to you, whether drawn or undrawn, from an Australian or foreign bank or non-bank financial institution, in the period between May 2006 and 8 February 2008.
6. Copies of all credit facilities available to a company, trust, partnership or joint venture in which you were a shareholder, beneficiary, trustee, appointor, or partner, whether drawn or undrawn, from an Australian or foreign bank or non-bank financial institution, in the period between May 2006 and 8 February 2008.
7. Copies of personal tax returns lodged with the Australian Taxation Office for the financial years ended 30 June 2006, 30 June 2007 and 30 June 2008.
8. Copies of all Income Tax Assessment Notices issued to you by the Australian Taxation Office for the financial years ended 30 June 2006, 30 June 2007 and 30 June 2008.
9. Copies of all statements of account issued to you by any bank or non-bank financial institution, whether located in Australia or overseas, for accounts in your name or which you had authority to draw upon, in the period between 1
May 2006 and 8 February 2008.
10. Copies of all statements of account issued to an entity controlled by you, or which could advance funds to you, by any bank or non-bank financial institution, whether located in Australia or overseas, in the period between 1 May 2006 and 8 February 2008.
11. Copies of ail documents including letters, faxes, emails, file notes, minutes, settlement sheets, title documents, agreements or memoranda concerning:
a) The purchase of real property by you, whether in Australia or overseas, in the period between 1 May 2006 and 8 February 2008.
b) The purchase of real property by any entity, trust, partnership or joint venture controlled by you, whether in Australia or overseas, in the period between 1 May 2006 and 8 February 2008.
c) The purchase of real property by any entity, trust, partnership or joint venture controlled by you, whether in Australia or overseas, in the period between 1 May 2006 and 8 February 2008.
d) The purchase of securities by you in the period between 1 May 2006 and 8 February 2008.
e) The purchase of securities by any entity, trust, partnership or joint venture controlled by you, whether in Australia or overseas, in the period between 1 May 2006 and 8 February 2008.
12. Copies of all documents including letters, faxes, emails, file notes, minutes, settlement sheets, title documents, agreements or memorandums that relate to, refer to, evidence or are in connection with:
a) The sale of real property by you, whether in Australia or overseas, in the period between 1 May 2006 and 8 February 2008.
b) The sale of real property by any entity, trust, partnership or joint venture controlled by you, whether in Australia or overseas, in the period between 1 May 2006 and 8 February 2008.
c) The sale of real property by any entity, trust, partnership or joint venture controlled by you, whether in Australia or overseas, in the period between 1 May 2006 and 8 February 2008.
d) The sale of securities by you in the period between 1 May 2006 and 8 February 2008.
e) The sale of securities by any entity, trust, partnership or joint venture controlled by you, whether in Australia or overseas, in the period between 1 May 2006 and 8 February 2008.
For the purposes of this subpoena the following terms have the following meanings:
' Document ' has the same meaning as under the Evidence Act 1995 (NSW). The term "document" therefore means any record of information, and includes:
a) anything on which there is writing, or
b) anything on which there are marks, figures, symbols or perforations having a meaning for persons qualified to interpret them, or
c) anything from which sounds, images or writings can be reproduced with or without the aid of anything else, or
d) a map, plan, drawing or photograph.
' Control ' has the same meaning as in the Corporations Act 2001 (Cth)."
Mr Wavish's submissions
Mr Wavish submitted that he was entitled to recover his costs incurred in relation to the subpoena. He relied upon a combination of s 98(1) of the Civil Procedure Act 2005 and UCPR 33.11(1).
It is well settled that legal costs incurred in complying with a subpoena may be recovered by a subpoenaed party either pursuant to the rules or the inherent jurisdiction of the Court: J Aron Corporation Pty Ltd v Newmont Yandal Operations Pty Ltd [2005] NSWSC 1280; Danieletto v Khera (1995) 35 NSWLR 684. Those costs may include the following:
- Costs of compliance with the subpoena, including costs of advice on whether to comply with it at all: Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; (2004) 48 ACSR 681.
- Correspondence about the scope of the subpoena: Charlick Trading Pty Ltd v Australian National Railways Commission (1997) 149 ALR 647; Fuelxpress Ltd v LM Ericsson Pty Ltd (1987) 75 ALR 284; Hadid v Lenfest Communications Inc (1996) 144 ALR 73; (1996) 65 FCR 350.
- Costs of advice on confidentiality and privilege issues: A Pty Ltd v Z [2007] NSWSC 999; Fuelxpress ; Hadid .
Costs incurred in complying with a subpoena are payable whether or not the subpoena is ultimately complied with: J Aron ; Danieletto .
Mr Wavish submitted that he was also entitled to recover the costs of his motion to set the subpoena aside. The Court has inherent jurisdiction to award costs of such an application: Re Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 879; (2006) 67 NSWLR 289. Mr Wavish contended that Frontier had indicated by the 1 February 2011 letter that it was prepared to accede to the substantive order sought by Mr Wavish on the motion. The motion was in due course set aside by consent. Mr Wavish submitted that he was therefore entitled to his costs as he was "successful" on the motion, and that UCPR 42.1 applied. (It should be noted that even though the subpoena was set aside, Frontier's lawyers 1 February 2011 letter had in fact not indicated any agreement to that course, but instead actually proposed only that the motion be dismissed with no order as to costs).
Frontier's submissions
Frontier contended that a distinction existed between "loss and expense" contemplated by UCPR 33.11 on the one hand and the costs of the motion to set aside the subpoena on the other hand. It submitted that UCPR 33.11 was spent on 11 February 2011 when the subpoena was set aside and that any consideration of a claim by Mr Wavish for compensation or reimbursement for his time, his legal costs or his expenses had thereafter to be considered as a claim for his costs of the motion. Moreover, Frontier submitted that the outcome on the motion did not usefully inform Mr Wavish's claim for the costs of the motion in line with principles discussed in cases such as Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194; (1993) 11 ACSR 136 and Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622. In the former case, Hill J said this (at ACSR 143):
"These cases seem to me to support the following propositions being made.
(1) Where neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQEB case.
(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford supra. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.
(3) In determining the question of costs it would be appropriate, however, for the court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them ( SEQEB , supra).
(4) In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Company Ltd v McIntosh (1933) 33 SR NSW 371.
(5) Where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted..."
In the later case McHugh J said this at 624-625:
"In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action ...
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried ...
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases ..."
Frontier submitted that the appropriate order was that each party pay or bear his or its own costs of the subpoena and of the motion to set it aside.
Consideration
UCPR 33.11(1) provides as follows:
" 33.11 Costs and expenses of compliance
(1) The court may order the issuing party to pay the amount of any reasonable loss or expense incurred in complying with the subpoena."
It was submitted on behalf of Mr Wavish that the costs and expenses of complying with the subpoena and also the costs of the motion to set it aside should be paid by Frontier on an indemnity basis. Whereas determination of the issue of Mr Wavish's entitlement to these sums in the first place is logically anterior to and distinct from the consideration of his entitlement, if any, to be reimbursed on an indemnity basis in the second place, the particular circumstances of this case suggest that there is some utility in considering the matters together. Section 98(1) of the Civil Procedure Act provides that:
" 98 Courts powers as to costs
(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis."
UCPR 42.5 provides relevantly that:
" 42.5 Indemnity costs
If the court determines that costs are to be paid on an indemnity basis:
(a) ...
(b) in any other case, all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed."
Mr Wavish contended that there were a number of reasons why he should be entitled to reimbursement on an indemnity basis. First, Frontier had issued the subpoena in circumstances that Mr Wavish said were unreasonable. For example, the subpoena was issued before Mr Wavish or his lawyers had had an opportunity to respond to Frontier's request that Mr Wavish voluntarily provide the evidence that Frontier sought. He referred to Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72; Harrison v Schipp [2001] NSWCA 13; NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480; (2001) 109 FCR 77. However, whereas it is true that the subpoena was issued very promptly, Mr Wavish's lawyers disputed that the information sought by Frontier was necessary for its purposes and only reluctantly and conditionally agreed to provide evidence in the form of an affidavit to assist Frontier.
Secondly, Frontier knew or ought to have known that the subpoena was liable to be set aside but it persisted with pressing for compliance with the subpoena and defended the motion in circumstances where there were no real prospects of success: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401. It is true that the subpoena was very wide and that it imposed an unduly onerous obligation upon Mr Wavish to collect and produce manifold documents. It arguably failed to identify the documents required with reasonable particularity. However, it is likely in my view that the subpoena would have survived to some extent if the issue of its validity had been pressed for determination. It is not possible to say that the subpoena was wholly bad, that it had no legitimate forensic purpose or that no discernible obligation that it imposed on Mr Wavish was reasonable. Moreover, the issue to which the subpoena was directed, and the type of information that Frontier hoped to obtain for use in its case using the documents produced, was clear, simple and obvious. Mr Wavish had been a party to the earlier proceedings out of which the later proceedings sprang and could not have failed to understand or appreciate the fairly fundamental issue to which the subpoena was directed. On one view, a much less bellicose and combative response to the subpoena was called for, and might reasonably have been expected from Mr Wavish and his lawyers, in the circumstances.
Thirdly, Mr Wavish gave notice that he intended to make a claim for indemnity costs: Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242; (1995) 125 FLR 151. However, it is important not to confuse those cases or circumstances where a warning about an intention to claim indemnity costs may be a necessary precondition to their recovery, with an argument suggesting that the giving of such a warning of itself somehow amounts to or operates as a separate and independent basis for the award of such costs.
The following matters emerge in this case as to my mind being beyond controversy. First, Frontier became liable upon the issue of the subpoena to an order that it pay the reasonable loss and expense incurred by Mr Wavish in complying with it. Secondly, Frontier did not take, but should have taken, reasonable steps prior to the issue of the subpoena to obtain the evidence that it required from Mr Wavish by some other means. Although an appropriate letter was sent before the subpoena was issued, insufficient time or effort was given or expended thereafter in an attempt to establish whether or not the issue of the subpoena could be avoided. Thirdly, the subpoena was too wide and too far-reaching. It was oppressive and potentially liable to be set aside. Frontier and its lawyers failed to acknowledge that in a timely way. A much simpler and finely drawn subpoena could and should have been issued. Fourthly, even notwithstanding the two previous points, Mr Wavish and his lawyers ought to have attempted to come to some arrangement suitable to Frontier and to Mr Wavish before expending the considerable costs that are said to have been incurred in complying with it. The aim of the subpoena was obvious, or should have been, and Mr Wavish's ability to meet a judgment against him for a specified sum at a specified time should have informed both the width of the subpoena and the response to it. Fifthly, the provision of an affidavit by Mr Wavish was an appropriate compromise and should have been reached or considered with less suspicion by both sides much earlier. Alternatively, Mr Wavish could have produced documents falling short of all of the material sought by the subpoena that could have sufficed for Frontier's purposes. Sixthly, the application to set aside the subpoena should have been made well before Mr Wavish's costs had escalated to the quite extraordinary sums that they ultimately became. In so saying I have not lost sight of the fact that the loss and expense contemplated by UCPR 33.11 must be reasonable, and even indemnity costs are restricted by UCPR 42.5 to costs that have not been unreasonably incurred.
It seems to me that the parties to the current dispute and their lawyers in various respects have all failed to have regard, or sufficient regard, for the important provisions of the Civil Procedure Act when dealing with what Frontier needed from Mr Wavish and what Mr Wavish ought reasonably to have anticipated or understood he could and should provide. The following provisions are relevant:
" 56 Overriding purpose
(1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings .
(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.
(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.
(3A) A party to a civil dispute or civil proceedings is under a duty to take reasonable steps to resolve or narrow the issues in dispute in accordance with the provisions of Part 2A (if any) that are applicable to the dispute or proceedings in a way that is consistent with the overriding purpose.
(4) Each of the following persons must not, by their conduct, cause a party to a civil dispute or civil proceedings to be put in breach of a duty identified in subsection (3) or (3A):
(a) any solicitor or barrister representing the party in the dispute or proceedings,
(b) any person with a relevant interest in the proceedings commenced by the party.
(5) The court may take into account any failure to comply with subsection (3), (3A) or (4) in exercising a discretion with respect to costs ...
60 Proportionality of costs
In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute ." [emphasis added]
Having regard to the overriding purpose and to these principles, it seems to me that there is little scope for dispute about what should have been the result in October 2010 when Frontier's lawyers wrote to Mr Wavish's lawyers seeking information to establish their case on damages in the later proceedings. Mr Wavish was not at risk, except as to his reasonable costs. The issue was clearly described by Frontier's lawyers in the 6 October 2010 letter. The proposed subpoena was enclosed and its width alone should have prompted some lateral thinking when a response to the letter was crafted. Instead, Mr Wavish's lawyers spoke in terms of many months of work to assemble the documents and to advise on questions of confidentiality and privilege and of an estimated cost of as much as $100,000. Neither of these estimates strikes me as reasonable. Although I have the advantage of hindsight, those estimates also appear to me to be both excessive and not a little provocative. By the same token, Frontier's lawyers' fixed attitude to the validity of the subpoena was itself ill founded and unreasonable in my view.
There has been a conspicuous absence of reasonable conduct and common sense throughout the events with which I am here concerned on the part of the lawyers and their clients. Limited and sporadic outbreaks of enlightenment or reason have for the most part been quelled by tactical and positional responses. I have considerable doubt that an independent, fair minded and casual observer of these matters would have thought that a request by a party to litigation for information that it needed to prove its case would require months of work and generate tens of thousands of dollars in costs, or that it would escalate into the present contest with its own associated expense. I apprehend there to be disproportion in the parties' responses to the differences between them and in the costs that have been generated. I am also not convinced that either party consistently conformed to the duty at all times to further the overriding purpose or to resolve or narrow the issues in dispute.
Having issued the subpoena, Frontier is liable for the reasonable loss and expense incurred by Mr Wavish in complying with it. UCPR 33.11 makes that clear and Frontier's lawyers acknowledged it to be so in the correspondence. I do not consider that that loss or expense is necessarily the same as the loss or expense that Mr Wavish has calculated and to which his lawyers' letters refer. That remains to be seen. It will be obvious that in my view the costs claimed appear to be excessive and unreasonable but my view must yield to that of a costs assessor or an equivalent person charged with the task of reviewing them.
I do not consider that the loss and expense for which UCPR 33.11 provides extends to include the costs associated with a challenge to the validity of the subpoena, or in this case the costs of the motion to set it aside. Costs of compliance can hardly include or incorporate the costs of litigation seeking to impugn or to challenge the very obligation to comply. Those costs must fall to be determined as part of the costs of the motion filed by Mr Wavish on 12 November 2010. However, I do not consider that the filing of the motion automatically had the effect that all or any costs incurred thereafter became costs in the motion as opposed to loss suffered and expense incurred in complying with the subpoena. Frontier and Mr Wavish were effectively corresponding on two fronts after 12 November 2010, sometimes attempting to resolve the issue of compliance with the subpoena and sometimes dealing with the motion to set it aside. Those efforts will have to be examined, with the costs and loss and expense apportioned accordingly.
In my opinion Frontier should be ordered to pay Mr Wavish's reasonable loss and expense incurred in complying with the subpoena on an ordinary basis. There is no sufficient reason to distinguish between the conduct of Frontier and Mr Wavish in a way that suggests that Frontier's conduct was so unmeritorious, or that the conduct of Mr Wavish was so meritorious, that some special order should be made. As will be clear, my view is that each party failed to promote the overriding purpose and the ordinary costs order should apply. These costs necessarily ceased to be incurred by no later than the date upon which the subpoena was set aside if not before.
In my opinion, there should be no order made in respect of the costs of the motion. The subpoena was ultimately set aside by consent. It was always arguably too wide and potentially vulnerable to such a fate. However, the application to set it aside was not a foregone conclusion, especially having regard to the likelihood that some mid course may have been ordered. Moreover, the application to set the subpoena aside should in my view have yielded to a more common sense approach on Mr Wavish's part and much earlier than it did, in particular having regard to the material sought by Frontier and the availability of an obvious and cheap solution to its dilemma.
I dealt with the question of Mr Wavish's entitlement to be paid his loss and expense incurred in complying with the subpoena issued to Milan Djekovic dated 13 October 2010 as a matter of principle only in my earlier reasons for judgment. It only remains for me to make a formal order giving effect to the conclusion that I came to at that time.
Costs of the present argument on costs
Mr Wavish submitted that he was entitled to his costs of the present argument on an indemnity basis because he made an offer that was unreasonably refused. The letter and the terms of the offer are referred to earlier in these reasons. It will be apparent that the question of whether or not Frontier unreasonably refused to accept the offer would depend upon at least a comparison between the amount of the costs that Mr Wavish was prepared to accept and the amount of the costs to which he may in due course be found to be entitled. The latter amount has not yet been determined.
However, this is not the only matter to be taken into account. For the reasons already given, I consider that the costs of arguing these issues of costs before me should follow the order that I have indicated should be made generally with respect to the costs of the motion to set the subpoena aside. I do not propose to make any order other than that there should be no order as to the costs of that motion, including the costs of the proceedings and arguments before me.
Orders
I make these orders:
1. Order Frontier to pay Mr Wavish's reasonable loss and expense of complying with the subpoena issued to him dated 13 October 2010.
2. Make no order as to the costs of the motion filed 12 November 2010 to set aside the subpoena, including the costs of the hearings and argument before me.
3. Order Frontier to pay Mr Wavish his reasonable loss or expense incurred in complying with the subpoena issued to Milan Djekovic dated 13 October 2010.
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Decision last updated: 27 April 2011
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