Giorgio v Fiorita (No 2) - [2008] SASC 343

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
GIORGIO & ORS v FIORITA (No 2)
[2008] SASC 343
Reasons of Judge Lunn a Master of the Supreme Court
9 December 2008
PROCEDURE
Order made for discovery by non-party under 87R 60 - non party applies for security for its costs of giving the discovery before giving it - held no power to make such an order - not within 87R 100.01 or the inherent jurisdiction of the Court - s 1335(1) of the Corporations Act does not apply to a non-party - application dismissed.

GIORGIO & ORS v FIORITA (No 2)
[2008] SASC 343
Reasons on non-party’s application for security for its costs to make non-party discovery.

JUDGE LUNN: On 23 August 2008 I ordered a non-party, Tax & Financial Services Pty Ltd (“TFS”), to make discovery of various documents under 87R 60. At the request of TFS I did not fix a time for it to comply with that order so that it could bring an application that its compliance with the order should be conditional upon the plaintiffs first providing security for the costs for its work in providing the discovery.
On 5 November TFS issues a notice for specific directions in the following terms:
To: The plaintiffs …..
Tax & Financial Services Pty Ltd, non party respondent to an application for non-party discovery made by the plaintiffs, intends to apply to the court for specific directions in this action as follows:-
…..
2The plaintiffs provide security in the sum of $39,295.85 for the non party’s costs in complying with the order for non party discovery made by the honourable court.
3The above security be provided by way of the plaintiffs making payment into court of the sum specified in paragraph 1 (sic).
…..
This application will be made pursuant to Rules 60.05, 100.01, section 1335 of the Corporations Act and the inherent jurisdiction of the Court.
It is not necessary to go into many of the matters raised in the submissions, as for the reasons set out below, I conclude that the Court has no power to make the order sought by TFS.
The power to award the costs of TFS of complying with the order for discovery is contained in 87R 60.05 which states:
60.05(1) Where a person who is ordered to do anything under rule 60 incurs substantial expense or loss in complying with the order the Court may order that the party who requested the making of the order pay to that person in addition to any amount which the person served with the order is otherwise entitled to be paid an amount which is sufficient to compensate him for such expense or loss as is reasonably incurred by lost by that person in complying with the order.
(2)The Court may refuse to make an order under subparagraph (1) hereof if the cost incurred or to be incurred by the person requesting the issue of the order would effectively prevent such person from proceeding with his action or defence or if it seems otherwise desirable to do so or the Court may order that such costs be not recoverable until the termination of the litigation or of any subsequent proceedings.
It should be noted that subr (1) refers to being paid an amount for “such expense or loss as is reasonably incurred or lost” (underlining added). The costs in question have not been “incurred or lost” by TFS as the work to comply with the order has not yet been performed. The latter part of subr (2) empowers the Court to defer payment of the costs incurred by the non-party, but it does not give any express power to order the payment of an amount of account on costs in advance of the work being done.
87R 60.05, as quoted above, appeared in that form in the original 1987 Rules. Also in those original Rules 87R 81.09 provided as follows:
(1)Where a person named in a subpoena for production of any document or thing is not a party to the proceeding and he incurs, or will incur, substantial expense or loss in complying with the subpoena, the Court dealing with the proceeding may order that the party who requested the issue of the subpoena pay to that person, in addition to any moneys payable under Rule 81.08, an amount which is sufficient to compensate him for such loss or expense as is reasonably incurred or lost by that person in complying with the subpoena.
(2)(a)The Court may refuse to make an order under subparagraph (2) of this Rule:
(i)if the cost incurred, or to be incurred, by the person requesting the issue of the subpoena would effectively prevent such person from proceeding with his action or defence; or
(ii)in any other case where it seems to the Court desirable to do so
(b)Alternatively the Court may order that the costs shall not be recoverable from the party requesting the issue of the subpoena until after the termination of the litigation.
It was dealing with costs payable to non-parties for producing documents on subpoena which is a similar subject matter to 87R 60.05. (It has since been substantially amended). The original 87R 81.08(1) refers to expense or loss which the non-party incurs “or will incur”. The omission of “or will incur” from the similar 87R 60.05 is significant and suggests that while it was intended that 87R 81.09(1) could be used in respect of future costs, there was no such intention for 87R 60.05.
Counsel for TFS submitted that there was jurisdiction to make the security order under each of 87R 100.01, s 1335 of the Corporations Act or the inherent jurisdiction of the Court.
87R 100.01 provides:
100.01 The Court may order security for costs to be furnished:
(a)where the plaintiff is a mere nominal plaintiff and is in a condition of poverty or insolvency;
(b)where the plaintiff is ordinarily resident out of the jurisdiction;
(c)where the residence of the plaintiff is incorrectly stated in the summons with an intention to deceive;
(d)in circumstances authorised by any statute;
(e)where for special circumstances the justice of the case so required.
Although there is some evidence of the impecuniosity of the first plaintiff, there is no suggestion that she is merely a nominal plaintiff. Thus subr (a) is not enlivened. The only grounds for “special circumstances” suggested for subr (e) was the alleged impecuniosity of the plaintiffs. However, that in itself is not sufficient to constitute “special circumstances”: Collins v Emacord Autos Pty Ltd Full Court 3 November 1997, Judgment No S 6418; Eddy v Mac Audio Pty Ltd [2000] SASC 145. No sufficient special circumstances have been established.
S 1335(1) of the Corporations Act 2001 provides:
Where a corporation is plaintiff in an action ….. the Court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
I accept the submission of the plaintiff’s counsel that s 1335(1) by its terms cannot apply in respect of costs claimed by a non-party. The costs which are the subject of an order under s 1335(1) are those of a successful defence. There is no lis (as yet) between the plaintiff and TFS in this action. S 1335(1) cannot apply to TFS.
The inherent jurisdiction of this Court to award security is no wider than the terms of 87R 100.01: August Investments Pty Ltd v Poseidon Ltd (1971) 2 SASR 65 at 69; Dwyer v Canningvale, 11 March 2005, [2005] SASC 80. Accordingly, as TFS has not brought its claim within any of the categories in 87R 100.01 it can gain no greater rights in the inherent jurisdiction.
The application of 5 November 2008 by TFS is confined to the costs of complying with the order of 23 August 2008 and the costs of the application. The plaintiffs requested that I concurrently determine who was to pay the costs of their discovery application under 87R 6 which I had reserved in my order of 23 August 2008 on the basis that if they were awarded those costs they could offset them against any security ordered in favour of TFS. As no security has been ordered for TFS, there is no necessity to determine these reserved costs at this stage. It is premature to do so. One of the major submissions made by TFS was that it had in previous correspondence offered to make most of the discovery which was ordered, but this was disputed by the plaintiffs who said what was ordered went far beyond what had been offered. This dispute is best resolved by comparing what is to be actually discovered and produced by TFS against what it had previously offered. Although it was not mentioned in the submission, 87R 101.01(7) also applies. That provides:
(7)An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order.
Accordingly, I do not intend to determine the issue of the reserved costs at this stage.
While I do not intend to go into most of the other matters which were argued on the application, I do need to say something about the claim by the solicitors for TFS that they will be entitled to charge $22,680 for perusing 3,150 pages of documents anticipated to be produced by TFS to comply with the discovery order. The standard allowance for perusals in item 5 of the First Schedule of $7 per page is intended to be a once and for all allowance for all perusals of the documents required during the whole conduct of the litigation. It would be unusual to allow that rate for any “one off” perusal for the purpose of instructions for, and preparing, an affidavit of documents by a non-party. I also do not accept that either any perusal or scanning allowance would necessarily be allowed for all of the documents to be discovered by the non-party. There would need to be some proper justification shown for the solicitor having to look at their contents. If necessary the proper amount payable will need to be the subject of a formal adjudication where the taxing officer will have the documents in question before him.
I have today made the following orders:
1Paragraph 2 of the notice of 5 November 2008 is dismissed.
2Costs of that application to be paid by TFS to the plaintiffs.
3Fit for counsel.
4Further directions hearing to be held on 18 December 2008 at 9.30 am.