Hadid v Lenfest Communications Inc

[1996] FCA 67

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )     No NG 36 of 1995
  )
GENERAL DIVISION                  )

BETWEEN:ALBERT HADID

Applicant

AND:LENFEST COMMUNICATIONS INC

First Respondent

GARY LENFEST

Second Respondent

BAIN CAPITAL MARKETS LIMITED

Third Respondents

WAYNE BURT

Fourth Respondent

AUSTRALIS MEDIA LIMITED
  Fifth Respondent

RODNEY PRICE
  Sixth Respondent

AND:LENFEST COMMUNICATIONS INC

Cross-Claimant

ALBERT HADID
  Cross-Respondent

CORAM:    HILL J
PLACE:    SYDNEY
DATED:    4 APRIL 1996

REASONS FOR JUDGMENT

East Coast Pay Television Pty Limited ("East Coast") moves the Court for an order that Mr Hadid, the applicant in the present proceedings, pay to it an amount to compensate it for expenses or losses said to have been reasonably incurred or lost in complying with certain subpoenas issued by or on behalf of the applicant.  A direction is also sought that the amount to be paid be fixed by "the taxing officer".

The motion is opposed on behalf of Mr Hadid on the basis that it is said that the Court has no power as a matter of law, to order reimbursement for expenses or losses to the extent to which those expenses or losses relate to amounts incurred for legal services.  There is a fall back position which is put, if that absolutist view does not find favour.  The fall back position is that Mr Hadid be not be obliged to reimburse East Coast for legal costs arising out of or incidental to a notice of motion filed by East Coast on 27 October 1995, seeking to have the subpoenas in question set aside.  In that motion, East Coast was unsuccessful, although orders were made dealing with confidentiality.

The second part of the fall back position is that the amount which is to be ordered should not include any legal costs arising out of or incidental to ensuring compliance with undertakings of confidentiality, subsequent to the production of the documents to the Court.

The argument in favour of the absolutist view commences with the judgment of Sheppard J in Bank of New South Wales v Withers (1981) 35 ALR 21. That case discussed the question whether a person upon whom a subpoena to produce documents has been served was entitled to be reimbursed the expenditure incurred in searching out, collating and copying documents required to be produced under the subpoena. It should be said at that time that no rule of Court dealt specifically with the question. It is unnecessary to canvas all of the matters discussed by Sheppard J in that judgment. It suffices to say, that his Honour was of the view that, absent a specific rule, there was no general entitlement on the part of a third party to be reimbursed expenditure incurred in searching out or obtaining copies of documents.

His Honour's judgment concludes with a plea (at 41) that the whole question of recovery of costs occasioned for the production of documents, should be "looked at".  His Honour's words did not fall on deaf ears.  The rules of the Court were amended by the insertion of r4A into O27.  That rule now reads as follows:

"Where a person named in a subpoena is not a party to the proceeding and he incurs substantial expense or loss in complying with the subpoena the Court or a Judge may order that the party who requested the issue of the subpoena pay to that person, in addition to any amount which the person served with the subpoena is entitled to be paid pursuant to Order 27 rule 3 or the Second Schedule, an amount to compensate him for such expense or loss as is reasonably incurred or lost by that person in complying with the subpoena."

The rule sets up a statutory test which must of course be complied with, that is to say, the test whether the relevant expense or loss has been reasonably incurred or lost and whether that incurring or loss is in, that is to say in the course of, complying with the subpoena.  The submission on behalf of Mr Hadid as I understood it was that while O27 r4A sufficed to overcome the difficulty discussed by Sheppard J in Withers, it did no more than that.

In particular, it did not in any way deal with the cost of legal advice, so that while a third party served with a subpoena may be entitled to recover costs incurred in searching for and/or obtaining documents to comply with a subpoena, it would not cover any legal costs which may be incurred in obtaining advice. It was said that legal costs would need to be dealt with specifically and some reference was made to s.43 of the Federal Court of Australia Act 1976 (Cth).

The view put on behalf of Mr Hadid is not one which has found favour in this or other courts around the country.  In Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284, Lockhart J was called upon to consider whether O27 r4A extended to the costs of legal advice concerning confidentiality and legal professional privilege incurred by the third party recipient of a subpoena. On the particular facts of that case, his Honour held that the rule was intended to compensate a person subpoenaed to produce documents for all expenses or loss reasonably incurred in complying with the subpoena and that this extended to, inter alia, amounts it had actually cost that third party in expense or loss in complying with the subpoena and that that included legal costs.
         In the result, his Honour ordered the respondent in that case to pay to the third party subpoenaed:

"... an amount which is sufficient to compensate it for the expense or loss which it had reasonably incurred or lost in complying with the subpoena...".

and directing that the amount in question be fixed by a relevant taxing officer.

The judgment of Lockhart J was the subject of some consideration by Burchett J in Ex parte: Eastern Pastoral Company Pty Limited; John Patrick Gorman & Ors v Australia & New Zealand Banking Group Limited (unreported, 9 June 1994).  There his Honour made reference to the case before him, noting that the rule imposed a duty on the Court to determine whether a particular cost was reasonably incurred, requiring the Court to:

"... hold the scales even between a party, who has exercised a right given by the law to ensure the availability of documents which may be of vital importance in the proof of his case, who has to be able to assert that right, and, at the same time, the stranger to the litigation, who may have incurred expense or loss in facilitating the party's assertion of his right, and should not as a result be left unreasonably out of pocket."

Counsel for Mr Hadid made reference to a judgment of Young J in Triotas Pty Limited v Rohn (unreported, 20 May 1993), where Young J indicated that he did not agree with everything which Lockhart J had said in Fuelxpress.  That same reservation does not seem to have troubled Bryson J in Danieletto v Khera (1995) 35 NSWLR at 684. In that case his Honour (at 687) referred to a "considerable body of case law" relating to the entitlement of witnesses to payment of their expenses, concluding that the Court had power to order payment for expenses incurred by witnesses, including compensation for their time.

The Family Court has taken a similar view to this Court and in The Marriage of Kennedy and Evans (1994) 18 FamLR 472, Butler J discussed a rule of that Court in substantially similar terms to O27 r4A and mentioned with apparent approval the judgment of Lockhart J in Fuelxpress.

Of course there is nothing which technically binds me in any of those cases, however, I would, as a matter of comity, follow the judgment of Lockhart J, approved as it has been by at least one other judge of this Court, unless I was convinced that it was clearly wrong, and I am not.  Accordingly, I would not agree with the absolutist view which has been put on behalf of Mr Hadid.

That then leads me to the fall back position.  It was accepted in the course of argument by the solicitor for East Coast that the expenses to be reimbursed under O27 r4A would not extend to the cost of the motion in which East Coast had in fact been unsuccessful, so that the first of the two matters raised by Mr Hadid is no longer an issue.  The second matter relates to compliance with the confidentiality order.  In essence, what happened is that after the motion to set aside the subpoenas was brought by East Coast and dismissed, I ordered that material under the subpoena be available for inspection by a limited class of persons upon execution of confidentiality undertakings in a form that had been already adopted with other persons subpoenaed.

It appears from a draft bill of costs that has been prepared on behalf of East Coast that there were attendances required by the solicitor of East Coast to check whether the confidentiality undertakings were properly given, as a necessary step in advising East Coast that it should comply with the subpoena, because the relevant undertaking had been given.  I do not think that O27 r4A should be given so narrow a construction that it would not apply to expenditure or losses of this kind provided, of course, that they have been reasonably incurred.

Where a subpoena is served, there seems little doubt, at least from the view taken by Lockhart J, that in an appropriate case a party served would be entitled to seek advice as to whether or not it was required to disclose information which may be confidential.  If the Court orders that the information required to be produced under the subpoena may be produced for inspection of persons who give appropriate confidentiality undertakings, then in a real sense, ensuring that those confidentiality obligations have been given, it can be said to be an expense incurred in complying with the subpoena.  Thus, so long as the expenses are reasonable, they fall within the terms of O27 r4A.

I would accordingly make the following order, pursuant to O27 r4A:

1. I order the applicant, Albert Hadid, to pay to East Coast an amount which is sufficient to compensate it for the expense or loss which it reasonably incurred or lost in complying with subpoenas issued on 19 September 1995, 28 September 1995 and 13 October 1995, on behalf of Mr Hadid and served on East Coast and that the amount shall be fixed by the Court's taxing officer;

(2)I declare that the amount required to compensate East Coast does not include the legal costs of and incidental to the notice of motion filed by East Coast on 20 October 1995;

1. I order the amount to be certified by the taxing officer is to be paid to East Coast by Mr Hadid within twenty-one days after the certificate of taxation has issued.

(4)I order that Mr Hadid pay the costs of and incidental to East Coast of the motion today.

I certify that this and the
preceding eight (8) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Justice Hill.

Associate:

Date: 

Solicitors for East Coast        D Hilliard of Tress Cocks &

Pay Television Pty Limited       Maddox

the Applicant to the Motion:

Counsel and Solicitors           R Dubler instructed by

for the Applicant, the           Corrs Chambers Westgarth

Respondent to the Motion:

Date of Hearing:                 4 April 1996

Date Judgment Delivered:             4 April 1996