Markoska & Markoska and Anor
[2011] FamCA 833
•28 October 2011
FAMILY COURT OF AUSTRALIA
| MARKOSKA & MARKOSKA AND ANOR (COSTS) | [2011] FamCA 833 |
| FAMILY LAW – COSTS – Between parties – Where judgment delivered in relation to discrete issue – Where wife wholly unsuccessful in relation to that issue – Where first and second respondents seek costs – Where wife opposes costs orders – Whether first and second respondents entitled to costs pursuant to s 117(2) of the Family Law Act 1975 (Cth) (“the Act”) – Where wife ordered to pay the second respondent’s costs – Where first respondent’s costs reserved. |
| FAMILY LAW – COSTS – Where orders sought by third party solicitors firm for costs associated with complying with a subpoena – Where wife issued subpoena to the solicitors firm, which had previously acted for the husband –Where husband objected to the subpoena, claiming privilege – Where solicitors firm objected to the subpoena, claiming privilege on behalf of the husband – Where solicitors firm has not intervened in the proceedings – Where solicitors firm seeks costs against the husband pursuant to s 117(2) of the Act – Whether an order for costs can be made pursuant to s 117(2A) against the husband in favour of the solicitors firm – Whether there were proceedings (per s 4 of the Act) between the solicitors firm and the husband – Where there were no proceedings between the husband and the solicitors firm – Where the Court does not have jurisdiction under s 117(2) of the Act to make the costs sought by the solicitors firm, against the husband. |
| FAMILY LAW – PRACTICE AND PROCEDURE – Subpoenas – Where wife provided minimum amount of conduct money to the solicitors firm – Where solicitors firm seeks “costs” of compliance with the subpoena – Whether an order should be made pursuant to r 15.23(3) – Whether solicitors firm has incurred substantial loss or expense as a result of complying with the subpoena – Where expenses incurred by solicitors firm were not substantial – Whether costs can be awarded against wife in favour of the third party solicitors firm pursuant to s 117(2) of the Act – Where subpoena hearing constituted an “incidental proceeding” between the wife and the solicitors firm – Where no costs order made. |
| Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) Legal Profession (Solicitors) Rule 2007 (Qld) |
| Ascot Investments v Harper (1981) 148 CLR 337 Fitzgerald (as Child Representative for A (Legal Aid Commission of Tasmania)) & Fish and Another (2005) 191 FLR 294; [2005] FamCA 158 Fuelxpress Ltd v LM Ericsson Pty Ltd (1987) 75 ALR 284 Penfold v Penfold (1980) 144 CLR 311 Re JJT; ex parte Victoria Legal Aid (1998) 195 CLR 184 |
| APPLICANT: | Ms Markoska |
| 1st RESPONDENT: | Mr Markoska |
| 2nd RESPONDENT: | Ms M |
| FILE NUMBER: | BRC | 5680 | of | 2010 |
| DATE DELIVERED: | 28 October 2011 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Murphy J |
| SUBMISSIONS RECEIVED: | 8 August 2011: N Lawyers in respect of compliance with subpoena costs; 9 August 2011: 1st Respondent; 9 August 2011: 2nd Respondent; 29 August 2011: 1st Respondent in respect of subpoena costs 9 September 2011: Applicant |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr R Cameron |
| SOLICITOR FOR THE APPLICANT: | McDuff & Daniels Lawyers |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr M Kent SC |
| SOLICITOR FOR THE 1ST RESPONDENT: | Simshoe Lawyers |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr P Looney |
| SOLICITOR FOR THE 2ND RESPONDENT: | Power & Cartwright Solicitors |
| COUNSEL FOR THE THIRD PARTY: | Ms R Lyons |
| SOLICITOR FOR THE THIRD PARTY: | Neilson Stanton & Parkinson |
Orders
IT IS ORDERED THAT:
The applicant wife pay the costs of the Second Respondent of and incidental to these proceedings as and from 23 May 2011, including these proceedings as to costs in an amount agreed in writing between the parties or failing agreement to be assessed.
The amount payable by the wife pursuant to paragraph (1) of these Orders, be agreed or assessed prior to, as the case may be:
(a)the Registrar’s directions hearing at which the proceedings pursuant to s 79 of the Act between the husband and wife will be allocated to the trial callover; or
(b)the making of any orders by consent pursuant to that section or signature of any financial agreement giving effect to any settlement of those s 79 proceedings.
The First Respondent husband’s costs of and incidental to these proceedings, including these proceedings as to costs, be reserved to the trial judge hearing the s 79 proceedings between the husband and the wife.
AND IT IS FURTHER ORDERED THAT
The application by the third party solicitors firm pursuant to rule 15.23(3) of the Family Law Rules 2004 and/or for costs pursuant to s 117(2) of the Family Law Act 1975 (Cth), each be dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Markoska & Markoska and Anor (Costs) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 5680 of 2010
| Ms Markoska |
Applicant
And
| Mr Markoska |
1st Respondent
And
| Ms M |
2nd Respondent
REASONS FOR JUDGMENT
(Costs)
On 19 July 2011 I delivered reasons and made orders in respect of an application in which it was contended by the husband that he holds his one-third interest in specified property on trust for his mother. That issue was heard discretely from other proceedings between the husband and the wife, including claims to s 79 relief, with the intent that all claims and counter-claims involving the husband’s mother (who had been joined as a respondent to the proceedings by the wife) could be heard and determined.
Orders were made essentially in accordance with the orders sought by the husband and his mother. Further orders were made on that date which provided that any application for costs be contained in written submissions and, unless any party submitted to the contrary, the issue be determined on the basis of those written submissions in chambers.
The husband and his mother have each applied for costs. The wife opposes any such order. All parties agree that the application is to be decided in chambers on the filed material, including submissions.
An additional order was made in respect of a claim by a solicitors firm in respect to their compliance with a subpoena issued by the wife to produce documents. Their claim is said to be made “pursuant to Rule 15.23(3) and/or pursuant to s 117 (e), (g) (c)”. The firm had previously acted for the husband. They were never a party to the proceedings.
The solicitors firm seeks orders against the husband and the wife; no orders are sought against the husband’s mother. The orders are opposed by each of the husband and wife. The basis of, and the circumstances surrounding, the firm’s claim will be addressed below.
The Claim for Costs by the Husband and His Mother
The Family Law Act 1974 (Cth) (the “Act”) provides that, as a general rule, each party to proceedings under the Act shall bear their own costs (s 117(1)). But, the Court retains a discretion to award costs in circumstances considered appropriate to justify an award.
The Court is required to have regard to a number of specified matters in the exercise of that discretion (s 117(2A)). Yet, while regard must be had to those matters, the discretion ultimately remains at large (s 117(2A)(g)).
Thus, it is not necessary for a court to be satisfied that all of the factors enumerated in s 117(2A) of the Act are satisfied before an order for costs is made. (See generally Fitzgerald (as Child Representative for A (Legal Aid Commission of Tasmania)) & Fish and Another (2005) 191 FLR 294; 33 Fam LR 123)
So too, it is not necessary for an applicant for costs to satisfy “any additional or special onus”; rather what is required is “a finding of justifying circumstances as an essential preliminary to the making of a order” (Penfold v Penfold (1980) 144 CLR 311 at 315-316).
The Matters Relied Upon
The matters referenced to s 117(2A) upon which each of the father and his mother rely in support of their respective applications are largely identical; an unsurprising circumstance given that their respective cases at trial were largely identical.
Each contends that the wife was wholly unsuccessful in the relief sought against them. As a corollary, each of the husband and his mother were wholly successful in establishing the cases for which they each contended. Neither proposition can be seriously challenged.
In what might be seen as a further amplification of this factor, but which might also be seen to be relevant to “the conduct of the proceedings” generally (s 117(2A)(c)), the husband points to the fact that, although contending at the outset of the trial that the husband was the sole owner of the business conducted on the relevant farm, “the wife conceded during cross-examination that, at best, the evidence that she relied upon could only give rise to a 50% share in the business”.
Further in respect of the conduct of the case, or otherwise said to be relevant more generally, it is submitted on behalf of the husband’s mother that, “[m]uch of the evidence upon which [the husband’s mother] relied was not challenged by [the wife] in the hearing”. The evidence of Mr C, the parties’ accountant, is referred to specifically in that respect. As is plain from the Reasons, the unchallenged evidence of Mr C was important to the ultimate decision reached. The submission made on behalf of the husband’s mother goes on:
Further, facts that were material to the circumstances in which [the husband] became the holder of a registered interest in [the relevant property] involved conversations to which [the wife] was not a party and was not in a position to gain say. Evidence of these was given not only by [the husband’s mother] and [the husband] but was also corroborated by [the accountant]. Finally, events that were inconsistent with the position asserted by [the wife] occurred during the course of her relationship with [the husband] and it may reasonably be inferred she had knowledge of them at the time or, in the alternative, became aware of them and had no reason to dispute them when [the husband’s mother’s] evidence was filed …
Examples of the last proposition there cited are given as dealings with Company 1 shares and the evidence as to applications for finance. Again, it can be seen by reference to the Reasons that each of these matters was central to the ultimate conclusions reached by the Court.
The case at trial, founded in s 78 declarations, did not readily admit of “offers to settle” in what might be seen as a traditional sense; either the relevant interest/s would be declared or they would not. Yet, that does not, of course, preclude an “offer in writing” within the meaning of the section being made.
Approximately three weeks prior to the commencement of the hearing the husband’s mother’s solicitors gave written “notice” to the wife that they would seek costs in the event that the wife’s application against her was unsuccessful. Subsequently, approximately a week prior to the commencement of the hearing, those solicitors wrote again to the wife on a “without prejudice save as to costs” basis:
… on the basis and in accordance with our response application that your client agrees [the husband] holds his one third interest in the [specified property] on Trust for [the husband’s mother] and that [the husband] is not and never was a partner or ever held any business interest in any of the properties owned by [the husband’s mother] or [the husband’s mother] and her late husband… no order for costs will be sought”
The offer was open for acceptance until 26 May 2011 (that is, about five days prior to the commencement of the trial). The offer was not accepted.
It is submitted on behalf of the husband’s mother that all material upon which the husband’s mother relied had been filed and served by the end of April. Thus, it is submitted, the wife was, or should have been, well aware of the nature and strength of the evidence in support of the case advanced by the mother (and husband) and, armed with that knowledge, was, or should have been, well aware that success by the mother in the action would result in an application for costs.
The submissions on behalf of the husband contain no reference to “an offer in writing to settle the proceedings” within the meaning of s 117(2A)(f).
A financial statement was filed by the wife on 21 June 2010. It reveals total income (including government benefits and child support) of about $1,289 per week on average. The property and resources revealed by that financial statement are modest.
Submissions on behalf of the husband’s mother concede that the Court “may come to the conclusion after reviewing the [the wife’s] financial statement and the evidence generally that, if the Court were to grant a costs order [the wife] would not have the present financial capacity to meet that order.” However, the submission goes on, “… the applicant could meet a costs order on the conclusion of her application for property settlement and accordingly an order could be made in those terms”.
The Wife’s Response
It is submitted on behalf of the wife that there ought to be no order for costs in respect of the trial on 31 May 2011 or the taking of submissions on 29 June 2011.
The wife submits that the:
… husband advanced a case for the benefit of his mother. The husband did not need to be separately represented at the hearing of the discreet [sic] application…So far as the discreet [sic] application was concerned, the husband’s and his mother’s interests coincided…
I reject that submission. Each of the husband and his mother were entitled to pursue the declaration of interests that each contended that each had (or didn’t have) in the relevant land and business. Whilst it is true that, ultimately, their positions qua the litigation can be seen as identical it by no means follows in my view that they did not each need to be separately represented. It is not merely actual conflict that must be guarded against and prevented, but also the real potential for conflict.
Each of the father and his mother were entitled to receive advice independent of the other and to have their respective interests agitated for independent of the other. Further, each was entitled to have lawyers acting solely for them whose duty was to guard against adverse circumstances that might arise during the trial.
It is submitted on behalf of the wife that, whilst she was ultimately unsuccessful in respect of this discrete issue, her opposition to the second respondent’s application “was not clearly unreasonable or so unreasonable as to warrant a costs order being made against her”. In support of this proposition, counsel for the wife points to the wife’s unchallenged evidence that she was “effectively kept in the dark” about the financial arrangements between the husband and his parents. It is said: “plainly this was a case where the wife had a significantly lesser grasp of the financial arrangements between her husband and his family”. The wife, it is said, should not be “criticised for having resisted the second respondent’s application” especially given that “no evidence was led that the wife was informed of the husband’s decision to effectively divest himself of his interest in the [B property]…”.
Counsel for the wife also points to the apparent failure to adequately disclose to the wife financial documents (“albeit it seems in error”) and “in such circumstances the wife was deprived, in the relevant sense, of having been able to make a timely inspection of objective evidence relevant to matters in issue between the parties at the hearing”.
Whilst an award of costs is not, of itself, punitive of unreasonableness, the inclusion of “conduct” and “offer in writing” among the s 117(2A) factors suggests that the reasonableness in pursuing a claim can be seen as a matter relevant to the exercise of discretion. But, here, it seems to me that the submission ignores two important matters.
First, the wife had knowledge, or ought to reasonably have had knowledge of the matters set out in paragraph [37] of the Reasons from the time that the affidavit of Mr C (the parties’ accountant) was served. As pointed out there, although it was suggested in submissions that Mr C was partial, he was not at all cross-examined and no such proposition was put to him. There was no cogent evidence from the wife which countered the unchallenged evidence of Mr C. Secondly, in respect of the business, the sole evidentiary basis for asserting the husband’s interest in the business for which she contended, was a statement allegedly made by him when they were “courting” in 1999.
In my view, the wife was in a position, at least from a time shortly subsequent to the service of the affidavit of Mr C, to sufficiently and accurately assess any differences between what she may have suspected to be true and what she could reasonably prove to be true in respect of the requisite elements of her case.
Counsel for the wife contends that the wife is “simply not in a financial position to meet any order for costs that might be made against her”. The wife, it is submitted, is the full-time carer for the parties’ two children and is currently living in rented accommodation.
Further, it is submitted that while the wife may ultimately be successful in the s 79 proceedings, “just what orders might be made in her favour (and what division of property she might receive and what value of that property might be) is not known”.
Findings as to Costs
In Lenova and Lenova (Costs) [2011] FamCAFC 141 the Full Court held ([10] – [13]):
In this jurisdiction, costs do not “follow the event”; the Act prescribes, relevantly, that “subject to subsection (2) … each party to proceedings under this Act shall bear his or her own costs” (s 117(1)). As a result, a litigant, or prospective litigant, cannot rely upon a costs order following upon success in the action as a means of dissuading the other party from pursuing unmeritorious litigation or as a means of seeking to persuade the other party from pursuing litigation.
A timely offer in writing genuinely made might, then, be seen as an important part of a limited armoury available to prospective litigants seeking to avoid the costs of litigation. Conversely, where, consequent upon success in an action, a litigant can point to the making of a genuine and timely offer having been made, that offer might be seen as an important (albeit not the only) matter in the exercise of the discretion as to the ordering of costs.
That consideration must, of course, be balanced against a litigant having a limited capacity to meet a costs order, as well as any other relevant considerations. But, a limited financial capacity to meet an order can not be determinative; if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order in circumstances where pursuit of the litigation has continued in the face of a reasonable offer to cease that litigation and the incurring of its attendant costs.
Whilst regard is had to the financial circumstances of the respondent wife, she was advised by legal practitioners at each stage of the proceedings. She can, in our view, be seen to have known the risks of refusing to compromise in the face of a written offer made before the appeal was filed. That factor, together with the husband’s success in the appeal, warrants an order for costs being made in favour of the husband.
It will be appreciated that the comments by the Full Court were made in respect of the costs of an appeal. They seem to me to be equally apposite to all cases. I consider that they are important to this application.
In my view, the wife was in a position to properly assess her position at the time when the husband’s mother made the offer earlier referred to. In particular, she was apprised of the important evidence of Mr C which she did not challenge at the trial. She well knew, or ought to have well known, that the evidentiary basis for her claim as to the husband’s interest in the business was limited. Parties are entitled to have such suspicions as they might have – indeed, suspicions which a court decision may not allay. But a decision to proceed with litigation or to trial, and, in this Court in particular, litigation or a trial involving third parties, should be based upon a reasonable assessment of what can be proved to be true rather than what might be suspected or hoped to be true.
I consider that the wife should pay the second respondent’s costs of and incidental to these proceedings as and from the date of the offer made by her solicitors on 23 May 2011, including the costs of these costs proceedings in an amount to be agreed in writing and failing agreement to be assessed.
I consider, however, that there is merit in the submission that, in light of what is currently known of the wife’s financial circumstances, the payment of any such sum should be postponed until the determination of the wife’s entitlement to any settlement of property pursuant to s 79 of the Act. I am not in the position of being able to assess what the likely “pool” of property or the respective assessments of the parties might be, but it seems to me at least likely that the wife’s overall financial position will be no worse than it is now, and likely better. It seems to me just to postpone payment until that position is crystallised.
I will make orders for the crystallisation of that amount as part of the wife preparing her case for the trial of the s 79 proceedings and prior to its commencement.
I consider that different considerations apply to the husband’s position.
While the same factors (other than making an offer) might be seen to apply to the determination of his application, he is a party to the financial proceedings which remain outstanding between him and the wife.
Whilst it is true, in my view, that he has been “wholly successful” in respect of the application, that application – insofar as the parties to the marriage are concerned – is but a part of wider litigation between the parties. There are factors which might pertain to that litigation that may have an impact on an order for costs of those proceedings, of which these proceedings form but a part.
That is not to deny that these are separate “proceedings” (see s 4) but the s 117(2A) considerations that might be applicable to the s 79 proceedings have the potential to impact upon any order for costs in respect of these separate proceedings as between the parties. Issues of disclosure or other conduct within the proceedings or the financial circumstances of the parties are examples which spring to mind.
In those circumstances, I consider that justice requires an order that will see the husband’s costs of and incidental to these proceedings reserved to the trial judge.
The Application By the Third Party Solicitors Firm
Background
The applicant solicitors firm (“the firm”) had previously acted for the husband, including in respect of a mooted binding financial agreement that was never perfected. A subpoena issued by the wife sought the production of documents by the firm. The subpoena was appropriately specific and sought documents relating to a mooted financial agreement and documents relating to transfers of certain property.
The minimum conduct money of $10 provided for by the Family Law Rules 2004 (“the Rules”) was tendered with the subpoena as the Rules contemplate. (r 15.23(1)(b) and Schedule 4, Part 1).
The firm wrote to both the husband’s and the wife’s solicitors in letters bearing the date (I will assume erroneously) 26 May 2011.[1] In the letter to the wife’s solicitors, a claim is made that “our costs of complying with the Subpoena will exceed [the tendered $10] particularly given that we will be attending the Subpoena Hearing to claim confidentiality and/or legal professional privilege in relation to the documents produced”. The letter continues:
We confirm that … Counsel will be attending the Subpoena Hearing to claim client confidentiality and/or legal professional privilege in relation to the inspection and copying of the documentation. We will also be seeking costs in respect of our appearance for the Subpoena Hearing and in relation to the production of the documentation.
[1] Although the letters are each dated 26 May 2011 they plainly refer by their terms to a prospective hearing on the return of the subpoena which occurred before Registrar Kane on 25 May 2011. No point was taken in the submissions by any party relating to this date, nor does the assumption appear to me to materially affect any issue in the proceedings before me.
The husband, it seems, had previously indicated that he would not consent to a waiver of any legal professional privilege attaching to those documents.
At the subpoena hearing before a Registrar on 25 May 2011, the husband consented to the production of two files relating to transfers of property but maintained that the file relating to the mooted financial agreement was privileged. Production of those documents was ordered; I gather, because it was held that, by dint of that which was contained in an affidavit, any privilege had been waived. Leave was granted to all parties to inspect.
At that hearing, the firm appeared by counsel and indicated that they sought an order for their costs of compliance with the subpoena, which such application was sent by the Registrar to be heard by me at the conclusion of the proceedings between the parties.
All parties agreed to that application proceeding by way of filed written submissions (without the necessity for formal Application or Responses) and that it be determined in chambers.
Orders are sought by the firm against the first respondent (husband) and applicant (wife). No order is sought against the second respondent (mother).
The order is opposed by the husband and the wife. The wife submits that the husband should pay the firm’s costs of compliance with the subpoena. In the alternative, it is submitted that the wife should pay the firm “reasonable” conduct money in relation to the production of the documents but, otherwise, that the husband pay the firm’s costs of, and incidental to, compliance with the subpoena, including the costs of the hearing before Registrar Kane on 25 May 2011.
Conduct Money and the Rules
In examining the historical basis of “conduct money” in Bank of New South Wales v Withers (1981) 35 ALR 21, Sheppard J held (at 38):
…it should be emphasized that unless the payment is provided for in the rules there can be no recovery. Collins v Godefroy remains the law. The citizen’s duty to aid the administration of the law by attending remains paramount and is the reason why there can be no recovery for loss of time as distinct from out of pocket expenses in the absence of specific provisions in rules of court.
Similar sentiments can be seen in the principles underlying the issue of subpoenae to third parties. For example In Lucas Industries v Hewitt (1978) 18 ALR 555, Bowen CJ, Smithers and Nimmo JJ said (at 570–571):
The purpose of the process of subpoena is to facilitate the proper administration of justice between parties. For that purpose it is the policy of the law that strangers who have documents may be put to certain trouble in searching for and gathering together relevant documents and bringing them to court. It is according to the same principle that persons who have knowledge of facts are put to the inconvenience of being brought to court and required to give evidence.
Assessment of the reasonableness of burdens involved in complying with a subpoena must take account, inter alia, of the desirability that justice be administered effectively. The capacity of a party to collect and produce the documents referred to is a relevant circumstance. Large business entities may be thought to be highly organized and well staffed. What may be burdensome to lesser entities may be of small significance to a large one.
In this Court, r 15.23 provides relevantly:
(1) A named person is entitled to be paid conduct money by the issuing party at the time of service of the subpoena, of an amount that is:
(a) sufficient to meet the reasonable expenses of complying with the subpoena; and
(b) at least equal to the minimum amount mentioned in Part 1 of Schedule 4.
…
(3)A named person may apply to be reimbursed if the named person incurs a substantial loss or expense that is greater than the amount of the conduct money or witness fee payable under this rule.
Rule 15.31 provides:
(1)This rule applies if the named person, or a person having sufficient interest in a subpoena for production:
(a) objects to the production of a document identified in the subpoena; or
(b) objects to a document identified in the subpoena being inspected or copied by any of the parties.
(2) The person must, as soon as practicable after being served with the subpoena and at least 10 days before the court date, give written notice of the objection, or other order sought, in accordance with Part F of the Subpoena, to:
(a) the Registry Manager;
(b) the named person, if applicable;
(c) the other parties; and
(d) any independent children’s lawyer.
(3) A notice under this rule operates as a stay on the operation of the parties’ and independent children’s lawyer’s right, under subrule 15.30 (4), to inspect and copy a document produced under a subpoena.
The firm did not intervene in the substantive proceedings and is not a party to them. Plainly, subpoenae can be issued to third parties, subject of course, to the supervision of the Court over its processes so as to prevent abuse. (See e.g. r 15.17 and r 15.18).
However, where objection is taken and the person objects to the production of documents or seeks additional conduct money they must attend at the subpoena hearing. Rule 15.26 provides relevantly:
15.26If a named person or a person having sufficient interest in a subpoena:
…
(b) objects to the production of a document required by the subpoena;
(c) seeks to be paid for any loss or expense relating to the person’s attendance, or the production of a document, in compliance with the subpoena; or
…
the person must attend court on the court date to apply for the order.
…
In Kelleher and Anderson [2008] FamCA 113, Carter J said:
[35]Provided that the loss or expense is otherwise reasonable in the circumstances of any case the recipient of a subpoena may seek to be reimbursed, for example, for the expenses of finding, collecting, collating, marshalling and producing the documents or materials sought, together with the incidental cost of attending the court. For the purposes of Pt 15.3 the recovery of costs of legal advice and representation in relation to the documents which have been subpoenaed may also be sought. (See Fuelxpress Ltd v LM Ericsson Pty Ltd (1987) 75 ALR 284; and Hadid v Lenfest Communications Inc (1996) 65 FCR 350.) The sort of matters envisaged include legal costs incurred in seeking advice as to the validity of the subpoena, or as to matters such as privilege and confidentiality.
In Moriarty & Moriarty [2009] FamCA 369, the issue was discussed by Cronin J:
What is the loss to be compensated?
57. The rules refer to a “substantial” loss or expense.
58. The determination of what is substantial is very subjective. In my view, it means that the expense must be large causing loss; it must be unusual in the sense of requiring normal activity to be stopped; or it must cause an unfair inconvenience having regard to the fact that the recipient has nothing to do with the litigation.
59. Assessment of the reasonableness of burdens involved in complying with a subpoena must take account the capacity of a party to collect and produce the documents. That means that in a large organization, the capacity to cover the expense is greater than in a small organization (see Lucas Industries v Hewitt (1978) 18 ALR 555 and G and D & D (2005) FamCA 1429).
60. Notwithstanding the administration of justice issue, the rules are not intended to put the individual presenting the documents in a position where they lose income or capital. The rule however refers to a substantial expense and each situation must be determined on its peculiar facts.
61. However, if the subpoena is simple and clear, requiring the production of the recipient’s own documents, the inconvenience is intended and expected to be minimal.
62. Thus, in a case where a professional fee is claimed or the bobcat driver claims significant hours of “downtime”, the question still remains whether the finding, collecting, collating, marshalling and producing the documents or materials required the attention of the owner, partner or professional or whether it could be done by a clerical person albeit with some ownership or professional oversight. It is that question that the judicial officer has to ask in every case.
63. The outcome is determined by the exercise of a discretionary judgment guided by the rules of court.
As has been seen, the Rules contemplate the “named person” as the primary source of objection and that same person potentially seeking recompense. In circumstances where what is in issue is documents of the husband in the possession of former solicitors and there is an objection on the basis of legal professional privilege, the client (here the husband) is, clearly, a person having “a sufficient interest” in the subpoena.
Basis of the Firm’s Claim
In view of the manner in which these proceedings were agreed to be conducted, no Application or Responses were filed. The orders sought are contained, then, in the submissions. But, they are not specified with particularity. The Court is left to discern the precise terms of the orders sought from the written submissions themselves.
Moreover, as will shortly be seen, relief claimed pursuant to r 15.23 of the Rules is, in my view, conflated with potential relief pursuant to s 117(2) of the Act.
The written submissions on behalf of the firm assert an entitlement to conduct money pursuant to r 15.23, in particular, additional “expenses or loss” pursuant to that rule. The submissions then refer to s 117(2A) and, specifically, “s 117(2A)(d)” which refers to “whether any party to the proceedings has been wholly unsuccessful in the proceedings”[2] and also to s 117(2A)(g).
[2] Plainly, this is a reference to s 117(2A)(e), as opposed to s 117(2A)(d) as submitted on behalf of the firm.
The written submissions then go on to refer to the well known passage from Shephard J in Colgate-Palmolive Company and Colgate-Palmolive Pty Ltd v Cussons Pty Ltd (1993) 46 FCR 225 at 232-234 – presumably to support the claim that any “costs” that are awarded against the husband ought be awarded on an indemnity basis.
Under the heading “Should Costs be Awarded to [the firm]?”, the written submissions assert that the respondent (i.e. the husband) was “wholly unsuccessful”. That is, s 117(2A) is averted to. The submissions immediately go on to refer to both “costs” and the words of r 15.23(3):
It is submitted that [the firm] incurred a substantial loss or expense and therefore they should be awarded costs given that the loss or expense was greater than the amount of the conduct money or witness fee payable under the Rules given:
· significant photocopying costs;
· conduct of the husband requiring appearance of [the firm’s] representative from 9am – 7.45pm on 25 May 2011. [Emphasis added]
The Court’s Powers
Under the heading “Who should the costs be awarded against?”, the firm’s written submissions contend that:
Typically costs are awarded against the issuing party. In this matter it is submitted that the costs should be apportioned between the issuing party and the Respondent Husband as in the case of Zova and Elliott [2008] FamCA 166 and Elliott and Zova [2009] FamCA 49. [Emphasis added].
Those decisions of O’Reilly J are relied upon in support of the submission that a person other than the “issuing party” can be ordered to pay “costs” pursuant to r 15.23. As her Honour observed, the facts underpinning each of those cases were highly unusual, including, for example, the fact that one party (the wife) had issued the subpoena but the other party (the husband) had served it. Her Honour held in the earlier of the two cases:
63.However, Rule 15.23(3), which provides that a named person may apply for the reimbursement of “substantial loss or expense” that is greater than the amount of conduct money or witness fee payable under Rules 15.23(1) and (2), invites the exercise of a discretion and, it must be observed, the discretion is not fettered by the requirement that the reimbursement may be sought or ordered only against the issuing party.
64.Therefore in my view it is open to me to order the reimbursement of Mr Zova’s substantial loss or expense (if I find there has been any) against either or both of the wife, as the issuing party, or the husband, as the serving party, or both of them by way of apportionment.
65.In short, whilst usually the issuing party is responsible for the named person’s costs (conduct money and witness fee) and loss and expense, Rule 15.23(3) is not constrained to order such only against the issuing party. It is not for me to speculate whether this may be by oversight or intention. It is sufficient that I observe that whilst Rules 15.23(1) and (2) contain a restraint, Rule 15.23(3) does not.
As her Honour observes r 15.23(1) and (2) are each confined by their terms to amounts being paid by “the issuing party”, whereas r 15.23(3) contains no such constraining words. However, I respectfully disagree with her Honour’s conclusion that r 15.23(3) contains a separate discretionary head of power.
The terms of r 15.23(3) might be contrasted with the provisions of Order 20 Rule 17 of the Family Law Rules 1984 (that is, the Rules as they existed prior to their amendment in 2004). That rule provided:
17. Where in proceedings a person being –
(a) a respondent to an application under rule 7; or
(b)a person required by an order made under rule 8 to produce a document, reasonably incurs costs or expenses on the hearing of the application or in connection with the production of the document, as the case may be, the person may apply to the court for an order as to the assessment and payment of such costs and expenses and the court may make such an order or give such directions as it thinks fit. [Emphasis added].
In drafting the Rules, the rule-makers, presumed to be cognisant of the provisions of the earlier Rules, altered the expression “costs and expenses” to the expression “substantial loss or expense”. So, too, the specific reference to “costs or expenses on the hearing… or in connection with the production …” was changed to make specific reference to “substantial loss or expense” and so as to provide in the sub-rule a specific reference to relevant amounts “payable under this Rule”.
Rule 15.23 appears within Part 15.3 of the Rules which deal generally with subpoenas. Within that context, r 15.23 provides initially for the payment of conduct money sufficient to meet the reasonable expenses of complying with a subpoena in an amount at least equivalent to the amount specified in Part 1 of Schedule 4 to the Rules (15.23(1)) and, separate to that, “a witness fee” where the subpoena relates to giving evidence or to giving evidence and producing documents (15.23(2)). The entitlement to claim provided for in sub-rule (3) is, by the terms of that sub-rule, confined to a reimbursement of an amount considered reasonable that is related to either conduct money or a witness fee (as the case may be), “payable under this rule”.
In my view, the rule should be read as a whole and the sub-rule as governing the amounts that might be paid by an “issuing party” to a “named person” as “conduct money” or a “witness fee” as the case may be.
Consistent with the historical context earlier referred to (e.g. Bank of New South Wales v Withers; Lucas Industries v Hewitt, above) the Rules prescribe very modest amounts payable as a minimum or “default” (r 15.23(1) and (2)) but, in order to strike the balance referred to, for example, in the authorities just mentioned, application can be made for the issuing party to pay a greater (but reasonable) amount where loss or expense is established as “substantial”.
In my view the sub-rule gives power to the Court to enlarge the amounts of conduct money or witness fee payable to a named person by an issuing party in compliance with a subpoena, where the claimed loss or expense can be regarded as “substantial”; where the conduct money or witness fee as the case may be is otherwise payable pursuant to sub-rules (1) or (2); and where any amount claimed is, in any event, determined by the Court to be reasonable in all the circumstances of the individual case.
In other words, the sub-rule does not, in my respectful view, give power to the Court to recompense loss or expense to a person other than the issuing party.
Who, If Anyone, Should Pay the Firm’s “Costs”?
Orders for “Costs” Contrasted
It will be noted that, as earlier emphasised, the expression “costs” is used throughout the firm’s submissions and there is reference to s 117 and the factors enumerated in s 117(2A). As has already been seen, the expression used in r 15.23(3) can be contrasted; the rule refers to “substantial loss or expense”.
In my view, the failure to make the distinction just referred to is apt to cause confusion.
The power in this Court to award “costs” (properly so called) is confined to s 117(2) of the Act. The “substantial loss or expense” ordered pursuant to r 15.23 is a separate head of power, noting that the sum so claimed might, in appropriate circumstances, include legal costs or expenses (see e.g. Kelleher & Anderson [2008] FamCA 113; Moriarty & Moriarty [2009] FamCA 369; Fuelxpress Pty Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284).
So, too, it may be that, where an issuing party is ordered to pay to a named person a sum pursuant to r 15.23(3) (whether including, as part thereof, any legal costs incurred by the named person), the circumstances may be such that the issuing party can include the sum so ordered as part of an order for costs as against the other party to the substantive proceedings. But, that, in my view, is a matter quite separate from the power contained in r 15.23(3) and any sum that might be awarded as between the issuing party and the named party thereunder.
Here, it seems to me that the firm’s written submissions conflate the two separate heads of power. An example is the reference to matters pursuant to s 117(2A) in support of a claim made pursuant to r 15.23(3). For example, it is submitted:
… that the costs of [the firm’s] costs resulting from the hearing of the matter on 25 May 2011 including an appearance from 9am – 7.45pm including, advice from counsel and various telephone attendance with [the firm] should be awarded against the Respondent Husband on an indemnity basis … pursuant to Rule 15.23(3) and/or pursuant to s 117(e), (g) (c) given that the application was wholly unsuccessful and the conduct of the Respondent Husband [in] maintaining an objection when there was held to be a waiver of privilege.
The written submissions go on:
It is submitted that in relation to the Respondent [husband] this is a matter that justifies the ordinary departure from party party costs and that indemnity costs should be ordered against the Respondent [husband] due to the conduct of the Respondent [husband].
[Thereafter reference is made to some of the factors referred to by Shephard J in Colgate-Palmolive, above.]
Can a Third Party Seek “Costs”?
If, as in my judgment is the case, the power contained in r 15.23(3) is confined to orders as between the issuing party and the named party and if, as in my judgment is the case, the power under that rule is an entirely separate matter to the Court’s power pursuant to s 117(2), two questions emerge: (a) can the firm (here “the named party”) seek an order pursuant to s 117(2) as against the wife (here, “the issuing party”)?; and (b) can the firm as “the named party” seek an order pursuant to s 117(2) as against the husband who did not issue the subpoena to the firm?
The first question may be moot; it will later be necessary to “unbundle” the orders sought by the firm so as to ascertain what order, if any, the firm seeks as against the wife for “costs” (properly so called). But, whether the Court has power to make such an order will, in any event, be considered below in the course of attempting to answer the second question just posed.
As has been seen, the Court’s power to order costs is contained in s 117 of the Act and it is to that section that attention must turn in answering the question of who might seek such an order and against whom such an order might be sought. This Court derives its jurisdiction from statute and questions of jurisdiction and power can arise when orders are sought by, or against, parties who are strangers to the marriage. (See, generally, Ascot Investments v Harper (1981) 148 CLR 337, in particular per Gibbs J).
In contrast to s 117(1), no reference is made in s 117(2) to orders as between “parties” to proceedings. Section 117(2) provides relevantly:
If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs … as the court considers just.
In Re JJT; ex parte Victoria Legal Aid (1998) 195 CLR 184, Gummow J held (at 191):
Thirdly, while s 117(1) is directed to the carriage by the parties of their own costs, Penfold v Penfold established that s 117(1) must yield to s 117(2) whenever the court forms the opinion “that there are circumstances justifying” it in making an order of the description in s 117(2). That subsection speaks not of parties but of certain orders. In considering what order (if any) should be made, the court is obliged by s 117(2A) to have regard to certain matters. These are set out in paras (a) – (g). Whilst paras (a) – (f) are focused upon the parties to the proceedings and their circumstances and conduct, para (g) speaks of “such other matters as the court considers relevant”. The result is to accommodate within s 117 orders as to the carriage of costs by third persons with an interest in the litigation of the nature identified by Mason CJ and Deane J, and Gaudron J, in Knight v FP Special Assets Ltd. [Citations omitted].
[See, similarly, Hayne J at 222 and Callinan J at 228.]
In Knight v F P Special Assets (1992) 174 CLR 178, Mason CJ and Deane J held (at 186):
…Generally speaking, only parties on the record of the proceedings are bound by the orders made in the proceedings. But there are now a variety of situations in which persons, not being parties in that sense, will be bound.
…
…it is impossible to construe the wide and general words of…O 91, r 1 as delimiting the jurisdiction to order payment of costs as one which was and is confined to parties to the proceedings…It is preferable to interpret the words of the rule according to their natural and ordinary meaning as conferring a grant of jurisdiction to order costs not limited to parties on the record and ensure that the jurisdiction is exercised responsibly.
Mason CJ and Deane J concluded (at 192) that:
Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party…
For our part, we consider it appropriate to recognise a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non- party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.
In Re JJT Gaudron J held (at 189):
One other matter should be noted with respect to s 117(2), namely that its terms are, if anything, wider than the bare power “to award costs” considered in Knight v FP Special Assets Ltd. Accordingly, it follows that the subsection authorises orders against persons who are not parties to proceedings in the exceptional circumstances in which that course is appropriate… [Emphasis added].
In In the Marriage of McAlpin (1993) FLC 92-411 it was held (Nicholson CJ and Maxwell J at 80,215 - in statements which, in view of the central findings are obiter) that:
In our view, on a natural reading of s 117(2) of the Family Law Act, this court’s jurisdiction to order costs is similarly unlimited. It is true that s 117(1) and (2A) refer to “parties” but s 117(2) is not so limited and is expressed in the widest possible terms. We therefore see no reason to confine the jurisdiction of this court in this area.
However, the Court went on to hold that the power should be exercised “sparingly”.
Whilst, then, it seems clear that costs can be awarded against third parties in the narrow circumstances averted to, a pre-condition to relief is that there be “proceedings” as defined in the Act before any costs order can be made. It will be appreciated that the cases referred to speak of costs orders against third parties. But, given that it is the “proceedings” which found the s 117 power, I see no reason in principle why if the third party is, properly, an applicant in relevant “proceedings”, they cannot be an applicant for costs.
Section 4 of the Act defines “proceedings” as:
a proceeding in a court, whether between the parties to a marriage or not, and includes cross-proceedings or an incidental proceeding in the course of or in connexion with a proceeding.
In Ostasheen Pty Ltd & Deputy Registrar of Child Support [1998] FamCA 68 the Full Court held at [76]:
… In light of this definition [of “proceedings”] we take the view that when the company applied to the Magistrate under O. 20 r. 17 of the Family Law Rules for an order for its costs in complying with the expenses [sic], there was initiated by it an “incidental” proceeding to the main enforcement summons proceedings. The company was clearly a party to these incidental proceedings and the provisions of s. 117 as [sic] whole apply to those proceedings. [Emphasis added]
In my view, proceedings of a type contemplated by r 15.23(3) can be seen to be a proceeding in the course of a proceeding (being the s 79 proceedings or, more precisely, the proceedings for a s 78 declaration within those s 79 proceedings), properly brought by a third party.
The word “incidental” should bear its natural meaning: “happening or likely to happen in fortuitous or subordinate conjunction with something else” or “to happen in connection with” or “naturally appertaining to” (Butler, S, (ed), Macquarie Dictionary, 5th ed, Macquarie, 2009) or “liable to happen” or “naturally attaching” (Shorter Oxford English Dictionary, 4th ed, Oxford University Press, 1993). Used in any of those senses, the r 15.23(3) proceeding between the firm and the wife can be seen as incidental to the substantive proceedings between the husband and the wife.
But, consistent with the matters discussed above, the parties to the incidental proceedings pursuant to r 15.23(3) are the firm and the wife. Thus, in my view, it follows that an order for costs pursuant to s 117(2) could have been sought as against the wife (distinct from any order pursuant to r 15.23(3)) in respect of the incidental proceedings for that latter relief.
Of course, it should be observed that because, in appropriate cases, legal fees might be claimed as part of the requisite substantial loss or expense, any such claim may be, in the circumstances of a particular case, duplicitous. But, equally, the considerations applicable to whether an order pursuant to r 15.23(3) should be made (and, if so, its quantum) may be different to the considerations applicable to whether an order for costs should be made (and, if so, its quantum).
Whether any such action for costs can lie as against the husband must depend upon whether there are “proceedings” to which such an order can attach because it is the “proceedings” which found the jurisdiction and power to make the order (s 117(2)). As I have discussed above, the husband is not (and could not have been) a party to the proceedings for r 15.23(3) relief – that is, the “proceedings” incidental to the substantive proceedings between the husband and wife.
The husband is not a party to any “proceeding” at the suit of the third party firm unless it can be said that the costs proceedings themselves are proceedings to which s 117(2) might apply. The proceedings for costs themselves are not a matrimonial cause; they are not proceedings relating to “concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a) to (eb) …” of the definition of “matrimonial cause” (s 4(f)). Those specific paragraphs relate to proceedings between parties to a marriage (or, as in a case such as, e.g. paragraph (ca), between a party to the marriage and a specified third party).
Thus, if the husband was to be susceptible to an order for costs at the suit of the third party firm, proceedings for costs against the husband would of themselves need to be seen as incidental to the proceedings between the firm and the wife for relief pursuant to r 15.23(3) or otherwise as incidental to the substantive proceedings alive between the husband and wife. In my view any such proceedings can not be seen as “incidental” within the ordinary meaning of that expression as used in s 117(2).
Accordingly, there is in my judgment no power in the Court to make an order for costs in favour of the firm as against the husband.
Summary of the Firm’s Position as to “Loss or Expense” or “Costs”
For the reasons just outlined, I am of the view that:
· The Court does not have the power to make an order pursuant to r 15.23(3) in favour of the “named party” against any person other than the “issuing party” for a subpoena (as each expression is defined in r 15.16(1));
· The Court has the power, exercisable in only limited circumstances, to make an order for costs pursuant to s 117(2) against a third party;
· There is no reason in principle why, in similarly confined circumstances, the Court does not have the power to make a costs order in favour of a third party;
· The power in each case derives from there being “proceedings” between the parties to the costs application within the meaning of s 117;
· By reference to the definition of “proceedings”, those proceedings can be an incidental proceeding in connection with a proceeding;
· The claim by the firm against the wife pursuant to r 15.23(3) can be seen as such an incidental proceeding;
· There are not, nor could be, proceedings of that type between the firm and the husband;
· There are no other proceedings between the firm and the husband that can be described as proceedings incidental to proceedings in the course of, or in connection with, a proceeding;
· The Court has no power pursuant to s 117(2) (or otherwise) to order costs in favour of the firm as against the husband.
Conclusions as to The Amounts Claimed by the Firm
What is the Claim against the Wife?
In light of the conclusions just referred to, it is necessary to revisit the orders sought by the firm and to “unbundle” them so as to distinguish between orders sought as against the wife and orders sought as against the husband. (It will be recalled that the firm submits that the (conflated) claim pursuant to r 15.23(3) and s 117(2) should result in the amount awarded “being apportioned” between the husband and the wife).
The written submissions on behalf of the firm contend:
It is submitted that the initial costs of producing the documents over and beyond the conduct money that was provided should be awarded against the issuing party as per the court scale (see below) pursuant to Rule 15.23(1) and Sch3 Family Court Rules 2004. Such expenses include photocopying and postage.
It is submitted that the cost of [the firm’s] costs resulting from the hearing of the matter on 25 May 2011 including appearance from 9am – 7.45pm including, advice from counsel and various telephone attendance with [the firm] should be awarded against the Respondent Husband on an indemnity basis (see below) pursuant to Rule 15.23(3) and/or pursuant to s 117 (e), (g) (c) given that the application was wholly unsuccessful and the conduct of the Respondent Husband [in] maintaining an objection when there was held to be a waiver of privilege.
Thus, it might be seen that, whether expressed as “costs” or “substantial loss or expense”, the claim against the wife, as “pleaded” is limited to “the initial costs of producing the documents over and beyond the [$10] conduct money that was provided [upon service of the subpoena]” quantified by reference to the Schedule 3 scale.
At this point, it should be observed that it was open to the firm to claim as against the wife pursuant to r 15.23(3) an amount comprising the totality of the expenses said to be incurred by the firm in compliance with the subpoena, including, in particular, what is said to be the expenses associated with the subpoena hearing. (See e.g., Fuelxpress Ltd v L M Ericsson; Kelleher & Anderson, above.) The firm expressly made no such claim as against the wife. (Of course, whether any such claimed sum would have been awarded is an entirely different question).
No specific amounts are attributed to the claim against the wife in the submissions. An affidavit was filed by a partner of the firm, Ms S, on 27 May 2011. In her affidavit, Ms S deposes:
As a consequence of compliance with the Subpoena I also incurred costs and charges including correspondence, copying fees and briefing and instructing Counsel…These costs including GST total $1,090.61.
In addition costs will be incurred in relation to my appearance for the further Mention of the matter on 30th May 2011. The Firm’s hourly rate for appearances including GST is $325.60.
As our Firm is not a party to the proceedings, was compelled to comply with a Subpoena and to ensure that client privilege was not breached in relation to compliance with the Subpoena, I seek payment of the costs incurred by this Firm on an indemnity basis. These costs total $3,840.61 excluding the necessary costs of appearance on Monday 30th May, 2011.
The affidavit annexes what is deposed to be “a summary of time and expenses incurred in accordance with the Firm’s usual costing policy”. The total of the summary is the $1090.61 just referred to. It includes an item “Photocopying complete file requested under subpoena” to which an amount of $175.45 inclusive of GST is attributed. Other items up to but preceding the briefing of counsel to appear at the subpoena hearing (noting that the firm is situated in Town 4, approximately 160km north of Brisbane) include correspondence to the Court and the husband’s solicitors. The total of those items is about $400.
As a result of my earlier findings, it is necessary to attempt to discern such amount as is claimed only against the wife. I propose to do so generously to the firm given the reliance upon an earlier decision of the Court with which I respectfully disagree. Any potential for injustice to the respondents can, in my view, be taken up in the discretionary aspects of any award, whether by reference to r 15.23(3) or s 117(2).
Seen in that light, it seems to me that the claim against the wife should be seen at its highest as a claim for $1,090.61 as referred to in the affidavit of Ms S.
Is the Rule 15.23(3) Claim Against the Wife Made Out?
As has been seen, r 15.23(3) gives the “named person” in a subpoena an entitlement. It is an entitlement to be paid the “reasonable expenses” of complying with the subpoena in an amount not less than the prescribed minimum (currently $10). But, where the prescribed amount is tendered and is asserted by the named person to be less than the named person’s “reasonable expenses”, an onus is cast upon the named person to make application for an additional payment. When that application is made, the Court must be satisfied that the named person has incurred a “substantial” loss or expense. If that threshold is crossed, the claimed amount cannot be greater than the “reasonable expenses” of compliance with the subpoena.
Thus, it is necessary to ask :
(a)What “loss or expense” is asserted to have been incurred by the named party?; and
(b)Can the loss or expense/s so claimed be regarded as “reasonable expenses of complying with the subpoena” for this particular named party receiving this particular subpoena in these particular circumstances?; and
(c)Can any such reasonable expense/s be regarded as “substantial loss or expense” that is, relevantly, greater than the $10 tendered?
The answers to those questions should be given a proper context.
The historical context referred to earlier (Bank of New South Wales v Withers etc) and the extremely modest amount provided for as the “minimum” or “default” amount of conduct money both give context to any claim for reimbursement of substantial loss or expense. What is reasonable (and what is “substantial”) should in my view be seen against, and balanced with, “the citizen’s duty to aid the administration of the law”. I consider that such a duty, applicable to any citizen, can be seen to apply a fortiori to a solicitor who is an officer of the court and whose first duty is to the court.
Reasonable expenses of compliance are, in my view, not ascertained by reference to any pre-ordained categorisation of those expenses. Rather, what are reasonable expenses must be ascertained by first looking as to what reasonably needed to be done so as to comply with the particular subpoena and any obligations attached to, or associated with, its compliance?
Thus, for example, the particularity with which a subpoena is drawn or the type or extent of the documents it seeks to have produced might each be relevant to the question. So, too, what might be a reasonable expense will change with the circumstances of a particular case. The obtaining of legal advice as to compliance with a subpoena might be recoverable pursuant to r 15.23 in one case (e.g. Fuelxpress Pty Ltd, cited in Kelleher &Anderson, above) but not be recoverable in another case. The briefing of counsel to appear at a subpoena hearing and preparation for that hearing may be recoverable in one case, but not in another. Collating and photocopying may be recoverable in one case, but not in another.
Whether a particular expense, or particular expenses, should be seen as reasonable can also depend in my view upon the manner in which compliance is effected, or might reasonably have been effected. Compliance with a subpoena – including obligations imposed by the Rules or court procedures which attend compliance – might permit of same by a means more economical than that which was in fact employed. Where it is established that a more economical means of compliance ought reasonably have been perceived and could reasonably have been carried out, it might be argued that it is not a “reasonable expense of compliance” if a more expensive means of compliance is actually employed.
Thus, an assessment of the reasonableness of expenses might take account of those things which were done that ought reasonably not have been done, those things which were not done that might reasonably have been done and, things which might have been done significantly more economically than those things which were or were not done.
Photocopying
Rule 15.29 prescribes two means of producing documents pursuant to a subpoena, but mandates neither over the other. One of the three alternative methods outlined by the rule is the production of photocopies verified by affidavit.
There may be cases where it is more reasonable for a named party to produce photocopies rather than originals and for the cost of same to be attributed to the issuing party (if determined as “substantial”). An example might be where the original documents were owned by a third party unconnected with the proceedings but were in the possession of the named party.
Here, however, nothing in the material before the Court persuades me that the photocopying of the relevant files was an expense reasonably associated with compliance by a firm of solicitors in respect of documents held on files relating to a former client who is himself a party to the proceedings in which the documents were being produced.
Plainly, the firm were entitled to take photocopies of such documents as they might choose; a firm may well desire reasonably to photocopy documents (whether to produce them as a means of compliance with r 15.29 or to retain them as a record, having produced the originals). But, it by no means follows, without more, that the costs of photocopying ought be met by the issuing party. It is again emphasised that r.15.23 does not serve as an indemnity for costs or expenses incurred.
Here:
· Many of the documents on the firm’s files belong, axiomatically, to the client, not the firm;
· There is no obligation to photocopy documents to be produced pursuant to the subpoena. Conversely, there was nothing to prevent – and much to commend – the production of originals;
· Nothing in the affidavit material or submissions provides any specific reason why documents were photocopied;
· Nothing in the affidavit material or submissions indicates that the owner of the documents (the husband) was given any choice as to the means of production of documents owned by him or required the firm to produce photocopies;
· Nothing in the affidavit material or submissions suggests that the photocopying was done in the husband’s (i.e. the former client’s) interests, as distinct from the firm’s.
The question is not whether the photocopying of the documents for production was reasonable; it very well might have been. The question is whether any alleged loss or expense associated with the photocopying can be classed as a reasonable expense of compliance which might be susceptible to reimbursement by the issuing party.
Further, what is prescribed as having the potential for reimbursement is “loss or expense”. The loss or expense to a solicitor’s firm in respect of claimed amounts is, in my view, something quite different to an amount or amounts that might be charged by that firm to another in respect of the same items. The amounts that might be recovered by way of costs (r 19.18 and Schedule 3) are not, in my view, the same as the loss or expense to the firm in respect of those same items. It is only the latter that might be claimed.
Secondly, and in any event, I am not persuaded that the claimed photocopying costs can be regarded, in the context earlier referred to, as “substantial”. Again, I consider that the word should receive its ordinary and natural meaning as “having real substance” or “of ample or considerable amount”. (See, too, Moriarty, above per Cronin J at [58]).
The Expenses Claimed in Total
Similar considerations to those just discussed apply equally in my view to the claim against the wife when looked at as a whole.
Reference to Annexure D to the affidavit of Ms S discloses a claim made up of a number of matters itemised by reference to Schedule 3 to the Rules. Again, they comprise a listing of matters that might be claimable in respect of a claim for party/party costs (r 19.18). Even assuming for a moment that each and all are potentially claimable as reasonable for “the finding, collecting, collating, marshalling and producing the documents or materials sought”, in my view they do not, individually or collectively, represent the “loss or expense” to the “named person” in the subpoena. There is no evidence of what the “loss or expense” is.
Further, and in any event, I do not consider many of the items properly form part of any claim pursuant to r 15.23(3). For example, “Phone attendance[s] on [counsel]” and the perusal and scanning of correspondence do not, in the circumstances of this case, comprise – individually or collectively – amounts “sufficient to meet the reasonable expenses of complying with the subpoena”. Again, the duty of every citizen and officers of the Court in particular is relevant in that context.
Moreover, and irrespective of that matter, I do not regard the cost or expense to the firm of doing that which was necessary to comply with the subpoena is “substantial” within the meaning of the rule.
Even if the sums claimed represent the cost or expense to the firm (which, in my view, they plainly do not) I do not consider that, either by reference to the quantity and type of the tasks, or the proper quantum of “loss or expense” produced by them, they could be described as “substantial”.
Additional questions might be seen to arise on the facts of this case but were not addressed in evidence or argument.
The husband’s solicitors suggested in a letter to the firm that it ought be them that claimed the privilege on the husband’s behalf. The husband’s solicitors wrote: “The Subpoena hearing for this matter is on 25 May 2011 at 9:00am. Whilst it is a matter for you whether or not you attend the Hearing, we would suggest that you do so to object to the Subpoena” (emphasis added).
There is something immediately counter-intuitive about that assertion. First, the privilege belongs to the client, not the solicitor. (See e.g., Minter v Priest [1930] AC 558 at 579 and 580 per Lord Atkin). Secondly, the Rules specifically provide that either the “named person” or “a person having sufficient interest in a subpoena” may object (r 15.31). Plainly, where the basis of objection is legal professional privilege, and the relevant documents, or a majority of them, belong to the husband, he is such a person.
Issues arise for the firm as a “named person”: can the firm, whose retainer with the husband has ceased, but whose duty of confidentiality, at least, continues (see, e.g., Legal Profession (Solicitors) Rule 2007 (Qld), rule 3; In the Marriage of Magro (1989) 93 FLR 365) properly leave it to the husband - who they knew to be represented in the substantive proceedings - to claim his own privilege? Is it necessary, in compliance with their obligations as a “named person” in the subpoena, (and with any obligations owed by them to a former client), for the firm to themselves object (and therefore subject themselves to r 15.26’s mandatory obligation to attend, potentially at a cost to them)? Is there an alternative less costly but equally efficient and compliant process (for example, one that did not involve attendance)?
It is in my view possible to construct such an alternative process by reference to the Rules which are, by their express terms, capable of being dispensed with or amelioration (rr 1.12; 1.10) and which can be seen to clearly require the adoption of less costly processes and alternatives. (See, e.g., the Main Purpose of the Rules – r. 1.04; the Rule expressed to “promot[e] that main purpose” including, e.g. the direction to the Court to “minim[ise] the need for parties and their lawyers to attend court by, if appropriate, relying on documents…” (r 1.06(i)) and the direction to apply the Rules in a way that “is proportionate to the issues in a case and their complexity, and the likely costs of the case” and in a manner which “promotes the saving of costs”(r 1.07(c))).
I make it plain that, in the absence of any evidence or argument, these issues and, specifically, any possible alternative method of compliance do not form any part of my ultimate conclusions. But, in an appropriate case arguments might be mounted that an alternative, more economical but equally effective method of compliance with a subpoena by a “named person” should be taken into account in assessing “reasonable steps” pursuant to r 15.23.
Conclusion
In terms of the questions posed earlier:
(a)An amount of $1090.61 is claimed as the firm’s “loss or expense” but, in my view, neither that amount, or any amount like it, can properly be said to be “loss or expense” of the firm;
(b)In the context of this case, I do not consider that the amount claimed can be regarded as “reasonable expenses of complying with the subpoena” for this particular named party receiving this particular subpoena in these particular circumstances; and
(c)In any event, I do not consider that the claimed amount or any lesser “loss or expense” properly so called can be regarded as “substantial loss or expense”.
I reject the claim by the firm that the wife pay this amount pursuant to r 15.23(3).
Is Any Costs Claim Made Out Against the Wife?
As I have said, it seems to me that no case is in fact made out by the firm that the wife should pay costs pursuant to s 117(2). Nevertheless, given that, in my view, the firm conflates that claim with a claim made pursuant to r 15.23(3) and that some s 117(2A) matters would appear to be addressed in so far as they might be said to apply to the wife, I propose to address this issue briefly.
As earlier discussed, any s 117(2) claim by the firm as against the wife relates to the costs of the proceedings in respect of the subpoena. Potentially, then, costs claimed by the firm in and about the subpoena hearing (but said in the firm’s claim to be payable by the husband) might form the basis of a claim against the wife.
But, if such a claim is to be maintained in respect of the wife there should be evidence before the Court of matters relevant to the exercise of the discretion (s 117(2A)) that might sound in an award payable by her.
By reference to s 117(2A):
(a)The financial circumstances of the wife have already been referred to in the context of the costs proceedings as between the parties to the substantive proceedings. Plainly, the financial circumstances pertaining to the firm (I infer) are significantly more substantial than the very modest financial circumstances of the wife;
(b)Obviously neither party is in receipt of legal aid;
(c)Any allegations pertaining to the conduct of the proceedings that might be said to be relevant to an award of costs are directed in the evidence and submissions to conduct of the husband. No conduct is pointed to, nor it seems to me could be pointed to, on the part of the wife save for the issue of the subpoena itself. In that respect, the subpoena was, in my view, drawn with appropriate specificity and was directly relevant to issues potentially in dispute between the parties. (Indeed, the objection by the husband to the production of the relevant documents utterly baffles me; I would have thought that he had by his affidavit plainly waived any privilege, but, more to the point, the documents the subject of the subpoena might properly be seen as having been helpful to his case);
(d)No failure to comply with previous orders by the wife is alleged;
(e)Whilst the submissions on behalf of the firm plainly assert that the husband was wholly unsuccessful in his opposition to the production of documents, it cannot be said the wife has been “wholly unsuccessful”. Indeed, she has been wholly successful; the documents she sought were produced and, ultimately, inspected;
(f)There is no evidence of any offers in writing in respect of these proceedings.
There is no evidence before me that persuades me that I should exercise my discretion to make an award of costs in favour of the firm as against the wife. The “usual rule” provided for in s 117(1) should be seen to apply in respect of these proceedings between the firm and the wife.
Conclusion As To The Firm’s Claims
For the reasons just discussed, in my judgment, the claim by the firm against the wife in respect of alleged loss or expense of the firm pursuant to r 15.23(3) should fail.
So, too, any claim by the firm as against the wife for costs pursuant to s 117(2) should also fail.
The Court has no power to order that the husband pay the alleged, or any, sum to the firm pursuant to r 15.23(3).
The Court has no power to order that the husband pay the firm’s costs (whether on an indemnity or party and party basis) because there are no proceedings between those parties to which any such claim can relate.
The application/s by the firm should be dismissed.
I certify that the preceding one hundred and fifty (150) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy delivered on 28 October 2011.
Associate:
Date: 28 October 2011
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