Re Pan Pharmaceuticals Ltd; Selim v McGrath

[2004] NSWSC 129

Reported Decision: 48 ACSR 681

Supreme Court

CITATION:	Pan Pharmaceuticals Ltd - Selim v McGrath - Costs [2004] NSWSC 129
HEARING DATE(S):	Written Submissions - 07/10/03, 22/10/03, 30/10/03. 31/10/03, 12/12/03, 17/12/03
JUDGMENT DATE:	9 March 2004
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Applications for costs by non-parties refused, except for application related to costs of answering subpoena
CATCHWORDS:	COSTS - interested persons granted leave to be heard without becoming parties - other interested persons attending without such leave - whether costs orders in favour of such persons may be made against party - factors relevant to such award - non-party subjected to subpoena - jurisdiction to award costs - whether award confined to fixed sum
LEGISLATION CITED:	Supreme Court Act 1970, s.76 Supreme Court (Corporations) Rules 1999, r.2.13 Supreme Court Rules, Pt 37 r.9
CASES CITED:	Cresvale Far East Ltd v Cresvale Securities Ltd (2001) 39 ACSR 622 Danieletto v Khera (1995) 35 NSWLR 684 Knight v F P Special Assets Ltd (1992) 174 CLR 178 Kumagai Australia Finance v Avarton Ltd (NSWSC, unreported, Bryson J, 7 June 1991) Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77 Re Obie Pty Ltd (1983) 8 ACLR 439 Petrovski v Radin [2000] NSWSC 323 Selim v McGrath (2003) 47 ACSR 537 Triotas Pty Ltd v Rohn (NSWSC, unreported, Young J, 20 May 1993)
PARTIES :	Pharmacy Guild of Australia - Applicant F H Faulding & Co Limited - Applicant Australian Pharmaceutical Industries Ltd & Ors - Applicants James Selim - Respondent
FILE NUMBER(S):	SC 4687/03; 5062/03
COUNSEL:	Mr D B Studdy - Pharmacy Guild of Australia Mr M C Garner - F H Faulding & Co Ltd Ms S C M Cockayne, Solicitor - Australian Pharmaceutical Industries Ltd & Ors Mr S J Stanton - Respondent
SOLICITORS:	Minter Ellison - Pharmacy Guild of Australia Freehills - F H Faulding & Co Ltd PricewaterhouseCoopers Legal - Australian Pharmaceutical Industries Ltd & Ors Aitken McLachlan Thorpe - Respondent

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY, 9 MARCH 2004

4687/03 – RE PAN PHARMACEUTICALS LTD – JAMES SELIM v ANTHONY GREGORY McGRATH & ANOR
5062/03 – JAMES SELIM v ANTHONY GREGORY McGRATH & ANOR

JUDGMENT ON COSTS

Background

1 This judgment deals with applications for costs orders in proceedings 4687/03 and 5062/03. In each case, the plaintiff was Mr Selim and the defendants were Mr McGrath and Mr Honey who, when the first proceeding was commenced, were the administrators of Pan Pharmaceuticals Ltd (“Pan”) under Part 5.3A of the Corporations Act 2001 (Cth). By the time the second proceeding was initiated three weeks later, they had become the liquidators of Pan.

2 Proceedings 4687/03 were commenced by an originating process filed on 4 September 2003 by which Mr Selim sought certain declarations and orders as to the status and effect of decisions and conduct of Mr McGrath and Mr Honey, as administrators, in relation to recognition of voting entitlements at a meeting of creditors of Pan convened under Part 5.3A. That meeting first proceeded to business on 1 September 2003. Proceedings 5062/03 were commenced by an originating process filed on 25 September 2003. By that time, the meeting that began on 1 September 2003 had ended, having been adjourned on two occasions. When, on 23 September 2003, the meeting reconvened after the second adjournment, there was deliberation upon certain proposals and Mr McGrath, as chairman, made in the usual way declarations as to the results of polls taken at the meeting including, in each case, a declaration that the particular proposed resolution had been passed or not passed. One of the proposed resolutions was a resolution that Pan be wound up. That resolution was declared passed. By the originating process in proceedings 5062/03, Mr Selim claimed orders that various steps in relation to the adjourned meeting on 23 September 2003 be “reviewed and/or reversed”. The relief sought was under ss.447A and 447E of the Corporations Act, with the result that the proceedings were proceedings under that Act.

3 Because proceedings 4687/03 became redundant when the general subject matter became the subject of proceedings 5062/2003, I made an order on 29 September 2003 dismissing the former. I also ordered that the plaintiff pay the defendants’ costs. Proceedings 5062/03 in due course proceeded to trial and were heard by me on 13 and 14 October 2003. Judgment was delivered on 17 October 2003. The claims of the plaintiff were dismissed and there was again an order that the plaintiff pay the defendants’ costs: see Selim v McGrath (2003) 47 ACSR 537.

4 In 5062/03, certain persons were, on 25 September 2003, granted leave under rule 2.13 of the rules now cited as the Supreme Court (Corporations) Rules 1999, that is, leave to be heard without becoming a party. Rule 2.13 should be set out in full:

“ Leave to creditor, contributory or officer to be heard
(1) The Court may grant leave to any person who is, or who claims to be:
(a) a creditor, contributory or officer of a corporation, or
(b) an officer of a creditor, or contributory, of a corporation, or
(c) any other interested person,

to be heard in a proceeding without becoming a party to the proceeding.

(2) If the Court considers that the attendance of a person to whom leave has been granted under subrule (1) has resulted in additional costs for any party, or the corporation, which should be borne by the person to whom leave was granted, the Court may:
(a) direct that the person pay the costs, and
(b) order that the person not be heard further in the proceeding until the costs are paid or secured to the Court’s satisfaction .


(3) The Court may order that a person who is, or who claims to be, a creditor, contributory or officer of a corporation be added as a defendant to the proceeding.

(4) The Court may grant leave to a person under subrule (1), or order that a person be added as a defendant to a proceeding under subrule (3):
(a) on application by the person or a party to the proceeding, or
(b) on the Court’s own initiative.

(5) The Court may:
(a) appoint a creditor or contributory to represent all or any class of the creditors or contributories on any question, or in relation to any proceeding, before the Court, at the expense of the corporation, and
(b) remove any person so appointed.”

5 In 4687/03, one of the persons to whom leave was afterwards granted in 5062/03, the Pharmacy Guild of Australia (which I shall call “the Guild”), was present by counsel on the second, third and fourth of four occasions on which the matter was briefly before the court. On the third occasion, Campbell J noted the appearance of counsel for the Guild and said:

“Without having made any decision about the standing of the Pharmacy Guild of Australia in the proceedings, I grant liberty to any party, including the Pharmacy Guild of Australia, to apply on two days notice.”

The present applications

6 In each of 4687/03 and 5062/03, the Guild now applies for a general costs order against the plaintiff, with special and, if necessary, separate reference to costs in relation to answering a subpoena served by the plaintiff in the latter proceeding. An application for a general costs order is also made in 5062/03 by another of the persons granted leave under rule 2.13, being F.H. Faulding & Co Ltd (“Faulding”). Both the Guild and Faulding associated themselves with and supported the contentions of the successful defendants. I shall say more about their participation presently. Other persons granted like leave to be heard in 5062/03 without becoming parties (that is, leave pursuant to rule 2.13 of the rules now cited as the Supreme Court (Corporations) Rules 1999) took the opposite course by supporting the claims of the plaintiff which, in the end, were unsuccessful. There are no applications for costs orders by them.

7 Separately, certain other non-parties, being persons who did not make any application for leave under rule 2.13, seek an order for costs against the plaintiff. Those persons were represented by PricewaterhouseCoopers Legal and it is convenient to refer to them as “the PwC clients”. I shall come to their claims and the role they played in relation to proceedings 5062/03 after dealing with the claims of the Guild and Faulding.

The roles of the Guild and Faulding

8 Faulding and the Guild had similar interests in the proceedings. Faulding was a substantial creditor of Pan. For that reason, coupled with other commercial considerations (Faulding also being a competitor of Pan), Faulding had an interest in the question whether the meeting’s decision that Pan be wound up should be overturned. It also had an interest in the questions as to the admission of creditors’ proofs of debts and proxies for voting purposes that were material to maintaining the decisions reached at the meeting of creditors.

9 The Guild is a trade association the members of which are retail pharmacists. Certain of those members were creditors of Pan. The Guild had assisted them in preparing and lodging proxies for the meeting, which proxies were under strenuous challenge by the plaintiff.

10 In terms of rule 2.13, Faulding was within paragraph (a) of sub-rule (1) as a “creditor”, while the Guild must be classified as no more than “any other interested person” as referred to in paragraph (c).

Can a costs order be made against a party in favour of a non-party?

11 Each of Faulding and the Guild submits that a costs order should be made against the plaintiff in its favour and, in so doing, contends that there is jurisdiction for the making of such an order, even though the person seeking costs was not a party to the proceedings. In separate written submissions, they refer to the comprehensive power of the court under s.76 of the Supreme Court Act 1970 with respect to costs:

“ Costs
(1) Subject to this Act and the rules and subject to any other Act:
(a) costs shall be in the discretion of the Court,
(b) the Court shall have full power to determine by whom and to what extent costs are to be paid, and
(c) the Court may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on an indemnity basis.

(2) In subsection (1) the expression costs includes:
(a) costs of or incidental to proceedings in the Court, including the administration of estates and trusts,
(b) in the case of an appeal to the Court, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal, and
(c) in the case of proceedings transferred to or removed into the Court, the costs of or incidental to the whole proceedings, both before and after the transfer or removal.

(3) The powers of the Court under this section apply in relation to a married woman, whether as party, next friend, guardian ad litem, relator or otherwise, and this section has effect notwithstanding anything in the Married Persons (Equality of Status) Act 1996 .”

12 Faulding and the Guild say that, if that section is broad enough to allow a costs order to be made against a non-party in favour of a party (as it undoubtedly is), then it must also be broad enough to accommodate an order against a party in favour of a non-party.

13 That submission not only has a logical attraction but may also derive some support from observations of Dawson J in Knight v F P Special Assets Ltd (1992) 174 CLR 178. The High Court was there called upon to consider a provision of the rules of the Supreme Court of Queensland in terms substantially similar to those of s.76 of the Supreme Court Act. The question for determination concerned jurisdiction to make a costs order in favour of a party against a non-party, being the receiver of a company. The converse question of jurisdiction to order that a party pay costs of a non-party did not arise for determination but appears to have been the subject of comment by Dawson J (at p.198):

“The respondents' primary submission is that either O 91, r 1 or s 58 is sufficient to authorize the Supreme Court, in a proper case, to award costs against a person not a party to the proceedings before it. This submission basically raises no more than a question of construction. But the respondents also rely upon the recognized exceptions to the general principle that costs may not be awarded against a non-party. They say that this case falls within those exceptions or is sufficiently analogous to be included in them. In one sense, the exceptions, which admittedly do exist, create a logical difficulty in the way of the appellants' argument. If there are exceptions allowing costs to be awarded to non-parties, then the provisions conferring jurisdiction to award costs must encompass them. That is to say, the provisions must contemplate the award of costs to a non-party, if only in an exceptional case.”

14 Dawson J also referred (at p.199) to a situation in which costs were historically allowed to a non-party, being the real person standing behind a fictitious party to an action of ejectment at common law:

“But there was a clear exception to any rule that costs could not be awarded to a person who was not a party to the proceedings in the case of ejectment proceedings. This was recognized in Hayward v Giffard [(1838) 4 M&W 194; 150 ER 1399]”.

15 At page 203, Dawson J said:

“The wording of O 91, r 1 does not confine the discretion to award costs to the parties to the proceedings. The circumstances in which it would be appropriate to award costs to a non-party would necessarily be confined, but that is a question of discretion, not jurisdiction.”

16 Taken in their context, these observations of Dawson J, although appearing, in terms, to contemplate the making of an order for costs against a party in favour of a non-party, may in reality be references to the opposite situation where it is sought to subject a non-party to a costs order in favour of a party, being the situation actually before the High Court. But given the comprehensive nature of s.76 of the Supreme Court Act, there is a statutory basis for the view that, although the statutory jurisdiction will not support orders for and against persons having nothing to do with the proceedings, it will permit an order that a party pay costs incurred in relation to proceedings by a non-party having some connection with the case. In Petrovski v Radin [2000] NSWSC 323, Sperling J regarded the section as sufficiently general to support such an order and in fact made a costs order against a party in favour of a non-party in circumstances where, “although [the non-party] was not a party to the notice of motion as a matter of form, he was a party as a matter of substance”. There also exist reasonably well established principles on which a non-party creditor supporting a winding up application may be allowed costs: see Re Obie Pty Ltd (1983) 8 ACLR 439 and other cases referred to by Austin J in Cresvale Far East Ltd v Cresvale Securities Ltd (2001) 39 ACSR 622 at [101].

17 It is important to note that the generality of s.76 only prevails to the extent that no contrary specification is made in any other provision of the Supreme Court Act, or in rules made by the Rules Committee or in any provision of any other Act. This is the effect of the opening words of s.76: “Subject to this Act and the rules and subject to any other Act”. It is therefore necessary to return to rule 2.13 and, in particular, rule 2.13(2) which expressly contemplates the making of a limited costs order against a non-party granted leave to be heard.

18 Rule 2.13(2) focuses on “additional costs” incurred by a party by reason of the non-party’s participation in exercise of the leave granted. It contemplates the making of a costs order against the non-party and in favour of the party put to extra expense by the non-party’s decision to become involved. But the order contemplated is one that does no more than cater for incremental expense referable to the non-party’s involvement. Rule 2.13(2) thus reflects an assumption that in some cases a party will incur such incremental costs and, no doubt, that in others it will not. Where there are no “additional costs”, rule 2.13(2) cannot support a costs order in favour of the party against the non-party. The rule thus tends to imply that there should not be a costs order against the non-party except with respect to a party’s “additional costs”, at least in the ordinary course of events. There is a clear concern to guard against the award of more than one set of costs except where good reason is shown.

19 If rule 2.13(2) were to be seen as a code as to the awarding of costs against a non-party granted leave under rule 2.13(1) (except, perhaps, in some exceptional circumstance), it would be reasonable to think that the rule also reflects an expectation that costs should not be awarded in favour of the non-party. It would be an odd result if the awarding of costs against a non-party and in favour of a party was closely controlled by rule 2.13(2) but the awarding of costs against a party and in favour of a non-party was intended to be entirely at large.

20 These considerations, coupled with the emphasis by members of the High Court in Knight’s case on the extraordinary nature of the aspect of the general costs power that involves orders against non-parties, lead me to think that some very special factor outside the ordinary and expected course of events and engendering a justifiable expectation of compensation in the mind of the non-party would have to be found before any relevant aspect of the comprehensive jurisdiction with respect to costs might be regarded as properly and regularly invoked in favour of a non-party as against a party. In other words, such an award, if ever appropriate, will be extraordinary and exceptional. Someone who seeks and is granted leave under rule 2.13(1) chooses a course entailing the limited costs exposure described in rule 2.13(2). Such a person can have very little expectation of being awarded costs.

The claim by Faulding

21 Faulding submits that its presence was necessary to protect its interests. Proxies lodged by creditors for the purposes of the meeting were under attack by the plaintiff. Faulding was a large creditor, its proof having been accepted at approximately $31 million. Resolution of the proceedings in favour of the plaintiff might well have seen Faulding’s voting rights neutralised and Faulding had a particular interest in resisting such an outcome. Submissions made by counsel for Faulding, as well as making these points, say:

“The issues which affected or might have affected F H Faulding’s interests were the subject of detailed submissions by counsel for the liquidators and those submissions were adopted by F H Faulding.”

22 This last submission, it seems to me, tells heavily against the making of the order Faulding seeks. It was clear in the pre-trial phase and remained clear thereafter that the defendants would be making comprehensive submissions in support of the decisions they had made on the admission of proofs and proxies for the purposes of the meeting and, in particular, the decisions that caused the voting constituency and the respective voting strengths to be as Faulding wished. The position that Faulding, in its own interests, was keen to promote was the very position for which, as Faulding knew, the defendants would be strenuously contending.

23 Any “value added” requirement approach that might, by reverse inference, be gleaned from rule 2.13(2) was not met by Faulding’s participation. As I view matters, the circumstances in which Faulding sought and exercised leave under rule 2.13(1) did not exhibit any exceptional features which should have led it to entertain any justifiable expectation of compensatory recourse against a party to the litigation in respect of expenses it chose to incur in relation to proceedings in which it was not a party, did not seek to be joined as a party and did not, in any explicit way, chance its own position as to liability for costs beyond the limited extent envisaged by rule 2.13(2). I see no basis on which Faulding could be said to have been in substance a party even though technically a non-party.

24 I am therefore not satisfied that Faulding has made out a case for the exercise in its favour of any extraordinary and special jurisdiction there might be to award costs against a party in favour of a non-party.

The claim by the Guild

25 The Guild, as I have said, appeared by counsel on three of the four occasions on which proceedings 4687/03 were very briefly before the court and, like Faulding, was granted leave to be heard in 5062/03. The Guild seeks, in the first instance, a general costs order against the plaintiff in each proceeding. In my view, the way in which one proceeding became subsumed in the other and the brevity of the appearances in 4687/03 means that the Guild’s participation in both should be viewed, in effect, as a single event. The Guild also seeks an order in respect of its costs of answering a subpoena, a matter to which I shall come presently.

26 As to the general orders it seeks, the Guild maintains that its interests (or, more precisely, those of its members) were distinct from the interests of the defendants. I do not accept that this is so. Like Faulding, each relevant member of the Guild was (or purported to be) a creditor by whom a proof of debt and proxy had been submitted for voting purposes; and again like Faulding, the Guild members wished to see upheld the respective voting blocs that had resulted from the defendants decisions under challenge The defendants had accepted the voting entitlements asserted by the Guild members with the assistance of the Guild, as well as others which had brought about a result coinciding with that favoured by the Guild members. It was clear from the pre-trial stage that the defendants would seek to justify and defend their decisions with respect to not only the proofs and proxies of the Guild members but also others material to the voting outcome they wished to see maintained. There was therefore, in my view, again a coincidence of objectives as between the defendants and the Guild members.

27 In substance, I regard the position of the Guild – or, more accurately, the Guild members – as indistinguishable from that of Faulding, so far as concerns the possible exercise of any extraordinary and special jurisdiction there might be to award costs against a party in favour of a non-party.

The claim by the PwC clients

28 I turn now to the position of the PwC clients, being Australian Pharmaceutical Industries Ltd, Soul Pattinson (Manufacturing) Pty Ltd, Cambert (M) Shn Bhd and Cambert FE. The transcript in 5062/03 for the first day of the hearing indicates the following, immediately after appearances were announced:

“(Miss Cockayne sought leave to appear for the parties listed above, only for the purpose of certain documents being tendered, that were commercially confidential to her clients.)

HIS HONOUR: I will hear from you as and when you think I should.

COCKAYNE: Yes.”

Ms Cockayne is a solicitor with PricewaterhouseCoopers Legal.

29 It has been made clear in written submissions on costs lodged on behalf of the PwC clients that the documents in relation to which the PwC clients had confidentiality concerns were documents that had been produced by the defendants in response to a notice to produce served by the plaintiff. The PwC clients had become aware of the possibility that the plaintiff might seek to tender some or all of the documents thus produced by the defendants, being documents that had been in the custody and control of the defendants. The situation was not one in which a person subjected to subpoena had a concern about confidentiality of the person’s own documents.

30 No doubt with a view to seeking to place before the court any matter that might be considered relevant to the interests of the PwC clients, Ms Cockayne remained in court throughout 13 and 14 October. Evidence in the case concluded on the morning of the second day. The matter of formal tender of documents was reviewed at a point on the first day that is difficult to identify as to precise time but which occurs at pages 36 and 37 of a transcript of 110 pages, from which it might be taken to have occurred some time around middle to late morning, the hearing having begun at 9 am. The procedure that was then settled between the parties with the concurrence of the court was that identification of the exact documents to be tendered by the parties and formal tender would be deferred “perhaps until tomorrow morning”.

31 At the conclusion of the evidence on the morning of the second day, Mr Sheahan SC, senior counsel for the defendants, sought a confidentiality order in respect of certain tendered documents. Ms Cockayne said that she was instructed to support the application. Mr Newlinds SC, senior counsel for the plaintiff, did not oppose the application and the order was made. The transcript records the following as having occurred at a later point on that morning:

“HIS HONOUR: From a documentary viewpoint, the various parts of the tender bundle you have just taken me to, plus these share sale agreements, are what you wish to tender. Is there any objection to the tender of any of that?

SHEAHAN: No, your Honour

WALSH: No.

COCKAYNE: Could I indicate that I am instructed to make an application for costs on behalf of my client in relation to the tender issue.

HIS HONOUR: We will come to costs at the end of the proceedings.
What I propose to do is to initial and date the document headed ‘plaintiff's tender bundle’ and to admit as exhibit A those parts of the tender bundle that are identified on the document headed ‘plaintiff's tender bundle’ that I have initialled and dated.

EXHIBIT #A PARTS OF THE TENDER BUNDLE AS ARE IDENTIFIED ON THE DOCUMENT HEADED ‘PLAINTIFF'S TENDER BUNDLE’ TENDERED, ADMITTED WITHOUT OBJECTION

Separately as exhibit B, there will be admitted the share sale agreements.

EXHIBIT #B SHARE SALE AGREEMENTS TENDERED, ADMITTED WITHOUT OBJECTION

That deals with the plaintiff's documentary evidence. Is there any additional documentary evidence from the defendants?

SHEAHAN: No, your Honour. I only tendered the material I had identified in that schedule yesterday by reference to the exhibits. I do have a further affidavit.”

32 The point is made on behalf of the plaintiff that Ms Cockayne did not at any time seek to be excused or to put in place any practical means of being made aware if there was to be a tender of any of the documents produced by the defendants in which the PwC clients were interested. The plaintiff also says that, following Ms Cockayne’s statement to the court at the start of the hearing, she took no step that would warrant the PwC clients being regarded in any way as akin to parties or active participants. She did, as I have noted, support the defendants’ application for a confidentiality order but that was an application that was not opposed by the plaintiff, thus suggesting that some practical and sensible regime might have been put in place by discussion among the several legal representatives either before the hearing began or at an early stage of it.

33 The position of the PwC clients is really no different from that of anyone else who fears that some interest of theirs may be prejudiced by something that a party to legal proceedings seeks to introduce into evidence. Someone in that position may, if they wish, sit through the proceedings to monitor events in the hope (it can be no more) that, if the introduction of some document into evidence by a party will, in the person’s estimation, cause some prejudice the person, the court might consent hear to them. An alternative and less speculative course would be for the person to institute, separately and in advance, proceedings seeking some appropriate relief calculated to establish the quality of the relevant document and to vindicate such legal or equitable right as the person might have to prevent or limit its use in the way apprehended.

34 I must say that, even allowing for the comprehensive nature of the jurisdiction created by s.76 of the Supreme Court Act, I do not regard that section as concerned with a person who has a lawyer attend court in proceedings to which the person is not a party merely for the purpose of being on hand to seek to do whatever it may prove possible to do should the proceedings take a turn the person thinks may be prejudicial to them. The position of such a person is different from that of someone who, although not a party, has been granted leave to be heard or is compelled by subpoena to play a part in relation to the proceedings.

35 The application by the PwC parties for a costs order against the plaintiff will be refused.

The Guild’s claim in relation to the subpoena

36 It remains to consider the aspect of the Guild’s application involving an order in respect of its costs of and incidental to answering a subpoena served on it by the plaintiff. Written submissions lodged on behalf of the Guild make it clear that the application is based on Part 37 rule 9 of the Supreme Court Rules:

“ Expense and loss
(1) Where a person named is not a party and, in consequence of service of the subpoena, reasonably incurs expense or loss substantially exceeding any sum paid under rule 3, the Court may order that the party who requested the issue of the subpoena pay to the person named an amount in respect of the expense or loss.

(2) Subrule (1) of this rule shall not apply to a subpoena issued before 26 October 1988.

(3) This rule shall take effect on and from 26 October 1988.”


The applicability of this rule is confirmed by rule 1.3(2) of the Supreme Court (Corporations) Rules .

37 The plaintiff says two things about this application: first, that the rule does no more than permit an order for the payment of “an amount in respect of the expense or loss” and does not contemplate an order for costs in the ordinary sense, with those costs being assessed in the usual way (indeed, it does not refer to costs at all); and, second, that before the court could make an order that “an amount in respect of the amount or loss” be paid, it would have to have before it evidence warranting a finding that the Guild had “reasonably” incurred “expense or loss” and of the amount thereof, so that any order made could be an order with respect to an “amount”.

38 This is, to my mind, too narrow a view of matters. Part 37 rule 9 has been held to represent but an aspect of a more comprehensive jurisdiction in respect of persons subjected to compulsion by the processes of the court in proceedings to which they are not parties. It is apposite to quote the following observation of Bryson J in Danieletto v Khera (1995) 35 NSWLR 684:

“The power of superior courts by subpoena to order witnesses to attend and persons to produce documents has existed for centuries and is based on the inherent power of the Court, because power to compel attendance and production is necessary for the determination of the facts on which decisions are based and for the attainment of justice. There can be no effective proof of facts unless attendance and production can be compelled. The power of the Court to issue subpoenas is restated in Pt 37, r 2 of the Rules, but neither that rule nor the rules generally should be taken as the exclusive or exhaustive statement of the powers of the Court relating to subpoenas. As persons who are subpoenaed have a legal duty to obey the subpoena and to attend they cannot make effectual and binding contractual arrangements for payment of their expenses with the parties who require their attendance;
there would be no contractual consideration for such arrangements. However such persons have an entitlement against the parties who subpoenaed them to be paid their expenses and that entitlement has been recognised and enforced by courts incidentally to the conduct of proceedings in various ways, such as by rules of court which require tender of conduct money and by enforcement of actions by witnesses against parties who have
subpoenaed them on the common money counts, although any contractual element must be fictitious. Enforcement is justified on the basis that there is a legal obligation to pay those expenses. There have at least in the past also been measures of enforcement by other quaint means such as by declining to compel a witness to give his evidence until he has been paid his expenses.
Some of the old case law is referred to in the notes to Pt 37, r 3 in Ritchie's Supreme Court Procedure New South Wales . In my opinion it is not the only recourse available to a witness that a witness should sue in a common law action for his expenses; the court's inherent power to administer justice includes as an incident of the subpoena power the power to order a party to pay such expenses and to assess the amount. I am not aware of any reported
authority for the making of such orders, but I have long experience of their having been made. The law would be ineffectual if the court could bring a trial to a halt and not require a witness to speak until the witness is paid, but did not have power to carry on and make an order that the witness be paid, and later to enforce that order.”

39 Bryson J later said:

“The right approach in my view is that the Court
decides whether to order a witness to attend, and ought to do so on a basis which is just to the witness, and it is not just to make the witness give attention to someone else's litigation without being paid for his time. In my opinion resort to principle shows that it is a necessary incident of the exercise by the Court of its subpoena power that the Court should deal with the question of paying persons whose time and attention are involved in the exercise, and the Court has power to order payment of expenses incurred by
witnesses and also compensation for their time, whether before or after the subpoena is complied with, and whether or not it is complied with or set aside or compliance is dispensed with. A limit to compensation for time actually spent in attendance at court is not reasonably based whether for professional persons or for any others. If the Court is invoked by a party to use public power to compel a person to give attention to preparation to hear
litigation, there is a just entitlement to payment for the time of the person whose attention is thus required and whose liberty and freedom of action are thus interfered with. A law which entitled a party to conscript the time and attention of others without paying for it would be oppressive. It would also be very poor policy as it would tend to generate resistance to the ordinary administration of justice. Rules of court which apply in most cases entitle witnesses to be paid for their time as well as their expenses, and the same result should follow in the present case notwithstanding that close attention to the exact terms of the rules of court has revealed that this is an interstitial case with which they do not deal.”

40 The extent to which a person subjected to subpoena should be given a right to recover costs of obtaining legal assistance in connection with compliance (including advice on matters of confidentiality) was the subject of comment by Young J in Triotas Pty Ltd v Rohn (NSWSC, unreported, 20 May 1993). His Honour expressed a tentative view that legal advice on confidentiality issues was “not in connection with complying with the subpoena, but rather in respect of the private rights which are threatened by the issue of the subpoena”. In Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77, Levine J did not accept that approach as appropriate to the circumstances before him. He saw the subpoena as having “triggered, in my view, properly, considerations in relation to ‘private rights’ which could be compromised or affected by the issue of the subpoena constituting an order of the court”. Levine J accepted that the applicant before him (the subpoenaed person) was entitled to be recompensed for the obtaining of legal advice ”in relation to what clearly were, I accept, complex and delicate questions in respect of privilege and confidentiality”.

41 The principal order made by Levine J was as follows:

“The defendant is to pay the applicant's costs of obtaining legal advice including the opinion of senior counsel concerning compliance with the subpoena served on the applicant on 16 April 1999 and costs of and incidental to the compilation of and preparation of the production to the Court of the materials called for by the subpoena and the costs of that production, in accordance with these reasons.”

42 This, it seems to me, may be seen as reflecting either a particular view as to the meaning of “amount” in Part 37 rule 9 or an exercise of the aspect of the court’s inherent jurisdiction to which Bryson J referred in Danieletto v Khera. In the end, I do not think it matters, although the former would be consistent with the result in Kumagai Australia Finance v Avarton Ltd (NSWSC, unreported, Bryson J 7 June 1991):

“Accordingly, I propose to refer the assessment of the amount payable to a Deputy Registrar as referee pursuant to pt72, the question referred being the determination of the amounts payable to each applicant pursuant to pt37 r9, but I will refer it with the expression of opinion that insofar as legal costs are part of the applicants’ claims it would be appropriate to determine them on the solicitor and client basis in pt52 r33, except that the references to the approval of the client and warnings to the client in subrs (2), (3) and (4) are not applicable.”

43 I am satisfied that, in the present case, the Guild’s role in responding at short notice to a subpoena covering a substantial quantity of documents and raising issues of confidentiality and the need to assess them warrants an order that its reasonable legal costs of complying with the subpoena be paid by the plaintiff, being the party which caused the relevant legal compulsion to be imposed upon the Guild. I am satisfied that an order for costs as such may and should be made, without any need for the Guild to claim and the court to award some defined and fixed sum. I am also satisfied that costs so awarded will properly be regarded as “costs” as defined by s.3 of the Legal Profession Act 1987 so that, if there is no agreement as to quantum and payment, the assessment process initiated by an application under s.202 of that Act will be available. As to quantification, the approach in Marsden will therefore be appropriate, rather than that in Kumagai which case, in any event, predated the present costs assessment system introduced by the Legal Profession Reform Act 1993. To this, however, I make one qualification: particularly in view of the actual application made by the Guild, assessment should be on the party/party basis as in Kumagai, rather the indemnity basis as in Marsden.

Conclusion

44 The only order that will be made in response to the applications by Faulding, the Guild and the PwC clients is an order in 5062/03 in favour of the Guild and against the plaintiff as just outlined. A form of order that may be appropriate, having regard to the order made in the Marsden case, is:

“Order that the plaintiff pay the costs of the Pharmacy Guild of Australia of obtaining legal advice (including any opinion of counsel) concerning compliance with the subpoena (originally styled notice to produce) dated 26 September 2003 and served on it by the plaintiff and costs of and incidental to the compilation and preparation of the production of the materials called for by the subpoena and the costs of that production, all such costs to be assessed on the party/party basis.”

I shall, however, defer pronouncing any order until both the plaintiff and the Guild have had an opportunity to make any submissions they consider appropriate in relation to the precise form of the order.
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Last Modified: 03/09/2004