Supabarn Supermarkets Pty Limited v Cotrell Pty Ltd [No. 2]
[2014] ACTSC 12
•18 February 2014
SUPABARN SUPERMARKETS PTY LIMITED v COTRELL PTY LTD [No. 2]
[2014] ACTSC 12 (18 February 2014)
PROCEDURE – Costs – costs associated with receipt of subpoena – addressee of subpoena not a party to proceedings – subpoena widely drawn – issuer not willing to discuss narrowing scope of subpoena – application to set aside subpoena – issuer agreed to negotiate – after negotiations, two redacted documents agreed to be produced – confidentiality orders made by consent limiting access to lawyers and expert witnesses and excluding access by clients –costs orders made in respect of reasonable costs of complying with subpoena; costs of disputing subpoena; costs of application to set aside subpoena.
Court Procedures Rules 2006 (ACT) rr 6601, 6604, 6611
Charlick Trading Pty Ltd v Australian National Railways Commission (1997) 149 ALR 647
Taylor v Dixon Advisory (2010) 5 ACTLR 146
No. SC 1030 of 2009
Judge: Penfold J
Supreme Court of the ACT
Date: 18 February 2014
IN THE SUPREME COURT OF THE )
) No. SC 1030 of 2009
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:
SUPABARN SUPERMARKETS PTY LIMITED
Applicant
AND:
COTRELL PTY LTD
Respondent
ORDER
Judge: Penfold J
Date: 4 October 2013
Place: Canberra
THE COURT ORDERS THAT:
Supabarn pay Woolworths’ costs as follows:
(a) Any reasonable loss or expense incurred by Woolworths in complying with the subpoena, including in particular the reasonable costs of obtaining advice on matters relating to the confidentiality of the material sought, and of obtaining the confidentiality order in respect of the material produced, those costs to be paid on an indemnity basis.
(b) To the extent not covered by order (a), any reasonable losses or expenses incurred by Woolworths in respect of:
(i) obtaining advice about the validity of the subpoena and the extent of compliance required;
(ii) correspondence with or attendances on Supabarn about its terms, including anything done with a view to narrowing or clearly identifying the scope of the subpoena, whether before or after the filing of the application to set aside the subpoena; and
(iii) attendance in court in relation to the return of the subpoena;
those costs to be paid on an indemnity basis.
(c) The costs of Woolworths’ application to set aside the subpoena, including attendances at court in relation to the application, those costs to be paid on a party/party basis.
(d) The costs of this application for costs, those costs to be paid on a party/party basis.
IN THE SUPREME COURT OF THE )
) No. SC 1030 of 2009
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:
SUPABARN SUPERMARKETS PTY LTD
Plaintiff
AND:
COTRELL PTY LTD Defendant
Judge: Penfold J
Date: 18 February 2014
Place: Canberra
REASONS FOR JUDGMENT
Introduction
On 4 October 2013, I made costs orders arising out of the issue of a subpoena to a third party in proceedings between Supabarn Supermarkets Pty Limited (Supabarn) and Cotrell Pty Ltd (Cotrell) (SC2009/1030), and said I would provide reasons later. These are my reasons.
Supabarn has taken action against Cotrell in respect of alleged breaches of contracts between the parties relating to Supabarn’s lease of supermarket premises from Cotrell, the owner of a shopping centre in the Canberra suburb of Kaleen. The damages claimed include damages reflecting profits that would have been made by Supabarn but for the asserted breaches of contract.
Background
The subpoena
On 24 July 2013 Supabarn served a subpoena on Woolworths Ltd (Woolworths), another supermarket operator, seeking:
All reports, memoranda or other documents prepared by any officer of Woolworths Limited in 2011 in support of any submission that Woolworths Limited develop a liquor store and supermarket at Giralang in the Australian Capital Territory.
Giralang is a Canberra suburb that adjoins Kaleen.
The letters
On 1 August 2013, Woolworths’ solicitors wrote to Supabarn’s solicitors resisting the subpoena, and specifically questioning how the material sought could be relevant to Supabarn’s case. The letter noted that, having regard to the pleadings in Supabarn’s claim against Cotrell:
the documents sought under the Subpoena do not appear to bear any conceivable relevance to the issues in dispute in the Proceedings. Accordingly, and in light of the nature of the documents your client seeks, the Subpoena is oppressive, unreasonable and liable to be set aside.
On 2 August 2013, Supabarn’s solicitors replied, referring to the expert report prepared by Peter Leyshon for Cotrell, which was relevant to the damages sought by Supabarn, and to Mr Leyshon’s view that, having regard to the local competition, a refurbished Kaleen shopping centre would not achieve any increase in sales, and concluded:
Your client’s assessment of the likely sales which it could achieve if it was able to establish a supermarket 1km distance from the Kaleen Plaza is relevant to the correctness or otherwise of Mr Leyshon’s claims.
On 22 August 2013, Woolworths’ solicitors wrote again to Supabarn’s solicitors, this time going into more detail in support of their refusal to provide documents as described:
First, if your client wishes to impugn the matters contained in the expert report of Mr Leyshon, it should do so by reference to the materials and assumptions relied upon by Mr Leyshon for his report and our client’s subjective opinion in relation to the proposed development at Giralang is not of any probative value to that exercise. Your client and any expert witnesses retained by your client are more than capable of conducting their own analysis of the likely sales of any proposed supermarket at Giralang, and are not permitted to resort, at first instance, to the confidential and commercially sensitive documents of our client.
Second, the Subpoena requires production of documents that are in no way limited, or relevant, to an “assessment of the likely sales”. For example, it is unclear to our client why only documents in 2011 are said to be relevant to the issues in dispute in the Proceedings. In the circumstances, the Subpoena can only be regarded as an impermissible fishing expedition by your client.
In any event, our client disputes that documents concerning its subjective beliefs as to likely sales are relevant to the question of loss, in circumstances where the construction of any supermarket at Giralang has not even commenced and details of that development have not been finalised.
The letter concluded with a request to Supabarn to withdraw the subpoena, and “notice” that if Woolworths needed to make an application to have the subpoena set aside, it would incur costs of about $12,000, and would seek to recover them from Supabarn.
On 23 August 2013, Supabarn’s solicitors replied by email in the following terms:
My client’s position is that the subpoena, as served, is relevant to the matters in question in the current Proceedings. I reject your suggestion that this is a fishing expedition.
Your letter has not altered my client’s position in relation to the subpoena and we intend to press it.
The set-aside application
On 30 August 2013, Woolworths filed an application (the set-aside application) to have the subpoena set aside, and seeking costs.
Woolworths’ application was listed to be heard before me at the beginning of the trial between Supabarn and Cotrell scheduled to start on 16 September 2013. On 12 September 2013, following discussions with Supabarn, Woolworths agreed to produce two documents, entitled “The Giralang Property Submissions Papers”, with substantial redactions. On 16 September, I made orders by consent (the confidentiality orders) restricting access to those documents to solicitors and counsel for the parties and experts engaged by the parties, and explicitly excluding the parties themselves from access without further order of the Court.
Relevant legislation
The relevant rules are rr 6601, 6604 and 6611 of the Court Procedures Rules 2006 (ACT), which are as follows:
6601 Issuing subpoena
(1)In any proceeding, the court may by subpoena order the addressee to do either or both of the following:
(a)to attend to give evidence as directed by the subpoena;
(b)to produce the subpoena or a copy of it and any document or thing as directed by the subpoena.
(2)An issuing officer must not issue a subpoena—
(a)without the court’s leave if it appears to the issuing officer that the subpoena—
(i) is not substantially complete; or
(ii) does not substantially comply in form with these rules; or
Note The registrar may refuse to accept a subpoena for filing under r 6142 (Rejecting documents—abuse of process etc).
(b)if the court has made an order, or there is a provision of these rules, having the effect of requiring that the proposed subpoena—
(i) not be issued; or
(ii) not be issued without the court’s leave and the leave has not been given; or
(c)requiring the production of a document or thing in the custody of the court or another court.
Note Pt 6.2 (Applications in proceedings) applies to an application for leave for this subrule.
(3)The issuing officer must seal, or otherwise authenticate, a sufficient number of copies of the subpoena for service and proof of service.
(4)A subpoena is taken to be issued on its being sealed or otherwise authenticated under subrule (3).
6604 Setting aside subpoena or other relief
(1)On the application of a party or someone else having a sufficient interest, the court may set aside a subpoena completely or partly, or grant other relief in relation to it.
Note Pt 6.2 (Applications in proceedings) applies to an application under this rule.
(2)A copy of the application must be served on the issuing party.
(3)The court may order that the applicant give notice of the application to any other party or anyone else who has a sufficient interest.
6611 Costs and expenses of compliance with subpoena
(1)This rule applies if the addressee for a subpoena in a proceeding is not a party to the proceeding.
(2)The court may order the issuing party to pay the amount of any reasonable loss or expense incurred in complying with the subpoena.
Note Pt 6.2 (Applications in proceedings) applies to an application for an order under this rule.
(3)If an order is made under subrule (2), the court must fix the amount or direct that it be fixed according to the court’s usual procedure in relation to costs.
(4)An amount fixed under this rule is separate from and additional to—
(a)any conduct money paid to the addressee; and
(b)any witness expenses payable to the addressee; and
(c)any amount that the addressee is entitled to under rule 1722 (Costs—solicitors’ costs generally).
The costs application
Woolworths sought costs associated with the subpoena process. In the course of argument the following three categories of costs were identified:
(e) the direct costs of compliance with a subpoena, which were described in Taylor v Dixon Advisory (2010) 5 ACTLR 146 (Taylor) at [36] as including the costs of:
searching for, collating, copying if necessary (for example, to enable business to continue while the documents are produced and inspected), and producing the documents.
(f) the costs of, in general terms, disputing the subpoena; and
(g) the costs of the application to set aside the subpoena.
Direct costs of compliance
The parties to the costs application agreed that Supabarn should pay Woolworths’ reasonable costs of complying with the subpoena, and that these should be paid on an indemnity basis (that is, Woolworths should be reimbursed for its actual costs of compliance, to the extent that those costs are reasonable; Taylor at [45]).
Supabarn did not object to the proposition that in this case Woolworths was also entitled to the reasonable costs of obtaining the confidentiality orders (Taylor at [47], fourth bullet point).
Costs of disputing the subpoena
As well as the direct costs of compliance, Woolworths wanted the costs of the legal advice it obtained about the validity and extent of the subpoena, and about resisting the subpoena, and it wanted these to be treated as costs of compliance and also ordered to be paid on an indemnity basis. Specifically, Woolworths sought orders for Supabarn to pay its costs of:
(a) obtaining advice about the validity of the subpoena and the extent of compliance required; and
(b) the correspondence about the scope of the subpoena.
Supabarn opposed these orders, submitting that not only should Woolworths not recover these costs on an indemnity basis but that they should not be recoverable at all.
Costs of set-aside application
Woolworths sought the costs of filing the set-aside application, but on a party/party basis.
Supabarn said that it should not be responsible for any of the costs of the set-aside application, because the application was based on the misconception that none of the material described in the subpoena was relevant.
Consideration
General comments
In considering the costs in dispute between Supabarn and Woolworths, I note first that the law in the ACT permits parties to litigation to make demands of uninvolved third parties to produce documents or to give evidence (r 6601), presumably in the interests of ensuring that disputes being dealt with in the courts are resolved by reference to relevant information. The law now also seeks to ensure that those third parties are not disadvantaged by being drawn in to the disputes of others, by providing for the court to set aside a subpoena in whole or in part (r 6604), and for the court to order the payment of the reasonable costs of complying with the subpoena (r 6611). Refshauge J in Taylor at [33] refers to the common law approach to the costs of complying with the law, as described in Triotas Pty Ltd v Rohn (NSWSC 1903 of 1993, Young J, 20 May 1993, unreported), but also (at [38] to [40]) to authorities about the entitlement to reimbursement for the actual costs of compliance. To the extent that the law does not provide for reimbursement of any particular costs of complying with a subpoena, the obligation on the litigant to act reasonably in drafting and issuing a subpoena that might expose the recipient to such costs would seem to be heavier.
Those assumptions about the purposes of the law relating to the issue of subpoenas to third parties underlay my reasoning in this matter.
First, they suggested to me that a litigant who seeks to involve a third party should act reasonably in so doing, with particular regard to the need to avoid inconveniencing the third party more than is absolutely necessary in the interests of justice. The expectation that the litigant will reimburse the third party for its costs of complying with the litigant’s demands might be expected to provide a real incentive to the litigant to behave reasonably, but if a litigant fails to behave reasonably, the costs payable to the third party should not be limited by reference to the costs that might reasonably have been incurred by the third party in dealing with a reasonable litigant.
The recipient of a subpoena is also in my view obliged to act reasonably in responding to the subpoena, although not necessarily to be particularly helpful.
Costs of compliance
The costs of compliance with a subpoena will be met by the issuer to the extent that they are reasonable (r 6611(2)). As noted, Supabarn did not dispute an order awarding these costs to Woolworths, covering the direct costs of compliance as described at [14(a)] above and the costs of ensuring a degree of confidentiality for the documents produced (at [16] above).
Costs of disputing the subpoena
As to the costs of disputing the subpoena, I note first that the original subpoena, which was very widely expressed (except to the extent that it limited the demand to material produced in 2011), could have covered a large number of documents and might, depending on how Woolworths’ filing systems are organised, have required considerable searching by Woolworths. It was also apparent that the subject-matter of the demand, Woolworths’ proposal to open a liquor store and supermarket in Giralang, might have covered a variety of material that Woolworths would in ordinary circumstances have wished to keep confidential from a direct business competitor such as Supabarn (which already operated a full-line supermarket in the adjoining suburb of Kaleen that would be in direct competition with any supermarket opened by Woolworths in Giralang). That circumstance was reflected in the confidentiality orders ultimately made by consent in relation to the documents that were produced by Woolworths (at [12] above).
It seems that where a subpoena is disputed, the costs of disputing it will be payable by the issuer to the extent that it was reasonable to dispute the subpoena and to the extent that those costs are reasonable.
Refshauge J in Taylor quoted from Charlick Trading Pty Ltd v Australian National Railways Commission (1997) 149 ALR 647 at 649, in which Mansfield J said:
There are a number of decisions of the Court where orders have been made under O 27 r 4A, including the decision of Lockhart J in Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 to which I was referred, and more recently, the decision of Hill J in Hadid v Lenfest Communications Inc (1996) 65 FCR 350; 144 ALR 73. In my view, they establish that the scope of the rule is sufficient to encompass, if the expense is otherwise reasonable in the circumstances, the expense incurred in seeking advice as to the validity of the subpoena, including whether to comply with it at all or in part; correspondence or attendances on a party issuing the subpoena, regarding its terms, and including with a view to narrowing or clearly identifying the scope of documents to be produced; advice as to whether documents are confidential or properly subject to claims for privilege; correspondence and attendances and negotiations with the party issuing the subpoena, as to the terms upon which access to the documents should be permitted by the Court, including the negotiation of and formulation of any undertakings as to confidentiality; attendances in Court when the subpoena is called on or when it is stood-over, including attendances to assert and make out any claim that the documents subpoenaed should be protected from unrestricted access due to their confidential character and to seek orders restricting access to the document or documents produced; and steps to ensure that any confidentiality undertakings proposed to be entered into have, in fact, been properly given: Hadid's case. That list may not be exhaustive.
That is, Mansfield J identifies, as actions that may be reasonable on the part of the addressee of the subpoena, the following:
(a) seeking advice as to the validity of the subpoena, including whether to comply with it at all or in part;
(b) correspondence with or attendances on a party issuing the subpoena about its terms, including with a view to narrowing or clearly identifying the scope of documents to be produced;
(c) advice as to whether documents are confidential or properly subject to claims for privilege;
(d) correspondence and negotiations with and attendances on the party issuing the subpoena, as to the terms upon which access to the documents should be permitted by the court, including the negotiation of and formulation of any undertakings as to confidentiality;
(e) attendances in court when the subpoena is called on or when it is stood-over, including attendances:
(i) to assert and make out any claim that the documents subpoenaed are confidential and therefore should be protected from unrestricted access; and
(ii) to seek orders restricting access to the document or documents produced; and
(f) steps to ensure that any confidentiality undertakings proposed to be entered into have, in fact, been properly given.
For each of these actions, if it is reasonable in the circumstances, reasonable costs will be payable. Thus, the question was which of Woolworths’ actions in disputing the subpoena were reasonable in the current circumstances.
I could see no basis for saying that it was unreasonable of Woolworths to seek legal advice about the subpoena rather than simply undertaking the search and handing over possibly commercially confidential information to a commercial competitor. In these circumstances, I considered that the reasonable costs of obtaining initial legal advice about the subpoena, which required among other things a consideration by Woolworths’ advisers of the pleadings in Supabarn’s action against Cotrell, were expenses legitimately incurred in complying with the subpoena.
Furthermore, given the breadth of the original demand, I could not see that Woolworths or its legal advisers, although neither positively helpful nor even conciliatory, acted unreasonably in simply resisting the subpoena initially (at [6] above) rather than seeking to negotiate a narrowing of its terms.
Supabarn’s response to Woolworths (at [7] above) did attempt to explain why it considered that some material held by Woolworths might be relevant to the litigation, but it made no attempt to narrow the terms of the subpoena in accordance with its explanation of relevance, and nor did it even hint at a willingness to discuss a possible narrowing. The tone of the letter indicated no recognition at all of the inconvenience it was likely to cause to Woolworths, or of Woolworths’ possible concerns about being asked to release commercially sensitive material to a competitor. Accordingly, I did not consider it was unreasonable for Woolworths to deal with this letter by seeking further legal advice.
Woolworths’ reply to Supabarn produced as a result of seeking the further legal advice (at [8] above) was, again, not at all conciliatory. However, it did set out in some detail Woolworths’ objections to the subpoena, including objections (possibly valid) to the probative value of the Woolworths sales estimates, objections to the breadth of the subpoena in that it went beyond sales estimates, questions about the significance of the demand for only 2011 documents and whether this indicated that the subpoena was in fact “an impermissible fishing expedition”, and an objection (possibly misconceived) to the demand for sales estimates on the ground that the contemplated Giralang development had not been started and nor had its details even been finalised.
Supabarn’s response (at [10] above) was also not conciliatory. It simply restated that the subpoena as served was relevant, denied that it involved a fishing expedition, and emphasised that Woolworths’ second letter had not induced any reconsideration on Supabarn’s part, nor even any willingness to negotiate about the details of the demand. In response to Woolworths’ request to withdraw the subpoena, the Supabarn letter concluded:
Your letter has not altered my client’s position in relation to the subpoena and we intend to press it.
At that point, Woolworths was in my view within its rights to believe that there was no further scope to negotiate with Supabarn, and that an application to have the subpoena set aside was its only option.
That application was filed a week later, and appears to have overcome Supabarn’s resistance to any negotiations about the scope of the subpoena. As noted at [12] above, two days before the day on which the application was to be heard, and following discussions, Woolworths agreed to produce two documents, with significant redactions, and subject to confidentiality orders prohibiting the provision of the documents to the parties themselves.
As I have noted, Woolworths’ responses to the subpoena and to Supabarn’s subsequent letters were not conciliatory, and they certainly did not involve any attempt to comply or to cooperate. However, in the light of what I have already identified as unreasonable behaviour by Supabarn, first in drawing the subpoena too widely and secondly in refusing, until after the application to set aside was filed, not just to make any concessions in response to Woolworths’ objections but even to talk about whether those objections could be addressed, I could not see that it was Woolworths’ responsibility to continue to pursue negotiations with Supabarn.
Counsel for Supabarn argued against the order sought by Woolworths in relation to the costs of obtaining legal advice on the basis that:
(a) Woolworths’ objections on the grounds of relevance were misconceived, and were not objections to the width of the subpoena or an attempt to narrow its scope; and
(b) in any case costs are not to be awarded for legal advice if the advice is incorrect or it turns out that the documents should have been produced without debate.
Counsel for Supabarn expanded on this latter argument by saying that the advice Woolworths received was wrong and so Woolworths had acted unreasonably in resisting the subpoena because it turned out that the documents should have been produced without debate. This argument was pressed despite counsel’s concession that if Woolworths had simply complied with the terms of the subpoena, it would have produced more than it eventually did.
There are several responses to this argument.
First, it seems that Woolworths’ original objection on the grounds of relevance was made after Woolworths’ legal advisers had examined the pleadings in the litigation. The pleadings in this matter, and particularly the way in which Supabarn seeks to establish its damages for the claimed breaches of contract, are relatively opaque, and some of the arguments sought to be made in reliance on the pleadings are by no means obvious; there was in the circumstances nothing unreasonable about an initial, global, objection on the grounds of relevance, notwithstanding that, after Supabarn’s first letter and as a result of negotiations after the application was filed, it was apparently possible to identify two documents parts of which were appropriately produced in response to the subpoena.
Secondly, I did not consider that Woolworths was primarily responsible for seeking to narrow the scope of the subpoena; Supabarn was initially responsible for drafting the subpoena so as to avoid putting Woolworths to unnecessary inconvenience, and in my view it was also responsible for indicating a willingness to negotiate once Woolworths, having examined the pleadings, challenged the relevance of the material sought.
Finally, I could see no basis for finding that the legal advice obtained by Woolworths was incorrect (if in fact the correctness of the legal advice is a relevant test, as to which I have some reservations). The fact that Woolworths, after negotiations, agreed to produce two redacted documents, on the basis that they would not without further order of the court be made available to Supabarn but only to its legal advisers and experts, does not prove that any of Woolworths’ legal advice was wrong or that it acted unreasonably in resisting the original, very broad, subpoena. It was possible, for instance, that Woolworths received entirely defensible legal advice that the subpoena might have been able to be set aside in its entirety, and equally defensible advice that Woolworths’ own interests could however be protected just as effectively by releasing the two documents concerned, suitably redacted and subject to confidentiality requirements, and that such a compromise would better protect Woolworths’ claim for costs.
I was satisfied that Woolworths’ response to the subpoena, and its role in the exchanges with Supabarn, were reasonable in the circumstances, and that the reasonable costs of Woolworths’ actions in disputing the subpoena should therefore be met by Supabarn.
Costs of set-aside application
Woolworths also sought the costs of the set-aside application to set aside the subpoena, but only on a party/party basis.
Supabarn opposed the making of such an order, on the basis that the application was based on the misconception that none of the material sought by the subpoena was relevant in the litigation.
I rejected Supabarn’s proposition, noting that, despite the exchange of correspondence outlined at [6] to [10] above, it was only after the application was made that there was agreement, or even apparently any constructive discussion, about what needed to be produced. Nothing was put to me that raised any doubts about my assessment that the application was likely to have been filed not because of any misconception on the part of Woolworths about the relevance of material sought but because of what seemed to have been a well-founded belief, first that the subpoena as served was inappropriately wide and secondly that nothing short of filing an application would induce Supabarn to negotiate about what it could legitimately require Woolworths to produce.
I could see no reason why Woolworths should not have the costs of its application on a party/party basis.
Orders
Accordingly, I ordered that Supabarn was to pay Woolworths’ costs as follows:
(a) Any reasonable loss or expense incurred by Woolworths in complying with the subpoena, including in particular the reasonable costs of obtaining advice on matters relating to the confidentiality of the material sought, and of obtaining the confidentiality order in respect of the material produced, those costs to be paid on an indemnity basis.
(b) To the extent not covered by order (a), any reasonable losses or expenses incurred by Woolworths in respect of:
(iv) obtaining advice about the validity of the subpoena and the extent of compliance required;
(v) correspondence with or attendances on Supabarn about its terms, including anything done with a view to narrowing or clearly identifying the scope of the subpoena, whether before or after the filing of the application to set aside the subpoena; and
(vi) attendance in court in relation to the return of the subpoena;
those costs to be paid on an indemnity basis.
(c) The costs of Woolworths’ application to set aside the subpoena, including attendances at court in relation to the application, those costs to be paid on a party/party basis.
(d) The costs of this application for costs, those costs to be paid on a party/party basis.
I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of her Honour, Justice Penfold.
Associate:
Date:
Counsel for the plaintiff: Mr R M Smith SC
Dr D A Hassall
Solicitor for the applicant: King & Wood Mallesons
Counsel for the respondent/plaintiff: Mr R M Smith SC
Solicitor for the respondent/plaintiff: Snedden Hall & Gallop
Date of hearing: 16, 18 September 2013
Date of decision: 4 October 2013
Date of reasons: 18 February 2014
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