Vanguard Financial Planners Pty Ltd v Ale

[2017] NSWSC 196

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Vanguard Financial Planners Pty Ltd v Ale [2017] NSWSC 196
Hearing dates:	6 March 2017
Date of orders:	06 March 2017
Decision date:	07 March 2017
Before:	Gleeson JA
Decision:	The first defendant to pay the costs of the plaintiffs’ Notice of Motion dated 20 February 2017.
Catchwords:	PROCEDURE – Costs – Interlocutory proceedings – where claim of privilege maintained in relation to subpoenaed documents – where consent orders permitting access ultimately made after complete capitulation of earlier held position – whether appropriate to order costs in favour of party filing motion to obtain access
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 56 Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 42.7
Cases Cited:	Australian Securities and Investment Commission v Rich [2003] NSWSC 297 Gambro Pty Ltd v Fresenius Medical Care of Australia Pty Ltd [2002] FCA 581 R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13 Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622
Category:	Costs
Parties:	Vanguard Financial Planners Pty Ltd ACN 143 411 689 (First plaintiff) Mark Andrew Pauling (Second plaintiff) Jason Ale (First Defendant) Vanguard Accountants Pty Ltd ACN 117 612 316 (Second Defendant)
Representation:	Counsel: N Avery-Williams (Plaintiffs) S Tully (Defendants)   Solicitors: Harris Wheeler Lawyers (Plaintiffs) Roderick Storie Solicitors (Defendants)
File Number(s):	2016/106309

Judgment

1. GLEESON JA: By notice of motion filed 20 February 2017, the plaintiffs, Vanguard Financial Planners Pty Ltd and Mr Pauling, sought access to certain documents produced to the court on subpoena by Mr Crisp, an expert retained in the proceedings by the first defendant, Mr Ale. The access motion was returnable before the Court on 27 February 2017, when it was stood over to the Corporations Motions List on 6 March 2017. On that day, the parties reached agreement as to an access regime essentially in the terms sought by the plaintiffs in their motion. Those same terms had been proposed by the plaintiffs in correspondence with Mr Ale’s solicitors preceding the filing of the motion. The practical effect of the access orders made by consent on 6 March 2017 is that the plaintiffs will obtain access to a significant number of documents over which Mr Ale had previously made a claim for privilege.

2. There remains the issue of costs of the plaintiffs’ motion. The plaintiffs seek costs of the motion against Mr Ale. This is resisted by Mr Ale who submitted that there should be either no order as to costs, or alternatively costs should be costs in the cause.

3. The power to order costs is a discretionary power. The general rule as to costs is that costs follow the event unless it appears to the court that some other order ought to be made as to the whole or part of the costs: see r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Rule 42.7 deals with interlocutory applications. It provides that unless the court otherwise orders:

The costs of any application or other step in any proceedings … are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.

4. Counsel for the plaintiffs accepted that since there had been no hearing on the merits, the court would not ordinarily determine the substance of the access application in order to deal with a question of costs. Reference was made to the statement of McHugh J in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622 at 624 that:

"In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The Court cannot try a hypothetical action between the parties … In some cases, however, the Court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action."

When McHugh J said in Ex Parte Lai Qin that in an appropriate case a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed, he had in mind a case where the party seeking costs, in effect, has succeeded in obtaining the relief sought in the proceedings. This is made clear by his Honour’s earlier observations (at 624) that he was citing principles which

“govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means.” (Emphasis added)

5. His Honour illustrated the point by reference to R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13, a case in which the prosecutor in the proceedings was awarded costs up to the date the respondent (a council) notified the prosecutor that it would agree to the orders that had been sought.

6. The plaintiffs submitted that the present case fell within the exception mentioned by McHugh J - one party had acted so unreasonably that a costs order was appropriate. Related to this was the submission that the plaintiffs had wholly succeeded in obtaining the relief sought in the access motion.

7. Against this Mr Ale submitted that the present case fell within the observations of McHugh J in Ex parte Lai Qin (at 625) that:

“If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.”

8. His Honour had prefaced this statement with the qualification (at 625) that a costs order may be appropriate where the Court can be confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully determined. The plaintiffs did not suggest that the present case fell within that exception to the general proposition by McHugh J in Ex Parte Lai Qin.

9. In support of the competing submissions, both parties referred to the circumstances leading to the filing of the plaintiffs’ motion. Those circumstances can be briefly summarised as follows.

10. It is common ground that the subpoena addressed to Mr Crisp was served on 16 December 2016 and was returnable on 18 January 2017. On that date, or shortly thereafter, the plaintiffs sought access to documents produced under subpoena by Mr Crisp. Subsequently on 1 February 2017 orders were made by Senior Deputy Registrar Hedge that: (a) in respect of any claim for privilege by the defendants over material produced on subpoena by Mr Crisp, the defendants serve by 15 February 2017 an affidavit setting out a description of each document over which privilege is claimed and in relation to each, the basis for the claim of privilege, and (b) that if the parties were unable to resolve the question of access, the plaintiffs were to file a notice of motion by 20 February 2017.

11. An affidavit by Mr Ale sworn 15 February 2017 claiming privilege over certain subpoenaed documents was served on that date. Although that affidavit was not tendered by either party of the present application, it may be inferred from the consent orders made on 6 March 2017 that the privilege claim related to a significant number of documents.

12. The plaintiffs’ solicitors sent a letter by email to Mr Ale’s solicitors at 3.09pm on Friday, 17 February 2017 proposing consent orders for access to identified documents listed in paragraph 24 of Mr Ale’s affidavit. That letter provided detailed reasons as to why, it was contended, privilege either did not attach, or had been waived in respect of a number of the subpoenaed documents. In conformity with the earlier directions made on 1 February 2017, the plaintiffs filed their motion seeking access to such documents on Monday, 20 February 2017. The request for access in Schedule A to that motion was in the same terms as the request made by plaintiffs’ solicitors on the previous Friday.

13. There was correspondence between the parties’ solicitors on 22 and 23 February 2017. Relevantly, Mr Ale’s solicitors indicated in a letter to the plaintiffs’ solicitors on 23 February 2017, that they intended to consult with “his [Mr Ale’s] counsel as to whether the claim for privilege will be maintained in respect of every item. If it will not, an inspection on behalf of your client be (sic) arranged”.

14. It is common ground that there were discussions between the parties’ counsel on the first return of the motion on 27 February 2017. On any view, the consent orders which were ultimately made on 6 March 2017 represented a complete capitulation by Mr Ale to the relief sought by the plaintiffs.

15. Notwithstanding that history, counsel for Mr Ale submitted that Mr Ale’s conduct in dealing with the access dispute did not occasion unnecessary expense, that it was not the case that Mr Ale had wholly capitulated and that Mr Ale did not act unreasonably. In my view, none of these submissions should be accepted.

16. As to the first matter, it may be accepted that Mr Ale had only a short time to consider the plaintiffs’ proposed consent orders before the plaintiffs were required to file their motion on 20 February 2017. Nonetheless, Mr Ale’s solicitors, knowing of the earlier orders of the Court requiring any motion to be filed and served by the plaintiffs by 20 February 2017 in the event of any unresolved dispute as to access, did not communicate with the plaintiffs’ solicitors until after that time had passed. If Mr Ale required further time to re-consider the privilege claims which he had formally made only a few days earlier, his solicitors should have responded to the plaintiffs’ solicitors no later than the morning of 20 February 2017 and indicated that they required further time to consider the plaintiffs’ proposed consent orders and to that end they would consent to an extension of time for the filing of any motion by the plaintiffs if the dispute could not be resolved within a short period of time.

17. As to the second matter, contrary to Mr Ale’s submissions, this is a case where it may be said that Mr Ale wholly capitulated to the relief sought by the plaintiffs. It is not to the point, and it does not assist Mr Ale’s position, to refer to the fact that Mr Ale ultimately agreed to provide the whole of one of the identified documents, rather than redacted versions of that document as originally sought by the plaintiffs in their access motion. That concession by Mr Ale simply reinforced the capitulation which occurred in the present case.

18. As to the third matter, I am satisfied that Mr Ale acted unreasonably by not immediately responding to the plaintiffs’ proposed access orders and requesting further time to re-consider Mr Ale’s claims for privilege which had been disputed by the plaintiffs. The lack of an immediate response by Mr Ale’s solicitors in circumstances where they were aware of the earlier court directions for filing of any motion by the plaintiffs by 20 February 2017 if any dispute had not been resolved, was not consistent with facilitating the “just, quick and cheap resolution of the real issues in the proceedings”: Civil Procedure Act 2005 (NSW), s 56.

19. In oral argument, counsel for Mr Ale submitted that the plaintiffs’ access motion was unnecessary because Mr Ale’s solicitors had subsequently indicated in correspondence with the plaintiffs’ solicitors on 23 February 2017 Mr Ale’s willingness to re-consider his claims for privilege after obtaining counsel’s advice. This submission ignored that Mr Ale only indicated a willingness to re-consider his position after the plaintiffs’ access motion had been filed. This was a case where the plaintiffs’ had no choice than to file their motion seeking access to the subpoenaed documents.

20. Ordinarily, the Court will take into account the desirability of encouraging and not penalising the party who responds to an application by negotiating a compromise. Nevertheless, it is recognised that there are cases where it is appropriate for the Court to make a costs order, in circumstances where the parties have reached agreement to dispose of the substance of the application but there is no agreement as to costs: Australian Securities and Investments Commission v Rich [2003] NSWSC 297 at [79] (Austin J).

21. In my view, the lack of a timely response by Mr Ale to the plaintiffs’ proposed consent orders for access to the subpoenaed documents left the plaintiffs with no realistic option but to make the application. The consent orders ultimately agreed to by Mr Ale were inconsistent with his claims for privilege. The consent orders represented complete success for the plaintiffs on the access motion. The present case is not properly characterised as the kind of “constructive compromise” to which Tamberlin J referred in Gambro Pty Ltd v Fresenius Medical Care of Australia Pty Ltd [2002] FCA 581 at [26].

22. In all the circumstances, I am satisfied that the first defendant’s conduct in relation to the plaintiffs’ request for access to certain subpoenaed documents in respect of which Mr Ale did not ultimately seek to maintain his privilege claim, ought properly be characterised as unreasonable and deserving of an order for costs. Accordingly, I ordered on 6 March 2017 that the first defendant pay the costs of the plaintiffs’ notice of motion filed 20 February 2017.

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Amendments

10 March 2017 - Minor typographical amendments

Decision last updated: 10 March 2017