Warren F Ball and Co and Farrer

[2007] FamCA 1005

FAMILY COURT OF AUSTRALIA

WARREN F BALL & CO AND FARRER [2007] FamCA 1005

FAMILY LAW – COSTS - Costs of complying with a subpoena

Family Law Act 1975 (Cth)

National Employers Mutual General Association v Waind and Hill (1978) 1 NSWLR 372 at 381
Commissioner of Railways v Small (1938) 38 SR (NSW) 564
Lucas Industries v Hewitt (1978) 18 ALR 555
Green and Dwyer and Derek (2005) FamCA 1429
Fuel Express Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284
Bank of New south Wales v Withers & Anor (1981) 35 ALR 21 at 30

APPLICANT: Warren F Ball & Co

RESPONDENT: Ms Farrer

FILE NUMBER: SYF 5530 of 2003

DATE DELIVERED: 31 August 2007

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: O'Ryan J

HEARING DATE: 16 March 2007, affidavits and submissions

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Doak

SOLICITOR FOR THE APPLICANT: Warren F Ball & Co

SOLICITOR FOR THE RESPONDENT: Ms Morozov of Barkus Edwards Doolan

Orders

1. By 4.00 pm on 12 October 2007 the Wife pay to Warren F Ball & Co Solicitors the sum of $8,939.08.

2. The Wife pay to Warren F Ball & Co the costs of Warren F Ball & Co of and incidental to the application filed on 16 March 2007 such costs to be in an amount as agreed in writing between Warren F Ball & Co and the Wife by 4.00 pm on 12 October 2007 and failing such an agreement as taxed on a solicitor and client basis.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice O’Ryan delivered this day will for all publication and reporting purposes be referred to as Warren F Ball & Co v Farrer.

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 5530 of 2003

Warren F Ball & Co 

Applicant

And

Ms Farrer

Respondent

REASONS FOR JUDGMENT

Introduction

1. Before me for hearing is an application filed on 16 March 2007 on behalf of Warren F Ball & Co, Solicitors who I shall refer to as the solicitors.  The Respondent to the application is Ms Farrer who I shall refer to as the Wife. 

2. The solicitors seek that the Wife pay their costs of complying with a subpoena issued on the application of the Wife on 23 December 2004 against the solicitors.  The solicitors sought the amount claimed in an itemised costs account in the sum of $10,120.78 that was served on the Wife’s solicitors by letter dated 10 October 2006.  The amount now claimed is $8,939.08 as the Wife paid $2,553.51.  The solicitors also seek costs as agreed or as assessed of and incidental to the current application.  The application is opposed by the Wife.

3. I had a number of affidavits and detailed written submissions. 

Background

1. There were proceedings for property settlement and parenting orders between the Wife and Mr Farrer and others commenced by application filed on 12 December 2003.  The proceedings were settled and on 22 April 2005 final financial orders were made. 

2. On 23 December 2004 a subpoena issued on the application of the Wife addressed to the solicitors in relation to six entities and in addition the solicitors files in relation to 55 properties.  The subpoena required production of voluminous documents from in excess of 200 files.  The solicitors acted for the Husband and the Wife for a period of in excess of ten years primarily in conveyancing matters and continued to be instructed in matters involving various companies.

3. On 11 January 2005 the subpoena was served on the solicitors and only $20 in conduct money was supplied. 

4. On 24 January 2005 the solicitors wrote to the Wife’s solicitors and advised as to the substantial costs involved in complying with the subpoena.  On the same day notice was given of an intention to seek security for the costs.

5. On 25 January 2005 Danuta Newson, who was an Associate Partner, with the solicitors swore an affidavit outlining the work involved and estimated the costs of compliance with the subpoena.  Ms Newson contended that a substantial amount of work had to be completed in order to comply with the subpoena and the solicitors sought “protection of its reasonable costs”.  It was contended that compliance with the subpoena required checking records including manual and electronic files for documents, drawing up lists of files, identifying the location of files, identifying files which had been destroyed being in excess of seven years old, retrieving files from archives and disks and from the Guildford offices, checking and processing each file including perusal of files for potential claims for legal professional privilege, printing files on disks and photocopying files not stored on disk.  Ms Newson said that her best estimate of the costs was $40,000.

6. On 25 January 2005 the solicitors for the Wife wrote to the solicitors and proposed that the return date of the subpoena and the issue of costs of compliance with the subpoena be adjourned to 7 February 2005.  However in the letter there was no indication of agreement to meet the reasonable costs and expenses of the solicitors complying with the subpoena.

7. The subpoena was initially returnable on 27 January 2005 and on that day by consent it was adjourned to 7 February 2005. 

8. On 4 February 2005 the solicitors for the Wife wrote to the solicitors and advised that the Wife opposed an application for security for costs of compliance with the subpoena.

9. The matter did not proceed on 7 February 2005 and was adjourned to 8 February 2005. 

10. Ms Newson said that she continued to locate and collate documents.  She also sought the advice of counsel.  Mr Stephen Stewart of counsel was briefed to appear on an application to the Court for additional time to comply with the subpoena and on the issue of costs.

11. On 8 February 2005 Mr Stewart appeared on behalf of the solicitors.  The solicitor for the Wife informed the Court that the subpoena was not pressed on that day and there was no agreement concerning the amount of conduct money being required to enable full compliance with the subpoena.  The matter was then adjourned to 15 February 2005.

12. The Wife’s solicitors then served an affidavit of the Wife sworn on 11 February 2005 detailing the circumstances giving rise to the issue of the subpoena and responding to the affidavit of Ms Newson of 25 January 2005.

13. On 14 February 2005 an affidavit was sworn by Ms Newson addressing the issues raised by the Wife about the work required to comply with the subpoena and the costs.  Ms Newson also set out the further work that would be required to comply with the subpoena and provided a revised estimate of the costs and expenses involved.  The Wife had indicated that certain documents were not required.

14. On 15 February 2005 the matter was adjourned to 18 February 2005.  Counsel appeared for the solicitors.

15. On 15 February 2005 an affidavit was sworn by Ms Morozov, the Wife’s solicitor, regarding compliance with the subpoena and the costs of compliance.

16. On 15 February 2005 the solicitors for the Wife wrote to the solicitors and set out their understanding of an agreement.

17. On 17 February 2005 Ms Newson swore an affidavit in reply to the affidavit of Ms Morozov sworn on 15 February 2005.  Ms Newson identified the files in relation to what she called “current litigation matters”.  She identified the conveyancing files with regard to a particular project.  She said there were 101 conveyancing files archived at an external storage facility.  She said that there were 19 conveyancing files previously archived which were under discovery in litigation and currently with counsel.  She said that there were approximately 50 files stored in the solicitors office.  She said that the cost of retrieving the files from the external storage facility was $20 for each file and in total would be $2,020 plus GST.  She estimated that it would take one member of her staff approximately three hours to record and assemble all of the stored files for delivery to the Court.  There would also be the fees of a courier company delivering the files to Court.  She said that there were 29 files stored on disk two of which were currently being scanned.  She estimated that the costs of reproducing these files onto disks would be in the vicinity of $200 plus GST.  I am not going to repeat all of what she said, however she went on to say that her firm had spent approximately 23 hours going through the matters register listing the files and determining their location as well as time spent corresponding with the Wife’s lawyers, briefing counsel, drafting, engrossing, filing and service of affidavits.

18. On 17 February 2005 the solicitors for the Wife wrote to the solicitors and advised that the Wife was prepared to pay $500.  On the same day the solicitors wrote to the solicitors for the Wife and rejected the offer.

19. The matter then came before me on 18 February 2005.  On 18 February 2005 Mr Doak of counsel appeared for the solicitors and sought payment of reasonable costs as set out in the affidavit of Ms Newson sworn on 17 February 2005.  I made the following orders:

    In relation to subpoena issued on behalf of the wife to Warren F Ball & Co

    9.      Orders in the terms of paragraphs 1 and 2 of a document titled “Minute Of Orders Sought by Wife In Relation To Subpoena Issued To Warren F Ball & Co” dated 18 February 2005 and initialled by me.

    “1.That compliance with the subpoena issued to The Partners, Warren F Ball & Co on 23 December 2004, be effected on the follow bases:

    1.1all files held at Messrs Warren F Ball & Co for current matters including any files the subject of discovery, are not to be produced to the Court on the basis that the wife, and her legal representatives, are permitted to inspect the files at Messrs Warren F Ball & Co upon reasonable notice and at reasonable times and no later than 14 days from the date of this Order;

    1.2all archived files that are stored on disk are, within 7 days, to be copied to a disk provided by the wife to Warren F Ball & Co and returned to the wife forthwith thereafter;

    1.3the balance of the archived files to be produced to the Court within 7 days.

    1.4liberty to apply on 24 hours notice.

    2.That in relation to the costs claimed by Warren F Ball & Co they are to prepare a bill in taxable form and serve same on wife’s solicitors to determine reasonableness or otherwise.”

    10.     The application by Warren F Ball & Co for costs of and incidental to compliance with the subpoena be adjourned and the parties have liberty to restore that application on giving reasonable notice to the Court and to all other affected parties.

    11.     D F pay the wife’s costs of and incidental to the application for substituted service filed on behalf of the wife on 4 February 2005 which costs I assess in the sum of $500.

    12.     D F pay the costs referred to in the preceding order within 28 days.

20. The trial was listed to commence on 11 April 2005 for a period of 10 days and in February 2005 I was concerned to ensure that it proceeded.  On behalf of the Wife it was submitted that the security application was abandoned.  I do not accept this submission.  At that time I was concerned that the documents be produced on the basis that I would later adjudicate on the issue of the reasonable costs of doing so and in my view the solicitors were entitled to proceed on the basis that the claim could include any legal costs incurred up to that point.

21. Arrangements were then made for the Wife’s legal representatives to inspect the current matters at the offices of the solicitors.  The archived files stored on disk were copied to disk.  The balance of the archived files were retrieved from storage including storage fees and produced to the Court.

22. As seen on 22 April 2005 final financial orders were made.

23. By letter dated 10 October 2006 the solicitors wrote to the Wife’s solicitors and enclosed an itemised costs account and made a request for payment within seven days. 

24. By letter dated 24 January 2007 the solicitors wrote to the Registry requesting that the matter be listed before me.

25. On 15 March 2007 Ms Newson swore an affidavit.  Ms Newson contended that as at 15 March 2007 her firm had not received a notice disputing the itemised account.

26. On 16 March 2007 the application was filed by the solicitors.

27. On 16 March 2007 I made the following orders:

    1.      The Respondent Wife file and serve within seven days a Response to the Application in a Case filed in Court today on behalf of Warren F Ball & Co.

    2.      The Wife file and serve within seven days of today any affidavits in support of the Response referred to in the preceding Order.

    3.      Warren F Ball & Co file and serve within a further seven days of receipt of the affidavits referred to in the preceding Order any affidavits in answer to the said affidavits.

    4.      Each of the parties lodge with my Associate within seven days of the filing of any affidavits in answer by Warren F Ball & Co pursuant to Order 3 hereof a written Outline of Argument.

    5.      The parties have liberty to restore the matter before me upon compliance with the above Orders.

28. On 23 March 2007 a response was filed by the Wife.  On 23 March 2007 an affidavit was sworn by the Wife. 

29. On 18 April 2007 an amount of $2,553.31 was paid by the Wife to the solicitors.  It was contended that this was the amount conceded by the Wife as reasonable costs.

30. On 20 April 2007 Ms Newson swore an affidavit in reply to the affidavit of the Wife of 23 March 2007.

31. On 20 April 2007 the solicitors gave notice to the Wife that the amount claimed was $8,939.08.

32. On 30 April 2007 I received an outline of submissions on behalf of the solicitors.

33. By letter dated 2 May 2007 I received an outline of case on behalf of the Wife.

Relevant principles

1. Part 15.3 of the Family Law Rules governs the procedure for the issue of subpoenas in proceedings in the Family Court.  The process to be followed in order to comply with the obligation to satisfy a subpoena for the production of documents was prescribed in National Employers Mutual General Association v Waind and Hill (1978) 1 NSWLR 372 at 381. See also Commissioner of Railways v Small (1938) 38 SR (NSW) 564 per Jordan J at 573-4.

2. In Lucas Industries v Hewitt (1978) 18 ALR 555 at 570 Smithers J, with whom Bowen CJ and Nimmo J agreed, said:

   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

3. In G and D & D (2005) FamCA 1429 Carmody J said:

   …[t]he subpoena is a compulsory process to aid the proper administration of justice between litigating parties.  For that purpose, the law imposes a legal duty on strangers to the action who have relevant knowledge or documents in their possession or control.  The procedure interferes with the enjoyment of private rights by third parties and can put them to considerable expense and effort.  Severe penalties are provided for non-compliance yet they are available to litigants as of right and issued ex parte by an administrative officer without judicial supervision.

4. A subpoena is an ex parte court order directed to a named person, requiring him or her to attend on a specified date to give evidence or to produce documents or do both of those things.  A subpoena cannot be amended after service (r 15.20) and remains in force until it is complied with or the witness is excused or released by the issuing party or the court from the obligation to do so (r 15.24(2) and 15.25(a), (b)).  Failure to strictly comply with a valid subpoena may lead to the issue of a warrant for arrest or proceedings for contempt, or both (see s 1112AP and r 15.36.1).

5. Rule 15.23 of the Family Law Rules provides as follows:

   (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.

   (2)     A named person served with a subpoena to give evidence and a subpoena to give evidence and produce documents is entitled to be paid a witness fee by the issuing party in accordance with Part 2 of Schedule 4, immediately after attending court in compliance with the subpoena.

   (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.

6. In order to ameliorate the burden and expense of compliance with a subpoena for production the rules of court provide that, at the time of service of a subpoena, conduct money is to be paid to the recipient.  The conduct money must be of an amount that is sufficient to meet the reasonable expenses of compliance and at least equal to the minimum amount in Pt 1 of Sch 4, viz, $10.00.  In Fuel Express Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284, Lockhart J discussed the rationale behind the rules requiring payment of conduct money to the recipient of a subpoena.

7. It was submitted, and I accept, that r 15.23(1) imposes a requirement that the party issuing the subpoena tender, at the time of service, sufficient conduct money to “meet the reasonable expenses of complying with the subpoena”.  In other words, it is not sufficient for the issuing party merely to tender the minimum amount referred to in paragraph (b).  Rather as the paragraphs are conjunctive, the requirement imposed by paragraph (a) of r 15.23(1) must also be met.

8. Rule 15.26(c) provides that if a named person seeks to be paid for any loss or expense relating to the production of a document in compliance with the subpoena the person must attend court to apply for the order.

9. Consistent with the general policy behind rules of court providing for payment of conduct money to third party recipients of subpoenas r 15.23 is directed to ensuring that the reasonable expenses of a third party complying with the subpoena is met by the tender of sufficient conduct money at the time of service of the subpoena and further, by providing an entitlement to the third party to seek reimbursement if the named person incurs a substantial loss or expense exceeding the amount of the conduct money tendered.  To that end pursuant to r 15.23(3) the person named by a subpoena is entitled to be reimbursed for loss or expense that is greater than the amount of the conduct money.

10. The court has discretionary power to order that the issuing party pay a third party who has been subpoenaed and who incurs substantial additional expense or loss in complying with a subpoena the amount needed to compensate him or her for such expense or loss (r 15.23(3)): Bank of New South Wales v Withers & Anor (1981) 35 ALR 21 at 30. It was submitted and I accept that the loss or expense that the person named may ask be reimbursed includes the expenses of finding, collecting, collating, marshalling and producing the documents or materials sought and for the incidental cost of attending the court. It may also include recovery of the costs of legal advice and representation in relation to documents under subpoena: see Fuel Express Ltd v LM Erickson Pty Ltd (supra).

Conclusion

1. The proceedings were commenced by an application filed on 12 December 2003. The property settlement proceedings were complex and involved extensive and valuable assets. The Husband and the Wife had accumulated considerable wealth. There were various companies and trusts involved including companies involved in the acquisition of property, the construction of units, villas and townhouses, and the sale or lease of properties. There were proceedings pursuant to s 85A of the Family Law Act 1975 (Cth) in relation to the assets of a trust.

1. The Wife said that the solicitors had acted for the Husband and the Wife and companies of which they were directors.  The solicitors had been instructed in relation to numerous conveyancing transactions and also litigation matters arising from property developments.  The Wife said that she had known both Warren Ball and Ms Newson for many years.  I accept the evidence of Ms Newson as to the amount of documentation that was covered by the subpoena.

2. The costs of the proceedings for final orders were very significant.  The Wife had costs including costs of the hearing and experts’ fees of in excess of $900,000.  The amount of evidence for the hearing was very considerable.  The Wife had sworn an affidavit that comprised 278 pages or 1,016 paragraphs.  This was in circumstances where the valuations were undertaken by a single expert and there was no issue that was the subject of expert evidence.

3. In these current proceedings the claim is for $10,120.78.  However I have had to read and consider nine affidavits and the written submissions.  I did not receive costs memorandums in accordance with the Family Law Rules but if history is any guide the costs may exceed the quantum of the amount in dispute.

4. Notwithstanding my delay in dealing with this matter it can be shortly disposed of.

5. The solicitors have an entitlement to seek appropriate orders from the Court in order to secure payment of reasonable expenses of complying with the subpoena.

6. I accept that the subpoena issued by the Wife initially sought a very large number of documents in relation to numerous developments carried out by the Husband, the Wife and various companies.  I also accept that compliance with the subpoena necessarily required the solicitors to locate, collate and produce such documents relating to the numerous developments in the solicitors possession and control.  I also accept that the steps taken by the solicitors to identify, locate, collate and produce the documents sought by the Wife were detailed in the affidavits of Ms Newson. 

7. The only conduct money tendered at the time of service of the subpoena was $20.  In view of the scope of the subpoena, I accept, and it is now accepted by the Wife, that this amount of conduct money was manifestly inadequate to cover the expenses likely to be incurred in complying with the subpoena. 

8. It was submitted that the Wife should have been aware of the extent of the documentation sought by the subpoena given her knowledge of the nature and extent of the property development carried out by the companies.  Indeed the Wife contended in the substantive proceedings that because of the Husband’s limited formal education the Wife carried out a major proportion of the paper work required in order to successfully complete the property developments.  It was submitted that in those circumstances it ought to have been clear to the Wife that the solicitors would potentially be put to significant expense complying with the subpoena issued by her.

9. I accept that upon receipt of the subpoena and conduct money of only $20 the solicitors were entitled to make an application to the Court for appropriate orders and in so doing seek the advice and assistance of counsel.

10. The solicitors set out the expenses likely to be incurred in complying with the subpoena in the affidavit of Ms Newson of 24 January 2005.  It was submitted that the Wife partly waived the obligation of the solicitors to comply with the subpoena on or about 11 February 2005 as set out in an affidavit of Ms Newson of 20 April 2007.  However, the solicitors were put to considerable expense in attempting to comply with the subpoena as originally issued before the Wife did so.

11. Ms Newson then prepared a further affidavit sworn on 17 February 2005 setting out the revised estimate of costs and expenses likely to be incurred in complying with the subpoena namely $16,000.  However, the Wife continued to dispute the costs and expenses sought.  On 17 February 2005 the Wife made an offer to pay $500.

12. The Wife accepts that she should meet the reasonable costs of the solicitors in complying with the subpoena.  The Wife also accepted that the solicitors were entitled to be paid the reasonable expenses of finding, collecting, collating, marshalling and producing the documents.  However it was submitted that the solicitors are not entitled to be paid in respect of the legal costs incurred in respect of the application for security for costs.  The Wife does not accept the legal costs incurred were reasonable.  The Wife also contends that she made certain proposals regarding production.

13. In the itemised account there are a considerable number of items between 17 January 2005 and 14 March 2005.  In her affidavit of 23 March 2007 being more than two years after the subpoena was served and almost six months after receipt of the itemised account the Wife said that she agreed to pay an amount of $2,553.31 being for some 33 items in the account.  She contends that the items relate to the production of documents to the Court and making files available for inspection.  The Wife contends that the amount of $2,553.31 relates to the finding, collection, collation, marshalling and production of the documents to the Court. 

14. The Wife said she was not prepared to pay the legal costs relating to the application for security for costs.  The Wife identified some 39 items that she was not prepared to pay for.  There are 138 items in the account. 

15. I have considered very carefully the items in the account and although I am not undertaking a taxation I have to be satisfied that the amounts claimed are reasonable. 

16. I have come to the conclusion that the amount claimed by the solicitors as expenses is reasonable.  I am also of the opinion that in the circumstances of this case the solicitors are entitled to the legal costs as set out in the itemised account and I accept the submissions made on behalf of the solicitors in relation to this category of the claim.

17. As to the costs of the application I am presently dealing with I am going to make an order that the Wife pay such costs in an amount as agreed or failing such agreement as taxed on a solicitor client basis.  As Lockhart J pointed out in Fuel Express Ltd v LM Erickson Pty Ltd (supra) it is not the case of a successful party to litigation seeking recovery of costs where the distinction of solicitor and client costs on the one hand and party and party costs on the other is observed by taxing officers.  It is a case of a third party seeking compensation for what it has actually cost it in expense or loss in complying with the subpoena and that includes the costs of the current application.

I certify that the preceding 64 paragraphs are
a true copy of the reasons for judgment
of the Honourable Justice O’Ryan

………………………………………………………..
Associate:    
Date: 31 March 2007