Zha & Wun (No 7)
[2024] FedCFamC1F 532
•9 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Zha & Wun (No 7) [2024] FedCFamC1F 532
File number(s): SYC 4269 of 2020 Judgment of: SCHONELL J Date of judgment: 9 August 2024 Catchwords: FAMILY LAW – COSTS – Where the third party objector sought a costs order against the wife in relation to a subpoena – Where both costs of compliance and legal costs are sought – Where the third party objector sought costs against the wife on an indemnity basis or alternatively costs in accordance with scale – Consideration of factors under s 117(2A) of the Family Law Act 1975 (Cth) – Where the Court is not satisfied there are exceptional circumstances warranting indemnity costs – Costs ordered in a fixed sum of $1,320 Legislation: Family Law Act 1975 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 6.34, r 6.35
Cases cited: Kohan & Kohan (1993) FLC 92-340
Moriarty & Moriarty (2009) 41 Fam LR 336
PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123
Penfold and Penfold (1980) 144 CLR 311
Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029
Division: Division 1 First Instance Number of paragraphs: 26 Date of hearing: 30 July 2024 Place: Sydney Counsel for the Applicant: Mr Richardson Solicitor for the Applicant: Pickering Pendleton Counsel for the Third Party Objector: Mr Butters Solicitor for the Third Party Objector: ClarkeKann Lawyers Counsel for the First Respondent: Did not participate Solicitor for the First Respondent: Did not participate Counsel for the Second, Third and Fourth Respondents: Did not participate Solicitor for the Second, Third and Fourth Respondents: Did not participate ORDERS
SYC 4269 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ZHA
Applicant
AND: MR WUN
First Respondent
MR A WUN
Second Respondent
MS YANG (and another named in the Schedule)
Third Respondent
DD PTY LTD
Third Party Objector
ORDER MADE BY:
SCHONELL J
DATE OF ORDER:
9 AUGUST 2024
THE COURT ORDERS THAT:
1.The applicant wife to pay the compliance costs of DD Pty Ltd in relation to a subpoena assessed in the sum of $1,320 such sum to be paid within 28 days of the date of these Orders.
2.The oral application of DD Pty Ltd for legal costs is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Zha & Wun has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
SCHONELL J:
The husband, wife and others are involved in highly contested financial proceedings in which judgment has been reserved.
As part of those proceedings, the wife caused a subpoena to issue to DD Pty Ltd (“the third party objector”) calling for the production of certain documents.
On 8 May 2024, the third party objector filed a Notice of Objection objecting to the subpoena in its entirety. Pursuant to directions made 17 May 2024, the Notice of Objection was listed for hearing before me on 25 June 2024. On that day the scope of the subpoena was narrowed in that the wife did not press certain parts. The parties thereafter made submissions. I thereafter dismissed the Notice of Objection and directed production. The third party sought the question of their costs be reserved to the last day of the substantive hearing. On that date, counsel for the third party objector and wife made submissions as to costs, both as to compliance and for legal costs.
The third party objector sought an order for costs incurred in compliance with the subpoena of $6,290.81 and legal costs of about $45,000 on an indemnity basis or alternatively $15,448.24 at scale. The wife opposed any order for legal costs. As to the cost of compliance, counsel for the wife accepted that $1,320.00 being the fees of an external IT provider retained by the third party objector were reasonable.
COSTS OF COMPLIANCE
In relation to the costs of complying, the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) provide as follows:
6.34 Order for cost of complying with subpoena
Subject to rule 6.35, the court may, on application, make an order for the payment of any loss or expense incurred in complying with a subpoena.
6.35 Cost of complying with subpoena if not a party
(1)This rule applies if:
(a)a subpoena is addressed to a person who is not a party to the proceeding; and
(b)before complying with the subpoena, the person subpoenaed has given the issuing party notice that substantial loss or expense would be incurred in properly complying with the subpoena, including a particularised estimate of the loss or expense; and
(c)the court is satisfied that substantial loss or expense is incurred in properly complying with the subpoena.
(2)Unless the court otherwise directs, the amount of the loss or expense estimated under paragraph (1)(b) is payable by the issuing party.
(3)The court may fix the amount payable having regard to the scale of fees and allowances payable to witnesses in the Supreme Court of the State or Territory where the person is required to attend.
(4)The amount payable is in addition to any conduct money paid.
(5)If a party who is to pay an amount under this rule obtains an order for the costs of the proceeding, the court may:
(a)allow the amount to be included in the costs recoverable; or
(b)make any other order it thinks appropriate.
A claim for “substantial loss or expense” of complying is quite separate to a claim for legal fees. In respect of the former Rules, Cronin J in Moriarty & Moriarty (2009) 41 Fam LR 336, observed:
47. The loss or expense that the recipient may seek includes the expenses of finding, collecting, collating, marshalling and producing the documents or materials sought and for the incidental cost of attending the court (Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284).
…
49. In some circumstances where a subpoena seeks production of complex materials or the recipient needs to obtain legal or accounting advice, he or she may also include a claim for recovery of the costs of that advice including representation.
…
57. The rules refer to a “substantial” loss or expense.
58. The determination of what is substantial is very subjective. In my view, it means that the expense must be large causing loss; it must be unusual in the sense of requiring normal activity to be stopped; or it must cause an unfair inconvenience having regard to the fact that the recipient has nothing to do with the litigation.
59. Assessment of the reasonableness of burdens involved in complying with a subpoena must take account the capacity of a party to collect and produce the documents. That means that in a large organization, the capacity to cover the expense is greater than in a small organization (see Lucas Industries v Hewitt (1978) 18 ALR 555 and G and D & D (2005) FamCA 1429).
60. Notwithstanding the administration of justice issue, the rules are not intended to put the individual presenting the documents in a position where they lose income or capital. The rule however refers to a substantial expense and each situation must be determined on its peculiar facts.
61. However, if the subpoena is simple and clear, requiring the production of the recipient’s own documents, the inconvenience is intended and expected to be minimal.
The costs of compliance of the third party objector were set out in an affidavit of Ms AT, a director of the third party objector. The affidavit incorporated a table as follows:
12.The table below sets out the personnel and resources employed by [DD Pty Ltd] to collate and review documents in answer to the Amended Subpoena.
Person/Company Position Time required (hours) Rate ($/hour) Costs ($) [Ms AT] Director 2.75 $111.15 $305.66 [Mr AU] Director 5.00 $111.15 $555.75 [Ms AV] Bookkeeper 22.25 $68.40 $1,521.90 [Mr AW] Chief Financial Officer 17.25 $150.00 $2,587.50 [AX Company] External IT provider 8.00 $165.00 $1,320.00 Total: $6,290.81
Counsel for the wife submitted that the scope of the subpoena was not such as to require the input of two directors, a bookkeeper, and the Chief Financial Officer. Counsel also submitted that the charge out rates were not supported on the evidence.
Counsel for the third-party objector conceded that while the material was collated electronically, there were elements of the scope that were best identified by the Chief Financial Officer, such as the quarterly report, rather than a bookkeeper or external IT provider.
The onus is on the third party objector to demonstrate they incurred a substantial loss or expense. The affidavit of Ms Walker provides some evidence of the task undertaken, saying that it involved the redirection of “substantial resources” away from the core business of the company which caused considerable disruption to its business operations. Beyond such hyperbole, the Court is told nothing about the size of the enterprise, the total number of employees relative to the number required to undertake the task of collating the documents. Nor is there any evidence as to why it required the input of both a bookkeeper and the Chief Financial Officer as well as two directors.
I am not satisfied that there is evidence sufficient to demonstrate that there was such a substantial loss and expense incurred by the third party objector over the conceded costs of the IT provider to warrant an order for compliance costs of the magnitude sought by the third party. I will make an order that the wife pay the third parties’ costs of complying with the subpoena in the sum of $1,320.
I am satisfied, given the wife’s financial position, that she is able to pay the costs within 28 days.
LEGAL FEES
Counsel for the wife submitted that other than concessions made in narrowing the scope of the subpoena by the wife, the third party objector was wholly unsuccessful and there was no warrant for an order for costs. Further he submitted that Ms Walker’s affidavit did not distinguish between legal costs incurred and the cost of complying with the subpoena.
Counsel for the third party objector rejected the submission of wife and contended that the narrowing of the subpoena justified the incurring of legal fees and as such amounted to significant changes to the documents required to be produced. Counsel for the third party objector also submitted that as the subpoenaed party, they have met the cost of the disclosure requirements of the 2nd and 3rd respondents. In this way, while they have submitted their application on scale costs, the third party objector sought that the apportionment of costs could be attributed between the parties. However, in making this submission, counsel submitted that they were only pressing relief as against the wife.
An application for costs is governed by the provisions of s 117 of the Family Law Act 1975 (Cth) (“the Act”), which provides a general rule that each party to the proceedings should bear their own costs.
Section 117(2) of the Act reposes in the Court a discretion to make a costs order if the Court determines there are circumstances that justify this and, if there are such circumstances, the Court may make such order as it considers just, having regard to the matters set out in s 117(2A) of the Act.
In Penfold and Penfold (1980) 144 CLR 311 at 315, the plurality in the High Court determined that to make an order under s 117(2) of the Act, the Court needs to make a finding of “justifying circumstances” as a preliminary prerequisite to the making of an order. Their Honours also observed that a term such as “a clear case” is not necessarily a determiner of whether an order for costs should be made. All that is required or necessary is that there are justifying circumstances.
It is well-settled law that no one factor in s 117(2A) is determinative, and the Court may give such weight as it considers relevant to any factor. In PBF as Child Representative for AF (Legal Aid Commission of Tasmania) & TRF & LKL (2005) 33 Fam LR 123 at 130, the Full Court observed:
41. … Nowhere in subs (2A) or elsewhere in s 117, is there any prescription that more than one factor must be present before an order for costs is made nor of comparative weight of the factors set out in subs (2A). As a consequence, there is nothing to prevent any factor being the sole foundation for an order for costs.
Having regard to the matters under s117(2A) as are relevant I note the third party objector has not put on any evidence as to its financial position. I am aware of the wife’s financial position in view of the evidence in the proceedings. I am satisfied that she is able to meet an order even of the magnitude sought. The wife is not in receipt of legal aid.
I note that the third party objector was unsuccessful in resisting production but that in doing so there was nothing in their conduct that would attract a costs order. The proceedings were not necessitated by the failure of any person to comply with an order. It cannot be said that the third party objector was wholly unsuccessful on the application as there was some limiting of the scope of the relevant subpoena. That said they resisted production of documents in circumstances where the Court found that they should be produced.
The affidavit of the third party objector identifies they made an offer to provide certain documents, but the order made went beyond the ambit of their offer.
The third party objector seeks costs on an indemnity basis. The authorities make it plain that an order for indemnity costs is not one that is made lightly and there should be circumstances of an exceptional kind that warrant costs on an indemnity basis. In Kohan & Kohan (1993) FLC 92-340, their Honours in the Full Court observed at 79,614:
The intent of s117(1) and 117(2) is that in this jurisdiction costs should not follow the event as a matter of course. However, where the justice of the matter so requires, the Court may make such order as the Court considers just. As we have pointed out, the Court may depart from the scale of costs prescribed under the rules. However, the purpose of fixing a scale of costs must be understood to signify that they contain the normal rates of charges. By O. 38 r. 2, the provisions of O. 38 apply to costs ordered to be paid or taxed, and costs payable or to be taxed between solicitor and client. O. 38 r. 7 makes provision for the allowance of additional amounts for complexity, difficulty or novelty and special skill, knowledge or responsibility. Consequently, the Court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind. See Degmam v. Wright (No.2) “(supra); Wentworth v. Rogers (No. 5) (1986) 6 NSWLR 534; Hobartville Stud v. Union Insurance Co. (1991) 25 NSWLR at 368 to 370.
Indemnity costs orders are still an exception in this and other jurisdictions. …
The category of cases in which a court may make an indemnity costs order are not closed. In Yunghanns & Ors v Yunghanns & Ors and Yunghanns (2000) FLC 93-029 at 87,471, the Full Court said:
… It will suffice to say that the categories of circumstances which enliven the discretion to award indemnity costs are not closed, and that it is not a condition precedent to the exercise of the discretion that some collateral purpose or species of fraud be established against the party against whom such an order is sought. All that is required is that the Court asked to exercise the discretion be satisfied that some “particular facts and circumstances of the case in question warrant the making of an order for the payment of costs other than on a party and party basis”: per Shepherd J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.
I was not taken to any fact or matter by counsel for the third party objector that would warrant a finding of exceptionality. In light of the authorities, I am not satisfied that there are exceptional circumstances that warrant an order for costs on an indemnity basis.
Nor am I satisfied that there was a proper basis for the third party objector to resist production of the documents. There are no justifying circumstances that warrant an order for their costs.
I will dismiss the oral application of the third party objector for costs.
I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 9 August 2024
SCHEDULE OF PARTIES
SYC 4269 of 2020 Respondents
Fourth Respondent:
AB LTD
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