ACP Magazines Pty Ltd v Motion [2006] NSWSC 879 | Case summary

1486/06 IN THE MATTER OF BAUHAUS PYRMONT PTY LTD (IN LIQUIDATION) JUDGMENT 1 HIS HONOUR: Mr Andrew Wily, the liquidator of Bauhaus Pyrmont Pty Ltd (in liq) ("the Company"), caused examination summonses to be issued against various executives in the Multiplex Group, including the chief executive officer, Andrew Roberts ("the Roberts parties"). The Roberts parties filed an interlocutory process seeking to set aside the issue of the examination summonses and to remove Mr Wily as liquidator. They issued subpoenas to various persons, including Mr Wily's solicitors (Landerer & Co), Mr James Byrnes and a company associated with Mr Byrnes, now called ACN 089 518 721 Pty Ltd and formerly called Consolidated Byrnes Holdings Pty Ltd ("CBH"). 2 Landerer & Co, Mr Byrnes and CBH claimed legal professional privilege for some of the documents they produced, and the Roberts parties made an application for access to those documents. The Roberts parties were successful in obtaining an order for access, for reasons I published on 6 June 2006 (Re Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 543). At the hearing of the application for access, Landerer & Co were represented by counsel, whereas Mr Byrnes appeared on his own behalf and as a director on behalf of CBH. For the most part, Mr Byrnes adopted and relied on submissions made by counsel for Landerer & Co, although he gave a separate description of the documents for which he claimed privilege. 3 On 16 June 2006 I heard an application by the Roberts parties for an order for costs against Mr Byrnes and CBH in respect of the application for access to the documents over which they claimed privilege. It had been notified to Mr Byrnes by various means on 8 June 2006. Mr Byrnes did not appear, although the Roberts parties proved that he was duly notified of the hearing in accordance with my directions. However, by a facsimile letter sent to the solicitors for the Roberts parties and my chambers on the morning of the hearing of the application for costs (Exhibit A1), Mr Byrnes stated that "due to the short week and the short notice", he was unable to get counsel ready to deal with the matter, and he proposed that the matter be dealt with by written submissions according to an agreed timetable. According to the affidavit of Christopher Andrew Johnstone sworn on 16 June 2006, Mr Byrnes also contacted Mr Johnstone (who is a solicitor acting for the Roberts parties) and had a conversation to similar effect. 4 I decided to proceed with the hearing, by allowing counsel for the Roberts parties to make the application he had prepared, and then making directions with a view to giving Mr Byrnes an opportunity to make written submissions (as he had suggested), and the Roberts parties an opportunity to make written submissions in reply. Later on 16 June the solicitors for the Roberts parties sent Mr Byrnes by e-mail copies of the evidence read and tendered that day and (by separate e-mail) a copy of the transcript of the hearing on the day. 5 In the result, I had the benefit of the oral submissions by counsel for the Roberts parties in support of their application for an order for costs against Mr Byrnes, written submissions dated 20 June 2006 made by Bryan Gorman & Company, solicitors for Mr Byrnes and CBH, and written submissions in reply by Clayton Utz on behalf of the Roberts parties dated 22 June 2006. 6 The Roberts parties make two main submissions. First, they submit that the court can and should make an order for costs against Mr Byrnes, even though he is not a party to the proceeding in which Mr Wily has caused examination summonses to issue, nor a party to the interlocutory process by which the Roberts parties seek to set aside the examination summonses and have Mr Wily removed as liquidator. They contend that it is enough that Mr Byrnes was a respondent to subpoenas issued to him and CBH who contended, unsuccessfully, that documents produced in response to the subpoenas were protected by legal professional privilege. Secondly, they submit that if (contrary to their first submission) Mr Byrnes is a non-party, the court may order costs against him because his claim for privilege was an abuse of process. Is Mr Byrnes a non-party? 7 Section 98(1) of the Civil Procedure Act 2005 (NSW) provides: "Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid…." 8 If it stood alone, s 98 would clearly authorise the court to make an order against a person in the position of Mr Byrnes. But it is expressed to be subject to rules of court, including rule 42.3, which provides: "(1) Subject to rule 42.27, the court may not, in the exercise of its powers and discretions under section 98 of the Civil Procedure Act 2005, make any order for costs against a person who is not a party. (2) This rule does not limit the power of the court: … (c) to make an order for payment, by a person who has committed contempt of court or an abuse of process of the court, of the whole or any part of the costs of a party to proceedings occasioned by the contempt or abuse of process, or … (f) to make an order of the kind referred to in rule 42.27, or …" 9 Rule 42.3(1) raises the question whether Mr Byrnes and CBH were "parties" and therefore amenable to a costs order in respect of the application for access to the documents produced by them over which they unsuccessfully claimed privilege. In my opinion Mr Byrnes and CBH were "parties" for the purposes of the rule, on two grounds, one relating to the general meaning of the word "party" and the other relating to the proper construction of the Civil Procedure Act and UCPR. The second ground depends on the deeming effect of s 22(3)(b) of the Civil Procedure Act rather than on the general meaning of the word "party". Therefore, strictly speaking, it is an alternative to the first ground for the conclusion that the court has jurisdiction to make a costs order. 10 Support for both lines of reasoning may be found in the judgment of Rolfe J in ACP Magazines Pty Ltd v Motion [2000] NSWSC 1169, although his Honour was considering statutory provisions and rules of court that have now been superseded, and did not find it necessary to keep the two lines of reasoning fully separate. 11 In that case, documents were produced, subject to a claim for client legal privilege, by the former solicitors for CPH Property Pty Ltd, in response to a subpoena issued by the defendants and directed to those solicitors. CPH Property was not a plaintiff or defendant in the proceeding. The defendants, by notice of motion to which the plaintiff but not CPH Property was made respondent, sought an order for access to the documents. CPH Property was represented at the hearing of the application, and contended that the documents were protected by client legal privilege. Rolfe J delivered a judgment in which he concluded that the claim for privilege had not been made out, although he gave CPH Property the opportunity to put on additional evidence. Subsequently the dispute about access to the documents was resolved, except for the question of costs. The judgment that I have cited relates to the defendants' successful application for an order that CPH Property pay their costs of the notice of motion. 12 CPH Property submitted that the court had no jurisdiction to make an order for costs against it because it was not a party to the proceeding. Rolfe J did not accept this submission. He held (at [32]) that CPH Property was a party against whom a costs order could be made. It had attempted to justify the claim to client legal privilege in respect of the subpoenaed documents, the onus being on it to make a good the claim for privilege (at [24]). In so doing, it participated in the proceeding for the purpose of seeking a determination favourable to it (at [52]). If it were otherwise, a subpoenaed person who succeeded in claiming privilege would be entitled to costs against the subpoenaing party, but if the claim for privilege failed, would not be subject to an order for costs, and so there would be no mutuality in relation to costs in a contest over privilege (at [32], [36], [52]). 13 Rolfe J relied (at [34]) on Law Society of New South Wales v Jackson [1981] 1 NSWLR 730. In that case, as his Honour observed, the Council of the Law Society had participated in a proceeding before the Statutory Committee, although it was not, at least on one view and perhaps strictly speaking, a party. Samuels JA, with whom Reynolds and Mahoney JJA agreed, said (at 735): "A party, essentially, is a person who takes part in legal proceedings and that is the definition to be found in Jowitt's Dictionary of English Law , at p 1302. It cannot reasonably be doubted that the Council took part in these proceedings." 14 This concept of "party" is consistent with the observations of Mason CJ and Deane J in Knight v FP Special Assets Ltd (1992) 174 CLR 178, at 190, according to which the word "party" is not confined to a person on the record in the proceedings. See also Victoria Legal Aid v The County Court of Victoria (2004) 9 VR 686; King v GIO Australia Holdings Ltd (2001) 116 FCR 509. 15 It was open to Rolfe J to base his decision on the general meaning of the word "party", because the general meaning was not excluded by the statutory provisions and rules of court that his Honour considered. The only definition of "party" was an inclusive definition. As I read Rolfe J's judgment, he relied on Samuels JA's observations about the general meaning of the word "party" when he concluded (at [52]) that CPH Property was a party because it participated in the proceeding for the purpose of seeking a favourable determination. Similarly in the present case, Mr Byrnes, personally and as agent for CBH, participated in the application by the Roberts parties for access to the subpoenaed documents, unsuccessfully resisting access on the ground of privilege. Nothing in the Civil Procedure Act and rules can be said to exclude the general meaning of "party". On the authority of the ACP Magazines case, which is indistinguishable, Mr Byrnes and CBH were parties for the purposes of rule 42.3(1) and therefore a costs order may be made against them. 16 The second ground for concluding that the court has jurisdiction to make a costs order is statutory. Rolfe J made careful reference to the relevant provisions of the Supreme Court Act 1970 (NSW) and the Supreme Court Rules. Section 76 of the Supreme Court Act and Part 52A rule 4 were not materially different in terms from s 98 of the Civil Procedure Act and UCPR rule 42.3. However, s 19 of the Supreme Court Act contained a definition of "party" which is not matched in the Civil Procedure Act. "Party" was defined in s 19 as including "any defendant and any person against whom a claim for relief is made under s 78". "Claim for relief" was defined in s 19 as including a claim for a declaration of right and a claim for the determination of any question or matter which could be determined by the court, and any other claim (whether legal, equitable or otherwise) justiciable in the court. Section 78(1) permitted the court to grant to the defendant in any proceedings all such relief against any person as the court might grant against that person if the person were a defendant in separate proceedings commenced by the defendant for that purpose (e.g. a cross-claim). 17 Although Rolfe J did not fully spell out the way in which the statutory provisions applied to the case before him, his analysis implies that: · the defendants' claim, by notice of motion, for access to the subpoenaed materials was a claim for the determination of a question that could be determined by the court, and therefore a "claim for relief" for the purposes of the definition of "party" in s 19; · the defendants' claim was a claim for relief that the court might have granted against CPH Property if CPH Property had been a defendant in separate proceedings commenced by the defendants for the purpose of gaining access to the subpoenaed materials, and therefore it was a claim for relief made under s 78; · consequently, CPH Property was a person against whom a claim for relief was made under s 78, to whom the definition of "party" in s 19 applied. 18 This conclusion is reinforced by s 78(4)(a), although his Honour did not expressly referred to that provision. Section 78(4)(a) said that, subject to the rules, a person against whom relief was claimed under s 78, if not already a party to the proceedings, became a party. 19 There is no general definition of "party" in the Civil Procedure Act, comparable to the definition in s 19 of the Supreme Court Act. The definition of "party" in s 21 of the Interpretation Act 1987 (NSW) is unhelpful. However, the relevant provisions of the CPA are otherwise very similar to the provisions of the Supreme Court Act. As mentioned above, s 98 is not materially different from s 76 of the old Act, and rule 42.3 is not materially different from Part 52A rule 4. "Claim for relief" is defined in s 3 in terms substantially identical with the definition in the Supreme Court Act. Section 22 of the CPA states (relevantly): "(3) A person against whom the defendant makes a claim for relief under this section: … (b) if not already a party to the first proceedings: (i) becomes a party to the first proceedings, and (ii) unless the court otherwise orders, is bound by any judgment (including and judgment by consent or by default) or decision (including a decision by consent) on any claim for relief in the proceedings (including a claim for relief in any cross-claim in the proceedings)." 20 Given the terms of s 22 and the definition of "claim for relief", it seems to me that the absence of a definition of "party" is a matter of no consequence. In the present case the Roberts parties are parties to the proceedings as examinees and therefore defendants (persons against whom proceedings are commenced, according to definition of "defendant" in s 3(1)). They are the applicants in the interlocutory process seeking to set aside the examination summonses and to remove Mr Wily as liquidator. Their application for access to the documents of Mr Byrnes and CBH, subpoenaed in connection with their interlocutory application to set aside the examination summonses, is a "claim for relief" within the definition in s 3 of the CPA because it is a claim for the determination of a matter which can be determined by the court. It is an application by defendants in proceedings before the court, for relief against other persons (Mr Byrnes and CBH) that the court might grant against those persons if the defendants commenced separate proceedings against them for access to the subpoenaed documents. Therefore it is a claim for relief under s 22. Consequently s 22(3)(b) declares that the persons against whom the defendants make their claim for relief, namely Mr Byrnes and CBH, thereby become parties to the proceedings and are amenable to an order for costs consistently with rule 42.3(1). 21 In the ACP Magazines case, Rolfe J referred (at [30]-[32]) to a submission based upon Part 42 rule 7(1)(f). That provision was substantially the same as the present rule 42.27(1), except that the old rule also authorised the court to issue a warrant. The present rule 42.27(1) is as follows: "If: (a) a person is ordered by the court, by subpoena or otherwise, to attend court: (i) for the purpose of giving evidence, or (ii) for the production of any document or thing, or (iii) to answer a charge of contempt, or (iv) for any other purpose, and (b) the person fails to attend in accordance with the order, the court may order the person in default to pay any costs occasioned by the default." 22 Rule 42.27(2) deals with a subpoena to a corporation, and provides: "If: (a) a corporation is ordered by the court, by subpoena or otherwise, to produce to the court any document or thing, and (b) the corporation fails to produce the document or thing in accordance with the order, the court may order the corporation to pay any costs occasioned by the default." 23 These rules create an exception to the proposition that the court is not to make an order for costs against a person who is not a party (formerly Supreme Court Rules, Part 52A rule 4(5)(a); now UCPR rule 42.3(2)(f)). The submission to Rolfe J (repeated on behalf of Mr Byrnes and CBH in the present case) was that Part 42 rule 7(1)(f) dealt expressly with circumstances in which a costs order could be made against a subpoenaed person, by implication excluding other circumstances such as those before the court. 24 Rolfe J rejected this submission, pointing out that Part 42 rule 7 (now rule 42.27) dealt with a completely different situation, concerning a subpoenaed person who defaults in complying with the subpoena. While such a person could not be described as a "party" to the proceedings, the position is different where the subpoenaed person comes to court seeking to contest access to the subpoenaed documents on the ground of privilege, and fails to make out the claim to privilege. His Honour's reasoning is equally applicable to the present rule 42.27 and I respectfully adopt it. 25 It was submitted on behalf of Mr Byrnes that curious consequences would follow from the reasoning that a person compelled to attend court, who then makes a claim for relief in respect of that compulsion, could be considered a "party" to the proceedings. For instance, it would be odd, according to this submission, if a witness who makes a claim of privilege against self-incrimination in respect of oral testimony thereby becomes a "party" to the proceedings. That hypothetical situation is not the one before the court now, and is best addressed when concrete facts are before the court. However, I fail to see anything odd about the proposition that the court has jurisdiction to order costs against a person who comes to court to make a contested claim for privilege of any kind, in order to resist compulsion, and fails to make out the privilege. 26 My conclusion is that Mr Byrnes and CBH are parties for the purposes of rule 42.3(1) on each of the two alternative grounds that I have set out. Consequently the court has jurisdiction under s 98 to make an order for costs against them. Abuse of process 27 The Roberts parties submitted that even if Mr Byrnes and CBH were not parties for the purposes of rule 42.3(1), the court would have the power to make an order for costs against them under rule 42.3(2)(c), because Mr Byrnes, acting for himself and as agent for CBH, had committed an abuse of process of the court. Although I base my decision that the court has jurisdiction to make costs orders against Mr Byrnes and CBH on my conclusion that Mr Byrnes and CBH are parties for the purposes of rule 42.3(1), I also accept the submissions for the Roberts parties on the "abuse of process" ground, upon which I would rely if the other grounds were not available. 28 As I explained in my reasons for judgment delivered on 6 June 2006 (In the matter of Bauhaus Pyrmont Pty Ltd (in liq) [2006] NSWSC 543), the Roberts parties served a notice to produce on Mr Wily and subpoenas on Landerer & Co, Mr Byrnes and CBH, which led to the subpoenaed persons making claims for legal professional privilege. After various directions hearings at which Landerer & Co and Mr Wily were represented by Mr Lucarelli of counsel, and Mr Byrnes appeared on his own behalf and on behalf the CBH, 17 documents were identified over which Mr Wily, or Landerer & Co on his behalf, had a contested claim to privilege, and 7 such documents were identified in the case of Mr Byrnes/CBH. The hearing of the Roberts parties' claim for access to those documents, and the subpoenaed persons' asserted privilege over them, lasted for three days in May 2006, and led to lengthy reasons for judgment dealing with the scope of legal advice and litigation privilege under ss 118 and 119 of the Evidence Act 1995 (NSW), waiver of privilege under s 122, and loss of privilege under s 125. 29 I found that there was nothing in the evidence before me to indicate that five of the documents, over which Mr Byrnes and CBH had claimed privilege, related to any lawyer-client relationship (judgment at [45]). I found that Mr Wily, rather than Mr Byrnes, was entitled to claim privilege over the other two documents (subject to two questions arising under ss 122 and 125), and that he had done so (judgment at [48]). However, I held that privilege has been lost under s 125. 30 My findings under s 125 are relevant to the claim by the Roberts parties that the court has jurisdiction to make a costs order under rule 42.3(2)(c). I held (at [66]) that there were "reasonable grounds for finding that Mr Byrnes has at all relevant times intended to use the examination proceedings for an improper purpose and to induce Mr Wily to abuse his powers to seek the issue of examination summonses and conduct examinations". I said that the "reasonable grounds" had been supplied by Mr Byrnes' correspondence, which was in evidence before me. I summarised the relevant parts of that correspondence at [67]-[82]. I said (at [83]): "Taken together, these letters show that Mr Byrnes intended, over an extended period of time, to take such steps as were available to him to cause embarrassment to the Roberts parties in a public forum, and to apply pressure to the Roberts parties so as to extract favourable financial settlements from them. Plainly he saw liquidation and the examination proceedings as a means for him, with the co-operation of Mr Wily, to apply such pressure." 31 I added (at [84]) that "the court will not lightly disregard or discount the significance of threats deliberately made in correspondence for the purpose of inducing favourable negotiations". I referred (at [85]) to the jurisdiction of the court to set aside examination proceedings initiated for an improper purpose, and I said that using the examination process to cause inconvenience or embarrassment is an abuse of process of the court. 32 These findings in my 6 June judgment amount to holding that there were reasonable grounds for finding that Mr Byrnes was engaging in an abuse of process with respect to the examination process, over the period of time reflected in the correspondence. The Roberts parties submitted that I should now find, for the purposes of making a costs order, that Mr Byrnes has committed an abuse of process by seeking to assert privilege in order to resist their claim for access to subpoenaed documents. Mr Byrnes has not provided any substantial answer to that submission. 33 Mr Byrnes' correspondence, summarised in my judgment, is evidence of the approach that he took to the examination process prior to and after the issue of the examination summonses. At the hearing of the application for access, Mr Byrnes identified 7 documents over which privilege was claimed, and I found that only two of them could be subject to a legitimate claim. Counsel for the Roberts parties tendered, on the application for costs, the whole bundle of documents over which privilege was claimed. Having perused them, I agree with counsel's submission that the only document over which there could be any plausible claim for privilege was a copy of the funding agreement. There was no foundation for the asserted claim to privilege over the other documents. Any basis for Mr Byrnes to claim privilege over the copy of the funding agreement, on behalf of Mr Wily, was removed by s 125 (and also by my findings about waiver under s 122). 34 These matters, taken together, provided an ample foundation for me to conclude, for the purposes of rule 42.3(2)(c), that Mr Byrnes has committed an abuse of process of the court by resisting the application by the Roberts parties for access to the subpoenaed documents, in the context of his attitude to the examination process disclosed in his correspondence. Since Mr Byrnes acted with respect to the application for access both on his own behalf and on behalf of CBH, my finding of abuse of process extends to CBH. There is therefore jurisdiction under rule 42.3(2)(c) to make an order for costs against both Mr Byrnes and CBH. 35 The cost of the application for access, so far as they related to access to the 7 documents over which Mr Byrnes and CBH claimed privilege, were wholly occasioned by the abuse of process, and therefore (subject to other discretionary considerations) the costs order should extend to the whole of those costs. Discretionary considerations and conclusion 36 Having established that the court has the power to make an order for costs against Mr Byrnes and CBH, I turn to the question whether, in the exercise of the court's discretion, such an order should be made. In my view discretionary considerations overwhelmingly point to the conclusion that a costs order should be made against both Mr Byrnes and CBH. The principal discretionary considerations supporting that conclusion are: · Mr Byrnes and CBH failed comprehensively in their attempts to resist the claim for access; · the grounds upon which they failed involved serious adverse findings against Mr Byrnes under s 125 of the Evidence Act; · the court has also found that the resistance to access on the basis of privilege was an abuse of process by Mr Byrnes and CBH; · although Mr Byrnes and CBH were not legally represented at the hearing of the claims for access, it was not suggested that this was the result of impecuniosity or that they suffered some disadvantage from lack of representation of a kind that should be taken into account for costs purposes (indeed, there is evidence before me that the website of ALF, a company associated with Mr Byrnes, claimed that he was "one of the wiliest characters in corporate Australia"); · Mr Byrnes and CBH had legal representation for the purpose of submissions on costs. 37 In an e-mail dated 13 June 2006, Mr Byrnes questioned how time spent on his claim to privilege, as opposed to the claims by Mr Wily and Landerer & Co, could be assessed. That is not, at any rate in a case such as this, a reason for declining to make a costs order. The allocation of costs, where the claim is resisted by separate parties on partly shared and partly separate grounds, is an appropriate matter for a costs assessor. 38 My conclusion is that the court should accede to the application of the Roberts parties by making the following order: · Order that the costs of the first, second and third defendants with respect to their application for access to documents under subpoenas issued to James Warren Herbert Byrnes and ACN 089 518 721 Pty Ltd (formerly Consolidated Byrnes Holdings Pty Ltd) (together called "the Subpoenaed Persons"), as agreed or assessed, be paid by the Subpoenaed Persons.

ACP Magazines Pty Ltd v Motion

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