The applicants, McCabes Lawyers Pty Ltd and McCabe Curwood Lawyers Pty Ltd, seek by motion pursuant to r 33.11 of the Uniform Civil Procedure Rules 2005 (NSW) their reasonable costs of complying with subpoenas served on the firms. The issue involves only one firm of lawyers which underwent a change of arrangement and name. I shall therefore refer to them jointly as the applicant.
[3]
Background
The applicant had previously acted for the plaintiff, Allstar Capital Pty Ltd, on a commercial transaction it entered into with the defendant, FIP Holdings Victoria Pty Ltd (FIP), prior to the commencement of the proceedings.
On or about 23 August 2018 FIP served a subpoena to attend to give evidence and to produce, naming the recipient as "McCabe Curwood". The documents required to be produced were described as follows:
Any and all communications or documents produced or received by Terry McCabe and/or McCabe Curwood, in relation to the loan agreement and/or transactions of the property situated at 368 Rocky Point Road, SANS SOUCI NSW 2219.
$25.00 conduct money was provided.
On 30 August 2018 the applicant sent a letter by email to the solicitors for FIP, M Law Group, seeking clarification about whether a subpoena to give evidence was really intended (given the recipient was a firm). The letter also raised the issue of the scope of the production sought, requested a copy of the pleadings in the proceedings to assess the relevance of the documents sought, and requested that the initial return date be adjourned in order to afford FIP the opportunity to limit the scope of the subpoena.
On 12 September 2018 M Law Group emailed Belle McKinley, the solicitor at the applicant dealing with the matter, copies of two further subpoenas dated 29 August 2018 which had a return date of 14 September 2018. They were served late and M Law Group agreed to an adjournment for that reason. On 13 September 2018 the applicant received hard copies of the subpoenas and two cheques each in the sum of $25.00 for conduct money. The new subpoenas contained almost identical wording to the schedule in the first subpoena.
After further correspondence from the applicant to M Law Group, M Law Group wrote on 18 September 2018 providing copies of the pleadings and saying that the defendant wanted loan documentation between the parties in and around October 2017.
The applicant wrote again on 24 September 2018 asking for specificity with what documents were required to be produced and the relevant period.
On 3 October 2018 M Law Group wrote to the applicant saying (inter alia):
In regards to the time-frame of the documentation relevant to the subpoenas, it is between one April and 29 May 2017. The October date appears to have been an error. By reference to the pleading documents it would be obvious to you that the October date had no bearing or relevance to the transaction.
I note that it was M Law Group who identified the October 2017 date as the relevant one.
Further correspondence ensued about additional adjournments because of the limited time for the applicant to identify the documents following the identification of the relevant period by the solicitors for FIP.
The applicant produced the documents in compliance with the subpoenas on 10 October 2018.
On 12 October 2018 Ms McKinley wrote to FIP's solicitors estimating their reasonable costs for compliance with the subpoena at approximately $7,500 plus GST. It appears that at about this time the name of FIP's solicitors changed to Eden York. This email was so addressed. The email went on to say this:
We note that our costs for complying with the subpoenas have increased as a result of:
• Issuing of an invalid subpoena by the issuing party's solicitors;
• Numerous correspondence with the issuing party's solicitors regarding the scope of the subpoenas and the issuing party's solicitors failing to respond to our correspondence regarding the scope of the subpoenas requiring follow up by our firm;
• The issuing party's solicitor's failure to agree to adjourn the subpoena for a period of 1 week requiring a court attendance and preparation for what we were informed would be a contested adjournment application, which cost could have been avoided as the subpoenas were ultimately adjourned with the consent of your client's counsel; and
• A large volume of documents that we had to review and consider for the purpose of complying with the subpoena.
Having received no response to that email, the applicant wrote to FIP's solicitors on 19 October 2018 making a claim pursuant to UCPR r 33.11 for payment of the applicant's reasonable losses and expenses incurred in complying with the subpoenas in the amount of $7,675 plus GST. They attached a schedule of the breakdown of the work done and the costs totalling that sum.
No response was received to that letter and a further email was sent by Ms McKinley on 14 November 2018 asking for a response by 21 November 2018, failing which the applicant would seek appropriate orders from the Court.
No response having been received, Ms McKinley sent a further email on 10 December 2018 to FIP's solicitors saying:
In light of our above correspondence which you have now been given ample opportunity to respond to, we consider that we have complied with our obligations under r 42.33 of the UCPR to attempt to agree on the amount of costs to be paid in relation to compliance with the subpoenas issued by your clients to McCabes Pty Ltd and McCabe Curwood Pty Ltd.
Unless you provide a response to our letter dated 19 October 2018 within seven days from the date of this email, we intend to file an application to recover our firm's compliance costs pursuant to rule 33.11.
No response was received by the applicant to that or any earlier email and correspondence.
On 7 February 2019 the applicant sent a further email to FIP's solicitors saying (inter alia):
We note that we are yet to receive a response to any of our correspondence and as previously advised, consider that we have complied with our obligations under rule 42.33 of the UCPR to attempt to agree on the amount of costs to be paid in relation to compliance with the subpoenas issued by your client to McCabes Pty Ltd and McCabe Curwood Pty Ltd.
The email attached a draft notice of motion to recover the costs. The email went on to say that in addition to the initial costs of compliance, the applicant had incurred additional costs of $3,500 plus GST since 17 October 2018.
A senior associate at the applicant, Fiona Lymant, telephoned Michael Doueihi at FIP's solicitors on 25 and 26 February 2019 and left messages for him to return her call. Mr Doueihi did not return the calls. On 27 February 2019 Ms Lymant again rang Mr Doueihi and had a conversation with him to this effect:
Ms Lymant: I am calling in respect of the matter of Allstar and your client FIP Holdings Victoria Pty Ltd. Our firms have responded to subpoenas issued by your client and I am calling to try and reach agreement on our compliance costs before a motion becomes necessary.
Mr Doueihi: Yes, I agree we should try and reach agreement on your
compliance costs.
Ms Lymant: We have sent an offer and have not received a response.
Mr Doueihi: Are you typing? I am hanging up now. Bye.
Mr Doueihi then hung up on Ms Lymant.
Later on 27 February 2019 Mr Doueihi sent an email to the applicant which said (inter alia):
We do not take kindly to your attempt to type up our comments in conversation which were aimed at trying to resolve a dispute in regards to your fees.
Our client has instructed us to indicate that your fees are exorbitant and unreasonable.
You may care to submit a reasonable offer which is fair and proper.
Until then, we cannot debate with you a figure when the amount that you submit is totally unreasonable.
Finally if you have intentions of contacting us to discuss a resolution but yet find it necessary to type up our comments to submit in your affidavit, we take great offence to your actions. Hence why we hung up the phone.
We have always maintained for the record that your fees were grossly over exaggerated and totally unreasonable.
A few observations should be made about that email. First, Ms Lymant could not be criticised for typing a record of a conversation she was having with FIP's solicitors, particularly when the lawyers were engaging in the discussions required by r 42.33 UCPR. Given the lack of any response to attempts by the applicant at negotiation, it may well have been necessary to record accurately for an affidavit anything that was said during the telephone call. Secondly, it is not apparent when those lawyers had "always maintained" that the applicant's fees were "grossly over exaggerated and totally unreasonable", because they had never responded to the email of 12 October 2018 estimating those fees, or to any subsequent correspondence.
Thirdly, given that the applicant had forwarded a schedule showing a breakdown of the costs it claimed, the response from Mr Doueihi more than four months after that schedule was sent, does not constitute any compliance with r 42.33. Finally, I note that Mr Doueihi's email contains no apology for having ignored correspondence from the applicant for that four month period.
Ms Lymant replied to Mr Doueihi on the same day noting that his email was the first correspondence the applicant had received and was the first time that the applicant had been informed that its costs were "grossly over exaggerated and totally unreasonable". The email went on to point out that the schedule of costs gave a breakdown of the work done, the time spent and the fees charged. It invited FIP to comply with its obligations under r 42.33 by making an offer as to the amount of costs it would be willing to pay in relation to compliance with the subpoenas. The letter sought a response within seven days to resolve the matter as quickly as possible. The email warned that if there was no response within that time a notice of motion would be filed to recover compliance costs under r 33.11.
No response was received to that email, and the applicant filed its notice of motion on 19 March 2019.
By the time the motion was filed the applicant had incurred further costs of $6,993, principally arising from the attempts to comply with r 42.33 and preparation of documents in relation to the notice of motion.
Further costs of approximately $2,000 have been incurred by the applicant for court attendances in relation to the notice of motion on 4 and 9 April 2019 and for preparation of the hearing of the motion. The total of the costs to the time of the preparation of the applicant's written submissions for the hearing of the motion amounted to $19,285.
[4]
Legal principles
In Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 Lockhart J was considering a relevantly similar provision in the then Federal Court Rules (Order 27 r 4A) to what is contained in UCPR r 33.11. His Honour said (at 286):
The intent of r 4A is to compensate a person subpoenaed to produce documents for expense or loss reasonably incurred in complying with the subpoena. 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. In those circumstances I think it is appropriate in this case that the legal costs and expenses incurred by DMR in and about compliance with the subpoena (including its costs of this motion) and in and about the preparation of the bill for taxation and attending to the taxation should be on a solicitor and client basis.
That decision has been followed in New South Wales in Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77 at [21] and Kumagai Australia Finance v Avarton Ltd (Supreme Court (NSW), Bryson J, 7 June 1991, unrep).
As to what constitutes reasonable expenses, Brereton J in A Pty Ltd v Z [2007] NSWSC 999 said at [45]:
The expenses that may be allowed under this rule include time incurred in dealing with the subpoena [Deposit & Investment Co Limited (Receivers Appointed) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267, 289; J Aron Corporation v Newmont Yandal Operations [2004] NSWSC 996], legal advice reasonably incurred in relation to confidentiality and privilege issues pertaining to the subpoena [Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77] on a solicitor/client basis [Kumagai Australia Finance v Avarton Ltd (NSWSC, Bryson J, 7 June 1991, unreported)], and the cost of photocopying [Mancorp Pty Ltd v Baulderstone Pty Ltd (SASC, Debelle J, 5 March 1993, unreported)].
In Foyster v Foyster Holdings [2003] NSWSC 881 Campbell J (as his Honour then was) said at [11]-[12]:
[11] There is provision in Part 37 rule 9 for the payment of an extra amount to be ordered by the court. However, the situation ought not arise where the issuer of a subpoena tenders a fairly nominal amount at the time of issuing, has the benefit of a court order requiring the person who receives the subpoena to incur substantial expense, and then, when the documents are brought to court, says that if the person who brought the documents to court wishes to be paid for the work done in complying with the subpoena, then that person should put on a notice of motion, should put on evidence, and should arrange for a lawyer to come along to court to argue about whether there is any entitlement to be paid, and if so the quantum.
[12] That way of proceeding would involve imposing a very substantial inhibition on a person being actually paid for the work done in compliance with the subpoena. It is the clear policy of Part 37 rule 3 and Part 37 rule 9 that the person issuing a subpoena should bear all reasonable expenses and loss involved in complying with it, unless the expense or loss incurred beyond the amount tendered at time of service of the subpoena is so slight that it can fairly be ignored. Subpoenas involve the exercise of a significant compulsive power, and they are issued by the Court on request, without any pre-screening of the appropriateness of the orders so made. The combined effect of Part 37 rule 6(1) and rule 6(1A) is that it is the solicitor for a party or (if the court gives leave to a party not represented by a solicitor) the party himself or herself, who procures the issue of the subpoena. While the issuing of subpoenas is necessary for the proper administration of justice, the intrusiveness of a subpoena is justified, according to this policy of the rules, only on terms that, ultimately, reasonable expenses and loss involved in complying will be paid by the party who issues the subpoena. If a request by the recipient of a subpoena to the issuer of the subpoena to be paid reasonable expenses and loss is met by an unreasonable refusal to pay, or an unreasonable statement that the only way the recipient will get paid is by going to court to seek an order under Part 37 rule 9, the issuer of the subpoena can usually expect to pay the costs of any application then made under Part 37 rule 9. And when the issuing of subpoenas is to such a large extent in the hands of solicitors, they have a professional responsibility that the power is not abused.
[5]
Submissions
At the hearing of the motion a person by the name of Nathan Elali sought to appear on behalf of FIP. Mr Elali was not a director or an officer of the company but handed up a written authority to represent the company at the hearing of the motion, signed by George Bojdak, the sole director and secretary of the company. I was initially reluctant to permit Mr Elali to appear in that way because I took the view that r 7.1 UCPR only permitted a solicitor or a director of the company to appear. However, to avoid further delay in the determination of the matter I was ultimately persuaded by both Mr Elali and Mr Dominish who appeared for the applicant that I should dispense with the requirements of that rule pursuant to the power contained in s 14 of the Civil Procedure Act 2005 (NSW).
A consideration which informed that decision was the fact that a written submission had already been filed by Mr Bojdak on 3 June 2019 and the letter of authority to Mr Elali also included a further written submission by Mr Bojdak. Both those written submissions and Mr Elali's oral submissions focused on the time after the notice of motion was filed by pointing to two offers apparently made by FIP to resolve the costs issue. Mr Dominish objected to my receiving the submissions in that regard because, he said, both offers were made on a without prejudice basis. This was not because they were expressly so marked but, he submitted, the nature of the offers pointed to the fact that they were made without prejudice. However, ordinarily such offers are made without prejudice except as to the issue of costs, and it is the issue of costs with which this motion is concerned. The written submissions from FIP in any event disclosed the amount of the offers made. I saw no reason not to receive the submissions but, in my opinion, they did not advance the position of FIP because the offers were, in all the circumstances, woefully inadequate.
The applicant submitted that it would be appropriate for a fixed sum costs order to be made. This was because FIP was largely, if not wholly, responsible for the payment of the costs, and because an assessment of costs would be protracted and expensive, especially considering a relatively small sum is involved. The applicant submitted that although its costs total $19,285 not including the costs of the hearing of the motion, it sought only a fixed sum of $10,000.
In relation to paying the reasonable costs generally, Mr Elali submitted that the costs should have been assessed in the ordinary course. I drew his attention to the provisions of UCPR r 42.33 and the failure of FIP's solicitors to respond to correspondence from the applicant. Mr Elali submitted only that the costs assessment process should have been undertaken, and that FIP's solicitors should be punished and not the company. He drew attention to the offers that were made after the notice of motion was filed. That approach only highlighted the difficulty of unqualified persons seeking to appear in matters where a knowledge and understanding of the Rules of Court and court processes are necessary.
[6]
Determination
In my opinion, it was appropriate for the applicant to seek a fixed sum costs order in conjunction with the order under r 33.11 UCPR. It is apparent from the attitude taken by FIP that the only other way this matter could be determined would be a costs assessment. The total amount of the costs involved does not justify the time and expense involved in such a process. It is unsatisfactory that a third party to litigation which is obliged to comply with the service of a subpoena should endure the delay caused by such an assessment and undergo the process in any event. The delay involved in that process is emphasised in the present matter by the dilatory manner in which FIP and its solicitors have treated the obligation upon them under r 42.33. At the present time, costs commenced to be incurred by the applicant almost nine months ago.
In my opinion, the applicant is entitled to an order under r 33.11. The reasonable costs are not only those involved in the initial dealing with the subpoenas up until the time the documents were produced but extend in this case to the expenditure by the applicant up to the present time.
I accept the submission of the applicant that the costs of compliance were increased by a number of matters being:
(a) The subpoena issued on or about 23 August 2018 being defective;
(b) Correspondence with FIP's solicitors regarding the scope of the subsequent subpoenas served on 13 September 2018 including the failure and the delays on the part of FIP's solicitors in responding to correspondence;
(c) FIP's solicitors failing to agree to a reasonable request for an adjournment of the subpoenas on 4 October 2018;
(d) The volume of documents, initially approximately 730 but thereafter 136 documents when the scope of the subpoenas were narrowed;
(e) The need to consider whether Allstar had a claim for client legal privilege in circumstances where the applicant had acted for Allstar prior to the commencement of the proceedings.
The costs were also unreasonably increased by the failure on the part of FIP's solicitors to negotiate and reach agreement under r 42.33. Costs incurred by the applicant after production of the documents and by reason of the filing of the notice of motion were entirely brought about by the failure of FIP and its solicitors to comply with r 42.33.
The failure of FIP's solicitors to negotiate in accordance with r 42.33 and, indeed, even to respond to correspondence from the applicant about the matter, was not only an abdication of the solicitors' professional responsibilities and the solicitors' obligations under s 56 of the Civil Procedure Act 2005 (NSW), but also inevitably caused the applicant to file the present motion to seek its reasonable costs.
I am entirely satisfied that the amount sought by the applicant as a fixed sum costs order is appropriate and represents reasonable costs of compliance with the subpoena. When it is borne in mind that the recipient of a subpoena is entitled to costs on a solicitor and client basis, the applicant would only be deprived of any of the costs incurred in a similar way to a reduction on assessment when indemnity costs are ordered against a party to proceedings. I have no doubt in the present case that the amount of costs actually incurred by the applicant would not be reduced by a figure that remotely approaches the reduction that the applicant is prepared to accept in return for a fixed sum costs order.
The finding that the applicant should be entitled to reasonable costs and that the fixed sum sought amounts to reasonable costs is not made, contrary to FIP's submission, to punish FIP but to compensate the applicant for the costs incurred. If the submission was intended to suggest that FIP should not, but Eden York should, be responsible for those costs, then it is a matter for FIP to claim against Eden York in that regard. Although the Court has the power under s 99 of the Civil Procedure Act to order costs against a legal practitioner in the circumstances set out in that section, I do not consider that I should exercise that power in the absence of any representative of Eden York to make submissions in relation to the matter. I do not know, for example, to what extent, if any, FIP had any responsibility for Eden York's acts and omissions during the relevant period. FIP is, for present purpose, bound by those acts and omissions.
[7]
Conclusion
I make the following order:
Pursuant to r 33.11 of the Uniform Civil Procedure Rules and s 98(4)(c) of the Civil Procedure Act 2005 (NSW) I order the defendant to pay to the applicant costs fixed in the sum of $10,000.
[8]
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Decision last updated: 14 June 2019