Applicants v Respondents

12 In relation to Clough Engineering Limited v Origin Energy Resources Limited,[10] ASADA emphasises that Hollingworth J made an order that the addressee of the subpoena receive his costs on a solicitor-client basis. At the time of decision, the definition of "solicitor-client" was, it is submitted, in effect identical to what is now provided for under the General Rules as the "standard basis".[11] Accordingly, it is contended by ASADA that if the Court chooses to follow Clough, costs should only be awarded to Alavi on the standard basis; a basis of taxation which would ensure that Alavi was "not out of pocket"[12] in the general sense of the term. Moreover, it is contended that if Clough stands for the proposition that the addressee of a subpoena should receive "higher than usual"[13] costs, it is distinguishable on its facts. ASADA says that in that case, the subpoenas as originally drawn were "very broad and far-ranging" and that it was only then intervention of the defendant and the addressee that "reduced [the subpoena] to something which is far more manageable".[14] If required to comply with the original subpoenas, the addressee would have faced an enormous task in dealing with over 50,000 pages of documents.[15] The addressee assisted the Court in that respect in identifying and refining the issues. ASADA says that in the present case, there was no suggestion that the subpoenas sought to be issued were improperly drawn or unworkable[16] and that in any event, the relevant issues were identified by ASADA in its written submissions, namely whether proceedings before the AFL Anti-Doping Tribunal were properly characterised as "arbitration" proceedings and whether, if they were arbitration proceedings, they were of a "commercial" nature and whether s 1(6) of the Act was invoked. ASADA does concede, nevertheless, that even if the facts in Clough are distinguishable from those in the present case, the question of costs is "a highly discretionary matter".

13 ASADA also submits that the decision in Kennedy v Wallace[17] does not support Alavi's position. ASADA says that the Federal Court found in that case that the service of the subpoena was "clearly inappropriate" and was potentially done for ulterior motives.[18] On this basis, Gyles J found that the service of the subpoenas was "flawed and a misuse of the power to do so".[19] Moreover, ASADA emphasises that even in those circumstances, the court refused to order indemnity costs, the court, instead, deciding the costs should be taxed on a solicitor-client basis. In this respect, reference is made by ASADA to the following parts of the judgment of Gyles J, which it is helpful to set out in full:[20]

1. ASIC must pay Rivkin's costs of the motion. I do not agree that the former O 27 r 4A was the only, or the appropriate, source for an order of costs in this instance. However, a case for indemnity costs has not been established. If I had concluded that the exercise was designed by ASIC to apply pressure upon either or both of Rivkin or Kennedy rather than for a perceived appropriate forensic purpose, I would have required no persuasion to make such an order. I am not prepared to make that finding. The decision to serve the subpoenae might be seen as hasty and perhaps ill-considered but is quite explicable in the context of preparation of a case of considerable evidentiary complexity that was being dealt with with expedition. It was also argued that service of the subpoenae in the face of the correspondence from Rivkin's solicitors was itself a proper basis upon which to make an order for indemnity costs. I do not agree. The correspondence was primarily directed to other issues and was not in any sense a barrier to service of a subpoena at a time when that was appropriate. I further take note of the fact that the setting aside of the subpoenae by consent limited the adverse practical effect upon Rivkin of the service of them upon him.
2. I am thus not prepared to order indemnity costs on the basis of fault on the part of ASIC. On the other hand, there is no reason why a third party should be out of pocket through becoming involved in this way in another piece of litigation with no possible advantage to him, particularly where he was a target of ASIC at the time. It was reasonable that he take all available steps to protect his position. ASIC will be ordered to pay the taxed costs of Rivkin on this motion on a solicitor/client basis. Such costs should be taxed and paid forthwith.

On this basis, ASADA contends that the facts calling for indemnity costs in Kennedy were far stronger and more serious than those in the present case. Moreover, it is observed that Alavi accepts that his application for indemnity costs is "not an adverse reflection on the merits of ASADA and the AFL's application".[21]

14 ASADA also submits that Pyramid Building Society v Farrow Finance Corporation is more appropriately seen as authority for the making of a costs order on a standard basis, Byrne J having rejected the claim by the addressee for indemnity costs. In this respect, reference is made to the following passage where Byrne J said:[22]

This is not to say that a witness is entitled to be indemnified against all expenses incurred. They must be reasonably incurred and they must substantially exceed the conduct money given. [emphasis added by ASADA]

15 ASADA submits that this more closely accords with the current definition of costs on the standard basis. I also observed that in Pyramid, the costs recoverable were limited to obtaining advice and representation on the issue of privilege alone "which fell outside the normal advice and assistance [of complying with a subpoena] for which no recompense is allowed".[23] Reference to this passage is, presumably, to indicate and emphasise that the order for costs in that case was something less than "indemnity" costs. However, in the context of that case, I take Byrne J to be excluding costs not sufficiently related to the species of costs which were recoverable with respect to the subpoena, rather than going to the basis upon which these costs would be ordered.

16 Finally, ASADA submits that no special circumstances exist which would warrant the award of "indemnity" costs, a submission which refers back to the submissions made with respect to the principles on which costs are awarded to non-parties, particularly the proposition that the Court, in exercising its broad discretion as to costs, should only make costs orders in favour of and against a non-party in exceptional circumstances and with caution.[24] In this respect, it is submitted that there was no suggestion of impropriety, unreasonableness or abuse of process on the part of ASADA or the AFL. It is contended that in those circumstances, the Court should reject awarding costs to Alavi, notwithstanding his position as a non-party, on an indemnity basis.[25]

Application of the current rules and authorities

17 In my view, the general proposition which is established clearly in the authorities to which reference has been made in both the Alavi and ASADA submissions is that in the context of the then costs rules, the position adopted by the courts was that where an addressee of a subpoena had incurred costs and expenses not covered by the conduct money provisions (flowing directly as a result of the issue of or application for a subpoena), then that person was entitled to have those costs and expenses met by the party issuing or seeking the subpoena. The cases also indicate, in this respect, that to the extent that costs within the contemplation of the rules were to be met, those costs were to be calculated on a higher basis than on the ordinary inter partes, party-party costs basis. Consequently, costs were awarded on a solicitor-client basis.

18 Reference has already been made to the decision of Byrne J in Pyramid Building Society v Farrow Finance Corporation in the context of r 42.08 as it appeared in the General Rules in 1994. For present purposes, it is helpful to set out the following part of his Honour's judgment in that case:[26]

I turn now to the second submission put on behalf of the building societies, that based on discretion. In considering this submission, with respect to a subpoena to give evidence. I am in relatively uncharted waters. Cases where orders have been made have all been concerned with subpoenas to produce documents. The common law position is that, subject to the cost of travel and sustenance, the citizen must bear the cost of complying with the court order. The role of the rule is to mitigate in the appropriate case the hardship of compliance which may be imposed on a person who is not concerned in the proceeding as a party.

In the insolvency jurisdiction the practice has long existed that a person summoned to be examined under legislation which admits the payment of witnesses' costs is not entitled to award of costs where he or she is "a mere witness", as opposed to a witness against whom legal proceedings are either in existence or have been determined upon: Ex parte Waddell; In re Lutscher (1877) 6 Ch D 328 (at 331) per Cotton LJ; Re Auto Import Co (Australia) Ltd [1925] NSWStRp 60; (1925) 25 SR (NSW) 587; Re Anderson; Ex parte Official Receiver (1937) 10 ABC 284; Re Spedley Securities Ltd (In liq); Ex parte Australian National Industries Ltd (1991) 4 ACSR 322, SC (NSW). In the case of a mere witness the non-entitlement to costs is said to flow from the fact that such a person is the equivalent of a witness called in any litigation: Ex parte Waddell; In re Lutscher (at 332). These cases are of limited value for present purposes because of the terminology in the statutes which focuses upon "costs" rather than "expenses". The view taken is that legal costs of representation should be dealt with as "costs" rather than as "expenses". See In re Appleton, French and Scrafton Ltd [1905] 1 Ch 749; Re Kusmenko; Golovachenko v Official Receiver (1976) 28 FLR 183. Nevertheless, there appears in the judgments an underlying resistance to the award of compensation for legal expenses except where the relationship between the party calling the witness and the witness is an adversarial one or it is otherwise just that an order be made: Re Equiticorp Finance Ltd; Ex parte Brock (No 2) (1992) 27 NSWLR 391 (at 394) per Young J. It may be said by analogy that a non-party witness stands in this relationship so that the court should approach an application under r 42.08 with a similar antipathetic disposition.

In my view, it would not be correct to do so. The rule confers a new right in general terms. In a case such as the present where the witnesses have been charged with serious offences arising out of the very subject matter of the litigation, it was proper that their interests be protected by representation. Furthermore, the court itself has derived benefit from the presence of counsel for the witnesses in producing material and explaining the nature of the apprehended risk to their clients. In these circumstances it is reasonable that the cost is properly treated as a cost to the party filing the subpoenas of bringing the witness to court to give evidence. That party, after all, might have decided not to press for compliance with the subpoena when the claim for privilege had been brought to its attention. This is not to say that a witness is entitled to be indemnified against all expenses incurred. They must be reasonably incurred and they must substantially exceed the conduct money given. In the ordinary course, non-party witnesses would not require advice as to their general rights and responsibilities in answering the subpoena, or legal assistance in communicating with the solicitors for the party filing the subpoena as to the time, place and manner of attendance. If such advice and assistance was sought in the ordinary case, its cost would not be recoverable under the rule. The normal consequence of the receipt of the court order should be borne by the witness as a burden of citizenship. Such costs, in any event, would not normally substantially exceed the conduct money given to the witness.

The witnesses before me sought payment of their legal expenses to be taxed on a solicitor and client basis. On behalf of the building societies this submission was resisted as being an inappropriate measure for a witness who is not a party to the litigation, but it was conceded that the order should be for actual costs reasonably incurred. I am content to adopt this course.

As observed by ASADA, it is clear from this passage that Byrne J eschewed entitlement to indemnity costs, that is "indemnification of all expenses", but it is clear from both this judgment and the other authorities to which reference has been made that the authorities support the position that the addressee of a subpoena is entitled to all costs and expenses reasonably incurred.[27]

19 As indicated previously, the General Rules have been amended since 1994 and relevantly now require reference to r 9.14(8) of the Arbitration Rules and rr 42.11 and 63.30 and 63.30.1 of the General Rules. The critical rules in the present context are, of course r 42.11 and these parts of r 63. In the present context, the provisions of r 63 are being applied outside the usual inter partes costs environment as the addressee of the subpoena is not a party. The application of the inter partes costs rules in r 63 is, however, as a result of the operation of r 42.11(2) and are, in a sense, rules which, in this context, simply provide the machinery for the operation of r 42.11 according to its own terms. Nevertheless, it is relevant to consider some aspects of the learning and operation of rr 63.30 and 63.30.1. However, it does not follow, in my view, that the learning in the authorities with respect to the circumstances in which "indemnity" costs might be awarded under the provisions of now r 63.30.1 necessarily apply in the present circumstances. Rather, the proper question is, how are the provisions of r 42.11 to be applied having regard to the authorities to which reference has been made; authorities which indicate that where a person seeks to invoke the coercive powers of the court with respect to subpoenas, a person who seeks to resist that process or to comply with the process is entitled to have costs and expenses reimbursed so that they are not out of pocket as a result. As the authorities indicate, this is particularly so in circumstances where they have no interest in the relevant proceedings and, in any event, seek to assist the court with respect to the issue of or compliance with the subpoena. As is clear from the reasons, Alavi was of considerable assistance to the Court with respect to the issues raised in the application for issue of the subpoenas.

20 Further light is helpfully cast on the present issue in the commentary on the rules in Civil Procedure Victoria:[28]

The previous solicitor and client basis of taxation of the costs payable by a party afforded a more generous recovery of costs than costs on the previous basis of party and party. However, solicitor and client costs did not provide a complete indemnity. Such complete indemnity would be given only if costs were awarded on an indemnity basis. Rule 63.28(c), introduced by Supreme Court (Chapter I Amendment No 18) Rules 2001 (Vic) SR 111 of 2001, provides that the court may award indemnity costs. Although the expression "indemnity costs" is not fully elucidated in the rules it appears to enable the court to allow any costs to allow the party an indemnity against all legal costs so long as the items claimed have not been unreasonably incurred or are not of an unreasonable amount, r 63.30.1(1).

...

In the case of solicitor and client costs, r 63.32 (now repealed) gave instances of when costs on that basis may be allowed, namely, upon payment to a party of costs out of a fund, or to a party who sues or issued as trustee. (Those instances have now been revoked). However, as r 63.32(2) made clear, that did not limit the power of the court to allow the recovery of solicitor and client costs in other circumstances. See Regal Life Insurance Ltd v Pacific Financial Resources Pty Ltd (VSC, Batt J, No 2145/92, 16 November 1994, unreported, BC9401301); Bass Coast Shire Council v King [1997] 2 VR 5 at 29; (1996) 92 LGERA 129. In contrast, r 63.30.1, which provided for indemnity costs, does not specify any circumstances in which costs on that basis may be awarded. The current rules do not specify the circumstances in which indemnity costs may be allowed or the items to be allowed on that basis. Standard costs are awarded in respect of all costs reasonably incurred and of reasonable amount, r 63.30. Indemnity costs are presumably to afford a complete indemnity since r 63.30.1 refers to all costs being allowed save for such as are unreasonably incurred or are of unreasonable amount. When the two rules are compared it is difficult to see whether the difference between r 63.30 and 63.30.1(1) in using positive as against negative reference to reasonableness of incurrence or amount of costs is a distinction without a real difference. Perhaps the distinction lies in the onus of establishing the reasonableness of the incurring of the costs of their amount which shifts against the opposite party in relation to indemnity costs, but see r 63.30.1(2). The distinction will no doubt be revealed by judicial elucidation in due course.

In my view, this commentary accurately and clearly highlights the position that the principal difference in effect now between an order for costs under r 63.30 and an order for costs under r 63.30.1 lies in the onus of establishing the reasonableness of incurring of the costs and that this does shift against the opposite party in relation to "indemnity" costs.

21 It follows from these considerations, in my view, that it is not appropriate to cast the onus on the addressee of a subpoena to establish the reasonableness of costs and expenses incurred but, rather, this should be the burden borne by the party issuing or seeking to issue the subpoena.

22 For the preceding reasons, I am of the opinion that Alavi is entitled to costs and expenses under r 42.11 of the General Rules calculated on the basis provided for under r 63.30.1 (Indemnity basis). In all the circumstances, particularly having regard to the position that this application arises directly out of the proceedings with respect to the principal Application, I am of the opinion that the costs of this application should be treated as part of the costs and expenses incurred by Alavi as addressee of the proposed subpoenas.

23 Orders are to be brought in to give effect to these reasons.

[1] ASADA v 34 Players and One Support Person [2014] VSC 635.

[2] [1995] VicRp 30; [1995] 1 VR 464.

[3] [2006] VSC 349.

[4] [2006] VSC 349 at [8].

[5] [2006] VSC 349 at [8].

[6] [2004] FCA 636; [2004] 136 FCR 114.

[7] [2004] FCA 636; [2004] 136 FCR 114, at [28].

[8] [2004] FCA 636; [2004] 136 FCR 114, at [28].

[9] By email dated 22 December 2014 sent to the Court by the solicitors for the AFL, the AFL adopted ASADA's Submissions on Costs (22 December 2014). Accordingly, in the submissions which follow, it should be taken that submissions on behalf of ASADA are to be taken to be submissions on behalf of both ASADA and the AFL.

[10] [2006] VSC 349.

[11] In this respect, ASADA submits (Submissions of the First Applicant on Costs (22 December 2014):

5. Relevantly, o 63 of the General Rules was amended on 1 April 2013. Prior to that date, costs could be awarded on a party-party, solicitor-client or indemnity basis, or some other basis directed by the Court. However from 1 April 2013, party-party costs were abolished and, except as otherwise provided or ordered, costs are to be taxed on standard basis (defined as 'all costs reasonably incurred and of reasonable amount'): Rules 63.30-63.31. Thus, under the current rules, costs shall be taxed on the standard basis (unless otherwise provided or ordered) and the standard basis for taxation correlates with the former solicitor-client basis for taxation. [Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd & Ors (No 9) [2014] VSC 622 at [14] per Dixon J.

[12] Referring also to Kennedy v Wallace [2004] FCA 636; [2004] 136 FCR 114, at [28].

[13] [2006] VSC 349, at [8].

[14] [2006] VSC 349, at [7].

[15] [2006] VSC 349, at [7].

[16] Referring to ASADA v 34 Players and One Support Person [2014] VSC 635 at [62]- [65].

[17] [2004] FCA 636; [2004] 136 FCR 114.

[18] [2004] FCA 636; [2004] 136 FCR 114, at [24]-[25].

[19] [2004] FCA 636; [2004] 136 FCR 114, at [26].

[20] [2004] FCA 636; [2004] 136 FCR 114, at [27]-[28].

[21] Mr Alavi's Submissions on Costs (17 December 2014), at [2].

[22] [1995] VicRp 30; [1995] 1 VR 464 at 469.

[23] [1995] VicRp 30; [1995] 1 VR 464 at 470.

[24] See Submissions of the First Applicant on Costs (22 December 2014), [3]; and see also [6], as follows:

The CEO submits that the prima facie position is that if exceptional circumstances warrant the award of costs to a non-party, it should be done on the standard basis. Only if further special circumstances exist should indemnity costs be ordered, in accordance with settled principles. [cf Naomi Marble and Granite Pty Ltd v FAI General Insurance Company Ltd (No 2) [1998] QSC 18; [1999] 1 Qd R 518 at 544 per Shepherdson J].

[25] Referring to Re Pan Pharmaceuticals Ltd [2004] NSWSC 129; [2004] 48 ACSR 681 at [20] (Barrett J).

[26] [1995] VicRp 30; [1995] 1 VR 464 at 468-469.

[27] And which have sufficient proximity in that they relate directly to the issue of or application for issue of the subpoena. In this respect, reference has already been made to the judgment of Byrne J in Pyramid at [1995] VicRp 30; [1995] 1 VR 464.

[28] Williams, Civil Procedure Victoria (Lexis Nexis, loose leaf), [I 63.02.180].