BETWEEN : AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Costs - Application by witness for compensation for reasonable expenses of complying with subpoena - General principles discussed - Meaning of "substantial expense" - Meaning of "expense or loss"

Order made that defendants pay to applicant its reasonable expenses of complying with subpoenas.

Mancorp Pty Ltd v Baulderstone Hornibrook, unreported; SA SCt; 5 March 1993

Hadid v Lenfest Communications (1996) 144 ALR 73

Mowie Fisheries v Switzerland Insurance Australia, unreported; Fed Ct; 23 July 1996

Triotas Pty Ltd v Rohn, unreported; NSW SCt; Library No BC9301725; 20 May 1993

Deposit & Investments v Peat Marwick (1996) 39 NSWLR 267

Robertson v Canadian Imperial Bank of Commerce [1995] 1 All ER 824

1 MURRAY J: This application was made in the course of civil litigation, but it was made by a non-party witness ("the Bank") who was required to answer two subpoenas duces tecum. The application is made for an order that the defendants, the parties issuing the subpoenas, pay the expenses it incurred in complying with the subpoena.

2 The first subpoena was dated 24 February 2000 and the second was dated 16 March 2000. The first return to a subpoena was made by a Perth officer of the Bank on the first day of the trial of the civil action on 13 March 2000. On 17 March 2000 the trial was adjourned sine die in circumstances which are of no present relevance. The second subpoena was issued subsequently and a return made to it at the court by a Perth officer of the Bank on 28 March. There is some overlap in relation to the expense incurred in answering the subpoenas, and one claim is made in respect of both.

3 For present purposes it is unnecessary that I discuss in any detail the way in which the sum claimed, $10,378.42, is made up. It is sufficient to note that apart from relatively minor amounts in relation to photocopying, facsimile charges, a courier fee, STD phone calls and searching for and collating documents the subject of the two subpoenas, as to which I say nothing as to the reasonableness of the amounts claimed, by far the bulk of the claim is for the Bank's legal expenses and in particular, a sum of $9,082.53 claimed as the professional fees of private practitioners consulted by the Bank in relation to the subpoenas.

4 The defendants object to pay any such sum and I shall deal with the matters raised in argument shortly. I note in passing that upon service of the subpoenas the sum of $5 was tendered as conduct money in each case.

5 The Rules of the Supreme Court, O 36 r 19(1) provides:

"Where a person named in a subpoena for production of any document or thing is not a party to the proceedings and he incurs substantial expense or loss in complying with the subpoena, the Court hearing the proceedings may order that the party who requested the issue of the subpoena pay to that person in addition to any amount that the person served with the subpoena is entitled to be paid pursuant to the Fourth Schedule, an amount that is sufficient to compensate him for any expense or loss that is reasonably incurred or lost by that person in complying with the subpoena."

By sub-rule (2), where such an order is made the Court may fix the amount to be paid by way of compensation or direct that it be assessed by the Taxing Officer, in which case, by sub-rule (3), taxation is to occur in accordance with the provisions of O 66 of the Rules with the necessary modifications.

6 In that regard, on a party and party taxation of costs, O 66 r 19(d) provides that on taxation an allowance may be made for "witness expenses paid or to be paid under any relevant scale of allowances fixed in that regard". As I understand it, there is now no such scale of allowances fixed and so it seems to me that the question of the recovery of witness expenses would fall under O 66 r 19(g) and (h) which provide for the allowance of "other necessary disbursements or payments made in the conduct of the litigation" and "any other necessary expense incurred in the conduct of the litigation, whether or not it has been paid before the taxation of that expense takes place."

7 Under the current costs determination, the Supreme Court (Contentious Business) Determination 1999 made by the Legal Costs Committee under the Legal Practitioners Act 1893 (WA), s 58W, cl 4 preserves the operation inter alia of O 66 r 19 and cl 6 brings into effect the provisions of the Table to the clause, which Table includes item 30, which in relation to disbursements provides that as between solicitor and client, as well as between party and party, an allowance may be made for "disbursements necessarily or reasonably incurred". In my opinion in the different context of its operation, O 36 r 19 is written in consistent terms.

8 The first question under that rule will be whether the witness has incurred substantial expense or loss in complying with the subpoena. It is difficult to know how to make a judgment about that threshold requirement. In jurisdictions where the rules expressly provide for the payment of "conduct money", as it is known, and give guidance as to how much is to be paid, the question of the substantial nature of the expense is by the rules themselves and by the courts generally measured by considering the degree by which the expense or loss incurred exceeds the amount of conduct money given or arranged. Of course that cannot be done in this State and it seems to me that the decision is to be made by having regard to the purpose of the rule.

9 It is expressly to compensate the witness where any substantial expense or loss is incurred. In that context, it seems to me, that "substantial" means "of a substantial kind" more than a relatively trivial expense of minimal significance.

10 If that threshold is overcome, as in my opinion it certainly is in this case having regard to the expense actually incurred by the Bank, then the order contemplated by the rule should be made unless there appears to be any particular reason why the witness may be regarded as being disentitled to the relief sought. No such disentitlement is suggested in this case. Here it is put that, subject to my being satisfied that substantial expense was incurred having regard to what may be recoverable, the question of the extent to which the expenditure actually made should be recovered from the defendant will be for the Taxing Officer to whom it will fall to determine whether particular items of expenditure were reasonably incurred and if so, whether the sum claimed in respect of each particular item is a reasonable sum.

11 I agree with that approach and for that reason, having heard the application, I made the order that the Bank should be paid by the defendants its reasonable expenses and losses incurred in complying with both subpoenas. In default of agreement, such expenses are to be taxed.

12 That, in my view, was strictly sufficient to dispose of the application, but I was urged by the parties to deal with the matters which are in contention between them so as to aid the process of their attempting to reach agreement as to the amount to be paid, or, in default, to aid the Taxing Officer in the process of taxation. Whilst I will accede to that request, I wish to make it clear that in doing so I have no wish to intrude upon the exercise of discretionary judgment by the Taxing Officer.

13 The first matter raised is the question whether the legal costs of the private practitioners instructed by the Bank in Victoria, the place where its head office is located, may be recovered at all because, it is said, and as I understand the evidence the solicitors do not contest, they are not admitted to practice in this State. Reliance is placed upon the Full Court's decision in Minister for Works v Australian Dredging and General Works Pty Ltd [1986] WAR 235. There it was held that the costs in arbitration proceedings which, under the Rules of the Supreme Court, were to be taxed on the same footing as in an action, could not include fees paid to counsel who were not admitted to practice here or the costs of getting up paid to solicitors who were not certificated practitioners in this State.

14 But that was a case where, if the sums in question were allowable, it was as professional costs taxed in accordance with O 66, the provisions of which, the Court held, make it abundantly clear that counsel fees may only be recovered if paid to counsel who have a right of audience before the Court and legal work may only be charged for and recovered by certificated practitioners under the Legal Practitioners Act 1893 (WA). In my opinion the case is clearly distinguishable from this situation where the question is whether the expense actually incurred was incurred in complying with the subpoena and was reasonable, both in kind and amount.

15 That the costs of instructing solicitors and obtaining legal advice may be recoverable under O 36 r 19 cannot be doubted. There are numerous cases which are authority for that proposition, but it is sufficient for present purposes to rely upon the oft quoted observation of Lockhart J in Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 at 285. The case dealt with the NSW Rule which, like many, expressed the concept of substantial expense by contrasting it with the amount tendered or arranged to be paid as conduct money. His Honour said:

"It has not been argued that legal costs do not fall within the scope of the expense or loss that is recoverable under O 27 r 4A. Whether they are in fact recoverable depends, of course, on the circumstances of each case. Where, as in a case like the present, a third party is subpoenaed to produce a large number of documents (some of which are agreed as being confidential and others may raise questions of legal professional privilege) if a third party seeks legal advice with respect to those and other related matters, the cost of that advice answers the description of expense or loss incurred by the third party in complying with the subpoena. In principle, therefore, the claim for legal costs is not impermissible. I say nothing about the quantum as I have no knowledge of those matters."

16 Generally as to the type of expense which might be recovered under the Rule, I derived assistance from the observations of Byrne J in Pyramid Building Society (In Liq) v Farrow Finance Corporation (In Liq); Ex p Farrow & Ors [1995] VicRp 30; [1995] 1 VR 464. At 468 in respect of a subpoena duces tecum his Honour said:

"Where the recipient incurs cost in collating documents, copying them and seeking advice as to privilege or as to a claim for restricted access or use, it is well established that such costs are recoverable."

It follows, of course, that an applicant would be hard pressed to persuade a Taxing Officer that mechanical administrative tasks such as searching for documents, recovering them, copying them if required, collating them and attending upon the court in answer to the subpoena were reasonable required to be performed by qualified solicitors.

17 But provided it was considered reasonable to instruct lawyers to advise and assist with respect to legal questions attendant upon compliance with the subpoena, then so far as such costs are reasonable in quantum they will be recoverable by the witness. In Pyramid at 469, Byrne J said that:

"This is not to say that a witness is entitled to be indemnified against all expenses incurred. They must be reasonably incurred .... In the ordinary case, 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."

18 Again I express my respectful agreement. It seems to me therefore, that where categories of documents are broadly expressed or some particular difficulty may be occasioned in determining whether documents fall within or outside of the ambit of the subpoena, that might be the proper subject of recoverable legal advice. Also, issues of legal professional privilege and confidentiality may arise. Such issues, in my opinion, in this case reasonably arose for the Bank, and to get legal advice in respect of such issues in the context of complying with the subpoena would be a recoverable expense.

19 Of course in that regard a further question may arise, and the defendants suggest does arise, as to whether the hours spent in dealing with such issues and advising upon them were reasonable given that any legal professional privilege attendant upon particular documents would be that of the client, in this case the plaintiff parties to the principal litigation who, if they were forewarned and knew what documents were being returned on subpoena, would have the capacity to pursue any such claim in their own right. The Bank, however, might properly seek legal advice with respect to such matters so that it might know the extent of its obligations under the compulsion of the subpoena, although it would not, of course, of itself be an expense reasonably incurred in complying with the subpoena to seek legal advice as to whether or not the Bank's clients might have in respect of any of the subpoenaed documents a maintainable claim of legal professional privilege.

20 Further, as to quantum, the question arises as to how the Bank might most reasonably obtain any necessary legal advice. Here, private practitioners were instructed. The evidence is that the Bank at its head office in Melbourne has, in its legal department, three full time lawyers and one part-time lawyer who together comprise what is referred to as the Bank's dispute resolution group, which it is said serves the Bank on a national basis. It is said on affidavit that the group does handle some of the Bank's legal matters internally, but a substantial portion of those matters are referred to external solicitors.

21 There is no evidence as to whether or not to do so is a cost effective way of providing advice or whether a matter of this kind might more reasonably be handled by the Bank's own legal department. Nor is there any evidence as to whether or not at the particular time that the issues in this case were said to arise, the members of the Bank's legal department were so pressed for time that they were unable to attend to the matter and forced to brief out. Finally, there is nothing to suggest why it was thought that only the three full time lawyers and the one-part time lawyer who were involved in processes of litigation would be competent to advise on the Bank's obligations in complying with a subpoena duces tecum.

22 It is not a question of dictating to the Bank from which source it obtains its legal advice. It is a question whether it was reasonable to do so in the manner in which the advice was obtained in this case, and whether if so, the expense incurred was in a reasonable amount. Those are issues for the Taxation Officer to resolve.