Foyster v Foyster Holdings [2006] NSWSC 253 | Case summary

1486/06 IN THE MATTER OF BAUHAUS PYRMONT PTY LTD (IN LIQUIDATION) JUDGMENT (Ex tempore; revised 5 April 2006) 1 HIS HONOUR: Subpoenas were issued to Mr James Byrnes and the company, which currently bears the name ACN 089 518 721 Pty Ltd and was formerly called Consolidated Byrnes Holdings Pty Limited, for the production of documents. The subpoenas were made returnable before me this morning. 2 This morning Mr Byrnes and the company were represented by counsel and sought leave, by notice of motion, to proceed for orders requiring the parties issuing the subpoenas (the respondents to today's application) to pay an amount of $50,000, or such other amount as was considered appropriate by the Court, for the applicant's expenses and costs reasonably to be incurred in answering the subpoenas. 3 Supporting that application was an affidavit of Mr Byrnes sworn on 30 March 2006, in which he gave estimates of the costs involved in responding to the subpoenas. He said that he estimated that about 100,000 pages of documentation would need to be examined. It would be necessary for him and his staff to sort out boxes containing documents in various storage areas and he estimated it would take more than sixteen hours to do so - work to the value of at least $1000 at a cost of $75 per hour. He estimated that there would be a cost of $19.50 per box, totalling about $4000, to bring boxes backwards and forwards. A member of his staff would need to examine the documents to see if they fell within the terms of the subpoenas. That would take about forty hours at approximately $150 per hour totalling $5,500. 4 He said he would need to obtain legal advice and that the lawyers would be required to read and examine 100 boxes of documents and their time would be in the order of $350 - $550 an hour, and so his likely legal costs were, according to his estimate, $30,000 to $40,000. 5 It will be seen that Mr Byrnes' costs estimate contained three components. The first, the cost of Mr Byrnes and his staff carrying out their work. The second, what might loosely be called transport costs in respect of the documents, and the third the legal costs. 6 Mr Byrnes had previously given a written estimate of costs, shortly after receiving subpoenas on 23 March 2006, of in excess of $100,000. 7 Counsel for Mr Byrnes relied this morning on the decision of Campbell J in Foyster v Foyster Holdings [2003] NSWSC 881. That was a case decided by his Honour under the Supreme Court Rules. A subpoena had been issued to a firm which estimated that the cost of compliance would be approximately $1,300 and the issue was raised whether that amount was required to be paid to the firm under the conduct money provisions of the old rules. 8 Campbell J observed at [10] that the wording of the old rule imposed "a wider obligation than to merely pay fares, or reasonably anticipated expenses for accommodation or sustenance involved in complying with the subpoena". He said the rule required that the person tendering the subpoena must make an estimate of what the reasonable expenses of the person named for complying with the subpoena would be and to tender that amount at the time of service. He observed that expenses would include all money actually paid out and the costs of items used up in complying with the subpoena. Although, as he noted, there was a provision in the old rules permitting the Court to make an order for payment of an extra amount, he said that: " The situation ought not to 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 document to court wishes to be paid for the work done in compliance 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." 9 It seems to me that if the situation described by Campbell J at [11] were to arise under the new Uniform Civil Procedure Rules (2005), the usual outcome would be the very outcome that Campbell J said "ought not to arise". That is, in the normal case the person receiving the subpoena is obliged to incur the expense of complying with it and then make an application to recover reasonable expenses. 10 The present subpoenas were issued under the Uniform Civil Procedure Rules and were served on 23 March 2006. They are clearly, on the face of each of them, subpoenas to produce rather than subpoenas for attendance. 11 Rule 33.3 has the effect that there are three kinds of subpoenas permitted under the new rules, namely, a subpoena for attendance, a subpoena to produce and a subpoena for attendance and to produce. As I have said, these are subpoenas to produce. According to rule 33.6(1) the addressee need not comply with the requirements of a subpoena to attend to give evidence unless conduct money has been handed or tendered to the addressee a reasonable time before the date on which attendance is required. "Conduct money" is defined in rule 33.1 to mean a sum of money, or its equivalent, such as prepaid travel, sufficient to meet the reasonable expenses of the addressee of attending court as required by the subpoena and returning after so attending. 12 None of the categories of expense of which Mr Byrnes has given evidence for the purposes of the application, fall within the definition of "conduct money". More importantly, it is clear from the wording of rule 33.6(1) that the obligation to tender conduct money now arises only in the case of a subpoena to attend to give evidence. 13 I contrast the current rule with the previous rule, Part 37 rule 3(1), which is set out at [9] of Campbell J's judgment. That rule said that a subpoena was not to require a person named to attend or produce any document or thing unless a sum sufficient to meet "reasonable expenses" was paid or tendered. The current position with respect to subpoenas to produce is found in rule 33.6(4). It says that the addressee must comply with a subpoena to produce either by attending at Court and producing the document or thing to the Court, or by delivering or sending a copy of the subpoena and the document or thing to the Registrar. Obviously enough, if the second option is selected the concept of conduct money is inappropriate. 14 Equally obviously, in modern commercial litigation the probability is that a subpoena to produce will require a substantial amount of work to be done in order to locate the documents and assess them for any claim to privilege, and then to respond by producing the documents in one of the permitted ways. The expense involved in that work may well include the categories of expenses to which Mr Byrnes has deposed, that is to say expenses of personal exertion, sundry out-of-pockets and legal expenses. 15 Rule 33.11 of the new rules makes provision for recovery of reasonable expenses. The rule declares that the Court may order the issuing party to pay the amount of any reasonable loss or expenditure incurred in complying with the subpoena. This proposition applies to subpoenas to produce as well as subpoenas of the other two kinds to which I have referred. Significantly, for present purposes, the authority given to the Court relates to the payment of reasonable loss or expenses "incurred in complying with the subpoena". This suggests that at least in the normal course, the Court will deal with the matter after the expenditure has been incurred. 16 Although rule 33.11 does not expressly say so, it seems to me that the Court would have jurisdiction, at least under its inherent jurisdiction, to entertain an application for an order to be made before the person to whom the subpoena is directed had incurred expenses. Such an application may be appropriate where the probability is that the amount of expenditure will be great compared with the resources of the applicant and/or there may be some doubt about the ability of the issuing party to meet an order for recovery of expenses of such a substantial amount. 17 In the present case, counsel for Mr Byrnes, submitted that if the Court were not prepared to grant his clients the primary relief they sought, that in the alternative "conduct money" should be ordered to be paid now. The concept of conduct money (as defined) is inappropriate here, but I take counsel's application to be an application for the Court to make an order for some significant payment to be made at the present time. However, no suggestion was made during the course of the hearing of the application this afternoon, or in the previous hearing this morning, that the parties issuing the subpoenas may have difficulty in complying with any order that the Court may make under rule 33.11. 18 It seems to me that in the absence of some special and additional facts beyond evidence of the sheer cost of compliance of the kind provided by Mr Byrnes, for the Court to intervene by ordering prepayment of an amount to cover expenses would be to act contrary to the policy underlying the new rules. I do not agree with the submission by counsel for Mr Byrnes that the new rules represent an "oversight". Rather, it appears to me from their drafting, that they are specifically intended to confine the concept of a tender of payment at the point of service of the subpoena, to the case of subpoenas for attendance where the payment is a payment only of conduct money as defined. The recovery of reasonable expenses is intended to be governed by rule 33.11 which speaks, as I have said, of expenses incurred, suggesting that the application is made after the response to the subpoena is complete. Since, it seems to me, this situation reflects the policy underlying the rules, I see no basis for intervening to make an order for payment of the kind sought on behalf of Mr Byrnes. 19 Counsel for Mr Byrnes also submitted, and this was the primary submission for relief this afternoon, that the Court should set aside the subpoenas given that there had been no tender of conduct money or reasonable expenses and having regard to the substantial cost of compliance. Again, it seems to me, by intervening to set aside the subpoenas on those grounds the Court would be acting contrary to the policy underlying the rules, and contrary to the express terms of the rules to which I have referred. 20 Of course, an application can be made to set aside a subpoena on the usual grounds of oppression and abuse of process, but that is not the application before me now. In the circumstances, the correct course is to dismiss the notice of motion. 21 I order the applicants in the notice of motion to pay the respondents' costs of the application. **********

Foyster v Foyster Holdings

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