Background
3The parties each took me at considerable length and in helpful detail to correspondence and similar material that had not been germane to my original deliberations. It becomes necessary for present purposes to review that material.
4Exhibited to the affidavit of Rani Sara John sworn 7 March 2011, upon which Mr Wavish relies, are letters passing between the solicitors for Frontier, as the party that issued the subpoenas to both Mr Wavish and Djekovic Hearne & Walker, and Mr Wavish's solicitors. The subpoena to Mr Wavish was the subject matter of his original notice of motion filed on 12 November 2010, by which Mr Wavish sought an order that it be set aside. It was originally returnable on 29 October 2010 and was ultimately set aside by consent on 11 February 2011. However, the considerable correspondence generated by the subpoena before that occurred serves starkly to frame both the respective positions adopted by the parties about whether the subpoena was too wide or otherwise vulnerable to attack on the one hand, as well as the arguments about how I should decide these four remaining issues on the other hand.
5A week before the issue of the subpoena, Frontier's lawyers wrote to Mr Wavish on 6 October 2010. The letter informed Mr Wavish that Frontier was suing its former solicitors "in connection with proceedings instituted in the Supreme Court of New South Wales in 2006 against [you and others]". The letter explained that the claim was for professional negligence arising out of the alleged mishandling of that litigation by Frontier's solicitors and counsel. Mr Wavish had been sued as a guarantor of the obligations of a defaulting purchaser in a commercial conveyancing transaction. The allegation was that loss of bargain damages had not been claimed but should have been, so that the proceedings were settled at an undervalue. Mr Wavish had been released and the lawyers were allegedly liable for the loss thereby created. Frontier took the view that proof of its loss in the negligence claim included being able to demonstrate that Mr Wavish could have met a claim for damages if he had not been released. This was explained in the letter as follows:
"Frontier ... will require some information from you relevant to the purposes of its claim. Essentially, the information Frontier seeks is that your financial circumstances at the time of the conclusion of the Prior Proceedings in early 2008 were such that you would have been able to meet the amount of a judgment which the Court might have awarded to Frontier against you ... in the Prior Proceedings for loss of bargain damages, had those damages been claimed ...
It would be of great assistance to our client if you were prepared to meet with the writer and provide us with the information ... as to your financial circumstances at the time of conclusion of the Prior Proceedings ...
Of course, if you are not prepared to voluntarily assist, we will have no option but to serve you with a subpoena ..."
6For reasons that will become all too apparent, it is regrettable that this offer was not accepted.
7Mr Wavish's lawyers asked for a copy of the pleadings and these were provided. The letter enclosing them also enclosed a copy of the subpoena, which had by this time somewhat curiously, and not a little prematurely, already been issued. The terms of the subpoena are central to the current dispute. Mr Wavish contends that they were unduly wide and oppressive. Frontier originally disputed that assertion but ultimately did not persist with the subpoena. This is referred to in more detail later in these reasons, but emerges almost from the start of the correspondence.
8By letter dated 25 October 2010, Mr Wavish's lawyers contended that the material that was sought was "not relevant to any pleaded issue in the proceedings". They went on to assert that Mr Wavish's "capacity or otherwise to meet a judgment in the order of the amount of damages sought by Frontier against its former legal advisers can have no bearing on whether Frontier's former legal advisers are liable to [it]... nor on the quantum of the damages claimed". The correctness of that assertion is doubtful, and must have been obviously so when it was made. It is unsurprising that Mr Wavish did not continue to embrace it, as the correspondence in due course reveals. The letter went on to say "regardless of whether it can be shown that the material sought under the subpoena is relevant to any fact in issue... the subpoena is on its face oppressive in its scope". The letter continued:
"We are instructed that our client's preliminary estimate is that compliance with the subpoena will involve several months of work, and require our client to enlist the assistance of his accounting advisers as well as obtaining legal advice. He presently anticipates that compliance with the subpoena would involve his incurring costs in excess of $100,000. You will be aware that your client is liable for our client's costs of compliance with the subpoena, on a solicitor-client basis.
Having regard to the above matters, we request that your client confirm by return that it consents to the withdrawal of the subpoena, or alternatively, provide a written undertaking that the subpoena will not be called upon."
9The letter also went on to foreshadow an application to set aside the subpoena. That application was in due course filed on 12 November 2010. Before that occurred Frontier's lawyers continued to assert that the subpoena was good and that the material sought was relevant. Their letter of 27 October 2010 insisted that "in no way can [the subpoena] be regarded as oppressive, either in scope or in substance". The letter also said this:
"Both our client and ourselves find it difficult to understand, let alone believe, your client's estimate of costs he would incur in complying with the subpoena exceeds $100,000. We would have thought most of the information sought in the subpoena is readily and presently available to your client.
... our client has no intention to withdraw the subpoena nor are we able to provide you with the written undertaking you seek."
10The following day Mr Wavish's lawyers wrote a long letter in reply. It continued to assert that the subpoena sought documents that were irrelevant to matters in issue and that it was for that reason alone an abuse of process. The letter stated that it was "manifestly obvious [ sic ] that, even if your assertions as to the relevance of our client's capacity to meet a judgment in February 2008 were correct (which they are not), the documents in fact sought by the subpoena go far beyond any legitimate request for production of documents going to that issue". The letter reiterated that the cost of complying with the subpoena, as well as providing advice on questions of confidentiality and privilege, would be very high, involving Mr Wavish and his advisers in "many months of work".
11It is noteworthy for present purposes that that letter also said this:
"On the basis of the matters raised above, we invite your client [to] reconsider its refusal to withdraw the subpoena. In the event that your client continues to so refuse, we hold instructions to make an application to ... have the subpoena set aside. Our client intends to seek his costs of any such application on an indemnity basis.
To the extent that any compliance with the subpoena is required following determination of that application, our client requires an undertaking from your client and the provision of verified evidence that it will be able to meet any costs order against it, taking into account the likely magnitude of the costs involved by reference to the matters referred to in this letter.
Your client should be under no misapprehension that our client intends to pursue your client to the fullest extent possible for all costs associated with the subpoena."
12In their reply the next day, Frontier's lawyers said that there was "nothing technically deficient in the subpoena". The letter continued:
"We again invite your client to provide an affidavit that had he remained a contracting party to the transaction which was the subject of the prior proceedings in the Supreme Court, he would have been able to pay the purchase price or the general damages which could have been awarded to our client in those proceedings."
13After an intervening letter, Frontier's lawyers "confirmed" that if Mr Wavish provided an affidavit of his financial position satisfactory to Frontier, the subpoena would be withdrawn. Then in a moment of apparent enlightenment, Mr Wavish's solicitors sent a letter dated 5 November 2010 saying that they were instructed that Mr Wavish was prepared to swear an affidavit in the proceedings verifying that at all times during the period 2006 to 2008 his net assets were in excess of two million dollars. The offer, however, was conditional upon the subpoena being first set aside, the affidavit not annexing documents sought by the subpoena and Frontier paying the costs incurred, including costs associated with any requirement for Mr Wavish to attend to be cross-examined on the affidavit.
14By letter dated 10 November 2010 Frontier's lawyers notified that it was prepared "to give favourable consideration to the proposal" that an affidavit would be provided. That favourable consideration was itself not unconditional, however, and particulars of the costs involved were asked for as follows:
"3. Please provide us with an estimate of your costs in connection with the preparation of the affidavit and your fees ... for any necessary attendance on cross-examination by [ sic ] Mr Wavish on his affidavit. Our client does not consider it appropriate that it be obliged to reimburse your client for his costs incurred in connection with the subpoena as we had invited Mr Wavish, prior to the issue of the subpoena, to co-operate in voluntarily providing evidence on behalf of the plaintiff in the proceedings, which he clearly declined to do. You might note that when we wrote to Mr Wavish we informed him a subpoena would be issued if his co-operation were not forthcoming."
15After Mr Wavish's lawyers filed the motion to set aside the subpoena, the parties then became embroiled in a dispute about short minutes of order and timetables. It is mercifully unnecessary presently to descend into the details of that dispute. On the bright side, however, the motion would appear at least to have provoked some progress concerning the subpoena, inasmuch as Frontier's lawyers wrote to Mr Wavish's lawyers in these terms on 18 November 2010:
"Although we do not believe the subpoena ... can be regarded in any way as oppressive or otherwise justifying it being set aside, we are instructed, so as to facilitate your client complying with the subpoena, to advise [that it will not be pressed in full]".
16In that regard certain nominated paragraphs were modified, restricted in scope or simply not pressed. In a response by letter dated 24 November 2010 Mr Wavish's lawyers advised that he was prepared to swear an affidavit verifying that at all times during the period May 2006 to February 2008 his net assets were in excess of two million dollars. Other details of his financial position were also offered as part of the affidavit to be sworn by him. However, nothing in this case came without conditions and Mr Wavish's solicitors sought to impose the following, among others, as a condition of his co-operation with respect to the affidavit:
"(c) Your client pay all of the costs incurred by our client as a consequence of the proceedings, including, without limitation, costs incurred by him in connection with the subpoena, the preparation of the proposed affidavit and the proceedings, and any requests made for him to attend cross-examination on his affidavit. Our client's legal costs in this regard up to and including Friday 19 November 2010 are in the amount of $34,197.35 inclusive of GST. He has also incurred disbursements of $483.24 inclusive of GST as at 19 November 2010 and costs by virtue of making inquiries to his accountants in the amount of $2,241.80 inclusive of GST up to and including 22 November 2010."
17The reply on 26 November 2010 from Frontier's lawyers somewhat predictably included the following:
"We note you advise your legal costs amount to date in excess of $34,000.00. To say the least, the writer finds this amount to be extraordinary and in the absence of a satisfactory explanation cannot, on any view of the matter, such an amount be regarded as reasonable. We would remind you that under Rule 33.11 of the Uniform Civil Procedure Rules , the Court may order payment by the issuing party of " any reasonable loss or expense " incurred in complying with a subpoena. Our client finds it difficult to understand that legal costs anywhere in the order of the amount advised has been reasonably incurred by your client in complying with the subpoena, to date. Perhaps you might wish to comment in this regard.
We reiterate our client is desirous of procuring an affidavit from your client provided that it contains evidence of relevance and weight. Furthermore, our client instructs it is willing to pay your client's reasonable costs, as approved by our client, of complying with the subpoena to date and furnishing an affidavit in the proceedings."
18A long letter was written in response on 30 November 2010. It included an agreement to swear an affidavit verifying that at all times during the period from May 2006 to February 2008 Mr Wavish had net assets in excess of two million dollars and that his interest in his Neutral Bay residence also exceeded that amount. The conditions attaching to that agreement referred to in the 24 November 2010 letter were repeated. The affidavit was now also to be "confidential" and used for the purpose of the proceedings and not otherwise. Mr Wavish's lawyers continued to insist that his costs as advised had to be paid.
19On 11 February 2011 the subpoena was ultimately set aside by consent. The matter was listed on 21 March 2011 for argument on costs. I heard that argument as earlier noted. Before those things occurred, the following letters were exchanged. Mr Wavish's lawyers wrote on 2 February 2011 in these relevant terms:
" 1 Our client is entitled to his costs of and incidental to complying with the subpoena, and his costs associated with the subpoena to his former solicitors Djekovic Hearne & Walker.
... Our client's entitlement to those costs arises by operation of [UCPR 33.11(1)]...
2 Our client is entitled to his costs of the motion on an indemnity basis.
... You[r] letter dated 1 February 2011 is a concession that the subpoena is liable to be set aside, which is precisely what we identified to you in our letter dated 25 October 2010. Had you and your client acted reasonably or come to the realisation that you have now reached regarding the scope of the subpoena, almost none of the costs of the steps outlined in this letter relating to the subpoena or the motion would have been necessary.
Accordingly, we consider that any application our client may be required to make to have his costs of the motion paid on an indemnity basis would be successful.
3 Costs incurred by our client
... the total costs incurred by our client up to and including 31 January 2011, including accountant's costs and personal costs, is $50,430.84...
3.1 Offer by our client to resolve the subpoena and the motion
In the interests only of avoiding the further time and cost that would be involved in an application for a costs order and any subsequent costs assessment, our client is willing to accept $37,823.13 (being 75% of the fees paid plus disbursements, accountant's costs and personal costs), in full and final satisfaction of any entitlement of our client to costs of the DHW subpoena, the subpoena or the motion paid... within 14 days of acceptance.
We consider the offer to be eminently reasonable including because it is calculated in the way that solicitor-client costs orders are often calculated between parties to proceedings. That is, in making his offer, our client is not seeking the costs of the motion on an indemnity basis and has not made any allowance for the fact that any costs assessor required to assess our client's claim is likely to assess [it] more favourably than the costs of a party to litigation ...
Our client's offer remains open for acceptance until 5pm on ... 10 February 2011 and thereafter lapses ...
You will also be aware of course that our client continues to incur costs in corresponding with you about, and attending court in relation to, this matter, and that any such further costs will also be pursued should the matter proceed to assessment..."
20On 3 February 2011 Frontier's lawyers asked for an itemised account from Mr Wavish's lawyers in order that they might properly consider the offer. That request was apparently complied with before 10 February 2011 when Frontier's lawyers wrote back in terms that included the following:
"1. At all times, our client sought your client's assistance to provide documents it required to prove facts in issue in the substantive proceedings. At no time did your client concede that the documents sought was [ sic ] part of a proper forensic exercise by our client (your letter of 25 October 2010 is an example). Your client's recent offers to swear an affidavit for use in the proceedings makes a nonsense of the assertion however.
2. At all times your client complained that the documents sought in the subpoena amounted to an oppressive and vexatious use of the Court's compulsion power because to comply, your client would be put to great expense and trouble. This was a fatuous claim as documents detailing your client's financial position at 2007 have now been obtained in these proceedings and reveal that your client was able to prepare a spreadsheet himself that listed his assets and liabilities and to verify the correctness of the documents. For the avoidance of doubt, it is because these documents have been obtained, that the subpoena was withdrawn.
3. The costs are excessive and in any event not recoverable by your client, because they were not incurred in complying with the subpoena as UCPR 33.11 requires. Further, approximately $18,000 of the costs relate to another subpoena, namely the subpoena served on Milan Djekovic, and no application was made for those costs to be paid and hence they may not be recovered."