HIS HONOUR: The Court is required to deal with a number of motions, each of which is on notice, and each of which deals with preliminary issues to the substantive proceedings. Because the motions deal with subpoenas and discovery, and there are objections to the subpoena and issues associated with the costs of the subpoena, it is necessary to deal with the substantive proceedings briefly.
The plaintiff is the father of Nathan Gazal (hereinafter "Nathan"). Nathan is engaged to the second defendant, Oezlem (Shirin) Topaloglu. The second defendant, in turn, is a friend of (and, for certain periods, a co-worker of) the first defendant (Fransisca Setiawan).
The plaintiff is also the father of Nasri Gazal (hereinafter "Nasri"). Nasri's mother, who is the plaintiff's ex-wife, is Theresa Gazal (hereinafter "Theresa").
Rabiaa El Samadi (aka "Ruby"), who is a witness in the plaintiff's case, is the plaintiff's current wife.
The plaintiff in these proceedings is a defendant in other proceedings brought by the Deputy Commissioner of Taxation (DCT) and various liquidators.
In this proceeding, the plaintiff alleges that he gave the first defendant an amount of $800,000 in cash and six luxury watches (valued at $698,808.31).
The plaintiff brings claims in bailment and conversion against the defendants. The claims are concerned with (i) $800,000 cash and (ii) six luxury watches, which the plaintiff alleges he provided to the first defendant for safekeeping. The items were stored in a safety deposit box in the name of both defendants.
The parties have served their evidence in chief in the case. The plaintiff has served his evidence in reply. The main proceedings are set down for trial in September 2024 for 10 days. There are 10 witnesses who have deposed affidavits.
The parties are currently preparing expert evidence, and the current expectation of the parties is that each of the witnesses will be the subject of cross-examination.
On 5 December 2022, the plaintiff obtained an Anton Piller [1] order, which was served the next day, 6 December 2022. Execution of the Anton Piller order resulted in data being extracted by the plaintiff's expert (Mr Yian Sun of Cyter Pty Ltd and Mr McKemmish) from mobile telephones owned by the first and second defendants. The defendants claimed privilege over documents within the extracted data.
On 8 December 2022, Yehia J ordered that the digital material be seized.
The plaintiff has filed 12 Notices of Motion in the proceedings. Six of those applications were set for hearing on 14 February 2024. The defendants have filed two applications.
On 1 November 2023, associates of the plaintiff filed four Notices of Motion seeking their claimed costs for compliance with four subpoenas for production issued by the defendants. The applicants on those applications are Ruby, Nasri and Theresa. It is appropriate, at this point, to recite that WE 1 Pty Ltd (hereinafter "Watch Exchange") is the company that, according to the plaintiff, allegedly sold watches to the plaintiff, which the plaintiff claims were converted by the defendants. The applicants unsuccessfully applied to set aside the subpoenas. [2]
The plaintiff seeks, by motion, subject to an amended notice filed on 18 October 2023, for the Court to appoint a referee in respect to the Extracted Communications. This motion will be referred to as "the referee motion". By the term Extracted Communication, the Court is referring to the communications to which Yehia J referred in her Honour's orders of 8 December 2022. Those communications are all message communication threads including, but not limited to, emails, text messages and WhatsApp communication threads sent to or from the first defendant's mobile phone between 1 July 2022 and 6 December 2022.
Further, the plaintiff seeks discovery by motion, notice for which was filed on 11 November 2023. It should be noted that, in relation to the Extracted Communications, her Honour ordered that an expert (Mr Sun) provide to the first defendant's solicitors copies of the Extracted Communications and that the aforesaid solicitors provide to the solicitors for the plaintiff "all Extracted Communications…which relate to the envelopes, cash or watches, the subject of the proceedings, excluding those communications over which the first defendant claims legal professional privilege".
Beech-Jones CJ at CL (as his Honour then was) issued orders to the same effect relating to the second defendant. Those later orders were issued on 16 December 2022, and the expert named in those orders was Mr McKemmish.
The defendants move on two motions, one for which notice was filed and served on 27 October 2023, in which a variation is sought of the freezing orders made on 5 December 2022 in order to remove the cap that was placed on legal expenditure, including expenditure for this proceeding; and the second, for which notice was filed on 7 August 2023 seeking to set aside the subpoena issued to the defendants' solicitor.
As already stated, Watch Exchange, seeks $3,465 for the costs of compliance with the subpoena issued to it on 18 August 2023, and the costs of the motion on an indemnity basis. Nasri seeks costs of $4,015 as compensation for compliance with the subpoena issued on 18 August 2023. Ruby seeks costs of $6,875 for complying with the subpoena issued to her on 18 August 2023.
Theresa seeks compliance costs of $6,875 as compensation for the costs of complying with the subpoena issued to her on 18 August 2023. Each of the subpoena-costs applicants seeks indemnity costs for the motions filed in relation to such costs.
Apart from the pleadings, which are before the Court, the plaintiff relies upon the affidavits of Claudette Gazi sworn 4 July 2023, 18 October 2023 and 8 September 2023. Watch Exchange relies on the affidavits of Claudette Gazi sworn 23 October 2023 and 22 December 2023. Nasri relies on the affidavits of Claudette Gazi sworn 23 October 2023 and 22 December 2023. Ruby relies on the affidavits of Claudette Gazi sworn 23 October 2023 and 22 December 2023. Therese relies on the affidavits of Claudette Gazi sworn 23 October 2023 and 22 December 2023.
The applicants also rely upon the affidavit of Claudette Gazi filed 1 November 2023 and the affidavit of Samantha Jade Langan of 27 November 2023.
The defendant relies on its Defence to the Amended Statement of Claim of 12 May 2023, and the affidavits of Samantha Jade Langan of 31 January 2024 and 23 November 2023 and 16 December 2022 (the last mentioned not having been filed); the affidavit of Claudette Gazi of 9 February 2024; Elias El Khoury of 15 September 2023 and 7 August 2023; Oezlem Topaloglu of 15 December 2022; and Fransisca Natalia Setiawan of 15 December 2022.
Leaving aside for present purposes the application for costs in answering the subpoenas, the issue between the parties is the adequacy and/or compliance with the orders already made by Yehia J, and the requirement to obtain documents that are said to be known to exist, but which may require formal proof, and therefore may require a party to provide it in formal answer to subpoena or on discovery.
Ordinarily, compliance with an order of the Court, and, in particular, compliance with subpoenas, is not dealt with by the issuing of further orders, the effect of which is to provide the same documents or some documents that are the same. Non-compliance or inadequate compliance with an order for production, whether it be a subpoena or discovery, is dealt with by testing the affidavit and/or answer to the order and/or an order for compliance of a more formal kind. [3] Nevertheless, the Court is faced with the application which seeks to facilitate the production of the document in question, amongst other things, by the appointment of a referee and/or expert to obtain the document and copy it.
[2]
Discovery
Initially, the motion for discovery was a prayer for discovery in certain categories. After discussion between the parties, it was agreed that there be mutual general discovery, subject to the approval of the Court.
Pursuant to the overriding purpose of the Civil Procedure Act 2005 (NSW), which requires the parties and the Court to facilitate the just, quick and cheap resolution of the real issues between the parties, and, in particular, the requirement to facilitate the proposition that costs in proceedings should not be disproportionate to that which is in issue, it is an exceptional course for the Court to order general discovery. Often, general discovery involves significant additional costs in unnecessary circumstances.
In the proceedings before the Court, the parties have an agreement that general discovery should occur. The Court, as presently constituted, is not satisfied that the mere agreement of the parties amounts to exceptional circumstances.
Nevertheless, this justiciable controversy has a long history with many interlocutory applications. Given the history of the matter and the attitude of the parties, it is most probable that any discovery by category would invite fine distinctions and arguments as to whether a document was properly categorised and sought.
In all of the circumstances, including the consent of the parties, the Court is satisfied that general discovery in these proceedings, given the confined factual controversy between the parties, will expedite the proceedings to a greater extent than discovery by categories and will reduce the burden of costs, rather than increase them.
In all the circumstances, the Court is satisfied mutual general discovery should be ordered.
[3]
Appointment of Referee
As can be seen from the immediately preceding paragraph, the Court is ordering general discovery. As a consequence of that general discovery, any document on the phone of any party that is adjectivally relevant to the proceedings, including any and all of the Extracted Communications, will be discoverable.
In accordance with the Uniform Civil Procedure Rules 2005 (NSW) (hereinafter "UCPR") r. 21.3(2), discovery must be by a list of documents in three parts. The list of discovered documents needs to be in two parts: one being the list of documents in the possession of the party giving discovery; and the second list being the list of documents that were within the last six months in the possession of the party but are no longer in the possession. In relation to the second of those lists, it is necessary to set out in whose possession the party believes the document to be. The third list, or part of the discovered list, is the documents that are privileged, which must be described sufficiently, together with the circumstances that give rise to the privilege, so that the party receiving the document is able to understand the claim for privilege.
Failure to comply with an order for discovery, once ordered, would be contempt, which may involve significant criminal punishment. In those circumstances, the need for a referee to extract and produce a document that is otherwise now required to be discovered seems unnecessary and inconsistent with the facilitation of the "cheap" resolution of the issues between the parties. Even though the factual controversy between the parties is within short compass, there are 10 witnesses from whom evidence will be adduced, and as is clear from the affidavits and submissions, the credit of one or other of the parties will be in issue.
Nevertheless, the documents relating to these transactions, and that which may be adjectivally relevant to the issues before the Court, should not be of such vast quantities that the Court should do otherwise than order the general discovery.
While the credit of one or more of the parties looms large in the proceedings, in and of itself, such a circumstance does not compel an order for the appointment of a referee or expert to extract a document that is now the subject of discovery.
[4]
Costs of Compliance to Subpoenas
An examination of the costs associated with the subpoenas disclosed that each of the recipients of an impugned subpoena sought legal advice and instructed the solicitor to copy and serve/file the documents in answer to the subpoena. The Court is not satisfied that legal advice was a reasonable reaction to the service of the subpoena.
It has not been suggested in the motion before the Court that the subpoenas were a fishing exercise nor that the documents sought were other than that which was adjectivally relevant to the proceedings. The terms of the subpoena do not require the independent assessment of documents as would be required, possibly, for discovery. The recipients of the subpoenas are not parties to the proceedings.
In the foregoing circumstances, it is not reasonable to seek legal advice. The demand for production was in relation to documents that are, as earlier stated, described in a straightforward manner. Nor is there any issue relating to privilege. [4]
In Dovico, Young AJ said:
"There is strong authority that a person who receives a subpoena may claim the cost of getting legal advice: see for example Hadid v Lenfest Communications Inc (1996) 65 FCR 350; 144 ALR 73. However, I affirm what I said in Triotas Pty Ltd v Rohn (Unreported, Supreme Court of New South Wales, 20 May 1993), that this depends on whether it was reasonable to seek the advice and that a person who receives a straightforward demand to produce a document would not be justified in first going to a lawyer to get advice. Nonetheless, in the present case, because of the legal professional privilege question, it may well have been appropriate to obtain counsel's advice. On the other hand, solicitors are presumed to know the law. The Associate Judge will have to decide what was reasonable in all the circumstances of this case." [5]
In Franklins Pty Ltd v Endeavour Holdings Pty Ltd [6] , Pembroke J said:
"The costs of legal advice may be recoverable under [UCPR] Rule 33.11 but only where it is reasonable to seek that advice. A person who receives a straightforward demand to produce documents, to which no issues of privilege or confidentiality attach, is not justified in recovering the costs of first going to a lawyer to obtain advice." [7]
Given that the documents were in the possession of each of the applicants on these motions, it is even less reasonable then to subcontract to a solicitor the photocopying and delivery of documents that are otherwise straightforward, that are not reasonably expected to be privileged or confidential and that could have been produced by the recipient of the subpoena itself. In those circumstances, the additional costs, all of which are costs of the solicitor, are not allowed.
It is appropriate, at this stage, to deal also with the issue associated with the subpoena issued against the solicitor for the defendants. If the solicitor is in possession of documents (as broadly defined) which are not privileged and which are held as the solicitor for the defendants, then such documents would be discoverable and would, and should, be listed with the other documents that are discovered as a consequence of the earlier ruling. On the other hand, if the solicitor to whom the subpoena was issued, was in possession of material from other clients, a privilege attaches. In my view, the subpoena to the solicitor is either unnecessary or inappropriate. The Court will strike out the subpoena.
[5]
Freezing Orders
The defendants are subject to a freezing order, which allows them to pay lawyers up to a limit of $30,000. The Court is not here concerned with the appropriateness of the freezing order in the proceedings before the Court. Rather, the Court is concerned with the reasonableness of the $30,000 limit.
As earlier stated, the substantive proceedings are listed for 10 days. The $30,000 limit is wholly inadequate, assuming legal fees at the lowest possible level. Apart from the numerous motions filed by the plaintiff, which have occasioned costs, the defendants are required to prepare and to run the hearing when it comes before the Court.
The freezing orders were obtained ex parte, and it is clear from the material in the file and before the Court on these applications that the work that has been done so far is extensive.
It is my firm view, in the circumstances, that a $30,000 limit on reasonable legal fees is unfair to the defendants and has an impact on their capacity to prepare and to present their case.
On this aspect of the motions before the Court, the plaintiff has sought copies of the invoices of the solicitors for the defendants. It would be wholly unnecessary, and not in keeping with the overriding purpose of the Civil Procedure Act, for the Court to insist upon evidence of something that is so manifestly obvious. The defendants seek variation of the orders of the Court, issued by Yehia J, so that the limit would relate to "reasonable costs" without a monetary cap. In the circumstances, and in light of the fact that the hearing will occur in the not-too-distant future, it seems to the Court that some cap should be placed upon the reasonable costs that may be paid to legal representatives.
In the absence of a determination by a Costs Assessor, there is no independent evaluation of that which is said to be "reasonable". In those circumstances, there should be some limit, which will encompass at least the costs that have been incurred so far and some measure of the costs of the 10 day hearing. Beyond that, the freezing order will expire at the time that the proceedings are determined.
It seems appropriate for the limit on the freezing order expenses to be $250,000.
[6]
Conclusion
For the foregoing reasons, the Court makes the following orders:
1. The Court dismisses the motion of the plaintiff, notice of which was filed on 4 July 2023 and amended by notice filed on 18 October 2023;
2. The Court sets aside the subpoena issued to Francom Legal Pty Ltd issued by the plaintiff;
3. The Court varies clause 10(b) of the freezing order issued by Yehia J in these proceedings by deleting the sum of "$30,000.00" and inserting in lieu thereof the sum of "$250,000.00";
4. The Court orders that each party give general discovery within 10 days of the date of this order;
5. Costs of the motions will be costs in the cause;
6. Pursuant to the earlier reasons delivered today ex tempore, order 4 above is stayed until further order of the court.
[7]
Endnotes
Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 53.
Gazal v Setiawan [2023] NSW SC 923 at [91]-[122].
See for example Uniform Civil Procedure Rules 2005 ("UCPR") Rule 33.12.
Re Dovico; Ex Parte Mayne Wetherall [2012] NSWSC 822.
Ibid, at [9] (Pembroke J).
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Decision last updated: 20 August 2024