Hadid v Lenfest Communications Inc [2000] FCA 481 | Case summary

3 In addition to those five orders, I gave the parties liberty to apply, principally so that if any party wished to seek a special order for the payment of its costs it would have an opportunity to do so. The first, second, third, fourth and sixth respondents have all filed and served notices of motion by which they seek orders for payment of their costs incurred up to and including 24 February 1998 on a party and party basis and, thereafter, on the indemnity basis. In addition, the third, fourth and sixth respondents (but not the first and second respondents) have sought orders, under FCR O 62 r 4(2)(c), to the effect that instead of taxed costs each of those respondents should be entitled to a specified gross sum. All those motions have been set down for hearing on 26 and 27 April. The notice to produce has been issued by the sixth respondent in connection with his application for an order under FCR O 62 r 4(2)(c). 4 The notice to produce was issued and served by the sixth respondent in accordance with directions made on 4 February 2000. In accordance with those directions the notice was made returnable before the Registrar on 23 February 2000. On 22 February the applicant's solicitors wrote to the sixth respondent's solicitors claiming, among other things, that the notice to produce "does not go to any matter arising under the Notice of Motion, but to topics which are not relevant to it". Accordingly, the applicant's solicitors suggested that the sixth respondent should not call on the notice but should "allow it to lapse". The solicitors indicated that if that were not done they would file a motion seeking an order setting aside the notice to produce. 5 By some oversight, the matter was not listed before the Registrar on 23 February. However, the sixth respondent's solicitor (but not the applicant's solicitor) appeared before a Deputy Registrar who noted that the notice to produce had been called but that there was no appearance and ordered that any notice of motion to set aside the notice to produce be filed and served before 4.00 pm on 1 March 2000. A notation was, by a direction of the Deputy Registrar, entered on the short minutes of the orders which she made reciting, in summary, the history of the dealings between the solicitors concerning the notice to produce. In further correspondence, to which the applicant's solicitors appear not to have replied, the sixth respondent's solicitors made it clear, among other things, that they intended to insist on compliance with the notice to produce. The applicant did not file or serve a notice of motion seeking to set aside the notice. In those circumstances, the present motion came before the Court on 7 April 2000. There was some brief argument on that occasion and counsel for the applicant handed up brief written submissions. Directions were made for the filing of written submissions by the sixth respondent (these submissions have been filed) and submissions in reply by the applicant (the applicant's counsel has indicated that he does not propose to file further submissions). 6 In essence, the applicant makes two submissions. The first is that the notice to produce is oppressive. Although the submission speaks of a demand for production of wide categories of documents, it is not submitted - and probably it could not be submitted, there being no evidence directed to the point - that any particular level of expenditure of time, effort or money would be required in order to produce the documents. Rather, the submission is that the notice to produce is abusive, because it discloses no relevant forensic purpose, and that it requires the applicant to form a judgment as to which of the documents sought relate to a fact in issue. Another aspect of the first submission is that, it is said, the true purpose of the notice to produce is "to aid provisional enforcement of the costs orders in favour of the sixth respondent, without adoption of the usual methods for such enforcement", this being an improper purpose for the issue of a notice to produce. 7 The second submission is to the effect that the purported call before the Deputy Registrar on 23 February was of no effect; that the notice was not relisted; and that the conduct of the sixth respondent, in relation to the notice to produce, departs from what is customary and amounts to a tacit acknowledgment of "the lack of efficacy in the course so followed", so that the notice to produce cannot be relied upon. 8 It is convenient to deal first with the second of the applicant's submissions. In my view it should not be accepted. The sixth respondent has made it perfectly plain throughout, and reinforces the point by his motion, that he insists on compliance with the notice to produce. The Deputy Registrar made directions for the filing and service of the applicant's foreshadowed motion to set aside the notice to produce. No such motion was filed or served within the time required by the direction and none has been filed or served since. Nothing in the record of the proceeding before the Deputy Registrar supports a proposition that the notice to produce had, by some means, ceased to be effective (if it had, there would have been no point in making directions for filing and serving a motion to set it aside). The position is that the sixth respondent has served a notice under FCR O 33 r 12(1) and the applicant is obliged to produce the documents specified in the notice, without the need for any subpoena for production, unless the Court otherwise orders. 9 The first submission is less easily dealt with. The sixth respondent contends that it is not open to the applicant to set aside the notice to produce - and the Court should not "otherwise order" - at the first of the three stages identified by the Court of Appeal in Waind v Hill and National Employers' Mutual General Association Ltd [1978] 1 NSWLR 372 at 381: the stage at which the documents required by a subpoena, or notice to produce, are brought to Court and handed to the judge. I am by no means convinced that that is right. The procedure referred to by Moffitt P in Waind at 381 is that "of having a third party bring documents to Court". It would be very odd if a party to litigation might significantly supplement, by widely drawn notices to produce, discovery of the kind now customarily ordered under FCR O 15 r 2. In my view, in a case such as the present, the Court would order that a party, on whom a notice to produce is served, not be required to comply with it except to the extent that the documents called for were, of their nature, likely to disclose information which would be relevant to an issue to be decided - in this case, whether the discretion under FCR O 62 r 4(2)(c) should be exercised in the way in which the sixth respondent asks the Court to exercise it. That is substantially the approach which Cooper J took in CCOM Pty Ltd v Jiejing Pty Ltd (1992) 37 FCR 1. 10 The applicant is right, I think, in submitting that it is properly and reasonably to be inferred that the purpose of the sixth respondent in seeking production of the documents is to construct a statement of the financial position of the applicant. The applicant then submits - at least by implication - that the applicant's financial situation is not relevant to the exercise of the Court's discretion under FCR O 62 r 4(2). The sixth respondent, on the other hand, says that the financial position of the applicant, particularly the extent to which the applicant is likely to be able to meet any costs which he is ordered to pay, is relevant to the exercise of the discretion. 11 So far as I am aware, the only reported judicial consideration of the discretion conferred by FCR O 62 r 4(2)(c) is that of von Doussa J in Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119; and reported decisions on similar rules in other jurisdictions seem to be sparse indeed. Justice von Doussa at 120 cited the decision of the English Court of Appeal in Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261 for these propositions: "The purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation. The power is appropriate to be used in complex cases. An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place, but the power must be exercised judicially and after giving the parties an adequate opportunity to make submissions on the matter." 12 In considering the exercise of the discretion in the case before him, his Honour said, at 122, 123: "In my opinion this is an appropriate case to exercise the power to award costs on a gross sum basis. The bill already drawn demonstrates what could be expected anyway from the size and complexity of the matter, namely that the preparation of a bill in taxable form is an unrealistic demand which would require quite unreasonable time and expense. It will be noted that the fees incurred by the applicants for the drawing of the bill so far, and for preparing the estimates placed before the Court, total $286,670. The bill and accompanying documents as drawn reflect an expert application of the traditional rules for taxing costs. The enormity and expense of the task demonstrates how inappropriate the old system of taxation is to the modern commercial world. The expense of several hundred thousand dollars on an exercise that cannot be described as socially useful is most regrettable. By exercising the power to fix a gross sum now the further expenditure of funds on drawing the balance of the bill will be saved. Mr Norman [described by his Honour as 'an acknowledged expert in legal costs in this State'] in his affidavit refers to his experience in taxing bills in other large matters and suggests that if the bills in this case were the subject of a contested taxation, the taxation could extend over several months. Court resources cannot accommodate such an exercise." 13 It may be - see the account of the argument at 124 - that in Beach it was not argued that it was inappropriate to make an order under the rule: the submissions appear to have been directed to the amount which the unsuccessful parties should be required to pay. Nevertheless, the passage which I have quoted is a clear statement of the principles according to which the discretion will be exercised. In essence, the question is how, in fairness to both sides (and in the public interest), is the amount payable under a costs order appropriately ascertained. If the Court, on relevant evidence, is in a position fairly to fix the amount payable and if the more usual means of ascertainment are likely to involve considerable additional expense and delay, then an order for payment of a specified gross sum may be appropriate. 14 How, then, does evidence of the financial position of a party liable under a costs order fit into that picture? In my view it does so substantially in the way suggested by the sixth respondent. Where the amount of costs likely to be payable is very substantial and where, in any event, taxation is likely to be drawn‑out, burdensome and expensive, the burden borne by the successful party is aggravated if it appears that, in any event, the party obliged to pay costs may not be able to meet a liability of the order likely to be involved. For that reason, in my view, in a case where the liability for costs may be expected to be large and a taxation complex and expensive the financial position of the party liable is a matter relevant to be taken into account in exercising the discretion. 15 Accordingly, subject to what follows, the applicant's first submission (in all its aspects) fails and the applicant will be ordered to comply with the notice to produce. 16 Two further comments should be made. What I have said should by no means be taken as an indication of the way in which, ultimately, the discretion will be exercised. The discretion is a broad one and the parties may well wish to urge a number of matters relevant to the desirability of making an order under FCR O 62 r 4(2)(c) as opposed to taking some other course open to the Court. The only matter which I have decided is that the applicant's financial position is relevant to the exercise of the discretion. 17 The second comment is that, relevance being established, it may be possible to deal with the issue, between the parties, in a way which does not require the production and inspection of a number of documents. It cannot be in the interests of any party unnecessarily to add to the considerable burden of costs which has already accumulated. For that reason I shall, when publishing these reasons, hear the parties as to the precise orders which ought to be made to give effect to them. I see no reason why, in any event, the applicant should not be required to pay the sixth respondent's costs of the present motion: fortunately, the amount of those costs is unlikely to be very great. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.

Hadid v Lenfest Communications Inc

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Judgment (11 paragraphs)

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Cited By (4)