Hera Project Pty Ltd v Bisognin

Supreme Court of Victoria|2017-05-22|Before: RIORDAN J

PRACTICE AND PROCEDURE - Subpoena to produce client's documents served on a solicitor - Reasonable loss or expense incurred in complying with the subpoena under Supreme Court (General Civil Procedure) Rules 2015 r 42.11 - What costs may be recovered as compliance costs - Onus of proof - Whether solicitor entitled to indemnity costs.

CONFIDENTIALITY - Effect of solicitor's duty of confidentiality to the client on subpoena obligations - Proper procedure to be adopted with respect to claim for confidentiality - Whether there is a right, without leave, to redact a subpoenaed document on the ground of confidentiality.

SUBPOENA TO PRODUCE DOCUMENTS - Principles relating to the scope of a subpoena - Right of issuing party to limit scope the subpoena - Importance of communications between the issuing party and the addressee to the subpoena - Proper procedure to be adopted to reduce compliance costs - Civil Procedure Act 2010 s 9(g) - Law Institute of Victoria, Subpoenaed Documents Guidelines considered.

A Pty Ltd v Z [2007] NSWSC 999

ASADA v 34 Players and One Support Person [No 2] [2015] VSC 14

Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] FCA 353; [2004] ATPR 41-996

Babcock & Brown DIF III Global v Babcock & Brown International Pty Ltd [2015] VSC 612

Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52

Bank of New South Wales v Withers [1928] ArgusLawRp 98; (1981) 35 ALR 21

Bisognin v Hera Project Pty Ltd [2016] VSC 75

Charlick Trading Pty Ltd v Australian National Railways Commission [1997] FCA 674; (1997) 149 ALR 647

Commissioner for Railways v Small [1938] NSWStRp 29; (1938) 38 SR (NSW) 564

Deposit & Investment Co Ltd v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267

Gunns Ltd v Marr [2008] VSC 464

Hadid v Lenfest Communications Inc (1996) 65 FCR 350

Lenark Pty Ltd v TheChairmen1 Pty Ltd [2012] NSWSC 124

Lucas Industries Ltd v Hewitt (1978) 18 ALR 555

Mancorp Pty Ltd v Baulderstone Pty Ltd (Unreported, Supreme Court of South Australia, Debelle J, 5 March 1993)

McColl v Lehmann [1987] VicRp 46; [1987] VR 503

Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] VicRp 54; [1996] 2 VR 34

Moorehead Nominees Pty Ltd v Barclays Australia Securities Ltd (Unreported, Federal Court of Australia, Hill J, 17 May 1991)

Moriarty v Moriarty [2009] FamCA 369; (2009) 243 FLR 409

Pico Holdings Inc v Voss [2002] VSC 269

Portal Software v Bodsworth [2005] NSWSC 1115

Re Dovico; Ex parte Mayne Wetherall [2012] NSWSC 822; (2012) 265 FLR 445

Roussel Uclaf v Imperial Chemicals Industries Plc [1990] FSR 25

Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corporation Ltd [1984] 1 NSWLR 710

St Frances Xavier Cabrini Hospital v Micallef [2000] VSC 19

Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [No 4] [2010] FCA 863

Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161; (2006) 33 WAR 1

1 By this proceeding, the plaintiff seeks an injunction restraining the defendants ('the vendors') from exercising a power of termination under a contract exchanged on 25 March 2015 ('the 2015 Contract') for the sale of Lot 1 ('Lot 1') on an unregistered Plan of Subdivision being part of the land described in Certificate of Title Volume 8776 Folio 892, being part of 1 Adrian Street, Cranbourne East ('the Land'); and orders in the nature of specific performance of the 2015 Contract.[1]

2 The principal issue at the trial was whether the vendors had lost their right to terminate the 2015 Contract when settlement had not occurred by 31 August 2016.[2] The plaintiff contends that the vendors lost that right by reason of their conduct, including their breach of a best endeavours obligation under the 2015 Contract.

3 By a subpoena to produce documents issued on 29 March 2017 by the plaintiff, Gadens Lawyers ('Gadens') were compelled to produce certain documents relating to the Land.

4 After service of the subpoena, counsel for the vendors produced a contract of sale of the Land between the vendors and CMJ Property Group Pty Ltd which had been executed on 6 and 9 July 2015 ('the CMJ Contract'). It is a condition of the CMJ Contract that, in substance, the vendors would use their best endeavours to ensure that the 2015 Contract is terminated.

5 Pursuant to r 42.11 of the Supreme Court (General Civil Procedure) Rules 2015, Gadens seeks an order that the plaintiff, being the issuing party, pay the reasonable expenses incurred by it in complying with the subpoena. Rule 42.11 provides as follows:

(1) The Court may order the issuing party to pay the amount of any reasonable loss or expense incurred in complying with the subpoena.

(2) If an order is made under paragraph (1), the Court shall fix the amount or direct that it be fixed in accordance with the Court's usual procedure in relation to costs.

(3) The amount fixed under this Rule is separate from and in addition to -

(a) any conduct money paid to the addressee;

(b) any witness expenses payable to the address.

6 The trial of the proceeding started on Monday 27 March 2017 on an estimate of four days to complete the hearing of the evidence.

7 In the afternoon of Tuesday 28 March 2017, the plaintiff closed its case and Mr Bisognin was called to give evidence. During the course of cross-examination, Mr Bisognin gave evidence that he had been 'working with' and 'had engaged' Ms Meg Lee of Gadens and had instructed the town planning consulting firm Contour Consultants Australia Pty Ltd ('Contour'). He was asked to produce documents from Gadens and Contour. Mr Bisognin said 'I'm happy if Mr Ribbands [counsel for the vendors] or my legal team can do that because I really don't have any documents'.

8 At the commencement of the hearing on Wednesday 29 March 2017, Mr Ribbands said with respect to the call for production of documents from Gadens:

We have spoken to Gadens and they have confirmed that they undertook a small matter for Mr Bisognin, on which they anticipated there might be a couple of letters to council and the like which they have written. They haven't been paid but they are prepared to produce the letters and I hope they will be available this morning.

9 He further stated that Contour town planning confirmed they had a file; but they had not been paid and were not prepared to co-operate by voluntarily releasing the documents. In response, Mr Pane QC, senior counsel for the plaintiff, said that they would prepare a subpoena to Contour and request leave to issue the subpoena urgently. On the production of a proposed subpoena later in the morning of Wednesday 29 March 2017, I granted leave as requested.

10 On resuming at 2:30 pm, Mr Ribbands produced two letters in response to the call of documents from Gadens, which became an exhibit in the proceeding. In response, Mr Pane QC said that the plaintiff would seek leave to issue a subpoena to Gadens 'in relation to their files and in relation to the subject property'. The Court was informed that 'Gadens have been put on notice that [the plaintiff was] seeking leave to issue the subpoena, so they should be expecting it'. On the basis that the subpoena would be served within 45 minutes, leave was granted to issue the subpoena which sought production from Gadens of the following documents by 10:15 am on Thursday 30 March 2017:

(1) All documents concerning the whole property situated at 1 Adrian Street, Cranbourne East, Victoria;

(2) All documents concerning the provision of any advice or services to Gino Andrew Bisognin or Leah Joan Bisognin;

(3) All documents concerning the provision of any advice or services to Contour Consultants Australia Pty Ltd regarding the property situated at 1 Adrian Street, Cranbourne East, Victoria; and

(4) All documents concerning the opening of a file in relation the matters referred to in paragraphs (1), (2) and (3).

11 At about 3:00 pm on Wednesday 29 March 2017, Mr Leonard Warren, solicitor for the plaintiff, telephoned Ms Lee of Gadens to discuss the subpoena that the plaintiff was intending to issue. He deposed that the substance of the telephone conversation was as follows:

50.1 I told her that the documents sought were in relation to the file maintained by Gadens on behalf of the Bisognins;

50.2 I read to her the proposed schedule to the subpoena;

50.3 I told her that the subpoena required production to the Court by 10.15 am the following morning;

50.4 I asked her whether there would be sufficient time to respond;

50.5 Ms Lee said to me that the file was quite small and there would be sufficient time to respond;

50.6 Ms Lee did not say to me that the scope of the subpoena was too wide as it might encompass work done by Gadens on behalf of other clients, or otherwise express any concern about the scope of the subpoena;

50.7 Ms Lee did not suggest to me that the scope of the subpoena ought be narrowed to avoid encompassing work done by Gadens on behalf of other clients; and

50.8 Ms Lee indicated that the appropriate person to serve was Mr Woolley, as he had been the main partner involved.

Ms Lee then called me back on her mobile phone and said that the appropriate person to serve was herself.

Ms Lee did not file an affidavit disputing this evidence.

12 Mr Warren then telephoned Mr Mark Woolley, who did file an affidavit on this application. It is common ground that, in a telephone conversation between Mr Warren and Mr Woolley in the afternoon of 29 March 2017, Mr Warren told Mr Woolley that his client proposed to issue a subpoena requiring production of documents relating to any file maintained by Gadens for the vendors concerning the sale of one of the lots of the Land, or any advice given to Contour about that property. Mr Woolley also told Mr Warren that he 'believed the scope of the intended subpoena would be limited and manageable'. Unlike the conversation with Ms Lee, Mr Warren did not read the wording of the proposed subpoena to Mr Woolley.

(a) He returned from a meeting shortly after 4:00 pm and was handed the sealed and served subpoena.

(b) He noted that the subpoena was not limited to files in which Gadens acted for the vendors nor to files relating to Lot 1; but extended to all documents concerning the Land. Accordingly, another very large file fell within the ambit of the subpoena.

(c) 'The task had become substantial' and he 'took the view that the written subpoena was a Court order and therefore prevailed over any oral representations Mr Warren may have made before its service'.

(d) He received instructions 'to maintain all available claims to legal professional privilege and maintain all confidentiality including the identity of Gadens' client'.

(e) He organised a team of seven lawyers and, as the subpoena was returnable at 10:15 am the following morning, at least some of them worked through until 11:00 pm that evening.

14 By the end of 29 March 2017, costs of $10,364.50 excluding GST had been incurred with respect to the subpoenaed documents for 25.3 hours of recorded time.

15 The following day, work continued on the preparation of the documents, which after being printed out, occupied approximately 12 lever-arch files;[3] and a further $10,611.50 excluding GST was incurred for a further 17.1 hours of recorded time.

16 At 10:30 am on Thursday 30 March 2017, Mr McGowan QC, chief counsel of Gadens, appeared on behalf of Gadens and advised that 12 lever-arch files of documents responding to the subpoena had been compiled; but that Gadens had not finished 'the most important task [of] reviewing that material to make sure that privileged and confidential material is identified'. He stated that Gadens would require 'at least another day or so to review all those documents to distinguish confidential and privileged material'; and that Gadens was not prepared to identify the name of its client because the client's name was confidential.

17 Mr McGowan QC further sought an order allowing Gadens to inspect the file 'that had been produced by Contour'. In support of the application, Mr McGowan QC said that Gadens had become aware of correspondence between Gadens and Contour which it regarded as privileged.

18 In response to a request to limit the subpoenaed material to documents relating to the vendors, Mr McGowan QC said as follows:

I am instructed that documents falling within the subpoena limited to Gadens' dealings with the Bisognins can be produced and is of quite limited volume and once I look at that, that can be produced relatively quickly ... certainly within an hour or two.

19 Senior counsel for the plaintiff then requested production of the files in respect of which the vendors were the client and otherwise requested Gadens to stop other work.

20 The matter was stood down for a short time to allow Mr McGowan QC the opportunity to inspect about eight documents from those produced by Contour on which the plaintiff intended to rely. At the conclusion of that short adjournment, Mr McGowan QC did not take objection to the use of those documents. However, he again stated that 'Can I emphasise that my instructions are to maintain the confidence of the identity of Gadens' client'. At the request of Mr McGowan QC, Mr Pane QC said that he would amend the subpoena to accord with the more limited request for documents.

21 At 11:18 am the Court adjourned for the purpose of the parties attending a mediation before an Associate Justice of the Supreme Court. Prior to adjourning for the purpose of mediation, Mr Pane QC said that he was proposing to cross-examine Mr Bisognin with respect to a number of documents including a handwritten note on a Contour Town Planners' letterhead which stated: 'Separate contract for full lot conditional on first contract being terminated'.

22 At approximately 1:38 pm, Gadens received the proposed amended subpoena from Russell Kennedy which was further amended by a proposed subpoena at 1:49 pm which sought the following documents:

The entire file opened by you on behalf of Gino and/or Leah Bisognin concerning the property situated at 1 Adrian Street, Cranbourne East, Victoria;
All communications to or from, or copied to Gino Andrew Bisognin or Leah Joan Bisognin;
All invoices in respect of the work done by Gadens in respect of the file referred to in paragraph 1 hereof.
All office or trust receipts for payment for the work done in respect of the file referred to in paragraph 1 hereof.
The office and trust ledger in respect of the file referred to in paragraph 1 hereof.
All documents concerning the opening of a file in relation to the matter referred to in paragraph 1 hereof.[4]

23 By email at 2:51 pm on 30 March 2017 to Mr Warren, Mr McGowan QC responded to the revised subpoena as follows:

I will take instructions. However, the revised subpoena casts a new net which has its own new problems. It is expanded in a number of respects and it is likely that objections will be taken to the new categories. In any event, we will not be in a position to respond by 3.15 pm.

Our preliminary reactions (and subject to instructions) are:

We have a file answering this description which we are reviewing now to identify privileged and confidential documents - this will take some time.
This appears too wide. If it is intended to be comprehended by 1., then it is unnecessary. If it is wider than 1., then we do not understand it, especially concerning the meaning of 'any person for or on their behalf'.[5]
If these are producible, they will be redacted to anonymise them and redacting the narrations to avoid exposure of privileged material.

4. If these are producible, then they will be redacted to anonymise them.

5. Ditto.

6. This appears to be confidential.

If we had been consulted, we would have suggested that your original category 2 should be the only category suitable to pursue.

24 With respect to this response, it was not explained by Gadens, either in evidence or submissions:

(a) why the file, referred to in paragraph 1 could not be produced 'certainly within an hour or two' as stated by Mr McGowan QC (see [15] above); nor

(b) the basis upon which Gadens would apply for documents to be redacted for the purpose of 'anonymising' them. A subpoenaed party has no right, without leave, to redact documents to 'anonymise' them.

25 At 3:00 pm, after completion of the mediation, the trial resumed and Mr Ribbands informed the Court that the vendors waived their claim for privilege with respect to the file from Contour and tendered the CMJ Contract together with a letter varying the CMJ Contract dated 18 February 2016. It is common ground that the CMJ Contract was provided to the plaintiff prior to the resumption of the hearing earlier in the afternoon.

26 After the production of the CMJ Contract, by email at 4:56 pm on 30 March 2017, Mr Warren informed Mr McGowan QC that 'As matters have progressed today we will not need to call on the subpoena'.

27 By email of 31 March 2017 to Mr Warren, Gadens forwarded a tax invoice for $23,073.60 (inclusive of GST) calculated as follows:

28 By email at 4:52 pm on 31 March 2017 to Mr McGowan QC, Mr Warren set out in detail why the plaintiff contended that Gadens was not entitled to the costs as claimed. In particular, Mr Warren proposed that the plaintiff pay Gadens costs to be taxed on an indemnity basis limited to the costs related to the production of the Gadens file on behalf of the Bisognins and should exclude costs associated with the appearance of Mr McGowan QC on 30 March 2017.

29 On behalf of Gadens, it was submitted as follows:

(a) An addressee of a subpoena is entitled to costs and expenses reasonably incurred and the onus of proving that expenses are not reasonably incurred lies on the issuing party - citing a statement of Croft J in ASADA v 34 Players and One Support Person [No 2].[6]

(b) The subpoena was 'far wider' than that represented by Mr Warren orally and Gadens were obliged to comply with the Court order represented by the subpoena.

(c) The amended subpoena was also too wide because it required Gadens to produce all communications with the vendors regardless of the subject matter.

(d) The fact that Mr Woolley did not telephone after receiving the subpoena is explicable by the short period during which the documents were required to be produced.

(e) Although Ms Lee had been informed of the wording of the subpoena prior to making a representation about the capacity to comply, she had also informed Mr Warren that Mr Woolley was the partner responsible for responding to the subpoena; and Mr Woolley had not been informed of the wording of the subpoena.

30 On behalf of the plaintiff, it was submitted as follows:

(a) The subpoena was not too broadly drawn because it was directed to dealings and negotiations concerning the Land.

(b) The plaintiff had informed two Gadens partners that the subpoena was intended to be directed to a file maintained by Gadens on behalf of the vendors and had been informed by Gadens that the file was quite small and that it would not be difficult to respond within the time available.

(c) When Gadens had realised that the task involved substantial costs, it should have contacted the solicitors for the plaintiff and so advised.

(d) Gadens' client had 'skin in the game' in that the CMJ Contract was conditional on the 2015 Contract being terminated.

(e) The costs were principally incurred in an attempt to maintain the secrecy of the CMJ Contract.

(f) The appearance of senior counsel on 30 March 2017 was not warranted.

(g) The plaintiff's offer contained in its email of 31 March 2017 with respect to the costs and expenses of complying with the subpoena was reasonable.

(f) Further, the costs and expenses payable to Gadens should ultimately be borne by the vendors because the vendors had deliberately concealed the existence of the CMJ Contract by:

(i) failing to disclose it in discovery in the proceeding before Sloss J;

(ii) not disclosing the existence of the CMJ Contract in evidence before Sloss J; and

(iii) not disclosing the existence of the CMJ Contract in evidence in the current trial.

(g) There is an established practice that an issuing party may limit the scope of a subpoena.

31 On behalf of the vendors, it was submitted as follows:

(a) The cost of compliance with the subpoena was an issue that should be limited as between the plaintiff, the issuing party, and Gadens, the addressee of the subpoena.

(b) The costs were substantially incurred because the subpoena was too wide.

(d) It was not put to Mr Bisognin in cross-examination after the production of the CMJ Contract that he had deliberately concealed it.

(e) If the subpoena was intended to be directed towards the existence of a prior contract of sale or communications of Mr Pinzone, a director of CMJ, it could have been so limited.

(f) Mr Bisognin was not cross-examined about his explanation that by May 2016 he considered that the contract was no longer on foot because of the deed of settlement.

32 No submission was made with respect to the reasonableness of Gadens' claim for expenses.

33 The documents to be produced should be described in the subpoena in relatively clear language[7] and with reasonable particularity.[8] However, it may be reasonable for an issuing party, being unaware of the precise nature of the documents held by the addressee, to describe the documents for production with a degree of generality.[9]

34 A subpoena is usually directed to lay persons, who are not obliged to consult a dictionary;[10] or to seek and gather information to enable them to understand the subpoena.[11] However, an addressee is required to read it sensibly and with reference to the circumstances known to her or him;[12] and a court will not engage in 'excessive indulgence in legalism' by setting aside a subpoena because it directs production of documents by reference to a specified subject matter.[13]

35 The tension between an issuing party wanting to ensure that the scope of the subpoena includes the relevant documents; and the requirement of particularity, in many instances, may be best resolved by the issuing party making preliminary contact with the addressee to inform them of the nature of the documents being sought by the proposed description and possibly something about the issues in the proceeding. As was observed by Sheppard J in Bank of New South Wales v Withers:[14]

Desirably preliminary inquiries should first be made in order to acquaint the person to be served with what is required or sought to be proved. The subpoena first issued in this case was obviously too wide and ought not to have been issued. How much better would it have been if the conversations earlier recounted had taken place before any subpoena had been issued.

36 It is the solicitor for the issuing party who will normally be in the best position to assist the addressee about how to most efficiently comply with the subpoena; and, although the description of the documents cannot be expanded by oral communication, the issuing party can limit the extent of the production required.

37 For the following reasons, although the subpoena is an order of the Court, and it is unusual that an order of the Court can be limited unilaterally by a party, in my opinion, an issuing party is entitled to so limit a subpoena:

(a) A subpoena is an order that is drawn by a party for the purpose of advancing that party's case. As has been explained:

The reality is that although a subpoena is a Court order, and it is sealed by the Court, it is issued at the request of a party to the proceedings. The party (or more likely its solicitors) prepares the subpoena. By sealing the subpoena the Court does not endorse or approve the description of the documents required to be produced by the subpoena.[15]

It is for this reason that remarkably a subpoena, although a court order, can be set aside as an abuse of process.

(b) The issuing party is usually responsible for the reasonable costs of compliance and any costs incurred if the subpoena is set aside.

(c) The form of Subpoena for Production to Prothonotary instructs the addressee to direct any questions concerning the subpoena to the solicitor for the issuing party and not the Court.[16]

(d) The form of the subpoena to give evidence authorises the issuing party to extend the date on which the witness is required to attend.[17]

(e) It is a long established practice that an issuing party can inform the addressee that his or her attendance is no longer required.

(f) The right is to be inferred from the fact that in Charlick Trading Pty Ltd v Australian National Railways Commission,[18] Mansfield J found that the addressee's costs incurred in 'correspondence or attendances on a party issuing the subpoena, regarding its terms, and including with a view to narrowing or clearly identifying the scope of documents to be produced' were recoverable.[19]

(g) A court's obligation under s 8 of the Civil Procedure Act 2010 to give effect to the overarching purpose requires it to encourage discussions between the issuing party and the addressee for the purposes of clarifying the documents relevant to the dispute before the court; expediting the production of the documents; and minimising the inconvenience to the addressee and the costs of compliance.

38 A lawyer is under a duty to keep inviolate the client's confidences;[20] but only some confidential communications between the solicitor and the client and third parties will be subject to legal professional privilege.[21] The distinction is important because privileged communications, absent waiver or statutory ouster, are protected from compulsory disclosure; but it is well established that an obligation of confidence, of itself, does not entitle the person who owes the duty to refuse to answer a question or to produce a document in the course of legal proceedings.[22] As was observed by Logan J in Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [No 4]:[23]

[S]ave in cases where a privilege is claimed, the whole document should be produced unless there were prior agreement to the contrary from the opposing party or some prior dispensation by the court.

39 Accordingly, the fact that a document, which is the subject of a subpoena, may be highly confidential is not of itself a basis for objection to inspection of the document.

40 The obligation to an addressee of a subpoena is to produce the subpoenaed documents to the Court - not to the parties.[24] Accordingly, if an addressee has a legitimate claim for confidentiality or the like, on producing the documents, it may request that the Court exercise its discretion and order that the parties only inspect redacted copies of the documents; or that the documents not be inspected by the parties.[25] The onus of proving that inspection should be so limited rests on the addressee.[26]

41 Except in limited circumstances, a party will not be entitled to inspect a privileged document; but a party having a legitimate forensic purpose will not otherwise ordinarily be denied inspection of the subpoenaed document.[27] As Hayne JA explained in Mobil Oil Australia Ltd v Guina Developments Pty Ltd:

Where it is said that the documents are confidential, it may be accepted that the fact that the documents are confidential will not ordinarily be a sufficient reason to deny inspection by the opposite party. In most cases, the fact that the documents may not be used except for the purposes of the litigation concerned will be sufficient protection to the party producing them. But where, as here, the party obtaining discovery is a trade rival of the person whose secrets it is proposed should be revealed by discovery and inspection, other considerations arise.[28]

42 The exception referred to by Hayne JA is well established and the applicable principle was described by Brereton J[29] as 'best encapsulated' in the judgment of Aldous J in Roussel Uclaf v Imperial Chemicals Industries Plc as follows:

Each case has to be decided on its own facts and the broad principle must be that the Court has the task of deciding how justice can be achieved taking into account the rights and needs of the parties. The object to be achieved is that the applicant should have as full a degree of disclosure as would be consistent with adequate protection of the secret. In so doing, the Court will be careful not to expose a party to any unnecessary risk of its trade secrets leaking to or being used by competitors. What is necessary or unnecessary will depend upon the nature of the secret, the position of the parties and the extent of the disclosure ordered. However, it would be exceptional to prevent a party from access to information which would play a substantial part in the case, as such would mean that the party would be unable to hear a substantial part of the case, would be unable to understand the reasons for the advice given to him, and in some cases the reasons for the judgment. Thus what disclosure is necessary entails not only practical matters arising in the conduct of a case but also the general position that a party should know the case he has to meet, should hear matters given in evidence and understand the reasons for the judgment.[30]

43 The ethical guidelines for solicitors served with a subpoena, published by the Law Institute of Victoria,[31] recommend that a solicitor served with a subpoena to produce a client's file acts as follows:

If the client wishes to claim the privilege, the solicitor should write to the subpoenaing party confirming receipt of the subpoena, advising that:

the file will be delivered to the court;
client legal privilege is not waived; and
the documents are not to be made available for inspection by any party (other than the client/former client) unless ordered by the court or tribunal, or the privilege is waived by the holder of the privilege.

Where the solicitor's client or former client claims the privilege, documents the subject of the subpoena which are privileged should be identified. Having done so, the solicitor should place the privileged documents in a sealed envelope or something similar, together with a covering letter stating that the documents are delivered under the subpoena and that privilege is not waived. This applies even if all the documents are privileged.

The privileged documents, and where applicable, the other subpoenaed documents, should be conveyed to the court or tribunal either by hand or by post. In this regard, solicitors need to familiarise themselves with the applicable rules of the court or tribunal. The solicitor receiving the subpoena should not simply copy the file and send it to the party who served the subpoena.

44 I would respectfully suggest that in addition it might be recommended that:

(a) if there is doubt about the scope of the documents sought by the subpoena, a solicitor, who has been served with a subpoena, should consider contacting the issuing party's solicitor to resolve any uncertainty;

(b) if a solicitor intends to apply for leave to redact documents or for an order that documents not be inspected on the ground of confidentiality, the solicitor should consider contacting the issuing party and informing it of the claim for confidentiality and a proposed protocol for dealing with the issue; and

(c) if a solicitor intends to charge substantially more than the conduct money for complying with the subpoena, the solicitor should consider contacting the issuing party and informing it of the estimated costs of compliance.

45 For an expense to be recoverable under r 42.11 it is necessary that it be incurred in complying with the subpoena and is reasonable. Expenses incurred in complying with a subpoena have been held to include expenses incurred in the following:

(a) Advice as to the validity of the subpoena and whether the addressee should comply with it at all or in part.

(b) Correspondence and attendances on the issuing party regarding its terms particularly with a view to narrowing or clarifying the scope of documents to be produced.

(d) Advice as to whether inspection of documents may be restricted on the basis of confidentiality including correspondence, attendances and negotiations with the issuing party as to the terms for inspection.

(e) Attendances in court on the return of the subpoena including attendances to assert that the subpoenaed documents should be protected from unrestricted access due to their confidential character and ensuring confidentiality undertakings have been properly given.[32]

46 Whether an expense is incurred in compliance with the subpoena and whether the expense is reasonable are questions of fact.[33] In my opinion, the addressee as the party applying for an order under r 42.11 bears the onus of proving each of these elements.

47 I should add that I do not consider that the above proposition is contrary to the statement of Croft J in ASADA v 34 Players and One Support Person [No 2] that:[34]

It follows from these considerations, in my view, that it is not appropriate to cast the onus on the addressee of a subpoena to establish the reasonableness of costs and expenses incurred but, rather, this should be the burden borne by the party issuing or seeking to issue the subpoena.

48 His Honour analysed previous authorities about whether the addressee to a subpoena was entitled to its costs to be taxed on an indemnity basis; and noted that:

(a) an addressee was entitled to all costs and expenses reasonably incurred;[35] and

(b) the principal difference between a standard costs order and an indemnity costs order 'lies in the onus of establishing the reasonableness of incurring of the costs and that this does shift against the opposite party in relation to "indemnity" costs'.[36]

Accordingly, his Honour concluded that the addressee was entitled to an indemnity costs order. In my opinion, his Honour was not intending to change the usual onus that falls on an applicant for relief.

49 A difference in opinion has arisen about whether a solicitor served with a subpoena is entitled to recover, as the amount of any reasonable loss or expense incurred in complying with the subpoena, an amount based on profit costs or a reduced amount to reflect the out of pocket expense without profit.

50 In Deposit & Investment Co Ltd v Peat Marwick Mitchell & Co,[37] Bainton J held that a subpoenaed solicitor was entitled to recover as loss or expense the time spent by the partners and employees at their usual charge out rates.

51 In Moriarty v Moriarty,[38] Cronin J refused to follow the Deposit & Investment case for the following reasons:

The first is that there is nothing in the rules nor should there be that gives any profession or business sector a right to claim expenses based upon their respective scales or charges. It is inappropriate for a court to look at those scales as anything more than a guide. For example, a solicitor who charged their client based upon a costs agreement would be seeking indemnity costs if not more, as in this case, if the court simply gave them what was sought.

The second reason is that even if a court considered the scale or charge-out rate, is it the loss to the recipient or the firm that is to be compensated? What does a court factor into its deliberations for overhead expenses, taxation and the like? It becomes a difficult and unwieldy task.

The third reason is that the subpoena process is an integral part of the administration of justice. If we are to enjoy the benefits of a justice system, the community must be prepared to bear that cost to some degree. For example, Bainton J referred to a legal firm losing the financial benefit of a partner or employee's longer hours by non-income producing activity. The same could be said of the bobcat driver who has to work a little longer to make up for the time lost in collating and dealing with the subpoena. In my view, that is a facet of community responsibility.[39]

52 In Re Dovico; Ex parte Mayne Wetherall,[40] Young AJ noted the difficulties in following the Deposit & Investment case as follows:

(1) that a different regime may apply to solicitors (and accountants) as opposed to that applying to corporations and to other business people (such as bobcat operators, to borrow the example used by Cronin J in Moriarty); and (2) the solicitors may make a profit out of complying with the subpoena.

53 In my opinion, there is substantial merit in the reasoning of Cronin J and, if a subpoena is issued requiring production of a solicitor's own documents, I consider that the solicitor should be limited to the out of pocket expense incurred and should not be entitled to recover the profit component of charge out rates. However, where the solicitor is subpoenaed to produce its client's documents, the client may require it to advise and undertake work for the purposes and protection of the client's interests. Accordingly, to the extent that it advises and undertakes work on behalf of its client, it is entitled to charge profit costs. I consider usually in these circumstances, it should be entitled to recover indemnity costs from the issuing party.[41]

54 In my opinion, the sum sought by Gadens as reasonable costs of compliance should be substantially reduced for the following reasons:

(b) Gadens misled, albeit innocently, the issuing party about the extent of compliance work; and failed to correct the misapprehension that they had induced.

55 The terms of the subpoena were reasonably framed by referencing the documents to be produced as those concerning the vendors' Land, rather than specifically limiting the scope to a file in respect of which the vendors were the clients. In retrospect, it may be easy to criticise the terms as drawn; but limiting the terms of the subpoena, for example by reference to a file held on behalf of a particular client, creates a real risk that the addressee would not have been required to produce a file relating to the Land for which the named client was a trust or corporation in which the vendors had an interest.

56 It was further submitted on behalf of Gadens that the amended subpoenas were 'wider than the original as issued' because it sought financial documents and required all communications with the vendors or anyone for or on their behalf.[42] I reject this submission for the following reasons:

(a) The evidence of Gadens, and submissions by Mr McGowan QC, did not substantiate why invoices and office and trust documents held by Gadens, with respect to a file maintained on behalf of the vendors, could not be readily produced.

(b) Mr McGowan QC, in submissions to the Court, stated that his instructions were that 'documents falling within the subpoena limited to Gadens' dealings with the vendors can be produced and is of quite limited volume and ... can be produced relatively quickly'. It is not apparent how that category is in substance different to the communications with the vendors sought in paragraph 2 of the amended subpoenas (particularly the revised version).

57 The solicitor for the plaintiff properly telephoned the partner of Gadens (who had been identified by Mr Bisognin as the person the vendors had engaged) specifically for the purposes of:

(a) informing Gadens that the subpoena was intended to be directed to a file held by Gadens for the vendors' interests; and

(b) inquiring whether Gadens would be able to comply within the very short proposed time frame.

58 Ms Lee, after being read the proposed terms of the subpoena, confirmed that the file was quite small and there would be 'sufficient time to respond'.

59 As a result of being told that Mr Woolley was the main partner involved, the solicitor for the plaintiff properly telephoned him for the same purposes as set out above at [57] and was given similar assurances (although the terms of the subpoena were not read to him).

(a) he promptly realised that the terms of the subpoena extended to a large file, which I infer related to work associated with the CMJ Contract;

(b) he obtained instructions from 'the client' to press confidentiality and privilege rights; and

61 If Mr Warren had been informed that the assurances given by Ms Lee and Mr Woolley were no longer applicable by reason of:

(a) the terms of the subpoena being limited to documents relating to the Land but not to a file of the vendors; and

(b) Gadens holding a further substantial file relating to the Land,

I consider that the plaintiff's solicitors would have limited the subpoena to the file held on behalf of the vendors. This conclusion is supported by the fact that, when Gadens informed the Court of the above matters on 30 March 2017, the plaintiff did so restrict the subpoena.

62 No explanation was offered by Mr Woolley as to why he did not contact Mr Warren when he realised that the assurances given to Mr Warren no longer applied except that he took the 'view that the subpoena was an order of the Court and must be complied with strictly'. Mr McGowan QC submitted that the failure to contact Mr Warren may have been the result of the limited time for compliance.

63 If Mr Woolley was not aware that he could have clarified and greatly reduced the compliance obligations by contacting Mr Warren, I consider that to be unfortunate. I would emphasise the importance of direct and meaningful communications between legal practitioners for the purpose of reducing interlocutory disputes and avoiding unnecessary costs.[43]

64 Nothing I have said should be interpreted as being critical of Gadens. The evidence is that Gadens did nothing but act in accordance with their client's instructions. For the reasons considered below, Gadens' client may well have considered that its interests were in not disclosing the CMJ Contract; and therefore a co-operative approach with the plaintiff would not be consistent with non-disclosure. However, the additional costs incurred by Gadens in conducting the matter in accordance with its client's instructions do not constitute reasonable costs of compliance with the subpoena.

65 As stated above, the fact that a solicitor owes an obligation of confidentiality to a client is not of itself a basis for resisting compulsory disclosure of a document under a subpoena. It was not submitted by Gadens that its client's confidentiality claim was in the nature of the prevention of the disclosure of a trade secret to a commercial competitor. However, Gadens, on their client's instructions, sought to keep confidential the names of their clients and the CMJ Contract.

66 This is unsurprising because the CMJ Contract refers to the 2015 Contract and presumably Gadens' client was well aware of its terms including the conflict of the duties created for the vendors by the two contracts. However, the CMJ Contract was centrally relevant to the issues in this proceeding; and no submission was made as to how disclosure of these matters could be resisted on the basis of confidentiality or privilege.

67 Accordingly, on the evidence, I do not consider that the substantial expense incurred in advising the client about resisting disclosure on the basis of confidentiality, could be said to be a reasonable cost of complying with the subpoena.

68 Of course, Gadens were entitled to resist inspection of some documents on the basis of legal professional privilege; but:

(a) the name of the client and the CMJ Contract could not be resisted on this basis; and

(b) the disclosure of these facts probably could have avoided further expense. Certainly, after the CMJ Contract was disclosed by the vendors, the plaintiff sought no further production of documents.

69 In these circumstances, I consider that the reasonable expense of compliance with the subpoena should be limited to the costs that would have been likely to be incurred if Gadens had contacted Mr Warren and informed him that, contrary to what he had been told:

(a) the terms of the subpoena extended beyond the vendors' file to another very substantial file;

(b) the costs of complying with the subpoena as drawn would be in the tens of thousands of dollars; and

70 In my opinion, I consider the reasonable costs that would have been incurred if Mr Warren had been so informed and consequently limited the scope of the subpoena, would have included the following:

(a) reviewing the subpoena, assessing the scope of compliance requirements;

(d) reviewing the vendors' file extracting privileged material;

(e) collating the subpoenaed material for the purpose of production;

(f) appearing at Court producing the vendors' file and protecting the interests of Gadens and its clients about the result of the negotiations with the plaintiff's solicitors, the limited production of documents; and the inability to comply with the subpoena within the time prescribed by the subpoena.

71 In my opinion, the taxation of this hypothetical exercise would be imprecise and would incur more costs than is proportionate to the amount in dispute.[44] Applying a broad-brush approach, I consider that a reasonable estimate of the time to complete the above tasks would be no more 8 hours. Accordingly, I consider the reasonable costs of compliance to be $3,040.00 being 8 hours at the rate prescribed under the Supreme Court scale of $380.00 per hour.

72 With respect to the costs of the application, in the ordinary course, Gadens would be entitled to an order for costs to be taxed. However, I consider that the application was substantially the result of Gadens' excessive claim for costs. Accordingly, subject to any Calderbank offers, I propose to order that:

(a) In the first instance, the plaintiff pay Gadens' reasonable expenses of compliance with the subpoena fixed at $3,020 together with 50% of the costs of this application to be taxed on a standard basis.

(b) The ultimate responsibility for the above costs be costs in the proceeding.

73 As a result of the decision in the trial of this proceeding, the ultimate burden of these costs will be borne by the vendors. I consider that this is particularly appropriate because I consider the subpoena would not have been necessary if the vendors had disclosed the existence of the CMJ Contract.

[1] See Hera Project Pty Ltd v Bisognin [No 3] [2017] VSC 268. These reasons should be read in conjunction with the reasons given in Hera Project Pty Ltd v Bisognin [2017] VSC 268. Some events and people and their relative importance to the issues in this application are explicable only by reference to the facts found, circumstances referred to and submissions made in those reasons.

[2] Being the day to which the termination date under the 2015 Contract had been extended by orders of Sloss J made 22 June 2016, following the publication of reasons in Bisognin v Hera Project Pty Ltd [2016] VSC 75.

[3] Gadens software did not permit the file to be produced electronically.

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Judgment (238 paragraphs)

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Cases Cited (10)