Inspector James v Ryan

A Pty Ltd v Z [2007] NSWSC 999 A v Z [2007] NSWSC 899 CASES CITED: Inspector James v Ryan [2009] NSWIRComm 215 Inspector James v Ryan (No 3) [2010] NSWIRComm 127 Seven Network Ltd v News Ltd [2007] FCA 2059

HEARING DATES: 16 August and 25 November 2010.

Mr D Chin of counsel (Prosecutor) Solicitor: Legal Group WorkCover Authority of New South Wales LEGAL REPRESENTATIVES: Ms E Collins SC (Alesco Corporation Limited) Solicitor: Mallesons Stephen Jaques

Prosecution under s 8(1) of the Occupational Health and Safety Act 2000 (in the alternative pursuant to s 10(2)) by operation of s 26 of the Occupational Health and Safety Act 2000

JUDGMENT ON APPLICATION BY ALESCO CORPORATION LIMITED FOR RECOVERY OF COSTS AND EXPENSES

1 These interlocutory proceedings are constituted by an amended notice of motion. The applicant, Alesco Corporation Limited ("Alesco"), seeks certain orders for the payment of costs and expenses against the prosecutor, consequent upon the production by it of voluminous records to the Court pursuant to a summons for production of documents. The summonses for production were issued by Inspector Wayne James of the WorkCover Authority of New South Wales who was the prosecutor in proceedings alleging a breach of provisions of the Occupational Health and Safety Act 2000 against the defendant Justin James Ryan. The defendant, at all relevant times, held a senior position within Alesco, latterly as its chief executive officer and managing director. 2 A notice of motion had originally been filed on 21 June 2010. In it, Alesco sought an order against Inspector James for the payment of $225,940.71 "for its reasonable costs and expenses of complying with summonses for production …." Alternatively, the motion sought an order that the applicant's expenses be assessed. 3 The notice of motion was amended on 16 August 2010. The amount sought was reduced to $168,319.31. 4 The amended notice of motion asserted that the prosecutor had undertaken to pay its "reasonable costs of complying with the summonses" in correspondence and in accordance with cl 20(2) of the Industrial Relations (General) Regulations 2001. 5 The prosecutor accepted that he was obliged to pay monies to the applicant pursuant to the provisions of cl 20(2) of the General Regulation. It is in the following terms:

(2) Any such person is not required to comply with the summons unless an amount sufficient to meet the reasonable expenses of the person in complying with the summons is paid or tendered to the person at the time of service of the summons or not later than a reasonable time before the day on which the person is required to comply with the summons. 6 There was no issue between the parties that the provisions of the regulation should be applied by reference to those expenses or that loss which are reasonably incurred or sustained both as to necessity and to quantum. What was at issue was the amount claimed. The applicant based its claim on an expert opinion provided to it by Ross Nicholas, a legal costs consultant. In an affidavit affirmed on 27 October 2010, Mr Nicholas expressed the opinion that the totality of the costs and expenses payable by the prosecutor was $153,372.31. The applicant's claim was resisted by the prosecutor on the basis of an expert opinion provided to him by Peta Leslie Solomon, also a legal costs consultant. In an affidavit sworn 20 September 2010, Ms Solomon estimated the maximum range of total reasonable costs as between $62,760.50 and $65,060.50. 7 It is immediately obvious that there is a wide gulf between the opinions expressed by each of these legal costs consultants. Prior to the hearing of the motion, I asked that they meet with each other to discuss their differences. They did so, but neither changed their position. I shall refer to some of the differences between the parties later in these reasons for judgment. 8 I should state at the outset that the prosecutor did not resist any order that the Court might make requiring that the costs be assessed by a third party. The applicant submitted that the Court should fix a lump sum amount and order that the prosecutor pay that amount rather than that the quantum of the costs and expenses be assessed in the more time consuming and costly exercise involving formal assessment. I determined that this is a matter that should be decided on a preliminary basis and this judgment is directed only to this aspect of the proceedings. However, in doing so I shall also determine a number of discrete issues which were argued by the parties in the course of the hearing of the proceedings. The substantive proceedings

9 In order to assist in an understanding of the factual circumstances that apply to a consideration of this matter, it is first necessary to make some brief observations about the nature of the underlying substantive proceedings. The defendant, Justin James Ryan, was charged by the prosecutor with a breach of s 8(1) and, in the alternative, s 10(2) of the Occupational Health and Safety Act ("the Act"). He was so charged by reason of the provisions of s 26(1) of the Act which provides, in effect, that if a corporation contravenes the Act, a director of the corporation is taken to have contravened the same provision unless the director is able to establish certain matters by way of defence. They include that the defendant was not in a position to influence the conduct of the corporation in relation to its contravention of the provision. 10 It was alleged by the prosecutor and not seriously contested by the defendant that a corporation Dekorform Pty Ltd had breached the relevant provisions of the Act when an accident occurred at its premises on 3 July 2006 in which an employee of Dekorform Pty Ltd sustained fatal injuries. Dekorform Pty Ltd was a wholly owned subsidiary of Parbury Pty Ltd. That company, Parbury Pty Ltd, was in turn a wholly owned subsidiary of Alesco. 11 There was evidence available to the prosecutor that the defendant in the proceedings was a director of Dekorform Pty Ltd. At the commencement of the proceedings, the defendant asserted for the first time that one of the defences upon which he would rely was that he was not a director of Dekorform Pty Ltd. The defendant maintained consistently that even if he were a director of Dekorform Pty Ltd, he was not in a position to influence the conduct of that corporation in relation to its contravention of the Act. 12 The prosecutor was granted an adjournment to pursue the question of directorship and when the proceedings resumed much of the focus of attention of the parties was whether or not the defendant was a director of Dekorform Pty Ltd as well as whether he was in a position to influence the conduct of the corporation in relation to the breach. 13 The proceedings were dismissed on the basis that, firstly, the defendant was not a director at law of Dekorform Pty Ltd and, secondly, even if this had been established, he was entitled to avail himself of the defence. The prosecutor instituted an appeal. A Full Bench of this Court dismissed the appeal holding that the defendant was not a director at the relevant time and finding it unnecessary to deal with the establishment of any defence. See Inspector James v Ryan (No 3) [2010] NSWIRComm 127. The factual background to these proceedings

14 By summons for production, filed on 6 July 2009 addressed to the proper officer of Alesco, the prosecutor sought the production of 25 categories of documents. I reproduce some of these categories so that there may be some understanding of the extensive nature of the documentation sought.

The minutes of meeting of the board of directors (or any committee thereof) of Alesco Corporation Limited ("Alesco") in the period 1 January 2005 to 30 October 2008.

Any reports, briefing papers, agendas, draft minutes, proposed resolutions or other documents provided to directors by any director or company secretary of Alesco for the purposes of any meeting of its board (or any committee thereof) during the period 1 January 2005 to 30 October 2008.

Any report, briefing papers, agendas, proposed resolutions or other documents provided by Kevin Clarke to Justin Ryan or by Justin Ryan to Kevin Clarke for the purpose of preparation or discussion any meeting of the board of directors of Alesco during the period 1 January 2005 to 30 June 2006.

All documents in respect of work undertaken upon the acquisition/merger proposals listed below including all documents identifying: a. the commencement date of such work b. the nature and content of consideration of such proposals c. the date of abandonment of such proposals d. work undertaken by Justin Ryan e. work undertaken by any other person in respect of such proposals

(There then followed a list of 19 named "acquisition/merger proposals")

All documents in respect of work undertaken upon the acquisitions/mergers listed below including all documents identifying: a. the commencement date of such work b. the nature and content of consideration of proposals for acquisition c. the date of conclusion of such acquisitions d. work undertaken by Justin Ryan e. work undertaken by any other person in respect of such acquisitions

The acquisitions/mergers: 1. Concrete Technologies 2. Flex Tool 3. Pre Medica

Any document in relation to any direction or instruction from Kevin Clarke to Justin Ryan concerning the nature and/or extent of any work duties to be undertaken or not undertaken by Justin Ryan during the period 1 January 2004 to 3 July 2006.

All documents in relation to any appointment of Justin Ryan to any position or office in respect of Alesco (or related corporations including subsidiary companies) in the period 1 January 2005 to 3 July 2006.

All documents identifying any roles, responsibilities, duties, powers or authorities of Justin Ryan in the period 1 January 2005 to 3 July 2006.

All documents recording or in relation to communications between the following persons in the period 1 January 2005 to 3 July 2006: a. Justin Ryan and Kevin Clarke b. Justin Ryan and Sean Wareing c. Justin Ryan and Luci Rafferty d. Justin Ryan and Robert Paul in relation to the following matters: a. the roles, responsibilities, duties, powers or authorities of Justin Ryan b. the appointment of Justin Ryan to any position or office in Alesco (or related corporations including subsidiary companies) c. any roles, responsibilities, duties, powers or authorities of Justin Ryan in relation to the kitchen and laundry businesses and/or divisions of Alesco d. any roles, responsibilities, duties, powers or authorities of Justin Ryan in relation to Dekorform Pty Ltd or any business conducted under the business name Dekorform e. any roles, responsibilities, duties, powers or authorities of Justin Ryan in relation to occupational health and safety compliance in relation to Alesco (or related corporations including subsidiary companies) f. any responsibilities or duties of Justin Ryan in relation to reporting to Kevin Clarke and/or the board of directors of Alesco (or any committee thereof) in relation to: i. the Parbury division of Alesco ii. Parbury Pty Ltd iii. Dekorform Pty Ltd g. Any limitation upon the duties to be undertaken by Justin Ryan in any capacity. 15 There then followed extensive correspondence between solicitors for Alesco and the solicitor for the prosecutor concerning the summons for production and in particular its extensive nature. In the midst of this correspondence, the prosecutor's solicitor said that the WorkCover Authority "accepts that it is obliged to pay your client's reasonable costs of complying with the summons …." The letter sought an estimate of the costs for compliance including the basis for calculation of that estimate. 16 In a letter dated 21 July 2009, Alesco's solicitors stated that its client's costs and expenses of complying with the summons would be calculated on a solicitor-client basis including "the costs of legal advice obtained on the question of relevance and scope." The letter cited cases decided in the Supreme Courts of Victoria and Western Australia in support of this. Furthermore, the letter sought the recovery of reasonable costs "of reviewing documents in order to determine matters in respect of legal professional privilege and issues of confidentiality …" and cited authorities in support. 17 There does not appear to be any further correspondence between the parties relating to the question of costs. 18 The further detailed correspondence between the solicitors produced some modifications to the documents that were required to be produced and some measure of agreement. 19 The prosecutor sought a hearing dealing with the outstanding issues between him and Alesco relating to the summons for production. I conducted a hearing on 31 August 2009 in which I issued certain directions concerning the scope and width of the summons for production and concerning also the question of confidentiality of some of the material to be produced. 20 Subsequently, the prosecutor issued two further summonses for production to Alesco, both of which were confined in the scope of the documents sought. 21 Mallesons Stephen Jaques, Alesco's solicitors, issued a number of tax invoices to Alesco seeking the payment of costs and expenses involved in legal work performed by them in connection with the production of the documents required by the several summonses for production. Alesco has sought recovery of that amount from the prosecutor. Furthermore, Alesco has sought the recovery of certain expenses incurred by it in connection with certain work performed by its general counsel, finance director, CIO, its "IT team", an executive assistant and a "former GGM biolab" person. Of that work, the bulk, namely 50 hours, was expended by Luci Rafferty, Alesco's general counsel, for which the sum of $8,462 was charged-out. The 50 hours was said to comprise, inter alia, 10 hours searching for emails and files, 27 hours in receipt and review of documents and emails, and 6 hours in liaising with Mallesons Stephen Jaques. 22 The total cost charged out for all of the Alesco personnel was $23,562. I shall defer considering the appropriateness of these charges until after there has been a determination of the legal professional costs and disbursements in the manner that I intend directing. 23 However, it will be necessary to refer to the involvement of Ms Rafferty because of certain matters that were raised in submissions by the parties. I shall return to this aspect later in these reasons for judgment. 24 In an affidavit sworn for the purpose of these proceedings, Catherine Mary Mills, a partner of Mallesons Stephen Jaques and the solicitor on the record for Alesco, described the nature and extent of the work undertaken for Alesco in connection with the summonses for production of documents as follows:

[20] The volume of documents potentially relevant to the Summonses was substantial, running to several thousand documents. All of these documents had to be reviewed by Mallesons to identify the documents actually relevant to the Summonses. In addition, Alesco instructed Mallesons to undertake a review of all documents determined to be relevant to the Summonses to establish whether those documents may be the subject of a claim for legal professional privilege or might otherwise contain information that was confidential or commercially sensitive to Alesco's business. The latter review was necessary to ensure an appropriate confidentiality regime was established. In my experience, a review to identify commercially sensitive or confidential documents is not unusual in circumstances where a non-party corporation is called upon to produce such things as minute books, board packs and documents evidencing sensitive negotiations with third parties in respect of corporate mergers and acquisitions transactions which did not proceed ultimately or in respect of which the producing company may be the subject of extant confidentiality orders.

[21] At my instructions, an initial review of Alesco's documents was completed by Peter Richard and Michaela Whitbourn, junior solicitors in Mallesons' employ. They were assisted in respect of documents provided by Alesco electronically, by Gavin Wingfield, an e-discovery specialist in Mallesons' employ. The document review was supervised by Caroline Cook, a senior lawyer in Mallesons' employ, who determined, on a final basis, which documents were relevant, and those which were also subject to confidentiality or legal professional privilege.

[22] I was also required, along with Ms Cook, to provide legal advice to Alesco in relation to the scope of the Summonses, protocols for the production of confidential material and privilege issues. As a result of the confidentiality regime agreed to in Court on 31 August 2009 in respect of certain of the documents to be produced under the Summonses, it was necessary for Mallesons to review transcripts of the Proceedings, to retain counsel to advise and appear, and to prepare further confidentiality orders which were endorsed by his Honour Justice Marks on 23 September 2009. It was also necessary for Caroline cook, Imtiaz Ahmed (another senior lawyer employed by Mallesons) and Peter Richard to prepare and respond to correspondence with WorkCover regarding the Summonses, and to prepare for and attend on Alesco's behalf, directions hearing in the Industrial Court of New South Wales in connection with the Summonses. 25 In a subsequent affidavit, Ms Mills described the volume of the material received by Mallesons Stephen Jaques from Alesco as comprising in all "approximately 98 lever-arch folders of documents". She said all of those documents were reviewed for "relevance, privilege and commercial in confidence." 26 Of the total of the documents reviewed by Mallesons Stephen Jaques, a quantity of documents "equating to approximately 29 folders" was produced to the Court in answer to the summonses for production. 27 I should add that Ms Mills, who said that she had over 16 years experience in commercial litigation, estimated that on assessment there would be recovery of between 70 to 75 per cent of legal professional costs and 100 per cent of disbursements including counsel's fees. Accordingly, the total recoverable in her opinion ranged from approximately $168,000 to $177,000. The expert evidence

28 As I have said, both the prosecutor and Alesco retained an expert costs consultant to assist in the evaluation of the costs and in providing an opinion as to the amount that was likely to be recoverable on assessment. Both appear to be experienced costs consultants. Their respective affidavits were tendered into evidence and Mr Nicholas was cross-examined on his affidavit. Ms Solomon was not required for cross-examination on the basis that the hearing to date has been confined to the preliminary issue as to whether the costs would be assessed by the Court or by a costs assessor. 29 Both of the experts proceeded on the basis that the relevant power of the Court to make an order for costs in the context of these proceedings is to be found in regulation 20 of the Industrial Relations (General) Regulations 2001, which I have previously set out. 30 Both parties proceeded on the basis that in determining what amount was sufficient to make good the expense or loss claimed by a non-party, it was necessary to determine that the expense or loss must have been reasonable in amount and appropriate in terms of the manner in which it was incurred. Furthermore, any costs of compliance incurred by a legal practitioner are to be assessed on a solicitor and client basis. Both of the experts appear to have proceeded on this basis, although Ms Solomon took the approach, which she said accorded with her instructions, that "where costs are claimed such that they would exceed costs that would be allowed on a party/party basis, those costs are incurred only to the extent that they were reasonably incurred." I am not sure what Ms Solomon meant by this but I shall assume that she proceeded on the basis that solicitor client costs should be reasonably incurred in the context of the amount charged and the necessity for the work to be done. 31 There are a number of matters of significance where the expert opinions differed and I shall deal with the more important of them. Charge-out rate

32 Both experts differed as to what was the appropriate charge-out rate for each of the persons at Mallesons Stephen Jaques who had carried out the work for Alesco. For example, the charge-out rate of Ms Mills, the partner, was $695 per hour. Ms Solomon thought that an appropriate charge-out rate, given the nature of the work being performed, was $400 an hour, whereas Mr Nicholas would have allowed $550 an hour. There are similar variations that apply to the senior associate (charge-out rate $565 per hour, Solomon allowance $350 an hour, Nicholas allowance $450 an hour), as well as to all of the other solicitors and a paralegal involved. 33 In considering what was a reasonable charge-out rate, Ms Solomon took into account the nature and complexity of the work as well as the seniority of the practitioner. She also took into account that the solicitors were obtaining instructions from an experienced in-house legal counsel rather than from laypersons. Mr Nicholas, on the other hand, took into account the market for legal services in which Alesco could obtain legal representation, the rates commonly allowed on costs assessments for solicitors and the dates of admission of the solicitors. He does not specifically take into account the "nature and complexity of the work". I do not make this observation by way of criticism; rather I am unaware as to whether or not it is appropriate to take this matter into account in determining what are reasonable legal costs for the purpose of these proceedings. I note, however, that about 80 per cent of the solicitors' costs charged refer to work undertaken by Ms Cook, a senior associate, and a Mr Richard, an employed solicitor. Staffing

34 Ms Solomon noted that five fee earners in total undertook the work at Mallesons Stephen Jaques. She thought that using multiple fee earners would produce "substantial duplication" and that the proportion of the work carried out at the higher levels was "excessive". In her opinion,

[T]he review of documents, for the purposes of production requires a less detailed examination of the documents than documents which are considered for evidentiary analysis such as by parties who are required to undertake the preparation of proceedings.

Mr Nicholas disagreed. He took into account that there were substantially two main fee earners with minimal partner time spent, the appropriate delegation of the work, "the expedited nature of the work", and his consideration of the times recorded by each of the solicitors. Duplication

35 It was the principal position of Ms Solomon that, because of the large number of fee earners, duplication was inevitable and the need for supervision would also lead to duplication. 36 Because there was, in the opinion of Ms Solomon, insufficient particularisation of the work performed by each of the fee earners, it was difficult to assess the extent of the duplication. She concluded that:

[T]here is the potential for substantial duplication but this is not able to be reliably determined or excluded based on the particularisation provided in the invoices. 37 However, Ms Solomon singled out a particular reply to a letter received from the prosecutor of about 400 words in length. She thought that it would have taken between 8 to 12 minutes to read this letter and up to 2½ hours to prepare a letter in response comprising 2100 words. She thought that a reasonable charge-out rate for a senior associate to perform this work would be of the order of $805 to $945. As best as Ms Solomon could reconstruct the total charges of the four Mallesons Stephen Jaques' persons involved in the preparation of the response by reference to the time take by all of them, the total appropriate cost was of the order of $3,738. 38 Mr Nicholas thought that these assertions as made by Ms Solomon were "incorrect and accordingly misleading." He described the letter in question as being complex, as referring to numerous cases and one that would have reasonably taken considerably longer to draft than 2½ hours. He also queried Ms Solomon's analysis of the attendances set out in the various invoices, which supposedly related to the drafting of this letter. 39 In particular, Mr Nicholas complained that Ms Solomon's analysis of the time taken did not take into account the need to obtain instructions for the letter and, in particular, the time necessary to consider the documents, which were the subject of the summons and which were referred to in the letter. 40 The letter in question is in evidence. It consists of 3½ closely typed pages. There is specific reference to documents in a number of categories by reference to "relevance" and "oppression". It seem to me that neither of these matters could have been the subject of detailed submissions without careful consideration of the subject matter of the documents referred to in the summons for production. 41 That letter also contains some detailed observations about the existence of such documents and the source to enable them to be produced. 42 There are references to some well-known authorities in this area that were used by Mallesons Stephen Jaques to justify propositions which were being put seeking a reconsideration by the prosecutor of each of the categories and what was sought to be produced. 43 The letter also contained observations about the costs of compliance and the time taken for the production of documents. 44 Ms Solomon has proceeded on the basis that, in her opinion, that letter would have taken no more than 2½ hours to prepare. The costs actually charged are more reflective of something in excess of 10 hours' work. 45 In order to resolve this controversy, it would be necessary to undertake a great deal more investigation. For my part, having practised as a solicitor for about 30 years (albeit not having practised as such for some considerable time), it is my opinion that a letter of this kind could not have been written in anything like 2½ hours without taking into account the time necessary to obtain instructions about a number of matters, which are referred to in the letter, and without taking into account the detailed examination of the summons for production which was essential to the crafting of the letter. Furthermore, it would be necessary to spend a little time at least in collecting the relevant authorities. Whether 10 hours is an appropriate time in all the circumstances I am unable to say based on such evidence as is before the Court about these matters. The involvement of in-house counsel

46 It was the position of Ms Solomon that Alesco had available to it experienced in-house counsel and other members of an in-house legal team. The fact that Ms Rafferty had spent so much time on the matter rendered it unnecessary for as much time to have been taken by Mallesons Stephen Jaques personnel. Furthermore, Alesco should have undertaken more of the work in-house at a much cheaper charge out rate. 47 Whilst these observations might be seen to have some pragmatic basis in an ideal world, they do not necessarily reflect reality. There is simply no evidence available to suggest that Ms Rafferty and her in-house legal team were able to devote any more time to the production of documents. There is no evidence about what other matters needed to be attended to by the in-house legal team within Alesco at the same time as the summonses for production needed to be dealt with. 48 Without there being any relevant evidence to entitle Ms Solomon to maintain such a position on a reasoned basis, I would reject any attempt to reduce the level of costs for this reason. The number of documents reviewed

49 Ms Solomon was of the opinion that the number of documents that were provided to Mallesons Stephen Jaques for review, namely the equivalent of 98 lever-arch folders, was "excessive relative to the number of folders ultimately regarded as caught by the various summonses", namely 29 folders. She was of the opinion that the external solicitors should have only been given and claimed the costs of reviewing 29 lever-arch folders together with a buffer of 20 to 30 per cent more, making a total of 37 folders in all. However, Ms Solomon does not appear to me to make any allowance for who it is that determines which of the 61 excess folders would not be given to Mallesons Stephen Jaques for review, and on what basis. Presumably Ms Solomon regards this work as having properly been undertaken by Alesco, without any consideration as to whether the Alesco legal team had the capacity to review these 61 folders of documents. 50 Furthermore, Ms Solomon asserts that allowance should be made of one hour for each folder of documents, totalling 37 hours work in all. Whether and to what extent her assertion is "reasonable" is something that is more appropriate, in my opinion, to be taken up by someone with expertise in the area of assessment of costs. Other matters

51 In her affidavit, Ms Solomon refers to a number of other discrete matters by reference to particular invoices and particular items. In general terms, she has expressed the opinion that the number of persons working on the particular matter was unreasonably high, there was duplication in the work conducted and, in any event, there was insufficient particularisation to allow a final opinion to be expressed. These are all matters that, in my opinion, would require some more detailed consideration before any appropriate ruling could be made about whether the costs were recoverable and, if so, in what amount. General observations

52 Each of the experts acknowledged that they were retained in accordance with the usual Court rules that apply to the giving of expert evidence to a Court. Both experts met with each other before the Court hearing. I remain perplexed as to how there could remain such a gulf between them. The final assessment of Mr Nicholas was of the order of $153,000. That of Ms Solomon was between $56,000 and $65,000. As I understand the evidence, and information given to me by counsel representing the parties, the assessment of costs is undertaken by a costs assessor with expertise in this area. Both Mr Nicholas and Ms Solomon are costs assessors with professed expertise. It is regrettable, in my opinion, and without being critical of either of them, that the area of controversy remains so large. The costs of the contested proceedings

53 It was asserted by the prosecutor that Alesco should not be entitled to its costs of participating in the proceedings before me during the course of the hearing on 31 August 2009. In essence, it was said by the prosecutor that these were not the costs of compliance with the summons for production but were in effect costs of resisting the summons for production. The prosecutor relied substantially for this proposition on the judgment of Brereton J in the Supreme Court of New South Wales in A Pty Ltd v Z [2007] NSWSC 999. 54 Those proceedings arose out of substantive proceedings with which his Honour was dealing, in which an order was claimed for the extension of a caveat and for a declaration that a party had an equitable interest in certain land. There was an underlying dispute about whether or not there had been a loan made and whether or not there had been a transaction that was tainted by illegality. One of the parties issued a summons for the production of documents directed to the Commissioner of Police. The documents covered matters such as investigations concerning a fire and including tapes, records of interview and transcripts of telephone interceptions. There were many more documents sought, but this brief description gives some indication of their general nature. 55 There were discussions between the particular party and the Commissioner concerning the breadth of the summons for production. Eventually, the Commissioner filed a motion seeking orders that the summons for production be set aside or alternatively that the Commissioner be excused from producing certain documents on the basis of public interest immunity. The motion raised an argument about whether there was a legitimate forensic purpose attaching to the issue of the summons. In an ex tempore judgment published on 4 July 2007, Brereton J declined to set aside the summons for production for lack of legitimate forensic purpose. (See A v Z [2007] NSWSC 899). His Honour stood over the balance of the proceedings to a later date, and those adjourned proceedings were the subject of the judgment that is relied upon by the prosecutor in these proceedings. 56 In this later judgment, his Honour dealt with a number of points concerning the validity of the summons for production including a claim for statutory privilege. His Honour made orders that had the effect of restricting the width of the summons. 57 His Honour then dealt with two aspects of the costs of the proceedings. The first was the costs of the Commissioner's motion and, secondly, the costs of the Commissioner's compliance with the summons for production, including obtaining legal advice. His Honour dealt with both aspects separately. 58 In terms of the Commissioner's motion, his Honour determined that no order as to costs should be made. In doing so, his Honour observed, on the one hand, the interlocutory proceedings had been extended because of the failure of the Commissioner to raise the statutory privilege point on the first occasion but, on the other hand, the Commissioner had been successful in narrowing the scope of the summons for production as the matter had proceeded. 59 In dealing with the costs of compliance, Brereton J applied the provisions of rule 33.11 of the (NSW) Uniform Civil Procedure Rules 2005. His Honour said:

[44] UCPR r 33.11 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 subrule (1), the court must fix the amount or direct that it be fixed in accordance with the court's usual procedure in relation to costs.

(3) An amount fixed under this rule is separate from and in addition to: (a) any conduct money paid to the addressee, and (b) any witness expenses payable to the addressee.

[45] The expenses that may be allowed under this rule include time incurred in dealing with the subpoena [ Deposit & Investment Co Limited (Receivers Appointed) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267, 289; J Aron Corporation v Newmont Yandal Operations [2004] NSWSC 996], legal advice reasonably incurred in relation to confidentiality and privilege issues pertaining to the subpoena [ Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77] on a solicitor/client basis [ Kumagai Australia Finance v Avarton Ltd (NSWSC, Bryson J, 7 June 1991, unreported)], and the cost of photocopying [ Mancorp Pty Ltd v Baulderstone Pty Ltd (SASC, Debelle J, 5 March 1993, unreported)]. 60 In discussing the costs of compliance, and in dealing with that issue, his Honour said:

[48] The costs of compliance with the subpoena, however, are a different matter. A subpoena is an invasive process which puts third parties to costs and trouble for the benefit of the parties to litigation, and in particular the issuing party. The price that an issuing party pays for the privilege of being able to issue subpoenas more or less as of course is the liability to pay a recipient its reasonable costs of compliance. It was entirely reasonable for the Commissioner to seek and obtain legal advice as to issues of privilege. However, once he moved from obtaining legal advice as to whether or not documents should be produced, to agitating a motion to set aside the subpoena, that passed beyond the scope of compliance with the subpoena, to an application not to comply with it.

[49] In my view the Commissioner is entitled to recompense for searching and assembling the documents called for, and obtaining advice as to the subpoena up to the time a decision was made to file a motion to set aside the subpoena; but not in respect of the motions. I appreciate that the distinction is not always clear, but in my view, the costs of legal advice between 18 May 2007 (when the motion was originally filed) and 6 September 2007 (when this judgment is delivered) should be regarded as costs of the motion. Legal costs related to the subpoena before the commencement and after the completion of that period, together with all costs of searching, assembling, copying and producing documents called for by the subpoena, should be regarded as costs of compliance. 61 The prosecutor submitted that the costs of the proceedings before me should be treated in the same way as the costs of the motion before Brereton J in A Pty Ltd. There are a number of reasons why I reject this submission. Firstly, in those proceedings Brereton J was dealing with a discrete motion issued by the Commissioner of Police which advocated as a basis for non-compliance certain statutory provisions, as well as arguments going to the legitimate breadth of the summons for productions. The costs of that motion were clearly able to be considered by his Honour in the context of that discrete interlocutory process, an approach that his Honour adopted. This situation is relevantly different in the context of these proceedings. In these proceedings, there had been an evolutionary process undertaken by way of negotiations between legal representatives of the parties, which reached an impasse. At that stage, the further resolution of that impasse was dealt with by the Court at the instigation of the prosecutor. It was, in my opinion, a further step in the process that had been initiated by the legal practitioners, which dealt with the legitimate and necessary breadth of the summons for production. No questions of statutory immunity and the like arose. Because no separate and discrete application was brought before the Court in terms of a formal notice of motion, there was no need to deal with the costs of the proceedings on a discrete basis other than pursuant to the jurisdiction and power of the Court to deal with the costs of those proceedings. Furthermore, and, significantly, I do not regard the proceedings before me as capable of being characterised as an application by Alesco not to comply with the summons for production. The attitude taken by Alesco in response to the issue of the summons for production was to seek clarification to ensure that the otherwise asserted oppressive nature of the summons might be circumscribed in some reasonable way so as to inflict the least possible inconvenience and trouble on Alesco. Once it is established (as it clearly is on the basis of the authorities) that it was entirely reasonable for Alesco to seek and obtain legal advice about the summons for production, it seems to me that as a logical step it became entirely reasonable for Alesco to agitate its concerns, based on the legal advice obtained by it, to the issuing party and, ultimately, before this Court. These observations are made on the basis that the legal advice given was proper and appropriate in all the circumstances. There is no suggestion in the context of these proceedings that that advice was other than reasonable and appropriate. Once a person who is the subject of a summons for production is legitimately entitled to seek advice about a matter concerning the summons and the issuing party is obliged to pay the reasonable costs thereof, and assuming the advice given to be reasonable and appropriate, there is no reason why the same approach should not be adopted in the context of any agitation of a controversy thrown up by the advice before a court. 62 Accordingly, this submission is rejected. Costs of maintaining confidentiality

63 As a result partly of orders made by me and partly as a result of consent reached between the parties, there was agreement that during the course of the substantive proceedings certain of the material produced by Alesco in answer to the several summonses for production and which became exhibits in the proceedings were to be marked as confidential and publication and access were restricted accordingly. Alesco retained Mallesons Stephen Jaques to peruse the transcript of the evidence taken in the proceedings and note up those documents that became the subject of orders concerning confidentiality. Alesco sought to recover the costs incurred by it for the work performed by Mallesons Stephen Jaques in so noting up the confidential documentation from the prosecutor. 64 I do not regard these costs as being recoverable under cl 20(2) of the General Regulations. Once the documentation is provided to the Court in answer to the summons for production, in general terms the provisions of cl 20(2) are expended. The primary obligation for the adherence to and compliance with any orders made by the Court concerning confidentiality rests on the parties to the substantive proceedings. The work undertaken by Mallesons Stephen Jaques in reviewing the transcript and noting up those documents that were the subject of a confidentiality order was too remote, in my opinion, to be able to be claimed against the prosecutor pursuant to the provisions of cl 20(2) of the General Regulations. They are more in the nature of costs and expenses of a private nature and not properly recoverable. Lump sum or refer costs for assessment?

65 It was the position of Alesco that the Court should adopt a "broad brush" approach and fix a lump sum, rather than referring the costs for assessment. Both parties agreed that the Court was empowered to fix a lump sum that would be payable for Alesco's costs, although, as I have said, the prosecutor argued that I should not do so. 66 There seems to me no reason why the Court should not, if it considers it appropriate to do so, fix a lump sum amount to cover the costs and expenses recoverable under reg 20. 67 I was referred to a number of authorities, principally in the Federal Court of Australia, where this approach has been taken. However, the Federal Court Rules specifically allow the Court to order that the whole or any part of costs specified by it should be paid by way of a gross sum specified in the order, instead of taxed costs. 68 The in principle approach to the assessment of a lump sum costs order was discussed by Sackville J in the Federal Court of Australia in Seven Network Ltd v News Ltd [2007] FCA 2059. At [25] to [29], his Honour said:

[25] The authorities establish a number of principles applicable to a claim for a gross sum costs order to be made pursuant to FCR , O 62 r 4(2)(c):

(i) The purpose of the subrule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum v Johnson (No 2) , at 120, per von Doussa J, applying Leary v Leary [1987] 1 All ER 261; Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, at 742 [21] per Giles JA.

(ii) 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. On the contrary, the Court applies a much broader brush than would be used on a taxation of costs pursuant to O 62: Beach Petroleum v Johnson (No 2) , at 120, 124, per von Doussa J; Harrison v Schipp , at 743 [22], per Giles JA.

(iii) The Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable. The Court should be astute to avoid both overestimating the recoverable costs and underestimating the appropriate amount, for example by applying an arbitrary discount to the amounts claimed: Beach Petroleum v Johnson (No 2) , at 123, per von Doussa J.

(iv) Although the power to assess a gross sum for costs involves the exercise of a discretion, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis. These include the principles contained in O 62 r 19 (embodying the ' necessary or proper ' test) and those stated in Stanley v Phillips [1966] HCA 24; (1966) 115 CLR 470, at 478, per Barwick CJ (on a party and party taxation the emphasis is upon obtaining adequate representation to enable justice to be done, not upon the propriety of steps taken to ensure maximum success in the cause): Auspine Ltd v Australian Newsprint Mills Ltd [1999] FCA 673; (1999) 93 FCR 1, at 4-5 [12]-[15], per O'Loughlin J; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629, at [6]-[8], per Mansfield J.

(v) Although the methodology permitted by O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 62 and Schedule 2 provide assistance in fixing an appropriate gross sum: Charlick Trading Pty Ltd v ANRC , at [10], per Mansfield J.

[26] The last point should be developed a little further. FCR , O 62 r 4(2)(c) authorises the Court to order that, instead of taxed costs , the successful party should be entitled to a gross sum costs order. The subrule contains no express direction that the Court is to apply the detailed criteria that are laid down in O 62 and Schedule 2. On the contrary, the subrule apparently leaves the question of quantification at large.

[27] Rule 4(2)(c) is, however, located within an Order that makes detailed provision for the assessment of party and party costs. It would be extremely odd if the more expeditious procedure contemplated by r 4(2)(c) resulted in either a successful or an unsuccessful party being exposed to an assessment of costs which simply ignores or overrides the basic principles applicable to a taxation of costs. I accept Mr Sheahan's submission that it would be an error for a Court to use its power under r 4(2)(c) to assess a gross sum clearly higher than that which would be allowed on a taxation of costs.

[28] On the other hand, it must be borne in mind that r 4(2)(c) establishes a procedure that applies instead of taxed costs . As the cases have stressed, the object of the procedure is to avoid the expense, delay and aggravation that would be involved in a taxation of costs, especially in a lengthy and complex case such as this. The procedure is intended to replace the potentially elaborate process contemplated by O 62 and Schedule 2, whereby a taxing officer meticulously analyses a specially prepared bill of costs by reference to individual items, some of which have distinctly Dickensian overtones.

[29] It is necessary for the Court to have sufficient information to enable it to make a logical, fair and reasonable estimate. In this respect, as the parties agreed, Telstra bears the onus of establishing that its claim to a gross sum satisfies the applicable test. In practice, this may involve the parties adducing evidence from expert costs assessors addressing whether the costs claimed by the successful party were ' necessary or proper for the attainment of justice or for maintaining or defending the rights of a party ' (O 62 r 19) or, in more general terms, whether the amounts sought would have been recoverable on a taxation of costs. 69 The circumstances of the proceedings before Sackville J were somewhat different to those conducted before me. His Honour, with the assent of the parties, sat with a Deputy Registrar experienced in conducting taxation of costs who participated in the proceedings and who was consulted by his Honour about the conclusions that he had reached. Importantly, by implication, the Deputy Registrar was experienced about rates customarily allowed by taxing officers. 70 The only assistance that I have in the context of these proceedings is that which is provided by the experts. Unfortunately, the opinions expressed by them differ markedly with respect to almost every aspect of the consideration of the costs claimed. Although I have made comment in the course of these reasons for judgment in which I have rejected some of the opinions expressed by the experts, and in particular Ms Solomon, there remains outstanding the diverse approach concerning what is an appropriate and proper charge-out rate for the work undertaken and a detailed consideration of the level of seniority and time taken to undertake the work. Furthermore, a rejection of part of the approach of Ms Solomon does not necessarily justify a rejection of the other parts of her overall opinion. In the same vein, there can be no justification in splitting the difference between the experts down the middle or in any other proportion. Such an approach is not based on any rational thought process, although it is sometimes seen as a common sense way of resolving disputation. In short, I conclude that the Court does not have sufficient information "to enable it to make a logical, fair and reasonable estimate." 71 Accordingly, I propose to refer the question of costs, other than the costs and expenses incurred by Alesco itself with respect to its own internal personnel, for assessment. The assessment process

72 The parties did not address the Court concerning any statutory or other basis upon which the assessment process, as ordered by the Court, might be based. 73 The rules of the Court, including those made under the Civil Procedure Act, apply only to civil proceedings. In general terms, the conduct of criminal proceedings is regulated by the Criminal Procedure Act 1986 and the Regulations made pursuant to that Act. Division 4 of Part 5 of Chapter 4 of the Criminal Procedure Act deals with the awarding of costs. However, as I read the provisions of that Division, they seem to be confined to the awarding of costs in favour of a prosecutor against an accused and in favour of an accused against a prosecutor. 74 Section 257G of that Act makes reference to an assessment of costs under the Legal Profession Act 2004. Section 257G is in the following terms:

The professional or other costs payable by a prosecutor or accused person in accordance with an order directing that the amount of costs is to be determined under this section are to be determined:

(a) by agreement between the prosecutor and accused person, or

(b) if no such agreement can be reached, in accordance with Division 11 of Part 3.2 of the Legal Profession Act 2004 (with or without modifications prescribed by the regulations). 75 I conclude that it cannot be assumed that the Court is empowered to make an order for the assessment of costs under Division 11 of Part 3.2 of Chapter 3 of the Legal Profession Act in the circumstances of these proceedings, which are concerned with the assessment of legal professional costs incurred by Alesco in connection with compliance with a summons for the production of documents issued by the prosecutor. 76 I have examined for myself whether, nevertheless, it might be possible to refer this issue for assessment under the Legal Professional Act. The difficulty is that within Division 11 of Part 3.2 of Chapter 3 of that Act, s 353 provides:

353 Application for assessment of party/party costs

(1) A person who has paid or is liable to pay, or who is entitled to receive or who has received, costs as a result of an order for the payment of an unspecified amount of costs made by a court or a tribunal may apply to the Manager, Costs Assessment for an assessment of the whole of, or any part of, those costs.

(2) A court or tribunal may direct the Manager, Costs Assessment to refer for assessment costs payable as a result of an order made by the court or tribunal. Any such direction is taken to be an application for assessment duly made under this Division.

(3) An application or direction under this section may not be made in relation to costs arising out of criminal proceedings in a court except as provided by section 257G of the Criminal Procedure Act 1986.

(4) An application or direction under this section may be made in relation to an application for and the issue of an apprehended violence order within the meaning of the Crimes (Domestic and Personal Violence) Act 2007. 77 It would seem in these circumstances that the Court is not empowered to issue a direction under Division 11 because the proviso contained within s 353(3) is restricted to costs recoverable by a prosecutor against an accused and an accused against a prosecutor. 78 In these circumstances, it would seem, without the benefit of submissions from the parties, that the Court is thrown back on an inherent or implied power as a superior court of record to put in place a procedure to facilitate the exercise of its powers and jurisdiction. I propose to proceed on this basis but I will give the parties an opportunity of addressing the Court if there is no agreement that the orders, which I propose to make, are made within power or, alternatively, they are prepared to be bound by them in any event. 79 In proceeding in this way, I am conscious of the need to facilitate the just, quick and cheap resolution of this issue. For the prosecutor, it comes at the end of protracted litigation in which I have delivered a substantive judgment and a further judgment on costs, both unfavourable to the prosecutor. Both of those judgments were the subject of appeal and both appeals were dismissed. The costs of the proceedings before me were estimated by the prosecutor and the defendant as exceeding in total $2 million. I assume that neither Alesco or the WorkCover Authority of New South Wales want to spend any more costs or expend any more time and energy than is absolutely necessary to resolve this dispute in the most cost-effective manner. 80 The orders that I propose are as follows: 1) That the parties jointly select a person with expertise as a costs consultant to be a costs assessor for the purpose of this order.

2. If the parties are unable to agree within 14 days on the person to be appointed a costs assessor, each party is to submit the name and curriculum vitae of a person proposed by each of them to be the costs assessor for the purpose of this order to my associate, such submission to be made in writing within 21 days of this date.

3. I will then appoint without conducting any further hearing one of those persons to be the costs assessor for the purpose of this order and the parties will be notified accordingly. Such a person must undertake in writing to comply with the provisions of this order to the best of his or her ability.

4. The costs of the assessor shall be borne in the first instance by each of Alesco and the prosecutor equally.

5. The parties shall submit to the costs assessor within 21 days of being notified of his or her appointment such documentation as they require to enable the assessment by the costs assessor of the costs and disbursements of Mallesons Stephen Jaques incurred in connection with the compliance by Alesco of its obligations under the summons for production documents.

6. Such costs are to include costs incurred in connection with the proceedings conducted by me on 31 August 2009 and are to include the perusal of and dealing with all of the material provided to those solicitors by Alesco and otherwise are to be assessed in accordance with these reasons for judgment.

7. Alesco and the prosecutor must allow the person appointed as costs assessor to have access to and inspect all documents that the costs assessor may require in respect of the assessment of the costs of Mallesons Stephen Jaques.

8. The provisions of s 364, other than s 364(4), of the Legal Profession Act 2004 shall apply to the conduct of the assessment of legal costs by the assessor.

9. Upon completion of the assessment process, the costs assessor is to certify to the Court the amount of the costs as assessed by him or her in accordance with these orders.

10. The Court will determine the costs and expenses to be paid by the prosecutor to Alesco with respect to the work performed internally by Alesco personnel without conducting any further hearing and based on the evidence filed in the proceedings.

11. The costs of the costs assessment process and the costs of the proceedings are reserved. 81 The proceedings are stood over to give the parties an opportunity of considering the proposed orders, which I have set out above. My associate will make administrative arrangements with the parties to have the proceedings relisted to hear further submissions. If the parties are able to reach agreement on the terms of the proposed orders, or on any other terms that reflect a consensus as to the disposal of the issue concerning costs and expenses, consent orders may be forwarded to my associate and I will make those orders in chambers.

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