Inspector James v Ryan

Inspector James v Ryan - [2010] NSWIRComm 184 - NSWIRComm 2010 case summary — Zoe

[11]

(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

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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

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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:

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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

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[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

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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:

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[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

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[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

At a glance

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Judgment (78 paragraphs)

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Cases Cited (15)