J Aron Corporation Pty Ltd v Newmont Yandal OperationsPty Ltd & Ors

Supreme Court of NSW|2005-12-12|Before: Gzell J, The J

Introduction 1 On 14 October 2003, The J Aron Corporation issued five subpoenas to Arnold Bloch Leibler, RFC Corporate Finance Ltd, Newmont Mining Corporation, Newmont Australia Ltd and Michael Tilley. None of those persons was a party to the proceedings. 2 At the time the subpoenas were served, the entitlement of a non-party to compensation for expense or loss in answering a subpoena was governed by the Supreme Court Rules 1970, Pt 37 r 9 that was then in the following terms: "Where a person named is not a party and, in consequence of service of the subpoena, reasonably incurs expense or loss substantially exceeding any sum paid under rule 3, the Court may order that the party who requested the issue of the subpoena pay to the person named an amount in respect of the expense or loss." 3 On 19 July 2004, the above non-parties applied to the court under the above rule for payments aggregating $265,694.00 in respect of the expense or loss incurred by each of them. Arnold Bloch Leibler (ABL) was retained by each of the other applicants with respect to the subpoenas. 4 On 17 December 2004, I made an order under the Supreme Court Rules 1970, Pt 72 r 2 referring the following questions to a referee: "1 What are the expenses or losses (if any) reasonably incurred by each Applicant, based on the affidavits and exhibits set out in paragraph 3 and or any further evidence or information, in consequence of service on each of them of the subpoenas which appear at Exhibit LZ1 to the affidavit of Leon Zwier sworn 16 July 2004 ("Subpoenas"). 2 What expenses or losses (if any) were reasonably incurred by each Applicant in respect of the following matters: (a) the Application to Set Aside Subpoenas filed 20 October 2003, as referred to in Exhibits LZ3 to the affidavit of Leon Zwier sworn 16 July 2004. (b) the preparation of lists of privileged documents. (c) Identifying, searching for and collating documents claimed by each Applicant to be privileged." 5 It was common ground that the Supreme Court Rules 1970 continued to apply to the application and the reference. Clause 10(a) in sch 6 to the Civil Procedure Act 2005 provides that anything begun before the commencement of that Act or the Uniform Rules under a provision of the old legislation for which there is a corresponding provision in that Act, may be continued and completed under the old legislation as if the Act had not been enacted. The Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005 commenced on 15 August 2005.

The issues 6 The referee has delivered his report. The issues are whether it should be adopted, varied or rejected in whole or in part under the Supreme Court Rules 1970, Pt 72 r 13 and what orders should be made on the application. Aron opposes the report and submits it should be rejected. The applicants submit that I should adopt the report notwithstanding that is assesses the expenses and losses at $126,405.00.

The legal principles 7 The principles to be applied in considering whether to adopt or reject a referees report were distilled, usefully, by McDougall J in Chocolate Factory Apartments v West Point Finance & Ors [2005] NSWSC 784 at [7] as follows:

"(1) An application under Pt 72 r 13 is not an appeal either by way of hearing de novo or by way of rehearing. (2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised. (3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest. (4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh. (5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report. (6) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than "unsafe and unsatisfactory". (7) Generally, the referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence. (8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based. (9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire. (10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report. (11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise. (12) The right to be heard does not involve the right to be heard twice. (13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised "by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it". The real question is far more limited: "to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence". (14) Where, although the referee's reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee's findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence. (15) Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified."

Absence of any evidence claim 8 It was submitted that there was no basis upon which the referee could have awarded payment to the applicants other than Newmont Australia Ltd (NAL) because it paid the fees of ABL on behalf of all the subpoenaed parties. 9 It was argued that since the Supreme Court Rules 1970, Pt 37 r 9 speaks of a person named in a subpoena incurring expense or loss, NAL was not entitled to compensation for the amounts paid by it on behalf of other persons and, since the other persons did not pay ABL, they could not claim that any expense was incurred by them. 10 In my view, the submission should be rejected. The evidence reveals that ABL performed work on behalf of each of the subpoenaed parties. Each of them was indebted to ABL for those services. The fact that those obligations were discharged by NAL does not mean the subpoenaed parties did not incur expense by way of fees due to ABL that fall within the purview of the rule. 11 Furthermore, in my view, Aron did not establish by this argument that there was a real question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he did. 12 The evidence before the referee included summaries of the costs recorded in ABL's computer records. The summaries indicated the activity performed, time spent, the rate charged and the total cost. 13 The referee acted upon these cost summaries. He accepted that partners, senior associates and solicitors of ABL engaged in the work would otherwise have been engaged in other work at the applicable fee rates. 14 It was submitted that the referee was not entitled to act upon the summaries. It was submitted that Mr Zwier, who caused the summaries to be compiled, lacked personal knowledge of their contents and no evidence was adduced that he monitored the professional staff involved, or even spoke to them about what they did. 15 Further, it was argued that the cost summaries were generated by a computer operator having no involvement in the subject matter of the proceedings. 16 It was submitted that the consequence was that the costs summaries lacked any probative value. Further, since the primary records from which the cost summaries had been derived were not put to the referee, it was submitted that the summaries were inadmissible. 17 As to the submission of lack of probative value, that is a matter of weight of the evidence and such an objection is hardly open to this court in determining whether to adopt or reject the referee's report in accordance with the principles set out above. 18 In any event, the only evidence before the referee was that the cost summaries had been extracted from the records of ABL and they were in accordance with the rates charged by the persons involved in the tasks. The referee was entitled to infer that the summaries accurately reflected actual entries for actual work done. 19 So far as the second submission is concerned, the Supreme Court Rules 1970, Pt 72 r 8(2)(b) provides that a referee, in conducting proceedings under the reference, is not bound by rules of evidence but may inform himself or herself in relation to any matter in such manner as the referee thinks fit. There is no suggestion that in acting upon the only evidence put before him, the referee denied natural justice to Aron. 20 The referee dealt with the submissions made to him that the cost summaries were inadmissible, their accuracy was not verified, Mr Zwier's evidence of their accuracy was mere hearsay, and the referee should state in his report that it was not possible to fix any amount for the expense or loss reasonably incurred by the applicants. His response was as follows: "I did not accept the submissions of the Plaintiffs in relation to these matters. In my opinion the exacting requirements proposed by the Plaintiffs for proof are neither necessary or reasonable. Leon Zwier is a senior practitioner and a senior partner of ABL and the partner responsible for the whole litigation. He was prepared to depose to relevant matters based on his knowledge of the way in which ABL operates and his belief in the information provided to him by staff of ABL. I consider that what he says is of very strong probative value. As appears from the following sections of this report, I have evaluated the material, based on my experience as a practitioner and a costs assessor." 21 And the referee did precisely that in arriving at figures considerably less than those claimed by the applicants. 22 I reject the submissions that there was no evidence upon which the referee could have arrived at his assessments of the expenses and losses reasonably sustained by the subpoenaed parties. 23 I reject the submission that the referee's report should be rejected. In my view, it should be adopted. Under question 1, the referee identified the reasonable expenses and losses of ABL at $38,389, of RFC at $26,241 and of Mr Tilley at $3,950.

The aggregated claim of NAL and NMC 24 With respect to NAL and Newmont Mining Corporation (NMC), an aggregated claim was made because the documents required by the subpoenas were produced on a joint basis. NAL is a wholly owned subsidiary of NMC and for purely administrative convenience the two companies were treated jointly for purpose of compiling with the subpoenas served upon them. 25 The referee was invited to amend the questions to enable him to report on the aggregated expenses and losses incurred by the two companies. Aron submitted that the Supreme Court Rules 1970, Pt 37 r 9 required individual assessments of the expenses or losses. The referee declined to amend the questions. 26 The referee was unable to answer the questions with respect to NAL and NMC separately on the material before him. But he was able to say, based on the principles and methodology used to report on the expenses and losses of the other applicants that, collectively, costs aggregating $64,427.25 were reasonably incurred. 27 Aron relied on King v GIO Australia Holdings Pty Ltd [2001] FCA 1773. In that case the defendant served a subpoena on ASIC seeking documents relating to two firms of accountants. The accountants sought to limit access to subpoenaed documents on grounds of confidentiality and brought applications against GIO for payment of their expenses and costs. Moore J dismissed the application. At [24] his Honour pointed out that the person named in the subpoena was ASIC and the equivalent rule of the Federal Court to the Supreme Court Rules 1970, Pt 37 r 9 was confined to such a person. The phrase "person named" was defined in the rules, as it is in the Supreme Court Rules 1970 Pt 37 r 1, as the person to whom the subpoena is addressed. 28 But the instant circumstances are different. Subpoenas were addressed to each of NAL and NMC. As a result, each of them incurred expenses or losses as a result of the conjoint answer to the subpoenas because of the services provided to them by ABL. ABL was entitled to payment of its fees, and if they were not satisfied, both NAL and NMC could, no doubt, be held responsible. The fact that the quantum of expenses or losses attributable to one rather than the other cannot be identified, does not mean that no liability was incurred. Significant services were provided by ABL at significant cost. In my view, those costs are recoverable under the Supreme Court Rules 1970 Pt 37 r 9. 29 The referee assessed those expenses and losses at $39,042.87.

The application to set aside subpoenas 30 On 20 October 2003, the first defendant in the proceedings, Newmont Yandal Operations Pty Ltd (NYOL) applied to set aside each of the subpoenas in question. NYOL was not a person named in any of the subpoenas. 31 On 6 February 2004, at the instance of the Registrar, the applicants were either added as parties to the NYOL application or were substituted for NYOL. In the result, the Registrar varied the subpoenas by restricting the obligations in certain respects. But Aron should be regarded as having succeeded on the application. That is because of the following exchange at the end of hearing: "Ryckmans: So as not to delay matters Registrar I take it with costs its either in the cause, it's not worth making the submission on or can we reserve costs perhaps? Or apply for it? Registrar: I think in the circumstances costs be costs in the cause."

There was no submission from the applicants or NYOL with respect to this matter. 32 Costs in the cause could not apply to the applicants as they were not parties to the proceedings. Costs in the cause could only have been those of Aron that was the moving party for the order. That indicates a failure on the part of NYOL and/or the applicants on their application. 33 The referee was unable to extract from the fees charged by ABL, those amounts attributable to the application to set aside the subpoenas. He concluded that the reasonable costs of this process were $4,131.50 and that each of the applicants should bear one sixth of those costs at $689.00. 34 In Darcy v Pre-Term Foundation Clinic (1983) 2 NSWLR 497 it was held that where a subpoena was set aside by a magistrate, the magistrate had an inherent jurisdiction to order the party issuing the summons to pay the costs of the person to whom the summons was directed. At 504, Hunt J said it would be manifestly unfair for a person, upon whom a subpoena had been served and who had successfully moved to have the subpoena set aside, not to have his costs of the application just as it would be manifestly unfair for the party who issued the summons for the production of documents, not to have his costs if the application to set the subpoena aside was unsuccessful. 35 In Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77 at [31], Levine J observed that the arguing of the matters in opposition to a subpoena was unsuccessful and his Honour could see no basis in justice for the successful issuing party to have to pay any costs in regard thereto. 36 The applicants did not seek the costs of the application to set aside the subpoenas. In light of the Registrar's attitude to costs in the cause, any such application is unlikely to have been successful. It was pointed out that the Registrar was sitting after hours and in the rush of the moment, counsel omitted to raise the question of the applicants' costs. 37 If that was so, the remedy lay in seeking a variation of the Registrar's orders and, if necessary, an appeal from his refusal to do so. It does not seem to me to be appropriate to overturn the logic of the above decisions by arguing that those costs were reasonably incurred in consequence of service of the subpoenas in terms of the Supreme Court Rules 1970, Pt 37 r 9. 38 In my view there was an intervening cause for the costs in question, the application to set aside the subpoenas. Costs incurred in relation to that application, in my view, ceased to be costs in consequence of the service of the subpoenas. It was not the service of the subpoenas that led to their incurrence but the commencement of the proceedings to set aside the subpoenas. 39 In my view, the applicants are not entitled to the amounts of $689.00 each identified by the referee under the question 2(a).

Lists of privileged documents 40 The referee identified the following reasonable costs of preparation of lists of privileged documents: ABL $19,609, RFC $675.00, Mr Tilley $810.00, and NAL/NMC $2,209.50. In approaching this task the referee discounted the cost estimates by 10% to take account of anomalies and imprecisions that were pointed out to him in the course of the reference. 41 On 12 March 2004, Austin J ordered, with respect to documents sought to be produced under the subpoenas in question, that NYOL and the 12 companies listed in a schedule constituting the fourth defendants should provide a list of subpoenaed documents over which a claim for privilege was made. 42 It was submitted that there is no obligation on a subpoenaed person to prepare a privilege list, with the consequence that the costs of doing so were submitted not to have been reasonably incurred in consequence of the service of the subpoenas. It was submitted that the costs of preparation of the lists stemmed from the order of Austin J of 12 March 2004 and not from the service of the subpoenas. 43 There will be many occasions on which a judge makes orders clarifying the response that a person named in a subpoena must make in answer to it. For example, a judge may rule that paragraphs in the schedule to the subpoena be varied by limiting the call. 44 It cannot be said, in my view, that costs incurred subsequent to such an order are incurred by reason of that order and not incurred in consequence of service of the subpoena. The order in clarification of the obligation to answer the subpoena gives rise to expenses or losses that, in my view, are still incurred in consequence of the service of the subpoena. The call of the subpoena is still on foot but its answer is varied. 45 That position is different from the costs of an application to set aside the subpoena the purpose of which is to terminate the call. 46 While the order of Austin J may have blurred the positions of the applicants with the positions of NYOL and the fourth defendants, it is none the less the case, in my view, that the order sought to clarify the obligations of the applicants in answering the subpoenas. 47 I therefore reject the submission of Aron that the costs of preparation of the lists of privileged documents assessed by the referee under question 2(b) are not recoverable by the applicants under the Supreme Court Rules 1970, Pt 37 r 9.

Costs of identifying privileged documents 48 The referee identified the reasonable costs of identifying, searching for and collating documents claimed by each applicant to be privileged at $24,753.00 with respect to ABL, $8,191.00 with respect to RFC, $1,720.00 with respect to Mr Tilly and $21,796.88 with respect to NAL and NMC. 49 It was submitted on behalf of Aron that the claims to privilege were made by NMC and/or NAL and not on behalf of the other applicants who could not recover any of their expenses or losses. 50 Reliance was placed on Mancorp Pty Ltd v Baulderstone Pty Ltd, unreported, SASC, 5 March 1993, in which Debelle J disallowed a claim for loss or expense by a subpoenaed persons in seeking legal advice as to which documents should be made the subject of a claim for legal professional privilege, not by the subpoenaed persons, but by the plaintiff. His Honour said that the applicants misunderstood their obligation. They had no claim to privilege. They knew that the proper person to claim privilege was Mancorp. Each of them had been actively involved in the preparation of Mancorp's case and each of them knew that Mancorp had retained legal advisers who could determine whether any claim for privilege should be made. 51 In Australia and New Zealand Banking Group Ltd v Actus Australia Pty Ltd & Ors [2000] WASC 244, Murray J concluded that it would not be an expense reasonably incurred in complying with a subpoena for the bank to seek legal advice as to whether or not the bank's clients might have, in respect of any of the subpoenaed documents, a maintainable claim of legal professional privilege. 52 In answer to this submission, it was submitted that the costs of identifying privileged documents would have incurred whether or not a claim for privilege was made. A subpoenaed person's reasonable costs of searching for and collating documents required to be produced by the subpoena requires such identification with respect to all documents including those for which a claim for privilege may be made. 53 In my view, those costs will be incurred in any event. They are different from the additional costs incurred in ANZ Banking Group of seeking legal advice as to whether the bank's customers might have a claim to privilege or the additional costs in Mancorp of seeking advice as to whether legal professional privilege might be claimed by Mancorp. 54 It was submitted that the claim was premature because a party who makes an unsustainable claim for privilege should not have the costs of the application. I reject that submission. The answer to a subpoena requires the production of all documents whether a claim for privilege is made with respect to the documents or not. The costs of that performance are in consequence of the service of the subpoena. They are different from the costs of maintaining an unsuccessful application for the determination of a claim for privilege with respect to any document. 55 In view of my attitude to the costs of identifying, searching for and collating such documents, it is unnecessary for me to deal with a further submission of Aron that any costs of claiming privilege by NAL and/or NMC were irrecoverable because the one could not identify the privileged documents of it as against the privileged documents of the other. 56 Were it necessary for me to decide that issue, I would have adopted a similar approach to that with respect to the costs of compliance with subpoenas by NMC and NAL collectively. If costs were incurred in identifying documents for which NAL or NMC had a claim to privilege, they were nonetheless incurred even though the costs of both were raised collectively. 57 I reject the submission of Aron that the costs of identifying, searching for and collating documents claimed to be privileged under question 2(c) were irrecoverable by the applicants.

Conclusion 58 In terms of the Supreme Court Rules 1970, Pt 72 r 13, I will adopt the report of the referee. In terms of the interlocutory process filed on 19 July 2004, I will make orders under Pt 37 r 9 that Aron pay the expenses or losses reasonably incurred by ABL of $38,389.00, plus $19,609.00 with respect to the preparation of lists of privileged documents, plus $24,753.00 with respect to identifying, searching for and collating documents claimed to be privileged, a total of $82,751.00. 59 With respect to RFC, I will order Aron to pay the reasonable expenses or losses incurred by it in consequence of the service of the subpoena of $26,241.00, plus $675.00 with respect to the preparation of lists of privileged documents, plus $8,191.00 with respect to identifying, searching for and collating documents claimed to be privileged, a total of $35,107.00. 60 With respect to Mr Tilley, I will order Aron to pay the expenses or losses reasonably incurred by him in consequence of the service of the subpoena upon him of $3,950.00, plus $810.00 with respect to the preparation of lists of privileged documents, plus $1,720.00 with respect to identifying, searching for and collating documents claimed to be privileged, a total of $6,480.00. 61 With respect to NAL and NMC, I will order Aron to pay their expenses or losses reasonably incurred in consequence of the service of the subpoenas upon them of $39,042.87, plus $2,209.50 with respect to the preparation of lists of privileged documents, plus $21,796.88 with respect to identifying, searching for and collating documents claimed to be privileged, a total of $63,049.25.

62 I will hear the parties on the appropriate terms of the orders to be made and I will hear the parties on costs. I direct the parties to bring in short minutes of orders reflecting these reasons.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

CITATION : J Aron Corporation Pty Ltd v Newmont Yandal OperationsPty Ltd & Ors [2005] NSWSC 1280

Chocolate Factory Apartments v West Point Finance & Ors [2005] NSWSC 784 King v GIO Australia Holdings Pty Ltd [2001] FCA 1773 Darcy v Pre-Term Foundation Clinic (1983) 2 NSWLR 497 CASES CITED : Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77 Mancorp Pty Ltd v Baulderstone Pty Ltd, unreported, SASC, 5 March 1993 Australia and New Zealand Banking Group Ltd v Actus Australia Pty Ltd & Ors [2000] WASC 244

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Judgment (13 paragraphs)

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