NJH Pty Ltd v Billabong International Limited & Ors [2010] QSC 239

Lynn & Rowland Lawyers for the applicant plaintiff.

Clayton Utz for the respondent Billabong International Limited.

[2] MARGARET WILSON J: This application concerns the costs of compliance with a notice of non-party disclosure served pursuant to UCPR r 242.

[3] The plaintiff alleges that it appointed the first defendant to act as its agent in the acquisition of shares in the respondent Billabong International Limited under a share offer, and that the first defendant purchased the shares using the plaintiff's money but refused to transfer them to it.

[4] On or about 17 April 2009 the applicant plaintiff served a notice of non-party disclosure on the respondent seeking the following documents:

All documents (whether paper or electronic) including share application forms, share allocation confirmation relating to:-

(a) the identity of and relationship to, Billabong of the class (restricted and/or otherwise) of persons/entities to whom the share offering was made described as 'Billabong Ref No' CH35-CH148 and AR7-AR113 in the share application form Batch 'B' dated 27 July 2000, and annexed to this Notice and marked with the letter 'C';

(c) any other preferential offer howsoever described made to the class (restricted and/or otherwise);

(d) the qualifying conditions for the inclusion of persons/entities in the class (restricted and/or otherwise);

(e) the qualifying conditions for the inclusion of persons/entities in the green room offer;

(f) the qualifying conditions for the inclusion of persons/entities in any other preferential offer howsoever described;

(g) the conditions under which persons/entities were excluded from the class (restricted and/or otherwise);

(h) the persons/entities referred to in (a) above to whom shares were issued.

in the circumstances relied upon by the First Defendant in support of his allegation that the Plaintiff/Second Defendant sought to defraud Billabong as pleaded.

[5] The relevance of the documents sought was expressed as follows:

"1. The allegation in Paragraph 13 of the further amended defence ('the defence') a copy of which is annexed hereto and marked 'A' of the First Defendant that the Plaintiff/Second Defendant engineered the defrauding of Billabong International Limited ('Billabong') as further particularized in the First Defendants answer to the Plaintiffs request for further and better particulars of Paragraph 13 of the Defence, a copy of which is annexed and marked 'B';

1. The identity of the restricted class of persons ('the class') to whom the share offering was made and the relationship of the class to Billabong as pleaded in paragraph 3(b) of the defence

2. The Plaintiff/Second Defendants knowledge that the Plaintiff was excluded from the class as pleaded in paragraph 3(e)(i) of the defence. "

Copies of the Further Amended Defence of the Defendant filed 9 March 2009[1] and Particulars filed 7 April 2009 were annexed.

[6] On or about 18 August 2009 the respondent produced documents in compliance with the notice.[2]

[7] In this application filed on 4 March 2010 the plaintiff seeks the following orders:

"1. That Michael Campbell be appointed cost assessor in this matter pursuant to r713 of the Uniform Civil Procedure Rules ('UCPR') to assess the reasonable costs and expenses payable by the Plaintiff to the Respondent under Rule 249 (1) of the UCPR for producing documents pursuant to the Notice of Non Party Disclosure filed 16 April 2009 ('the Notice').

1. That the Respondent, pursuant to Rule 249(2) of the UCPR, serve a statement that complies with Rule 705 of the UCPR, of its reasonable costs and expenses of producing such documents within 14 days.

2. That the statement to contain sufficient detail, supported by source documents, to enable the Plaintiff to properly prepare any notice of objection to the statement.

3. That leave be given to the Plaintiff to relist the matter on seven (7) days notice.

4. Such further or other directions or orders as the Court deems fit.

[8] Rule 249 of the UCPR provides:

(1) Subject to rule 247(3), the applicant must pay the respondent's reasonable costs and expenses of producing a document.

(2) Within 1 month after producing a document, the respondent must give to the applicant written notice of the respondent's reasonable costs and expenses of producing it.

(3) Within 1 month after receiving written notice under subrule (2), the applicant may apply to the registrar for assessment of the costs and expenses under chapter 17A."

[9] By letter dated 2 September 2009 from its solicitors to the solicitors for the applicant, the respondent claimed the sum of $15,559.50 plus GST for professional costs of producing the documents. The letter began with a recitation of the respondent's initial response to the notice of non-party disclosure, including its demand that the plaintiff maintain the confidentiality of commercially sensitive material, and some observations on why the costs claimed were considerably higher than originally estimated. It went on to assert that the respondent was "out of pocket for an amount in excess of $15,500 + GST". The hourly charge out rates of four lawyers (a partner, a senior associate and two solicitors) were set out, followed by a table of 79 attendances totalling 42 hours. All but 4.8 hours were claimed at the applicable rates, totalling $15,559.50 exclusive of GST. This was followed by the statement that the respondent did not propose to claim telephone and document production outlays if the costs could be swiftly resolved, and a without prejudice settlement offer.

[10] The respondent's solicitors wrote again on 12 October 2009, saying:

"In our letter dated 2 September 2009 we provided your client with notice of client's costs pursuant to UCPR 249(2).

1. Pursuant to UCPR 249(3) your client had 1 month in which to apply for an assessment of costs under Chapter 17A (if required). It has not done so. Accordingly the sum of $15,559.50 + GST is now payable without deduction.

2. Additionally, your client has failed to accept the without prejudice offer made on 2 September 2009 (which is now withdrawn).

Please forward your client's cheque payable to Billabong International in the sum of $17,115.45 to avoid the necessity for proceedings and an application for summary judgment to issue."

[11] The applicant's solicitors responded on 14 October 2009, saying (inter alia):

"We note that we have not been provided with any details of the respondent's actual costs and expenses of producing the documents from the Green Room Club agreed list, which would enable us to determine whether such costs and expenses are reasonable, only your letter comprising what only be described as a solicitor/client bill.

Even on the indemnity basis we doubt whether you would be successful in obtaining as assessment order for anything like the amount your client is claiming.

Until we have details of your client's costs and expenses, we cannot determine whether such costs and expenses are reasonable and therefore are not in a position to recommend to our client any payment.

You may take it that we regard your solicitor/client bill as grossly excessive and completely unreasonable.

Our clients are prepared to meet the respondent's reasonable costs and expenses of production in accordance with in Rule 249 but are not prepared to pay the solicitor/client costs as claimed.

Your statement that you will apply for Summary Judgment is incorrect and we refer to the rules for the correct procedure to be followed.

Please provide a schedule of your client's reasonable costs and expenses of producing the documents from the Green Room List that were nominated by us so that our client may be in a position to consider what are your client's reasonable costs and expenses of production.

We will rely on this letter on the question of costs should you client proceed contrary to Rule 249(3)."

[12] On 30 October 2009 the respondent's solicitors wrote another letter maintaining their stance that as the applicant had allowed the time to apply for an assessment to pass, there was nothing to argue about concerning the costs, and threatening to apply for a default assessment.

[13] On 2 November 2009 the plaintiff's solicitors wrote:

As you are aware, the costs to be paid pursuant to Rule 249 are subject to the assessment procedures set out in Chapter 17A of the Uniform Civil Procedure Rules 1999. In particular, Part 3 of Chapter 17A applies in that Rule 705 requires a cost statement to be served in the approved form.

We have not received a cost statement from you which complies with the Rule, therefore we have not applied for assessment as it is our view your client has not complied with Rule 249(2) of the UCPR.

In anticipation of receiving a costs statement we did not respond to your letter of 2 September 2009, and for the reasons set out below.

Even if you are of the view that your client is not required to provide a cost statement in accordance with the approved form, your letter of 2 September 2009 could not be the subject of an assessment as it contains matters at pages 1, 2 and 10 which we would object to being placed before a costs assessor.

Please serve a cost statement in accordance with the rules so that we may obtain instructions."

[14] Thus, the battle lines were drawn, the plaintiff contending that by rule 249(2) the respondent was required to deliver a "costs statement", and the respondent contending that something else was required - namely "written notice", which it had provided.

[15] The applicant duly served the respondent with the application. Nevertheless, the respondent failed to appear at the hearing on 28 April 2010 - because its solicitors mistook the date. In the event, the respondent's solicitors obtained a copy of the transcript of the oral hearing, and I allowed them to make written submissions, to which the applicant's counsel responded in writing.

[16] Non-party disclosure necessarily involves an infringement of the rights of the non-party, and, as it clearly did in this case, it may require the non-party to incur quite substantial time and expense in compliance. The purpose of rule 249 is clearly to provide reasonable monetary compensation for that impost and to provide a mechanism for resolving any dispute about what is reasonable in the circumstances.

[17] Rule 249(3) refers to assessment of the non-party's costs and expenses under chapter 17A.

[18] Chapter 17A was introduced into the UCPR by amendments which took effect on 10 December 2007. It replaced the former chapter 17 part 2, under which costs were assessed by the registrar, with a new system of assessment by costs assessors. At the same time r 249(3) was amended. It formerly referred to assessment under chapter 17 part 2: this was amended to assessment under chapter 17A.

[19] The former provisions applied to costs payable or to be assessed under an Act, the UCPR or an order of the Court,[3] as do the provisions of the current chapter 17A (with some exceptions, not presently relevant, relating to costs payable under the Legal Profession Act 2007).[4]

[20] Under the former provisions "costs statement" meant a bill of costs, account or statement of charges,[5] and an application to the registrar to assess costs had to be in the approved form and accompanied by a costs statement in the approved form.[6]

[21] Under the present rules, "costs statement" is defined as a costs statement mentioned in r 705:[7]

A party entitled to be paid costs must serve a costs statement in the approved form on the party liable to pay the costs. "

A "party" includes someone not a party to the proceeding by or to whom assessed "costs of the proceeding" are payable.[8] "Costs of the proceeding" mean:

"costs of all the issues in the proceeding and includes:

(b) costs of complying with the necessary steps before starting the proceeding; and

(c) costs incurred before or after the start of the proceeding for successful or unsuccessful negotiations for settlement of the dispute."[9]

[22] Whether or not the respondent to a notice of non-party disclosure is a "party" within the meaning of chapter 17A, r 249 does not require it to serve a "costs statement in the approved form". Both before and since the introduction of chapter 17A, "written notice of the respondent's reasonable costs and expenses" would suffice. In my view the respondent's solicitors' letter of 2 September 2009 fulfilled this requirement. That letter did contain some extraneous material, but that part of it beginning with the words "Details of those costs and expenses of compliance are as follows..............." on page 2 and ending at the bottom of the table on page 3 constituted the necessary "written notice".

[23] Under r 249 the applicant had one month in which to apply to the registrar for assessment of the costs and expenses. It was not obliged to serve any formal "notice of objection"[10] identifying particular items as being in dispute or otherwise explaining the basis of its complaints before doing so. But in a case like the present one, some particularisation of the complaints and some statement of what the plaintiff contended would have been a reasonable claim may have obviated this application.

[24] The Court has power to extend time under r 7. Here the quantum of the costs and expenses claimed is considerable, and the applicant challenged that quantum six weeks after the claim was made. In these circumstances, it would be a proper exercise of judicial discretion to extend the time within which the applicant may apply to the registrar for assessment of the respondent's costs and outlays.

[25] I am going to give some directions to facilitate the assessment process.

[26] The orders and directions of the Court will be as follows:

(a) Order that the time within which the applicant may apply to the registrar for assessment of the respondent's costs and expenses of complying with the notice of non-party disclosure be extended until 23 July 2010;

(i) that by 16 July 2010 the applicant serve on the respondent a notice identifying each item of the costs and expenses claimed by the respondent to which it objects, and for each objection stating the reasons for the objection;

(ii) that if the applicant does not serve a notice of objection in accordance with the preceding direction, r 708 (with any necessary modification) apply;

(iii) that if the applicant serves a notice of objection and applies to the registrar for assessment of the costs and expenses, rr 710 - 713 (with any necessary modification) apply to that application;

(iv) that unless there is a default assessment under direction (ii), the provisions of chapter 17A part 3 division 3 (with any necessary modification) apply to the assessment.

[27] I will receive submissions on the costs of this application.

[1] Paragraph 13 was amended on 21 May 2009 and then struck out by Applegarth J on 17 June 2009. Further amended defences were filed on 9 July 2009 and 11 August 2009.

[2] Well outside the 14 day period for compliance prescribed in r 242.