ONE.TEL Ltd v Deputy Commissioner of Taxation

Judgment 1HIS HONOUR : This application concerns the costs of an interlocutory process filed by the defendant on 24 September 2010. In it the defendant sought access to documents which were the subject of a notice to produce addressed by the defendant to Telstra Corporation Ltd ("Telstra") dated 21 July 2010. 2On 6 September 2010 directions were made by consent for Telstra to serve on the defendant a schedule of grounds upon which privilege was claimed in respect of documents produced to the Court on 16 August 2010, and for parts of documents produced by Telstra that had been redacted, and in respect of further documents to be produced in answer to the notice. A direction was made that any application by the defendant in relation to any of the privilege claims be filed and served by 24 September 2010. An interlocutory process was filed in accordance with that direction. 3On 23 September 2010 the solicitor for Telstra advised the solicitor acting for the defendant that the person providing instructions was overseas until 4 October 2010. He stated that Telstra would prefer not to have a lengthy and costly dispute about those privilege claims and was prepared to provide the defendant with further information to assist him to understand the basis of its privilege claims. 4Up to that point the claims for privilege had been set out in two schedules, the first of which listed 18 documents but did not identify the grounds upon which privilege was claimed, and the second of which listed the same documents and two other documents which had been redacted and which set out the sections of the Evidence Act 1995 upon which privilege was claimed. 5The defendant filed its interlocutory process seeking access to the documents or parts of documents for which privilege was claimed on 24 September 2010 without awaiting the production of further information that Telstra's solicitor had foreshadowed. 6I do not accept the submission for Telstra that the defendant acted unreasonably in pursuing that course. He was acting in conformity with the directions of the court. 7On 6 October 2010 the solicitors for Telstra wrote to the solicitors for the defendant a detailed letter describing the grounds upon which privilege was claimed. Telstra did not press the claims for privilege in respect of three documents. I was advised, however, that Singtel Optus Pty Ltd has claimed privilege in respect of those documents. That claim is yet to be determined. 8At the conclusion of its letter of 6 October 2010 the solicitor for Telstra invited the defendant to discontinue its application, challenging the claims for privilege. There was further correspondence between the solicitors. On 18 October 2010 O'Neill Partners, the solicitors for the defendant, stated that in the absence of an affidavit from Telstra the defendant did not accept the assertions in the letter of 6 October 2010, in particular, as to the asserted dominant purpose for which documents were said to have been brought into existence, or the asserted common interest between Telstra, Optus and Cisco Systems Capital (Australia) Pty Ltd. 9Accordingly, the general counsel of Telstra, Ms Suzanne Laver prepared and swore a detailed affidavit on 22 October 2010 in respect of the claims for privilege. 10The issue as to whether Telstra was entitled to privilege as claimed was not then determined. There are still before the court various processes concerning subpoenas or notices to produce issued by, or at the request of, the defendant to numerous persons, including the plaintiffs and members of the committee of inspection and other creditors. I understand that the issues on the interlocutory process of 24 September 2010 were stood over whilst the other applications were progressed. Be that as it may, I am informed that on Friday of last week the defendant advised that he would not be pressing the claims made in the interlocutory process filed on 24 September 2010 for access to the balance of the documents over which Telstra has maintained its claim of privilege. 11It is in this context that Telstra seeks an order that its costs of and incidental to the interlocutory process dated 24 September 2010 be paid by the defendant on the ordinary basis up to and including 6 October 2010 and on the indemnity basis thereafter. 12The defendant submits that there should be no order as to costs of the interlocutory process to the intent that Telstra and the defendant bear its and his own costs of that interlocutory process. 13The interlocutory process raises distinct issues. Prima facie costs follow the event. The event has been that Telstra has not pressed its claim for privilege in respect of three documents, and the defendant has not pressed his claim for access to the remaining documents for which privilege had been claimed. 14Counsel for the defendant submits that there has been no capitulation by the defendant to Telstra's claim for privilege, that the matter has been resolved without a hearing on the merits and therefore there should be no order as to costs as it cannot be said that either party has acted unreasonably (see Re Minister for Immigration and Ethic Affairs (Cth); Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624-625; and see also ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 at 553). 15On the other hand, counsel for Telstra submits that it has been the successful party. Counsel submitted that the defendant acted unreasonably in not accepting the claims for privilege as outlined in the letter of 6 October 2010 and instead insisting upon the preparation of an affidavit. 16In my view neither party's submission should be wholly accepted. This is not a case for an award of costs on the indemnity basis. I do not accept that the defendant acted so unreasonably as a litigant in requiring that the claims for privilege be verified as to warrant an order for indemnity costs. Whilst it is true that the letter of 6 October 2010 contains a detailed exposition of the grounds of privilege and whilst I think it generally true that the affidavit of Ms Laver did not substantially take those matters further, other than to verify the claims made in the letter, I think that the defendant was not guilty of delinquent conduct in requiring the claims for privilege to be verified on oath or affirmation. 17The question then is whether Telstra should have all or part of its costs of the application on the ordinary basis or whether there should be no order as to costs. 18The interlocutory process was not resolved by any process of compromise as that expression is usually understood in this context. Rather, what happened is that an initial claim for privilege in respect of three documents was not pressed and it may be noted that the person providing instructions to Telstra's solicitor was overseas during relevant times. However, the claims of privilege over the bulk of the documents was pressed and ultimately the defendant abandoned his claim for access to those documents. 19I am satisfied that Telstra was the substantially successful party in relation to the dispute in relation to privilege and that in respect of the bulk of the documents for which privilege was claimed, there was a capitulation such that costs should follow the event. However, costs should only follow the event from 7 October 2010, being the day after Telstra abandoned its claim for privilege in respect of three documents and provided a detailed explanation of the basis of its claim for the balance. 20I order that the defendant pay the costs of Telstra Corporation Limited of and incidental to the interlocutory process dated 24 September 2010 on the ordinary basis from 7 October 2010. [Parties addressed on costs.] 21The defendant seeks his costs of the argument today on the ordinary basis. This claim is made by reason of certain email correspondence exchanged between the solicitors yesterday evening. At 5.15pm, the solicitor for Telstra wrote to the solicitors for the defendant thanking them for confirming that the defendant no longer sought access to the documents over which Telstra had claimed privilege, and stating that today Telstra would seek an order that the defendant pay its costs of the interlocutory process of 24 September 2010 on the ordinary basis up to and including 6 October 2010 and thereafter on the indemnity basis. 22At 7.28pm, the solicitor for the defendant made a " without prejudice " offer on the defendant's behalf to pay Telstra's costs of the interlocutory process for the period after 6 October 2010 on the ordinary basis. This is the order I have made. 23The matter came before the court at 9.30am this morning to deal with other issues concerning other parties. At that time counsel for Telstra commenced the application for costs. I stood the matter down to 2pm, partly to enable counsel for the defendant to consider the material that was relied upon by Telstra for that purpose and partly because I had another matter with which to deal. The matter resumed at 2pm. 24Whilst there is no doubt that the offer at 7.28pm was late, its lateness is explained by the fact that it was only a little over two hours earlier that Telstra had foreshadowed seeking the costs orders today. 25In those circumstances I think that Telstra has had an adequate opportunity to consider the offer, at least before the matter resumed at 2pm today. There is a public policy in giving effect to such without prejudice offers of compromise. I ought to give effect to that. On the basis of the offer of compromise, I consider that Telstra ought to pay the defendant's costs of today's application. 26I order that Telstra Corporation Limited pay the defendant's costs of the hearing today on the ordinary basis. 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. Decision last updated: 09 September 2011