Oswal v Commissioner of Taxation [2016] FCA 1507 | Case summary

1091 J Aron Corporation Pty Ltd v Newmont Yandal Operations Pty Ltd (2005) NSWSC 1280 Mowie Fisheries Pty Ltd v Switzerland Insurance Australia Ltd [1996] FCA 608 ONE.TEL Limited v Deputy Commissioner of Taxation [2000] FCA 270 Oswal v Commissioner of Taxation (No 4) [2016] FCA 666 Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 Smith v Wyong Shire Council [2007] NSWLEC 395 Young v Lalic [2006] NSWSC 379

PAGONE J: 1 Mr Vikas Rambal (in his personal capacity and in his capacity as trustee of the Vikas Rambal Family Trust) seeks interlocutory orders for costs in connection with subpoenas issued at the request of Mr and Mrs Oswal in proceedings by them against the Commissioner of Taxation under Part IVC of the Taxation Administration Act 1953 (Cth). The Part IVC proceedings between Mr and Mrs Oswal and the Commissioner were heard in June 2016 but the dispute was settled before judgment was given. On 21 April 2016 a subpoena to produce documents had been issued to Mr Rambal on the application of Mr and Mrs Oswal which on 23 May 2016 Mr Rambal sought to set aside but was withdrawn on 27 May 2016. On 17 May 2016 a second subpoena to produce documents had been issued to Mr Rambal on the application of Mr and Mrs Oswal which Mr Rambal was told on 20 May 2016 would not be pressed. On 28 November 2016 Mr Rambal was given leave to file an amended interlocutory application seeking his costs, losses and expenses in respect of the subpoenas, and also freezing orders to secure the payment of any costs, losses and expenses that may be ordered in his favour. 2 The first order sought by Mr Rambal in the amended interlocutory application was for his costs on his application which had first been made on 23 May 2016 to set aside the first subpoena to produce dated 21 April 2016. Those costs are sought pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act") and also pursuant to rules 24.15 and 24.22 of the Federal Court Rules 2011 (Cth) ("the Rules"). 3 The Court's power to award costs in relation to an application to set aside a subpoena is in s 43 of the Federal Court Act: Ann Street Mezzanine Pty Ltd v Beck [2011] FCA 1328 at [3]; Hua Wang Bank Berhad v Commissioner of Taxation (No 12) [2013] FCA 1091 at [5]. The power does not arise under r 24.22 or under r 24.15. Rule 22.24 permits an order for the costs of compliance, but costs incurred in respect of an application to set aside a subpoena are not fairly described as losses or expenses in complying with a subpoena: Ann Street Mezzanine Pty Ltd v Beck [2011] FCA 1328 at [5]; A Pty Ltd v Z [2007] NSWSC 999, [48]-[49]. Rule 24.15 gives the Court a wide power to "grant other relief" in relation to a subpoena on an application to have a subpoena set aside, but the "other relief" contemplated in r 24.15 are orders dealing with the scope of production (see A Pty Ltd v Z [2007] NSWSC 999 at [41]), rather than providing the source of a power to award costs independently of s 43 of the Federal Court Act. 4 Mr Rambal's application for his costs in relation to his application on 23 May 2016 to set aside the first subpoena arises in the context of the first subpoena having been withdrawn on 27 May 2016. The withdrawal of the subpoena, however, does not deprive the Court of power to award costs in an appropriate case. In Smith v Wyong Shire Council [2007] NSWLEC 395 Talbot J awarded costs in relation to a motion to set aside a subpoena notwithstanding that the subpoena had been withdrawn pursuant to an agreement. 5 The principles to apply in cases like the present are those considered in Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 ("Lai Qin"): see also Hua Wang Bank Berhad v Commissioner of Taxation (No 12) [2013] FCA 1091 at [6]; Young v Lalic [2006] NSWSC 379 at [10]; Chapman v Luminis Pty Ltd [2003] FCAFC 162 at [7]; and Ann Street Mezzanine Pty Ltd v KPMG [2011] FCA 453 at [24]-[35]. In Lai Qin McHugh J said at 624-5: In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extracurial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. (footnotes omitted) In deciding, therefore, whether or not costs are to be awarded in relation to an application to set aside a subpoena that has been withdrawn, it is necessary to proceed from the premise that the issue is not to be resolved by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 at 201; Chapman v Luminis Pty Ltd [2003] FCAFC 162 at [7]. The question of costs is not to be answered by considering whether or not Mr Rambal would have succeeded in his application to have set aside the first subpoena, but by considering whether Mr and Mrs Oswal acted so unreasonably in respect of the first subpoena that Mr Rambal should obtain his costs: see Lai Qin at 624; Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 at 201. In that context it is the applicant for the costs who has the onus of satisfying the Court that the party who had obtained the subpoena had acted so unreasonably that costs ought to be awarded. The fact that the subpoena was withdrawn is not to be taken as a concession in the application to set aside the subpoena that was not determined. In Young v Lalic [2006] NSWSC 379 Brereton J said at [10]: Finally, I would add that the circumstance that the plaintiff's claim was not ultimately pressed at its highest, and that the contract claim was "abandoned", is not to be taken as a concession that it was unarguable. Counsel and parties should not be discouraged by the risk of an adverse costs order from making responsible judgments […]. Those observations have wider application than the specific circumstances in which his Honour made them and are relevant also to cases in which parties to litigation make forensic decisions to abandon subpoenas issued against third parties. 6 The material upon which Mr Rambal seeks costs in respect of the application to set aside the first subpoena does not warrant the order sought. There was no suggestion that the documents sought by the subpoena to Mr Rambal were not relevant to the Part IVC proceedings in which they were sought. Mr Rambal's application for his costs in relation to the first subpoena relied upon the fact that similar documents had been sought from the Commissioner by subpoena and by notice to produce which in a contested hearing were largely set aside in an application by the Commissioner: Oswal v Commissioner of Taxation (No 4) [2016] FCA 666. The letter from Mr Rambal's solicitors on 20 May 2016 informing the solicitors for Mr and Mrs Oswal that the former considered the subpoenas to Mr Rambal to be an abuse of process expressed the view that the documents could not be sought by subpoena to Mr Rambal, as a third party, (a) if they could not be obtained from the Commissioner (who was the respondent in the Part IVC proceedings) or, alternatively, (b) if they could be obtained from the Commissioner. It was decided that most of the documents could not be obtained by Mr and Mrs Oswal from the Commissioner but it does not follow that documents which could not be obtained from the Commissioner could not independently be obtained by subpoena from Mr Rambal. It does not follow, furthermore, that the failure by Mr and Mrs Oswal to obtain documents by subpoena and notice to produce from the Commissioner (as respondent in the Part IVC proceedings) would be sufficient for Mr Rambal to obtain an order for costs in an undetermined application by Mr Rambal to set aside the subpoena issued to him. That is because the relevant inquiry in Mr Rambal's application for costs is not whether the subpoena issued to him is to be set aside but, rather, whether Mr and Mrs Oswal acted so unreasonably in respect of the subpoena that costs ought to be awarded. 7 Mr Rambal has not discharged the onus upon him to show that Mr and Mrs Oswal acted so unreasonably in respect of the first subpoena to justify an order that they pay his costs. The position of Mr Rambal in relation to the first subpoena was not the same as that of the Commissioner in relation to the production which had been unsuccessfully sought. The scope of the first subpoena issued to Mr Rambal was in some respects broader than the documents sought by Mr and Mrs Oswal from the Commissioner; but, importantly, Mr Rambal, unlike the Commissioner, had been a direct participant in the transactions in respect of which production was sought of documents thought to be relevant to the issues in the Part IVC proceedings. The Commissioner had been a stranger to the taxable events and came to have the documents sought by Mr and Mrs Oswal as a third party. The Commissioner may have held documents created by others, including Mr Rambal, that bore upon the issues in the Part IVC proceedings, but the Commissioner did not have them as a party to the taxable events. Mr Rambal, in contrast, had potentially probative documents as a party to the taxable events. The conclusion in Oswal v Commissioner of Taxation (No 4) [2016] FCA 666 at [8] that Mr and Mrs Oswal could not obtain evidence from the Commissioner concerning dealings between Mr Rambal and Mr and Mrs Oswal once a forensic decision had been made that Mr Oswal would not be called to give evidence did not necessarily preclude that evidence being led directly by Mr Rambal (subject to leave). Mr Rambal, unlike the Commissioner, had been a party to the transactions and, although a third party to the Part IVC proceedings, he had been an active party to the events in question about which production by subpoena was sought. 8 The authorities also draw a distinction between cases in which one party effectively surrenders to the other and those in which there is some supervening event or settlement which so removes or modifies the subject of the dispute that the only matter remaining to be resolved is that of costs: see Chapman v Luminis Pty Ltd [2003] FCAFC 162 at [7]. In ONE.TEL Limited v Deputy Commissioner of Taxation [2000] FCA 270 Burchett J said at [6]: In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs. In Ex Parte Lai Qin, McHugh J was careful to state (at 624) that the principles with which he was concerned were those that "govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means". As his Honour recounted the facts, the instant case was one where the applicant had challenged a decision of the Refugee Review Tribunal denying her status as a refugee but, during the pendency of her action in the High Court, the Minister had exercised his special discretion in her favour under s 417 of the Migration Act 1958. The question whether the Tribunal had or had not erred in law thus became moot. Sun Zhan Qui v Minister for Immigration and Ethnic Affairs was a similar case. Following the decision of the Full Court in Sun v Minister for Immigration and Ethnic Affairs (1997) 81 FCR 71, the Minister exercised his discretion under s 417, with the result that an outstanding proceeding in respect of one of several decisions of the Refugee Review Tribunal lost any significance for either party. Beaumont J followed Ex parte Lai Qin. Gribbles v Health Insurance Commission was a variation on the theme. There, the Health Insurance Commission was sued by a pathologist because it declined to recognize particular services as eligible for the payment of Medicare benefits; but during the pendency of the proceeding, certain arrangements affecting the performance of the services were changed, with the result that the Commission reversed its decision. The original dispute thus ceased to have any significance, and the argument about the appropriate costs order had to take place in the absence of any determination of the merits. Again, in Australian Securities Commission v Aust-Home Investments Limited and in Australian Securities Commission v Berona Investments Pty Ltd, as Cooper J put it in the latter case (at 777), "events had overtaken the proceedings". The relief originally sought was no longer required, and the proceedings were terminated without any decision on the merits. Neither side had won or lost (see the former case at 202, and the latter at 777). Reddy v Hughes and Rizal v Minister for Immigration and Multicultural Affairs perhaps each turned even more clearly on an assessment of the reasonableness of a party's behaviour. In Reddy v Hughes, the respondent had offered the applicant a substantially complete remedy before the institution of proceedings, and Branson J held (at 415) that her Honour was "not able to be satisfied that the applicant acted reasonably in commencing the proceeding". In Rizal, although the applicant achieved the result he sought by his proceeding in the Court, there was an "at least arguable" objection to the Court's jurisdiction to entertain the application, and a proposed amendment to overcome the jurisdictional problem would have required leave to file an application long out of time. That leave had not been granted when the proceeding became moot because of the Minister's plainly reasonable decision to reconsider the request the previous rejection of which was the subject and casus belli of the litigation. In this case it is at least arguable that there was some supervening event that so removed or modified the dispute concerning the first subpoena that would not warrant the awarding of costs. On 27 May 2016 the hearing of the Part IVC proceedings was scheduled to commence in five business days and by 27 May 2016 events had modified the dispute between Mr and Mrs Oswal and Mr Rambal about compliance with the first subpoena. The solicitor for Mr and Mrs Oswal deposed in an affidavit filed in the interlocutory proceeding for costs that the first subpoena was withdrawn for reasons which included Mr Rambal's refusal to comply with the subpoena and the timing of the commencement of the Part IVC proceedings (6 June 2016) relative to the date of the decision to withdraw the first subpoena (27 May 2016). The application for the issue of the first subpoena had been supported by an affidavit dated 14 April 2016 by Ms Rebekah Giles explaining the relevance of the documents sought in the Part IVC proceedings. There were attempts between those acting for Mr and Mrs Oswal and those acting for Mr Rambal in the weeks that followed the service of the first subpoena for the categories of the documents sought by the subpoena to be refined. On 16 May 2016 the solicitors for Mr and Mrs Oswal wrote to the solicitors for Mr Rambal further refining the documents to be produced under the first subpoena. Three days later Mr and Mrs Oswal obtained access to some of the documents from the Commissioner. The application to set aside the first subpoena was made on 23 May 2016 and orders were made refusing leave to issue a subpoena against Mr Rambal to attend the hearing of the Part IVC proceedings to give evidence. Mr and Mrs Oswal were also given access to another one of the documents which they had sought from the Commissioner and reasons for the orders made on 24 May 2016 were subsequently delivered on 3 June 2016 in Oswal v Commissioner of Taxation (No 4) [2016] FCA 666. The hearing of the Part IVC proceedings had been scheduled to commence, and did commence, on 6 June 2016 and it was in that context that the solicitors for Mr and Mrs Oswal wrote on 27 may 2016 to the solicitors for Mr Rambal informing the latter that they had instructions to withdraw the first subpoena. 9 Mr Rambal also sought his reasonable costs or expenses of complying with the subpoenas. In Bank of New South Wales v Withers (1981) 35 ALR 21 at 38 Sheppard J was of the view that there was no general entitlement on the part of a third party to be reimbursed expenditure incurred in searching out or obtaining copies of documents in the absence of a specific rule: see also Hadid v Lenfest Communications Inc (1996) 65 FCR 350 at 351. Rule 24.22 now provides the basis upon which the Court may order the issuing party "to pay the amount of any reasonable loss or expense incurred in complying with" a subpoena, and an order under this rule does not depend upon ultimate compliance: J Aron Corporation Pty Ltd v Newmont Yandal Operations Pty Ltd (2005) NSWSC 1280; Danieletto v Khera (1995) 35 NSWLR 684 at 687. 10 The scope of the rule now found in r 24.22 was helpfully summarised by Mansfield J in Charlick Trading Pty Ltd v Australian National Railways Commission (1997) 149 ALR 647 at 649: There are a number of decisions of the court where orders have been made under O 27, r 4A, including the decision of Lockhart J in Fuelxpress Ltd v LM Ericsson Pty Ltd (1987) 75 ALR 284 to which I was referred, and more recently, the decision of Hill J in Hadid v Lenfest Communications Inc (1996) 65 FCR 350; 144 ALR 73. In my view, they establish that the scope of the rule is sufficient to encompass, if the expense is otherwise reasonable in the circumstances, the expense incurred in seeking advice as to the validity of the subpoena, including whether to comply with it at all or in part; correspondence or attendances on a party issuing the subpoena, regarding its terms, and including with a view to narrowing or clearly identifying the scope of documents to be produced; advice as to whether documents are confidential or properly subject to claims for privilege; correspondence and attendances and negotiations with the party issuing the subpoena, as to the terms upon which access to the documents should be permitted by the court, including the negotiation of and formulation of any undertakings as to confidentiality; attendances in court when the subpoena is called on or when it is stood-over, including attendances to assert and make out any claim that the documents subpoenaed should be protected from unrestricted access due to their confidential character and to seek orders restricting access to the document or documents produced; and steps to ensure that any confidentiality undertakings proposed to be entered into have, in fact, been properly given: Hadid's case. That list may not be exhaustive. And, of course, whether any order should be made is a matter to be determined in the particular circumstances of the case: see generally Burns Philp Trustee Co Ltd v Moneylink Financial Planning (Systems) Ltd (Wilcox J, 7 June 1990, unreported); Moorehead Nominees Pty Ltd v Barclays Australia Securities Ltd (Hill J, 17 May 1991, unreported); Beneficial Finance Corp Ltd v FCT (Olney J, 2 March 1992, unreported); Ex parte Eastern Pastoral Co Pty Ltd; Gorman v Australia and New Zealand Banking Group Ltd (Burchett J, 9 June 1994, unreported); Mowie Fisheries Pty Ltd v Switzerland Insurance Australia Ltd (Tamberlin J, 23 July 1996, unreported). The losses and expenses of compliance do not, as mentioned above, extend to the costs of setting aside a subpoena once, and from when, a decision has been made no longer to comply with the subpoena but to seek to have it set aside: see Ann Street Mezzanine Pty Ltd v Beck [2013] FCA 960 at [34]-[48] especially at [46]. 11 Mr and Mrs Oswal submitted that no order could be made for the reasonable losses or expenses of complying with the subpoenas in the absence of specific evidence identifying the scope of the order to be made. It was submitted that the authorities had established that an order under r 24.22 required that Mr Rambal produce evidence of the expenses and losses claimed, although not the quantum, and that a general order could not otherwise be made under the rule for subsequent referral to taxation. In Hadid v Lenfest Communications Inc (1996) 65 FCR 350 Hill J said at 351 about the predecessor to r 24.22: The rule sets up a statutory test which must of course be complied with, that is to say, the test whether the relevant expense or loss has been reasonably incurred or lost and whether that incurring or loss is in, that is to say in the course of, complying with the subpoena. Neither the observation by his Honour nor the terms of r 24.22 (or its predecessor in O 27) requires an applicant to identify specific items of loss or expenses, or of their amounts, that might ultimately be itemised in a bill of costs submitted to taxation. What must be established is that there are expenses or losses which have been reasonably incurred and that they have been incurred in the course of complying with the subpoena. An itemisation of those losses or expenses by description should prudently be supplied to satisfy the requirements of the test but a list or description is not a precondition to the making of an order where the test can otherwise be satisfied. 12 In Ann Street Mezzanine Pty Ltd v Beck [2013] FCA 960 there had been a general award in favour of a non-party for the payment of "loss and expenses incurred in complying with [a] subpoena" which subsequently led to a report from a taxing officer that came to be in dispute: see at [2], [6], [9] and [32]. In Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 Lockhart J made an order expressed as an amount which was sufficient to compensate the applicant for the expense or loss which it had reasonably incurred or lost in complying with the subpoena. There was evidence referred to in Fuelxpress at 285 of specific claims and amounts but the order was not limited to those claims. That decision was followed in Hadid where a draft bill of costs had been prepared but the order made in that case was also made in general terms as the amount sufficient to compensate the applicant for the expense or loss which it reasonably incurred or lost in complying with the subpoena. 13 There is sufficient evidence in this proceeding of Mr Rambal complying with the subpoenas to satisfy the test in r 24.22. The correspondence between the solicitors for Mr and Mrs Oswal and the solicitors for Mr Rambal from the date of issue of the first subpoena to 19 May 2016 refers to discussions between the lawyers refining the terms of the subpoenas and to discussions about the costs to Mr Rambal of compliance. The subpoenas were served upon Mr Rambal; solicitors were retained by him to provide legal advice in respect of compliance with the subpoenas; and discussions took place between the respective solicitors directed to compliance. The first subpoena was issued to Mr Rambal on 21 April 2016 and the letter from the solicitors for Mr and Mrs Oswal to Mr Rambal's solicitors on 27 April 2016 indicated that there had already been discussions between the respective solicitors which were directed to compliance. The solicitors for Mr and Mrs Oswal proposed to refine the scope of the subpoena by reference to those discussions and requested "an updated" estimate of Mr Rambal's cost of compliance based upon the refined scope. The letter asked for confirmation about whether Mr Rambal expected to be in a position to produce the documents by 4 May 2016 and referred to a request by Mr Rambal for an undertaking that he be paid his costs of complying with the subpoena. The terms of the letter shows compliance and identifies losses and expenses of complying with the subpoena by retaining solicitors and seeking advice. Subsequent letters are to the same effect in respect of both subpoenas until 19 May 2016. 14 It was not until 20 May 2016 that the solicitors for Mr Rambal informed the solicitors for Mr and Mrs Oswal that they considered that the subpoenas were an abuse of process and that they would seek to have them set aside if Mr and Mrs Oswal pressed for compliance. It is clear from the letter of 20 May 2016 that the basis of the decision not to comply from 20 May 2016 emerged, at least in part, from events which had then recently occurred, or which were then about to occur, in the Part IVC proceedings. Costs incurred from 20 May 2016 may not fairly be described as losses or expenses incurred in complying with the subpoena (see Ann Street Mezzanine Pty Ltd v Beck [2011] FCA 1328 at [5]) and, therefore, Mr Rambal is not entitled to any loss or expense or incurred from 20 May 2016; but he is entitled to an order for his reasonable losses or expenses of complying with the two subpoenas between their date of service upon him and 19 May 2016 to be taxed upon delivery of an itemised bill of costs unless otherwise agreed. 15 Mr Rambal also sought an order pursuant to r 24.15 and r 24.22 of the Rules restraining Mr and Mrs Oswal from making distributions or payments from the net proceeds of the sale of a specified property pending payment to Mr Rambal of the amounts found to be payable pursuant to orders to be made in this interlocutory application. It is unnecessary to consider the many interesting arguments about whether the Court has jurisdiction to make an order upon the basis sought because the material relied upon in support of the application would, on no view, justify a restraining order. 16 The foundation for the application for a freezing order was said to be a perceived fear of dissipation of assets based upon the fact of sale of one property by Mr and Mrs Oswal and upon inadmissible hearsay evidence that Mr and Mrs Oswal had left Australia in September 2016. Written submissions filed for Mr Rambal contained indefensible submissions which were sensibly abandoned by counsel who appeared on the application but who seems not to have authored the written submissions. The written submissions were purportedly authored by the person identified only by the word "counsel" which was typed at the end of the submissions. The written submissions did not otherwise identify or reveal the name of any practitioner responsible for their authorship. The mark indicating the signature by "counsel", however, seemed to be the same mark which appeared in correspondence from Mr Rambal's solicitors (such as the letter dated 24 November 2016 under the name of Mr Iain Freeman as Partner of Lavan Legal). 17 Solid evidence of a danger of dissipation or disposal of assets is required for a restraining order of the kind sought by Mr Rambal: see Curtis v NID Pty Limited [2010] FCA 1072 at [10], [14]-[18]. No such solid evidence was produced to justify the making of the restraining order which was sought. The only evidence concerning the quantum sought by Mr Rambal in the interlocutory application was in a letter dated 27 July 2016 from Mr Rambal's solicitors to the solicitors for Mr and Mrs Oswal. That letter identified the total costs then sought to total $74,304.98 comprising (a) a total of $8,920 (excluding GST) in legal fees incurred in relation to compliance with both the first subpoena and the second subpoena, (b) $39,204.92 in legal fees incurred in relation to the application to set aside the two subpoenas and (c) $26,180 in counsel fees. The only evidence concerning the sale of any property by Mr and Mrs Oswal was of the sale of one property thought to be worth about $30 million on which there was a caveat for a debt to a plumber of around $30,000. However, the evidence for Mr Rambal included also a number of other certificates of title to real estate in Australia owned by Mr and Mrs Oswal that was not the subject of any pending sale or of any apprehended threat of dissipation. The presence of other properties owned by the potential judgment debtors against which to execute any judgment for costs is sufficient to reject the application for any freezing order and to suggest, without specifically deciding, that it was an application that should never responsibly have been made. 18 The next matter to consider is the basis upon which orders for costs should be paid. Mr Rambal's application had been for his costs to be paid on a full indemnity basis or, in the alternative, on a solicitor and client basis relying upon the dicta in Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 and Mowie Fisheries Pty Ltd v Switzerland Insurance Australia Ltd [1996] FCA 608. In Fuelxpress Lockhart J said at 286 in a passage adopted by Tamberlin J in Mowie Fisheries at [3]: The intent of r.4A is to compensate a person subpoenaed to produce documents for expense or loss reasonably incurred in complying with the subpoena. It is not the case of a successful party to litigation seeking recovery of costs where the distinction of solicitor and client costs on the one hand and party and party costs on the other is observed by taxing officers. It is a case of a third party seeking compensation for what it has actually cost it in expense or loss in complying with the subpoena. In those circumstances I think it is appropriate, in this case that the legal costs and expenses ... in and about compliance with the subpoena (including its costs of this motion) and in and about the preparation of the bill for taxation and attending to the taxation should be on a solicitor and client basis. The facts in the interlocutory proceedings do not warrant an order that any cost be awarded to Mr Rambal on a full indemnity basis but his costs in respect of compliance with the subpoenas should be paid on a solicitor and client basis up to 19 May 2016. 19 The final matter to consider is the order for costs to be made in respect of the interlocutory application. Mr Rambal succeeded only in his application for his losses and expenses in respect of compliance. He is entitled to those costs on the same basis as his losses and expenses in respect of compliance with the subpoenas. Mr Rambal should otherwise pay for the costs of Mr and Mrs Oswal in respect of the other issues on a party and party basis. In each case the costs should be taxed unless otherwise agreed. The parties should each bear their own costs of the hearing on 28 November 2016 because the time spent on the issue on which Mr Rambal succeeded was about the same as that on which he failed. 20 The basis upon which the application was made on behalf of Mr Rambal for a freezing order, however, raises separate questions about whether the costs payable by Mr Rambal should be paid by his legal practitioners personally. Applications for freezing orders should not be made lightly. A freezing order is an extraordinary interim remedy requiring a solid foundation. The material relied upon in this case raises a question about how an application for a freezing order could responsibly have been commenced on Mr Rambal's behalf. It is not a case of an application having failed but of whether any application could ever possibly have been maintained in light of the material tendered in support of the application which showed the existence of assets that appeared, on any view, sufficient to meet a costs order if made. Legal practitioners have positive duties to the Court and to the administration of justice which may require them not to commence proceedings that lack sufficient foundation. In those circumstances, those acting for Mr Rambal should file submissions within 10 days about whether the costs incurred by Mr and Mrs Oswal in respect of the application by Mr Rambal for a freezing order should be paid by his solicitors personally. 21 Accordingly, there will be orders that: (a) Mr and Mrs Oswal pay to Mr Rambal his costs of complying with the subpoenas between the dates of issue and 19 May 2016 on a solicitor and client basis; (b) Mr Rambal otherwise pay the costs of Mr and Mrs Oswal on a party and party basis (other than the costs of the hearing on 28 November 2016 which are to be borne by the parties) subject to any order that may hereafter be made that those costs referrable to his application for a freezing order be paid by his solicitors personally; (c) The solicitors for Mr Rambal file submissions within 10 days on the question of whether they should be ordered to pay personally the costs ordered above to be paid by Mr Rambal in respect the application for a freezing order. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone.

Oswal v Commissioner of Taxation

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Judgment (19 paragraphs)

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Legislation Cited (3)

Cases Cited (20)