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[2017] VSC 331
General information, not legal advice.
Supreme Court of Victoria
2017-06-16
J FORREST J
Original judgment source is linked above.
COSTS - Application for costs of compliance with subpoena to produce documents - Claim for public interest immunity over documents - Claim for public interest immunity sustained over parts of the document - Application for costs of making and prosecuting the public interest immunity objection - Application that costs be taxed immediately.
For the Secretary to the Department of Education and Training
1 This defamation trial has now occupied 28 sitting days and has been adjourned until 21 August 2017.
2 This ruling concerns a claim by the Secretary to the Department of Education and Training ('DET') for costs incurred in relation to a subpoena issued by Mr Charan's solicitors for production of documents, including the Victorian Training Guarantee Contract and Compliance Audit Manual ('the Manual').
3 DET wants its costs incurred in complying with the subpoena, including costs of making and prosecuting a public interest immunity ('PII') objection to the production of the Manual. Additionally, DET is seeking an order that, in default of agreement, those costs be taxed immediately.
4 I will not repeat Mr Charan's claim and Nationwide's defence, which I set out in an earlier ruling,[1] save to say that the heart of Nationwide's defence of justification (pursuant to s 25 of the Defamation Act 2005 (Vic)) is that prior to December 2014:
(a) Mr Charan engaged in unscrupulous conduct in his management of a number of vocational educational and training ('VET') companies controlled by him and Mr Ivan Brown; and
(b) The VET Companies controlled by Mr Charan failed to comply with quality standards set by State and Federal regulators.
5 In 2015, audits were commissioned by DET into two of the companies that it is alleged were under Mr Charan's control in 2014. The evidence of the auditors engaged by DET and the tender of their reports underpins much of Nationwide's justification defence.
6 On 1 March 2017, during the course of the trial, Mr Charan's solicitors issued a subpoena to DET, for production of documents relating to the audits - returnable on 3 March 2017. There were five categories of documents including the following (category 2):
The Department's "Victorian Training Guarantee Contract Compliance Audit Manual" referred to in the letters from Garran Duncan, Protiviti, to Peter Graham, Department of Education and Training, dated 4 May 2015 and 15 May 2015 in relation to Protiviti's EOE and EOP audits of CTT.
7 The claim for PII over the Manual was foreshadowed by DET in an email early in the evening of 3 March 2017.
8 A number of documents were produced by DET in response to categories 1, 3, 4 and 5, and released to the parties for inspection. However, the Manual - used by the auditors as a guide in preparing their reports - was produced in a redacted form.
9 It was not suggested that the entirety of the Manual was unavailable for production, nor that it was irrelevant to the issues in this proceeding. The redacted parts are based on a claim by DET of PII, in what is colloquially known as a 'contents claim'.[2] This was primarily founded on the proposition that disclosure of the unredacted version of the Manual would reveal the investigative techniques underpinning VET audits.
10 Two affidavits of Mr Glenn Sullivan (an Acting Director in the Training Market Quality division at DET), of 6 March 2017 and 8 March 2017, were relied upon in the application to support the claim of PII.
11 Several of the claims of PII over redacted parts of the Manual were abandoned by DET shortly prior to the hearing on 9 March 2017, as identified in Mr Sullivan's second affidavit.[3]
12 Following the hearing on 9 March 2017 I reserved my ruling on the claim, which I subsequently gave on 28 March 2017 (day 17 of the trial). I concluded that the claim by DET for PII was sustained over parts of the Manual (but not all those sought to be redacted by DET). I made orders that those parts not be disclosed to the parties and that the copy of the unredacted Manual provided to the Court be returned to DET.
13 I also ordered that the question of costs associated with the subpoena be reserved and that Mr Charan and DET file written submissions within 14 days. I subsequently granted an extension of time for the provision of submissions, which were filed on 21 April 2017.
15 DET contends, given that it properly responded to the subpoena and was successful in maintaining its claim for PII over parts of the Manual, that its costs of complying with the subpoena (including making and prosecuting the claim for PII) should be met by Mr Charan.
16 Mr Charan submits that each party should bear its own costs of DET's claim for PII on the basis that:
In the alternative, Mr Charan submits that any costs awarded should be limited to the costs of the hearing on 9 March 2017.
17 Rule 42.11 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('the Rules') provides that:
42.11 Costs and expenses of compliance
(1) The Court may order the issuing party to pay the amount of any reasonable loss or expense incurred in complying with the subpoena.
(2) If an order is made under paragraph (1), the Court shall fix the amount or direct that it be fixed in accordance with the Court's usual procedure in relation to costs.
(3) An amount fixed under this Rule is separate from and in addition to -
(a) any conduct money paid to the addressee;
(b) any witness expenses payable to the addressee.
19 Pyramid stands for the proposition that once the requirements of the rule are satisfied then the Court has a wide discretion as to the award of costs, extending to an award on an indemnity basis. The current position is neatly summarised by Croft J in ASADA, in which his Honour said:
Rather, the proper question is, how are the provisions of r 42.11 to be applied having regard to the authorities to which reference has been made; authorities which indicate that where a person seeks to invoke the coercive powers of the Court with respect to subpoenas, a person who seeks to resist that process or to comply with the process is entitled to have costs and expenses reimbursed so that they are not out of pocket as a result. As the authorities indicate, this is particularly so in circumstances where they have no interest in the relevant proceedings and, in any event, seek to assist the Court with respect to the issue of or compliance with the subpoena.[8]
20 In my view, the submissions of Mr Charan miss the point. The determination of whether an award of costs should be made under r 42.11 does not turn upon the result of the claim for privilege and the events preceding it. Rather, as the observations of Croft J regarding the purpose of the rule make clear, it is intended to provide a means for properly compensating a party which has gone to the trouble and expense of complying with a subpoena - and where it would not adequately be covered by the provision of conduct money or witness expenses.
21 The application of this principle, particularly in the case of a claim for privilege, is made clear by Byrne J in Pyramid:
Where the recipient incurs costs in collating documents, copying them and seeking advice as to privilege or as to claim for restricted access or use, it is well established that such costs are recoverable.[9]
22 Whilst I accept that it is difficult for a party resisting a claim of PII to gauge its efficacy when it is prevented from seeing the whole or a major part of the document, by 8 June 2017 Mr Charan's lawyers could not have failed to comprehend the basis of the claim nor the policy reason behind it. Indeed, they only had to read the decision of the Court of Appeal in Ryan v State of Victoria[10] to understand that the application would be difficult to resist.
23 But that is not the real point. Even if DET had lost the PII claim but had sufficiently arguable grounds to maintain it, then it may well have been entitled to an award of costs in its favour as the rule envisages. I repeat that, as Croft J pointed out in ASADA, the purpose of the rule is to endeavour to ensure that a party who acts reasonably in complying with a subpoena is not out of pocket.
24 Of course DET did not lose the PII argument; it was vindicated.
25 In my view, it was entirely reasonable for DET to seek advice and be represented by senior counsel on an important point of privilege at the subpoena hearing. I should add that there was considerable utility provided by such representation, both in terms of reference to principle and to the contents of the Manual. Compliance with Mr Charan's subpoena required a distinction to be drawn between the privileged and non-privileged parts of the Manual. Ultimately, this could only be advanced by recourse to the Court given that Mr Charan contested the PII claim.
26 I accept that in a proceeding where a PII claim was demonstrated to be untenable, then a Court may, on a discretionary basis, refuse to make a costs order under the rule. However, in this case where the PII submission has been upheld and the ambit of compliance with the subpoena determined, then there is no good reason why DET is not entitled to its costs of the subpoena including those on the PII claim.
27 To make it clear, I think such costs of 'compliance' include not only the taking of advice in relation to questions of privilege but also putting submissions and articulating the PII claim at the subpoena hearing. Those costs were reasonably incurred in compliance with the subpoena and fall within the ambit of the rule.
28 If I am wrong in my analysis of the scope of the rule, I think that there is no good reason not to exercise the costs discretion in favour of DET given that it had substantiated its claim, in the main, for PII. That in itself is sufficient to give rise to a prima facie entitlement to costs.[11]
29 The end result is that DET should have the costs of complying with the subpoena, including those of making and prosecuting the PII objection, on a standard basis.
If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that costs may be taxed immediately.
32 In any event, it would serve no useful purpose (and be contrary to the intention of the rule) for a party with no further interest in the litigation to be shut out of its costs and be required to await the final determination. So, in an abundance of caution, I will make an order that the costs of DET be taxed immediately.
33 I propose to make orders to the following effect:
1. The plaintiff pay the costs of the Department of Education and Training's compliance with the subpoena issued by the plaintiff on 1 March 2017 (including those of making and prosecuting the PII objection) on a standard basis.
[1] Charan v Nationwide News Pty Ltd (Ruling No. 3) [2017] VSC 138 (28 March 2017).
[2] Ryan v State of Victoria [2015] VSCA 353 (17 December 2015) ('Ryan'), [56].
[3] Supplementary affidavit of Glenn William Sullivan, dated 8 March 2017.
[4] Outline of submissions seeking costs of objection to inspection of VTG audit manual and compliance with subpoena, filed by DET and dated 21 April 2017. The reference to "her" is the Secretary.
[5] Costs submission relating to the Department's PII claim over the VTG audit manual, filed by the plaintiff, dated 21 April 2017.
[6] [1995] VicRp 30; [1995] 1 VR 464 ('Pyramid').
[7] [2015] VSC 14 (30 January 2015) ('ASADA').
[10] [2015] VSCA 353 (17 December 2015).
[11] see Di Simone v Legal Services Board [2015] VSC 286 (19 June 2015) [27].
[12] [2015] VSC 286 (19 June 2015).
Charan
Nationwide News Pty Ltd