Stephen John Pilgrim and another v Wendy's Supa Sundaes Pty Ltd and others

THIRD RESPONDENT Bryan Clifford Johnson

FOURTH RESPONDENT Ann Margaret Johnson

FILE NUMBER: 1028 of 1999 CORAM: Peterson J CATCHWORDS : Unfair contract - interlocutory motion - summons for production served on non party (ASIC) - costs - time spent in dealing with the search for documents and the ascertainment of the correctness of the response - cost burden not insubstantial - amount sufficient to make good the expense or loss without profit element - reasons for earlier order LEGISLATION CITED : Industrial Relations Act 1996 Industrial Relations (General) Regulations 1996 Deposit and Investment Company Limited (Receiver's appointed) and others v Peat Marwick Mitchell & Co. (1996) 39 NSWLR 267 at 289 D per Bainton J Fuelexpress Ltd.v L M Ericsson Pty Ltd per Lockhart J (1987) 75 ALR 284 CASES CITED : Hadid v Lenfest Communications Inc and Others (1996) 65 FCR 350 Mancorp Pty Ltd v Baulderstone Pty Ltd t/as Baulderstone Hornibrook (Supreme Court of South Australia, Debelle J, 5 March 1993, Unreported) Marsden v Amalgamated Television Services Pty Ltd (Supreme Court of NSW, Levine J, 27 February 2001, Unreported) HEARING DATES: 08/31/2001 DATE OF JUDGMENT: 01/30/2002

APPLICANTS: Mr J Whittle SC

SOLICITORS Barry Lazarus Lawyers SYDNEY

FIRST RESPONDENT Mr D J Hammerschlag SC

SOLICITORS LEGAL REPRESENTATIVES: Piper Alderman Lawyers SYDNEY

SECOND TO FOURTH RESPONDENTS Mr I Neil of Counsel

SOLICITORS Gordon & Johnstone Lawyers SYDNEY

NON PARTY (ASIC) Mr D Stack of Counsel

JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

STEPHEN JOHN PILGRIM & ANOR v WENDY'S SUPA SUNDAES PTY LTD & ORS

Application under s106 of the Industrial Relations Act 1996

1 The Australian Securities and Investment Commission ('ASIC') has by notice of motion sought an order that the first respondent, Wendy's Supa Sundaes Pty Ltd ('Wendy's'), pay the costs and expenses incurred by ASIC in complying with a Summons for Production.

2 This judgment records the reasons for an order made during the course of the hearing on 13 August 2001 that Wendy's pay to ASIC the sum of $1390.98, together with costs of the motion as agreed or as assessed.

3 ASIC is not a party to these proceedings, which have been brought by the applicants against the four respondents in relation to the franchise of an ice cream store under the name Wendy's Supa Sundaes at the Bay Village, Bateau Bay near The Entrance, New South Wales.

4 On 28 May 2001 ASIC was served with a summons for production which was issued in connection with these proceedings. The documents sought by the summons related to ASIC activities in connection with a person the applicants intended to call as an expert witness, to deal with the financial features of the applicants' franchise business. It appears from the summons that the person involved had been the subject of some inquiry in relation to audits undertaken by him and his administration of a particular corporation. The summons sought: "All documents submitted to the Companies Auditors and Liquidators Disciplinary Board in support of the Australian Securities and Investment Commission application (Matter No. - - - -) to discipline (the named person in relation to the specified activities).

5 I do not intend to repeat in this judgment the matter number, the name of the particular person or the details of the documents sought by the summons, for the reason that the witness was not ultimately called in the substantive proceedings, the documents were not utilised in that context and their identity is immaterial to the costs issue.

6 The alternative claims made by the ASIC were as follows: (i) $1788.96 made up of $515.86 for (Mr Moyle's time lost) $1082.00 (photocopying) plus $51.20 (file retrieval fee) plus $164.90 (GST) less $25.00 (conduct money). The photocopying sum of $1082.00 claimed in this alternative reflects $1 per page in accordance with schedule G of the New South Wales Supreme Court Rules. That rate includes photocopying, compiling and collating documents, so the time spent by the administrative assistant would be absorbed within this figure. (ii) $1390.98 (sic - in fact, $1390.18) made up of $515.86 (Mr Moyle's time) $178.47 (administrative assistant's time) plus $541.00 (photocopying) plus $51.20 (file retrieval fee) plus $128.65 (GST) less $25.00 (conduct money).

7 In support of the motion, ASIC has relied upon the affidavit of a solicitor in its employ, Lawrence Scott Moyle. That affidavit details the work undertaken by him and the time spent in dealing with the search for the documents and the ascertainment of the correctness of the response to the summons as involving 5.4 hours work which was charged at a rate of $95.53 per hour, giving a total of $515.86.

8 Additionally, a claim for $1,082.00, representing photocopying of 1082 pages at $1.00 per page, was made although ASIC indicated through Mr Moyle that it was prepared to accept a rate of 50 cents per page. Four and one half hours were spent by an ASIC administrative assistant in photocopying, collating, compiling and delivering the documents to the Commission. That work was charged out at $39.66 per hour giving a total of $178.47. Accordingly, ASIC's claim was for a total of $1,788.96 or alternatively $1,390.98 taking into account the lower photocopying charge.

9 In contesting the motion Mr. Hammerschlag suggested in cross-examination of Mr Moyle that the period of time spent by him totalling 5.4 hours was excessive and that 2 hours might be more realistic. In addition, it was suggested that the work involved did not require the skill and expertise of a solicitor and was in large measure administrative. Mr Moyle disputed both of those propositions.

10 ASIC relied on clause 19(3) of the Industrial Relations (General) Regulation 1996 (repealed on 1 September 2001 but now prescribed as cl.20(3) of the Industrial Relations (General) Regulation 2001) which provides: If the person required to comply with the summons is not a party and, in order to comply with the summons, incurs expense or loss substantially exceeding any amount paid under subclause (2), the Commission may order the party who requested the issue of the summons to pay to the person an amount sufficient to make good the expense or loss.

11 The reference to subcl. (2) relates to what is commonly referred to as 'conduct money' and presents no obstacle to the claim here, the expenses now claimed being substantially in excess thereof.

12 Mr. Stack referred me to authority in support of his contentions. In particular, he referred to the judgment of Bainton J in Deposit and Investment Company Limited (Receiver's appointed) and others v Peat Marwick Mitchell & Co. (1996) 39 NSWLR 267 at 289D as authority for the following propositions:

· Clause 19(3) of the Regulations ought be given full forceful effect

· Not just the bare hourly rate of pay of the employee performing the work but all on-costs capable of calculation ought be included in the amount to be reimbursed.

· A body corporate or other entity put to expense or loss in answering a subpoena is entitled to claim that cost. (See also Fuelxpress Ltd. v L M Ericsson Pty. Ltd. per Lockhart J (1987) 75 ALR 284 and Hadid v Lenfest Communications Inc and Ors (1996) 65 FCR 350).

· The law firm required to answer a subpoena duces tecum is entitled to be reimbursed at the particular partner or solicitor's ordinary charge-out rate where the partner or employee performs the work. · The cost of making photocopies of records are recoverable where the documents are likely to be required to be consulted or otherwise used during what could be a long absence.

13 I am satisfied on the evidence that the work done by ASIC staff was necessary to be done and, in Mr. Moyle's case, appropriate to be done by a solicitor. While a solicitor is obviously not an essential element in the response of a person to a summons to produce, it seems to me that where such a summons relates to other proceedings, in the sense as here of seeking access to evidence in those other proceedings, resort to a lawyer for the purpose is entirely reasonable. This would seem to be the more so where the person subject to the summons is bound by a particular statutory obligation such as those imposed by section 127 of the ASIC Act.

14 The first respondent had in writing indicated to ASIC that it was willing to pay ASIC's reasonable costs which were estimated in the sum of $400. It was that figure which the first respondent submitted was appropriate. As Mr Hammerschlag submitted, ASIC is not entitled to recover the legal costs but merely the expense or loss, there is no profit element to be allowed. However I do not accept the submission that a profit element is involved in allowing the actual cost of a solicitor's time.

15 Reference was made to section 127 of the ASIC Act which obliges ASIC to take all reasonable measures to protect from unauthorised use or disclosure information given to it in certain circumstances. An analogy was sought to be drawn between time spent in that way and time spent where a subpoenaed party seeks legal advice as to the confidentiality or privilege of its own documents. Where a third party is subpoenaed to produce documents and seeks legal advice regarding confidentiality and privilege, the costs of that advice is an "expense or loss" incurred in complying with the subpoena. See generally: Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 at p 286; Mancorp Pty Ltd v Baulderstone Pty Ltd t/as Baulderstone Hornibrook (Supreme Court of South Australia, Debelle J, 5 March 1993, unreported) at p3; Hadid v Lanfest Communications Inc & Ors (1996) 65 FCR 350 at p353; Marsden v Amalgamated Television Services Pty Ltd (Supreme Court of NSW, Levine J, 27 February 2001, unreported) at pp3-4.

16 As the judgment of Bainton J in Deposit & Investment Co. Limited makes clear, in the context of modern, often complex, litigation and in relation to 'dragnet' forms of subpoena, "it would be intolerably unjust to leave the burden of the cost of responding to such subpoenas upon a stranger to the litigation on whom the subpoena is served." (ibid, at p.289G). While one must recognise the summons issued upon ASIC in this matter was not of a dragnet kind, the evidence demonstrates the level of the cost burden imposed on ASIC was not insubstantial. Were it otherwise, it may be that the Court should be less responsive to a claim for recovery of the cost and expenses. However, where substantial costs are to be borne, I consider the approach of Bainton J is appropriate.

17 As to the amount of expenses which should be awarded, I consider that ASIC established an entitlement to the lower sum claimed. Where a claim is advanced in the alternative as here and opposed by the party to the proceedings who had the summons issued, there does not seem to me to be any basis for taking an approach to assessment which is on the generous side. To award the larger of sums claimed would seem to me to involve that fault. The rate claimed for the hours spent did not involve any profit element, but only the actual cost to ASIC of employing the relevant persons on the functions necessary to answer the summons. Accordingly I order that the lesser of the sums be payable together with costs on the motion as agreed or assessed.

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.