FEDERAL COURT OF AUSTRALIA

Ann Street Mezzanine Pty Ltd v Beck [2013] FCA 960

THE COURT ORDERS THAT:

1.    Derrick Vickers have leave to file the affidavit of Elizabeth Mary Harris sworn on 22 February 2013, with effect from 22 February 2013.

2.    The application made pursuant to rule 40.34 of the Federal Court Rules 2011 (Cth) be dismissed.

3.    The first cross-claimant pay the non-party’s costs of and incidental to the application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    This is an application pursuant to rule 40.34 of the Federal Court Rules 2011 (Cth) (‘Federal Court Rules’) for a review of a decision made by a Registrar of this Court in exercise of his function as a taxing officer under rr 40.27 and 40.28 of the Federal Court Rules. The application is made by Norman Phillip Carey, the first cross-claimant in a suit arising from the collapse of the Westpoint Group of companies in January 2006 (‘the Westpoint proceedings’). Judgment in that matter was delivered on 20 September 2013 as Carey v Freehills [2013] FCA 954.

2    The costs at issue in this application were awarded in favour of Derrick Vickers, a non-party to the Westpoint proceedings, on 14 December 2011 for:

[His] loss and expenses incurred in complying with the subpoena dated 21 November 2011 [issued by the cross-claimants, including Mr Carey].

3    These costs were ultimately the subject of a certificate of taxation issued on 6 September 2012 (‘Certificate of Taxation’). It is unnecessary here to set out the previous procedural history, which, for the most part does not bear on the issue for decision. The Certificate of Taxation was issued in the amount of $23,332.73 comprising $17,232.73 for the total amount of the taxed bill (‘the core amount’); and a further $6,100 for Mr Vickers’ costs of the taxation (‘the further amount’). Mr Vickers was entitled to this second amount because the taxed costs were ultimately calculated at more than 85% of the taxing officer’s estimate (an estimate to which the cross-claimants as a whole (‘the Carey parties’) relevantly objected by notice on 15 August 2012): see r 40.33(1) of the Federal Court Rules.

THE APPLICATION

4    The present application was filed on 7 September 2012. By this application Mr Carey seeks various orders, including that the Certificate of Taxation be set aside and the allowances be varied, to effect a reduction of $15,462.73 in taxed costs; and that Mr Vickers pay the Carey parties’ costs fixed in the sum of $6,100.

5    On 23 November 2012, pursuant to r 40.34(5) of the Federal Court Rules, I called for a written report from the taxing officer. This report was delivered on 27 December 2012 (‘the Report’). Also on 23 November 2012, I ordered (among other things) that the application for a review of taxation be dealt with, on the papers, by way of written submissions.

6    The Report made it clear that, after the subpoena had issued at the instance of the Carey parties, Mr Vickers took legal advice. Subsequently, his solicitors informed the Carey parties’ solicitors that they considered that the subpoena was too wide and that compliance with its terms as issued would be unduly onerous. In consequence, Mr Vickers’ solicitors proposed that the parties negotiate to limit the scope of the subpoena. The parties ultimately reached agreement, with consent orders being made discharging the subpoena. The dispute in this case arises from the fact that, in the course of negotiations, Mr Vickers signalled that, if agreement were not reached, he would make an application to set the subpoena aside and took preparatory steps in relation to so doing. Since the parties reached agreement, no such application was in fact made, although, in the meantime, Mr Vickers had incurred costs in taking advice and placing himself in a position that the foreshadowed application could be made, if this became necessary in the absence of agreement. These costs are said by Mr Carey to be reflected in items within the core amount, which were successfully claimed by Mr Vickers before the Registrar (‘the core items’). Mr Carey disputed some of these costs on the ground that they were not covered by the costs order of 14 December 2011. This is the principal issue that now arises for determination.

the report

7    In order to understand how the issues in dispute have been identified and addressed, it is helpful to refer to the Report of the Registrar, who was the taxing officer.

8    After setting out the procedural history of the taxation, the Report discussed the core items and set out the argument advanced on Mr Carey’s behalf, stating:

At the taxation, Ms Coulson for the Carey parties relied on two authorities to establish the proposition that costs incurred by an addressee to a subpoena in resisting the subpoena cannot be costs of compliance.

These authorities were Ann Street Mezzanine Pty Ltd (in liq) v Beck & Ors [2011] FCA 1328 (‘Ann Street’) and A Pty Ltd v Z [2007] NSWSC 999 (‘A Pty Ltd v  Z’).

9    The Report further stated:

Upon reviewing some of the correspondence between the solicitors for the Carey Parties and the solicitors for Mr Vickers, and correspondence sent by the solicitors for the Carey Parties to the Court concerning the Subpoena, I formed the view that Mr Vickers had taken the following steps once the Subpoena had been brought to his attention. He had sought legal advice about the Subpoena. His solicitors had communicated to the solicitors for the Carey Parties the view that the scope of the Subpoena was too wide and that compliance with the Subpoena as issued would be onerous. It was proposed that the parties negotiate to limit the scope of the Subpoena. There were subsequent discussions between the parties that appear to have been robust, but not exceptionally so, in attempting to reach agreement on the scope of the Subpoena. Mr Vickers’ ultimate position in the days leading up to the return date for the Subpoena, as put by his solicitors, was that, if agreement could not be reached on the scope of the Subpoena, he would pursue an application to set the Subpoena aside. That did not eventuate, as the parties reached agreement, and provided the Court with signed consent orders. Those orders were made in chambers, and the parties were advised they were not required to attend Court for the listed return of the Subpoena.

Mr Vickers did not at any time make any interlocutory application to set aside the Subpoena, such as those considered by Justice Kenny in [Ann Street], and Justice Brereton in [A Pty Ltd v Z]. Nevertheless, following the reasoning in A Pty Ltd v Z, the question remained whether Mr Vickers had moved to a position where he could clearly be said to have been agitating a motion to set aside the subpoena, such that he was no longer complying with the Subpoena. In A Pty Ltd v Z Brereton J noted that the time when a decision is made to set aside a subpoena will not always be clear. In that case, he chose the date of filing of the interlocutory application to set aside the subpoena as the logical point when the Commissioner could no longer be said to be complying with the Subpoena. In this matter, as the taxing officer, I formed the view that an equivalent point was never reached. The fact that an application to set aside the Subpoena was plainly considered as an option by Mr Vickers and his legal advisors, and even communicated to the solicitors for the Carey Parties as Mr Vickers’ alternative to a negotiated outcome, was not enough, in my view, to amount at any time to agitating a motion to set aside the Subpoena. On that basis, applying the principles from the cases referred to, I rejected the objections to all the [core] Items and allowed the amounts claimed.

(Emphasis added: see [23] below.)

10    The Report stated that the taxing officer rejected the objections to the further amount, regarding them “as part of Mr Vickers’ loss and expenses incurred in complying with the subpoena, rather than as costs of the taxation”, although the taxing officer considered that the distinction was unlikely to be material (emphasis in original). In total, the taxing officer taxed the Bill of Costs at $17,232.73, including costs and disbursements. The Report is discussed in further detail below at [61].

function of the Court on review

11    While the exact characterisation of the Court’s review function under r 40.34 post Harris v Caladine (1991) 172 CLR 84 has been the subject of some interesting and conflicting comments, obiter dictum, by judges of this Court, the distinction between a de novo review discussed in that case and the sui generis form of review endorsed by Kitto J in Australian Coal & Shale Employees’ Federation v Commonwealth (1953) 94 CLR 261 (as described by Jordan CJ in Schweppes’ Ltd v Archer (1934) 34 SR (NSW) 178 at 183) need not concern me here. (On the question of function, see the review of authorities contained in Amos v Monsour Pty Ltd [2010] FCA 741 at [28]-[36] (Reeves J) and Cachia v Westpac Financial Services Limited [2003] FCA 817 at [18]-[24] (Hely J).)

12    It is enough for present purposes to note simply that the Federal Court Rules expressly provide for a review whereby a review applicant identifies the items in the bill that are subject to challenge (r 40.34(2)(a)) and states whether the review applicant wants the item included, deleted or varied ((r 40.34(2)(b)). No party can raise any ground of objection, or response to objection, not taken in the party’s original notice to the taxing officer under r 40.25(1) or r 40.26(1). Here it is clear that the same grounds are taken by Mr Carey and the same responses made by Mr Vickers before me, as before the taxing officer. As already indicated, the Court may call for a written report from the taxing officer (r 40.34(5)), as done here, but no further evidence “will be received on the review” (r 40.34(6). Subject to the limits imposed by the Federal Court Rules, on the review, the Court may exercise all of the powers of the taxing officer in relation to the items under review.

SUBMISSIONS made by Mr carey and Mr Vickers

13    In support of his application, Mr Carey relied on his written submissions dated 22 November 2012, further submissions dated 31 January 2013 (but filed 4 February 2013) and submissions in reply dated 1 March 2013 (but filed on 5 March 2013). In these submissions Mr Carey argued (as before the taxing officer and in compliance with r 40.34(3)) of the Federal Court Rules) that the core items (namely, item numbers 6-8, 12, 15-49, 53-54, 56 and 79 of the Bill of Costs) fell outside the costs order of 14 December 2011. Mr Carey submitted that these costs were not incurred “in complying with” the subpoena, but rather “in resisting the Subpoena and/or drafting a proposed application to set aside the Subpoena”. He relied on three decisions to support his position: Ann Street, A Pty Ltd v Z (both of which were discussed by the taxing officer) and Frontier Assets Pty Ltd v Fishburn [2011] NSWSC 334 (‘Frontier Assets’). I consider these authorities (and others) below.

14    Mr Carey also challenged the reasoning of the taxing officer as set forth in the Report that, because no application to set aside the subpoena had been filed, Mr Vickers had not “agitated a motion to set aside the Subpoena” as in A Pty Ltd v Z and his case was therefore not analogous to that in A Pty Ltd v Z. To this end, Mr Carey drew attention to particular items as examples that Mr Vickers had, in fact, “agitated a motion to set aside the Subpoena from the very beginning” (emphasis added). In submissions in reply, Mr Carey submitted that “the existence or otherwise of a Motion to set aside the Subpoena does not detract from the principle that only the costs incurred in complying with the subpoena are claimable” (emphasis in original).

15    In addition, Mr Carey submitted that no costs should be allowed for the costs of the taxation itself. These costs were said to be reflected in items 72-74, 77 and 80 (‘the further items’). This was because, if the core items mentioned in [13] above, were not allowed as in the taxing officer’s calculations, the costs would be taxed at less than 85% of the taxing officer’s estimate, sparing him the liability for the costs of taxation ordinarily imposed on a party who files an objection: see r 40.33(1)(b).

16    Mr Vickers relied on written submissions dated 22 November 2012 and further submissions dated 22 February 2013 (and filed on those dates). He also sought to rely on an affidavit sworn by Elizabeth Mary Harris on 22 February 2013 (‘the Harris affidavit’), which is discussed hereafter. Mr Vickers submitted that the question for consideration was “whether the work of preparing an application to set aside a subpoena should be allowed as part of Mr Vicker’s [sic] ‘loss and expense incurred in complying with the subpoena’, where the application was not issued”. Mr Vickers contended that Ann Street, A Pty Ltd and Frontier Assets were distinguishable from the present case and did not assist Mr Carey because, in contrast to the present case, an application to set aside the subpoena had in fact been issued and was before the Court in all three of the cited authorities.

17    Mr Vickers also contended that the question regarding the core items (and, in consequence, the further items) should be answered in his favour because: (a) the costs were incurred before the “time a decision [was] made to file a motion to set aside the subpoena” in reliance on Ann Street; (b) it would not be just for Mr Vickers to have to bear his own costs of preparing an application simply because those costs fell between the costs and expense of complying with the subpoena on the one hand and, on the other, the costs of the application (to which Mr Vickers can have no resort because the subpoena was withdrawn); (c) the decision to prepare the application was reasonable; and (d) the Registrar’s findings were proper on the facts in circumstances where the Court had made orders regarding the timeframes for filing an application to set aside the subpoena, and Mr Carey’s solicitors failed to respond to requests to negotiate the scope of the subpoena.

18    As to the further items, Mr Vickers submitted that they were properly allowed as part of his loss and expense, or were properly allowed in accordance with r 40.33(1)(b) of the Federal Court Rules.

Affidavit of Ms Harris

19    As indicated above, Mr Vickers sought the leave of the Court to rely on the Harris affidavit.

20    The Harris affidavit was short. Ms Harris, who was a legal practitioner and the Director of Harris Cost Lawyers Pty Ltd, deposed that she had been engaged by Mr Vickers to appear before the taxing officer on the taxation of costs and that, at the taxation hearing, she produced certain documents to the taxing officer. These documents were annexed to her affidavit. Reference to them indicates that they formed part of the file of Mr Vickers’ solicitor in relation to the subpoena.

21    Mr Carey objected to the Harris affidavit and to those parts of Mr Vickers’ submissions that apparently relied on that affidavit, on the grounds that: (a) it was filed without leave; (b) Mr Carey had not had the opportunity to put on evidence, or to respond to the affidavit; and (c) it was not relevant.

22    The evident purpose of the Harris affidavit is to place before the reviewing Court the correspondence that was before the taxing officer and that was relied on by him in reaching his decision: see the passages set out at [9] above. This correspondence was relevant to rebut Mr Carey’s claim that Mr Vickers had “agitated a motion to set aside the Subpoena from the very beginning” – a claim that Mr Carey sought to support by reference a range of “examples” drawn from the Bill of Costs before the taxing officer. The Harris affidavit is therefore relevant; and I would reject Mr Carey’s objection on this ground.

23    I would also reject Mr Carey’s objection on the ground that the Harris affidavit was filed without leave. This is relevantly to misstate what in fact occurred. On 22 February 2013, David Dickens of Mr Vickers’ solicitors emailed my Chambers and copy emailed Mr Carey’s solicitor with a covering note and, as an attachment, a copy of Mr Vickers’ 22 February 2013 submissions and the Harris affidavit. In his covering note, Mr Dickens wrote:

We respectfully request our client is granted leave to file the affidavit.

The 22 February 2013 submissions were in fact filed in Registry in the usual way; and so, it seems, was the Harris affidavit (although, as I understand it, solely on the basis that leave was being sought in respect of it). Whilst it might be technically correct to say, as Mr Carey did, that the Harris affidavit was filed without leave, this misstates the context in which this occurred. I do not consider that, when the circumstances are fully considered, Mr Vickers’ solicitors acted in any way improperly. I would therefore reject Mr Carey’s objection on this ground.

24    The critical question is whether leave should in fact be given. There are at least two considerations that might, if made out, militate against the grant of leave. The first is that indicated by Mr Carey’s third ground of objection: that he had no opportunity to put on evidence, or to respond to the Harris affidavit. The second is that r 40.34(6) expressly stipulates that:

No further evidence will be received on the review.

25    There is, however, little substance in either consideration. First, the only purpose of the Harris affidavit is to place before me the documents that Ms Harris produced to the taxing officer at the taxation hearing. These documents are not “further evidence” for the purpose of r 40.34(6); rather they constitute the evidence before the taxing officer and, as the Report shows, this correspondence formed an important basis for his decision.

26    Perhaps recognising the potential difficulty that r 40.34(6) might create, Mr Vickers’ solicitors explained why they sought to rely on the Harris affidavit as follows:

We refer to the submissions in reply filed by the First Cross-claimant.

The submissions take issue with our client’s request in our email below for leave to file the affidavit. The sole purpose of the affidavit was to put before the Court documents which were produced to the registrar at the taxation hearing. The documents bear directly on the issues that have been agitated in the current appeal.

We recognise that we could have achieved the same result by annexing the documents to our client’s submissions. If the Court believes this would be a preferable approach, we are happy to withdraw the affidavit and file amended submissions which exhibit the documents. …

27    Mr Carey has not disputed that the documents annexed to the Harris affidavit are documents that were before the taxing officer at the taxation hearing, notwithstanding the opportunity to do so in his reply submissions filed on 5 March 2013. These submissions were his opportunity to respond to the Harris affidavit and, if it were thought needful, to indicate that he wished himself to file answering evidence of a particular kind. Mr Carey’s omission to take up this opportunity in any genuine fashion, as for example, by challenging the nature of the documents annexed to the Harris affidavit, deprives his objection of its force. It may also be borne in mind that two weeks elapsed between Mr Vickers’ solicitors’ email of 22 February 2013 and the filing of Mr Carey’s submissions in reply on 5 March 2013. This was ample time to respond in a considered way to the Harris affidavit (the only relevance of which was to produce correspondence that was familiar to Mr Carey and of no particular quantity). As I have said, no substantive response was made. In the circumstances, it must be assumed that the correspondence attached to Ms Harris’ affidavit was the correspondence given to the taxing officer at the taxation hearing and to which he refers; and that Mr Carey had nothing relevantly to add to what he has said.

28    In this review, I have had regard to the documents annexed to the Harris affidavit on the basis that they were in fact before the taxing officer at the taxation hearing. I would grant Mr Vickers leave to file the Harris affidavit, nunc pro tunc, on the ground that the affidavit does no more than provide the reviewing court with the material that was before the taxing officer and verifies that fact. In so far as Mr Vickers’ submissions rely on those documents, the submissions are not objectionable.

CONSIDERATION

29    Rule 24.22 of the Federal Court Rules relevantly provides that:

(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 subrule (1), the Court must fix the amount or direct that it be fixed in accordance with the Court’s usual procedure in relation to costs.

…

The order of 14 December 2011 was made pursuant to this rule.

30    The principal issue for determination is whether or not the core items were part of Mr Vickers’ “loss and expense incurred in complying with” the subpoena issued on 21 November 2011, since these were the subject of the order made under r 24.22.

31    The Bill of Costs filed on behalf of Mr Vickers detailed the items for taxation, including the core items. Broadly speaking, in the period the challenged items were incurred, the Bill of Costs shows the following work was done:

29 November – 30 November 2011    drafting of communications by Mr Vickers’ solicitor to the client and counsel and to Mr Carey’s solicitor; attendance on the client; and drafting letter to Mr Carey’s solicitor as to hearing on 30 November 2011. (Items 6-8 and 12 were within this period.)

5 December – 7 December 2011    attending: (i) the client to discuss work required to comply and preparation of application (to set aside the subpoena) and as to the responses of Mr Carey; (ii) counsel; (iii) with respect to the drafting of application and affidavit material; (iv) Mr Carey’s solicitor. Also perusing and drafting related communications and attending court, including advising as to awaiting Mr Carey’s solicitors’ consent to orders. (Items 15-49 were within this period.)

8 December 2011     drafting letter to Mr Carey’s solicitors seeking response to proposed restriction of scope of subpoena and perusal of Mr Carey’s solicitor’s consent to discharge of subpoena and related matters. (Items 53-54 and 56 were within this period).

March 2012    various consequential work, including paying counsel’s fees on brief to appear and settle affidavit (as described in Item 79).

Relevant principles

32    The courts have accepted that certain expenses or loss, where reasonably incurred, fall within the costs of compliance with a subpoena. These include the cost of advice on whether to comply with the subpoena at all and as to matters of confidentiality: see, with respect to O27, r 4A of the Federal Court Rules 1979 (‘the former Court Rules’), Hadid v Lenfest Communications Inc (1996) 65 FCR 350 (‘Hadid v Lenfest’), citing Fuelxpress Ltd v LM Ericsson Pty Ltd (1987) 75 ALR 284 (‘Fuelxpress’). See also Re Pan Pharmaceuticals Ltd; Selim v McGrath (2004) 48 ACSR 681 at 692 [43]. The costs of compliance have also encompassed the costs of correspondence about the scope of a subpoena: Hadid v Lenfest; Fuelxpress; and Charlick Trading Pty Ltd v Australian National Railways Commission (1997) 149 ALR 647 (‘Charlick v ANR’) at 649.

33    Indeed, in Charlick v ANR at 649, Mansfield J helpfully summarised the effect of the Hadid v Lenfest and Fuelxpress as follows:

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 L M 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... 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 [above]. That list may not be exhaustive.

See also Frontier Assets at [23]. Whether any order should in fact be made is a matter to be determined in the particular circumstances of the case. Such costs, if reasonable, may be payable, however, irrespective of whether the subpoena is ultimately complied with: see, for example, Danieletto v Khera (1995) 35 NSWLR 684 (‘Danieletto v Khera’) at 687.

34    In the present instance, Mr Carey relies on Ann Street, A Pty Ltd v Z and Frontier Assets in support of the proposition that the core items were not part of Mr Vickers’ “loss and expense incurred in complying with the subpoena”, because they were incurred in resisting the subpoena and/or preparing an application to set it aside.

35    Ann Street is readily distinguishable and does not assist Mr Carey in this case. The matter also arose out of the Westpoint proceedings. In that instance, Mr Read sought the costs of his unsuccessful interlocutory application to set aside a subpoena issued to him. Mr Read argued that, despite his lack of success on his application, he should receive the costs of the application to set aside the subpoena because (among other reasons) “as a general rule, a party who causes a subpoena to be issued is ordinarily required to pay any legal expenses reasonably incurred by the recipient of the subpoena”. This submission was rejected, it being held that “[c]osts incurred in respect of an application to set aside a subpoena are not … fairly described as loss or expense incurred in complying with the subpoena”: Ann Street at [5] (emphasis in original). The case concerned the disposition of costs where an application to set aside has actually been made, in which event the usual cost rule would generally be applicable. No such application was made here. The disposition of costs is in this case is governed by the different considerations that arise when an order is made under r 24.22. In this case, the question is as to “the loss or expense incurred in complying with the subpoena”. This was not the question at issue in Ann Street.

36    A Pty Ltd v Z – not a case under this Court’s Rules – concerned the entitlement of a party to their costs both before and after a motion to set aside a subpoena had been filed. In the circumstances of that case, Brereton J held (at [48]) that:

A subpoena is an invasive process which puts third parties to costs and trouble for the benefit of the parties to litigation, and in particular the issuing party. The price that an issuing party pays for the privilege of being able to issue subpoenas more or less as of course is the liability to pay a recipient its reasonable costs of compliance. It was entirely reasonable for the Commissioner [against whom the subpoena issued] to seek and obtain legal advice as to issues of privilege. However, once he moved from obtaining legal advice as to whether or not documents should be produced, to agitating a motion to set aside the subpoena, that passed beyond the scope of compliance with the subpoena, to an application not to the comply with it.

Mr Carey relied on his Honour’s reference to “agitating a motion to set aside the subpoena” as the bright line that marked off the allowable items in the present application from items that should not be allowed because they post-dated the point at which Mr Vickers “agitated a motion to set aside the subpoena”.

37    In A Pty Ltd v Z Brereton J held that the Commissioner began “agitating a motion to set aside the subpoena” when he made a decision to file the motion to set aside the subpoena. This appears in his Honour’s statement (at [49]) that:

In my view the Commissioner is entitled to recompense for searching and assembling the documents called for, and obtaining advice as to the subpoena up to the time a decision was made to file a motion to set aside the subpoena; but not in respect of the motions. I appreciate that the distinction is not always clear, but in my view, the costs of legal advice between 18 May 2007 (when the motion was originally filed) and 6 September 2007 (when this judgment is delivered) should be regarded as costs of the motion. Legal costs related to the subpoena before the commencement and after the completion of that period, together with all costs of searching, assembling, copying and producing documents called for by the subpoena, should be regarded as costs of compliance.

(Emphasis added)

38    Brereton J’s analysis foregrounds the importance of a decision to file a motion (or, under the Federal Court Rules, an application) in understanding the point at which the subpoenaed person’s conduct “passed beyond the scope of compliance with the subpoena”. This must be the case. It is consistent with the reality of litigation and the negotiated interactions of opposing legal advisors that the threat of, including steps to prepare for a setting aside application, can, though will not always, be principally part of the strategies of negotiation employed by a party to narrow the scope of an unduly broad subpoena.

39    Consideration about the content of a contemplated application, including the mapping and intellectual testing of its parameters and likely chances of success, can, though will not always, occur squarely in the course of advising as to whether (or to what extent) there should be compliance with an issued subpoena. Where considerations of this kind fall within such advice, the costs also fall within the settled territory described above at [34]. In this situation, an application to set aside the subpoena has not yet been ‘agitated’, in the sense used by Brereton J.

40    This understanding is reflected in the Report of the taxing officer, in the passages set out earlier: see [9] above.

41    A common sense approach to understanding the nature of particular costs was endorsed, in a similar way, in Frontier Assets, the third case on which Mr Carey relied. In Frontier Assets – not a case under this Court’s Rules – also involved the filing of an application to set aside the subpoena in question. The subpoena was, however, ultimately set aside by consent. The circumstances in that case led Harrison J to observe (at [38]) that there had been “a conspicuous absence of reasonable conduct and common sense” on the part of the lawyers and their clients. His Honour continued (at [39] and [40]):

Having issued the subpoena, Frontier is liable for the reasonable loss and expense incurred by Mr Wavish in complying with it. …

I do not consider that the loss and expense for which [the Rule] provides extends to include the costs associated with a challenge to the validity of the subpoena, or in this case the costs of the motion to set it aside. Costs of compliance can hardly include or incorporate the costs of litigation seeking to impugn or to challenge the very obligation to comply. Those costs must fall to be determined as part of the costs of the motion filed by Mr Wavish on 12 November 2010. However, I do not consider that the filing of the motion automatically had the effect that all or any costs incurred thereafter became costs in the motion as opposed to loss suffered and expense incurred in complying with the subpoena. Frontier and Mr Wavish were effectively corresponding on two fronts after 12 November 2010, sometimes attempting to resolve the issue of compliance with the subpoena and sometimes dealing with the motion to set it aside. Those efforts will have to be examined, with the costs and loss and expense apportioned accordingly.

(Emphasis added.)

42    Mr Carey particularly relied on the second sentence emphasized in the above passage, the correctness of which may be accepted. This does not resolve the issue in this case, however, where no application to set aside the subpoena was made; and there was, therefore, no litigation in which the obligation to comply with the subpoena was impugned and, in consequence, no “costs of litigation”. Accordingly, this part of the passage does not assist Mr Carey’s case.

43    Critically, in this case, as in A Pty Ltd v Z, Harrison J treated the decision to file the application to set aside the subpoena as the relevant point of departure. In that case, his Honour treated the decision as having been taken on 12 November 2010 when the application was filed, despite the fact that an application had been foreshadowed and considered, and must have been drafted at some earlier date. While it is correct to say, as Mr Carey did, that the existence of an application to set aside “does not detract from the principle that only the costs incurred in complying with the subpoena are claimable”, the existence of such an application will often mark the point at which loss and expense cease to be “incurred in complying with the subpoena” within r 24.22 and became instead the costs of litigation.

44    As Frontier Assets and A Pty Ltd v Z indicate, however, there is no fixed rule as to when the decision to make an application to set aside a subpoena is taken as made. The context is everything. This is illustrated by the decision in Moorehead Nominees Pty Ltd & Ors v Barclays Australia Securities Ltd & Ors (Hill J, 17 May 1991, unreported) (‘Moorehead v Barclays’) cited and discussed in Charlick v ANR at 651. Relevantly, in Moorehead v Barclays, the expenses in question included the preparation of briefs to counsel and other attendances by solicitors in relation to an application to set aside a subpoena, “although no application… was made” (at 3, 7). Accordingly, Hill J was required to consider “the boundary for the proper operation of O 27, r 4 A” (Charlick v ANR at 651). (As indicated above, O 27, r 4A of the former Court Rules was the predecessor to r 24.22.) Similar arguments were run in Moorehead v Barclays as in the present case, on the one hand, that “all of the costs incurred [by the subpoenaed party] were costs of complying with the subpoena” because no application had been issued (at 5) and, on the other hand, that because advice had been given to set the subpoena aside, “no expenditure thereafter fell within rule 4A” (at 8). Again, similarly to the present case, reliance was placed on solicitors’ correspondence.

45    Consistently with Frontier Assets and A Pty Ltd v Z, Hill J rejected both the argument that since “at the end of the day there was no need to set aside the subpoena” then “the steps taken in the meantime to that end were steps of compliance” (7-8) and that two intentions (to comply and to set aside) could not coincide and that the advice to have the subpoena set aside did not also run parallel with continued attempts to comply with the subpoena (8-9).

46    The difference between Moorehead v Barclays and Frontier Assets and A Pty Ltd v Z is that no application to set aside the subpoena was in fact made in Moorehead v Barclays because in that case the matter settled. Consistently, however, with Frontier Assets and A Pty Ltd v Z, the critical point was whether (and, if so when) a decision had been made to apply to set the subpoena aside; and, in the circumstances that arose in Moorehead v Barclays, it was held that such a decision had in fact been made though no application had been filed. Thus, his Honour said (at 7):

Having sought advice as to the validity of the subpoena, instructions were given … to proceed to have the subpoena set aside. So far as one can gather from the bill of costs, those instructions caused the solicitors to brief counsel and were productive of many other attendances. It seems to be difficult to say that advice of setting aside a subpoena, once the decision has been made to set it aside, is advice in complying with the subpoena.

(Emphasis added.)

47    As a result, his Honour remitted the matter to the Registrar (at 9):

… to determine… how much of the bill related to compliance, that is to say seeking advice as to the validity of the subpoena, and taking steps to do what the subpoena requires to be done, including negotiations with the solicitor for Barclays as to the terms of the subpoena, and what items in the bill actually relate to giving effect to the instructions to set the subpoena aside…

Consistently with Frontier Assets and A Pty Ltd v Z, the costs of compliance with the subpoena could not extend to expenditure on items in the Bill of Costs that, in his Honour’s words, “actually relate[d] to giving effect to the instructions to set the subpoena aside” (at 9).

48    The authorities thus illustrate that context is all-important. Merely preparing or foreshadowing an application to set aside a subpoena will not of itself mean that the point has been reached where, to use Harrison J’s expression in Frontier Assets, the parties are corresponding “on two fronts”; and that they are to be taken to have decided to file an application to set aside the subpoena. In order for this to be said, the subpoenaed party must have made a decision to file an application to set aside the subpoena: see Frontier Assets, A Pty Ltd v Z and Moorehead v Barclay as discussed above. This point will be reached at the latest, when an application has been filed, although, as in Moorehead v Barclay, it can be reached at an earlier stage.

Was there a decision to file an application set aside the subpoena here?

49    In the present case, though foreshadowed, no application to set aside the subpoena was in fact filed. In this context, the question arises as to whether a decision to make such an application had nonetheless been made.

50    For the taxing officer, the answer was: ‘no’. The Report indicated that, in his view, the correspondence showed that the possibility of making an application remained a prospect to be pursued in the absence of a negotiated outcome and had not been transformed into a freestanding element in Mr Vickers’ litigation strategy.

51    Mr Carey challenged the taxing officer’s assessment, submitting that the decision to make application to set aside the subpoena was made “from the very beginning”. To make good this submission, Mr Carey referred to entries in the Bill of Costs for 5 December 2011, for items 15, 17, 19, 20 and 21; for 6 December 2011, for items 24 and 26. This reference was, so he said, “consistent with submissions made by [his counsel] at the assessment hearing” – a point that was not disputed. The earliest of these examples on 5 December 2011, read:

Claire Lethlean attending on Martin Ford of PwC Australia discussing subpoena, work required to comply, likely volume of documents and preparation of application for issuing tomorrow – 24 minutes.

The last of these examples on 6 December 2011 read:

Claire Lethlean perusing email from Arthur Metaxas of Metaxas & Hager proposing extension of time for making of application to 15 December 2011 – 6 minutes.

52    The email from the Carey parties’ solicitors, which is referred to in this last item, was attached to Ms Harris’ affidavit and relevantly stated “in the time then available the issues of concern can be discussed and hopefully resolved”. It may be inferred from this email that, as at 6 December 2011, the respective solicitors were still primarily engaged in finding a negotiated solution.

53    Of themselves, when read with other entries of the same dates, these entries were consistent with, though perhaps not determinative of, the taxing officer’s view that, at this time, Mr Vickers’ solicitors were actively seeking a negotiated outcome and merely exploring the possibility of making an application to set aside the subpoena and taking steps to have it prepared if this outcome could not be achieved. This appeared, for example, from other items for 6 December 2011, such as item 25, which read:

Clare Lethlean attending on Martin Ford of PwC Australia advising as to conversation with Arthur Metaxas of Metaxas & Hager and discussing staff resources to comply with the subpoena – 24 minutes.

Item 27, also for 6 December 2011, read:

Clare Lethlean attending on Martin Ford of PwC Australia as to consent email from Arthur Metaxas of Metaxas & Hager and future conduct – 6 minutes

54    As already stated, the Report of the taxing officer referred to correspondence between the solicitors for Mr Vickers and Mr Carey, which was produced to the Court as attachments to the Harris Affidavit. Reference to this correspondence shows that, as at 29 November 2011, Mr Vickers’ solicitors informed Mr Carey’s solicitors that their “client [was] prepared to comply with the subpoena” subject to limiting its scope consensually. There was little here about resisting compliance. The correspondence also indicated that, although there was no appearance for the Carey parties on the first return date of the subpoena, Mr Vickers’ solicitors nonetheless sought to facilitate Mr Vickers’ compliance with the subpoena by setting out to negotiate an agreement as to its scope. The correspondence further indicated that Mr Carey’s solicitors were not immediately responsive. In this circumstance, bearing in mind that, on the return of the subpoena, a Registrar had ordered that any application to set it aside be filed by 4 pm on 6 December 2011, I accept that Mr Vickers had little choice but to instruct his solicitors, on 5 December 2011, to prepare such an application as a stick to coax a response from the Carey parties’ solicitors and to have in the event that it was not possible to reach agreement with the Carey parties about the subpoena’s scope.

55    In substance, the correspondence bears out the taxing officer’s view that the focus of Mr Vickers’ solicitors was on compliance with the subpoena to be facilitated by agreement with the Carey parties’ solicitor as to its scope, with the rider that if these negotiations failed, then Mr Vickers would pursue an application to set the subpoena aside.

56    As Mansfield J confirmed in Charlick v ANR at 649, a matter like the present is “to be determined in the particular circumstances of the case”. In the present case it is plain enough that, as at 6 December 2011, Mr Vickers had not made a decision to file an application in the sense described in A Pty Ltd v Z or Frontier Assets. Instead, Mr Vickers’ instructions went no further than seeking advice about the subpoena and, when informed that it was overly wide, instructing his solicitors to negotiate an agreed outcome with Mr Carey and, in case negotiations failed, to have an application prepared (and counsel briefed in the event that he needed representation). At no point prior to reaching agreement with Mr Carey on 12 December 2011 did Mr Vickers abandon his position that the application would be made only if negotiations failed.

57    The contingent aspect of Mr Vickers’ approach to making any formal setting aside application was, as already noted, evidenced by the pattern and development of the correspondence as reflected in the Bill of Costs. Further, the correspondence annexed to the Harris affidavit showed, as did reference to the Bill of Costs, that the preparation of the application was precipitated by the non-responsiveness of Mr Carey as the issuing party and the imminent passing of the Court-ordered date on which any application could be filed, rather than a wish to have an application at the ready to be made at a previously determined time.

58    This case is therefore to be distinguished from Ann Street, A Pty Ltd v Z, and Frontier Assets, as well as Moorehead v Barclay. In this case, Mr Vickers did not reach the point at which it could be said that he ceased seeking to comply with the subpoena and instead commenced resisting the subpoena. In contrast to Moorehead v Barclay, no decision to file an application to set aside the subpoena was at any point made prior to agreement with respect to the subpoena on 12 December 2011. No such decision could, in the circumstances, have been made, until it was determined that the desired negotiations had failed. Since they never did, then the occasion to make that decision never arose. To the extent that the prospect of an application remained a chip in the negotiations after Mr Carey’s solicitors responded to Mr Vickers’ solicitors, this seems entirely within the established parameters of r 22.24.

59    I do not consider that r 24.22, which provides for the award of “reasonable loss or expense incurred in complying with the subpoena” should be interpreted narrowly, as Mr Carey would have it. Considerations of the kind referred to by Barrett J in Pan Pharmaceutical Limits at [39] (citing Bryson J in Danieletto v Khera) and by Brereton J in A Pty Ltd v Z at [48] tell against a narrow construction. The authorities make it clear that the “loss and expense” to which the rule refers can embrace expenditure in connection with matters that, on a narrow view, would not be thought to constitute the “costs of compliance”: see [34] above.

60    In the present circumstances, the challenged items were inseparably part of an attempt to comply with the subpoena, such that Mr Vickers had not “passed beyond the scope of compliance with the subpoena”: A Pty Ltd v Z at [48]. The result is that the core items are properly considered within the contemplation of r 24.22 of the Federal Court Rules and therefore the order of 14 December 2011. For the reasons stated, I would reject Mr Carey’s challenge to the core items.

Further items

61    As to the further items, the Report of the taxing officer stated that:

Having allowed the First Items, I then proceeded to tax the remainder of the Bill, including those items which were objected to, but are not included among the challenged items for the purposes of this report. I rejected the objections to the [Further] Items and allowed them in full as costs of the Bill, that is, as part of Mr Vickers’ loss and expenses incurred in complying with the subpoena, rather than as costs of the taxation, although the distinction is unlikely to be material here. In total, the Bill was taxed at $17,232.73, including costs and disbursements.

Costs of the taxation

I then had to apply 40.33(1) of the Rules, which provides:

40.33      Costs of taxation

(1)    A party who files an objection under rule 40.21 must pay the costs of taxation of all parties from the date on which the taxing officer notified the parties of the estimate unless:

(a)    if the party is the party who filed the bill — the costs are taxed at more than 115% of the taxing officer’s estimate; or

(b)    in any other case — the costs are taxed at less than 85% of the taxing officer’s estimate.

As the costs had been taxed at more than 100% of Registrar Caporale’s estimate, r 40.33(1)(b) required that the Carey Parties pay Mr Vickers’ costs of the taxation. Ms Harris for Mr Vickers submitted that those costs should be fixed at $7,800, made up as follows:

1.    4 hours preparation and 8 hours attendance at the taxation by Ms Harris, all at $450 per hr, coming to a sub-total of $5400;

2.    Review of the objections by Ms Harris at $1000;

3.    Preparation of the response to the objections by Ms Harris at $650; and

4.    Attendances by Ms Harris regarding correspondence and taking instructions at $750.

I formed the view there was considerable overlap in the amount claimed for preparation under 1 and the amounts claimed for the work described at 2, 3 and 4 above. Exercising my discretion as taxing officer, I allowed $6,100 for Mr Vickers’ costs of the taxation.

62    Mr Carey challenged this aspect of the taxing officer’s decision on only one basis. This was that “if the [a]pplication is successful, in relation to the [core] [i]tems, the Registrar’s estimate will have been varied by more than 15% in favour of the cross-claimants thereby disentitling the [n]on-[p]arty to costs of the taxation”. This challenge must fail since Mr Carey did not make out his challenge to the core items.

63    For the reasons stated, I would dismiss the application pursuant to r 40.34 of the Federal Court Rules. I would also order that Mr Carey pay Mr Vickers’ costs of and incidental to the present application.

Associate:

Dated:    23 September 2013

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