FEDERAL COURT OF AUSTRALIA

Titan Enterprises (Qld) Pty Ltd v Cross [2016] FCA 1275

ORDERS

THE COURT DECLARES THAT:

1.    The amount required, pursuant to the Court’s order made on 31 August 2016, to compensate Davies Collinson Cave in respect of that firm’s reasonable costs and expenses incurred in complying with the Subpoena does not include the legal costs of and incidental to the application in respect of privilege heard on 17 October 2016 and determined on 19 October 2016 (privilege application) but does include the reasonable legal costs as between solicitor and client of and incidental to the hearing on 19 October 2016 and the determination this day of costs in respect of the hearing and determination of the privilege application.

THE COURT ORDERS THAT:

1.    Save as declared, there be no order as to costs in respect of the hearing and determination of the privilege application.

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

REASONS FOR JUDGMENT

LOGAN J

1    By a judgment delivered earlier this month, I resolved a controversy as to whether a privilege claim grounded in s 229 of the Trade Marks Act 1995 (Cth) was made out in respect of certain communications in documents the production of which was the subject of a subpoena directed to the proper officer of a firm of patent and trade marks attorneys, Davies Collison Cave (DCC): Titan Enterprises (Qld) Pty Ltd v Cross [2016] FCA 1241 (principal judgment).

2    As the principal judgment discloses, I concluded that the asserted privilege claim was not made out on the facts. Upon the publication of the principal judgment, the first, second and third applicants (collectively, Titan Enterprises) sought an order for costs against DCC on the basis that costs should follow the event in respect of the disposition of the s 229 privilege claim. These reasons for judgment must be read in conjunction with the principal judgment.

3    This costs application was resisted by DCC on the basis that the assertion of the privilege claim, including the appearance of counsel, formed part of the reasonable costs of complying with the subpoena. In consequence, it was put that DCC should have its costs in any event and that these ought to be on an indemnity basis. In furtherance of the latter submission, it was put that DCC was a stranger to the litigation and ought not to be out of pocket as a result of its proper officer being the recipient of a subpoena. In addition, it was submitted that, in circumstances where DCC had previously acted for Mr Cross and given the inability of either that firm or its solicitors to obtain instructions from Mr Cross in relation to the production of documents in accordance with the subpoena, DCC was, in the absence of a waiver by him, bound by the prior retainer and an applicable code of ethics (referred to in the principal judgment) to assert the existence of the s 229 privilege. As a fall-back position, it was submitted that there ought at least to be no order as to costs made against DCC.

4    The riposte to this made on behalf of Titan Enterprises was that the s 229 privilege claim had failed on the facts and thus this could not be regarded as a reasonable compliance cost in any event.

5    In respect of the subpoena, there is a subsisting order, made by a registrar on 31 August 2016, which is in these terms:

Pursuant to rule 24.22 of the Federal Court Rules 2011, the applicants pay Davies Collison Cave’s reasonable costs and expenses incurred in complying with the Subpoena, and that the amount of such costs and expenses be fixed in accordance with the Court’s usual procedures in relation to costs.

6    At common law, a person, other than an expert witness, who is obliged by a subpoena to attend court for the purpose of giving evidence or producing documents, is entitled to be indemnified in respect of the expenses of travelling to and from court so as to answer the subpoena, together with related meal expenses. But the recipient of the subpoena is not at common law entitled to other subpoena-related expenses such as identifying, collating, copying documents, conveying them to the place appointed for production or taking advice as to the lawfulness of the subpoena or whether any claim in respect of privilege may be open: Bank of New South Wales v Withers (1981) 35 ALR 21 (Shepherd J) (Bank of New South Wales v Withers).

7    In England and Wales, notwithstanding the extensive revision of civil practice and procedure made by the Civil Procedure Rules 1998 (Eng & W) (CPR), this remains the position, although the view has been expressed there that, notwithstanding the absence of provision in r 34 of the CPR in respect of the costs of a non-party recipient of what is now there termed a witness summons, the High Court has power, pursuant to s 51 of the Senior Courts Act 1981 (UK) and r 48.2 of the CPR, to make an order for compliance costs in favour of a non-party: Individual Homes Ltd v Macbream Investments Ltd (2002) 99(46) L.S.G. 32; The Times, 14 November 2002. In Bank of New South Wales v Withers, at 25, Shepherd J took a different view as to the empowerment provided by the analogue provision in respect of the ordering of costs by this Court, found in s 43 of the Federal Court of Australia Act 1976 (Cth).

8    It is unnecessary to determine whether the correctness of the view expressed by Shepherd J in Bank of New South Wales v Withers ought to be reconsidered in light of this later, English authority. That is because, responding to a call for reform made by Shepherd J in that case, this Court’s then rules were amended so as to make express provision in respect of subpoena compliance costs, initially by O 27 r 4A and later by O 27 r 11 of the Federal Court Rules 1979 (Cth) and, currently, by r 24.22 of the Federal Court Rules 2011 (Cth), which provides:

24.22    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 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.

(3)    An amount fixed under this rule is separate from and in addition to:

(a)    any conduct money paid to the addressee; and

(b)    any witness expenses payable to the addressee.

It was pursuant to this rule that the registrar made the costs order of 31 August 2016. The power conferred by that rule extends but is not limited to non-party compliance costs.

9    In Charlick Trading Pty Ltd v Australian National Railways Commission (1997) 149 ALR 647 at 649-650, having considered pertinent earlier authority, Mansfield J offered a summary of what he understood to be the position in relation to the reform as to costs made by the then O 27 r 4A and its analogues. His Honour stated:

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. 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 Corporation Ltd v Commissioner of Taxation (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).

That enumeration of the circumstances in which a costs order under O 27 r 4A may be appropriate indicates that they have not extended beyond the second of the three stages in the process for the production of documents under subpoena described by Moffit P (with whom Hutley and Glass JJ A agreed) in Waind v Hill and National Employers’ Mutual General Association Ltd [1978] 1 NSWLR 372 at 381. His Honour said:

“The first is obeying the subpoena, by the witness bringing the documents to the court and handing them to the judge. This step involves the determination of any objections of the witness to the subpoena, or to the production of the documents to the court pursuant to the subpoena. The second step is the decision of the judge concerning the preliminary use of the documents, which includes whether or not permission should be given to a party or parties to inspect the documents. The third step is the admission into evidence of the document in whole or in part; or the use of it in the process of evidence being put before the court by cross-examination or otherwise. It is the third step which alone provides material upon which ultimate decision in the case rests. In these three steps the stranger and the parties have different rights, and the function of the judge differs.”

10    I respectfully agree that the position is as stated by Mansfield J.

11    From this summary it follows that the application determined by the principal judgment and the consequential order granting leave to Titan Enterprises to inspect formed part of what Moffit P (with whom Hutley and Glass JJ A agreed) in Waind v Hill and National Employers’ Mutual General Association Ltd [1978] 1 NSWLR 372 at 381 described as the second of the three stages in the process for the production of documents under subpoena (qv, also Akiba v Queensland (2010) 184 FCR 406 at 428, [114] per Greenwood J).

12    As Mansfield J highlights in Charlick Trading Pty Ltd v Australian National Railways Commission, though what constitutes the reasonable costs and expenses of complying with a subpoena must always be determined by reference to the circumstances of a given case, it has come to be accepted that there is no objection in principle to regarding those costs as extending to advice in respect of the lawfulness of the production obligation and whether any privilege claim is open. And those costs and expenses may extend to those incurred in relation to a judicial determination of any such question. Further, subject to that same caveat, such costs and expenses are, for the reasons given by Lockhart J in Fuelxpress Ltd v M Ericsson Pty Ltd (1987) 75 ALR 284 at 286, usually assessed on the basis of solicitor and client costs. The position of the recipient of a subpoena who is a stranger to the litigation is quite different to that of a party to that litigation. The default position in respect of an award of costs to a party is that such costs are assessed on a party and party basis (r 40.01, Federal Court Rules), which will usually result in only a partial indemnity: Cachia v Hanes (1994) 179 CLR 403 at 410 and 411 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ; Tyne v UBS AG (No 2) [2014] FCA 1228 at [23]] per Greenwood J. That longstanding feature of costs inter partes has no application to a non-party. The intent of the reform introduced in the wake of Bank of New South Wales v Withers was that, subject to an assessment of reasonableness, that non-party should be compensated for what it has in fact cost that party to comply with the subpoena.

13    These considerations are stepping stones to the primary outcome promoted on behalf of DCC but do not complete the pathway to that end. That is because the circumstances of this case necessarily include the failure by DCC to make out the asserted s 229 privilege on the facts. That means that the present case has a feature in common with another of the cases cited by Mansfield J in his Honour’s survey of earlier authority namely, Hadid v Lenfest Communications Inc (1996) 65 FCR 350 (Hadid v Lenfest Communications Inc). In that case also an application by the recipient of the subpoena (“East Coast”) had failed. It had applied, unsuccessfully as it transpired, to have the subpoena set aside although, on the hearing of that application, orders in relation to confidentiality were made. In seeking an order for costs of compliance under the then equivalent of the present r 24.22, the recipient of the subpoena came to concede in the course of argument that its compliance costs would not extend to the costs of its unsuccessful application. This concession was recognised in the orders which Hill J came to make in that case. Having made a costs order in general terms in favour of the recipient of the subpoena, akin to that made on 31 August 2016 in this case, Hill J qualified the benefit conferred by that order by a declaration in these terms:

I declare that the amount required to compensate East Coast does not include the legal costs of and incidental to the notice of motion filed by East Coast on 20 October 1995.

His Honour also ordered that the party which had procured the subpoena pay the costs of the application for costs made by East Coast. There is no indication in the report that his Honour had, when earlier declining to set aside the subpoena, made an order for costs against East Coast on the basis of costs following the event. It has not proved possible to confirm that but such an earlier order would have been inconsistent with the orders which came to be made in respect of East Coast’s costs application and which are set out in the report. Of course, it may be that, unlike the position in the present case, the party which procured the subpoena did not seek any order for costs in its favour.

14    Also unlike the position in Hadid v Lenfest Communications Inc, DCC has not just conceded that its compliance costs should not include the costs of and incidental to the determination of its s 229 privilege claim.

15    Upon the service of the subpoena to produce, DCC found itself in a similar position to the solicitor’s firm, Henderson & Lahey, when served with a statutory notice to produce documents by the Commission of Taxation, qv Packer v Deputy Commissioner of Taxation (Qld) [ 1985 ] 1 Qd R 275. In that case, initially, a member of the firm of solicitors attended before the Deputy Commissioner at the place appointed for production and asserted on behalf of the client, Mr K F Packer, client legal privilege in respect of the contents of particular documents. The firm gave notice of its receipt of the notice to produce to Mr Packer. In contrast with the present case, the client did not just receive the notice but, as might ordinarily be expected, then assumed the responsibility for vindicating, on a consequential application for a declaration, the asserted privilege. That expectation arises because, as with s 229 privilege, client legal privilege, as the modern descriptor of that privilege emphasises, is that of the client, not the retained professional. Also unlike the present case, such statutory production notices were not attended with a compensatory costs regime, which makes for an imperfect analogy in respect of the costs following the event outcome which occurred in that case when the assertion of the privilege failed.

16    Responsibly, DCC, by its proper officer, could not just have ignored the subpoena for so to do would have placed that officer, not its client, Mr Cross, in jeopardy of being dealt with for contempt of this Court. And that jeopardy was so even though the person in whom any s 229 privilege vested in respect of the documents the production of which was sought by that subpoena was the client, not the firm. Quite properly, DCC and, in turn, its solicitors attempted to obtain instructions from Mr Cross. Those attempts proved unsuccessful but the position which was obtained was that there was no evidence of any waiver of such s 229 privilege or any other privilege as existed. In my view, that left DCC in the position where it was obliged to resist production to the extent that it considered that particular contents of the documents sought were subject to a privilege known to law. And, because legal advisors had also been retained, such a privilege at least potentially included but was not limited to s 229 privilege.

17    The evidence discloses an exchange of correspondence concerning production pursuant to the subpoena between the solicitors for DCC and those acting from time to time for Titan Enterprises. That is hardly a novel feature of the second stage in subpoena compliance. Eventually, this yielded the production of certain documents in redacted form but the extent of the redaction and the basis for the same in the law of privilege came to be controversial. It is fair to say that client legal privilege, as opposed to s 229 privilege, provided the initial focus in exchanges about privilege but, by the time of the hearing of the application resolved by the principal judgment, s 229 privilege had also well and truly emerged as a basis for the continued redaction of much of what remained in contention in relation to the production requirement. Further, so far as a residual client legal privilege controversy was concerned, it was only in the course of that hearing that Titan Enterprises came to abandon its contention that redactions based on this premise were not maintainable.

18    That there had existed, as far as DCC was concerned, a retainer of that firm by Mr Cross meant that it was inherently likely that the subject of s 229 privilege would arise for investigation as a sequel to the issuing of the subpoena. That statutory provision altered the position at common law, which is that advice or other services provided by a trade marks attorney do not in themselves attract any privilege: Dormeuil Trade Mark [1983] RPC 131. Though there had been some judicial consideration of earlier statutory conferrals of privilege in respect of particular services provided by intellectual property, non-lawyer professionals such as trade marks attorneys (qv C Passmore, Privilege, 3rd ed., p 94, para 1-218, fn 41), the present s 229 had not previously been the subject of judicial consideration. This was always, in my view, a case where, responsibly and if able, it was prudent for DCC to have the benefit of legal advice in relation to the obligations cast on the firm’s proper officer by the subpoena. And the task of furnishing that advice and responding to the subpoena was complicated by an inability to secure instructions or evidence from Mr Cross. The vice in relation to the privilege claim lay not in the apprehension that s 229 privilege might attend advices furnished to Mr Cross by DCC but rather in the absence of precision as to the nature of the work performed pursuant to the retainer and how that gave rise to the asserted privilege in respect of redacted portions of the documents. That precision was essential in circumstances where merely to act for Mr Cross in the arbitral proceedings mentioned in the principal judgment did not inferentially carry with it a conclusion that all such services must necessarily fall within the scope of s 229 privilege.

19    In the circumstances of this case, I consider that a just costs sequel is not to award costs against DCC (which would entail a related need to join the firm for that purpose) but rather to make a declaration of the kind made by Hill J in Hadid v Lenfest Communications Inc. That will recognise not just the failure to vindicate on the facts the asserted s 229 privilege but also nonetheless a need for an appearance and evidence in relation to the hitherto not conceded, remaining controversy with respect to client legal privilege. In other words, Titan Enterprises did not enjoy unqualified forensic success in respect of the position it promoted at the commencement of the hearing but neither could an inability on the part of DCC to vindicate on the facts the asserted s 229 privilege be regarded as a reasonable cost of complying with the subpoena (which is not to say that DCC was not reasonably entitled to take advice on that subject). Neither side has enjoyed forensic success in relation to the costs outcomes for which they contended or, in DCC’s case, the primary costs outcome for which it contended. But DCC has, in effect, succeeded in vindicating its fall-back position, which was that no order as to costs should be made in respect of the contested privilege hearing. It is entitled to be compensated for that limited success.

20    There will therefore be orders in these terms:

(1)    The Court declares that the amount required, pursuant to the order made on 31 August 2016, to compensate Davies Collinson Cave in respect of that firm’s reasonable costs and expenses incurred in complying with the Subpoena does not include the legal costs of and incidental to the application in respect of privilege heard on 17 October 2016 and determined on 19 October 2016 but do include the reasonable legal costs of and incidental to the hearing on 19 October 2016 and determination this day of costs in respect of the hearing and determination of the privilege application.

(2)    Save as declared, there be no order as to costs in respect of the hearing and determination of the privilege application.

Associate:

Dated:    31 October 2016