FEDERAL COURT OF AUSTRALIA King v GIO Australia Holdings Ltd [2001] FCA 1773 COSTS – subpoena – non-party – subpoena to ASIC to produce transcript of examination by ASIC – legal expenses incurred by persons examined by ASIC in advancing claims to confidentiality – whether Court has the power to order party issuing subpoena to pay such expenses – discretion WORDS AND PHRASES – "proceeding", "costs" Federal Court of Australia Act 1976 (Cth) ss 4, 43 Federal Court Rules O 27 rr 1, 4A Re Amalgamated Metals Foundry and Shipwrights Union; Ex parte Adamson (1984) 4 FCR 319 referred to Fiorentino v Irons (1997) 79 FCR 327 referred to Bank of New South Wales v Withers (1981) 35 ALR 21 considered Knight v FP Special Assets Ltd (1992) 174 CLR 178 considered Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1992) 45 FCR 224 referred to Geoform Design Pty Ltd v Randwick City Council (1995) 87 LGERA 140 referred to O'Keeffe Nominees Pty Ltd v BP Australia Ltd (1995) 55 FCR 591 referred to Pyramid Building Society (in liq) v Farrow Finance Corporation (in liq) [1995] 1 VR 465 considered Maronis Holdings Ltd v Nippon Credit Australia Ltd (2000) 18 ACLC 609 referred to Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (2001) 109 FCR 280 referred to Charlick Trading Pty Ltd v Australian National Railways Commission (1997) 149 ALR 647 considered SHANE ROBERT KING v GIO AUSTRALIA HOLDINGS LTD (ACN 054 573 401), GRANT SAMUEL & ASSOCIATES PTY LTD (ACN 050 036 372), DAVID MORTIMER, BRUCE HOGAN, STEWART STEFFEY, RONALD ASHTON, MARINA DARLING, ANDREW KALDOR, LLOYD LANCE, DAVID O'HALLORAN AND IAN POLLARD N 955 OF 1999 MOORE J 13 DECEMBER 2001 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 955 OF 1999 BETWEEN: SHANE ROBERT KING APPLICANT AND: GIO AUSTRALIA HOLDINGS LTD (ACN 054 573 401) FIRST RESPONDENT GRANT SAMUEL & ASSOCIATES PTY LTD (ACN 050 036 372) SECOND RESPONDENT DAVID MORTIMER THIRD RESPONDENT BRUCE HOGAN FOURTH RESPONDENT STEWART STEFFEY FIFTH RESPONDENT RONALD ASHTON SIXTH RESPONDENT MARINA DARLING SEVENTH RESPONDENT ANDREW KALDOR EIGHTH RESPONDENT LLOYD LANCE NINTH RESPONDENT DAVID O'HALLORAN TENTH RESPONDENT IAN POLLARD ELEVENTH RESPONDENT JUDGE: MOORE J DATE OF ORDER: 13 DECEMBER 2001 WHERE MADE: SYDNEY THE COURT ORDERS: 1. The applications by PricewaterhouseCoopers, PricewaterhouseCoopers Securities, Geoffrey Vines and the unnamed member of Arthur Andersen for expenses and costs be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 955 OF 1999 BETWEEN: SHANE ROBERT KING APPLICANT AND: GIO AUSTRALIA HOLDINGS LTD (ACN 054 573 401) FIRST RESPONDENT GRANT SAMUEL & ASSOCIATES PTY LTD (ACN 050 036 372) SECOND RESPONDENT DAVID MORTIMER THIRD RESPONDENT BRUCE HOGAN FOURTH RESPONDENT STEWART STEFFEY FIFTH RESPONDENT RONALD ASHTON SIXTH RESPONDENT MARINA DARLING SEVENTH RESPONDENT ANDREW KALDOR EIGHTH RESPONDENT LLOYD LANCE NINTH RESPONDENT DAVID O'HALLORAN TENTH RESPONDENT IAN POLLARD ELEVENTH RESPONDENT JUDGE: MOORE J DATE: 13 DECEMBER 2001 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This judgment concerns oral applications to recover expenses or costs incurred by PricewaterhouseCoopers, PricewaterhouseCoopers Securities (collectively "PwC"), Mr Geoffrey Vines and an unnamed member of Arthur Andersen ("AA"). An order for the payment of the costs or expenses is sought against the first respondent, GIO Australia Holdings Limited ("GIO") in representative proceedings brought by Mr King against GIO and a number of other respondents. PwC, Vines and AA are not presently parties to those proceedings. 2 The expenses or costs sought are those said to have been incurred in obtaining legal advice and representation in connection with a subpoena served by GIO on the Australian Securities and Investments Commission ("ASIC") on 20 June 2001. The subpoena sought the production of "records of examination and related books in the investigation of the first respondent [GIO] … including but not limited to" thirty-three named persons, including employees of PwC, AA and Vines. PwC, Vines and AA participated in the formulation of a regime for access to the transcript of examinations conducted by ASIC which were produced on subpoena. I will, for convenience, generally refer to PwC and AA even if it should be a reference to the individual examinee. 3 The subpoena issued on 20 June 2001 and was returnable before a Registrar on 4 July 2001. The report of the hearing before the Registrar on that day records appearances on behalf of the parties, ASIC, Vines and PwC. The capacity in which Vines or PwC (or any other examinee) appeared in the proceedings or the status of each was never explored, though their right to appear was not challenged. The Registrar made orders which, in summary, required ASIC to notify the examinees that the subpoena had issued and required the examinees to make any objections to the release of any document. On 11 July 2001 the subpoena came before the Registrar again. There were appearances for the parties, ASIC, PwC and Chase Manhattan. It would appear that minor variations were made to the orders made at the previous hearing. Objections to the release of examination transcripts were later notified on behalf of a number of examinees, including AA (on 18 July 2001), PwC (on 20 July 2001) and Vines (on 23 July 2001). The matter then came before me on 8 August 2001. There were appearances for the parties and for PwC and there was some discussion about the appropriate orders concerning access to the subpoenaed documents. The documents were, by the agreement of at least ASIC and GIO, never physically produced in Court. Following the directions hearing, my associate circulated draft orders based on a draft agreed to at the hearing on 8 August 2001 providing for limited access to documents produced under the subpoena and for a timetable for the filing of motions by those persons objecting to what was described as the production of documents at all. More accurately it should have been described as objection to access. The orders were made on 17 August 2001. No motion was filed objecting to the production of documents. On 10 September 2001, the first respondent circulated proposed varied orders. The subpoena was next before me on 18 October 2001. There were appearances for the parties, PwC, Vines and AA and there was discussion about the proposed varied orders. On 24 October 2001, I made orders in chambers fixing a timetable for further argument on the regime for access. At the next directions hearing on 8 November 2001, consent orders were made imposing a final regime for access, and it was then that the applications for expenses or costs were made by PwC, Vines and AA. 4 The expenses or costs sought are summarised in the written submissions of PwC, Vines and AA. PwC seeks compensation for the expenses of: "(a) correspondence with solicitors for GIO and other parties in relation to the regime for access to the documents including the formulation of undertakings as to confidentiality; (b) review of documents, obtained by PwC in the course of the ASIC investigations, to determine whether documents were confidential or properly the subject of claims of privilege; and (c) attendances in Court when the subpoena was called, stood over or considered by the Court, including attendances in order to raise issues that the documents subpoenaed should be protected from unrestricted access due to their confidential character and to seek orders restricting access to the documents produced." 5 The expenses sought by Vines are: "(a) communications, both written and oral, between Mr Vines' solicitors and those for other parties (being parties to the proceeding and as well as other examinees whose transcripts are also the subject of production under the subpoenas); (b) inter alia, those communications involved the negotiation of the regime ultimately ordered by the Court on a consensual basis; and (c) appearances at a number of directions hearings before the Court." 6 The expenses sought by AA are described as: "(a) correspondences and discussions with solicitors of various parties in an attempt to agree a confidentiality regime being put in place for access to documents; and (b) various attendances at Court." 7 The application by each of PwC, Vines and AA sought to invoke the power conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) ("FCA Act") and O 27 r 4A of the Federal Court Rules. The first issue is whether these provisions confer power on the Court to order the payment of the expenses or costs sought. 8 Section 43 of the FCA Act relevantly provides: "(1) … the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded. (1A) … (2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge." 9 Each of PwC, Vines and AA submitted that s 43 empowers the Court to make an order for expenses or costs incurred by a non-party in relation to the provision of access to documents produced by subpoena served on another non-party. I was not referred to any authorities on the point. The written submissions of each were not particularly detailed. 10 One preliminary question is whether the issue of the subpoena to ASIC and the subsequent development of a regime for access constituted a "proceeding" for the purposes of s 43. The question was not addressed in submissions. 11 However, support has been expressed for the view that the issue of a subpoena itself gives rise to a "proceeding" within the meaning of s 4 of the FCA Act. In Re Amalgamated Metals Foundry and Shipwrights Union; Ex parte Adamson (1984) 4 FCR 319 Gray J said (at 332): "[The definition of] "proceeding" includes an incidental proceeding in the course of, or in connection with, a proceeding. The issue of a subpoena, particularly against a person who is not a party to any proceeding before the court, might be said to be incidental to or in connection with the proceeding before the court. A subpoena was, of course, originally a writ issued by a court, commanding the attendance before the court of a person to give evidence or to produce documents. … In view of the forms now prescribed in the schedule to the Federal Court Rules for subpoenas, it may be inappropriate to describe a subpoena issued out of this Court as a writ. Nevertheless, it is easy to see that the issue of a subpoena, especially against a stranger to the proceeding in connection with which it is issued, and any motion to set it aside, is a separate proceeding from that to which it is incidental or connected." 12 It has been observed that the definition of "proceeding" in s 4 of the FCA Act is a broad one: Fiorentino v Irons (1997) 79 FCR 327 at 330-331. In the absence of submissions on the question, I express no concluded view on whether the issuing of a subpoena itself amounts to a "proceeding". However, I am prepared to assume that "proceeding" is sufficiently broad to encompass the issue of the subpoena to ASIC and the formulation, before the Court, of a confidentiality regime for access to documents produced in compliance with the subpoena. It could reasonably be characterised as an "incidental proceeding" in the course of, or in connection with, the principal representative proceeding. On that assumption PwC, Vines and AA might be viewed as parties (even if not formally so) to that proceeding. On that basis power might arise to order their costs be paid. 13 However even if the issuing of the subpoena was not itself a proceeding, power to award costs for the benefit of PwC, Vines and AA may arise by a different route. The operation of s 43 in an application for payment of the expenses of the person on whom a subpoena was served in complying with the subpoena was considered by Sheppard J in Bank of New South Wales v Withers (1981) 35 ALR 21; 52 FLR 207. In that case, which preceded the making of O 27 r 4A, the bank commenced an application in the Court seeking an order for its expenses of complying with subpoenas issued in other proceedings to which the bank was not a party. The expenses were those of gathering and copying documents. Sheppard J concluded that s 43 did not provide a power to make such an order (at ALR 25-26): "It should be clear at the outset that the case is not directly concerned with a question of costs. The term "costs" signifies the sum of money which the court orders one party to pay another party in respect of expenses of litigation incurred by him: Halsbury's Laws of England 4th ed, para 1108, p 414. It will only be if the bank is successful in its attempt to recover its expenses of complying with the subpoena that the further question will arise of whether the respondents are entitled to recover as part of the costs ordered to be paid to them by the respondents in the principal proceedings the amount which they are obliged to pay to the bank. … … [Section 43] provides that the court or a judge has jurisdiction to award costs in all proceedings before the court other than proceedings in respect of which another Act provides that costs shall not be awarded. The term "proceeding" is defined in s 4 of the Act to mean a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connection with, a proceeding, and also includes an appeal. In the submission of counsel for the bank the subpoenas were proceedings within the meaning of s 43 of the Act. Thus the court has jurisdiction to make an order for the costs of the party upon whom the subpoena was served. I am prepared to assume, without deciding, that a subpoena may be a proceeding, but in my opinion the submission overlooks the ordinary meaning of "costs" to which I have earlier adverted. There is no indication that the legislature was using the word "costs" in other than its ordinary sense. It is true that provisions of the rules made by the judges pursuant to the Act cannot control its meaning. But it is plain that those responsible for the drafting of the rules thought that the expression "costs" in the Act was used in its conventional sense. That would not permit of the expression including expenses incurred by a party upon whom a subpoena had been served in collecting documents, production of which the subpoena required." 14 Sheppard J viewed the term "costs", as used in s 43, as referring only to costs payable by one party to another party in respect of litigation expenses, and did not include the expense of collecting documents. It is now clear, however that the power to award costs against a non-party can arise when a power to award "costs" is conferred: see Knight v FP Special Assets Ltd (1992) 174 CLR 178 and, as to s 43, Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (Qld) Pty Ltd (1992) 45 FCR 224. 15 However, does the power extend to making an order requiring the payment of the costs of a non-party, that is, a costs order for the benefit of the third party? Even if PwC, Vines and AA are not parties to any proceeding, can an order for costs be made for their benefit? In Knight v FP Special Assets Limited (supra), Mason CJ and Deane J (Gaudron J agreeing) made it clear that a rule which stated "the costs of and incidental to all proceedings … shall be in the discretion of the court or judge" were, in context, sufficiently expansive to enable the court to make an order for costs against a person whether that person was formally a party to the proceedings or not. Their Honours later said: "The language of the rule is quite inapt to give expression to the complex course of judicial decisions at common law and in equity before the Judicature Acts. Moreover, the extended concept of 'party', including as it does a variety of persons on whom notice of proceedings is served, makes it inappropriate to introduce a limitation which was applied at a time when the concept of 'party' related to a person on the record of the proceedings. It is preferable to interpret the words of the rule according to their natural and ordinary meaning as conferring a grant of jurisdiction to order costs not limited to parties on the record and ensure that the jurisdiction is exercised responsibly." 16 It may be accepted that their Honours later referred to English authority (Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 where the relevant rule provided "the Court shall have full power to determine by whom and to what extent the costs are to be paid" (emphasis added). That rule fairly clearly addressed the person against whom an order might be made and not a person for whose benefit the order might be made. 17 Nonetheless the approach of the High Court in Knight v FP Special Assets Limited (supra) was relied on by Pearlman CJ in Geoform Design Pty Ltd v Randwick City Council (1995) 87 LGERA 140 in concluding that a section which provided generally that costs were in the discretion of the court and the court may order by whom, and to what extent, costs are to be paid could be exercised so as to make a costs order for the benefit of a non-party. I note that in O'Keeffe Nominees Pty Ltd v BP Australia Ltd (1995) 55 FCR 591 Spender J concluded that he had power to make a costs order for the benefit of an intervener, albeit a body intervening in exercise of a statutory right to do so. His Honour said at 597: "It seems to me that in the absence of any express restriction on the orders for costs that may be made concerning intervention or associated with it, the unfettered discretion conferred on the Federal Court by s 43 of the Federal Court of Australia Act applies." Again I am prepared to assume that s 43 is cast in sufficiently wide terms as to enable the Court to make an order for costs in a proceeding for the benefit of a non-party. 18 The question is, then, whether the expenses actually sought by PwC, Vines and AA, amount to "costs" within the meaning of that term in s 43. The expenses sought might be compendiously described as those of engaging legal representatives to negotiate a regime for access, which involved reviewing documents to be produced by ASIC, communicating with other legal representatives, and appearing at directions hearings. 19 The judgment of Byrne J in Pyramid Building Society (in liq) v Farrow Finance Corporation (in liq) [1995] 1 VR 465 addresses a broadly analogous situation. In that case, his Honour made orders under r 42.08 of the Supreme Court Rules (Vic) that the plaintiffs, who had issued subpoenas to give evidence, pay the costs of the recipients of the subpoenas of obtaining legal advice in relation to the subpoenas and of engaging counsel to argue for privilege against self-incrimination in court. Rule 42.08 provides: "(1) Where a person named not being a party reasonably incurs in complying with a subpoena expense or loss substantially exceeding the amount of any conduct money given, the Court may order that the party who filed the subpoena pay to that person an amount in respect of that expense or loss." After referring to a line of authority in which the expenses of "mere witnesses" were held not to be payable, while those of witnesses who were also parties were held to be payable, his Honour observed (at 469): "… there appears in the judgments an underlying resistance to the award of compensation for legal expenses except where the relationship between the party calling the witness and the witness is an adversarial one or it is otherwise just that an order be made … . It may be said by analogy that a non-party witness stands in this relationship so that the court should approach an application under r 42.08 with a similar antipathetic disposition. In my view, it would not be correct to do so. The rule confers a new right in general terms. In a case such as the present where the witnesses have been charged with serious offences arising out of the very subject matter of the litigation, it was proper that their interests be protected by representation. Furthermore, the court itself has derived benefit from the presence of counsel for the witnesses in producing material and explaining the nature of the apprehended risk to their clients. In these circumstances it is reasonable that the cost is properly treated as a cost to the party filing the subpoenas of bringing the witnesses to court to give evidence … This is not to say that a witness is entitled to be indemnified against all expenses incurred. They must be reasonably incurred and they must substantially exceed the conduct money given. In the ordinary course, non-party witnesses would not require advice as to their general rights and responsibilities in answering the subpoena, or legal assistance in communicating with the solicitors for the party filing the subpoena as to the time, place and manner of attendance. If such advice and assistance was sought in the ordinary case, its costs would not be recoverable under the rule. The normal consequence of the receipt of the court order should be borne by the witness as a burden of citizenship. Such costs, in any event, would not normally substantially exceed the conduct money given to the witness." 20 I acknowledge that his Honour was concerned with a different statutory provision directed to expenses and not costs. But the question of whether s 43 enables an order for costs to be made in favour of examinees who engage legal representation to advance claims to confidentiality is not to be answered, in my opinion, on a narrow basis. In the present case, it was submitted on behalf of PwC, Vines and AA, and it may be accepted, that the examinees' claim to confidentiality is recognised by the statutory scheme for examinations under the Australian Securities and Investments Commission Act 1989 (Cth) ("ASIC Act"): see Maronis Holdings Ltd v Nippon Credit Australia Ltd (2000) 18 ACLC 609 at [9]. In some circumstances, it might be necessary for an examinee to secure legal representation to properly advance the claim. In some circumstances, it is at least arguable the expense of such representation might be compensated in an appropriate case by an order for "costs" under s 43 in a proceeding before the Court. I acknowledge, however, that the power conferred by s 43 is not without limits: see Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (2001) 109 FCR 280. 21 In the present case, on the assumption that I do have power to award costs to PwC, Vines and AA, I would not make such an order. Neither GIO nor any other party to the principal proceeding have indicated anything other than a willingness to develop and adhere to a regime designed to protect the confidentiality of the transcripts of the examinations. Nor is there anything to suggest that ASIC was not taking a proper and appropriate approach to the production of material which had been procured by compulsion by ASIC under legislative provisions which themselves are intended to provide confidentiality. While various examinees have elected to ensure that the regime was appropriate, a course they were plainly entitled to take, it is not apparent to me that it was necessary for them to do so. I do not, in the circumstances, consider that GIO should effectively underwrite the costs of them having done so. Different considerations may well have arisen if GIO, any other party to the principal proceedings or ASIC had adopted a different approach. But they did not. Accordingly I do not propose to order that GIO pay the costs or expenses of any of PwC, AA and Vines. 22 I should also briefly mention O 27 r 4A of the Federal Court Rules which was said also to be a source of power to order that the expenses or costs be paid by GIO. It relevantly provides: "(1) Where a person named in a subpoena is not a party to the proceeding and he incurs substantial expense or loss in complying with the subpoena the Court or a Judge may order that the party who requested the issue of the subpoena pay to that person, in addition to any amount which the person served with the subpoena is entitled to be paid pursuant to Order 27 rule 3 or the Second Schedule, an amount to compensate him for such expense or loss as is reasonably incurred or lost by that person in complying with the subpoena." 23 The phrase "person named" is defined in O 27 r 1 as follows: "1. In this Order, unless the contrary intention appears – person named means, in relation to a subpoena, the person to whom the subpoena is addressed." 24 The subpoena in question was addressed to ASIC. ASIC was, having regard to the definition in O 27 r 1, the "person named" in the subpoena. While the names of the persons on whose behalf this costs application has been brought appear in the subpoena, each is plainly not a "person named" under the definition. O 27 r 4A does not confer a power to make the order sought. 25 I should note that PwC, Vines and AA referred to the decision of Mansfield J in Charlick Trading Pty Ltd v Australian National Railways Commission (1997) 149 ALR 647. In that case, his Honour stated (at 649): "[O 27 r 4A] 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 on 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 …" 26 This is so where an application is made by the person to whom the subpoena is addressed. However, as Sheppard J emphasised in Bank of New South Wales v Withers (supra at ALR 38), "unless the payment is provided for in the rules there can be no recovery". See also Re Equiticorp Finance Ltd; Ex parte Brock (No 2) (1992) 27 NSWLR 391 at 393-4 per Young J. O 27 r 4A (read with r 1) does not provide for payment to a person other than the person to whom the subpoena is addressed. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. Associate: Dated: Solicitor for PricewaterhouseCoopers: Blake Dawson Waldron Counsel for Geoffrey Vines: G A Seib Solicitor for Geoffrey Vines: PricewaterhouseCoopers Legal Solicitor for unnamed member of Arthur Andersen: Andersen Legal Counsel for GIO Australia Holdings Limited: I M Jackman Solicitor for GIO Australia Holdings Limited: Ebsworth & Ebsworth Date of Hearing: 8 November 2001 Date of Judgment: 13 December 2001