FEDERAL COURT OF AUSTRALIA Australian Prudential Regulation Authority v Rural and General Insurance Limited [2004] FCA 933 PRACTICE AND PROCEDURE – subpoena to give evidence – whether costs of preparation for giving evidence is loss or expense incurred in complying with subpoena Federal Court Rules, O 27 r 11 Australian Prudential Regulation Authority v Rural and General Insurance Limited [2004] FCA 619 related Chapman v Luminis Pty Ltd (No 3) (2000) 104 FCR 368 applied AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY v RURAL AND GENERAL INSURANCE LIMITED (ACN 000 007 492) N 3050 OF 2003 GYLES J 19 JULY 2004 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 3050 OF 2003 BETWEEN: AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY PLAINTIFF AND: RURAL AND GENERAL INSURANCE LIMITED (ACN 000 007 492) DEFENDANT JUDGE: GYLES J DATE OF ORDER: 19 JULY 2004 WHERE MADE: SYDNEY THE COURT ORDERS THAT: The motion stand over to a date to be fixed. 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 3050 OF 2003 BETWEEN: AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY PLAINTIFF AND: RURAL AND GENERAL INSURANCE LIMITED (ACN 000 007 492) DEFENDANT JUDGE: GYLES J DATE: 19 JULY 2004 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This motion for costs pursuant to O 27 r 11 of the Federal Court Rules involves a novel question, namely, whether taking steps to prepare to give oral evidence where subpoenaed to attend for that purpose, including the obtaining of legal advice and assistance, is a loss or expense incurred in complying with the subpoena. 2 The principal proceeding was an application by Australian Prudential Regulation Authority (APRA) to wind up the defendant Rural and General Insurance Limited (Rural and General). The proceeding was to come on for hearing on 11 December 2003. Benfield (Australia) Pty Limited (Benfield) had acted as Rural and General's reinsurance broker in respect of that company's workers' compensation business. Rural and General wished to obtain evidence from Benfield relevant to the financial affairs of Rural and General. It proposed to Benfield that an affidavit be obtained from one Effy Dimos (Dimos), an employee of Benfield. The solicitors for Rural and General provided an outline of the questions or issues that the draft affidavit should address. It was requested that the affidavit be supported by documents where possible and extracts from a number of documents were provided. 3 Negotiations ensued between the solicitors for Rural and General on the one hand and employees of and lawyers acting for Benfield on the other. In the course of that negotiation it was indicated to the solicitors for Rural and General that Dimos would prepare and swear an affidavit provided that remuneration was received for doing so at a commercial rate and that all expenses, including legal expenses related to it would be met by Rural and General. Those negotiations broke down. In the end, Rural and General served a subpoena upon Benfield to produce documents. The costs of that have been dealt with (Australian Prudential Regulation Authority v Rural and General Insurance Limited [2004] FCA 619). It also served a subpoena to give evidence upon Dimos. That subpoena was returnable on 11 December 2003, the day fixed for the commencement of the hearing. Shortly prior to that day, it was indicated that Dimos would not actually be required to attend until at least 15 December 2003. On 11 December 2003, counsel for Rural and General informed the solicitor for Dimos that she would not be required to attend at all. There is no precise evidence as to when the subpoena was served upon Dimos but it was after 28 November 2003 and before 3 December 2003. By that time, the solicitor for Dimos had told the solicitors for Rural and General that an affidavit had been prepared. 4 The affidavit of the solicitor acting for Dimos included the following evidence: 'Ms Dimos instructed me to prepare a draft affidavit in response to the areas of concern and questions raised by the solicitors for the Defendant in their letters of 18 November and 24 November 2003. She instructed me that, even if the affidavit was not sworn and provided to the Defendant's solicitors, the drafting of the Affidavit would serve as preparation for giving evidence in court, as she was required to do pursuant to the subpoena to give evidence served upon her. I attended upon Ms Dimos on 28 November and on 1 December 2003 to receive instructions for preparation of the affidavit. I spent further time on 2 December 2003 editing the affidavit to produce a first draft. No further work was done on the affidavit after that. I am informed by Ms Effy Dimos, and truly believe, that she has spent a total of 14 hours in relation to the requests for evidence and the two subpoenas served by the Defendant in these proceedings.' 5 O 27 r 11 is not to be given any narrow interpretation, particularly in circumstances where a third party to litigation is involved. That is established by the decision in Chapman v Luminis Pty Ltd (No 3) (2000) 104 FCR 368 at [28]–[33], and the authorities there reviewed relating to the predecessor to O 27 r 11 (O 27 r 4A). I am sympathetic towards the problem that faced Benfield and its employees in this situation. They had nothing to gain from the litigation and there is no reason in principle why they should be put to expense because of the interests of the litigants. I am also sympathetic to the situation of a party who is subpoenaed to attend and give evidence in relation to past events of some complexity. The witness will almost certainly require reference to documents if memory is to be refreshed. The witness might well feel unable to do justice to giving evidence without having that opportunity. However, I do not think that O 27 r 11 can be stretched far enough to cover a claim such as the present which effectively involves solicitor/client costs for preparation of a statement of evidence. A witness who is subpoenaed has no obligation to produce such a statement or to be prepared to give evidence in that way and, correspondingly, has no right to visit the costs of doing so upon an unwilling party who has issued a subpoena. 6 The authorities to which I have referred do contemplate a reasonable opportunity for the witness to obtain advice as to her position and for some negotiation with the party issuing the subpoena. It is also appropriate to allow an amount for the business disturbance that the witness suffered, although not actually called upon to attend and give evidence. Benfield has paid the amounts in question. In my opinion, an amount of $750 would reasonably cover those items and I would so order. 7 Argument as to the applications in relation to Benfield and Dimos were heard at the one time pursuant to the one notice of motion. The applicant had a substantial measure of success. I would order that the costs of the applicant on the motion be paid by Rural and General. 8 I stand the motion over to a date to be fixed to consider what, if any, orders should be made as I am not aware of the current status of Rural and General. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 19 July 2004 Solicitor for Benfield (Australia) Pty Limited B Stavropoulos of Stavropoulos Solicitors Counsel for the Defendant: A J Abadee Solicitor for the Defendant: Malcolm Johns & Co Date of Hearing: 10 February 2004 Date of Judgment: 19 July 2004