FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Boral Ltd [2007] FCA 14 COSTS – Application to set aside subpoena – costs of application – ordered as between "solicitor and client" – meaning of – distinction with other methods of assessing costs 5 Eliz, c.9 1562 (Imp) s 12 Federal Court of Australia Act 1976 (Cth) Legal Profession Act 2004 (Vic), s 3.4.18 Federal Court Rules O 27 r 11, O 62 rr 12, 39(3) Australian & New Zealand Banking Group Ltd v Actus Australia Pty Ltd [2000] WASC 244 cited Bank of New South Wales v Withers (1981) 35 ALR 21 cited Bouras v Grandelis [2005] NSWCA 463 applied Danieletto v Khera (1995) 35 NSWLR 684 cited Deposit and Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell (unreported, Supreme Court New South Wales, Bainton J, 8 March 1996) cited EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59 applied Fat-Sel Pty Ltd v Brambles Holdings Ltd (1985) 61 ALR 536 cited Foyster v Foyster Holdings Pty Ltd (in liq) [2003] NSWSC 881 cited Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 cited Gibbs v Gibbs [1952] P 332 cited Giles v Randall [1915] 1 KB 290 cited Goodwin v Storrar [1947] 1 KB 457 applied J Aron Corp v Newmont Yandal Operations Pty Ltd [2004] NSWSC 996 cited King v GIO Australia Holdings Ltd (2001) FCA 1773 cited Knight v F P Special Assets Ltd (1992) 174 CLR 178 cited Kumagai Australia Finance v Avarton Ltd (unreported, Supreme Court of New South Wales, Bryson J, 7 June 1991) cited Milosevic v Government Insurance Office of New South Wales (1993) 31 NSWLR 323 referred to O'Keefe Nominees Pty Ltd v BP Australia (1994) 55 FCR 591 cited Pyramid Building Society (in liq) v Farrow Finance Corporation (in liq) [1995] 1 VR 464 cited Re Pan Pharmaceuticals Ltd; Selim v McGrath (2004)48 ACSR 681 approved Reed v Gray [1952] Ch 337 cited Smith v Smith [1906] VLR 78 cited AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v BORAL LIMITED VID 699 of 2004 FINKELSTEIN J 22 JANUARY 2007 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 699of 2004 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: BORAL LIMITED Respondent JUDGE: FINKELSTEIN J DATE OF ORDER: 22 January 2007 WHERE MADE: MELBOURNE THE COURT ANSWERS THE QUESTIONS REFERRED AS FOLLOWS: 1. If the court makes an order as in the present case that a party's costs be taxed on a solicitor/client basis - (a) Is the taxing officer constrained by O 62 r 12(1) (which applies because of O 27 r 11(2)) to require the party with the benefit of the order to submit a bill drawn in accordance with the party/party scale in Schedule II? Answer: No (b) If the answer is "Yes" to (a), on what basis does the taxing officer give effect to the order that costs be taxed on a solicitor/client basis? Answer: N/A (c) If the answer is "No" to (a), does the taxing officer have authority, and if so by what authority may the taxing officer permit the party with the benefit of the order to submit a bill drawn by reference to a costs agreement between the party and his or her solicitor? Answer: Yes, provided the Registrar is satisfied of the reasonableness of the items claimed and the amounts charged. (d) If the taxing officer may permit a bill to be drawn by reference to the relevant costs agreement what principles, if any, apply to the taxation of the bill? Answer: N/A 2. On an inter partes taxation is there now any difference between costs orders made – (a) as between "solicitor and client"; (b) as between "solicitor and own client"; (c) on an "indemnity" basis? Answer: Yes 3. Do any of the orders in (2) above operate to permit taxation of the bill by reference to any costs agreement which exists between the party in whose favour the order is made and his or her solicitor, instead of the scale set out in Schedule II without expressly stating this to be the case? Answer: Yes, provided none of items 44 to 47 (inclusive) in Schedule II apply or have been rendered irrelevant by an order of the Court. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 699 of 2004 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: BORAL LIMITED Respondent JUDGE: FINKELSTEIN J DATE: 22 january 2007 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Boral Limited obtained the issue of two subpoenae for the production of documents each directed to Nielsens Concrete Pty Ltd, the first on 23 July 2004 and the second on 11 August 2004. Nielson moved to have each subpoena set aside. Following the service of each motion (there were two) Boral informed Nielsens that it would not call upon the subpoena that was the subject of the motion. On the return of these motions, a Registrar made the following orders, of which orders 1 and 2 were not opposed by Boral: "1. The subpoenae for production of documents dated 23 July 2004 and 11 August 2004, issued at the request for the respondent, directed to the Proper Officer of Nielsens Concrete Pty Ltd, be set aside; 2. Pursuant to O 27, r 11 of the Federal Court Rules, the respondent pay an amount to be fixed by the Court in respect of the costs and expenses incurred by Nielsens Concrete Pty Ltd complying with the said subpoenae dated 23 July 2004 and 11 August 2004, such costs and expenses to be taxed on a solicitor/client basis; 3. The respondent pay the costs of the notices of motion filed 4 August 2004 and 12 August 2004 by Nielsens Concrete Pty Ltd, including reserved costs." 2 After the orders were made, Nielsens prepared and filed a bill of costs for taxation. To explain the way in which its costs had been calculated Nielsens endorsed the bill with the following notation: "Note: Costs of the notices of motion to set aside the subpoenas are claimed on the Federal Court scale. Cost of complying with subpoenas on a solicitor-client basis are claimed according to the relevant client agreement." 3 The parties are in dispute as regards the manner in which the taxing officer is to assess Nielsen's bill. Pursuant to O 62 r 39(3) the taxing officer has sought directions as follows: 1. If the Court makes an order as in the present case that a party's costs be taxed on a solicitor/client basis - (a) Is the taxing officer constrained by O 62 r 12(1) (which applies because of O 27 r 11(2)) to require the party with the benefit of the order to submit a bill drawn in accordance with the party/party scale in Schedule II? (b) If the answer is "Yes" to (a), on what basis does the taxing officer give effect to the order that costs be taxed on a solicitor/client basis? (c) If the answer is "No" to (a), does the taxing officer have authority, and if so by what authority may the taxing officer permit the party with the benefit of the order to submit a bill drawn by reference to a costs agreement between the party and his or her solicitor? (d) If the taxing officer may permit a bill to be drawn by reference to the relevant costs agreement, what principles, if any, apply to the taxation of the bill? 2. On an inter partes taxation is there now any difference between costs orders made - (a) As between "solicitor and client"; (b) As between "solicitor and own client"; (c) On an "indemnity" basis? 3. Do any of the orders in (2) above operate to permit taxation of the bill by reference to any costs agreement which exists between the party in whose favour the order is made and his or her solicitor, instead of the scale set out in Schedule II without expressly stating this to be the case? 4 To answer these questions it is necessary to begin with an examination of the Court's jurisdiction to award costs in favour of a witness ordered to attend to give evidence before, or produce document to, a court. There is a detailed examination of this topic by Sheppard J in Bank of New South Wales v Withers (1981) 35 ALR 21. According to that analysis, at common law, a person required to attend by subpoena was entitled to his costs and charges of attendance and, if a professional witness, some indemnity for his loss of time. The first statute allowing such expenses was 5 Eliz 1562, c 9 which, by s 12, provided that a person served with a subpoena should have paid to him "such reasonable sums of money for his or their costs and charges, as having regard to the distance of the places necessary to be allowed in that behalf". Thereafter all superior courts adopted scales that set out the "reasonable costs and expenses" to which a witness was entitled. The scale was set by the judges. Sheppard J's analysis led him to conclude that the witness was only entitled to receive the amount provided for in the scale of fees for witnesses. He said (35 ALR at 38) that "unless the payment is provided for in the rules there can be no recovery". 5 Following the decision in Bank of New South Wales v Withers,O 27 r 4A was introduced. This provides that when a person named in the subpoena is not a party to the proceeding and incurs expense in compliance with a subpoena, the court may order the party who issued the subpoena to pay an amount to compensate the person "for such expense or loss as is reasonably incurred or lost by that person in complying with the subpoena". Similar rules were introduced in all states and territories, other than Queensland, Tasmania and the Australian Capital Territory, to deal with what would otherwise have been an unsatisfactory state of affairs. 6 The views of Sheppard J have not withstood the test of time. The most powerful attack came in Danieletto v Khera (1995) 35 NSWLR 684. In that case Bryson J rejected the idea that the entitlement of witnesses to be reimbursed for their costs and expenses could be established by reference to conflicting decisions from long ago affected by a Tudor statute long since repealed. He said (35 NSWLR at 688) that the matter should be approached as one of principle and, according to principle it "is a necessary incident of the exercise by the court of its subpoena power that the court should deal with the question of paying persons whose time and attention are involved in the exercise". That is, the court has an inherent jurisdiction to award in favour of a witness such costs as it thinks appropriate to compensate the witness for his time and expenses incurred in compliance with a subpoena. Thus it has been said, correctly in my opinion, that the rules that fix costs for witnesses "represent[s] but an aspect of the more comprehensive jurisdiction in respect of persons subjected to compulsion by the processes of the Court in proceedings to which they are not parties": Re Pan Pharmaceuticals Ltd; Selim v McGrath (2004)48 ACSR 681, 690 per Barrett J. 7 In any event, since the decision of the High Court in Knight v F P Special Assets Ltd (1992) 174 CLR 178 where it was held that the power to award costs permits a court to award costs against a non-party, the view has been taken that s 43 of the Federal Court of Australia Act 1976 (Cth) confers a power to award costs in favour of a non-party. Thus, in O'Keefe Nominees Pty Ltd v BP Australia (1994) 55 FCR 591 Spender J considered that s 43 authorised him to make a costs order in favour of an intervenor and in King v GIO Australia Holdings Ltd (2001) FCA 1773 Moore J said that s 43 enabled him to make a costs order in favour of a person served with a subpoena. 8 In this case the Registrar's order is that Boral pay Nielsens' costs and expenses of complying with the two subpoenae as taxed "on a solicitor/client basis". The Registrar's questions assume, I think, that there may be some disconformity between this order and the rules. If there is any disconformity (a matter to which I will return) it is certainly not between the Registrar's order and O 62 r 12(3). That order is concerned only with the expense (formerly "costs and charges") of attending court. That is the only kind of expense that is covered by schedule 2, where the relevant items applying to witnesses are Items 44 to 47 (inclusive). Each item only comes into play if a witness in fact attends court. So much is evident from the description of the item. In this case, of course, Nielsens was not called upon to answer the subpoena with the result that its proper officer did not attend at court. Hence O 62 r 12(3) is irrelevant to the taxation of Nielsens' costs. Nevertheless it is worth noting that if any item of costs falls within any of the four items in schedule 2 relevant to attendances, the taxing officer is required to apply that item (Fat-Sel Pty Ltd v Brambles Holdings Ltd (1985) 61 ALR 536) unless there is an order of the court to a different effect. 9 There is, however, the possibility of disconformity between the Registrar's order and O 27 r 4A. Costs assessed on a "solicitor and client" basis may be different from the costs recoverable under the rule which provides that the subpoenaed person is to be paid his "expense or loss reasonably incurred". The kinds of expenses that are regarded as reasonable for the purposes of the rule can be seen from cases such as: Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284; Deposit and Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell and Co (unreported, Supreme Court New South Wales, Bainton J, 8 March 1996); Pyramid Building Society (in liq) v Farrow Finance Corporation (in liq) [1995] 1 VR 464; Australia & New Zealand Banking Group Ltd v Actus Australia Pty Ltd [2000] WASC 244; Foyster v Foyster Holdings Pty Ltd (in liq) [2003] NSWSC 881; J Aron Corp v Newmont Yandal Operations Pty Ltd [2004] NSWSC 996. These cases establish that if particular costs are reasonably incurred and the quantum is reasonable the costs are recoverable. Whether or not there is an inconsistency between the order and the rule depends upon what is comprehended by a "solicitor and client" costs order. 10 It is a little surprising that after so many years of judges having made costs orders on various bases including that they be taxed on a "solicitor/client" basis it is still not clear what such an order means. The usual position in an action where costs are awarded in favour of a party is that they are taxed on a party and party basis. That is a reference to costs that have been reasonably and properly incurred and not the expense which has been actually incurred: A G Saddington Taxation of Costs between Parties (1919), cited in Milosevic v Government Insurance Office of New South Wales (1993) 31 NSWLR 323, 333. 11 When costs are ordered to be taxed as between solicitor and client, that usually means one of two different things. If the order is made in an equity case it means that the costs are to be paid on a common fund basis. But costs ordered to be paid on a common fund basis are not determined on a uniform basis. In Daniels Chancery Practice 8th ed at 1018 it was said that when dealing with the taxation of costs on a solicitor and client basis a distinction is to be drawn where the costs were payable out of a fund belonging to the other party, or out of a common fund in which the party entitled to costs had only limited interest, or where the costs were payable out of a fund belonging exclusively to the party himself. The author also noted that if it were intended that the party should be fully indemnified against all expenses the order should say so because an order that merely required the costs to be taxed as between solicitor and client would not achieve that result. 12 More usually an order for costs to be taxed on a solicitor/client basis is understood to mean that the person should recover that which he ought properly pay to his solicitor: Goodwin v Storrar [1947] 1 KB 457, 458. The purpose of the order is to allow "as many of the charges which [the party] would have been compelled to pay to his own solicitor for costs of the action as fair justice to the other party will permit": Smith v Smith [1906] VLR 78, 80, citing from Daniels Chancery Practice. Oliver, Law of Costs (1960) p 1 states this is substantially "a party and party taxation on a more generous scale". See also Giles v Randall [1915] 1 KB 290, 295. In practice costs taxed on this basis will be much the same as those taxed under O 27 r 4A. 13 A "solicitor and client" costs order is to be distinguished from an order for taxation on a solicitor and own client basis. On such a taxation all costs are to be allowed, except if they are unreasonably incurred or unreasonable in amount: EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59, 64. On one view the onus lies on the paying party to show unreasonableness: Kumagai Australia Finance v Avarton Ltd (unreported, Supreme Court of New South Wales, Bryson J, 7 June 1991). Another view is that it is just "a question of who gets the benefit of any doubt in the mind of the taxing master": EMI Records at 71. See also Bouras v Grandelis [2005] NSWCA 463. 14 Costs are sometimes ordered on an indemnity basis. There is some support for the view that this is equivalent to a solicitor and own client taxation: see eg Giles v Randall [1915] 1 KB295, 298; Reed v Gray [1952] Ch 337; Gibbs v Gibbs [1952] P 332, 347. On the other hand there are cases, some of which are my own, where an indemnity cost order was made for the purpose of ensuring that the beneficiary of the order was not out of pocket by one cent. An example is when a party is joined so that there is a contradictor. 15 Returning to the facts of this case where a party has a costs agreement with his solicitor, the agreement may provide the basis for a taxation on a solicitor and client basis. It will be necessary for the party to show both that the cost charged under the cost agreement are reasonably incurred and that they are reasonable in amount. The evidence needed for this purpose is a matter for the taxation officer. In some instances all that may be required is production of the costs agreement and details of the items for which the solicitor has made a charge. In this connection it should be noted that in Victoria before a costs agreement can be entered into the solicitor is required by Part 3.4 of the Legal Profession Act 2004 (Vic) to provide a good deal of the information to his client and by s 3.4.18 is required to give progress reports in respect of the work done under the retainer. In other cases it will be necessary to provide the taxing officer with more information than the agreement and the details of the items charged, to establish the reasonableness of the costs claimed. It is for the taxing officer to decide how much information need be produced. 16 In light of the foregoing the following answers will be given to the Registrar's questions: (i) (a) No. (b) Not applicable. (c) Yes, provided the Registrar is satisfied of the reasonableness of the items claimed and the amounts charged. (d) Not applicable. (ii) Yes. (iii) Yes, provided none of items 44 to 47 (inclusive) in Schedule II apply or have been rendered irrelevant by an order of the Court. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. Associate: Dated: 22 January 2007 Solicitor for the Respondent: Blake Dawson Waldron Solicitor for Nielsens Corrs Chambers Westgarth Concrete Pty Ltd: Date of Hearing: N/A Date of Judgment: 22 January 2007