New South Wales Supreme Court CITATION : J Aron Corporation v Newmont Yandal Operations [2004] NSWSC 996 HEARING DATE(S) : 25 October 2004 JUDGMENT DATE : 25 October 2004 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Payment to recipient of subpoena ordered CATCHWORDS : PRACTICE - subpoenas - subpoena duces tecum addressed to stranger to proceedings - entitlement of recipient of subpoena to payment for its expense and loss - manner of calculation of amount to be paid LEGISLATION CITED : Supreme Court Rules 1970 Deposit & Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267 Danieletto v Khera (1995) 35 NSWLR 684 CASES CITED : Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 Foyster v Foyster Holdings [2003] NSWSC 881 Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77 Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129 J Aron Corporation - First Plaintiff/Respondent AMC Consultants Pty Limited - Non-party Applicant Goldman Sachs Group Inc - Second Plaintiff Newmont Yandal Operations Pty Ltd (Administration Appointed) - First Defendant Mark Anthony Korda in his capacity as Administrator of Newmont Yandal Operations Pty Ltd - Second Defendant Mark Francis Xavier Mentha in his capacity as Administrator of Newmont Yandal Operations Pty Ltd - Third Defendant Clynton Court Pty Ltd (subject to a Deed of Company Arrangement) - Fourth Defendant Australian Metals Corporations Pty Ltd - Fifth Defendant Eagle Mining Pty Ltd - Sixth Defendant PARTIES : Great Central Holdings Pty Ltd - Seventh Defendant Great Central Investments Pty Ltd - Eighth Defendant Great Central Mines Pty Ltd - Ninth Defendant Hunter Resources Pty Ltd - Tenth Defendant Matlock Castellano Pty Ltd - Eleventh Defendant Matlock Mining Pty Ltd - Twelfth Defendant Newmont Wiluna Gold Pty Ltd - Thirteenth Defendant Newmont Wiluna Metals Pty Ltd - Fourteenth Defendant Newmont Wiluna Mines Pty Ltd - Fifteenth Defendant Quotidian No 117 Pty Ltd - Sixteenth Defendant FILE NUMBER(S) : SC 4666/03 COUNSEL : M Ryckmans, solicitor - Plaintiff/Respondent I Griscti - Applicant SOLICITORS : Abbott Tout - Plaintiff/Respondent Allens Arthur Robinson - Applicant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST CAMPBELL J MONDAY 25 OCTOBER 2004 4666/03 J ARON CORPORATION & ANOR v NEWMONT YANDAL OPERATIONS PTY LTD (ADMINISTRATION APPOINTED) & ORS JUDGMENT 1 HIS HONOUR: On 25 October 2004 I made orders on a Notice of Motion whereby AMC Consultants Pty Ltd ("AMC") made application to be paid an amount for expense and loss it claimed to have incurred in complying with a subpoena. I stated that I would deliver reasons for judgment at a later time. These are those reasons. The Companies in Dispute 2 The Applicant carries on a business which includes the provision of consulting services to the mining industry. A significant number of its assignments relate to gold mines. 3 The Respondent to this motion is a company which is now the first plaintiff in proceedings number 4666 of 2003 in the Equity Division of this Court. Those proceedings relate to the affairs of Newmont Yandal Operations Pty Ltd (known as "NYOL"). The Applicant is not a party to those proceedings. The Subpoena 4 On 14 October 2003 the Respondent's solicitors, Abbott Tout, caused the Court to issue to the Applicant a subpoena in those proceedings. It required the Applicant to attend on 30 October 2003, at the Court in Sydney, and produce six categories of document. One of those categories, contained in paragraph 5 of the subpoena, was: "All reports and technical reviews prepared by you in respect of gold mines other than the mine assets of NYOL from 1 January 2000 to date." 5 The subpoena contained the usual provision which provided: "INSTEAD of so ATTENDING, YOU MAY PRODUCE this subpoena and the documents and things described in the schedule to a clerk of the Court at the above place by hand or by post in either case so that he receives them - (A) where this subpoena is served within New South Wales – NOT LATER THAN 48 HOURS; and (B) where this subpoena is served out of New South Wales – not later than 24 hours, BEFORE THE DATE on which you are required so to attend;" 6 The subpoena was served on or about 15 October 2003. Work Done to Comply with Subpoena 7 The Applicant has offices in Brisbane, Melbourne and Perth. The subpoena was served at the Melbourne office. The Applicant calculated that in order to comply with the subpoena, its documents had to be ready to be sent by courier from the Brisbane, Melbourne and Perth offices by 24 October 2003 so as to assure their arrival in Sydney by the time the subpoena required, if it was to use the opportunity the subpoena gave to produce documents at the registry 24 hours before the date fixed. This gave it at most eight working days in which to comply with the subpoena. 8 In order to comply with the subpoena the Applicant had to consider approximately between 1,100 and 1,200 job files, about half of which were further considered, in order to determine whether they fell within the scope of the subpoena. A large proportion of the relevant files were located in the Perth office of the Applicant, or at off-site archive storage in Perth. To comply with the subpoena and to facilitate the review of the job files, the Applicant re-organised its Perth office, and set aside two rooms. There were two stages of work involved. First, there was review of a job list in order to identify any relevant and potentially relevant jobs. Second, there was review of individual job files to determine whether they fell within the scope of the subpoena. The directors and principals of the Applicant personally reviewed the job list and the relevant job files in order to determine whether they fell within the scope of the subpoena. Mr Gillett, a director of the Applicant, took the view that the administrative and support staff did not have the appropriate professional qualifications, skills and knowledge of the jobs undertaken to make those determinations. However, certain task, including photocopying and general support duties, were carried out by support staff, rather than by directors or principals. Modification of the Subpoena 9 During the first few days after it received the subpoena, the Applicant instructed Gadens as its solicitors concerning it. Gadens was also acting for Ernst & Young Transaction Advisory Services Ltd ("Ernst & Young"), the company for which AMC had carried out work relating to the NYOL matter. Ernst & Young was the recipient of another subpoena. 10 On 17 October 2003 Gadens wrote to Abbott Tout expressing concern about the purpose and breadth of the subpoenas, and the amount of time which had been allowed for their compliance. They foreshadowed that compliance would be a substantial undertaking, and that they would be providing an estimate of the likely costs to Abbott Tout. 11 On 20 October 2003 Gadens wrote again to Abbott Tout, foreshadowing, so far as the subpoena served on the Applicant was concerned, that compliance would involve producing approximately 3,000 pages of documents, plus approximately five CD ROMS containing electronic data, and that approximately 200 working hours would be involved in compliance. At certain stated charge-out rates for directors, principals, and administration and support staff, it was estimated that total costs of the Applicant of complying with the subpoena would be approximately $35,000 plus GST, and that in addition legal advice, at a cost which could not then be estimated, was likely to be sought. Uncommendably, the charge-out rates claimed in that estimate were higher than rates which the Applicant ultimately claimed in this application. The letter continued: "Can you please confirm your client's acknowledgement of the estimate of the costs that are likely to be borne by AMC in complying with the subpoena. Further, for the avoidance of doubt, we put you on notice that both Ernst & Young and AMC have commenced preparation of documents to comply with the subpoena notwithstanding that those documents may not be produced if the subpoenas are set aside. This is because your client's failure to provide a statement of claim within the time ordered by the Court (and thus give our clients the context to which to evaluate the appropriateness of the subpoenas) means that Ernst & Young and AMC are required to commence the collation of the documents relevant to the subpoenas in order to ensure, on a worse case scenario, that they are able to comply with the date for production of 30 October 2003. Ernst & Young and AMC will therefore seek that your client pays their costs of complying with the subpoena even if the subpoenas are ultimately set aside." 12 By 21 October 2003 Allens Arthur Robinson had commenced acting for the Applicant concerning the subpoena. Ms Thornton, of Allens Arthur Robinson, telephoned Mr Ryckmans, of Abbott Tout, on 21 October 2003. Mr Ryckmans deposes to the following conversation occurring: THORNTON: "I am acting for AMC Consultants in relation to a subpoena issued by your client to my client. My client is presently in the process of collating documents in answer to the subpoena however I would like to discuss with you paragraph 5. That paragraph is particularly broad. I am instructed that there are some 1500 reports which potentially fall within paragraph 5. If my client is compelled to produce documents in answer to paragraph 5 I am instructed that the costs of compliance with the subpoena will be in the order of $35,000. My client will also need additional time to review the reports and to consider any claims of privilege or confidentiality. In the circumstances I would ask that the subpoena be limited to paragraphs 1-4 and paragraph 6 and that my client not be obligated to produce any documents in answer to paragraph 5." RYCKMANS: "In light of your instructions, I agree that for present purposes your client does not have to produce any documents falling within the description of paragraph 5. However, I wish to reserve my client's right to require production at some later stage after I have reviewed the material produced by your client in answer to the subpoena." THORNTON: "I will advise my clients that they do not need to comply with paragraph 5 and I will arrange for the subpoenaed documents to be delivered to the Supreme Court. Could you please send me a fax confirming that my client is not required to comply with paragraph 5." RYCKMANS: "Yes." 13 Ms Thornton gives a slightly different version of the conversation, which suggests that it did not include all the details to which Mr Ryckmans deposes. Neither Ms Thornton, nor Mr Ryckmans, was cross-examined for the purpose of this application. I shall decide the application by assuming, without finding, that Mr Ryckmans' version is correct. 14 Following that conversation, Ms Thornton contacted Mr Gillett, told him of the telephone conversation, and told him he could stop work on collating documents relevant to paragraph 5 of the subpoena. Mr Gillett (who was at the Perth office) promptly emailed the other offices of the Applicant, telling them to stop on item 5 of the subpoena. 15 In due course, the Applicant produced documents complying with the subpoena other than paragraph 5. Rules re Payment to Recipient of Subpoena 16 Part 37 Supreme Court Rules 1970, in the form they had in October 2003, contained a Part 37 rule 3, which provided: "Conduct money 3(1) A subpoena shall not require the person named to attend or produce any document or thing on any day on which his attendance or production by him is required unless a sum sufficient to meet the reasonable expenses of the person named of complying with the subpoena in relation to that day is paid or tendered to him at the time of service of the subpoena or not later than a reasonable time before that day." 17 Part 37 rule 9 Supreme Court Rules 1970 at that time provided: "Expense and loss 9(1) Where a person named is not a party and, in consequence of service of the subpoena, reasonably incurs expense or loss substantially exceeding any sum paid under rule 3, the Court may order that the party who requested the issue of the subpoena pay to the person named an amount in respect of the expense or loss." Caselaw Principles re Payment to Recipient of Subpoena 18 In Foyster v Foyster Holdings [2003] NSWSC 881 I said: "10 Part 37 rule 3 is headed "Conduct money". However, the wording of the rule imposes a wider obligation than to merely pay fares, or reasonably anticipated expenses for accommodation or sustenance involved in complying with the subpoena. The rule requires, it seems to me, that the person tendering the subpoena make an estimate of what are the reasonable expenses of the person named of complying with the subpoena, and to tender that amount at the time of service. "Expenses" would include all money actually paid out, and the cost of items used up, in complying with the subpoena. … 13 In determining what are "reasonable expenses" under Part 37 rule 3, it would be necessary to take into account that the issuer of a subpoena will not, usually, be in a position to know exactly what it is that is required to be done to search out any material that is required to be produced to comply with the subpoena. Any question of whether the issuer of a subpoena has failed to tender the "reasonable expenses" would need to be decided in that frame of reference. However, when it is completely predictable that expenses will be incurred, it is not open to the issuer of a subpoena to make no attempt to estimate what those expenses might be, and to take the attitude that it will leave the person issued with the subpoena to come along to court to make a claim under Part 37 rule 9. 14 Part 37 rule 3 requires the tender of the "reasonable expenses" at the time of service, while Part 37 rule 9 permits the later recovery of a more widely based sum, the reasonably incurred expense or loss involved in complying with the subpoena. The notion of "loss" includes reasonable reimbursement for time spent in complying with the subpoena, that would otherwise have been spent in productive activities." Here, the only amount tendered under Part 37 rule 3 was $25. 19 In Deposit & Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267, Bainton J set out the history of payment to recipients of subpoenas duces tecum. His Honour held, at 289 that, in deciding what counts as "loss" for the purpose of Part 37 rule 9, where the recipient of the subpoena was a firm of solicitors: "A professional person taken away from his income earning activities will lose what he would have earned in the time he has to spend in obeying the subpoena." And at 292-3: My view is that a firm required to answer a subpoena duces tecum is entitled to be reimbursed in respect of a partner's time spent on that task at his ordinary charge-out rate. If the work is done by an employed solicitor, the reimbursement should be at that solicitor's charge-out rate provided of course in both cases that the partner or employee would be otherwise devoting that time to chargeable work, as I would expect would usually be the case. That may at first sight be to treat a partnership differently from a corporation. But I do not think that it does. It would be rare that a corporation's income is derived from or includes a specific charge for the activities of a specific employee." 20 The Applicant in the present case is a corporation which provides professional consulting services, and usually charges for them on the basis of a specific charge for the activities for a specific employee. Thus, it is a corporation which fits into the category which Bainton J thought would be rare. 21 The Applicant directed my attention to the decision of Bryson J in Danieletto v Khera (1995) 35 NSWLR 684, where his Honour dealt with the situation of a person served with a subpoena duces tecum, who incurred expenses before the party who obtained the issuing of the subpoena decided that compliance was not required. In allowing that person his expenses, his Honour, at 687, held that: "… the Court has power to make an order for payment of Mr Jones' expenses relating to the subpoena whether or not his application falls within the terms of Pt 37, r 9 and whether or not he in fact complied with the subpoena." That case arose at a time when Part 37 rule 9 Supreme Court Rules 1970 was in a different form to that which it had in October 2003. In 1995, Part 37 rule 9 opened by saying "Where a person named is not a party and, in complying with the subpoena, reasonably incurs expense or loss … " . That is to be contrasted with the opening words of Part 37 rule 9 in October 2003 "Where a person named is not a party and, in consequence of service of the subpoena, reasonably incurs expense or loss …" . Insofar as the Applicant spent time and effort in seeking out, considering and organising documents to comply with paragraph 5 of the subpoena, which were then not required, that is activity engaged in in consequence of service of the subpoena, and hence, it falls within the words of Part 37 rule 9(1) as it stood in October 2003. Thus, there is in this case, and under the 2003 rule, no need to invoke the inherent jurisdiction of the Court, which Bryson J invoked in Danieletto v Khera (1995) 35 NSWLR 684. 22 However, the existence of that inherent jurisdiction, alongside the express terms of Part 37 rule 9 Supreme Court Rules 1970, provides a reason for not construing Part 37 rule 9 in any narrow fashion. Concerning that inherent jurisdiction, Bryson J said, in Danieletto v Khera (1995) 35 NSWLR 684 at 686: "… the court's inherent power to administer justice includes as an incident of the subpoena power the power to order a party to pay such expenses and to assess the amount." At 688, his Honour explained the rationale: "The right approach in my view is that the Court decides whether to order a witness to attend, and ought to do so on a basis which is just to the witness, and it is not just to make the witness give attention to someone else's litigation without being paid for his time. In my opinion resort to principle shows that 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, and the Court has power to order payment of expenses incurred by witnesses and also compensation for their time, whether before or after the subpoena is complied with, and whether or not it is complied with or set aside or compliance is dispensed with. A limit to compensation for time actually spent in attendance at court is not reasonably based whether for professional persons or for any others. If the Court is invoked by a party to use public power to compel a person to give attention to preparation to hear litigation, there is a just entitlement to payment for the time of the person whose attention is thus required and whose liberty and freedom of action are thus interfered with. A law which entitled a party to conscript the time and attention of others without paying for it would be oppressive. It would also be very poor policy as it would tend to generate resistance to the ordinary administration of justice." 23 In the present case, the Applicant was under a legal obligation to comply with the subpoena from the moment it was served. It was in practical terms released from that obligation when Mr Ryckmans told Ms Thornton that compliance with paragraph 5 would not be required. Insofar as it spent time and effort in searching out, considering and organising documents to comply with paragraph 5 of the subpoena before Mr Ryckmans said he would not require performance of the obligation to do so, the Applicant is entitled to be paid, under Part 37 rule 9 Supreme Court Rules 1970, an amount in respect of its expense or loss. 24 Insofar as the Applicant incurred legal fees in consequence of service of the subpoena, it is likewise entitled to a reasonable amount for that expense: Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 per Lockhart J; Marsden v Amalgamated Television Services Pty Ltd [2001] NSWSC 77 at [20] – [21] per Levine J; Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; (2004) 48 ACSR 681 at [40] – [43] per Barrett J. Quantum of Applicant's Entitlement 25 It was submitted on behalf of the Respondent that the conversation between Mr Ryckmans and Ms Thornton on 21 October 2003 amounted to a contract that if paragraph 5 was not insisted upon, the Respondent would save itself the expenses of complying with that paragraph. I simply do not find any such contract in that conversation. 26 While the Respondent accepts that it has an obligation in the terms laid down by Part 37 rule 9(1) Supreme Court Rules 1970, it says it has no obligation to pay the amount which the Applicant claims, because the costs have never been properly itemised. I do not accept that submission. The Applicant has set out a table of its costs of compliance, which lists each person who did work on complying with the subpoena, and states in relation to each such person the number of hours he or she spent in complying with the subpoena, and the hourly rate of that person. Disbursements, in the form of photocopying, courier fees, and cost of CDs, are also itemised. As well, an amount of $1,666.95 for legal costs is listed. The total amount itemised in that table is $14,572.20. Mr Gillett has sworn that the work set out in that table was performed by the people listed in it. Concerning the rate of charge for each person, Mr Gillett has sworn: "With directors and principals the rate set out is the actual charge-out rate of that director or principal. With support staff, the rate is the salary of the staff member reduced to an hourly rate." For the reasons which I have earlier quoted from the decision of Bainton J in Deposit & Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267 (Para [19] above), using the ordinary charge-out rate of directors and principals of the Applicant is appropriate. For the support staff, Bainton J in Deposit & Investment Co Ltd v Peat Marwick Mitchell at 290 held that not only the salary of the staff member reduced to an hourly rate should be recoverable, but also various on-costs associated with employing a person. To the extent to which these on-costs are not claimed, the claim of the Applicant is conservative. The failure to claim those on-costs more than outweighs the fact that the Applicant has not given credit for the $25 it was paid at the time of service of the subpoena. 27 The legal fees which are claimed are ones whose makeup has been listed in minute detail, stating in tenths of an hour which lawyer did which type of work and for how long, and applying charge-out rates of those lawyers which are within the range of reasonable fees. No legal fees paid to Gadens are claimed. 28 Concerning the photocopying, the Respondent complains that it has been charged for 3,440 pages, yet only 830 pages of documents were produced in response to the subpoena. Mr Gillett has sworn that: "The total costs incurred by the Applicant in complying with the Subpoena is $14,572.20 and details of how this amount is calculated are shown in the Calculations." The "Calculations" are set out in the table to which I have earlier referred. Thus, Mr Gillett has sworn that 3,440 pages were actually photocopied. He has not been cross-examined on this statement (or, indeed, on any of the statements in his affidavit.) 29 The Respondent submits that it is hardly reasonable to expect it to pay for photocopying of items when it has not received the photocopies. In the circumstances of this case, I do not agree. The reason why the photocopies which the Respondent has not received were made, was because the Respondent caused the Court to issue an order the carrying out of which required the photocopies to be made. The reason why the Respondent did not receive them, was because it decided it did not wish to bear the cost of full compliance with the order it had so obtained, and on 21 October 2003 waived any further performance. The cost of making all 3,440 pages was incurred in consequence of service of the subpoena, regardless of whether the Respondent ever received all those pages. 30 In the course of argument the Applicant offered to make available to the Respondent, subject to any proper claims it had concerning confidentiality and access to the documents, those photocopies which it had made. While I have noted an undertaking by the Applicant to make those photocopies available, the Applicant would have been entitled to payment for them even if it had not proffered that undertaking. 31 It is for these reasons that I made orders on 25 October 2004, namely: "I order the Respondent to pay to the Applicant the sum of $14,572.20, as the costs to date of compliance with the subpoena dated 14 October 2003. I order the respondent to pay the costs of the applicant of the application." ********** Last Modified: 11/02/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.