W and W & Budgem [2008]

FAMILY LAW - APPEAL – From decision of Federal Magistrate – PRACTICE AND PROCEDURE – Subpoenas – In pending litigation of property settlement between a husband and wife, solicitors for the wife issued a subpoena to another firm of solicitors – The subpoenaed party applied to set aside the subpoena – That application failed and the production of two identified files was ordered – Other questions were reserved for further hearing – At the further hearing the Federal Magistrate dismissed the solicitor’s application for costs of the application to set aside the subpoena, ordered that the wife pay the solicitor for loss and expense in answering the subpoena and that the husband pay the solicitor a small sum of money on those accounts – It is against those orders, save for the costs order against the husband, that the solicitor appeals – The solicitor seeks that the wife pay a further sum of money for loss or expense in responding to the subpoena – Whether on the first hearing the Federal Magistrate decided that the solicitor should be awarded costs of the (failed) application to set aside the subpoena – The argument turns on the wording of the order in question – Natural reading of the order – Whether in deciding that the solicitor should not be awarded costs of the application to set aside the subpoena, the Federal Magistrate erred in considering the significance to the question of costs, of the reasons for which the application to set aside the subpoena was refused – Argued that when the Federal Magistrate addressed the question of costs of the application to set aside the subpoena he failed to give proper weight to the factors that favoured the application’s success – Whether the Federal Magistrate wrongly disallowed various items of loss and expense claimed by the solicitor – Argued that the Federal Magistrate’s approach was wrong and/or unreasonable

FAMILY COURT OF AUSTRALIA

REPRESENTATION

ORDERS

(1) That the appeal be allowed.
(2) That order (2) of the orders made by Slack FM on 22 December 2006 be set aside.
(3) That the wife pay to the subpoenaed party the sum of $3,588.70 less any amount already paid pursuant to order (2) of the orders made by Slack FM on 22 December 2006 within 28 days, for loss and expense of the subpoenaed party to answer the subpoena, incurred up until 10 October 2006.
(4) That the issue of loss and expense of the subpoenaed party to answer the subpoena incurred subsequent to 10 October 2006 be heard and determined by Slack FM.
(5) That either party be at liberty to make an application by way of written submissions in respect of costs incurred by him or her in relation to the appeal by filing such submissions at the Brisbane Registry of the Family Court and serving them on the other party within 21 days of the date hereof.
(6) That the other party have a further 14 days in which to make written submissions in answer thereto by filing such submissions at the Brisbane Registry of the Family Court and serving them on the other party.
(7) That either party be at liberty to reply to an answer by way of written submissions by filing such reply at the Brisbane Registry of the Family Court and serving it on the other party within a further 7 days.
(8) That each party endorse on the cover sheet the date on which a copy of that submission was served on the other party.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Warnick delivered this day will for all publication and reporting purposes be referred to as W and W & Budgem.

Appeal Number: NA10 of 2007
File Number: TVM2303 of 2005

Appellant

And

Respondent

REASONS FOR JUDGMENT

1. In 2006, in pending litigation in the Federal Magistrates Court between a husband and wife over division of their property, solicitors for the wife issued a subpoena to another firm of solicitors:
   1. ...To produce all files and documents including file notes and attendance records in relation to litigation between the husband, his father, his mother and a business entity and the lessor of the [X] Shopping Centre.

(as described in reasons for judgment of Slack FM, delivered 22 December 2006).

1. Some of what followed the subpoena’s issue is also described by Slack FM in the same reasons:
   1. The subpoenaed party conducted a search of their archive files and identified two files that pertained to the litigation involving the named persons on the subpoena. ...
   2. A search of the records of the subpoenaed party revealed that 18 files related to the four persons named in the subpoena. Most of those files have been destroyed in accordance with the firm’s destruction of documents policy.
   3. On 1 September 2006, [the subpoenaed party] raised with the solicitors for the wife that the conduct money tendered with the subpoena was insufficient.
2. After an exchange of correspondence, the subpoenaed party applied to set aside the subpoena. On 26 September 2006, that application failed and Slack FM ordered the production of the two files identified. He also reserved some questions for further hearing. In this appeal by the subpoenaed party, (“the solicitor”) which is in respect of orders made on that further hearing, there is controversy about just what was decided and what was left undecided on 26 September 2006, but in his reasons for the orders appealed, Slack FM described the position as he saw it.
   1. When I heard the application to set aside the subpoena, I reserved for further hearing the application for payment of any loss or expense incurred in complying with the subpoena and the costs incurred in the application to set aside the subpoena.
3. The hearing in respect of reserved issues culminated in orders made on 22 December 2006. Slack FM dismissed the solicitor’s application for costs of the application to set aside the subpoena, ordered that the wife pay the solicitor $1,788.70 for loss and expense in answering the subpoena and that the husband pay the solicitor $342.10 on those accounts. Against these orders (save for the costs order made against the husband), the solicitor appeals. The solicitor seeks that the wife pay a total of $33,826.90 for loss or expense in responding to the subpoena. This includes at least $12,059.00 of costs of the application to set aside the subpoena.
4. The grounds of appeal are contained in a Further Amended Notice filed 3 May 2007. They exceed three pages, but in my view all grounds argued are reflected within the arguments delineated in the next paragraph.
5. The solicitor argues:
   • (i) that on the hearing in respect of costs the learned Magistrate misconceived the issues that had been reserved, he already having, by order of 26 September 2006, ordered that the solicitors have the costs of the application to set aside the subpoena.
   • (ii) That, in any event, in deciding that the solicitor should not be awarded costs of the application to set aside the subpoena, the Federal Magistrate erred in considering the significance to the question of costs, of the reasons for which the application to set aside the subpoena was refused.
   • (iii) That in respect of costs of compliance with the subpoena, the learned Magistrate wrongly disallowed various “items” of loss and expense claimed by the solicitor.
6. After I deal with these arguments, I will consider the consequences of my conclusions about them.

(i) Did Slack FM decide on 26 September 2006 that the solicitor should be awarded the costs of the (failed) application to set aside the subpoena?

1. The argument for the solicitor turns essentially on the wording of order 2 made on the day in question. There were only two orders made that day, the first requiring the solicitor to produce the two files and the second, as follows:
   1. That costs in addition to conduct monies that should be paid to a subpoenaed party be agreed as between the parties and failing agreement as determined by the court at the further mention of this matter in November, including any legal fees or costs incurred in relation to these proceedings.
2. The solicitor’s contention is that the last clause “...including any legal costs or costs incurred in relation to these proceedings” meant that, thereby, Slack FM pronounced a conclusion that (someone) should pay the solicitor’s costs of the application to set aside the subpoena.
3. Mr Land, for the solicitor, contends that the preceding part of the order meant that (someone) should also pay the costs “that should be paid to a subpoenaed party”, and that only the quantum of all such costs remained to be later determined, if the parties could not agree.
4. I do not consider that that is a natural reading of the order. The natural meaning of the order is that the questions of what costs, if any, including any legal fees of the application to set aside the subpoena, might be awarded to the solicitor (in addition of conduct monies), was stood over.
5. This interpretation is reinforced by the observation that the order is not directed to anyone; that is, it does not oblige anyone to pay any costs.
6. However, Mr Land also pointed to two contextual circumstances to support the interpretation that he propounded. The first was that the application to set aside had never been dismissed.
7. I do not necessarily accept that, where a subpoena is returnable at the same time as an application to set it aside is heard and an order is made enforcing the subpoena in part, an express order dismissing the application to set aside that subpoena need be made. In any event, Mr Land ultimately did not press the point.
8. In his written submissions, Mr Land for the solicitor also pointed to the absence of a “reservation” on 26 September 2006, of costs of the application to set aside, as supportive of his argument that the costs of that application had been awarded that day, to the solicitor.
9. As I have already said, in my view, order 2 made 26 September 2006 effects the reservation of the costs in question, an interpretation strengthened by what Slack FM said in his reasons of 22 December 2006:
   1. As part of the claim [a reference to the previous paragraph which recorded the issue as “what loss of time or expense has been incurred...”] the subpoenaed party claims the costs incurred in an application to set aside the subpoena.
10. In other words the “reservation” on 26 September 2006 of loss or expense of complying with the subpoena included reservation of the costs incurred in the application to set aside.
11. If there be any doubt about the effect of the order, the following matters nonetheless point strongly to the order having the effect which I consider is its natural meaning:
    • (i) Although the application to set aside sought the costs of it, there was no argument about those costs before Slack FM at the hearing of the issue whether to set aside or not, on 25 September 2005.

The only possible reference to those costs came after the learned Magistrate indicated that he would make an order for production, but the reference occurs in the context of discussion about the costs of compliance with the subpoena and the standing over of that question to another date. There was certainly no clear request for an order to be made that day that the respondents to the application to set aside pay the costs of it and there were no submissions about such an issue.

(ii) In the reasons for the order in question, contemporaneously given, there is no discussion whatsoever supporting an order for costs in favour of the solicitor in respect of the application to set aside. The expectation of reasons if such an order was made is increased in circumstances where the application failed.
(iii) To the contrary, towards the end of his discussion of matters relating to whether an order for production ought be made or not, Slack FM said:

1. There are sufficient funds in the property pool of this matter for the subpoenaed party to be properly compensated for any costs that they may have incurred in relation to the subpoena.
2. For those reasons, I intend to order the subpoenaed party to produce the named files to the Court.
3. That is not to say that I have determined those issues of costs or the costs that are to be incurred in relation to compliance with the subpoena. I will reserve those matters to the further hearing of the matter. (emphasis added)

(iv) Slack FM clearly considered that he had not determined the issue of the costs of the (failed) application to set aside the subpoena, for, in his reasons of 22 December 2006, in addition to paragraph 27 earlier quoted, he said:

1. This is an application ... for:
   1. “costs and conduct money” including its costs of producing the legal file to the Court;
   2. costs in respect of the application to set aside the subpoena.

1. In my view, Slack FM did not on 26 September 2006 award to the solicitor the costs of the application to set aside the subpoena. On this point, the appeal fails.

(ii) That, in any event, in deciding that the solicitor should not be awarded costs of the application to set aside the subpoena, the Federal Magistrate erred in considering the significance to the question of costs, of the reasons for which the application to set aside the subpoena was refused.

1. The primary argument here is to the effect that when the learned Magistrate dismissed the application to set aside in September 2006, he did so for essentially pragmatic reasons, notwithstanding matters which favoured the success of the application. Indeed, Mr Land places particular emphasis on the terms of paragraph 13 of the learned Magistrate’s reasons of 26 September 2006 to argue that Slack FM would have set aside the subpoena but for the imminence of the final hearing. The argument continues to the effect that, when in December 2006 Slack FM addressed the question of costs of the application to set aside, he failed to give proper weight to the factors that had favoured that application’s success.
2. Slack FM’s identification and assessment of factors relevant to the outcome of the application to set aside appear in the following paragraphs:
   1. Ordinarily parties in this instance should proceed by issue of a notice of non party production of documents pursuant to Ch 13 of the Family Law Rules. Once inspection has occurred then particular documents from the file that are relevant to the proceedings can be subpoenaed. In this matter apparently attempts were made to effect informal inspection of the documents but there were a number of factors that caused that not to happen, and I don’t consider it necessary for me at this point to make any findings as to the reasons why that didn’t happen. I should say that my recollection of the hearing of this matter when it was mentioned in the August sittings in Mackay and it was adjourned to the November sittings, was that inspection was considered in the course of submissions but it was the wife who specifically required the matter to be dealt with by the issue of a subpoena and I acceded to that submission.
   2. I do consider that there is merit in the argument that is raised by the subpoenaed party that the wife is unable to demonstrate relevance in relation to a significant number of the documents. Some, however, will clearly be relevant. I again think that there is merit in the argument raised by the subpoenaed party that it is not for them to have to identify the documents that are considered relevant.
   3. The options that face me in relation to this matter are that I can set aside the subpoena and insist on a proper process of third party or no party production of documents or I can order the production of the named files to the Court under the terms of the existing subpoena.
   4. This matter is listed for trial in the November sittings. The parties are anxious to have the matter heard and determined. The files themselves belong to the husband and his father who have recently waived privilege in relation to the matter. In the course of submissions yesterday counsel for the subpoenaed party acknowledged that save as for the issue of costs that they would suffer no prejudice in relation to compliance with production of the documents for the proceedings. The relevant documents that have been identified as part of the two files can be identified as part of any inspection process that occurs. It is apparent to me that no further attendant search or work is necessary by the subpoenaed party in relation to the two identified files.
   5. This Court is charged with the efficient management of these matters and I am concerned that to follow the proper procedure in this case may result in further delays in relation to the hearing of the matter. The husband has no objection to the production of the documents and, of course, he has an ongoing immutable litigation to disclose all documents that are relevant to the proceedings. The husband’s father did not give rise to any objection to the documents being produced.
   6. There are sufficient funds in the property pool of this matter for the subpoenaed party to be properly compensation for any costs that they may have incurred in relation to the subpoena. (emphasis added)
3. I do not accept the submission that Slack FM would have set aside the subpoena but for the imminence of the hearing of the property settlement proceedings. As seen from the passages emphasised, he took account of a number of factors in deciding to order production pursuant to the subpoena.
4. As to whether, when he came to consider the costs of the application to set aside, the Federal Magistrate gave proper weight to the reasons for which he had dismissed the application to set aside, in his December reasons, Slack FM said:
   1. In my judgment in the application, I acknowledged the merits in the submission that not all the documents on the files were likely to be relevant to the proceedings and it was not for the subpoenaed party to have to attempt to identify the relevant documents.
   2. Notwithstanding I saw merit in the argument, I considered there were other reasons that, on balance, the subpoena should be complied with.
   3. The subpoenaed party seeks, either as part of the loss of time and expense incurred in complying with the subpoena or by way of costs in the application, an order that the issuing party should pay the costs of the subpoenaed party in that application.
   4. I am not persuaded that the wife, as the issuing party of the subpoena, should pay the costs of the subpoenaed party in the application or that the loss and expenses incurred in the application should form part of the loss incurred in answering the subpoena.

34. My reasons for reaching that conclusion are as follows:

1. The application to set aside the subpoena was unsuccessful. Whilst I acknowledged that there was merit in some of the submissions of the subpoenaed party in relation to one of the grounds argued, I nevertheless considered that there were other balancing factors that warranted compliance with the subpoena.
2. The documents and any privilege relating to those documents were those of the husband in the proceedings, his parents and the named entity. There is no evidence to suggest that they required the action to set aside the subpoena.

1. If the issue was proper compensation for the loss and expenses incurred in connection with compliance with the subpoena, then that could have and would have been dealt with in an orderly way without the necessity for argument about whether the subpoena should be set aside.

1. The subpoenaed party determined not to proceed in that way and proceeded with the application to set aside the subpoena and they were unsuccessful in that attempt.
2. Compliance with the subpoena in the circumstances was not, in my view, so onerous that it amounted to oppression. The documents were readily identified and although they were large in number, they could have been produced to the Court without significant prejudice to the subpoenaed party, save as to ensuring that they were properly compensated for loss and expenses.
3. I am not satisfied that the loss and expenses were so significant that it warranted setting aside the subpoena as being oppressive or that the subpoenaed party was in jeopardy of not receiving proper compensation for its loss and expenses in complying.

1. In addressing this argument for the solicitor, an important consideration is that, whatever factors favoured success of the solicitor’s application to set aside, other factors outbalanced them and the application failed. The solicitor did not appeal that result.
2. I discern no error in Slack FM’s reasons for rejecting the solicitor’s application for costs of the application to set aside, in his consideration of the significance of the factors for and against the application to set aside.
3. Mr Land pursues a number of subsidiary arguments. He argues that other conduct surrounding the application to set aside the subpoena was relevant to the issue of the costs of that application. He points out that only on the day of the hearing did the wife’s solicitor resile from seeking production of five files and indicate that production of two would be sufficient.
4. In paragraph 9 of his reasons of September 2006, Slack FM referred to the fact that there had been a change in the position of the wife during submissions, to accept as sufficient, production of the two identified files. It is obvious from the passages of his December 2006 reasons, earlier quoted, that the Federal Magistrate had referred back to his September reasons. Though in his later reasons he did not mention the wife’s solicitors’ change of position in September, I see no reason to conclude that he overlooked it as one of a number of factors that might have borne on the question of costs. The fact is that, notwithstanding the wife’s change of position, the solicitor continued to oppose the application and failed.
5. In his written submissions, Mr Land argued:
   1. The learned Federal Magistrate in paragraph 34(e) and (f) of his Reasons for Judgment dated 22 December 2006 has confused the notion of oppression, a ground relied upon by the appellant to set aside the subpoena and the number and size of the files to which the subpoena could possible relate, which are relevant to the appellant’s claim for compensation for substantial “loss or expense”. The reasoning is therefore unsound and does not provide a proper basis for refusing the appellant its costs of its application to set aside the subpoena.
6. The relevant subparagraphs of Slack FM’s reasons have already been set out. I do not accept that there is any indication that the learned Magistrate therein confused the concept of oppression as it bore upon the application to set aside the subpoena and the number and size of the files as those features related to the solicitor’s claim for loss and expense. He merely states as one of his reasons for rejecting the solicitor’s claims for costs of the application to set aside, that nothing about the number of size or files prevented either their production of them or compensation in respect of their production.
7. A further argument that Mr Land puts is that because “legal professional privilege” was not a ground upon which the application to set aside was brought, the learned Magistrate was in error when, in his reasons of December 2006, he said:
   1. ...
      • (b) The documents and any privilege relating to those documents were those of the husband in the proceedings, his parents and the named entity. There is no evidence to suggest that they required the action to set aside the subpoena.
8. In my view, however, all that Slack FM was recognising in the paragraph quoted, was the absence of a reason that might have buttressed the application to set aside (but which had not been used). In any event, the question of privilege was raised by the solicitor, before and at the time, that the application to set the subpoena aside was initiated.
9. Finally, Mr Land contends that the learned Magistrate failed to recognise the dual nature of the solicitor’s application to set aside, because that application was also for compensation for loss or expense of responding to the subpoena. There is no merit in this proposition. Slack FM recognised the two distinct issues in paragraph 34(c) earlier quoted.
10. The discretion in respect of the costs of proceedings is broad. The question of the costs of the proceedings to set aside, if viewed as part of the costs incurred by the recipient of a subpoena, is also discretionary. The principles in respect of appeals from discretionary judgments were set out by the High Court in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 504-505:

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed ...

1. As to rulings about costs in particular, Nygh J (with whom Simpson and Smithers JJ agreed) said in Robinson and Higginbottom (1991) FLC 92-209 at 78,417:

As counsel for the husband rightly submitted, this Court should be very reluctant indeed to interfere with the exercise of discretion in respect of costs...

1. The Full Court (Ellis, Strauss and Lindenmayer JJ) also said in Harris and Harris (1991) FLC 92-254 at 78,711:

...Orders for costs are peculiarly a matter which are within the discretion of the trial judge and it is only in the rarest of cases that the Full court should interfere with a costs order.

1. I am not satisfied that there is any merit in this part of the appeal.

Conclusions thus far

1. In view of what I have said of the arguments considered thus far, the appeal fails in so far as it alleges that Slack FM misconceived the issues for determination on 22 December 2006, or failed to properly consider factors relevant to the solicitor’s claim for costs of the application to set aside the subpoena. That leaves only the following question.

(iii) That the learned Magistrate wrongly disallowed various items of loss and expense claimed by the solicitor.

1. In his December reasons in respect of the reserved issues, after recounting a history of the application to set aside the subpoena, Slack FM referred himself to the “Principles relating to payment of loss and expenses incurred by a subpoenaed party”. He set out relevant rules of Court and continued:
   1. Although the rules provide for recovery for “any loss” as well as expenses, the use of the word “may” in rule 15.19 would indicate that unless otherwise prescribed by the rules, the compensation for loss both in terms of nature and quantum is discretionary.
   2. ...The authorities referred to support the principle that Courts and litigants should not expect persons who are not party to the proceedings to incur expense through loss of time without appropriate and reasonable reimbursement....
   3. Because Rule 15.19 seems to allow a discretion as to the nature and amount of the claimed loss, I consider that one of the factors that can be taken into account in the exercise of the discretion is whether both the nature of the claimed loss and expense and the quantum are reasonable.
   4. In essence the claim by the subpoenaed party is for the cost to the firm for loss of time incurred by members of the firm of the subpoenaed party to comply with the subpoena. However, it does seem clear that the claim for the loss of time may include such things as obtaining legal advice about having to answer the subpoena.
2. The learned Magistrate next turned his attention to the “Application of the Rules and principles to this application”. He expressed satisfaction both that “substantial loss or expenses had been incurred in properly complying with the subpoena” (Rule 15.20(1)(a)) and that notice that such expense would be incurred had been given (Rule 15.20(1)(b)).
3. He then turned to that part of the solicitor’s claim that related to the application to set aside, and subsequently, to that issue to which the arguments that I am now considering relate, namely “Quantum of loss or expense incurred in complying with the subpoena”. Of this, in part, he said:
   1. The schedule of charges contained in Annexure 2 of the affidavit of Mr [A] contains the itemised “fees” said to have been incurred in response to the subpoena and those fees include the loss of time by various members and employees of the firm.
   2. Ordinarily, I would have thought that the hourly rate charged by Mr [A] as Principal of the firm would include a component for the operating costs of the firm as well as profit for the firm. As I understand it, there would be no separate charge out rate for
      non-legally qualified employees of the firm.
   3. Hence to claim as he does for his charge out rate, Mr [A], to my mind, has to some extent made a double claim by also claiming “fees” for the time for clerks and managers.
   4. I accept that as a Principal of the firm it was reasonable that he would have incurred time in:
      1. receiving and examining the subpoena;
      2. instructing a clerk to search the files;
      1. inspecting the documents when retrieved;
      1. giving consideration to whether any protection or advice ought to be given to the clients of the firm on whose behalf the file was retained and whether there was any implication for the subpoenaed party;
      2. raising in correspondence with the issuing party issues about the subpoena;
      3. giving notice in writing that the conduct money was not sufficient.
   5. I also accept that the firm would have incurred expenses in:
      1. delivering the subpoenaed documents to Court;
      2. photocopying expenses;
      1. fax fees.
   6. Having regard to those matters, I propose to allow the following items in the schedule attached to the affidavit of Mr [A] filed on
      18 October 2006:

...

1. Slack FM then set out items totalling $2,130.80 and continued:
   1. In rejecting the other items not already referred to in the schedule, I did so for the following reasons:
      1. I have refused any item that pertains to the application to set aside the subpoena;
      2. there were no costs actually incurred in having the documents produced to the Court;
      1. I am not persuaded that an inspection of the documents needed to be carried out in the presence of Mr [A] because:
         1. those inspecting were officers of the Court;
         2. they were examining documents under subpoena;
         3. they were opposing parties and they inspected the documents together. I do not consider it was necessary that, as solicitors of the Court inspecting documents under subpoena to the Court, that additional supervision was required.
   2. I consider that the wife, as the issuing party, should be responsible for those costs as assessed, save for those items that relate directly to the husband, namely Items 131, 143 and 145.
   3. My reasons for reaching that conclusion are as follows:
      1. When this matter was considered by the Court in August, the husband was proposing to deliver an authority to the subpoenaed party so that he could obtain the file. It was the decision of the wife to proceed with the issue of the subpoena in the circumstances where the husband had offered a perfectly viable way for the documents to be produced.
      2. Whilst it may be argued that the husband had an obligation to disclose the documents, the evidence is that he was prepared to make proper disclosure in a timely way but it was the wife who chose to proceed with the issuing of the subpoena.
2. In his written submissions, Mr Land set out various points of principle and referred to relevant authorities concerning loss and expense recoverable by subpoenaed persons. Ms Pagani SC for the wife took no issue with many of these points. I think it unnecessary to set out most of the non-contentious propositions, as the arguments do not turn on them, except as discussed below.
3. Mr Land’s specific arguments are, firstly:

The approach taken by the learned Federal Magistrate as set out in paras. 39 and 40 of his Reasons for Judgment dated 22 December 2006 is wrong and/or unreasonable.

1. These paragraphs, earlier set out but repeated here, were:
   1. Ordinarily, I would have thought that the hourly rate charged by Mr [A] as Principal of the firm would include a component for the operating costs of the firm as well as profit for the firm. As I understand it, there would be no separate charge out rate for non-legally qualified employees of the firm.
   2. Hence to claim as he does for his charge out rate, Mr [A], to my mind, has to some extent made a double claim by also claiming “fees” for the time for clerks and managers.
2. In is written submissions, Mr Land argues:

(a) Operating costs and profit of the appellant are treated as “loss or expense” and are recoverable;

G and D and D case, supra at paras. 20,21.

(b) A charge-out rate for clerks, manager and non-legally qualified persons employed by the appellant are “expenses” and in any event are items of the scale of costs of the Supreme Court of Queensland;

cf: Deposit and Investment case, supra

(c) This therefore means that the following items of the Schedule of Costs attached to the affidavit of [Mr A] sworn 13 October 2006 should have been allowed by the learned Federal Magistrate:

6, 7, 11, 24, 25, 43.

1. Ms Pagani takes no issue with these propositions, save that she argues that the items were not “reasonable” and she questions the relevance of the Supreme Court scale.
2. Mr Land’s next argument, as appears in his written submissions is:

The reasons given by the learned Federal Magistrate in rejecting the other items in the Schedule of Costs (see para. 44 of Reasons for Judgment dated 22 December 2006) do not adequately deal with those rejected items and does not constitute a proper rejection.

1. Paragraph 44 of Slack FM’s reasons, also earlier set out but again repeated, was:
   1. In rejecting the other items not already referred to in the schedule, I did so for the following reasons:
      1. I have refused any item that pertains to the application to set aside the subpoena;
      2. there were no costs actually incurred in having the documents produced to the Court;
      1. I am not persuaded that an inspection of the documents needed to be carried out in the presence of Mr [A] because:
         1. those inspecting were officers of the Court;
         2. they were examining documents under subpoena;
         3. they were opposing parties and they inspected the documents together. I do not consider it was necessary that, as solicitors of the Court inspecting documents under subpoena to the Court, that additional supervision was required.
2. Finally, Mr Land submitted:

The learned Federal Magistrate in para. 41 of his Reasons for Judgment dated 22 December 2006 correctly identified the categories of “loss or expense” that are properly recoverable by a stranger to the litigation; but in spite of so doing, unreasonably rejected the following items of costs all of which fall within the categories properly identified by the learned Federal Magistrate in the paragraph just referred to. ...

1. Ms Pagani conceded that within the parameters he set, Slack FM ought properly have allowed to the solicitor certain further items.
2. Notwithstanding her concessions, Ms Pagani did not concede that the appeal against quantum ought succeed. She submitted that the conceded matters were counterbalanced because some of the items allowed by the Federal Magistrate ought not have been granted, either because the solicitor’s claim overall was on an indemnity basis, whereas it should not have been on any basis beyond solicitor/client, or because various items were, in their nature, unreasonable. Therefore she submitted, given that the decision was discretionary, the learned Magistrate’s decision ought not be interfered with.
3. If error is made in a discretionary decision, then the result will not be permitted to stand merely because it was within reasonable parameters: De Winter and De Winter (1979) FLC 90,605 at 78,091. In my view, Slack FM erred, as submitted by Mr Land, in his denial of separate charge-out rates for non-legally qualified employees and in disallowing a number of matters such as photocopying charges and fax fees, that in fact fell within categories that he himself had identified in paragraphs 41 and 42 of his reasons as reasonable and allowable.

Re-exercise of discretion

1. Both parties seek a re-exercise of discretion, although Mr Land indicated that his original intention had been to seek that I give broad indications of what might be allowed and what might not and the matter remitted to an officer of the court for assessment. As I pointed out during the hearing, it is often very difficult to formulate general expressions that will clearly include or exclude particular items in a bill. Additionally, that course would require further process in a matter in which the costs in my view long ago became totally disproportionate to the issues.
2. I am persuaded that I ought re-exercise the discretion in relation to the claim at least in so far as it was presented to Slack FM.
3. Before turning to the quantum of items of loss and expense incurred by the solicitor in response to the subpoena, there are some more general points to be addressed.
4. Ms Pagani in her written submissions pointed out some discrepancies in the various notices of appeal filed, in particular as to the orders which were challenged. She endeavoured to take some advantage of this by indicating consent to the setting aside of an order by the Federal Magistrate (at least an order implied from his reasons of December 2006) not to award the wife her costs of successfully resisting the setting aside of the subpoena. Ms Pagani sought that on a re-exercise of discretion I grant the wife those costs.
5. However, in my view the limits of the challenges made by the solicitor in the appeal were plain from the written submissions and I do not regard the course propounded by Ms Pagani as appropriate, if indeed it is open to me.
6. Before Slack FM, a schedule of items of loss and expense (which is annexure “A” to this judgment) was relied upon by the solicitor. The total was $25,790.40 and the date of the last item was identified as “9.10.06”. The schedule was appended to an affidavit relied upon by the solicitor, in which the deponent said “...costs for work that needs to be carried out after 10 October 2006 (the date of swearing of this affidavit) “...have not [been included]”
7. Mr Land sought to put before me a second schedule of costs (which is annexure “B” to this judgment) and which claims items from 10 October 2006 to 1 May 2007 though the items attributed to the latter date are related to the preparation of the schedule, care and consideration, and communication costs, covering the entire response to the subpoena and all the other items on the two schedules, except for earlier charges for care and consideration and communication costs. As a general description, the items in the second schedule relate to the action for recovery of loss and expense in responding to the subpoena.
8. It is not clear to me why the claim for the bulk of those costs was not made on 31 October 2006, when the question of loss and expense and the cost of the application to set aside the subpoena was at least initially argued before Slack FM.
9. Ms Pagani initially opposed Mr Land’s attempt to rely on the second schedule, but in the end acknowledged that if, as I then did, I saw fit to endeavour to dispose of all matters without remission, she would accede to that course and she made such submissions as she wished.
10. Upon more fulsome consideration, I do not consider I should deal with the claim contained in the second schedule. There has not been a hearing in respect of it at first instance. Ruling on some of the items is likely to be assisted by evidence in respect of them or at least, by the familiarity with the matter that the learned Magistrate has.
11. Moreover, if I make an order in respect of these costs, the appeal from me lies to the High Court only with special leave. I consider I should allow the appeal, make an order in respect of so much of the claim as was dealt with by Slack FM, that is, up until 10 October 2006 and return the matter for his consideration of the question of any costs of compliance with the subpoena since 10 October 2006.
12. Returning then to the question of my re-exercise of the discretion, Mr Land endeavours to persuade me that notwithstanding that I might find, as I have, no merit in the challenge to the learned Magistrate’s consideration of the costs of the application to set aside, on a re-exercise I can and should grant some costs at least in respect of that application, as reasonable loss and expense in responding to (complying with) the subpoena.
13. Mr Land placed reliance upon the decision of Bryson J in Danieletto v Khera (1995) 35 NSWLR 684. In that case a solicitor, a stranger to litigation who had been subpoenaed, incurred certain expenses consequent upon service of the subpoena, but the subpoena was never complied with, because the action to which it related was resolved. In those circumstances the relevant rule, relating as it did to the cost of compliance with subpoenas, did not strictly apply. Bryson J held that nonetheless, in accordance with basic principle, a person in the position of the subpoenaed party should be able to recover costs. In making an order for expenses, Bryson J said at 687:

In the circumstances including the extensive requisitions in the subpoena, his wish to apply to set it aside was reasonable and the expenses which he incurred to that end were also reasonable.

1. While the decision in Danieletto (supra) is authority for these propositions and while, in accordance therewith, at first instance Slack FM might have allowed the solicitor some costs in respect of the application to set aside, nothing in Danieletto (supra) indicates that, in the exercise of his discretion, the course that Slack FM took was not open to him. Indeed, upon the facts, an important difference between Danieletto (supra) and the case before Slack FM was that the solicitor in the instant case prosecuted his application to set aside to hearing, and it failed.
2. The error I have found in Slack FM’s dealing with the matter relates only to items other than costs of the application to set aside the subpoena. I do not consider that I ought revisit the question of the costs of the application to set aside the subpoena.
3. In the alternative, Mr Land isolated all of the items which he said related to compliance with the subpoena, as distinct from the application to set aside the subpoena.
4. Unfortunately, I think the item-by-item approach is difficult to implement with fairness. From when the solicitor made his decision to apply to have the subpoena set aside, up until that application was determined, the solicitor’s actions were often attributable to dual considerations, namely the claim that the subpoena should be set aside and also to compliance and the costs thereof. For example, letters sent by the solicitor related to both issues and although I am not assisted by findings of fact made by the Federal Magistrate, submissions made by counsel to me indicate that steps taken, such as Mr Land travelling to [the town ‘T’] to appear on the return date of the subpoena (but prior to the return date of the application to set the subpoena aside), were by no means necessarily the action he would have taken, had he merely been intending to comply and to seek the costs of compliance. In the circumstances, I consider I cannot simply determine appropriate costs of compliance by addressing only the items included in the bill at the amounts nominated, and either including or excluding them.
5. Before me, some statements about matters relevant to items were simply made from the bar table. No objection however was taken to this course and there seemed to be no contention on matters of fact, save in respect of whether or not Mr Land had the files with him at court on the first return date of the subpoena and I accept that he did.
6. The question of indemnity versus solicitor and client costs, raised by Ms Pagani, is not clear cut. The solicitor, like any other business person the recipient of a subpoena, is entitled to compensation and this might well reasonably be at his charge-out rate. It is really only in respect of the costs of litigation arising in respect of the subpoena that the solicitor/client scale is relevant.
7. I do not accept Ms Pagani’s submission that if any costs are to be allowed to the solicitor they ought be less tax. This in effect would deprive both the Taxation Commissioner of legitimate taxation and would advantage the wife. The matter of taxation upon such expenses as the solicitor recovers is a matter for the solicitor.
8. Care and consideration is at least a questionable expense in relation to compliance with a subpoena. While it might be that, if working for a client, on top of the solicitor’s charge-out rate care and consideration may be chargeable (at ten per cent as in the instant case), depending on the complexity and nature of the work, I am not inclined to permit it in these circumstances where essentially some documents were to be retrieved and produced.
9. In taking a broader approach, I find myself in agreement with the conclusions of Slack FM set out in paragraph 34 of his December reasons, about the position in which the solicitor was placed by the subpoena. Allowing him some time to consider his own position and to take instructions from the clients to whom the files related, the solicitor ought then reasonably have concluded that his interests lay in simply producing the two files which he considered might contain some relevant material and in recovering his costs of retrieval and production.
10. Mr Land made it clear that the solicitor regarded the subpoena as an abuse of process and decided to take that point. From that stage the solicitor intended to and subsequently did, make himself party to litigation. While it may be that in some instances such actions are compensated as a reasonable part of “compliance” with the subpoena, there are obvious conceptual difficulties in that regard, particularly if the subpoena is set aside. The costs are conceptually more readily seen as something to be determined according to the circumstances and in particular the outcome of the action to set aside. In my view, here, the solicitor did not reasonably consider the position, neither the ramifications nor the alternatives, that the subpoena placed him in. The application to set aside was an overreaction. The procedural point, that the application might have been brought and ought have been brought by notice rather than subpoena, was always of limited significance because, as Mr Land acknowledges, he did not suggest, and did not endeavour, to ascertain whether the costs of any compliance required pursuant to that procedure would have been less than those incurred in complying with the subpoena.
11. Though taking a broad approach, it is useful to refer to the groups of items used by Mr Land. Items 6 and 7 (totalling $123.75) in my view clearly related to the retrieval. Items 8, 9, 10 and 11 (totalling $717.75) related to the solicitor’s consideration of the subpoena, the nature and amount of work involved and the allocation of responsibility for that work. In my view, this was a necessary part of compliance with the subpoena and would seem to comprise items excluded by Slack FM under the mistaken view that an overall charge made by the principal, would include charge-out rates for other personnel. Similarly, items 24 and 25 (totalling $66).
12. Items 14, 15, 16, and 17 (totalling $114.40) directly relate to the receipt of the subpoena and ought be allowed to some extent. However, items 16 and 17 charge for perusal of hard copy of what had already been received by way of fax and charged for and allowed in items 4 and 5.
13. On the other hand, Slack FM allowed item 18 at $396.00, this being a letter to the wife’s solicitors “addressing issues of insufficient conduct monies, subpoena too wide and oppressive etc.” This allowance might be somewhat generous to the solicitor, in that the contents of the letter were at least partly concerned with those matters which ultimately encouraged the solicitor to unsuccessfully apply to set aside the subpoena.
14. The following batches of items, for example 32 – 43, 54 – 66 and 72 – 82 involve dual factors. The actions of the solicitor charged for in those items relate both to the intention to apply set to aside the subpoena and matters of compliance. For example, there is some strength in Ms Pagani’s submission that Mr Land’s attendance at [the town ‘T’] on the return date of the subpoena, when he already intended to file an application to set aside, would not have been necessary if he intended simply to produce the two files which he considered might contain some relevant material.
15. Like Slack FM, and for the same reasons, I do not consider it reasonable that the solicitor supervised inspection by other solicitors of the files produced.
16. Item 140 is for a partner drawing the first affidavit for recovery of loss and expense. Of course this process was extended by the amount of work done in respect of the application to set aside, but something ought be allowed for this.
17. In my view, most of these expenses would not have been incurred if the solicitor had intended to merely produce the two files for inspection. I make some allowance for some communication between the solicitor and the solicitor for the wife and between the solicitor and the court, as related to production and inspection.
18. Allowing items 6-11 at $841.50, items 24 and 25 at $66.00, $75.00 for items 14-17, $150.00 for item 18 (that is $246.00 less than was allowed by Slack FM), $130.00 for items 32-43, $60.00 for items 54-66, nothing for items 72-82, items 140 and 147 at $500.00, items 141, 144 and 146 at $353.10 adds to the amount otherwise awarded by Slack FM; $1,779.60. I round the figure to $1,800.00.
19. While this figure is rather specific, in arriving at it I have balanced various considerations. For example, in making no further allowance for other items, such as an overall charge for communication costs and some other minor outlays, I have been conscious that the photocopying charge in item 144 is higher than scale.

Costs of the appeal

1. I indicated that I would hear submissions about these costs after I had delivered the substantive judgment. The orders include provision for written submissions.

I certify that the preceding eighty-five (85) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.

Associate:

Date: 15 January 2008