NMFM Property Pty Ltd v Citibank Ltd (No 9) [1999] FCA 638

FEDERAL COURT OF AUSTRALIA

NMFM Property Pty Ltd v Citibank Ltd (No 9) [1999] FCA 638

PRACTICE AND PROCEDURE – subpoena to non-party in Melbourne to produce documents in Sydney – third party's claim of lawyer-client privilege – as a result of "guideline" reasons for judgment, claim of lawyer-client privilege no longer pressed – appropriate order for costs.

Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284

Hadid v Lenfest Communications Inc (1997) 144 ALR 73

Deposit & Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267

Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194

Gribbles v Health Insurance Commission (1997) 80 FCR 284

`

NMFM PROPERTY PTY LIMITED (formerly called "National Mutual Property Services (Australia) Pty Ltd") v CITIBANK LIMITED (formerly called "Citibank Savings Limited")

NG 765 of 1994

LINDGREN J

7 MAY 1999

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 765 OF 1994

BETWEEN: NMFM PROPERTY PTY LIMITED (formerly called "National Mutual Property Services (Australia) Pty Ltd")

First Applicant

NATIONAL MUTUAL ASSETS MANAGEMENT LIMITED

Second Applicant

THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED

Third Applicant

AND: CITIBANK LIMITED (formerly called "Citibank Savings Limited")

Respondent

FIRST CROSS-CLAIM

CITIBANK LIMITED (formerly called "Citibank Savings Limited")

Cross-Claimant

[Lance Kelly Financial Management Pty Ltd, removed as a party]

First Cross-Respondent

LANCE KELLY

Second Cross-Respondent

[Dennis Jones & Company Pty Limited, removed as a party]

Third Cross-Respondent

DENNIS JONES

Fourth Cross-Respondent

TONY BAHR

Fifth Cross-Respondent

ALAN J BLEE

Sixth Cross-Respondent

[Wayne Fitcher, removed as a party]

Seventh Cross-Respondent

NORMAN KIRBY

Eighth Cross-Respondent

PAUL KENNEDY

Ninth Cross-Respondent

PETER KINROSS

Tenth Cross-Respondent

JAMES NAUGHTON

Eleventh Cross-Respondent

[D Rodstead, removed as a party]

Twelfth Cross-Respondent

[G Blaiklock, removed as a party]

Thirteenth Cross-Respondent

ERIK JAMES BUTTARS

Fourteenth Cross-Respondent

ROMMEL HACOPIAN

Fifteenth Cross-Respondent

CRAIG BYRON ROBERTS

Sixteenth Cross-Respondent

ANNA WASS

Seventeenth Cross-Respondent

ALLAN STEWART CRAWFORD

Eighteenth Cross-Respondent

PERMANENT TRUSTEE COMPANY LIMITED

Nineteenth Cross-Respondent

AMERICAN HOME ASSURANCE COMPANY

Twentieth Cross-Respondent

LAWRENCE C GRIMA

Twenty-first Cross-Respondent

SECOND CROSS-CLAIM

LANCE KELLY

Cross-Claimant

CITIBANK LIMITED (formerly called "Citibank Savings Limited")

Cross-Respondent

THIRD CROSS-CLAIM

DENNIS JONES

Cross-Claimant

CITIBANK LIMITED (formerly called "Citibank Savings Limited")

Cross-Respondent

JUDGE: LINDGREN J

DATE OF ORDER: 7 MAY 1999

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The respondent ("Citibank") pay to Arthur Robinson & Hedderwicks ("ARH") an amount to compensate them for such expense or loss as was reasonably incurred or sustained by them in complying with the subpoena issued by Citibank on 27 July 1998, including legal costs on a solicitor client basis of appearing on 19 August and, if the facts make it appropriate, 31 August (but not travel from and to Melbourne) and of considering and deciding whether a claim of lawyer-client privilege should be made including, but only if the taxing officer considers it was necessary, the taking of counsel's advice. 2. ARH pay Citibank's costs arising from the making and pressing of the claim of lawyer-client privilege, including Citibank's costs of resisting that claim and of the hearing of argument on the claim. 3. Otherwise there be no order as to costs to the intent that Citibank and ARH bear their own costs. 4. ARH pay two thirds of Citibank's costs of the present motion. 5. Otherwise the motion be dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 765 OF 1994

BETWEEN: NMFM PROPERTY PTY LIMITED (formerly called "National Mutual Property Services (Australia) Pty Ltd")

First Applicant

NATIONAL MUTUAL ASSETS MANAGEMENT LIMITED

Second Applicant

THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED

Third Applicant

AND: CITIBANK LIMITED (formerly called "Citibank Savings Limited")

Respondent

FIRST CROSS-CLAIM

CITIBANK LIMITED (formerly called "Citibank Savings Limited")

Cross-Claimant

[Lance Kelly Financial Management Pty Ltd, removed as a party]

First Cross-Respondent

LANCE KELLY

Second Cross-Respondent

[Dennis Jones & Company Pty Limited, removed as a party]

Third Cross-Respondent

DENNIS JONES

Fourth Cross-Respondent

TONY BAHR

Fifth Cross-Respondent

ALAN J BLEE

Sixth Cross-Respondent

[Wayne Fitcher, removed as a party]

Seventh Cross-Respondent

NORMAN KIRBY

Eighth Cross-Respondent

PAUL KENNEDY

Ninth Cross-Respondent

PETER KINROSS

Tenth Cross-Respondent

JAMES NAUGHTON

Eleventh Cross-Respondent

[D Rodstead, removed as a party]

Twelfth Cross-Respondent

[G Blaiklock, removed as a party]

Thirteenth Cross-Respondent

ERIK JAMES BUTTARS

Fourteenth Cross-Respondent

ROMMEL HACOPIAN

Fifteenth Cross-Respondent

CRAIG BYRON ROBERTS

Sixteenth Cross-Respondent

ANNA WASS

Seventeenth Cross-Respondent

ALLAN STEWART CRAWFORD

Eighteenth Cross-Respondent

PERMANENT TRUSTEE COMPANY LIMITED

Nineteenth Cross-Respondent

AMERICAN HOME ASSURANCE COMPANY

Twentieth Cross-Respondent

LAWRENCE C GRIMA

Twenty-first Cross-Respondent

SECOND CROSS-CLAIM

LANCE KELLY

Cross-Claimant

CITIBANK LIMITED (formerly called "Citibank Savings Limited")

Cross-Respondent

THIRD CROSS-CLAIM

DENNIS JONES

Cross-Claimant

CITIBANK LIMITED (formerly called "Citibank Savings Limited")

Cross-Respondent

JUDGE: LINDGREN J

DATE: 7 MAY 1999

PLACE: SYDNEY

REASONS FOR JUDGMENT (Judgment No 9 – subpoena and lawyer-client privilege) (ex tempore) 1 There is listed for judgment a motion by a non-party firm of solicitors who were subpoenaed to produce documents. The motion seeks an order that the party issuing the subpoena pay compensation to the solicitors. 2 More precisely the motion is brought by notice of motion filed 8 April 1999 and returnable on 29 April 1999, by Arthur Robinson & Hedderwicks ("ARH") and seeks an order that the respondent ("Citibank") pay ARH first, expenses and loss in complying with a subpoena for production dated 27 July 1998 in the amount of $26,681.27 pursuant to O 27, r 4A(1), or, in the alternative, an amount to be fixed by the taxing officer to compensate ARH for loss or expense reasonably incurred or lost by them in complying with the subpoena. As well, ARH seek an order that Citibank pay their costs of the present motion. 3 Order 27, subrules 4A(1) and (2) provide as follows: "(1) Where a person named in a subpoena is not a party to the proceedings and he incurs substantial expense or loss in complying with the subpoena the Court or a Judge may order that the party who requested the issue of the subpoena pay to that person, in addition to any amount which the person served with the subpoena is entitled to be paid pursuant to Order 27 rule 3 or the Second Schedule, an amount to compensate him for such expense or loss as is reasonably incurred or lost by that person in complying with the subpoena. (2) Where an order is made under sub-rule (1) the Court or a Judge shall either fix the amount or direct that the amount shall be fixed by the taxing officer." 4 The subpoena in question required ARH to produce: "All files, correspondence, memoranda and notes for the period 1 January 1992 to 30 June 1994 concerning: (a) the claim or claims for professional indemnity insurance by or on behalf of the National Mutual Life Association of Australasia Ltd ['NMLA'], National Mutual Assets Management Ltd ['NMAM'], National Mutual Property Services (Australia) Pty Ltd ['NMPS'] and/or their agents or authorised representatives in respect to negatively geared property trust plans; (b) the Australian Securities Commission investigation of NMAM; (c) the claim for compensation by or on behalf of D J & B Booker and P J & K R Booker against [NMLA, NMAM and/or NMPS]; (d) the claim for compensation by or on behalf of P J & L A Carrol against NMLA, NMAM and/or NMPS; and (e) the claim for compensation by or on behalf of L N Potts against NMLA, NMAM and/or NMPS." 5 The subpoena was served on 3 August 1998 and was returnable on 19 August 1998. It was stood over to 31 August and then to 4 September. On 23 September 1998 I published Reasons for Judgment in relation to ARH's claim of lawyer-client privilege. 6 I will not summarise those Reasons. ARH's clients were not the National Mutual companies but their "captive insurer" NM Insurances (Singapore) Pte Limited and London underwriters. The issue which had to be considered by ARH was whether by reason of the "common interest" of their clients and NM, a claim of lawyer-client privilege was able to be made and should be made. In circumstances set out in my earlier Reasons, I gave, in effect, ten "guidelines" which it seemed to me should govern the determination of the claim. Happily, the parties were able to resolve the matter in accordance with those Reasons. It is common ground that ARH produced for inspection all of the documents in respect of which they had previously been maintaining the claim of lawyer-client privilege. In other words, in substance that claim was no longer pressed in the light of my "guideline" Reasons. 7 On the hearing of the present motion, ARH have referred to several authorities, the relevance of which is not in dispute. They are Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 (Lockhart J), Hadid v Lenfest Communications Inc (1997) 144 ALR 73 (Hill J) and Deposit & Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267 (Bainton J). I think it clear by reference to such authorities that there should at least be an order that ARH be paid an amount to compensate them for their actual cost reasonably incurred of identifying the documents covered by the subpoena, assembling them and producing them to the Court. 8 The source of the present dispute relates to the legal argument which was waged over the privilege issue. ARH submit that there was a seriously arguable issue of some difficulty and that they were justified in making the claim and bringing it before the Court for determination, even though they abandoned it as a matter calling for adjudication. Citibank submits that costs should follow the event, that is, that ARH should not have any costs associated with the making of the claim for lawyer-client privilege and that Citibank should have its costs of resisting that claim. 9 The claim of lawyer-client privilege was not finally determined on 23 September last. The Courts have on occasion been confronted with an application for costs in a situation in which an application has not gone to a final determination but has been settled; see, for example, Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 (Hill J) and Gribbles v Health Insurance Commission (1997) 80 FCR 284 (Finkelstein J) (a difference of approach or emphasis is revealed in those respective judgments). 10 The present case appears to be in a different category from both of those cases: here I know that the claim of lawyer-client privilege was not pressed and that ARH made available for inspection by Citibank every document that had been in dispute. That is, Citibank obtained the full benefit of the subpoena without any element of compromise on its part. Prima facie on the issue of lawyer-client privilege, ARH should pay Citibank's costs. 11 The matter is, however, not quite so straightforward because the authorities support the proposition that ARH may be entitled to be compensated for considering the issue of lawyer-client privilege and reaching a decision on it (in the present case, a supposed decision not to pursue the claim) cf Hadid v Lenfest Communications Inc, above and Deposit & Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell & Co, above. I think that the necessity of considering and resolving the issue to which I referred earlier arose naturally from service of the subpoena and was a cost of complying with it. It will be a matter for the taxing officer whether that cost properly included the taking of counsel's advice. It is clear that the taxation must proceed on the basis that the advice would have been against pursuing the claim. 12 Another complicating feature for the taxing officer to consider is that the precise issue as between ARH and Citibank may not have crystallised until a time between the subpoena's return date, 19 August, and the second appearance on 31 August. A further consideration is that the investigation of the issue of lawyer-client privilege may not reasonably have been able to be resolved in the sixteen days between 3 August and the return date of 19 August. The point is that even assuming that ARH had decided, as they should have done, not to press a claim of lawyer-client privilege after due investigation, they may not reasonably have been able to come to that decision within the sixteen days between service of the subpoena on 3 August and its return date of 19 August. But if not, they should, in advance of 19 August, have advised Citibank that they were investigating the question of lawyer-client privilege and would need a little more time to resolve their position for which purpose they would seek Citibank's consent to a short adjournment. 13 In the result, I think that while the question of the amount of compensation recoverable is one to be determined by the taxing officer, the correct approach to the present question is to ask how much of the expense or loss of ARH can be said to have been reasonably attributed to the consideration of the issue of lawyer-client privilege and the notional resolution of that issue against the existence of the privilege. I would have thought that the expense or loss should be assessed along the lines that ARH are to be compensated for an appearance on the return date and if reasonably necessary, (I do not have sufficient facts to decide), a further appearance on 31 August to announce that the claim was not being pressed, and the reasonable cost and expense of considering, and deciding against the making of, the claim for lawyer-client privilege down to 19 August or whatever date shortly afterwards was reasonably necessary. But ARH should be ordered to pay Citibank's costs of litigating the privilege issue. 14 To express the matter differently, the taxation should proceed on the assumption that ARH did as they should reasonably have done to comply with the subpoena, that is, identified the documents covered by the subpoena; assembled them; considered and resolved the issue of lawyer-client privilege; to that end, if necessary sought an adjournment on the return date; abandoned the claim shortly afterwards; and advised Citibank of that abandonment on or before 31 August. ARH should not have their costs for making and persisting in the claim; on the contrary, they should be ordered to pay Citibank's costs of resisting the claim, including the costs of the hearing of argument on the claim. 15 Accordingly, the Court orders that: 1. The respondent ("Citibank") pay to Arthur Robinson & Hedderwicks ("ARH") an amount to compensate them for such expense or loss as was reasonably incurred or sustained by them in complying with the subpoena issued by Citibank on 27 July 1998, including legal costs on a solicitor client basis of appearing on 19 August and, if the facts make it appropriate, 31 August (but not travel from and to Melbourne) and of considering and deciding whether a claim of lawyer-client privilege should be made, including, but only if the taxing officer considers it was necessary, the taking of counsel's advice. 2. ARH pay Citibank's costs arising from the making and pressing of the claim of lawyer-client privilege, including Citibank's costs of resisting that claim and of the hearing of argument on the claim. 3. Otherwise there be no order as to costs to the intent that Citibank and ARH bear their own costs. 4. ARH pay two thirds of Citibank's costs of the present motion. 5. Otherwise the motion be dismissed. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate: Dated: 7 May 1999

Counsel for the subpoenaed party, Arthur Robinson & Hedderwicks: Mr D Ryan

Solicitor for the subpoenaed party, Arthur Robinson & Hedderwicks: Dunhill Madden Butler

Counsel for the Respondent: Mr S R Epstein

Solicitor for the Respondent: Deacons Graham & James

Date of Hearing: 29 April 1999

Date of Judgment: 7 May 1999