Blackstone Brief Volume 17
BStone Admin - 17 Nov 2019
What are the reasonable costs of complying with a Subpoena to Produce?
Mike Dudman is a Director of Blackstone Legal Costing, one of the largest legal costing firms in Australia with experienced costs lawyers and consultants in Sydney, Melbourne and Brisbane. Responsible for Blackstone’s Sydney, Brisbane and Gold Coast offices, Mike regularly gives evidence in Federal and Supreme Court matters.
Costs of complying with a Subpoena to Produce – What’s recoverable?
This question was answered recently in proceedings in which one of our own specialists accredited in costs law, Mike Dudman, provided exert evidence. In this month’s edition Mike sheds light on what can and can’t be claimed.
There is a common misconception that, when compelled to produce documents to the Court in complying with a Subpoena to Produce issued to a non-party to proceedings, that party is entitled to recover all costs incurred in considering the subpoena and its scope, reviewing all relevant documents, sorting out those requiring production and then producing these to the Court. This is a misconception that compliance costs are recoverable on something akin to an indemnity costs basis.
In my experience, it is true that a Court’s approach to compliance costs tend to be more generous than its approach to the parties to a dispute. Nevertheless, as the relatively recent case of Money Max Int Pty Limited (Trustee) v QBE Insurance Group Limited (No 3)  FCA 2101 illustrates, costs incurred by a non-party to proceedings must always be reasonable.
Principles established In Fuelxpress Ltd v L M Ericsson Pty Ltd (1987) 75 ALR 284 have been consistently followed in all jurisdictions. In Fuelxpress, Lockhart J said (at ):
The intent of r 4 A [the relevantly equivalent rule to r 667(1) of the Court Procedures Rules] is to compensate a person subpoenaed to produce documents for expense or loss reasonably incurred in complying with the subpoena. It is not the case of a successful party to litigation seeking recovery of costs where the distinction of solicitor and client costs on the one hand and party and party costs on the other is observed by taxing officers. It is a case of a third party seeking compensation for what it has actually cost it in expense or loss in complying with the subpoena. In those circumstances I think it is appropriate in this case that the legal costs and expenses incurred by DMR in and about compliance with the subpoena (including its costs of this motion) and in and about the preparation of the bill for taxation and attending to the taxation should be on a solicitor and client basis.
Following Fuelxpress, his Honour Justice Refshauge conveniently summarised costs recoverable by a non-party incurred in complying with a Subpoena to Produce in the A.C.T. Supreme Court proceedings Taylor v Dixon Advisory Limited & Ors  ACTSC 161 (22 December 2010) where he said, at :
Thus, the principles to be applied seem to be that the costs of compliance with a Notice for Non-Party Production, payable on an indemnity basis so long as they have been reasonably incurred, include:
• if the matter is complex and more so than the ordinary case, the costs of advice about its validity and the extent of compliance required;
• correspondence or attendances with the issuing party about its terms and whether they can be narrowed or production of the documents completed in a particular way;
• advice about whether documents are confidential or subject to legal professional privilege;
• correspondence and attendance to negotiate the terms of access to the documents sought, including the formulation of undertakings as to confidentiality;
• attendances when the documents are produced, though this will be ordinarily by post;
• any necessary attendances at court to ensure those arrangements are effected;
• attendances to ensure undertakings have properly been given and compliance is secured; and
• preparing, negotiating and having taxed a bill of costs for such costs and attending on such taxation.
Costs of work which is not to be characterised as compliance with the Notice, such as challenges to its validity, the filing of an affidavit under r 664, and correspondence on attendances in relation to other matters, with an enforcement of a costs order following taxation, should be paid on an ordinary party/party basis, unless the court considers in the particular circumstances that some other order is warranted.
Hence, it is now settled law that a person who seeks to resist or comply with a subpoena is entitled to have their costs and expenses reimbursed so that they are not out of pocket as a result: ASADA v 34 Players and One Support Person (No 2)  VSC 14; Prakash v Nationwide News Pty Ltd (Ruling No 6)  VSC 331.
This was specifically stated in Money Max Int Pty Limited (Trustee) v QBE Insurance Group Limited (No 3)  FCA 2101 (20 December 2018) (at ).
Costs sought must nevertheless be reasonable, and some features of a claim for costs (such as bulk time entries) will reduce reliability of the claim and, consequently, the costs allowed for the work undertaken.
Other factors will reduce costs claimed, including where work has been unnecessarily outsourced by the non-party to their lawyers at higher hourly rates, in which case related costs may be reduced to the non-party’s rate, or if work not specifically related to compliance is claimed, in which case it may be recoverable on the ordinary “party and party” basis.
In the Money Max proceedings PricewaterhouseCoopers (PwC) had been issued a subpoena to produce documents to the Federal Court. In responding to the subpoena, issued at the Applicant’s request, PwC sought orders that subpoena costs be assessed in the amount of $132,333 through a lump sum costs assessment procedure, and that it be allowed $26,842 for costs incurred in the preparation of its lump sum costs application. The applicant asserted that a reasonable lump sum costs assessment would be approximately $39,774.
In allowing $90,000 for the compliance costs and $17,000 for the costs of the gross sum application, salient points of judgment delivered by the Honourable Justice Murphy include:
- The use of a lump sum costs procedure is not limited to lengthy and complex cases where the process of taxation is likely to be unduly protracted or expensive, but may be appropriate where the “simplicity of the dispute makes a lump sum appropriate”.
- When awarding costs on a lump sum pursuant to Rule 40.22, evidence relating to costs must be sufficiently detailed and must identify the components of the costs incurred and how they have been calculated (Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus  FCA 1878 at  (Flick J)) and the Court must be sufficiently confident that the approach taken to estimate costs is logical, fair and reasonable: Beach; Seven Network Ltd v News Ltd  FCA 2059 at  (Sackville J); WM Wrigley JR Company v Cadbury Schweppes Pty Ltd  FCA 1186 at  (Sundberg J).
- Although Rule 24.22 of the Federal Court Rules 2011 (Cth) entitles a person complying with a subpoena to have their costs and expenses reimbursed so that they are not “out of pocket” as a result, if the task of reviewing documents for relevance is likely to have been less expensively and more efficiently performed by the non-party itself, rather than by its lawyers, and if legal advice was not required outside the “ordinary case”, costs of doing so will be reduced to rates more akin to paralegal work in accordance with the overarching purpose of civil practice and procedure provisions set out in s 37M of the Federal Court of Australia Act 1976.
Ultimately, his Honour in Money Max reduced PWC’s costs on a broad brush basis, noting bulk time entries reduced their reliability, holding that corresponding about the costs of compliance is not a cost incurred in compliance and finding that costs of $132,333 were not proportionate to the tasks of reviewing 9,000 emails and producing 1,267 documents.
Whilst the $7,000 in fees charged by Blackstone Legal Costing relating to evidence relied upon in the gross sum application were considered reasonable (and were allowed in full), other costs of the application were reduced from $19,842 to $10,000 as the former amount was not considered to be reasonable and proportionate for the preparation of short (three-page) submissions and a short affidavit.
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