M-H Engineering Solutions Pty Ltd t/as LMF Earthmoving v Michael John Rolfe & Ors

This judgment concerns a dispute over the amount of reasonable loss or expense in complying with a subpoena.

There are three Notices of Motion before this Court. They are one dated 10 February 2022 that relate to the costs of producing documents in answer to a subpoena before the Registrar. On 10 February 2022, the subpoenaed party filed a Notice of Motion that sought an order that the plaintiff pay $17,000 on account of reasonable expenses incurred by the subpoenaed party. By amended Notice of Motion filed 27 June 2022, Mr Farshad Amirbeaggi, the subpoenaed party, seeks to review orders made by Registrar Jones (‘the Registrar’) dated 30 May 2022 concerning payment of expenses prior to the production of documents to him by a third party. Mr Armibeaggi also filed a Notice of Motion seeking his costs of production.

The first plaintiff is M-H Engineering Solutions Pty Ltd (‘M-H Engineering’). The second plaintiff is Stephen Michael Rolfe who is a director of the first plaintiff (‘the plaintiffs’). The first defendant is Michael John Rolfe. The second defendant is Leetecia Yvonne Rolfe (‘the defendants’). The first and second defendants are husband and wife and the parents of the second plaintiff. The parties relied on a Court Book (‘Ex A’) and some documents that were omitted from the Court Book (‘Ex 1’).

These proceedings concern a claim by M-H Engineering and Stephen Rolfe for possession of chattels, or in the alternative, a claim for damages, restitutionary damages and equitable compensation for wrongful detention of chattels against the first and second defendants. The chattels comprised various vehicles and equipment used in an earthmoving business. Michael Rolfe and M-H Engineering had brought earlier Supreme Court proceedings against George Zacharia Group for the return of various items of earthmoving machinery which had been seized. Some of those items were returned to M-H Engineering and the first defendants.

On 20 January 2022, the first plaintiff, M.H. Engineering issued a subpoena addressed to Farshard Armibeaggi, of Yates Beaggi lawyers. Farshard Armibeaggi is a solicitor (‘the subpoenaed party’).

The schedule of the documents or things to be produced in the Schedule are as follows:

In the plaintiffs’ Notice of Motion filed 10 February 2022, they sought an:

In my view order (3) seeking to issue an arrest warrant against the subpoenaed party in this case, a solicitor of this court, seems extreme and unnecessary.

In the Notice of Motion filed 10 February 2022, the subpoenaed party seeks an:

Uniform Civil Procedure Rules (NSW) Part 33, r 33.11 reads:

It is now convenient that I briefly summarise the relevant portions of correspondence between the parties. It reads like a game of brinkmanship over the amount payable for the cost of producing documents in answer to the subpoena. The correspondence is as follows:

The email from the plaintiffs’ solicitors to the subpoenaed party dated 2 February 2022 reads:

The email from the subpoenaed party to the plaintiffs’ solicitors dated 2 February 2022 reads:

The mail from the plaintiffs’ solicitors to the subpoenaed party dated 2 February 2022 reads:

The email from the subpoenaed party to the plaintiffs’ solicitors dated 2 February 2022 reads:

The email from the subpoenaed party to the plaintiffs’ solicitors dated 3 February 2022 reads:

The email from the subpoenaed party to the plaintiffs’ solicitors dated 11 February 2022 reads:

In the affidavit of the subpoenaed party filed 9 March 2022, paragraphs [22]-[24] read:

The email from the plaintiffs’ solicitors to the subpoenaed party dated 16 March 2022 reads:

The significance of this letter dated 16 March 2022 is that the documents now required to be produced had been specifically identified by the plaintiffs’ solicitors. The copies of all pleadings and affidavits that were read in the prior proceedings were no longer sought. The task for the subpoenaed party at this point became a much less onerous task by the plaintiffs’ offer. However, this offer was not accepted by the subpoenaed party within the time specified. However, it is my view that this compromise narrowed the scope of documents produced and consequently meant that the amount of time that would be required for the subpoenaed party to produce the documents would be less.

The email from the plaintiffs’ solicitors to the subpoenaed party dated 8 April 2022 reads:

In the subpoenaed party’s outline of submissions filed 22 April 2022, it was stated:

The Review of the Registrar’s decision

Rule 49.19 of the Uniform Civil Procedure Rules 2005 sets out the review of a Registrar’s decision. It reads:

A review is not equivalent to an appeal and no error or material error is required for the Court, on review, to reach a different determination. The Court must exercise its own discretion (Tomko v Palasty (No. 2) (2007) 71 NSWLR 61, Basten JA at [43]-[48]: Hodgson JA at [5]-[10]; Davies J in AMV Australia Pty Ltd v Premier Compensation Lawyers Pty Ltd [2020] NSWSC 446 at [28]- [29]).

Although error is not required to be shown, there must be a reason to depart from the orders made by the Registrar. In this case, it was alleged that there was error on the part of the Registrar in that she failed to take into account a relevant consideration that was within her discretion to consider, particularly in respect of the ordering of costs under both Notices of Motion. Such a relevant consideration was the terms of the agreement reached between the parties in respect of the Subpoena and the subpoenaed party’s costs and expenses.

The Registrar’s reasons dated 30 May 2022 in relation to costs of the two motions dated 30 May 2022 are as follows:

The parties referred to Bauhaus Pyrmont Pty Ltd (In Liq) [2006] NSWSC 253 (‘Bauhaus’); Hall v Donlon [2011] NSWSC 1088 at (‘Hall’); In the matter of Aquaqueen International Pty Limited [2016] NSWSC 453 (‘Aquaqueen’); and Florida Kitchens Pty Ltd v Number One Marble and Granite [2019] NSWSC 574 (‘Florida Kitchens’).

In Bauhaus, Austin J stated at [9], [15], [16] and [18]:

In Hall, Brereton J stated at [5]:

In Aquaqueen, Kunc J quoted Bauhaus with approval at [7]- [8]. His honour stated:

Kunc J ordered Mr Penson to provide security for the recipient of subpoenas, Messrs Devine and Hoare, of $1,300 and $1,000 respectively, in respect of their reasonable costs of complying with the subpoena addressed to each of them.

In Florida Kitchens at [36], I said:

The plaintiff’s submissions – costs

The plaintiff submitted that the subpoenaed party’s submissions presuppose that it was always reasonable for him to resist production of documents on the basis he ought to be paid first.

The solicitor submitted that the Registrar did not record that the parties had agreed that payment was to be made prior to production, and as a consequence there was no basis for the relief granted.

The plaintiff’s argued that it is beside the point that M-H Engineering agreed to make payment prior to production. The plaintiff drew attention to commercial agreement reached in the face of steadfast resistance to production. It is argued that M-H Engineering was forced into bringing an application to achieve compliance with the subpoena and achieved success in doing so. The plaintiff further posits the submission made by the subpoenaed party that the relief sought was not relevant to compliance with the subpoena, which ignores the fact that M-H Engineering achieved the very thing it set out to do - that is, require the subpoenaed party to comply with the subpoena. It was further submitted that M-H Engineering does not, in any event, accept that the relief sought was irrelevant, and referred to paragraphs [21]-[24] of its submissions as to costs filed on 3 May 2022, and the authorities cited therein.

The plaintiff submitted that, having achieved an outcome on its motion in its favour, M-H Engineering was entitled to the usual order as to costs.

As McHugh J stated in Oshlack v Richmond River Council (1998) 193 CLR 72 at [67]:

The plaintiff asserted that the Registrar was correct to find that the subpoenaed party ought to pay the costs of M-H Engineering, and that finding should not be disturbed by the Court.

The Registrar found that M-H Engineering made an offer to settle compliance costs on 16 March that was accepted by the subpoenaed party on 8 April. On that basis, M-H Engineering was ordered to pay the subpoenaed party’s costs up to 16 March on the ordinary basis, and that the subpoenaed party pay M-H Engineering’s costs thereafter on the indemnity basis.

The plaintiff submitted that while the communication by the subpoenaed party on 8 April did not explicitly convey that he ‘accepted’ M-H Engineering’s earlier offer (which had expired), it achieved the very same thing. In doing so, the subpoenaed party achieved an outcome no better than that as had already been offered. On ordinary principles, costs should follow the event.

The Registrar also made a further finding relevant to the discretion to award costs. The Registrar’s decision to order indemnity costs accords with the authorities cited above, including the decision of Austin J in Bauhaus that relied upon by the subpoenaed party.

The subpoenaed party submitted that because he achieved success on his motion, it cannot be said to have been premature. To the extent that there was any success, it came as a result of a commercial compromise between the parties following the filing of the motion by M-H Engineering, whereby M-H Engineering offered to pay $1,000, which was taken up by the subpoenaed party. M-H Engineering accepts that it should pay the subpoenaed party up to the date it made that offer (16 March), a position that it articulated in its earlier cost submissions. However, the plaintiff submitted that since the agreement between the parties that was subsequently reached achieved the very outcome M-H Engineering had proposed, as a matter of discretion, there is no basis for the subpoenaed party to recover any costs after that date, and he ought to pay M-H Engineering’s costs after that date on the indemnity basis.

As for M-H Engineering also relying on its reference to Calderbank principles (in its offer of 16 March), it must be established that the offer represented a genuine compromise, and that it was unreasonable for the party against whom the order was made not to accept it.

As to the offer being a genuine compromise, the subpoenaed party was required to produce pleadings and affidavits read in earlier proceedings in which the subpoenaed party had been the solicitor for a party. M-H Engineering originally estimated that was a task that would take an administrative assistant three hours at $100 per hour, and offered $300. That offer was later increased to $450. Having then confined the scope of production to one pleading, and eight Affidavits, M-H Engineering then offered $1,000.

The plaintiff characterised the offer of $1000 as a genuine, and generous increase to the initial position of M-H Engineering on the costs of compliance.

As to whether rejection of the offer was unreasonable, between the date of the offer being made (16 March 2022), and the date the subpoenaed party confirmed that he would accept payment of $1,000 (8 April 2022), no evidence has been provided by the subpoenaed party as why the offer was not accepted before its expiry on 30 March 2022. There was sufficient time to permit the subpoenaed party to consider the offer, and in the particular circumstances of this dispute, all relevant evidence had been seen by M-H Engineering in support of its motion.

The plaintiff suggested that a a significant factor in favour of the indemnity costs order was the point raised by the Registrar, and as articulated above, that it was never reasonable for the subpoenaed party to have resisted production by demanding prepayment.

Ultimately, the parties reached a compromise on compliance expenses. That came about by reason of an offer by M-H Engineering on 16 March 2022. The plaintiff submitted the Registrar was correct in her costs decision concerning the motion by the subpoenaed party, and that decision should not be disturbed by the Court.

Ultimately, the plaintiff submitted that the Court should not disturb any of the orders made by Registrar Jones. On that basis, the plaintiff seeks that the motion by the subpoenaed party seeking review under UCPR r. 49.19 be dismissed, with the subpoenaed party to pay the costs of M-H Engineering on the ordinary basis.

The Registrar noted that the parties had reached agreement on the costs to be paid to the subpoenaed party. The subpoenaed party submitted that what the Registrar did not note was that such sum was to be paid prior to the subpoenaed documents being produced and that the scope of the documents to be produced had been substantially altered, thereby reducing the amount of time required in answering the subpoena. The subpoenaed party asserted that the Registrar did not take into account the relevant considerations.

The subpoenaed party also submitted that as a consequence of that agreement, there was no basis for granting any relief sought in the plaintiffs’ motion. The plaintiffs’ had, as the subpoenaed party alleged, relied upon provisions that were not applicable and irrelevant, and were opposed.

In any event, by reason of the agreement that the Registrar noted, it was argued that there was no need for determination of any of the substantive issues raised by the motion. Nonetheless, the Registrar proceeded to do so.

The Registrar referred to the decision of Hall in which Brereton J held that the absence of the payment of costs is not a legitimate basis to object to production. However, the solicitor submitted that the court has recognised that there may be circumstances in which costs are to be paid prior to the documents being produced, such as Bauhaus.

Although r 33.11 does not expressly say so, the subpoenaed party suggested that the Court would have jurisdiction, at least under its inherent jurisdiction, to entertain an application for an order to be made before the person to whom the subpoena is directed had incurred expenses.

Examples that were given in Bauhaus as to when the inherent jurisdiction is to be exercised include the amount of expenditure to be incurred and the resources of the issuing party.

The parties are always at liberty to agree that an alternative arrangement should it arise. It is submitted that such an agreement is what had occurred between the two parties.

The subpoenaed party's opposition to the subpoena and the plaintiffs' motion resulted in an outcome the subpoenaed party argues prevents a granting the relief sought under the motion.

The Registrar then determined that the subpoenaed party was unreasonable to refuse to produce the documents. The subpoenaed party submitted that such a determination was not available to her or not reasonably available in the circumstances. It was argued that the subpoenaed party had negotiated a reduced scope of the subpoena and had negotiated an agreement for the payment of $1,000 to defray expenses and on terms as to timing as to payment.

The subpoenaed party ultimately submitted that no costs order of the plaintiffs’ motion should have been made. It was also submitted that no other order in respect of the production of documents should have been made, other than in accordance with the agreement.

So far as the subpoenaed party's motion, it sought an order for its costs and expenses to be paid. It was successful in obtaining such an outcome. The reason for the amount agreed to being less than the amount sought is that the scope of the subpoena was narrowed and thereby the costs to be incurred was reduced. Nevertheless, by reason of its motion, the subpoenaed party successfully recovered monies (which have subsequently been paid).

The Registrar recognised this and ordered the plaintiffs’ to pay the costs of the subpoenaed party's motion until 16 March 2022, the date the respondents proposed to pay $1,000 one week before production was required.

The Registrar then ordered the subpoenaed party to pay indemnity costs to the respondents thereafter. The reasons for doing this appear to be; the subpoenaed party was unreasonable to not produce documents in answer to the subpoena. The subpoenaed party argued that that issue was irrelevant to the question of the subpoenaed party's motion that only sought costs, as it was entitled to; and the motion was premature as production had not yet occurred. UCPR 33.11 does not require an application to be made before production. Secondly, the plaintiffs’ agreed to pay the subpoenaed party's costs as agreed. Therefore, success occurred on the motion. The subpoenaed party submitted that it could not be premature.

There appears to be a suggestion in plaintiffs’ submissions before the Registrar that the offer was equivalent to a Calderbank letter and it had obtained a response no worse than the offer. The subpoenaed party submitted that if that is the reasoning the Registrar accepted (and given indemnity costs was awarded), she erred as there was no determination of the motion on its merits. The reason the plaintiffs’ did not suffer a more adverse outcome as the outcome was agreed between the parties. Therefore, Calderbank principles are irrelevant.

The subpoenaed party’s costs should have continued to be paid or no order for costs from after 16 March 2022 should not have been made.

As I stated earlier in this judgment, this dispute over production expenses became an exercise of brinkmanship. Originally, the plaintiff’s solicitor required the documents to be produced to the Court and then it would make it payment of reasonable expenses. The plaintiffs offered $150.00 compliance costs that will be incurred in complying with the subpoena. That amount was clearly insufficient.

As far as I can ascertain unlike in Hall, the plaintiffs’ solicitors did not give an actual undertaking to pay the subpoenaed party’s reasonable costs involved in producing the documents in answer to the subpoena, although I accept that they accepted that he was entitled to reasonable cost and expenses of compliance (email 2 February 2022).

I have carefully read the Registrar’s decision and the documents and submissions before her. The submissions of the subpoenaed party before me placed emphasis on the plaintiff’s letter 16 March 2022 where the plaintiff confined and specified the documents that should be produced. This narrowed the number of documents to be produced. To my mind, that made the production of those documents less onerous and therefore less time would be required by the subpoenaed party to produce those specified documents and less money would be required for reasonable expenses. This compromise, led to the costs production of these specified documents being agreed upon.

With respect, I have reached a different conclusion to that of the Registrar. It is my view that neither party’s approach up until the narrowing of the schedule of documents to be produced was reasonable until the plaintiffs’ solicitor’s email on 16 March 2022 when the plaintiff solicitor narrowed and specified the actual documents to be produced. The parties then agreed on reasonable expenses to be paid to the solicitor to produce these documents. The resolution of this dispute should never have required either party to file a Notice of Motion. On this basis, I set aside the decision of the Registrar dated 30 May 2022. It is my view that what follows is that each party should pay its own costs of the two Notices of Motion. Applying the same reasoning in relation to the Notice of Motion seeking a review of the Registrar’s order, I order each party to pay its own costs.