Conclusions
40 For the following reasons Bitzer should have the orders it seeks.
41 First, it is fair to say that Bitzer succeeded in its action, although it did not get all that it asked for. The evidence obtained from the respondents as a result of the search orders and discovery was, in truth, overwhelmingly against them. This was the only reason the respondents were not in a position to defend the proceedings further and the litigation was brought to an end. As their solicitor, Mr Johnston, candidly put it, the respondents had effectively capitulated, having been caught red-handed. He conceded that Bitzer would undoubtedly have established that the respondents had engaged in theft and use of confidential information. It also necessarily follows from those concessions, which were entirely appropriate, and also from the limited evidence Bitzer presented on this application, that the respondents breached their duties under ss 182 and 183 of the Corporations Act by using their positions as officers or employees to gain an advantage for themselves or others or to cause detriment to Bitzer (s 182) and by improperly using information obtained in that capacity to gain an advantage for themselves or others or to cause detriment to Bitzer (s 183). What is more, there is also uncontradicted evidence of infringement of Bitzer's copyright in its designs. In these circumstances, Bitzer's decision not to press for declaratory relief is immaterial.
42 Second, there is no evidence to support the submission that the respondents should pay only 65% of the costs. It is true that the respondents were cooperative after the proceeding was launched and plainly sought to minimise costs. In this respect, it is clear that they honoured their obligations under s 37N of the FCA Act. That requires all parties to litigation in the Court to conduct proceedings in a way that is consistent with the overarching purpose of the civil practice and procedure provisions of the FCA Act and the Federal Court Rules 2011 (Cth) ("FCA Rules"), that is to say, to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible (see FCA Act, s 37M). Section 37N(4) of the FCA Act states that, in exercising the discretion to award costs in a civil proceeding, the Court or a Judge is required to take into account any failure to comply with the duty imposed by s 37N. Complying with the duty, however, does not entitle a party to a reward or a discount.
43 Third, the mere fact that Bitzer did not press its claim for damages, compensation or an account of profits does not warrant a reduction in the costs for which the respondents should be liable. There is no evidence that the respondents incurred any costs in defending this aspect of the proceeding. Nor is it likely that any costs Bitzer may have incurred in investigating such a claim were significant.
44 Fourth, I do not consider that the costs order should distinguish between the respondents on the basis that Messrs Rudischhauser and Patil were not joined to the proceeding until 24 July 2013.
45 In general, where a court orders that costs be paid by two or more parties, whether applicants or respondents, third parties or non-parties, the liability is joint and several: G E Dal Point, Law of Costs, 2nd ed, LexisNexis Butterworths, Australia, 2009, [11.2]. The rationale for this principle is clear:
Were the law otherwise, it would imperil a basic principle of the law of costs, the costs indemnity rule. As the successful litigant is prima facie entitled to its costs of the action, he or she should not, it is reasoned, lose out if one of the parties against whom the costs order is made cannot or will not meet its share of the costs burden. It follows that a person who discharges a costs liability can seek contribution from others who are jointly liable to meet that liability. The issue of contribution - that of determining the relative responsibility for costs between those against whom the order is made - is a matter to be dealt with as between them rather than one that rests in the party who is awarded costs.
(Citations omitted.)
46 Of course this is not an invariable rule. It would not, for example, be just to saddle some respondents with costs the applicant incurs because of a separate and distinct defence run by a particular respondent in which they played no part: cf. Stumm v Dixon & Co (1889) 22 QBD 529.
47 Where, however, unsuccessful respondents have "basically the same interest", it is appropriate to make them jointly and severally liable for the applicant's costs: Shang v Zhang (No 2) [2007] NSWSC 1355 at [18]. That way the applicant will be paid and any questions of contribution between the respondents can be sorted out later, either amicably or upon taxation.
48 But Mr Johnston argued that this principle only applies from the time a person becomes a party to the proceeding. The difficulty with his argument is that it does not take into account the breadth of the Court's power and the ability of the Court in an appropriate case to make an order for costs against a non-party: Knight v FP Special Assets Limited (1992) 174 CLR 178 ("Knight") at 192 (Mason CJ and Deane J), 203 (Dawson J), 205 (Gaudron J). If it is in the interests of justice, such as where the non-party is the "real party" or the "effective litigant standing behind an actual party", an order that a non-party pay or contribute to costs may be made: Knight at 190, 202, 205.
49 In Kebaro Pty Ltd v Saunders [2003] FCAFC 5 the Full Court reviewed the authorities and concluded at [103]:
In our opinion, the authorities establish, on the foregoing analysis, the following propositions:
• A non-party costs order is exceptional relief, although some categories of factual situations are now recognised as within the discretion, for example, the situation described by Mason CJ and Deane J in Knight at 192-193. The width of the jurisdiction is illustrated by a recent English decision that there can be circumstances in which it would be appropriate to order costs in favour of a non-party against a party (see Individual Homes v Macbreams Investments, 23 October 2002, High Court of Justice Chancery Division at 8).
• Whilst such an order is extraordinary, the categories of case are not closed, although in order to warrant its exercise, a sufficiently close connection, or as Gobbo J [in Bischof v Adams [1992] 2 VR 198 at 204-5] expressed it, a "real and direct and ... material" connection with the principal litigation, must be demonstrated; in the words of Callinan J [in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406 at 414 [37]], the non-party can fairly be liable if adjudged by its conduct, to be a real party to the litigation, even if not the real party.
(Original emphasis.)
50 These cases, of course, are concerned with the situation in which the non-party never becomes a party. As the Full Court observed in State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 ("Sportsbet") at [15] the FCA Rules do not preclude the recovery of costs that were incurred before a party was formally joined. Depending on the circumstances of the case, costs incurred in preparing for the litigation may be recovered. Insofar as the involvement of Mr Rudischhauser and Mr Patil was disclosed by the search orders, the costs Bitzer incurred in applying for and executing them are of this nature.
51 Here, the evidence reveals that the respondents were engaged in a common enterprise, albeit that the participation of Mr Rudischhauser and Mr Patil was unknown until after the search orders were carried out. I have no doubt that they would have been parties from the outset if Bitzer had then known of their involvement. Mr Rudischhauser and Mr Patil both encouraged Mr Japp to pass over Bitzer's confidential information and its intellectual property with the common purpose of sharing the spoils. If the order Bitzer sought are not made, then Mr Japp may well end up paying the lion's share of the costs without having any right to obtain a contribution from his accomplices, although to some extent at least he appears to have been doing their bidding.
52 In all these circumstances it seems to me that it is in the interests of justice that all respondents be jointly and severally liable for Bitzer's costs regardless of when they became parties.
53 Accordingly, the order will be that the respondents pay Bitzer's costs, including reserved costs, on a joint and several basis.
I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.