CONSIDERATION
11 The disposition of the costs of an application such as this is in the discretion of the Court or Judge: see Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"), s 43(2). Rule 7.29 of the Rules provides that:
A person against whom an order is sought or made under this Division may apply to the Court for an order that:
(a) the prospective applicant give security for the person's costs and expenses including:
(i) the costs of giving discovery and production; and
(ii) the costs of complying with an order made under this Division; and
(b) the prospective applicant pay the person's costs and expenses.
12 First, who should bear the costs of the application? In Cappuccio, in ex tempore reasons for judgment, Burchett J observed (at [3]) that in his view "the costs order which would be appropriate in a case like this depends very much on the consequences of the discovery obtained". This led him to hold, in that case, that, if an action were subsequently commenced, then the costs of the preliminary discovery application should be part of the costs of the action; otherwise, the preliminary discovery applicant ought pay the costs. Other judges, including me, have made the same or similar orders in other preliminary discovery cases: see E D Oates, SmithKline and Alstrom Power (Costs). As already noted, Vaughan Super relied on these authorities to support its proposed costs orders. As I sought to make clear in argument at the hearing, however, much depends on the nature of the case, including the way the parties conducted the preliminary discovery litigation, the nature of any anticipated proceeding and the likely passage of time before resolution at trial.
13 Some judges have taken the view that where parties have resolved a preliminary discovery application consensually, then there should be no order as to costs unless it is shown that one or other party acted unreasonably in bringing or (initially) opposing the application: see, for example, Novartis AG v Agvantage Pty Ltd [2012] FCA 160 at [7]. Other judges have not pursued this approach even though the prospective respondent has not adopted an "adversarial approach": see, for example, Procter v Kalivis (No 3) [2010] FCA 1194 ("Procter"), where Besanko J said (at [17]):
First, the jurisdiction to make an order for preliminary discovery is an extraordinary jurisdiction. There is a sense in which a respondent is entitled to remain passive until the applicant makes out a case for preliminary discovery: Glencore International AG v Selwyn Miners Limited (2005) 223 ALR 238 at 241 [15] per Lindgren J. Secondly, if the respondent does not take an adversarial approach to the application for preliminary discovery and in fact provides discovery then it may be appropriate to make the type of order sought by the respondents in this case. Thirdly, if the respondent does take an adversarial approach then it may be appropriate to order that it pay the costs caused by that adversarial approach: Re Steffen; Western Bulk Carriers (Australia) Pty Ltd v Cosco Bulk Carrier Co Ltd [2002] FCA 1520. The costs caused by an adversarial approach would not necessarily include the costs of complying with an order for preliminary discovery. I would have thought that those costs ought to be paid by the applicant or at least be the subject of the type of order the respondents seek in this case.
In that case, with respect to the preliminary discovery application, his Honour ordered that the preliminary discovery applicants pay the respondents' costs unless proceedings were instituted within two months, in which case the costs were to be in the discretion of the trial judge.
14 There have been occasions, however, when an order deferring the disposition of costs until the conclusion of a potential trial has not been considered appropriate. In C7 in connection with a preliminary discovery application under O 15A r 6 of the former Federal Court Rules, Gyles J said (at [50]-[51]):
… It needs to be borne in mind that this is an extraordinary jurisdiction. It provides for compulsory access to the private affairs of members of the community in order that somebody else can determine if they have a case against that party and the threshold set by O 15A r 6(a) is not very high. There is much to be said for the view that a respondent in these circumstances is entitled to put the applicant to proof except in a clear case. Some judges have been disposed to make orders which, to a greater or lesser extent, leave costs to be determined after the result of preliminary discovery and inspection is known, and even to depend upon, to some extent, the fate of the litigation which ensues. I am not persuaded of the merit of that approach. An application pursuant to O 15A is a discrete application and may never lead anywhere. There is no reason why a party which is out of pocket because of costs should await some indefinite future event.
Taking all things into account, in my opinion the proper order in the present case is that the applicant pay 50% of the costs of each of the first to eighth respondents to the application. In the event that proceedings do eventuate and the applicant succeeds, then it may be arguable that the applicant should be compensated in those proceedings for the burden of this costs order (and perhaps for its own costs). That, however, would be a matter for the trial judge in that proceeding.
15 There are other occasions besides C7, when a judge has taken the view that the prospective applicant should pay the costs of a preliminary discovery application, notwithstanding the applicant's success: see Hoyts Multi-Plex Cinemas Pty Ltd v Fox Entertainment Precinct Pty Ltd [2003] FCA 1347 at [15] (where the preliminary discovery application was ultimately resolved consensually) and Riley at [18] (on the basis that the preliminary discovery applicant was seeking "an indulgence from the Court").
16 Principle and the authorities indicate that it is not useful to speak of a conventional rule as to costs in cases such as the present: see also Apache Northwest Pty Ltd v Newcrest Mining Ltd (2009) 182 FCR 124 at 146-147 [90] per Flick J. The disposition of costs will depend on the circumstances of the case, including the conduct of the parties, the likely nature of any prospective cause of action and the likely passage of time before any such matter would be resolved at trial. Section 37M of the Federal Court Act should also be borne in mind.
17 In the circumstances of this case, it seems to me desirable that the disposition of costs should not depend on the initiation and outcome of litigation following preliminary discovery. Further, as has been repeatedly affirmed, the jurisdiction to order preliminary discovery is an extraordinary one since an order for preliminary discovery involves an invasion of the prospective respondent's private affairs in order to determine whether or not a case can properly be brought against the prospective respondent. This feature has been said to justify an order that the preliminary discovery applicant pay the respondent's costs of the preliminary discovery application even when the application is successful.
18 Moreover, I reject Vaughan Super's contention that Becton acted unreasonably in not providing at an earlier date documents of the type it has now agreed to provide. In support of this contention I was taken to numerous documented communications between the parties and/or their representatives. These documents showed that, as counsel for Vaughan Super stated, Mr Vaughan asked numerous detailed questions about Becton and associated parties and the transactions in which they were involved. For the reasons canvassed at the hearing, however, I am not persuaded that Becton has acted unreasonably. As Besanko J said in Procter at [17], "[t]here is a sense in which a respondent is entitled to remain passive until the applicant makes out a case for preliminary discovery". Many matters may legitimately inform a prospective respondent's conduct in this regard. Becton has not been shown to have acted unreasonably in not giving discovery otherwise than pursuant to an order of the Court.
19 Accordingly, in this case, I would order that the prospective applicant pay the prospective respondent's costs of the application for preliminary discovery.
20 There is a second question raised in this case: who should bear the costs of complying with an order for preliminary discovery? In Alstom Power Selway J ordered that the applicant for preliminary discovery pay the respondent's costs in making discovery and providing inspection of discovered documents. As to the costs of the application, which was "hotly disputed", his Honour ordered that "[o]therwise the question of the costs of this application be reserved for future application by the parties". For the reasons stated, I would not make this latter order, but I would make the former.
21 I acknowledge that the authorities indicate that there are other possible options as to the costs of compliance Thus, for example, in Riley at [19], the costs of providing discovery were reserved on the basis that "[i]f … the plaintiff does not commence proceedings, the costs of giving discovery ought to be the defendant's". On the other hand, if "the plaintiff does commence proceedings, the discovery provided by the defendant will reduce the time taken and the costs incurred in providing discovery in the action. In those circumstances, an order for costs in the cause or that costs be reserved would, in my view, be appropriate". For the reasons already stated, I would not defer the disposition of costs in this case. In such a case as this, the prospective respondent should not be out-of-pocket.
22 Accordingly, I would order that the prospective applicant pay the prospective respondent's reasonable costs and expenses of giving discovery and production.
23 There is a third question as to whether it is appropriate that the prospective applicant provide security for the prospective respondent's costs of giving discovery. As Becton indicated, in the Western Australian Supreme Court, Master Sanderson has expressed the view that ordinarily security should be given. Plainly enough, however, there can be no hard and fast rule. Whether or not security should be ordered will depend on the relevant circumstances. For example, in Stratford Sun, the Court ordered that the prospective applicant give security only after noting that the applicant had no relevant assets within the jurisdiction. In the present case, the material before the Court indicates that Vaughan Super has more than sufficient funds to meet any costs order (whether or not the suggested likely costs of employees performing discovery tasks is included in recoverable costs - a point I do not decide here). In the circumstances, I would decline to make an order for security as sought by Becton.