FEDERAL COURT OF AUSTRALIA

COSTS - respondents’ costs met by third party - no agreement by solicitors to exempt respondents from liability to them for their costs - successful respondents entitled to recover from applicant the costs of their defence.

Federal Court Rules, O 33 r 12

Landsal Pty Ltd v REI Building Society (1993) 41 FCR 421, referred to

Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd (1993) 117 ALR 253, followed

Adams v London Improved Motor Coach Builders Limited [1920] 1 KB 495, applied

Angor Pty Ltd v Ilich Motor Company Pty Ltd (1992) 37 FCR 65, applied

COOGI AUSTRALIA PTY LTD v HYSPORT INTERNATIONAL PTY LTD & ORS

VG 284 OF 1993

DRUMMOND J

BRISBANE

25 SEPTEMBER 1998

THE COURT ORDERS THAT:

1.                  The notice of motion filed 17 September 1998 be dismissed.

2.                  The applicant to pay the costs of all respondents of and incidental to the notice of motion filed on 17 September 1998.

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

REASONS FOR JUDGMENT

The applicant in the action applies by motion on notice for orders that the first to sixth respondents in the action produce for the applicant’s inspection copies of documents evidencing the terms of any agreement whereby the Shima Seiki Company of Japan is to pay the costs of the Hysport respondents, ie, the first to sixth respondents in the action, and certain other documents concerned with their legal fees.  Similar but not precisely the same orders are sought against the seventh respondent in the action.  The applicant also relies upon a notice to produce which it has served on the solicitors for the Hysport respondents.

On 21 August 1998, I published reasons for concluding that the applicant’s copyright infringement action should be dismissed against all seven respondents and also my reasons for concluding that the first to sixth respondents were entitled to limited relief on their cross-claim.  I did not, however, go on to make any orders reflecting my conclusions.  Instead, I directed that the respondents bring into Court minutes of the orders to which they are entitled in accordance with my published reasons once the question of costs had been dealt with and I indicated I would receive written submissions on costs.  I therefore retain full power to entertain any application that might be made in the action, including that now made by the applicant.  Cf Landsal Pty Ltd v REI Building Society (1993) 41 FCR 421 at 428.

In any event, even if judgment in the action had been given and perfected, the orders now sought would be orders which the Court could, in my opinion, properly make, in the exercise of its power to make supplemental orders:  see Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd (1993) 117 ALR 253 at 264.  The question whether the Hysport respondents are under any liability to pay their solicitors’ fees is not one which I consider the applicant was bound to litigate at the trial.  That could only become an issue worthy of the expenditure of time and effort in pursuing it when the outcome of the trial was known and then only if that outcome exposed the applicant to a costs order in favour of the respondents.  It is an issue entirely appropriate to be left to be determined by the Court in the exercise of this special jurisdiction to make supplemental orders after judgment on the issues raised by the pleadings.

The first to sixth respondents do not now dispute that the question whether the applicant should escape the general rule that it, as the unsuccessful party, should pay the respondents’ costs is a matter for the Court, not the taxing officer.  Whether the applicant may be able to avoid this general rule depends, in the circumstances of the case, not on whether Shima Seiki is paying their legal costs but rather on whether the Hysport respondents were exempted by express or implied agreement from the ordinary consequence of having retained the solicitors to act for them in the action, namely, the consequence of being liable to pay the professional costs and outlays of those solicitors incurred in carrying out the retainer.  See Adams v London Improved Motor Coach Builders Limited [1920] 1 KB 495 at 499 and 501 and Angor Pty Ltd v Ilich Motor Company Pty Ltd (1992) 37 FCR 65 at 71, 73 and 74.

There is some basis for thinking that this may possibly be the case here.  In my published reasons, I found that Shima Seiki was financially backing Hysport’s defence, probably out of concern that victory for Coogi may well restrict the use to which its customers can put its own computerised knitting machinery.  Moreover, in the course of the cross-examination of Mr Jones, a principal of Hysport and himself one of the respondents, the following exchange took place:

Shima Seiki are paying your costs of this litigation, are they not?‑‑‑Yes, they are.

Yes.  And they have had representatives sitting in court during this trial, have not they?‑‑‑Shima Seiki employees?

Yes.  That is right, is it not?‑‑‑A Shima Seiki employee, yes.

The applicant, by its notice to produce, sought to obtain access to certain documents listed in the first to sixth respondents’ supplementary list of documents which comprised communications between Hysport, Shima Seiki and Shima Seiki’s Australian associate, Ramsay McDonald.  This was done in an attempt to turn up evidence to support the applicant’s case that the first to sixth respondents are free of liability for their solicitors’ costs, in view of Shima Seiki’s involvement.  The notice to produce is stated to be issued under O 33 r 12 the Federal Court Rules.  But it is not in Form 45.  It does not call on the respondents to produce, at this or any other hearing, documents for the purpose of evidence but, rather, to produce to the solicitors for the applicant, out of Court, the documents for their inspection.  In terms, it calls on the respondents to do something quite different from that which a notice authorised by this rule can require.

However, even if the notice is to be treated as one under the rule, so that the Hysport respondents would be obliged to produce the documents in question at this or some subsequent hearing unless they could show good ground for the Court freeing them of that obligation, I do not think the applicant could obtain access to any of these documents.  The reason is that the Hysport respondents, in their verified list, make a suitably worded claim that the documents in question are all subject to legal professional privilege and there is nothing in the material before me to throw doubt on the validity of that claim.  The inference can be drawn that, because of concern at the possible impact on its business of a decision adverse to Hysport, Shima Seiki not only funded Hysport’s defence, but was kept informed of the progress of the action and may well have provided information to Hysport for use in the litigation.  The claim of privilege for communications between Hysport and Shima Seiki cannot be said to be obviously untenable.  It is a good answer, therefore, to an O 33 r 12 notice to produce.

I have referred to what emerged at the trial that touches on the matter now of concern, viz, whether the involvement of Shima Seiki in paying Hysport’s costs provides a basis for granting the relief sought in the notice of motion.

The solicitor for the Hysport respondents, however, has said on oath that those solicitors were retained by Hysport and the second to sixth respondents; that the first to sixth respondents have been liable for that firm’s costs; that there has never been any agreement between the firm and the first to sixth respondents relieving any of them of their legal liability to pay the firm’s costs and that while Shima Seiki has provided financial assistance to these respondents to assist in their defence of this proceeding, there has never been any agreement between the firm and Shima Seiki whereby the latter would be liable to pay the firm’s costs instead of the first to sixth respondents.

It can be said that these are statements of opinion as to the effect of the arrangements between the first to sixth respondents and the solicitors and should not, therefore, be accepted as providing a complete answer to the applicant’s contention that there are good reasons for thinking that those respondents may be exempt from liability to their solicitors for the latter’s fees and outlays.  However, the solicitor, in addition, swore to a simple fact, viz, that the firm’s accounts have been rendered to the first to sixth respondents.

The solicitor’s probity in deposing to the matters I have referred to is not challenged.  Moreover, the applicant’s evidence is that Shima Seiki does not have any legal presence in Australia.  That, in my opinion, bears on the improbability of the solicitors being prepared to look only to an overseas paymaster for the very large amount of costs and outlays undoubtedly incurred by the solicitors in the course of this action.

I am not prepared to find that there is any reason for thinking that the arrangement between the first to sixth respondents and their solicitors was one under which they were exempted from all liability for the costs of those solicitors, even though the solicitors may have expected that the costs would, in fact, be paid by Shima Seiki and even though that expectation may have been realised.

The claim in the notice of motion against the seventh respondent is entirely speculative.  In contrast to the position against the first to sixth respondents, there is an absence of any evidentiary foundation for the claim that the seventh respondent may be exempt from the obligation to pay its own solicitors.

The notice of motion will therefore be dismissed. 

Associate:

Dated:              25/09/98