Case: Probiotec Ltd v University of Melbourne [2008] FCAFC 5 ; (2008) 166 FCR 30
Outcome: followed
where defendants or respondents in the same interest all participate in the proceedings and fail, as a practical result (but not because of any rule of law or practice) they will be liable jointly and severally to an order that they pay the plaintiffs' costs: cf Probiotec Ltd v University of Melbourne [2008] FCAFC 5 ; (2008) 166 FCR 30 at 44-46 [53] - [61] per myself, Finn and Besanko JJ agreeing. In general, the purpose of an order for costs is to indemnify, at least partially, a successful party: Probiotec 166 FCR at 44 [51] and Cachia v Hanes [1994] HCA 14 ; (1994) 179 CLR 403 at 410-411 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ. The consequence of ordering each of the corporate defendants to pay one-third or some other proportion of the Councils' costs severally, would be to put at risk the efficacy of the partial indemnity, were one or more of the defendants either incapable of paying its portion or recalcitrant. Despite their insolvencies, it is not suggested that the corporate defendants will not be able to meet any costs order. I am satisfied that it would not be appropriate or just to reduce their liabilities from being joint and several merely because they were the three unsuccessful active parties. They can seek contribution among themselves after one or more has paid the Councils. In principle, the Councils should be free to seek recovery of the full amount of any costs order against all of the corporate defendants, each of which took an active part in the proceedings. Each of them contributed to the costs being incurred, at least while a party (see below) in a way which, as between them and the plaintiffs was not readily distinguishable. Each of the corporate defendants was essentially in the same interest, adopting and reinforcing arguments the others put, even though there were some individual substantive (but as the matter proceeded, in the result, not substantial) differences between them (e.g. the different results sought in Lehman Asia's and Lehman Bros' cross-claims): see too Probiotec 166 FCR at 49 [73] per myself, at 52 [91] per Besanko J, and at 32 [1] per Finn J. Lehman Bros' position was different to that of Lehman Asia. Lehman Bros was not a necessary party to the proceedings. However, it obtained significant and express benefits from the impugned provisions in the deed of company arrangement. And, as its cross-claim showed, if it lost those benefits because the impugned provisions were found to be invalid, unlike Lehman Asia, Lehman Bros wanted the deed then to terminate and Lehman Australia to be wound up. Lehman Bros argued that its liability for costs before 16 July was governed by r 2.13(2) and that s 1335(2) prevented any wider order for costs being made against it before that date. Rule 2.13(2)(a) provides that the Court may direct that a person granted leave under r 2.13(1) to be heard, without becoming a party in a proceeding, if it considers that the attendance of that person has resulted in additional costs for any party that those costs should be borne by the person. Lehman Bros argued that the Councils had not incurred any additional costs because of its attendances prior to 16 July. I reject that argument. It is inconsistent with the substantive position put by Lehman Bros at the hearing on 10 July. Lehman Bros also argued that because it was not a party before 16 July, r 2.13(2) was the sole source of its liability for costs. I am of opinion that s 1335(2) gives the Court power to award costs against a party, including costs incurred by the successful party before the new party had been joined. The power to order costs in s 1335(2) is not confined, once the Court considers that a party to the proceedings should be ordered to bear them. Of course, the time and circumstances of a party's joinder will be relevant to the exercise of the discretion to order costs, particularly in respect of any period before that joinder: see Probiotec 166 FCR at 49 [72]. Here, Lehman Bros contemplated from its first appearance that it may wish to become a party. By 10 July 2009 that position had become substantially clearer. During the hearing on that day its counsel recognised the likelihood that Lehman Bros would become a party and argued in anticipation that it would put its own substantial case forward in the litigation. Of course, once it became one, Lehman Bros would assume the obligations of a party under the Federal Court (Corporations) Rules and the Federal Court Rules , including discovery. By this time, it was apparent that unless an order for an early trial of separate issues was made (a course resisted by Lehman Bros) these proceedings would be complex, lengthy and involve considerable discovery. The classes of documents sought in the subpoena broadly included documents that would have been discoverable by Lehman Bros. I have not considered whether the terms of the subpoena were appropriate in every respect. However, they reflected (whether or not, if challenged, they would be found too broad or imprecise) classes of documents that would be likely to be relevant for collection or consideration by Lehman Bros' lawyers for the purpose of discovery. Thus, much of what Mr Hoser's affidavit referred to was work that would have been required to be done in any event, even if no subpoena had been issued.