FEDERAL COURT OF AUSTRALIA
Bitzer Australia Pty Ltd v Japp [2014] FCA 1040
Citation: Bitzer Australia Pty Ltd v Japp [2014] FCA 1040 Parties: BITZER AUSTRALIA PTY LTD v ANDREW JAPP, COLDWORKS AUSTRALIA PTY LTD, RUDIGER RUDISCHHAUSER and VIVEK PATIL File number: NSD 820 of 2013 Judge: KATZMANN J Date of judgment: 26 September 2014 Catchwords: COSTS – respondents engaged in a common enterprise involving appropriation and use of applicant’s confidential information and intellectual property – settlement of proceeding by consent orders applicant largely successful– respondents sought to minimise costs – whether respondents should be liable for only a portion of the applicant’s costs – whether third and fourth respondents should be liable for costs only from the time when they were joined as parties – Federal Court of Australia Act 1976 (Cth), s 43(2) Legislation: Federal Court of Australia Act 1976 (Cth) ss 37N, 37M, 43(2) Cases cited: Cachia v Hanes (1994) 179 CLR 403
Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52
Kebaro Pty Ltd v Saunders [2003] FCAFC 5
Knight v FP Special Assets Limited (1992) 174 CLR 178
Latoudis v Casey (1990) 170 CLR 534
Lo v Australian Community Pharmacy Authority [2013] FCA 639
Oshlack v Richmond River Council (1998) 193 CLR 72
Probiotec Ltd v University of Melbourne (2008) 166 FCR 30
Shang v Zhang (No 2) [2007] NSWSC 1355
State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174
Stumm v Dixon & Co (1889) 22 QBD 529Date of hearing: 22 September 2014 Place: Sydney Division: GENERAL DIVISION Category: CATCHWORDS Number of paragraphs: 53 Counsel for the Applicant: Mr C Harris SC Solicitor for the Applicant: Matthews Folbigg Solicitor for the Respondents: Mr R Johnston of Johnson Winter Slattery
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 820 of 2013
BETWEEN: BITZER AUSTRALIA PTY LTD
ApplicantAND: ANDREW JAPP
First RespondentCOLDWORKS AUSTRALIA PTY LTD
Second RespondentRUDIGER RUDISCHHAUSER
Third RespondentVIVEK PATIL
Fourth Respondent
JUDGE:
KATZMANN J
DATE OF ORDER:
26 SEPTEMBER 2014
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The respondents pay the applicant’s costs, including reserved costs, on a joint and several basis.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 820 of 2013
BETWEEN: BITZER AUSTRALIA PTY LTD
ApplicantAND: ANDREW JAPP
First RespondentCOLDWORKS AUSTRALIA PTY LTD
Second RespondentRUDIGER RUDISCHHAUSER
Third RespondentVIVEK PATIL
Fourth Respondent
JUDGE:
KATZMANN J
DATE:
26 SEPTEMBER 2014
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Bitzer Australia Pty Ltd (“Bitzer”) is a wholly owned subsidiary of a foreign corporation (Bitzer GmbH), a leading manufacturer of compressors, condensing units and pressure vessels for the global refrigeration market. Those products have been sold in Australia since 1960 and, since 1988, by Bitzer. Andrew Japp was formerly employed by Bitzer as its national marketing and heat exchange engineering manager. Bitzer alleged that,…
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- AGLC
- Bitzer Australia Pty Ltd v Japp [2014] FCA 1040
- Case
- [2014] FCA 1040
- Decision Date
CaseChat Overview and Summary
In the case of Bitzer Australia Pty Ltd v Japp, Bitzer Australia Pty Ltd sought to recover costs following a successful application for search orders and interim relief against the respondents, who were accused of using Bitzer’s confidential information and intellectual property for their own advantage. The Federal Court of Australia was tasked with determining whether the respondents should be liable for all of Bitzer's costs, or only a portion, and whether the third and fourth respondents should be liable for costs only from the time they were joined as parties.
The Court considered the arguments put forth by the respondents, which included their cooperation after the proceeding was launched and their efforts to minimise costs. However, the Court found that there was no evidence to support a reduction in the costs for which the respondents should be liable. The Court also noted that the mere fact that Bitzer did not press its claim for damages, compensation or an account of profits did not warrant a reduction in the costs for which the respondents should be liable. The Court found that Bitzer was largely successful in its action, and the evidence obtained from the respondents as a result of the search orders and discovery was overwhelmingly against them.
The Court ordered that the respondents pay the applicant’s costs, including reserved costs, on a joint and several basis. The Court held that the overarching purpose of the civil practice and procedure provisions of the Federal Court of Australia Act and the Federal Court Rules 2011 was to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. The Court also held that complying with this duty does not entitle a party to a reward or a discount. The Court further held that 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.
The Court considered the arguments put forth by the respondents, which included their cooperation after the proceeding was launched and their efforts to minimise costs. However, the Court found that there was no evidence to support a reduction in the costs for which the respondents should be liable. The Court also noted that the mere fact that Bitzer did not press its claim for damages, compensation or an account of profits did not warrant a reduction in the costs for which the respondents should be liable. The Court found that Bitzer was largely successful in its action, and the evidence obtained from the respondents as a result of the search orders and discovery was overwhelmingly against them.
The Court ordered that the respondents pay the applicant’s costs, including reserved costs, on a joint and several basis. The Court held that the overarching purpose of the civil practice and procedure provisions of the Federal Court of Australia Act and the Federal Court Rules 2011 was to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. The Court also held that complying with this duty does not entitle a party to a reward or a discount. The Court further held that 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.
Orders
Orders of the court
1. The respondents pay the applicant’s costs, including reserved costs, on a joint and several basis.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
The proceeding has now been resolved by the making of consent orders. The outstanding issue concerns costs. Background to, and history of, the litigation On 13 February 2013 Mr Japp announced that he was resigning from his employment with Bitzer. Arrangements were made for him to stay until 28 March 2013 in order to complete certain projects. In the meantime Coldworks became a direct competitor of Bitzer, promoting and distributing compressors manufactured by an Italian company (Dorin) and other refrigeration and heat exchange products supplied by another company (Luvata) in the Australian and New Zealand market, in direct competition with Bitzer’s compressor, compressor-based and heat exchange products. The compressor Coldworks was advertising was made using a Bitzer design and marketed under the Coldworks brand. About a week after his departure from Bitzer, Mr Japp announced on LinkedIn that he had become a director of Coldworks. In accordance with usual business practice, on or about 3 April 2013 Peter Gibson, who had replaced Mr Rudischhauser as managing director, arranged with his finance manager to redirect Mr Japp’s emails to their computers so that they could monitor emails from clients and other business connections in order to ensure that all relevant business correspondence was answered and to gain a better understanding of the work Mr Japp had been managing in his employment. Mr Gibson then discovered that on his final day of employment Mr Japp emailed to his personal hotmail address two zip files containing hundreds of pages of highly sensitive confidential information belonging to Bitzer. That included:·electrical layout plans for the control of various refrigeration and heat exchange components for products manufactured and/or sold by Bitzer, including products manufactured and supplied by Bitzer exclusively to individual customers;·the complete list of Bitzer’s product costs, customer discounts and profit margins on each product; and ·the test results, performance comparisons and cost, discount and profit analyses for the new coil and LDV-D Compressor soon to be launched by Buffalo Trident Pty Limited (“Buffalo Trident”), a business acquired by Bitzer in 1992. This discovery prompted Bitzer to seek search orders to identify and recover its stolen confidential information, and to locate and preserve evidence of the theft and the use to which the information had been put, the breaches of obligations revealed by the expropriation of the information, and other evidence that would be relevant in proceedings Bitzer intended to bring against Mr Japp and Coldworks. The originating application was filed on 16 May 2013. It claimed interlocutory relief in the nature of Anton Piller orders and final orders restraining the respondents from using Bitzer’s confidential information, requiring them to return all copies of the confidential information and to eliminate any electronic copies. The originating application also sought orders for compensation, damages or an account of profits, and various declarations. Insofar as they concerned Mr Japp, the declarations were to the effect that he had breached his obligations to Bitzer under ss 181, 182 and 183 the Corporations Act 2001 (Cth), had infringed Bitzer’s copyright, and was in breach of his fiduciary and contractual duties to Bitzer. In the case of Coldworks, Bitzer sought a declaration that Coldworks had received and used Bitzer’s confidential information in the knowledge that it belonged to Bitzer, that it had been stolen by Mr Japp and that Coldworks had no right to use it. Alternatively, Bitzer asked for a declaration that Coldworks received the benefits of Mr Japp’s breach of his fiduciary duty to Bitzer, knowing that those benefits were the product of Mr Japp’s breach. The originating application was supported by affidavits and also a statement of claim in which causes of action supporting the claims for relief were pleaded.
Evidence
Evidence Before The Court
But the respondents in the present case do not disagree with Bitzer’s claim that it should recover costs. Their contention is merely that Bitzer should not recover all its costs. They submit that the Court should make orders requiring them to pay only 65% of the costs and, in the case of Mr Rudischhauser and Mr Patil, only from the time they were added to the proceeding. They rely on the following matters:(a)that the restraint of use orders Bitzer sought in order 1 of its originating application were agreed to at the first return date on 22 May 2013;(b)that orders 2 and 3 of the originating application were actually proposed by the respondents were the subject of consent orders on 24 July 2013 and were “designed to ensure the Applicants could be satisfied that the Respondents could not inadvertently use any confidential information they may have had”;(c)that the parties agreed to the market participation restraining orders in order 4 of the originating application when the proceeding settled on 23 June 2014;(d)that the proceeding was resolved without Bitzer pressing for many of the orders it sought in its originating application;(e)that the final consent orders were “offered up by the Respondents in order to end the litigation and so save costs. The Respondents were simply not in a position to defend the Applicant’s proceedings any further and so agreed to the orders proposed by the Applicant”.The evidence on the application The evidence Bitzer submitted to the Court was received without objection and was uncontradicted. What follows is a brief summary of it. Bitzer is a market and innovation leader in Australia in the refrigeration industry. It is also the sole Australian manufacturer of refrigeration and heat exchange equipment. It distributes to the Australian and New Zealand markets products designed and manufactured by Bitzer GmbH as well as by Buffalo Trident. Generally speaking, customers engage Bitzer to design a refrigeration system for a specific purpose and Bitzer’s engineers design the system, which is then assembled with components manufactured by Bitzer, Bitzer GmbH, Buffalo Trident, or third-party suppliers. Sometimes, where there is no standard component available for a particular function, Bitzer’s engineers design and manufacture components specifically for that function. Among its customers are large users of commercial refrigeration equipment, such as Woolworths and Coles. In developing and conducting its business Bitzer creates and uses information and technical data of a highly sensitive and commercially valuable nature, the secrecy of which it tries to protect at all times. That material includes plans, drawings, schematics and technical drawings of electrical systems derived from the investment of “thousands of engineering hours”; commercial details of products manufactured or sold by Bitzer including the costs of manufacture, profit margin and key account discount structure, test results, performance comparisons and proposed sale prices of new products. The information taken by the respondents covered the gamut of these items. It related to Bitzer’s compressors, compressor systems, heat exchange products, heat pumps and condensing units.
Decision
Reasons for decision
Plainly, the respondents’ purpose was to acquire and use Bitzer’s confidential information and intellectual property for their own advantage to undercut Bitzer and position Coldworks initially as a real competitor in the marketplace and ultimately to undermine Bitzer’s dominance.Conclusions For the following reasons Bitzer should have the orders it seeks. 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. 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. 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.
Ratio Decidendi
Legal Principle Established
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