How are costs apportioned in multi-party proceedings?
All good things come in threes (The Lord of The Rings, The Godfather, and the original Star Wars trilogy). This instalment of Bite Sized Legal Insights on costs in multi-party proceedings will also be split into three parts – to keep things digestible.
Part 1 (this post!) will deal with the general rules principles applicable to costs in mult-party proceedings.
Part 2 (next week) will deal with Bullock and Sanderson orders.
Part 3 (a blog post written a log time ago, in a galaxy far far away) will deal with an adjacent topic - some recent decisions about costs in group proceedings.
What is the general rule?
If a Court orders that costs are to be paid by two or more persons (defendants or plaintiffs), they are joint and severally liable for those costs unless there are ‘special circumstances’. The rationale is the successful litigant is entitled to be indemnified for her costs of the action and shouldn’t miss out just because an unsuccessful party’s partner in crime can’t or won’t pay their share; Zreika v Royal [2019] FCAFC 82; 271 FCR 65, [315].
‘Special circumstances’ means there are exceptions to the general rule, right?
There are a few exceptions to the general rule, each set out below.
Judicial Discretion to Apportion Costs
The Courts have a discretion to apportion costs between two or more unsuccessful litigants. The Court will exercise this discretion if it is satisfied that it is just in the circumstances to order the unsuccessful litigants to pay a set portion of the successful litigant’s costs; Australian Competition and Consumer Commission v SIP Australia Pty Ltd [2003] FCA 336; ATPR ¶41–937, [67]. This is an inexact and pragmatic science – and the Courts take a less rigorous approach than applies to the apportionment of liability. However, the apportionment must bear some rational relationship to the parties’ role in the overall proceeding; Morris v Riverwild Management Pty Ltd [2009] VSC 439, [13]. Case law demonstrates a range of approaches, including apportionment based on:
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Separate Defences and Claims
Where a defendant causes an ultimately successful plaintiff to incur additional costs by conducting a separate and distinct defence from their co-defendants, the Court may order that defendant to be solely liable for those additional costs; The Owners - Strata Plan No 68372 v Allianz Australia Insurance Limited (No 2) [2015] NSWSC 729, [22]. A similar approach is used where there is a successful defendant vis a vis multiple plaintiffs; Gove v Black [2006] WASC 298 (S2), [8].
Contribution by Co-Defendants
The Supreme Court (General Civil Procedure) Rules 2015 (Vic) also provide a mechanism by which a defendant can safeguard itself against the costs incurred by an unreasonable co-defendant. Defendant ‘A’ may make an offer to co-defendant ‘B’ to contribute to the amount of debt or damages that the plaintiff might recover from them without prejudice to their defence (see r26.10(1)). If B rejects A’s offer, and A obtains a judgment against B on more favourable terms than the offer, A is entitled to an order that B is liable for their costs on the standard basis up to 11 am on the second business day after the offer was served, and on the indemnity basis thereafter (see r26.10(2)).
Erdevicki v Amaca Pty Limited (Costs Ruling) [2021] VSC 248 is a recent example of these rules in action. In that case:
As is often the case, r26.10 preserves the Court’s general discretion as to costs by expressly including the caveat “unless the Court otherwise orders…” A defendant may not be able to rely on an offer of contribution if the offer is not a genuine compromise or will not materially reduce the costs of the proceeding (see for example Nilumbik Shire Council v Victorian YMCA Community Program Pty Ltd [2016] VSCA 192).
Plaintiff not Successful Against all Defendants
Last but not least, if a plaintiff is not successful against all defendants, the Court may order the plaintiff to pay the successful defendant’s costs and the unsuccessful defendant to pay the plaintiff’s costs (excluding costs referable to the successful defendant); Dimos v Willetts [2000] VSCA 154; 2 VR 170, [16] and [47].
Higher courts also retain the discretion to make a Sanderson or Bullock order, which may involve an unsuccessful defendant paying costs as between the plaintiff and a successful defendant. These orders will be discussed in more detail in next week’s instalment of Bite Sized Legal Insights, because they’re so tricky they warrant a separate blog post to themselves!
Key Takeaways
While the general rule is that in multi-party proceedings, the unsuccessful parties are joint and severally liable for the plaintiff’s costs, the Court may order otherwise where:
1️⃣ It is just in the circumstances of the case to apportion costs as between the defendants
2️⃣ One or more parties rely on separate and distinct defences or claims
3️⃣ One of multiple defendants has made an offer of contribution
4️⃣ The plaintiff is not successful against all defendants