General Principles
The general principle that costs follow the event must be applied with careful consideration when litigation involves multiple parties who are jointly represented. This situation frequently arises where co-defendants share legal representation throughout proceedings, but the plaintiff succeeds against some defendants and fails against others. The court's discretion regarding costs remains unfettered, but established principles guide the exercise of that discretion.
As emphasized in Chittleborough v Troy Group Pty Ltd [No 2] [2025] WASCA 4 at [74], although many guiding rules of principle and practice exist with respect to the award of costs, the discretion remains unfettered and each case must be decided on its own facts.
The "Rule of Thumb" Principle
Origin and Rationale
Where co-defendants are jointly represented, a "rule of thumb" principle has developed to address the allocation of costs when one defendant succeeds but another fails. This principle originated in Ellingsen v Det Skandinaviske Compani [1919] 2 KB 567 and was further developed in Korner v H Korner & Co Ltd [1951] Ch 10.
The principle can be summarized as follows:
When defendants share legal representation, they share the costs of their defence proportionately.
A successful defendant can only recover their fair share of the joint defence costs from the plaintiff plus any costs specifically related to their individual defence.
Similarly, a partially successful plaintiff can only recover from each unsuccessful defendant their proportion of the shared costs, plus any costs specifically related to the case against that particular defendant.
A more modern explanation of the rule is provided in Currabubula Holdings Pty Ltd v State Bank of New South Wales Ltd [2000] NSWSC 232 at [93]-[105].
Application of the Principle
The objective of the rule is to achieve substantial justice in the awarding of costs between a partially successful plaintiff and various successful and unsuccessful defendants. It prevents either side from being unfairly enriched or burdened when success is mixed and representation is shared.
Example 1: Where a plaintiff sues three defendants who are jointly represented and succeeds against two but fails against the third, the court might order the plaintiff to pay one-third of the successful defendant’s costs, reflecting the proportion of the shared defence costs attributable to the successful defendant.Departing from the Rule of Thumb
The rule of thumb is not an inflexible rule but rather a starting point for consideration. Courts may depart from the principle when circumstances warrant.
Factors That May Justify Departure
In determining whether to depart from the rule of thumb, courts may consider:
The overall success on substantive issues litigated, not merely the formal outcome between specific parties.
The extent to which the defendants presented a unified or common defence.
Whether certain factual issues dominated the trial and which party succeeded on those issues.
The relationship between co-defendants and whether their interests were aligned.
The conduct of parties throughout the litigation, including settlement offers.
Whether applying the rule would lead to a just outcome in the particular circumstances.
Ng v Sevastos: A Case Study in Departing from the Rule
A Western Australian authority on this issue is Ng v Sevastos by His Guardian Ad Litem Vanessa Vershaw [2024] WADC 75 (S). The case provides valuable guidance on when courts might depart from the rule of thumb.
Facts of the case: The plaintiff, Mr. Ng, had advanced money for the development of a West Perth property. He sued both Peter Sevastos and Steven Sevastos (Peter's nephew) to recover $160,000. The defendants were jointly represented throughout the proceedings. Mr. Ng succeeded entirely against Peter for the full amount claimed but failed in his claim against Steven. Peter was declared bankrupt shortly after judgment was entered against him. The defendants had filed a joint defence, made joint settlement offers, and Steven was the primary witness for both defendants.
Although the formal outcome was that Mr. Ng failed against Steven (suggesting costs should follow the event), the court made no order as to costs between Mr. Ng and Steven, departing from the rule of thumb that would have typically awarded Steven a proportion of the defendants' shared costs.
Curwood DCJ explained this departure at [33]-[38]:
"I consider this is an appropriate case to depart from the 'rule of thumb' principle I have outlined which, if applied, would permit Steven to recover from Mr Ng half of the joint costs incurred by the defendants. For the reasons which follow, that would not be a just result and the circumstances of this case do not meet the general conditions for application of the 'rule of thumb' principle.
First, Mr Ng enjoyed a significant measure of success on the issues litigated in the proceedings... Although I did not find that Steven was a party to the agreement as Mr Ng alleged, that conclusion was not reached by accepting Steven's evidence. This was the only issue where Mr Ng did not succeed. The time spent at trial on determining the identity of the contracting parties was minimal.
Secondly, Peter and Steven had closely aligned interests, shared legal representation, and approached the matter collectively. They jointly advanced a defence which raised many factual issues which consumed most of the trial time."
The court concluded that ordering Mr. Ng to pay any of the costs of the jointly represented defendants would not lead to a just outcome, particularly since none of the factual issues litigated at trial were agreed by the defendants.
Practical Considerations
Identifying the "Truly Successful" Party
As emphasized in Frigger v Professional Services of Australia Pty Ltd [2011] WASCA 103 (S) at [12], in determining who is the successful party, the question to be answered is who was successful in the "underlying, real contest" between the parties.
This requires looking beyond the formal success or failure of claims to consider which party succeeded on the major contentious issues that occupied the court's time and resources.
Apportioning Costs - A Matter of Impression
The exercise of the court's discretion to make a costs order to reflect the limited success of a party should be approached broadly and as a matter of impression, rather than as an exercise in mathematical precision. See Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) v Moss [2007] WASCA 162 (S) at [6].
Example 2: Where three defendants are jointly represented but have individual issues specific to their defences, the court might not simply award one-third of the costs to a successful defendant. Instead, the court might consider what proportion of the trial was devoted to common issues versus individual issues and adjust the costs award accordingly.
Relevance of Settlement Offers
Settlement offers, including Calderbank offers, remain relevant considerations in the exercise of costs discretion in cases with jointly represented parties.
In Ng v Sevastos, the court considered various Calderbank offers made by both sides but concluded that they did not assist in determining the final costs order. The court noted that the defendants' offers were joint offers but for amounts less than the judgment against Peter, while the plaintiff's offers required joint payment obligations from both defendants - an outcome not achieved at trial.
Fairness and Justice as Guiding Principles
The fundamental principle guiding costs decisions is fairness and justice between parties based on each case's specific circumstances. As noted in Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 at [49], generally, the court operates from the starting position that the successful party should recover their costs.
However, in cases with jointly represented parties, determining "success" requires nuanced consideration beyond formal outcomes. As demonstrated in Ng v Sevastos, the court may depart from both the general rule that costs follow the event and the rule of thumb for jointly represented defendants when fairness and justice require a different approach.
Conclusion
The determination of costs where there are jointly represented parties requires careful consideration of multiple factors beyond formal success or failure. While the rule of thumb provides a useful starting point, courts retain an unfettered discretion to make costs orders that achieve substantial justice between the parties based on the particular circumstances of each case.
Where defendants present a unified defence, share representation, and have aligned interests, courts may be more inclined to depart from the rule of thumb if applying it would not achieve a just outcome based on the substantive issues litigated and determined.