What happened
The substantive appeals in VID 1000 of 2011 and VID 1002 of 2011 were allowed on 12 October 2012. The Full Court (Emmett, Kenny and Middleton JJ) held that certain Victorian provisions regulating betting did not impermissibly burden interstate trade and commerce. Directions were then given for short minutes of orders. Disagreement arose solely on costs. The State of Victoria and Tabcorp Holdings Limited sought orders that Sportsbet Pty Ltd and Eureka Hotel Holdings Pty Ltd pay their costs of both the appeals and the proceeding at first instance (VID 808 of 2010). They also sought to vary the primary judge's costs orders so that Sportsbet and Eureka would pay the Victorian Commission for Gambling and Liquor Regulation's costs and the balance of Tabcorp's costs from 22 December 2010.
Sportsbet proposed a discounted liability: 80 per cent of the State's costs, 25 per cent of Tabcorp's first-instance costs, and no order as between Tabcorp and Sportsbet on the appeal. Eureka filed no separate submissions. The central complaints were that the appellants had failed on the trade-and-commerce issue, that there had been significant overlap between the State's and Tabcorp's submissions, and that Tabcorp's earlier status as a conditional intervener and the timing of its joinder warranted reduction. Tabcorp countered that it should recover costs from the date the Reply was filed (22 December 2010) because that pleading first introduced allegations directly affecting its fixed-odds approval and necessitated immediate preparatory steps ahead of the already-fixed April 2011 trial date.
The judgment, delivered on the papers, rejected every proposed discount. Orders were made allowing both appeals, substituting the VCGLR as fourth respondent, dismissing the amended application below, and requiring Sportsbet and Eureka to pay the costs of the State, Tabcorp and the VCGLR on the appeals and (with one limited exception) at first instance. Tabcorp's first-instance costs were ordered from 22 December 2010 rather than the formal joinder date of 3 March 2011. The reasons comprise only 16 paragraphs yet traverse the full discretionary landscape.
Why the court decided this way
The Court began from the orthodox position that a successful party is entitled to its costs: Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 [67] and 120-122 [134] and Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 237 [16]. Because the State and Tabcorp had succeeded on both appeals and obtained dismissal of the amended application, they were prima facie entitled to all costs unless Sportsbet demonstrated good reason to depart.
On the trade-and-commerce issue the Court accepted that it had occupied significant time at trial and on appeal. The primary judge had noted that a substantial part of the respondents' case addressed whether Sportsbet conducted business in and out of Victoria. Nevertheless, the Court held that failure on one argument does not justify issue-by-issue costs where the issue was not unreasonably raised and the party remained wholly successful overall. Nothing in the materials suggested the point was frivolous or extraneous. The Court cited Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) (2011) 288 ALR 385 at 402-403 [99]-[100] for the proposition that costs discretion is not engaged merely by partial forensic failure.
Sportsbet's second complaint concerned Tabcorp's separate representation. The Court first disposed of any lingering effect of Tabcorp's initial intervener status. Once joined under O 6 r 8 of the former Rules (and later r 9.05(1) of the 2011 Rules), Tabcorp became a full party with all rights and obligations, including the right to appeal and to seek costs: Forestry Tasmania v Brown (No 2) (2007) 159 FCR 467 at 470 [12]. Prior procedural history could not diminish that status. The Court endorsed the principle from Symphony Group PLC v Hodgson [1994] QB 179 at 193 that a joined party is treated as any other litigant.
On overlap, the Court found as a fact that there had been no undue duplication. The State advanced public-interest regulatory considerations while Tabcorp protected distinct commercial interests. Both sets of counsel had "evidently sought to eschew the unnecessary duplication of submissions". Critically, Sportsbet had taken no pre-hearing step to confine Tabcorp's role or to challenge its separate representation. Relying on Credit Lyonnais Australia Ltd v Darling (1991) 5 ACSR 703 at 710 and Re Octaviar Ltd (No 8) [2010] QCA 57 at [3]-[5], the Court held it was too late to complain after the event. The separate conduct had been reasonable having regard to the different interests: Statham v Shephard (No 2) (1974) 23 FLR 244 at 246-247.
The final question was the start date for Tabcorp's first-instance costs. The Court accepted that the Reply filed on 22 December 2010 first raised the fixed-odds allegations that made Tabcorp's joinder necessary. The trial date had already been fixed for 11 April 2011; pleadings were closed and evidence deadlines loomed. The primary judge had expressly considered the urgency when granting joinder: Sportsbet Pty Ltd v The State of Victoria [2011] FCA 170 at [20]. The Full Court concluded that Tabcorp had to conduct itself as though joined from that date or it could not have complied with the short post-joinder timetable.
The legal foundation was the definition of party-and-party costs in sch 1 to the Federal Court Rules 2011 (Cth) as costs "fairly and reasonably incurred by the party in the conduct of the litigation". This replaced the former "necessary or proper" test in O 62 r 19 but was not construed as excluding pre-joinder preparation. The Court surveyed older authorities (Société Anonyme Pêcheries Ostendaises v Merchants' Marine Insurance Co [1928] 1 KB 750; Scheff v Columbia Pictures Corporation Ltd [1938] 4 All ER 318; Re Gibson's Settlement Trusts [1981] 1 Ch 179) and texts (Quick on Costs; Costs Guide New South Wales) to confirm that costs incidental to litigation can include preparatory work. Ultimately each item would still be tested on taxation, but the order from 22 December 2010 was appropriate in principle. The result was a comprehensive vindication of the successful parties' costs claims.
Before and after state of the law
Before this judgment the law on costs discretion was settled at high level: the successful party usually recovers costs unless disentitling conduct or other discretionary factors appear (Oshlack). What constituted "success" and when partial failure justified apportionment remained somewhat flexible. Decisions such as Tomanovic had emphasised that mere failure on discrete issues does not automatically trigger apportionment. The treatment of joined parties and non-parties was also established (Symphony Group), but the precise costs position of a litigant who is required to prepare before formal joinder had produced divergent first-instance approaches.
The decision clarifies three practical points. First, it sets a high threshold for issue-by-issue costs: the unsuccessful party must show the issue was unreasonably raised, not merely that it consumed time. Second, it confirms that once a party is joined its earlier procedural history is irrelevant to its costs entitlement; the focus is on its status at the time costs orders are made. Third, and perhaps most usefully for practitioners, it interprets the 2011 Rules' definition of party-and-party costs as extending to pre-joinder preparation where the circumstances of the litigation (imminent trial, closed pleadings, urgent joinder) render such preparation necessary. The Court expressly links the new wording ("fairly and reasonably incurred … in the conduct of the litigation") to the older "necessary or proper" authorities, signalling continuity rather than rupture.
After the judgment, costs orders in complex regulatory or constitutional litigation are more predictable. Litigants with distinct interests can run separate cases without automatic fear of costs reduction provided they avoid duplication and the opponent does not seek pre-hearing directions. Parties anticipating joinder can more confidently incur preparatory costs knowing that, if joinder is granted on the basis that they "ought to have been joined", those costs may be recoverable from the date the need crystallised. The judgment has therefore narrowed the scope for late-stage costs arguments of the type Sportsbet advanced.
Key passages with plain-English translation
Paragraph 8 contains the central holding on apportionment: "The outcome of this issue did not relevantly qualify the success of either appellant on its appeal. Both appellants were ultimately wholly successful. The mere fact that a court does not accept all of a successful party's arguments does not make it appropriate to deal with costs on an issue by issue basis." In plain English, winning overall trumps losing on subsidiary points unless the point was obviously a waste of time.
At [10] the Court addresses Tabcorp's status: "Once Tabcorp was joined as a party, its status, both in the proceeding at first instance and on appeal, was that of a party … From this point, Tabcorp acquired a party's rights and obligations with respect to the proceeding, including a party's entitlement to participate in the trial and to appeal." Translation: procedural history before joinder drops away; you are either a party or you are not.
Paragraph 11 disposes of the overlap complaint: "There was no undue overlap between the submissions of the State and Tabcorp. Rather, the appellants conducted their appeals efficiently, having regard to their different interests … It is too late to complain of its separate representation and its role as an appellant at this stage with a view to affecting costs orders." In plain English, if you do not object before the hearing you cannot use overlap as a costs weapon afterwards.
The pivotal passage on pre-joinder costs appears at [15]: "We would not construe the words 'in the conduct of the litigation' as precluding the recovery of costs incurred before a party was formally joined. Rather, the definition of costs as between party and party is directed to the substance of the matter …" Translation: the Rules look at the reality of what was reasonably required to run the case, not the precise date a formal order is entered.
What fact patterns trigger this precedent
The decision is triggered whenever a party has succeeded overall but failed on one or more discrete issues that occupied substantial hearing time. It applies with particular force in constitutional or regulatory cases where multiple overlapping arguments are advanced. It is directly engaged when one litigant has been joined after pleadings have introduced new allegations against it and the trial timetable is already tight; the Court will look at the practical necessity of preparatory work before the joinder order.
The precedent also speaks to cases involving both governmental and commercial respondents or appellants. Where their interests diverge (public regulatory power versus private commercial advantage) separate representation will ordinarily be regarded as reasonable. The absence of any pre-hearing application to limit the scope of separate representation or to seek directions on costs is treated as powerful evidence that the separate conduct was accepted as legitimate at the time.
Finally, the judgment applies to any dispute about the start date for costs after late joinder. If the moving party can show that the need for its involvement crystallised on a particular date (here the filing of a Reply) and that the existing timetable forced immediate action, costs may run from that earlier date provided the items ultimately pass taxation as "fairly and reasonably incurred".
How later courts have treated it
The judgment has been cited for the proposition that overall success ordinarily attracts full costs even where discrete issues are lost, provided those issues were reasonably arguable. Courts have treated the paragraph 8 statement as reinforcing the high threshold for apportionment set by Oshlack and Tomanovic. The confirmation that a joined party's earlier procedural history is irrelevant to costs entitlement has been applied in subsequent joinder applications where interveners later become formal parties.
The reasoning on pre-joinder costs has been followed in cases where commercial entities have had to prepare evidence and submissions in advance of formal orders because of impending hearing dates. Taxation registrars have used the "substance of the matter" language at [15] when assessing whether preparatory work was fairly and reasonably incurred. The emphasis on the absence of prior objection to separate representation has been deployed to resist late complaints about duplication between state and industry parties.
The decision is treated as an authoritative application of the 2011 Rules' costs dictionary rather than a radical departure from the pre-2011 position. Later single-judge and appellate decisions have cited it alongside Ruddock v Vadarlis (No 2) when reiterating that costs discretion is not to be exercised merely because a successful party raised an argument that ultimately failed.
Still-open questions
The judgment leaves open precisely which categories of pre-joinder expenditure will satisfy the "fairly and reasonably incurred in the conduct of the litigation" test on detailed taxation. While the principle is clear, the boundary between recoverable preparatory work and irrecoverable "officious" expenditure is not exhaustively mapped. Practitioners must still persuade a taxing officer that each item was truly necessary given the looming trial timetable.
Another open question is the degree of divergence of interest required before separate representation is automatically regarded as reasonable. The Court accepted that a state government's public-interest role differs from a commercial operator's profit motive, but did not articulate a general formula. In future cases where two commercial parties with closely aligned interests both appear, the outcome on duplication arguments may be less clear.
The interaction between this costs approach and Calderbank or offer-of-compromise regimes is not addressed. If a party makes a generous offer that is rejected and then succeeds on all but one issue, it remains unclear whether the paragraph 8 principle survives or whether the offer changes the discretionary calculus. The judgment also does not discuss how its pre-joinder reasoning applies when the late-joined party is an applicant rather than a respondent, or when the joinder is discretionary rather than mandatory.
Finally, the decision assumes that the primary judge's earlier costs order of 9 September 2011 remains partially intact. Exactly how the "balance" of Tabcorp's costs interacts with that existing order in a complex multi-party taxation is left for the parties and the taxing officer to resolve. These residual practical questions mean the judgment, while clear at the level of principle, continues to generate satellite disputation in high-value regulatory litigation.