Trends in Cost Orders in Queensland – When are Indemnity Costs Awarded?
During civil litigation, legal costs are incurred by all parties to the proceeding. During or at the end of a proceeding, Courts have the power to make an order that one party pay the other party’s costs, either for part of the proceeding (for example, an interlocutory application), or for the whole of the proceeding. The Court can also make an order that there is ‘no order as to costs’, which means that parties bear their own legal fees.
Typically, when costs are awarded to a party in a legal proceeding, it’s on a “standard basis”. In Queensland, the scale of costs by which standard costs are calculated is contained in the Uniform Civil Procedure Rules 1999 (Qld), and it usually amounts to about 65% of a parties’ legal fees. Courts can also, in limited circumstances, award “indemnity costs”. An indemnity cost order provides for recovery of a higher proportion of actual expenses, potentially including higher solicitor and counsel fees and expert disbursements and are typically about 85% of a party’s legal fees.
The rationale for indemnity costs is – litigation costs should fairly reimburse the successful party for legal expenses that the party was forced to incur because of the unsuccessful party. However; this is not intended as a punitive measure, rather, it ensures fair compensation for incurred costs. Thus, indemnity costs cannot exceed the actual legal expenses borne by the successful party.
Queensland courts have highlighted particular circumstances that justify departure from standard costs. The seminal authority, Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, identified conduct warranting indemnity costs as including:
- Allegations of fraud made without basis or for ulterior motives
- Conduct involving wilful disregard of clearly established law
- Unreasonable prolongation of proceedings or pursuing meritless claims
- Imprudent refusal of reasonable settlement offers or Calderbank offers.
Illustrative of Queensland’s approach to indemnity costs and Calderbank offers is J & D Rigging Pty Ltd v Agripower Australia Ltd & Ors [2014] QCA 23. J & D Rigging made a Calderbank offer shortly before trial, proposing settlement terms including dismissal of Agripower’s application and release of approximately $2.6 million held by the Court. Agripower rejected this offer and initially won, although later lost on appeal. J & D sought indemnity costs, but the Court of Appeal refused, holding that Agripower’s rejection was reasonable given the complexity, limited time for consideration, and substantial amount at stake. This case reaffirms that indemnity costs are not automatic upon rejecting a Calderbank offer; the rejection must be shown to be clearly unreasonable.
Conversely, Haddow v Simala [2010] QSC 293 illustrates indemnity costs awarded for pursuing clearly unmeritorious claims. The plaintiff brought proceedings involving mortgage issues despite clear legal and factual shortcomings. Chief Justice de Jersey awarded indemnity costs, finding the claim groundless, unsubstantiated, and improperly motivated. Citing Di Carlo v Dubois [2002] QCA 225, the Court confirmed indemnity costs are justified where litigation involves allegations or contentions that ought never to have been pursued.
Additionally, Queensland judges have experimented with approaches to streamline cost determinations, acknowledging that separate hearings and extensive post-trial submissions can inflate overall litigation costs without significant benefit. Justice Thomas Bradley of the Supreme Court of Queensland, for example, has encouraged the resolution of cost orders within initial judgments to reduce unnecessary additional litigation on costs.
Overall, indemnity costs in Queensland are generally reserved for exceptional circumstances involving unreasonable conduct by a party (or if proceedings rely on a contractual agreement that provides for it). Recent judicial trends highlight that Queensland Courts take indemnity costs seriously and aim to make cost decisions more efficiently. At Rostron Carlyle Rojas Lawyers, we remain mindful of the circumstances in which indemnity costs might be awarded, to guide our litigation strategies accordingly.
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