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Indemnity Costs

These costs are sometimes referred to as solicitor and (own) client or legal practitioner and (own) client.

See for instance Commercial Arbitration Act 2010 (NSW) s33B

The can include up to 100% of the costs incurred.

When are they awarded?

  • Historically, the Court had the power to award costs on a solicitor and client (indemnity) basis as and when the justice of the case might so require 1)
  • French J (as his Honour then was), said 2) that for the court to depart from the usual party and party basis :
    • … it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established.
    • It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
  • These comments were made by French J in relation to the decision of Woodward J 3) , where he said:
    • Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where there is some special or unusual feature in the case to justify the court exercising its discretion in that way 4).
    • I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.
    • In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.


    • Expert Determination upheld
    • The defendant pay the plaintiff's costs of the proceedings (including the costs of the cross-summons) on the ordinary basis.
    • There is no dispute that the court can take into account the offer of compromise in determining an appropriate order in relation to costs in accordance with the principles that have their genesis in the decision of Calderbank v Calderbank 6)
    • According to those principles, the court may, in the exercise of its discretion, make a costs order in favour of a party who has made an offer of compromise that is more favourable than the order the party would normally obtain if that party can establish that the offer represented a genuine compromise of the dispute and that it was unreasonable for the offeree to have rejected it 7)
    • In my opinion, BDM's offer did not represent a genuine offer of compromise.
    • The only element of compromise it involved was foregoing a small amount of interest and its own legal costs.
    • In some cases, having regard to the strength of the plaintiff's case, an offer to forego interest and legal costs may be a genuine offer of compromise. 8)
    • However, I do not think it represents a genuine offer of compromise in this case.
    • In my opinion, it was open to UXC to argue that something had gone wrong with the drafting of the disputed clause and that, in those circumstances, the court should seek to find elsewhere in the contract the amount to which the disputed clause referred.
    • BDM's primary case before the hearing commenced accepted UXC's starting point, but involved a contention that the amount that should be inserted should be found elsewhere in the Agreement Details and did not affect the outcome of the case.
    • Although I rejected UXC's submissions, I do not think that BDM's case was so strong that the offer it made represented a genuine compromise of it.
    • In addition, I think it was reasonable of UXC to reject that offer in circumstances where it believed that the case being advanced by BDM was one which ultimately was not accepted by the court.


See also

1) Andrews v Barnes (1887) 39 Ch. D. 133 (CA) at 141; Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536
4) Preston v Preston (1982) 1 All ER 41 at 58
5) [2011] NSWSC 685
6) [1975] 3 All ER 333; 3 WLR 586.
7) see Commonwealth of Australia v Gretton [2008] NSWCA 117 at [38] per Beazley JA; Jones v Bradley (No 2) [2003] NSWCA 258 at [8] per Meagher, Beazley and Santow JJA.
8) see Manly Council v Byrne (No 2) [2004] NSWCA 227.
9) [2008] NSWCA 172
10) [2005] VSCA 298
11) [2001] VSC 189

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