The Importance of Contractual Entitlements to Indemnity Costs

Case Note: BWD Trading Acct Pty Ltd v Bellamon Pty Ltd (No 2) [2024] QCS

A recent Supreme Court decision highlights the weight upon which contractual obligations will factor into a Court’s discretion to award indemnity costs.

Summary:

The original application BWD Trading Acct Pty Ltd v Bellamon Pty Ltd [2024] QSC 151 involved the seeking of relief to vest property in the name of the Bellamon Family Trust, with the effect of removing Bellamon Pty Ltd (who had entered into liquidation) and subsequently disentangling and protecting the interests of the various parties affected by that relief.

Issues:

The parties reached ‘substantial agreement’ on appropriate orders to be made, with the only remaining dispute being as to costs. The liquidator sought costs on the standard basis, however the relevant property was the subject of a mortgage and the mortgagee sought costs on the indemnity basis.

Reasons:

Citing Lee v Australia and New Zealand Banking Group Ltd [2013] QCA 284 at [9] and HBU Properties Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd [2015] QCA 95 at [26], Henry J stated

‘The contract clearly contemplated the payment of costs on an indemnity basis’

‘It cannot be doubted that the mortgagee’s inclusion and participation in the present application arose in relation to the mortgage and the mortgagee’s protection of its’ rights under the mortgage. I have accepted that it was no fault of the mortgagee that the applicant had to make the application. No other reason exists to suggest the discretion should be exercised other than according to the mortgagee’s contractual rights.’

Decision:

Henry J awarded the respondent mortgagee its’ costs on the indemnity basis.

The Court’s decision to award costs on either the standard or indemnity basis will depend on the specifics of each individual circumstance and the Court has discretion on this issue with reference to the Uniform Civil Procedure Rules. However, this case highlights that the Court can consider the existence of any contractual entitlement for the payment of costs on an indemnity basis.

This confirms the importance of contract drafting, to ensure that contractual provisions properly consider whether payment of costs in the event of a dispute or default clearly provide for costs to be recovered on an indemnity basis.

How Enterprise Legal Queensland Can Help

Our Business Team is experienced in reviewing and preparing agreements, contracts, deeds, and similar documents. We ensure that the appropriate contractual clauses and provisions are included (or excluded where necessary) to achieve the best outcomes for our clients.

If you need assistance with a contract or agreement, contact our Business Team for reliable advice at (07) 4646 2621 or  to schedule a consultation.