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MTECC NEWS 21.06 ||| Pushing for indemnity costs – Winslow Constructions v Head, Transport for Victoria (Costs) [2021] VSC 74

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In this case the Applicant (Winslow) succeeded in an arbitration brought by it against the Respondent (the Department) under the Commercial Arbitration Act 2011 (Vic).

Winslow sought enforcement of the Award by the Court pursuant to S.35 of the Act, and Judgment was duly entered against the Department. The issue before the Court was Winslow’s application for indemnity costs of the enforcement application.

Riordan J. considered which of the following three alternative arguments was correct in relation to the awarding of indemnity costs in such circumstances:

  1. The “A v R principle” (A v R [2009] 3 HKLRD 389) where Reyes J in the Hong Kong Court of First Instance held that when an award is unsuccessfully challenged, the Court will normally consider awarding costs against the losing party on an indemnity basis. There is a reversal of the usual onus of proof requiring the unsuccessful challenging party to establish special circumstances as to why an indemnity cost order should not be made;
  2. The “no reasonable prospects test” – Beach J. in Sino Dragon Trading Ltd v Noble Resources International Pty Ltd (No.2) [2016] FCA 1169 [4] –[20], rejected the A v R principle, but applied the following principle – that where a party unsuccessfully challenged an award under Article 34 of the Model Law, if the challenge was found not to have had reasonable prospects of success, that would constitute a category of circumstances justifying an order for indemnity costs;
  3. The “hopeless case test” – whereby the discretion to award indemnity costs will not be enlivened unless the unsuccessful challenger to enforcement knew or should have known, on proper consideration, that the case was hopeless (per J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No.2) (1993) 46 IR 301, 303; and Macedon Ranges Shire Council v Thompson (2009) 170 LGERA 41,49 [15] (Victorian Court of Appeal).

Riordan J. decided (at [27]) that the hopeless case test was the appropriate test to be applied. He said that this was in accordance with the usual rule with respect to unmeritorious claims. He disallowed Winslow’s application for indemnity costs of the enforcement application, and ordered Winslow to pay the Department’s costs of the application on a standard basis.

Francis Tiernan QC*

*Liability limited by a Scheme approved under professional standards legislation.

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