AIG Australia Ltd v Jaques (No 2)

AIG Australia Limited, a plaintiff, and the respondent, sued the defendant, Mr. Jaques, over a dispute regarding a claim for indemnity costs in the Court of Appeal of Victoria. The original matter pertained to a claim brought by Mr. Jaques against AIG for indemnity costs incurred in defending a prior proceeding. The lower court had awarded indemnity costs from the commencement of the trial. On appeal, the dispute was over whether the indemnity costs order should be maintained or reduced to a standard costs order.

The court was required to determine whether the indemnity costs order should be upheld or reduced to a standard basis, given that an offer of compromise was made before the trial. The case hinged on whether the principles established in Lower Murray Urban and Rural Water Corporation v Di Masi, Belbin and Marciano (No 2) [2014] VSCA 133 applied. This precedent held that when a defendant secures indemnity costs from the commencement of the trial, the plaintiff should be awarded indemnity costs from the point of the offer of compromise.

The Court of Appeal held that the indemnity costs order should be reduced to a standard basis. The court found that an offer of compromise had been made before the trial, which aligned with the principles in Lower Murray Urban and Rural Water Corporation v Di Masi, Belbin and Marciano (No 2). The Court of Appeal exercised its discretion and determined that the costs should reflect the point from which the offer of compromise was made, rather than from the start of the trial.

Consequently, the Court of Appeal dismissed the appeal and ordered that the costs of the appeal be awarded on a standard basis. Additionally, the costs of the stay application were to be paid by AIG. The indemnity costs awarded at first instance were reduced to a standard basis from the date of the offer of compromise.