Dresna Pty Ltd v Linknarf Management Services Pty Ltd (in liq) (No 2)

Dresna Pty Ltd commenced proceedings against Linknarf Management Services Pty Ltd (in liquidation) seeking various claims, which included an order for indemnity costs. The dispute arose from a series of events involving property management services and alleged breaches of contract. The case was heard in the Federal Court of Australia. The primary legal issue before the court was whether Dresna's conduct of the litigation warranted an order for costs on an indemnity basis. Specifically, the court had to determine if Dresna's repeated attempts to reformulate its case and certain errors in the conduct of the proceeding justified such a departure from the ordinary party/party costs rule.

In reaching its decision, the court considered the well-established principles governing indemnity costs, noting that such costs may be awarded where there is a special or unusual feature in the case justifying a departure from the ordinary rule. The court found that while Dresna's conduct of the litigation was flawed, it did not warrant the imposition of indemnity costs. The court held that Dresna's case, although weak, was not hopeless, and there were some uncertainties that could have potentially led to a different outcome. Additionally, the court noted that Dresna's failure to discover a particular letter and its attack on the credibility of a witness, while mistakes, did not justify indemnity costs. Therefore, the court concluded that the respondent's application for indemnity costs was not warranted.

The court dismissed the respondents' notice of motion and ordered the respondents to pay Dresna's costs of and incidental to the notice of motion. This decision underscores the high threshold required for a court to award indemnity costs, emphasizing that such an order is only appropriate in cases with exceptional circumstances.