Kovac v Chanak (No 2)

In the case of Kovac v Chanak (No 2), the appellant, Kovac, sought a review of a decision by the Federal Circuit Court regarding the assessment of costs, specifically focusing on the application of indemnity costs under the Federal Circuit and Family Court of Australia (FCFCOA) cost rules. The dispute arose from a previous legal action where Chanak had been awarded indemnity costs. Kovac argued that the FCFCOA had erred in applying the indemnity costs principle and that the scale of costs was inappropriate.

The primary legal issue before the court was whether the FCFCOA had correctly exercised its discretion in awarding indemnity costs and whether the scale of costs applied was consistent with the relevant cost rules. Additionally, the court had to consider whether the FCFCOA had adequately justified its decision to award indemnity costs, given that such an award is generally reserved for cases involving exceptional circumstances.

The court examined the principles guiding the award of indemnity costs, emphasizing that such costs are only appropriate in cases where the successful party has been substantially prejudiced by the conduct of the losing party. The court found that the FCFCOA had not adequately demonstrated that the circumstances of the case warranted the imposition of indemnity costs. The court also noted that the scale of costs applied did not align with the principles set forth in the cost rules. Consequently, the court concluded that the FCFCOA had erred in both the assessment and the application of indemnity costs, and that the award should be reconsidered in accordance with the relevant cost rules. The court ordered that the matter be remitted to the FCFCOA for a fresh assessment of costs, excluding the indemnity component, and directed that the scale of costs be adjusted to reflect the proper application of the cost rules.