Nexgen Sydney Pty Ltd v Barakat (No 2)

Nexgen Sydney Pty Ltd brought an action against Barakat in the Supreme Court of New South Wales seeking a declaration of unpaid rent, interest, and legal costs. The dispute arose from a commercial lease agreement, and the case reached the court for a determination of the costs that could be claimed by the plaintiff. Specifically, the court had to decide whether the plaintiff was entitled to costs on an indemnity basis.

The court considered the principle that, in a party/party costs agreement, the prevailing party is entitled to recover its costs on the indemnity basis unless there is a specific agreement to the contrary. In this case, the agreement between the parties was silent on the basis of costs. The court held that, in the absence of an explicit agreement to the contrary, the prevailing party is entitled to indemnity costs. The court noted that the purpose of party/party costs agreements is to provide certainty and finality to the parties, and the indemnity basis is the default position unless otherwise specified.

In light of the reasoning, the court concluded that the plaintiff was entitled to indemnity costs. The court made orders accordingly, directing that the defendant pay the plaintiff's costs of the proceeding on the indemnity basis. The court emphasised that the principle of indemnity costs in party/party agreements is well established and serves to protect the prevailing party from bearing an unreasonable financial burden.