Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [No 2]

Sino Dragon Trading Ltd sought an order for the First Respondent, Noble Resources International Pte Ltd, to pay costs on an indemnity basis following an arbitration. The dispute arose from a failed arbitration process and the subsequent application to enforce the arbitration award. The matter was heard in the Federal Court of Australia. The primary legal issue before the Court was whether there exists a rule that requires costs to be assessed on an indemnity basis outside of exceptional circumstances, particularly when the application involves a breach of an arbitration agreement. Additionally, the Court needed to determine if there was any public policy context that supported such a rule and whether indemnity costs should be awarded through the application of usual principles.

The Court considered the principles established in the case of Chua v Chua, which emphasised that indemnity costs are generally not awarded unless there are exceptional circumstances. The Court further examined whether the breach of the arbitration agreement constituted an exceptional circumstance warranting indemnity costs. The Court found that the breach of the arbitration agreement did not, in itself, create a context of public policy that supported an order for indemnity costs. Instead, the Court emphasised the importance of applying the usual principles in determining costs, which typically do not include indemnity costs unless there are exceptional circumstances. Based on these findings, the Court ruled that the Applicant should bear the costs of the application, and the First Respondent's costs were to be taxed if not agreed upon.