The Sanko Steamship Co Ltd v Sumitomo Australia Ltd

In the Federal Court of Australia, the case of The Sanko Steamship Co Ltd v Sumitomo Australia Ltd involved a dispute concerning indemnity costs in protracted litigation. The plaintiffs, The Sanko Steamship Co Ltd and Grandslam Enterprise Corporation, were sued by the defendant, Sumitomo Australia Ltd. The legal issues before the court were whether the plaintiffs should be ordered to pay the defendant's costs on an indemnity basis and the appropriate allocation of costs for the application regarding indemnity costs.

The court considered the principles surrounding indemnity costs, particularly in light of the well-known Calderbank decision. The court highlighted that the general rule in litigation is for costs to be awarded on the party and party basis. Indemnity costs are exceptional and should only be awarded when the conduct of the losing party is deemed plainly unreasonable. The court examined the conduct of both parties, the history of settlement negotiations, and the nature of the litigation, which involved complex issues and significant uncertainty.

Sheppard J concluded that neither party acted unreasonably in the context of the settlement negotiations and the overall conduct of the litigation. The court observed that the defendant's settlement offers were sometimes higher than the amount it could have recovered if judgment had been entered at those times. Given these circumstances, the court decided against awarding indemnity costs to the defendant. The court also opted not to impose costs on the defendant for the application regarding indemnity costs, considering the application not entirely without merit and the lack of clear authority on the matter.

Ultimately, the court ordered that the plaintiffs pay the defendant's costs on the party and party basis and made no order for the costs of the application for indemnity costs. This decision reflects a careful consideration of the principles of indemnity costs and the specific circumstances of the case.