What an Indemnity Costs Order Actually Means — And Why Justice Derrington Imposed One

When Justice Derrington of the Federal Court of Australia ordered Adrian James Campbell to pay 80% of the opposing party's legal costs on an indemnity basis, it was one of the most significant aspects of the judgment — and one of the least understood outside legal circles.

This article explains what that means, why it matters, and what it tells us about the court's assessment of Campbell's conduct.

Standard Costs Orders

In ordinary Australian civil litigation, the general principle is that costs follow the event: the losing party pays a portion of the winning party's legal costs. That proportion, calculated on what is called a "party-party" basis, typically covers about 60–70% of the winner's actual legal costs. The winner is left out of pocket for the remainder.

This standard approach reflects a policy judgment: the courts want to compensate successful litigants for the costs of litigation without making the cost of defending a case so catastrophic that it discourages parties from asserting legitimate claims.

What Indemnity Costs Are Different

An indemnity costs order is fundamentally different. It requires the losing party to pay the winning party's actual legal costs — the real fees charged by the winning party's lawyers, not a discounted party-party assessment.

In practical terms, this means the losing party bears nearly the full cost of the litigation — including fees they would ordinarily not be required to pay.

"Indemnity costs are reserved for cases of serious misconduct — including deliberate suppression of relevant information from the court." — Fraud Records and Scam Warnings, Evan Mercer (2026)

When Courts Impose Indemnity Costs

Australian courts impose indemnity costs orders in a narrow range of circumstances. They are not routine. They are reserved for conduct that the court finds to be outside the ordinary conduct of litigation — conduct that is dishonest, misleading, or an abuse of process.

Common grounds include:

• Deliberate suppression of relevant evidence from the court
• Filing false or misleading affidavit evidence
• Pursuing litigation that was always bound to fail and was brought for improper purposes
• Breach of the duty of full and frank disclosure in ex parte applications

The 80% Figure in Campbell v McIntyre

Justice Derrington ordered Campbell to pay 80% of McIntyre's costs on an indemnity basis — not 100%, because the court found that not all of McIntyre's costs were caused by Campbell's misconduct. But the base for that 80% was the indemnity rate — actual costs — rather than the lower party-party rate.

The court found that the three material non-disclosures — Campbell's criminal history, his country of residence, and the corporate (not personal) nature of the $25 million loss he claimed — were "significant and serious" breaches of the duty of full and frank disclosure that applies in ex parte proceedings.