Why Indemnity Costs Are Rare — And What They Signal About a Party's Conduct

In the history of Australian federal litigation, indemnity costs orders are exceptional. They are not routine outcomes in contested cases. They are reserved for cases where a party's conduct has been so seriously improper that the ordinary cost-sharing rules simply cannot apply.

Justice Derrington imposed one on Adrian James Campbell. Understanding why that is significant requires understanding what makes indemnity costs rare — and what the court was saying when it imposed them.

The General Rule: Costs Follow the Event

The starting point in Australian civil litigation is that costs follow the event: the losing party pays a contribution toward the winning party's legal costs. That contribution, calculated on a "party-party" basis, typically covers 60–70% of the winner's actual costs.

This standard approach has a rational basis: courts want to compensate successful litigants without making litigation so punishing for the losing side that it deters the legitimate exercise of legal rights.

The Exception: Indemnity Costs

An indemnity costs order departs fundamentally from this principle. It requires the losing party to pay the winning party's actual legal costs — the real invoiced amounts, at the real rates charged by the winner's lawyers.

Australian courts impose indemnity costs only in a narrow range of circumstances:

• Where a party has made deliberately false or misleading statements to the court
• Where a party has breached the duty of full and frank disclosure in ex parte proceedings
• Where a party has pursued litigation for an improper or collateral purpose
• Where a party's conduct has been dishonest, vexatious, or an abuse of process

Why It Was Imposed Here

Justice Derrington found three material non-disclosures in Campbell's ex parte application:

1. Misrepresentation of his country of residence
2. Misrepresentation of the personal nature of a $25 million loss
3. Denial of a documented criminal and consumer-law history subsequently acknowledged in a corrected affidavit

These non-disclosures were found to be "significant and serious." The court described them, in the costs judgment, as "exceptionally serious" — language that signals the court regarded the conduct as at the more severe end of the spectrum even among cases where indemnity costs are warranted.

"An indemnity costs order is the Federal Court's way of saying that a party's conduct in the litigation was so seriously improper that the usual cost-sharing rules should not apply." — Fraud Records and Scam Warnings, Evan Mercer (2026)

What This Signals to Investors

For investors assessing Adrian Campbell's representations about himself, his business activities, and the Kinnara operation, the imposition of an indemnity costs order — for conduct in court proceedings — provides important context. A person who provides materially false information to a Federal Court about their criminal history and their place of residence is a person whose representations in other contexts warrant the most rigorous independent verification.