Key Takeaway points
- Even when you win in court, you usually only get back 40 to 75 per cent of what you spent on legal fees. Winning rarely means being fully reimbursed.
- If a court decides you behaved unreasonably during a dispute, it can order you to pay far more, up to 90 per cent of the other side’s legal bill. This is called an indemnity costs order.
- Courts only make this kind of order in serious cases, for example baseless claims, ignoring court process, or refusing a fair settlement offer for no good reason.
- The simplest way to protect yourself is to run your case sensibly: meet deadlines, take reasonable settlement offers seriously and avoid dragging things out.
Losing isn’t the worst part. Paying for everyone is.
Every business owner knows that going to court is expensive. What fewer people realise is that how you handle a dispute can make it far more expensive again, even if your case or defence was completely reasonable.
Here is the part most people don’t expect. If you win a court case and the other side is ordered to pay your costs, you still won’t get all your money back. Courts usually only order the loser to cover what was reasonably necessary to run the case, which in practice works out to about 40 to 75 per cent of what you spent.
There is a tougher version of this called an indemnity costs order. Instead of covering a portion of the other side’s costs, you could end up paying most of them, sometimes 75 to 90 per cent. Courts use this as a way of saying that a party did not just lose but ran the dispute so badly that it wasted everyone’s time and money. It is tempting to fight hard on every point in a dispute. But pushing every argument rarely changes the result, and it is often exactly this kind of behaviour that pushes a court toward ordering indemnity costs.
What gets you in trouble.
Losing a case, or even having a weak case, is not enough on its own to trigger an indemnity costs order. Courts are looking for something more: real evidence that you behaved unreasonably, not just that your argument didn’t win.
The kinds of behaviour that can lead to this outcome include making serious accusations, like fraud, that turn out to have no basis, running a case just to delay or pressure the other side, continuing with a case you should have known had no real chance of success, ignoring the facts or the law to drag things out, filing pointless applications to stall the inevitable, or knocking back a genuinely fair settlement offer without good reason.
None of this happens automatically. Courts still need clear evidence that someone crossed the line from simply losing to acting unreasonably. That protects your right to bring a genuine claim, or defend one, without worrying that a judge disagreeing with you will suddenly leave you with someone else’s legal bill.
Two Queensland court decisions from 2025 show how differently this can play out. In one case, the court ordered a losing party to pay indemnity costs after they filed an application with no real basis, simply to delay paying a debt they already owed. They had ignored court orders, dodged being served with documents and even denied who they were. The judge described their conduct as obstructive.
In another case, the winning party asked the court for indemnity costs and was refused. The people who lost had represented themselves, run their case properly and made no false claims. They had simply misunderstood what the court could do for them. Even though they were in a difficult financial position, that made no difference to the outcome, a reminder that these orders come down to how you behaved, not how sympathetic your situation is.
How we help you stay in control
We help clients manage this risk from the very start of a dispute, well before it ever reaches a courtroom. That means giving you an honest, early assessment of where you stand, advising you on whether it’s worth pushing ahead or whether settling or mediation makes more sense, and managing your case carefully from start to finish so you’re not caught out by an unexpected costs order.
These kinds of costs orders are still the exception rather than the rule, but the risk is real, and it’s largely in your hands. Courts don’t punish people for bringing a genuine claim that doesn’t succeed, or for defending a case they end up losing. What they won’t accept is a dispute run unreasonably.
The earliest decisions in a dispute are often the ones that carry the most costs risk. If you are weighing up how hard to push a claim or defence, talk to our Disputes team before you settle on a strategy.
Case references
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Arnold v Commonwealth Bank of Australia [2025] QDC 101
Moore v Ochkit (No 2) [2025] QSC 251
