Background
Following the Court’s principal judgment in May 2026, Dexus Capital Investors Limited (DCIL) had been found to be a defaulting shareholder under a shareholders’ deed concerning Australia Pacific Airports Corporation Limited (APAC). Clause 12.4 required a defaulting shareholder to indemnify the company and other shareholders against actions, costs, claims, demands, losses, damages and liabilities arising out of or in connection with its default.
APAC, IFM Investors (Nominees) Limited and the Northern Trust Company and Future Fund Board of Guardians sought recovery under that clause. Their claims included legal costs and disbursements incurred in the main litigation. APAC and IFM also claimed executive-time costs; APAC additionally claimed communications-advice costs. A claim for a litigation consultant had been abandoned.
The Court’s Holding
Hammerschlag CJ in Eq held that the indemnity was not confined to costs that would be allowed on an indemnity costs assessment under r 42.5 of the Uniform Civil Procedure Rules 2005 (NSW). On its proper construction, clause 12.4 covered costs and liabilities that objectively arose out of, or were connected with, DCIL’s default; it contained no implied requirement that costs be reasonably incurred or reasonable in amount.
The Court rejected DCIL’s proposed reductions based on a costs expert’s assessment, including suggested caps on counsel’s fees and deductions for duplication. The legal costs claimed were connected with the default, given the multi-party, high-stakes litigation. But executive salaries were not recoverable because the employees would have been paid in any event, and APAC’s media-advice retainer was not sufficiently connected with the default. The Court entered judgment for APAC for $17,076,075.21, IFM for $5,419,559.69, and Future Fund for $6,244,211.84.
Key Takeaways
- A broadly worded contractual indemnity may extend beyond costs recoverable on a court-ordered indemnity basis.
- The relevant question was whether the liability arose out of or was connected with the shareholder default, not whether a costs assessor would regard it as reasonable.
- Ordinary employee salaries and a general communications retainer were not shown to be indemnifiable losses.
Why It Matters
The decision gives practical force to broad indemnity wording in commercial shareholders’ agreements. Parties cannot assume that an indemnity claim will be limited by the conventional costs-assessment rules unless the contract says so.
It also marks a boundary: even a broad indemnity requires a sufficient connection to the default. Expenses that are merely part of ordinary operations or insufficiently linked to the breach remain outside its scope.