A rejected settlement offer has left Insurance Australia Limited with a $108,159.49 costs bill in a Federal Court fight over money owed. IAL is owned by insurance giant Insurance Australia Group Limited (IAG).
The case, proceeding NSD 133 of 2025 in the Federal Court of Australia’s General Division, involves Helicopter Aerial Surveys Pty Ltd (HAS) and Insurance Australia Limited (IAL). On November 7, 2025, Justice Jackman gave judgment in HAS’s favour for $507,510.61 plus interest in Helicopter Aerial Surveys Pty Ltd v Insurance Australia Ltd (No 2) [2025] FCA 1360.
In that earlier decision, the Court expressed a preliminary view that, because HAS had succeeded (though not to the full extent claimed), it was entitled to an order for costs and set a timetable for evidence and submissions on the costs question.
This follow‑on judgment, delivered on December 17, 2025, deals only with costs and ends with a clear outcome: IAL must pay HAS’s costs of the proceedings in the lump sum of $108,159.49.
HAS asked the Court to make a lump sum order, with IAL to pay costs on a party and party basis up to 30 September 2025 and on an indemnity basis from 1 October 2025. IAL argued that HAS should receive costs only on the ordinary basis, to be agreed or assessed, and, in the alternative, that any lump sum should be discounted below what HAS claimed.
The Court began by noting that its preference, where practicable and appropriate, is to make a lump sum costs order, referring to its Costs Practice Note. In this case, Justice Jackman found that approach both practical and appropriate.
The key turning point was an offer of compromise HAS made on 26 September 2025 under rule 25.1 of the Federal Court Rules 2011 (Cth). The offer said that IAL would pay HAS $600,000. It then added that the offer was in addition to costs. The offer did not mention interest.
By the time judgment was entered on the principal claim, the total amount in HAS’s favour, including interest, was $618,620.94. On those numbers, HAS ended up with more than it had offered to accept.
HAS relied on rule 25.14, submitting that it was entitled to party and party costs up to 30 September 2025 (the second business day after the offer was served) and indemnity costs from 1 October 2025. IAL responded that, because the offer was silent on interest, it treated the offer as excluding interest and therefore did not see the eventual judgment as clearly better than the offer.
The Court rejected that position. Justice Jackman pointed out that rule 25.03 says an offer of a sum of money may, but does not have to, separately specify the amount for the claim and any interest. Interest had always formed part of HAS’s claim and was expressly referred to in the originating process and Concise Statement. The proceedings involved a debt arising from a judgment given about four years and ten months before the offer was made. In that context, the absence of any reference to interest signalled that the $600,000 figure covered every part of HAS’s claim other than costs. The judge found no ambiguity and held that HAS was entitled to indemnity costs from 1 October 2025.
On the quantum of costs, HAS relied on a Costs Summary prepared by legal costs specialist Sharon Drew. She put total costs at $108,159.49, after applying broad‑brush reductions. Those included a 15 percent reduction to solicitors’ fees on a party and party basis (with a 5 percent loading for skill, care and responsibility) and a 10 percent reduction to counsel’s fees. For indemnity costs from 1 October 2025, she applied a 7.5 percent reduction to solicitors’ fees and a 5 percent reduction to counsel’s fees.
IAL criticised these reductions as too modest, saying that, in its solicitor’s experience, parties usually recover only 60 to 70 percent of their solicitor‑client costs on a party and party assessment. The Court preferred Ms Drew’s case‑specific assessment, noting her comparison with the applicable scale rates and the Court’s National Guide to Counsel Fees, and found the reductions appropriate in this matter.
IAL also argued that HAS had succeeded on only 72.12 percent of its claim and that costs should be reduced in line with that figure. Justice Jackman rejected that approach, finding no substantial work that would have been avoided if HAS had made earlier concessions and no clear separation of issues and evidence that would justify splitting the costs.
In the end, the Court ordered IAL to pay HAS’s costs of the proceedings in the lump sum of $108,159.49, underscoring the costs risk when an offer of compromise is later bettered at judgment.
Takeaway for insurers: Treat lump‑sum settlement offers that are silent on interest as potentially all‑in and weigh the real risk of indemnity costs before walking away.
