The Victorian Supreme Court of Appeal has found that a successful party represented under a pro bono scheme has a right to recover costs, rejecting the Queensland authority on point and tapering the barrier for people experiencing financial hardship to access justice.

The Court of Appeal was asked to determine whether the order for costs for a party represented on a pro bono basis offended the indemnity principle.

The facts

In Mainieri v Cirillo [2014] VSCA 227, the respondent, Mrs Cirillo, sold her home and contributed $240,000 of the proceeds of sale to her son, Mr Mainieri, and his wife, to be applied in reduction of his mortgage. In consideration, Mr Mainieri and his wife undertook to permit Mrs Cirillo to live with them indefinitely in their home and take care of her.

After the relationship broke down, Mr Mainieri refused to repay the money to Mrs Cirillo.

Mrs Cirillo instituted a proceeding claiming that she was entitled to a constructive trust over her son's property to the extent of her contribution to its costs of acquisition, or alternatively, a right of repayment with an equitable charge or lien as security for repayment.

The Supreme Court Decision

In finding in Mrs Cirillo's favour, the Supreme Court awarded costs to Mrs Cirillo, despite being represented on a pro bono basis.

The Appeal

Mr Mainieri sought leave to argue, amongst other things, that the trial judge erred in making an order for costs in favour of Mrs Cirillo.

In allowing the appeal and awarding costs to Mrs Cirillo, the court considered the effect of a costs agreement whereby Mrs Cirillo's liability to pay her solicitors was contingent on a costs order being made in her favour, or the case being settled on terms which included the payment of her costs.

Relevantly, the costs agreement provided that:

"2. How we calculate what we charge you
2.1 You will not have to pay us anything out of your own pocket for any of the work done by our lawyers on your matter (professional time).
3. Issuing a bill for payment by another party
We will only issue you with a bill for our professional time if one of the following things happens:
(a) a Court or other tribunal or statutory scheme orders another party to pay your legal costs; or
(b) the case is settled, and part of the settlement includes payment of your legal costs.
If one of these two things happens, we will issue a bill which includes our professional time and all disbursements which we have incurred in this matter. We will not ask you to pay any more under the bill than the amount recovered for legal costs in paragraph 3.1(a) or 3.1(b), even if that amount is less than the amount of our bill."

The indemnity principle

The indemnity principle is that, as between party and party, the party ordered to pay the other party's costs is obliged to pay only those costs which the other party is legally obliged to pay his or her solicitor. In making its decision, the court referred to the New South Wales decision of Wentworth v Rogers:

"[I]t is beyond dispute that the purpose of an adverse costs order is to compensate or partly indemnify one party to litigation (usually the successful party) for the legal costs incurred in the course of the proceedings. The [indemnity] principle does not require that the costs have been paid, but it does require that there be a legal liability to pay costs."1

The court decided that the application of the indemnity principle should not depend on a distinction between a contingency to pay costs expressed as a condition precedent or subsequent:2

"The general law governing the indemnity principle with its emphasis on flexibility is, in my opinion, quite capable of accommodating conditional fee agreements of this kind. It should do so recognising the importance of such agreements in promoting access to justice which may otherwise be unaffordable. The residual undertaking to pay, though qualified, strengthens the case for conformance with the indemnity principle. It is reasonable, not just in this ferocious litigation but more generally, to recognise in a costs agreement that the unsuccessful party who is subject to a costs order may delay or defeat recovery. Hence predicating payment on successful recovery is not unreason-able. In the words of Bramwell B this gives no unjustified bonus to the successful party nor does it impose any punishment on the losing one, so as to invoke the rationale behind the indemnity principle."3

The position in Queensland

In making its decision, the Victorian Supreme Court of Appeal considered but rejected the position in Queensland.

In King v King & Ors [2012] QCA 81, the applicant's lawyer was acting on a pro bono basis, and the costs agreement provided that there would be no charge to the applicant for professional work undertaken. Subsequent to judgment being pronounced in favour of the applicant, the applicant's lawyers filed submissions as to costs, and varied the costs agreement between the applicant and the solicitor so that the solicitor could recover costs if successful. The Queensland Court of Appeal rejected the application, finding that the applicant could not recover his costs.

It is to be seen whether the position in Queensland will change following this recent Victorian Court of Appeal decision.


1Wentworth v Rogers (2006) 66 NSWLR 474 [504], [126].
2Mainieri v Cirillo [2014] VSCA 227 at [51].
3Wentworth v Rogers(2006) 66 NSWLR 474 at [488] per Santow JA.

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