Australian Securities and Investments Commission v TerraCom Limited (No 2)

Australian Securities and Investments Commission v TerraCom Limited (No 2) [2025] FCA 959 is a Federal Court costs judgment, not the main liability ruling. After ASIC failed against the second to fifth defendants in the earlier proceeding, the Court had to decide whether those successful defendants should receive indemnity costs for the whole case, only from a later trigger point, or just ordinary costs.

The Court did not award indemnity costs from the start. Instead, ASIC was ordered to pay party-party costs up to 19 June 2025 and indemnity costs after that date. The Court also fixed substantial lump-sum costs amounts rather than sending the parties to a separate detailed assessment.

The available judgment sits at the end of a larger TerraCom proceeding. Jackman J recorded that he had already given judgment on 4 July 2025 concerning ASIC’s claims against the second to fifth defendants. This later decision dealt only with costs. That matters because the ruling does not retell the full commercial background in a way that would let a reader safely reconstruct all of ASIC’s allegations or the defendants’ responses.

What the judgment does make clear is that ASIC had pursued claims against the second to fifth defendants and failed. In the earlier judgment, the Court had expressed a tentative preliminary view that, properly advised, ASIC should have known that its proceedings against those defendants had no realistic chance of success, except perhaps on some minor aspects that would not have significantly affected the costs they incurred. That observation naturally led the successful defendants to seek indemnity costs.

The second to fifth defendants put forward three possible starting points for indemnity costs. First, they said indemnity costs should run for the whole proceeding. Second, the second and fifth defendants argued in the alternative that indemnity costs should run from a mediation conducted on 24 April 2025. Third, all relevant defendants relied on the expiry of an offer of compromise on 19 June 2025. Their fallback position was ordinary costs.

ASIC accepted only the last of those positions. It agreed to pay party-party costs from the commencement of the proceeding up to 19 June 2025 and indemnity costs from 19 June 2025 onward. That concession narrowed the dispute. The real fight became whether the Court should go further and award indemnity costs for the earlier period as well.

The parties also took a practical approach to quantification. Instead of leaving costs to be taxed later, they agreed that the Court could fix costs in lump sums under the Federal Court Rules. The defendants filed evidence supporting their calculations. ASIC accepted the amounts proved in the initial affidavits, and the Court later accepted supplementary evidence for additional costs incurred after 19 June 2025. That meant the Court could make final dollar orders immediately.

The judgment gives a few glimpses of the litigation landscape. The Court referred to flaws in ASIC’s pleading, insufficiency in ASIC’s affidavit evidence, uncertainty about whether the defendants would give evidence before ASIC closed its case, and an earlier privilege ruling by Stewart J concerning one pleaded representation about a February Announcement. But those references are fragments, not a full merits narrative. Anyone wanting the complete factual story needs the earlier substantive judgment.

The central issue was whether the circumstances justified indemnity costs for the period before 19 June 2025. The Court approached that question by reference to recognised categories for indemnity costs, including where allegations ought never to have been made, where a case is unduly prolonged by groundless contentions, where a party should have known it had no chance of success, or where a party persists in what should be seen as a hopeless case.

Importantly, the Court stressed that these categories involve a high degree of certainty about the deficiencies in the losing party’s case. It is not enough that the case was weak or tenuous. The deficiencies must be sufficiently manifest and clear that the losing party would or should have appreciated them when the action was commenced or continued, assuming proper consideration or proper advice. The Court also warned against reasoning with hindsight.

ASIC argued that additional considerations apply when indemnity costs are sought against a regulator. It relied on earlier authority recognising the public responsibilities of regulators and the concern that excessive readiness to award indemnity costs might deter enforcement action. The Court accepted that regulator proceedings can involve public responsibility considerations in some contexts, particularly around settlement in civil penalty matters, but rejected any general principle that regulators occupy a special position when indemnity costs are considered.

Jackman J said ASIC has substantial executive power and litigation resources and must use them responsibly. If ASIC chooses to conduct litigation that is doomed to fail because of some policy objective, it should generally face the risk of indemnity costs like any other litigant. The Court also recognised the real consequences of failed regulator litigation for wrongly accused parties, including expense, time, personal strain and obstacles to business or career progression.

The Court held that the second to fifth defendants were not entitled to indemnity costs for the period up to 19 June 2025. Jackman J described the issue as finely balanced, but concluded that the demanding test for earlier indemnity costs was not met. The Court accepted ASIC’s position that costs should be paid on a party-party basis up to 19 June 2025 and on an indemnity basis after that date.

A material factor was the absence of correspondence from the defendants specifically pointing out the weaknesses in ASIC’s case before 19 June 2025. The Court said that correspondence of that kind is not always required, and the defendants were not being criticised for remaining silent. In fact, the Court acknowledged there was tactical prudence in not interrupting opponents who were making fundamental mistakes. But in the particular circumstances of this case, the consequence of that silence was that the defendants did not obtain indemnity costs for the earlier period.

The Court drew support from earlier authority stating that the more specifically a party identifies the insurmountable obstacles faced by its opponent, the greater the likelihood of an indemnity costs order if those obstacles later prove decisive. That did not create any obligation on wrongly accused defendants to educate ASIC about its own case. The Court was clear that ASIC itself had to accept responsibility for the quality of its pleading and evidence. But where the question is close, the presence or absence of pointed correspondence can matter.

The Court also rejected the argument that the mediation on 24 April 2025 should trigger indemnity costs. There was no evidence of what was communicated at the mediation because those communications were privileged. The Court further rejected a claim for interest on costs, accepting ASIC’s submission that the relied-on statutory provision did not confer power to order interest on costs in the way claimed.

On quantification, the Court accepted the defendants’ supplementary evidence for additional post-19 June 2025 costs and made final lump-sum orders. ASIC was ordered to pay the second defendant $1,340,998.28, the third and fourth defendants $1,398,908.18, and the fifth defendant $1,082,422.01. Those figures reflected the agreed split between ordinary and indemnity periods, together with accepted updates for later costs.

This case is mainly about litigation conduct and costs exposure, not the underlying corporate conduct. For businesses, directors and officers, the first lesson is that costs outcomes are highly sensitive to timing. A party can lose comprehensively and still avoid indemnity costs for part of the case if the Court is not satisfied that the hopelessness of the case was sufficiently clear at the relevant time.

The second lesson is that courts will not automatically shield regulators from indemnity costs. That is important for defendants who may feel commercial pressure to settle simply because the claimant is ASIC or another public regulator. The Court expressly rejected any general principle that regulators have a special position on indemnity costs. At the same time, the Court was careful not to use hindsight too aggressively. Regulators can bring hard cases, and the threshold for saying a case was obviously doomed remains demanding.

The third lesson is about documents and conduct during the proceeding. This judgment strongly suggests that if you want indemnity costs for an earlier period, it can help to have contemporaneous written correspondence that clearly identifies the fatal defects in the other side’s case. That does not mean you always should send such a letter. There may be tactical reasons not to. But if you choose silence, this case shows there may be a costs price to pay later.

The fourth lesson is about offers of compromise. Here, 19 June 2025 became the practical trigger point because ASIC accepted indemnity costs from the expiry of the offer. Businesses involved in serious litigation should treat formal offers as strategic tools, not just settlement gestures. Their timing, wording and expiry dates can materially affect the economics of the dispute.

The fifth lesson is about evidence and pleadings. The Court referred to flaws in ASIC’s pleading and insufficiency in its affidavit evidence. Whether you are bringing a claim or defending one, the quality of your pleaded case and supporting evidence can shape not only the merits but also the eventual costs order. Weak drafting, overreach and evidentiary gaps can become expensive.

Finally, the case shows the value of being ready to prove costs efficiently. The defendants provided cogent evidence that allowed the Court to fix lump-sum costs. In a large dispute, that can save time and reduce the uncertainty of a later taxation process. Businesses should keep disciplined records of legal fees, counsel fees and disbursements throughout the life of the matter.

If your business is defending a regulator proceeding, costs strategy should run alongside merits strategy from the start. Review the pleaded case early and keep a running record of defects you say are fundamental. If those defects remain unresolved, consider whether a carefully framed letter should identify them with enough specificity that a later court can see the other side was squarely on notice. This judgment does not say such a letter is mandatory, but it shows why it can matter.

Think carefully about formal settlement mechanisms. An offer of compromise can become a powerful costs trigger if the matter continues and the offeror later does better than the offer. The commercial value of that step depends on timing, drafting and the surrounding litigation posture, so it should be handled deliberately rather than as a routine procedural move.

Keep your own house in order. Make sure your evidence is complete, your witnesses are prepared, and your legal team can explain costs clearly if the Court is later asked to fix a lump sum. In this case, the defendants’ evidence on costs was accepted as cogent, and that helped produce final dollar orders without a separate assessment process.

Also remember that mediation may not help you on a later indemnity costs application if what was said there cannot be proved because of privilege. If you want a clear costs record, privileged settlement discussions may need to be complemented by non-privileged procedural steps such as formal offers or open correspondence where appropriate.

The judgment was delivered on 13 August 2025. It followed the earlier substantive judgment delivered on 4 July 2025. The costs issue was determined on the papers after affidavits and written submissions were filed. The Court’s orders fixed final lump-sum costs payable by ASIC to the second to fifth defendants.

This page focuses on the costs ruling. A fuller account of the underlying allegations and the Court’s merits reasoning requires the earlier substantive judgment, which is referred to in these reasons as Australian Securities and Investments Commission v TerraCom Limited [2025] FCA 726.