Federal Court of Australia

Cathro v Chief Commissioner of State Revenue, in the matter of Cubic Interiors NSW Pty Ltd (in liquidation) [2026] FCA 275

ORDERS

THE COURT ORDERS THAT:

1.    The costs of the plaintiffs’ interlocutory application dated 26 September 2025 are to be costs in the cause.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

OWENS J:

1    The first plaintiff is the liquidator of the second to fourth plaintiffs. In these proceedings it is alleged that those companies made a number of payments to the defendants which are said to be insolvent transactions within the meaning of section 588FC of the Corporations Act 2001 (Cth), and voidable transactions within the meaning of section 588FE. The first plaintiff thus applies pursuant to section 588FF for the companies to recover the amounts paid from the defendants.

2    These reasons concern the plaintiffs’ application for costs orders to be made in their favour following various procedural developments, the end result of which is that the issue of insolvency is no longer in dispute between the parties.

3    The proceedings were commenced on 17 April 2025, by the filing of an originating process accompanied by an affidavit. On 15 May 2025, the matter was ordered to proceed by way of pleadings, and the plaintiffs filed and served a statement of claim on 12 June 2025. The statement of claim included allegations that each of the second to fourth plaintiffs were insolvent at certain times; allegations that were particularised by a reference to a “[s]olvency report dated 1 April 2025 prepared by” the first plaintiff. Reference to that report had also been made in the affidavit that was filed to accompany the plaintiffs’ originating process, but the report itself was neither annexed nor exhibited to it.

4    The insolvency report seems to have been provided to different defendants on different days. Insofar as the evidence reveals:

(a)    Most defendants were provided with a copy of the insolvency report on 21 August 2025, albeit that the complete appendices to the report were not provided for another week or so after that.

(b)    The third defendant was provided with a copy on 25 June 2025, following an emailed request on the same day.

(c)    The eighteenth defendant was provided with a copy at some point, not disclosed by the evidence, before 21 August 2025 (and possibly before 26 June 2025). That emerges from the fact that the plaintiffs’ solicitors sent a letter to the solicitors for the eighteenth defendant on 21 August 2025, in which they queried why the eighteenth defendant’s defence (filed on 26 June 2025) contained a non-admission in response to the pleaded allegation of insolvency in circumstances where it was said that the eighteenth defendant “has been served with the Liquidator’s report dated 1 April 2025”.

5    In any event, some defendants filed defences that admitted the allegations of insolvency in relation to those plaintiffs relevant to the claims against them. The defences of the first, third, fifth, eighth, fifteenth and eighteenth defendants, however, either did not admit, or denied, the allegations of insolvency. (I note that, on 15 August 2025, the fifth defendant filed an amended defence, in which it admitted the allegations of insolvency relevant to it.) With a few exceptions, each defence was filed before the relevant defendant had been provided with a copy of the insolvency report. Those exceptions (or at least those revealed by the evidence) were:

(a)    The third defendant’s defence was filed (in accordance with then extant programming orders) on 10 July 2025, when it had been provided with a copy of the insolvency report on 25 June 2025.

(b)    The twelfth defendant’s defence was filed on 17 November 2025, when, I assume, (although there was no direct evidence of it) it had been provided with a copy of the insolvency report on 21 August 2025.

(c)    The eighteenth defendant’s defence was filed (in advance of the then applicable deadline of 10 July 2025) on 26 June 2025, when it had (possibly) been provided with a copy of the insolvency report at some point before that.

6    I did not understand it to be in dispute that, in the absence of the insolvency report, the defendants had no information upon which they might form a view about the solvency of the second to fourth plaintiffs.

7    To the extent it remained in issue against some defendants, the plaintiffs were eager to have the issue of insolvency resolved, and on 26 September 2025 filed an application pursuant to rule 30.01 of the Federal Court Rules 2011 (Cth) seeking orders for it to be determined separately and in advance of the other issues in the proceeding. The relevant defendants (that is, the first, third, eighth, fifteenth and eighteenth defendants) ultimately either consented to, or did not oppose, that application, and on 17 October 2025 I indicated that I would make orders for the separate determination of the question of insolvency (the parties were directed to agree upon various dates to be included in those orders, which were ultimately made on 23 October 2025).

8    After that:

(a)    On 17 October 2025, after the case management hearing in the morning, the first defendant informed the plaintiffs that he would no longer contest the issue of insolvency, and in the proposed orders that were then being negotiated between the parties, an order was included granting leave to the first defendant to amend his defence to admit the insolvency of the relevant plaintiffs by 31 October 2025. On 23 October 2025 I made an order in those terms. The first defendant ultimately did file the foreshadowed amended defence but, for reasons that have not been explained, not until 21 January 2026.

(b)    On 23 October 2025, the third defendant informed the plaintiffs (by way of an email to the Court) that it would not be contesting the issue of insolvency. There was a debate, the details of which are presently unimportant, about how that decision ought to be effected, but on 19 December 2025, pursuant to leave granted on 19 December 2025, an amended defence was filed.

(c)    In the orders that I made on 23 October 2025, I also granted leave for the eighth defendant to file an amended defence admitting the allegations of insolvency of the relevant plaintiff by 31 October 2025. As with the first defendant, it would seem that in the course of negotiating the timetable in relation to the orders programming the separate question, the eighth defendant indicated that it wished to amend its defence. The eighth defendant filed its amended defence on 31 October 2025.

(d)    On 21 November 2025, the fifteenth defendant informed the plaintiffs that it proposed to amend its defence to admit the insolvency of the relevant plaintiffs. Consistently with that indication, on 19 December 2025 the fifteenth defendant sought, and I granted, it leave to do so by 23 December 2025. Again, for reasons that have not been explained, an amended defence was filed on 29 January 2026.

(e)    On 30 October 2025, the eighteenth defendant informed the plaintiffs that it would consent to the separate questions insofar as they concerned it being determined in favour of the plaintiffs. The eighteenth defendant did not propose to amend its defence to admit insolvency, but rather contended that the Court should make findings in relation to insolvency by consent. The correspondence between the plaintiffs and the eighteenth defendant on this topic also debated the proper costs consequences that should flow from the eighteenth defendant’s position. The details of this debate are unimportant. At a case management conference on 19 December 2025, I indicated that I did not consider it to be appropriate for the Court to make findings on the issue of insolvency on no basis other than the consent of the parties. Following that indication, the eighteenth defendant sought, and I granted, leave for it to amend its defence to admit insolvency. It filed an amended defence on 22 December 2025.

9    It may thus be observed that, by December 2025, it was plain that the question of the second to fourth plaintiffs’ insolvency was no longer in issue in the proceedings. While in one respect, to which I will come, it might have been hoped that the parties could have reached that position sooner, overall they are to be commended for having acted consistently with the overarching purpose in accordance with which all parties and their legal representatives are required to conduct civil litigation in this Court: sections 37M and 37N of the Federal Court of Australia Act 1976 (Cth). Regrettably, however, the sheen of the parties’ laudable achievement in narrowing the issues in dispute between them, has been dulled somewhat by the ensuing squabble about costs.

10    The plaintiffs now seek an order that the first, third, eighth, fifteenth and eighteenth defendants pay the plaintiffs’ costs thrown away by reason of the amendments to those defendants’ defences admitting insolvency. Although it was submitted that the question of exactly what costs were thrown away should be left to the taxing officer, the plaintiffs made plain that it was their contention that those costs would include the costs of the separate question application, and the costs of the solvency report prepared by the first plaintiff. The plaintiffs also advanced an entitlement to costs on the basis that they had obtained “substantial success” on the separate question application.

11    The position of the defendants was:

(a)    On the part of the first and third defendants: that no costs order should be made (and that if, contrary to that position, a costs order is made, it should exclude the costs of the preparation of the first plaintiff’s report on solvency).

(b)    On the part of the eighth and fifteenth defendants:

(i)    that while it is appropriate that the defendants be ordered to pay the costs thrown away by reason of the amendments to the defences (although I note that in another part of its submissions, the eighth defendant submitted that any costs thrown away should be costs in the cause), those costs should not include either the costs of preparing the first plaintiff’s solvency report, or the costs of the separate question application; and

(ii)    that the costs of the separate question application should be costs in the cause.

(c)    On the part of the eighteenth defendant, that the costs of the separate question application should be costs in the cause (with no submission being made concerning the appropriate costs order, if any, in relation to the amendment of the pleadings (other than to submit that the costs of the liquidator’s report should not be included)).

12    The ordinary position, of course, is that a party given leave to amend a pleading will be ordered to pay the costs thrown away by reason of the amendment. The fundamental justification for that, of course, is that an amendment to pleadings will usually operate to alter the scope of the proceedings in some way, and to the extent that work is wasted by reason of one party changing the scope of the proceedings, it will ordinarily accord with the requirements of justice that the amending party bear the consequences. It does not require an especially vivid imagination, however, to conceive of circumstances where a different result may be appropriate.

The First, Eighth and Fifteenth Defendants

13    I will begin by considering separately the position in relation to the first, eighth and fifteenth defendants. One factor that appears to me to be relevant to the present application so far as it concerns them is the fact that, as I have already mentioned, there was no suggestion that, at the time they prepared their defences, they had any information upon which they could have formed a view about the solvency of the second to fourth plaintiffs in the relevant period. While of course it is possible (as some defendants here did) to admit a fact of which a party has no knowledge, it seems to me that to put such a fact in issue is qualitatively different to putting in issue a fact on the basis of an evaluation of the available material. (In a different, but analogous context, see Buzzle Operations Pty Limited (in liq) v Apple Computer Australia Pty Ltd (No 2) [2010] NSWSC 490 at [16] (White J).)

14    If a party is simply not in a position to assess whether a pleaded fact is true or not, then, at least where the fact is one that is material to the establishment of the opposing party’s case, it is difficult to see what else the party can do but plead a non-admission. That does not mean, of course, that no costs consequences should follow from a subsequent amendment to such a pleading. That will depend on all of the relevant circumstances, which may include the nature of the fact, the nature of the cause of action or defence, the significance of the fact to the cause of action or defence, the timing of, and the circumstances in which, the amendment is made, to identify but the most obvious factors.

15    The point of present relevance is that at the point in time at which they filed their defences, the first, eighth, and fifteenth defendants could only have admitted the insolvency allegations if they chose to admit a fact they did not know to be true (and which was essential to the existence of the asserted liability). By putting insolvency in issue, they did not expand the scope of the proceedings beyond that which attended the establishment of the liability asserted by the plaintiffs. They simply said, in effect, that they did not have any information available to them to enable them to say one way or the other whether the plaintiffs’ allegations of insolvency were true. (I have not overlooked the fact that some of the defendants put insolvency in issue by denying, rather than not admitting, the allegation. The evidence makes clear that they did not intend by those pleadings to positively deny that the second to fourth plaintiffs were insolvent, much less assert that they were solvent. It appears to reflect a lack of appreciation of the difference between the two forms of pleading. In any event, the practical effect of either pleading is the same: see rule 16.07(4) of the Rules.)

16    It is at this point that it is relevant to return to the one respect in which the parties appear not to have cooperated in the manner that they ought to have. The first plaintiff completed his report on the solvency of the second to fourth plaintiffs on 1 April 2025 (more than two weeks before the proceedings were commenced, and nearly two and a half months before the statement of claim was filed). That report was referred to and relied upon, without being annexed to the affidavit that accompanied the originating process, and was identified in the particulars to the allegations of insolvency in the statement of claim.

17    Why that report was not provided to nearly all of the defendants before 21 August 2025 is nowhere explained in the evidence. Equally, why nearly all defendants did not, in terms, ask for a copy of the report is not explained. The evidence does reveal that, in discussions between the parties before the proceedings were commenced, the eighth defendant asked for a copy of any report that had been prepared in relation to solvency. At that point in time, the report had not yet been finalised, and the eighth defendant was told that, when it was, it would be served in due course. But there does not seem to have been any request, after the proceedings were commenced (and the 1 April 2025 report had been referred to), for the report to be handed over.

18    The evidence also demonstrates that the first defendant informed the plaintiffs, in correspondence concerned with an attempt to agree orders for a case management conference that was held on 15 May 2025, that unless it was provided with a copy of the 1 April 2025 report, it would have no option but to put insolvency in issue on its pleadings. Once again, though, it did not take the short, obvious, additional step, of in fact requesting a copy of the report.

19    I confess that I have found the reticence of the parties to hand over the report (in the case of the plaintiffs) and to ask for a copy (in the case of the first, eighth and fifteenth defendants) perplexing. Everyone appears to have appreciated the significance of the report as the means by which the defendants would be able to make an assessment of the solvency of the second to fourth plaintiffs. Rule 20.31 of the Rules provides a means by which parties can obtain prompt access to documents that are referred to in pleadings or affidavits. But, frankly, it is difficult to see why recourse to that rule should have been necessary here: a request in correspondence, one would have thought, would be all that was required to secure the report (and indeed the experience of the third and, presumably, the eighteenth defendants confirms that).

20    So, while it can be accepted that at the time they filed their original defences, the first, eighth, and fifteenth defendants did not actually have any information upon which they could form a view about the solvency of the second to fourth plaintiffs, there was a report which could have been provided to them which would have (we now know) enabled them to admit the allegations in question. The plaintiffs should have provided that report without being asked, and, given that that had not occurred, the defendants should have asked for it. It thus seems to me that the situation that eventuated, where insolvency was, for a time, put in issue, and then later promptly admitted, was brought about by the failure of all parties to cooperate as they should have.

21    Once the 1 April 2025 report was provided to the first, eighth, and fifteenth defendants, I understood it to be accepted by the plaintiffs that those defendants each admitted the allegations of insolvency within a reasonable period of time. In other words, it is not suggested that costs were incurred by reason of an unreasonable delay in responding to the solvency report. It follows that, looking at events as a whole, while the issue of insolvency could have been resolved earlier (and likely without the need for amendments to be made to defences), the reason it was not is attributable to the conduct of both sides. In those circumstances, I am not persuaded that it is appropriate to order that those defendants pay the costs thrown away by reason of the amendments to their defences.

22    Those amendments are not fairly characterised as effecting a change to the scope of the proceedings, in the sense of a reversal by the defendants of a forensic choice that they had earlier taken and which was reflected in their original defences. Rather, I consider that it had been made clear to the plaintiffs that the defendants were unable to form a view on solvency, and that that topic was being put in issue on the original defences only by reason of that inability. The cause of that inability was the failure of the parties that I have described. The need for the amendments to the defences thus arises out of the joint failure of the parties to cooperate; if they had done so then I consider the likely outcome would have been that the original defences filed would have admitted insolvency. So this is not, in truth, a case where the reason work was wasted was because of an amendment to an opposing party’s pleading. Both the pleading amendment and the wasted work were attributable to a more fundamental underlying problem, which is properly laid at the feet of all parties.

The Third and Eighteenth Defendants

23    The position insofar as it concerns the third and eighteenth defendants is, as I have already mentioned, different; in that it appears that they each did have (or in the case of the eighteenth defendants may have had) the insolvency report when they filed their original defences. I do not consider, however, that that difference, in the particular circumstances of this case, suggests a different outcome.

24    The third defendant was provided with a copy of the insolvency report about two weeks before it was required to file its defence. I did not understand it to be suggested that it was unreasonable for the third defendant not to have formed a view about the relevant plaintiffs’ insolvency in that period. Once again, the real problem seems to have been that it did not have the report earlier. And that problem, for the reasons I have already given, was caused by the combined failure of the plaintiffs to provide, and the third defendant to request, the report sooner.

25    Insofar as the eighteenth defendant is concerned, the evidence does not even disclose when it is that the insolvency report was provided. I am thus not satisfied that the eighteenth defendant’s defence reflected an informed and considered forensic choice to contest the issue of solvency.

26    In any event, it is almost inconceivable that the plaintiffs would have incurred any costs referable solely to the positions taken by the third and eighteenth defendants.

A More General Consideration

27    There is a further reason why I consider it is not appropriate to order that the first, third, eighth, fifteenth and eighteenth defendants pay the costs thrown away as a result of the amendments. Where the amendments in question reflect, in effect, the prompt acknowledgment of the defendants, effectively at the outset of the proceedings, that the plaintiffs possess a proper basis for their allegations of insolvency, then it seems to me that there is a risk that ordering that the defendants pay the costs thrown away may tend to subvert the usual reluctance of the Court to make separate costs orders in relation to different issues in one proceeding. It would be an odd outcome if a party were in a better position in terms of costs if it were (unsuccessfully) to put a plaintiff to proof on insolvency, or to state in opening submissions that it did not dispute insolvency, yet defeat the claim on some other grounds, than if it were to amend its pleadings to admit insolvency, and yet still prevail overall.

28    The issues in dispute between parties to litigation can be narrowed or determined in a range of different ways, with the amendment of a pleading being just one. The coherence of the approach to determining the issue of costs between the parties should not be permitted to be fractured by the particular procedural mechanism by which a particular narrowing or determination takes place. I emphasise, that this does not mean that the rule that, ordinarily, a party amending its pleadings should pay the costs thrown away by the other side is in any way weakened. I am simply observing that, in the particular circumstances of these particular amendments, it is better that the costs consequences of the amendments be determined in the context of the proceedings as a whole.

The Separate Question Application

29    Framing what has occurred as the plaintiffs obtaining substantial success on the (avoided) hearing of a separate question on the issue of insolvency does not lead to any different outcome. For the reasons I have given, I do not think that what has happened can fairly be described as capitulation by the defendants on the question of insolvency, in the sense that they have, in the face of an impending hearing, abandoned a previously held position on the topic. Rather, the amended defences represented the first occasion in the proceedings as a whole upon which the defendants took an informed and substantive position in relation to that issue.

Conclusion

30    For these reasons, I would not make any costs order in connection with the amendments to the first, third, eighth, fifteenth and eighteenth defendants’ defences. The costs incurred in relation to those amendments are properly to be seen as costs incurred in relation to a particular issue in the proceeding generally (i.e., insolvency), rather than costs wasted by reason of a change in the scope of the proceedings. The issue of costs in relation to the topic of insolvency (as with any other issue in the proceedings) is appropriately to be dealt with in the context of the disposition of the proceedings as a whole. It follows that I do not need to consider (to the extent that it would have been appropriate to do so in any event) what particular items of costs would properly be regarded as having been wasted by reason of the amendments.

31    Insofar as the costs incurred in relation to the application for a separate question, and the separate question itself, the position is much the same. I will thus order that those costs should be costs in the cause.

Associate:

Dated:    17 March 2026

SCHEDULE OF PARTIES