Federal Court of Australia

LK Law Pty Ltd v Karas (No 8) [2026] FCA 952

ORDERS

THE COURT ORDERS THAT:

1.    The first respondent is to have his costs of and incidental to the recusal application up to and including 15 March 2026 with the first applicant to have its costs as from and including 16 March 2026, which for the avoidance of doubt, includes the hearing that day.

2.    The assessment and enforcement of the costs of and incidental to the recusal application be stayed pending the outcome of the appeal.

3.    The first respondent is to pay the first applicant’s costs of and incidental to the stay of enforcement of judgment application.

4.    The first applicant is to pay the fourth respondent’s costs of the stay of enforcement of judgment application.

5.    The assessment and any enforcement of the first applicant’s and the fourth respondent’s costs of the stay of enforcement of judgment application respectively be stayed pending the outcome of the appeal.

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

REASONS FOR JUDGMENT

O’SULLIVAN J:

1    On 17 March 2026 and 18 May 2026, the Court made orders on two applications in this matter:

(1)    An application by the first respondent (Mr Karas) that I recuse myself from determining whether a stay of enforcement of judgment should be ordered (recusal application): LK Law Pty Ltd v Karas (No 6) [2026] FCA 551; and

(2)    Whether there should be a stay of enforcement of judgment as against the first respondent and the fourth respondent (MdR) (stay application): LK Law Pty Ltd v Karas (No 7) [2026] FCA 669.

2    The Court refused the recusal application and ordered a stay of enforcement of judgment on the stay application subject to certain conditions.

3    Mr Karas applied by interlocutory application for leave to appeal from the orders made on the stay application: SAD 120 of 2026. Mr Karas and MdR had previously filed notice of appeals from the primary judgment: SAD 58 of 2026.

4    In Karas v LK Law Pty Ltd (stay of judgment) [2026] FCA 807 delivered on 24 June 2026, the Court dismissed the application for leave to appeal in SAD 120 of 2026. However, Perram J sitting in the Court’s appellate jurisdiction in SAD 58 of 2026, stayed the following:

(a)    Order 1 of LK Law Pty Ltd v Karas (No 5) [2026] FCA 129 by which judgment for the first applicant (LKPL) was entered against Mr Karas;

(b)    Order 9 of LK Law Pty Ltd v Karas (No 5), which dealt with the costs of the proceedings;

(c)    Orders 10, 11 and 12 of LK Law Pty Ltd v Karas (No 5), which set out the steps to be taken for the assessment of the costs of the proceedings; and

(d)    Order 1 of LK Law Pty Ltd v Karas (No 7), being the stay of enforcement of judgment subject to certain conditions.

5    LKPL now seeks its costs of the recusal application and of the stay of enforcement argument.

6    Mr Karas seeks part of his costs of the recusal application and submits that the costs of the stay application should be costs in the appeal.

7    MdR seeks its costs of the stay application.

8    It is for the reasons which follow that:

(1)    on the recusal application, Mr Karas is to have his costs of and incidental to the recusal application up to and including 15 March 2026, with LKPL to have its costs as from and including 16 March 2026;

(2)    the assessment and enforcement of the costs of the recusal application be stayed pending the outcome of the appeal;

(3)    Mr Karas is to pay LKPL’s costs of the stay application;

(4)    LKPL is to pay MdR’s costs of and incidental to the stay application; and

(5)    the assessment and enforcement of the costs of the stay application be stayed pending the determination of the appeal.

9    The applications for costs were, at the request of the parties, determined on the papers.

Principles

10    The principles in relation to costs are well-settled. There is no need to repeat them.

Costs of the recusal application

11    LKPL submits that costs should follow the event, being the refusal of the recusal application.

12    Initially, LKPL required Mr Karas to be present at the argument on the stay application listed for 18 March 2026 and be available for cross-examination. Shortly prior to the recusal application hearing on 16 March 2026, LKPL confirmed that Mr Karas would not be required for cross-examination and that no submission would be made at the stay application as to Mr Karas’ credit.

13    Mr Karas submits that as a consequence, LKPL should bear his costs of the recusal application up to the point at which LKPL abandoned its intention to cross-examine him. Mr Karas accepts that from that point (16 March 2026), he should pay LKPL’s costs of the recusal application.

14    Mr Karas submits that the recusal application was brought appropriately in circumstances where his evidence was critical to the stay application, LKPL had required him to attend for cross-examination, and as trial judge, I had made adverse credit findings against him.

15    Mr Karas submits that LKPL’s disavowal of an attack on his credit, such that his evidence was to be taken at its highest, was critical to the Court’s disposition of the recusal application and that the costs order should reflect that change in position.

16    Mr Karas submits that absent the cross-examination and disavowal of any attack on Mr Karas’ credit on the stay of enforcement application, there was a compelling case that I recuse myself.

17    LKPL submits there was always a prospect that Mr Karas would be required for cross-examination on the stay application, yet the respondents had the matter timetabled to be heard despite the credit findings at trial. LKPL submits further that it was not until shortly before the hearing of the stay application that Mr Karas made his recusal application.

18    There is no doubt that the indication by LKPL that it no longer required Mr Karas for cross-examination and that no attack would be made to his credit on the stay application was an important factor in me refusing the recusal application.

19    However, that was not the only factor. As I made clear in LK Law Pty Ltd v Karas (No 6) at [33], there must be a logical connection between the identified source of apprehended bias and the feared deviation from deciding the case on its merits. In particular, I found that there was no logical connection between the adverse credit findings made in the primary judgment and the exercise of the discretion as to whether or not there should be a stay of enforcement of the judgment against Mr Karas.

20    I also determined that, in view of that failure by the respondents to establish a logical connection, as described by the High Court in SunshineLoans Pty Ltd v Australian Securities and Investments Commission [2026] HCA 8 at [42] (Gageler CJ and Gleeson J), objectively assessed, a fair minded lay observer with the characteristics identified in QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2023] HCA 15; (2023) 279 CLR 148 at [47]-[48] would not consider as reasonable an apprehension that I would decide the question of whether a stay of enforcement should be ordered other than on its legal and factual merits.

21    I do not accept Mr Karas’ submission that absent cross-examination and the disavowal of any attack on his credit, there was a compelling case that I recuse myself. That is because there is no logical connection between the adverse credit findings in the primary judgment and the exercise of the discretion on the stay application.

22    Nonetheless, I accept that LKPL specifically disavowing any attack on Mr Karas’ credit in relation to the stay application and Mr Karas’ evidence being taken at its highest, were important matters that I took into account in determining whether I should recuse myself and carried weight in my consideration.

23    In the exercise of my discretion on costs, LKPL is to pay Mr Karas’ costs of and incidental to the recusal application up to and including 15 March 2026 and Mr Karas is to pay LKPL’s costs as from 16 March 2026, which for the avoidance of doubt, includes the hearing that day.

Costs of the stay application

24    LKPL seeks its costs of the stay application as against Mr Karas on the basis he was seeking an indulgence of the stay of the final orders made on 20 February 2026 in LK Law Pty Ltd v Karas (No 5) and that there was a material difference between the case he advanced on the stay application and that which was ordered in LK Law Pty Ltd v Karas (No 6).

25    Mr Karas submits that he succeeded on the stay application in that the Court ordered a stay of an enforcement of judgment against him, though rather than making a costs order in his favour, the appropriate course is for costs of the application to follow the outcome of the appeal. Mr Karas submits such an outcome recognises that each party achieved a degree of success on the stay application, and that ultimately the utility of the stay application will turn on the result of the appeal.

26    Whereas it was always the case that a stay of some sort was going to be imposed given the draconian effects of not staying the primary judgment against Mr Karas, nonetheless Mr Karas provided information which was not complete and took a position which was in some respects unsubstantiated, such that the application focused on the terms of the stay rather than a stay per se. It was in relation to the terms of the stay, that Mr Karas was unsuccessful.

27    It is for those reasons that as against Mr Karas, LKPL should have its costs of the stay application, in which it was substantially successful.

28    As to costs against MdR, the parties had reached an accommodation by the time of the hearing. The only remaining issue at the hearing of the stay application was whether the bank guarantee proffered by MdR should include post judgment interest. I found that should not be the case.

29    In that sense, MdR was successful such that it is entitled to its costs.

Conclusion

30    There will be orders in accordance with these reasons.

31    As to the assessment and enforcement of the costs orders, in view of the orders made by Perram J in Karas v LK Law Pty Ltd (stay of judgment) staying any order for enforcement of costs, the same order should be made in this matter, such that the assessment and enforcement of the costs orders in these reasons will be stayed pending the outcome of the appeal.

Associate:

Dated:    23 July 2026

SCHEDULE OF PARTIES