Federal Court of Australia

McEwan v Official Trustee in Bankruptcy (Costs) [2026] FCA 1016

ORDERS

THE COURT ORDERS THAT:

1.    Order 1 of the Orders dated 17 June 2025 be vacated.

2.    Except as provided for by Order 2 of the Orders dated 13 February 2026, each party bear its own costs of and incidental to the proceeding QUD291/2025.

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

REASONS FOR JUDGMENT

COLLIER J:

1    Until recently, before the Court in proceeding QUD291/2025 was an application under the Federal Court (Bankruptcy) Rules 2016 (Cth) (Originating Application) lodged by the applicant, Ms Julie McEwan, on 2 May 2025. The respondents to the application were the Official Trustee in Bankruptcy and the Official Receiver. On 12 March 2026 I made the following Orders in QUD291/2025 (leave to discontinue Orders):

1.     The applicant be granted leave to file a Notice of Discontinuance, subject to the determination of the issue of costs.

2.     By 4.00pm on 2 April 2026, the applicant file submissions, not exceeding 10 pages, and material in respect of costs.

3.     By 4.00pm on 23 April 2026, the respondent file submissions, not exceeding 10 pages, and material in respect of costs.

4.     Judgment in respect of the issue of costs stand reserved as at 23 April 2026 and be determined on the papers.

2    The leave to discontinue Orders were made following the lodgment of a Notice of Discontinuance by Ms McEwan on 11 March 2026. The Registry accepted the lodgment of the Notice of Discontinuance on 12 March 2026, shortly after I made the leave to discontinue Orders. The combined effect of the leave to discontinue Orders and the Notice of Discontinuance was that it brought litigation in QUD291/2025 to an end, save as to the issue of costs.

3    Before considering where outstanding costs should fall, it is useful to outline the procedural history of this proceeding and that of a related proceeding, QUD243/2025.

Background

Bankruptcy and Objections to Discharge

4    On 26 November 2019, a sequestration order was made against Ms McEwan in the then Federal Circuit Court of Australia in proceeding number BRG657/2019. Mr Andrew Heers and Mr Mark Pearce of the firm Pearce & Heers were appointed joint trustees of Ms McEwan’s bankrupt estate (former trustees).

5    Although the former trustees are not parties to QUD291/2025 and have not put on any evidence by affidavit or otherwise, it does not appear to be in real dispute that on or about 24 January 2022, the former trustees lodged two Notices of Objection to Discharge with respect to Ms McEwan’s bankruptcy (collective, Objections to Discharge).

6    The first Objection to Discharge, to which QUD291/2025 relates, was grounded in ss 149D(1)(d) and 149D(1)(e) of the Bankruptcy Act 1966 (Cth), which permits an objection to be made on the basis that:

(d)     the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt’s property, income or expected income, failed to comply with the request;

(e)     the bankrupt failed to disclose any particulars of income or expected income as required by a provision of this Act referred to in subsection 6A(1) or by section 139U;

7    The second Objection to Discharge, to which QUD243/2025 relates, was grounded in s 149D(1)(f) of the Bankruptcy Act which permits an objection to be made on the basis that:

(f)     the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG;

8    On 7 July 2022, the Official Trustee and the Official Receiver became trustees of Ms McEwan’s bankrupt estate under s 181A of the Bankruptcy Act.

Litigation by Ms McEwan

9    Since 2022, Ms McEwan has filed a number of proceedings in relation to the Objections to Discharge by the former trustees, including proceedings QUD243/2025 and QUD291/2025.

10    I earlier dealt with an application for recusal by Ms McEwan in proceedings QUD243/2025 and QUD291/2025 (Recusal Application) in the published Judgment of McEwan v Heers [2026] FCA 87. I repeat and adopt the following paragraphs from that Judgment by way of background:

5.     The first of those substantive proceedings, QUD 243 of 2025, was commenced by originating application filed by Ms McEwan on 30 April 2025, seeking the following:

The applicant seeks the supervision and review of the administration of the Court, a Merits Review of the decision of Mr Andrew Heers and Mr Mark Pearce joint and several trustee of Pearce & Heers Insolvency Accountants (Former Trustee) to file the Objection to Discharge on 24 January 2022. The Review of the decision was commenced by the Official Trustee in March 2022 however not finalised.

(emphasis in original)

6.    The second of those substantive proceedings, QUD 291 of 2025, was commenced by originating application filed by Ms McEwan on 19 May 2025, seeking the following:

The applicant seeks the supervision and review of the administration of the Court, a Merits Review of the decision of Mr Andrew Heers and Mr Mark Pearce joint and several trustee of Pearce & Heers Insolvency Accountants (Former Trustee) to file the Objection to Discharge on 24 January 2022.

(emphasis in original)

…

8.     On 17 June 2025, I made the following orders in proceedings QUD 243 of 2025 and QUD 291 of 2025 (timetabling orders):

1.    Proceedings QUD243/2025 be heard and determined together with QUD291/2025.

2.    The Respondents file and serve any application in relation to a stay, summary judgment, strike out of any parts of the applicant's application and/or security for costs and any affidavits in support, on or before 4.00pm on 8 July 2025.

3.    The Applicant file and serve any affidavits in relation to the application(s) in paragraph 2 of these Orders on or before 4.00pm on 22 July 2025.

4.    The Respondents file and serve any submissions, not exceeding 10 pages in length, in support of their application on or before 4.00pm on 5 August 2025.

5.    The Applicant file and serve any submissions, not exceeding 10 pages in length, in relation to the application(s) on or before 4.00pm on 19 August 2025.

6.    Any application in accordance with paragraph 2 of these Orders will be listed for hearing before Justice Collier for one day at 10.15am on 28 August 2025.

7.    If the Respondents do not file and serve any application in accordance with paragraph 2 of these Orders, the matter return before Justice Collier for case management at 9.30am on 9 July 2025.

8.    The parties have liberty to apply.

9.    Costs be reserved.

9.     On 8 July 2025, the respondents Mr Heers and Mr Pearce (the former Trustees) filed an interlocutory application seeking the following:

1.    Pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) and r 26.01 of the Federal Court Rules 2011 (Cth), the Applicant's originating application be summarily dismissed.

2.    Pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) and r 19.01 of the Federal Court Rules 2011 (Cth), the Applicant provide security for the First and Second Respondents costs of the originating application in the amount of $35,000 by payment into the Court or by provision of an unconditional bank guarantee from an Australian trading bank in a form approved by a Registrar of the Court.

3.     These proceedings be stayed pending the provision of security.

4.    The Applicant pay the First and Second Respondents' costs of the application or proceeding on an indemnity basis or standard basis.

10.    On that same date, the respondents the Official Trustee in Bankruptcy and the Official Receiver filed an interlocutory application seeking:

1.    Pursuant to rule 26.01 of the Federal Court Rules 2011 (Cth), that judgment be given against the applicant because:

a)    the applicant has no reasonable prospect of successfully prosecuting the proceeding; and, or, in the alternative;

b)    the proceeding is frivolous or vexatious; and, or, in the alternative;

c)    no reasonable cause of action against the third and fourth respondents is disclosed; and, or, in the alternative;

d)    the proceeding is an abuse of the process of the Court.

2.    In the alternative to order 1 above, pursuant to rule 16.21(1)(e) of the Federal Court Rules 2011 (Cth), the applicant’s statement of claim against the first respondent be struck out on the ground that it fails to disclose a reasonable cause of action against the first respondent.

3.    The Applicant pay the Third and Fourth Respondents’ costs.

11.    Submissions and materials were filed in accordance with the timetabling orders. The matter returned before me for the hearing of the applications filed by the respondents (together, the summary dismissal applications) on 28 August 2025 …

…

14.    The summary dismissal applications returned before me, part-heard, on 25 September 2025 …

…

18.     The summary dismissal applications returned before me once again, part-heard, on 14 November 2025. At that hearing, Ms McEwan informed the Court that she had lodged a further two interlocutory applications with the Federal Court Registry I granted Ms McEwan leave to file those interlocutory applications, being dealt with together …

11    I note that an interlocutory application for summary dismissal was filed by the Official Trustee and the Official Receiver only in QUD243/2025, and that an equivalent interlocutory application has not been filed by the Official Trustee and the Official Receiver in the present proceeding QUD291/2025. Instead, the Official Trustee and the Official Receiver on 8 July 2025 filed a different interlocutory application in QUD291/2025 seeking a stay of that proceeding pending the final determination of proceeding NSD332/2025 by the Full Court (stay application).

12    Judgment in respect of the stay application stood reserved as at 13 February 2026, following the determination of the Recusal Application. I understand that the need to determine the stay application has since fallen away in light of the Notice of Discontinuance filed in QUD291/2025, for which leave has been granted subject to the present consideration of costs.

Discontinuance

13    On Thursday 19 February 2026, Ms McEwan attempted to send an email to my Chambers in the following terms:

Dear Associate

I refer to the proceedings QUD 291/2025, of which I have now discontinued.

I have signed the attached discontinuance dated 19 February 2026, now waiting on the respondents to return same.

Kind regards

Julie McEwan

14    Attached to the email was a Notice of Discontinuance signed by Ms McEwan but not signed by the respondents in the following terms:

The Applicant discontinues the entire proceeding against the respondents.

Each party consents to the discontinuance.

15    Noting that the respondents had not consented to the Notice of Discontinuance, the following email was sent to the parties through the Queensland Registry on Monday 23 February 2026:

Dear Parties

QUD243/2025; QUD291/2025 - Julie McEwan v Andrew Heers & Ors

I refer to the below email from Ms McEwan regarding the notice of discontinuance in QUD291/2025.

In light of this, Justice Collier would like to hear from the parties. The above matters, given they are being heard together, are now listed for Case Management Hearing at 9.00am on 26 February 2026.

Please provide appearances by 4.00pm on 24 February 2026.

(emphasis in original)

16    On 23 and 24 February 2026, Ms McEwan sent two additional emails to the Queensland Registry in the following terms:

Dear [Legal Case Manager]

I am sorry I am not available on 26 February 2026.

The Official Trustee has notified me last week that they are now in the process of withdrawing the objection to discharge as it relates. Therefore, there is no basis to continuing the proceeding, as that was the only relief that I was seeking.

If leave is required to discontinue, then I seek leave. However, I am simply waiting on the trustee to sign the consent form, considering they are withdrawing the objection.

Many thanks

Dear [Legal Case Manager]

I can now confirm the objection to discharge as it relates to the proceeding QUD 291/25 has now been withdrawn.  I am waiting for the trustee to sign the discontinuance. No further reviews should be necessary.

Kind regards

(emphasis added, personally identifying information omitted)

17    Ms McEwan’s email referred to the withdrawal of an Objection to Discharge. There is now affidavit evidence on the part of the respondents, sworn on 23 April 2026, that withdrawal of the first Objection to Discharge (referable to ss 149D(1)(d) and 149D(1)(e) of the Bankruptcy Act to which proceeding QUD291/2025 relates, hereafter the Notice of Objection) was processed on 24 February 2026. The same affidavit evidence asserted that the second Objection to Discharge (referable to s 149D(1)(f) of the Bankruptcy Act to which proceeding QUD243/2025 relates) had not been withdrawn.

18    Following some discussion as to parties’ availability and whether an appearance was required from the former trustees (who are not parties to QUD291/2025), the matter was set down for case management on 12 March 2026.

19    At the case management hearing counsel for the respondents indicated their position as follows:

MR McMILLAN: The respondents seek their costs. The respondents don’t object to the applicant being given leave to file a notice of discontinuance, subject to the court making an order that the applicant pay the respondents’ costs. I understand that order is not consented to by Ms McEwan.

(transcript 12 March 2026 p 2)

20     The following exchange then took place:

HER HONOUR: No, and I imagine that. So what I was going to say was, can we just cut to the chase here. I grant leave for the notice of discontinuance to be filed. I’m going to invite you both to put submissions in because I would like to get submissions from each of you. Ms McEwan’s – my understanding is Ms McEwan’s position is she is now seeking to discontinue her application because your client, Mr McMillan, has given her what she has been pressing for. This is my understanding. And so it would be interesting to hear from both of you as to why, in those circumstances, costs should flow, if the argument from Ms McEwan is, well, this could have been resolved a long time ago.

MR McMILLAN: Yes.

HER HONOUR: You understand what I’m saying?

MR McMILLAN: I do.

HER HONOUR: All right. So Ms McEwan, what I would like to do is, I would like to make some orders that you file submissions and material in respect of the issue of costs associated with your notice of discontinuance by a certain date. I will talk to you about a date. The respondents do the same and that I determine the issue of costs on the papers. Would you be content with that?

MS McEWAN: Thank you. I think that is appropriate course of action.

HER HONOUR: Thank you. So, Ms McEwan, I would like submissions to be confined to say, 10 pages. Would that do?

MS McEWAN: Yes.

HER HONOUR: Yes?

MS McEWAN: Thank you, yes.

(transcript 12 March 2026 pp 2-3)

21    Given the parties’ respective positions at the case management hearing, I made Orders in the terms set out at the beginning of this Judgment and reproduced below:

1.     The applicant be granted leave to file a Notice of Discontinuance, subject to the determination of the issue of costs.

2.     By 4.00pm on 2 April 2026, the applicant file submissions, not exceeding 10 pages, and material in respect of costs.

3.     By 4.00pm on 23 April 2026, the respondent file submissions, not exceeding 10 pages, and material in respect of costs.

4.     Judgment in respect of the issue of costs stand reserved as at 23 April 2026 and be determined on the papers.

22    I will now determine the issue of costs in this proceeding.

Submissions of the Parties

Applicant

23    In relation to the issue of costs Ms McEwan submitted, in summary, that:

    Ms McEwan was forced to commence proceedings against the respondents because the respondents failed to withdraw the Notice of Objection.

    Prior to the commencement of the proceedings, the respondents acknowledged that the information requested under the Notice of Objection had been provided by Ms McEwan. Despite this the respondents resisted Ms McEwan’s Originating Application. In other words, “it took the continued prosecution of the application by the applicant for the respondent to fulfill its statutory obligations under the Act”.

    If a trustee’s conduct has occasioned unnecessary expense by maintaining reliance on an objection longer than was reasonable, a costs order in favour of the applicant may be considered: Macchia v Nilant [2000] FCA 537. This is even the case where, as in this case, the applicant subsequently withdrew their application after the trustee acted to fulfill its obligation.

    “The trustee is the author of their own complaint and the respondents’ costs application must be dismissed.”

    There is nothing compelling in the respondents’ outline of submissions that would justify the making of a costs order in their favour, in circumstances where the Official Trustee has provided no explanation as to why they could not have withdrawn the Notice of Objection prior to the filing of these proceedings.

    The separate proceeding before Logan J in NSD634/2024 (which is the subject of the appeal in NSD332/2025) was finalised in February 2025 and is irrelevant to the consideration of a costs order in the present proceeding filed in May 2025. In any event, NSD634/2024 is under appeal and the Court is requested not to bring into issue that proceeding because any determination will be a matter for the Full Court.

    The relief sought in the present proceeding is similar to that sought before Logan J but not similar to the relief sought in the Full Court appeal. “The appeal does not seek any relief in relation to the withdrawal of the objection to discharge, and the reason the application was brought in good faith seeking the removal of same”.

    The current issue to be decided is whether it was reasonable for the respondents to defend the proceedings in circumstances where relevant information had been provided prior to the commencement of these proceedings. The answer to that question is “no”. The respondents maintained the objection to discharge from bankruptcy in circumstances where all relevant information had been provided.

    If the proceeding had not been commenced by Ms McEwan, “the respondents would have sat on their hands indefinitely showing no regard to the applicant’s rights and their objection as trustee to do their job fairly and in the interest of justice”.

    The overarching purpose of the Federal Court Rules 2011 (Cth) (FCR) includes ensuring that litigants conduct litigation responsibly.

    The authorities relied on by the respondents are irrelevant because they fail to address “the very reason why it took twelve months to withdraw the objection to discharge when practical compliance was met twelve months ago in February 2025”.

    “The only apparent argument provided by the respondent as to why they defended the maintenance of the objection, was waiting on the appeal”. This is misconceived and an abuse of process.

    There is no compelling reason provided by the respondents justifying defending the proceeding when practical compliance had been met.

Respondent

24    In relation to the issue of costs the respondents submitted, in summary, that:

    The relief sought by Ms McEwan in this proceeding, commenced on 2 May 2025, included orders to have the Notice of Objection, referable to ss 149D(1)(d) and 149D(1)(e) of the Bankruptcy Act, withdrawn or cancelled.

    The relief sought is substantially the same as relief sought in previous proceedings, which were determined by Logan J in McEwan v Official Trustee in Bankruptcy [2025] FCA 162 and are subject to appeal before the Full Court in proceeding NSD332/2025 (Appeal Proceeding) due to be heard in the August 2026 sittings.

    By interlocutory application filed on 8 July 2025, the respondents applied to stay this proceeding until the Appeal Proceeding is finally determined. Plainly the Appeal Proceeding has not yet been finally determined.

    Rule 26.12(7) of the FCR provides that “unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued”.

    The default position is that the applicant is liable to pay the respondents’ costs of the proceeding unless the Court orders otherwise. The principles applicable to deciding an application for costs in these circumstances were explained by Flick J in Taylor v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2020] FCA 1760 at [8]-[11].

    In this case, Ms McEwan appears to contend that the respondents have unreasonably defended the proceeding. However, the respondents have not acted unreasonably. To the contrary, the respondents sought to stay the proceeding until the Appeal Proceeding, which remains extant, is finally determined.

    Noting that the Court has already ordered Ms McEwan to pay the costs of the respondents referable to the Recusal Application, the only material steps taken by the respondents in this proceeding (and for which undetermined costs have been incurred) were in respect of the respondents’ stay application. That application was entirely appropriate having regard to the extant Appeal Proceeding.

    It is not to the point that the Official Trustee had, on 20 February 2026, withdrawn the Notice of Objection on the basis that Ms McEwan had practically complied with it. While it is true that Ms McEwan achieved the relief she sought by the proceeding, the costs of the proceeding were not incurred by some misbehaviour or unreasonable conduct of the respondents.

    In the circumstances, Ms McEwan has not demonstrated any “good reason” to depart from the default position in r 26.12(7).

Consideration

Applicable Principles

25    The default position in relation to liability for costs in a discontinued proceeding is set out in r 26.12(7) of the FCR. Relevantly r 26.12 provides that:

26.12 Discontinuance

(1)     A party claiming relief may discontinue a proceeding in whole or in part by filing a notice of discontinuance, in accordance with Form 48.

(2)     The party may file the notice of discontinuance:

…

(b)     with the opposing party’s consent—before judgment has been entered in the proceeding; or

(c)    with the leave of the Court—at any time.

…

(7)     Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued.

26    The default position is, of course, subject to the Court’s general power to award costs as a matter of discretion pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth) which provides that:

43 Costs

(1)     The Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which this or any other Act provides that costs must not be awarded. This is subject to:

…

…

(2)     Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.

(3)     Without limiting the discretion of the Court or a Judge in relation to costs, the Court or Judge may do any of the following:

(a)     make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial;

(b)     make different awards of costs in relation to different parts of the proceeding;

(c)     order the parties to bear costs in specified proportions;

(d)     award a party costs in a specified sum;

(e)     award costs in favour of or against a party whether or not the party is successful in the proceeding;

(f)     order a party’s lawyer to bear costs personally;

(g)     order that costs awarded against a party are to be assessed on an indemnity basis or otherwise;

…

27    In her written submissions, Ms McEwan made reference to and relied on the case of Macchia v Nilant [2000] FCA 537. In that case, there was an application before the Court for remedial orders against a bankruptcy trustee’s failure to withdraw a notice of objection to discharge, as well as for an order that the bankruptcy trustee be removed. Relevantly, Lee J stated that:

[6]     If the Trustee had not opposed the applicant's application and had undertaken to abide by the order of the Court, the applicant could not have expected to obtain an order for costs against the Trustee unless an order was made that the Trustee be removed. The Trustee, however, resisted the applicant's application in all respects, not restricted to opposing the application for removal, and at all times the applicant was at risk that an order could be made that the applicant pay the costs of the Trustee. The Trustee occasioned the applicant unnecessary expense in maintaining reliance for as long as he did on the notice filed objecting to discharge of the applicant from bankruptcy. An order for costs in favour of the applicant therefore may be considered.

[7]     However, the proceeding conducted by the applicant caused the Trustee to incur unnecessary costs in responding to material relied upon by the applicant to support the application for an order that the Trustee be removed. The application continued for some time with that issue as a live question until abandoned by the applicant at a late stage. Notwithstanding that the order sought by the applicant for the removal of the Trustee would only arise if the applicant failed to obtain a remedial order, the application for the alternative order necessarily caused costs to be incurred in respect of it until abandoned by the applicant.

(emphasis added)

28    More recently, in VDCL v Purcell [2024] FCA 107, Horan J explained the rationale and operation of r 26.12(7) of the FCR as follows:

14     Rule 26.12(7) is not necessarily founded on a premise that, when a proceeding is discontinued by an applicant, the respondent is the successful party. There may be a range of circumstances leading to the discontinuance of a proceeding, not all of which may be equated to success on the part of either the applicant or the respondent in the sense of a vindication of that party’s position in relation to the claims forming the subject matter of the proceeding. For example, there might be circumstances in which the relief sought in the proceeding has been overtaken or rendered inutile by supervening events or circumstances beyond the control of any of the parties, or where (as was the case in Lai Qin at 624) the applicant “has achieved the relief sought in the action either by settlement or by extra-curial means”.

15    Nevertheless, previous decisions of this Court have generally accepted that r 26.12(7) prescribes a starting point or a default position that, in the absence of any agreement between the parties, a party who files a notice of discontinuance should pay the costs of each other party unless “good reason” is shown for exercising the discretion to order otherwise: see, for example, Armstrong v Australian Community Pharmacy Authority [2012] FCA 577 at [9], [13]–[14] (Rares J); El-Debel v Secretary, Department of Immigration and Border Protection [2014] FCA 474 at [17]; 141 ALD 611 (Foster J); Diploma Group Limited (No 3) at [2]. While some decisions have described this as creating a “presumption” that the discontinuing party ought pay the costs of the other side unless good reason is shown (see Dalian Huarui Heavy Industry International Co Ltd v Duro Felguera Australia Pty Ltd [2018] FCA 905 at [7] (Barker J), cited in Zhao at [15] and Taylor at [8], [22]), it is unnecessary to determine whether such a description is apposite: cf. Lo v Australian Community Pharmacy Authority [2013] FCA 639 at [60] (Katzmann J), cited in Francis at [20].

16    The general policy embodied in r 26.12(7) is that, where a party elects to discontinue a proceeding, the other party has a prima facie entitlement to an award of costs: see Travaglini v Raccuia [2012] FCA 620 at [36] (McKerracher J). The Court retains a discretion to displace or depart from that position under r 26.12(7) in the circumstances of the particular case. Like any discretion as to costs, the discretion under r 26.12(7) must be exercised judicially by reference to facts connected with or leading up to the litigation. The need for good reason to be shown for any departure from the default position under r 26.12(7) should not unduly constrain or fetter the judicial discretion to make a different costs order in appropriate circumstances. Nevertheless, the onus is on the party who seeks to depart from the costs consequences under r 26.12(7), other than by the terms of a consent, to make an application to the Court and to explain and establish the basis on which a different costs order should be made: Francis at [20]; Taylor at [9]–[10]; Zhao at [16].

17    In exercising the discretion under r 26.12(7), it remains relevant to consider the conduct of the parties and the reasons for discontinuance: cf. O’Neill at [13]. However, the fact that the discontinuing party has acted reasonably is not necessarily sufficient of itself to warrant a departure from the costs consequences under r 26.12(7). As McKerracher J observed in Diploma Group Limited (No 3) at [18], even if an applicant acted reasonably in bringing and conducting the proceeding, “unless the litigation is rendered futile by external events, such as a settlement, or the objective of the litigation being achieved in other ways, the discontinuing party is almost always liable for costs”.

(emphasis added)

29    I further note that the principles summarised in VDCL are consistent with those set out in the earlier decision of Taylor v Minister for Immigration Citizenship, Migrant Services and Multicultural Affairs [2020] FCA 1760, which is a case relied on by the respondents. In Taylor Flick J said:

[8]     … Rule 26.12(7), it has been said, “creates a presumption that the discontinuing party will pay the costs of the other side, unless for a good reason shown, the Court orders otherwise”: Dalian Huarui Heavy Industry International Co Ltd v Duro Felguera Australia Pty Ltd [2018] FCA 905 at [7] per Barker J. His Honour had previously made similar observations in Croft v Evertop Investments Pty Ltd [2014] FCA 1098 at [66] (“Croft”). Rule 26.12(7) has also been referred to as creating “a prima facie entitlement on the part of the party not discontinuing to costs”: Travaglini v Raccuia [2012] FCA 620 at [36] per McKerracher J.

[9]     In El-Debel v Secretary, Department of Immigration and Border Protection [2014] FCA 474; (2014) 141 ALD 611 (“El-Debel”), Foster J repeated the reference to there having to be “good reason” but expressed the policy behind r 26.12(7) more broadly as follows:

[17]    … r 26.12(7) reflects a more general policy of the law to the effect that a party should always be permitted to discontinue its proceedings but, in the modern setting, should usually have to pay the costs of the other parties occasioned by the bringing of the proceedings and their subsequent abandonment. This is not to gainsay the broad discretion in respect of costs given to the court by s 43 of the Federal Court of Australia Act 1976 (Cth). None the less, the court should give effect to this general policy when making costs orders unless there is some good reason for declining to do so.

Other cases have also repeated the reference to there having to be “good reason” not to order the discontinuing party to pay costs: eg, Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Building and Construction Cmr [2017] FCA 1062 at [2] per Perram J (“CEPU v ABCC”). Some reservation may be expressed as to whether such a constraint otherwise unexpressed in the terms of r 26.12(7) should nevertheless be implied. But, however that reservation may ultimately be resolved, there could be no cavilling with a proposition that a discontinuing party must bring forward some explanation as to why costs should be ordered in a manner different to that provided for in the Rules. The more so is this the case where the form of the current r 26.12(7) departs from the former O 22 r 2(1) of the now repealed Federal Court Rules 1979 (Cth) which left the question of costs entirely to the discretion otherwise conferred by s 43 of the Federal Court of Australia Act 1979 (Cth). See: Armstrong v Australian Community Pharmacy Authority [2012] FCA 577 at [9] per Rares J; Travaglini v Raccuia [2012] FCA 620 at [15] to [27].

[10]    Nor could there be any cavilling with the proposition that the onus remains on the discontinuing party to demonstrate or bring forward some explanation as to why costs should not be ordered in accordance with r 26.12(7).

(emphasis added)

30    While there appears to be some divergence in the authorities as to whether the requirement that there be “good reasons” created a presumption against departure from r 26.12(7), the authorities do not dispute that the onus is on the discontinuing party, in this case Ms McEwan, to demonstrate why costs should not be ordered against her.

Disposition of the Issue

31    In the circumstances I consider that, subject to the Orders of 13 February 2026 that Ms McEwan bear the costs of the respondents in respect of the Recusal Application, Ms McEwan should not bear the costs of the respondents otherwise in respect of proceeding QUD291/2025.

32    I have formed this view for the following reasons.

33    First, in CZA19 v Commonwealth of Australia [2024] FCAFC 66, the Full Court (Mortimer CJ, Perram and Markovic JJ) made costs orders favourable to the discontinuing applicant. Their Honours’ reasoning is sufficiently brief to be quoted in full:

[5]     We are satisfied that the applicant should have his costs of the separate question, as agreed or taxed. That is because as the applicant submits:

(1)    he succeeded in obtaining the practical outcome he pursued by way of the separate question, namely release from immigration detention and a decision on his application for a protection visa. Had the applicant been denied his protection visa application and released prior to commencement of the proceeding or at least prior to further substantive steps having been taken, he would not have been required to advance a case seeking relief including mandamus to compel the executive to perform its duty;

(2)    contrary to the respondents’ contention, there was no agreed fact that as at 1 May 2024 the applicant’s protection visa application “was at the final stage of processing”;

(3)    even if that application was at the “final stage” by the time the parties finalised the statement of agreed facts, there is no evidence as to why the final stage took approximately five weeks to crystallise into a decision, no evidence of what occurred in the intervening period and no evidence of why the decision happened to coincide with the time at which the respondents’ submissions were due to be filed. No notice was given to the applicant of an anticipated time frame for the decision either before or after commencement of the proceeding;

(4)    the circumstances of this case bear some similarity to those in Grant v Secretary Dept of Home Affairs [2022] FCA 261 where, after a final hearing but before delivery of judgment, the applicant was granted a visa and the only question to be resolved was that of costs. Justice Murphy awarded costs to the applicant. His Honour did so for two reasons, the first of which concerned a finding (at [20]) that in that case “it [was] possible to say that the applicant would have been substantially successful, had he not been granted the visa”. His Honour found that the case was plainly distinguishable from the decision in Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622. Here, although there was no hearing and the respondents did not file their submissions, it is plain that the applicant would succeed at least in obtaining the relief he sought in para 2 of his originating application, a writ of mandamus directing the Minister to make a decision on his protection visa application. That the Minister, days before the hearing, accepted the inevitable state of affairs takes the case outside of cases such as Lai Qin; and

(5)    the second consideration in Grant was his Honour’s view that although “the relief the applicant sought would have produced a different (and for him, lesser) result than that which he obtained through the grant of a visa”, the application was “in a real sense” about his liberty. The same can be said here.

(emphasis added)

34    Much like the applicant in CZA19, here Ms McEwan succeeded in obtaining the practical outcome she pursued by way of her Originating Application. Specifically, Ms McEwan’s Originating Application sought the following orders:

1.     Within Seven days, pursuant to section 30(1) of the Bankruptcy Act 1966 (Cth) or s90-15 of the IPS, the Official Trustee withdraw or cancel the objection to discharge filed by the Former Trustee dated 24 January 2022 (Notice of Objection ‘Income Information Request’).

2.     Pursuant to s90-15 the Official Receiver is to update the NPII that the Notice has been withdrawn/cancelled forthwith.

3.     Costs.

4.     Any further or other order that this Honourable Court considers appropriate.

35    As the respondents themselves accept in affidavit evidence filed on 23 April 2026, the withdrawal of the relevant Notice of Objection was processed on 24 February 2026. I am satisfied that Ms McEwan obtained the practical outcome she pursued by way of her Originating Application on that date, and that, in Ms McEwan’s words, “there is no basis to continuing the proceeding” following that.

36    Second, there appears to be no material before me to explain why the respondents required more than one year to withdraw the relevant Notice of Objection, and no evidence as to what occurred in the intervening period. In her affidavit filed 2 April 2026, Ms McEwan asserted, without annexing any exhibits in support, that:

5.    Prior to filing these proceedings, the [Official Trustee] confirmed that all information requested under the objection to discharge had been provided however refused to withdraw the objection to discharge.

37    Ms McEwan’s assertions are not inconsistent with the respondents’ own affidavit evidence filed 23 April 2026, which provided that:

11.     On 20 February 2026, the First Respondent wrote to the Applicant and stated at paragraph 20 that at that date the Official Trustee had determined that practical compliance with the Notice has been reached and the Official Trustee intended to withdraw the Notice as soon as possible.

…

Practical compliance

12.     On 11 February 2025, Logan J delivered judgement and made orders which dismissed the Applicant’s application to set aside the Notice. His Honour found that the Applicant had not provided the list of payments from related entities as required by the former bankruptcy trustee’s letter dated 28 October 2021 (Information Request).

13.     On 11 February 2025 at 10:25pm (following Logan J’s decision), the Applicant provided the First Respondent with a list of payments from related entities. A true copy of this email and the list of payments is attached to this affidavit at pages 25-29.

Withdrawal of objection

14.     On 24 February 2026, the Second Respondent processed the withdrawal of the Notice.

...

38    The respondents, understandably, do not expressly state the date on which Ms McEwan practically complied with the Notice of Objection. However, it can be readily inferred from the structure and headings of their affidavit evidence that practical compliance occurred on or about 11 February 2025. This corroborates Ms McEwan’s own evidence that practical compliance occurred “prior to the filing of these proceedings” on 2 May 2025.

39    Despite all of this, the Notice of Objection was not withdrawn until 24 February 2026, more than a year after what appears to be the date of practical compliance by Ms McEwan.

40    Furthermore, Ms McEwan was not given any notice as to an anticipated timeframe for the withdrawal of the Notice of Objection, or even any notice as to the fact that the Notice of Objection will be withdrawn.

41    The respondents are, of course, entitled to consider their position in the administration of Ms McEwan’s bankrupt estate, and to have a reasonable period of time to do so. Equally, they are not expected to respond to Ms McEwan’s correspondence instantly, especially in light of the volume of correspondence that Ms McEwan had in fact sent in this matter. I consider it likely as a general proposition that the respondents have a level of administrative overhead that may have resulted in delays of an administrative nature. That, too, is understandable.

42    Notwithstanding all of the above, the filing of this proceeding by Ms McEwan should have put the respondents on notice of Ms McEwan’s contentions. In these circumstances, I find that the failure of the respondents to explain why the Notice of Objection was allowed to stand between May 2025 when this proceeding was filed, and February 2026 when the Notice of Objection was ultimately withdrawn, weighs against an award of costs in their favour.

43    Third, it is true that the respondents had, by their interlocutory application filed 8 July 2025, sought for the matter to be stayed pending the final determination of the Appeal Proceeding in NSD332/2025. However, I do not accept the respondents’ submissions that it had not acted unreasonably in doing so.

44    If the Notice of Objection had been practically complied with, the proper course of action for the respondents would be to withdraw the Notice of Objection and to seek Ms McEwan’s cooperation in bringing the proceeding to an end.

45    The manner in which the respondents had in fact conducted the proceeding does not weigh in favour of an award of costs to them.

46    Finally, the present case plainly falls within the exception to the usual rule of costs in discontinued proceedings discussed by McKerracher J at [18] of Australian Securities and Investments Commission v Diploma Group Limited (No 3) [2017] FCA 891 (see also VDCL at [17]):

[18]     Essentially, ASIC argues that it acted reasonably so should not be obliged to pay costs. There is no suggestion that ASIC did not act reasonably. But, unless the litigation is rendered futile by external events, such as a settlement, or the objective of the litigation being achieved in other ways, the discontinuing party is almost always liable for costs. This case is no different. The premise on which the case was based against the fifteenth defendant was either incorrect or not established as being correct. That is sufficient for the usual costs consequence.

(emphasis added)

47    In this case, the objective of the litigation was plainly achieved in another way, namely the withdrawal of the Notice of Objection by the respondents. The respondents cannot now seek to recover costs that would have never been incurred if it does now what it ought to have always done. I am satisfied that this weighs against an award of costs in favour of the respondents.

Conclusion

48    For the reasons I have given, there should be no order of costs in favour of the respondents in proceeding QUD291/2025 except in respect of the Recusal Application filed by Ms McEwan.

49    I note that the respondents already have the benefit of the Orders dated 13 February 2026, including Order 2 of those Orders which entitles the respondents to costs of and incidental to the interlocutory applications filed by Ms McEwan on 14 November 2025 in QUD243/2025 and QUD291/2025 (ie the Recusal Application). That Order remains in force.

50    As Ms McEwan is a litigant in person, she cannot be awarded costs. In these circumstances, I will order that each party bear its own costs except as provided for by Order 2 of the Orders dated 13 February 2026.

Associate:

Dated:    31 July 2026