Federal Court of Australia

Yey Pty Ltd v Active Skin Pty Ltd [2026] FCA 1288

ORDERS

THE COURT ORDERS THAT:

1.    The time for the applicant to file its application for leave to appeal be extended to 4.00 pm on 21 May 2026.

2.    The application for leave to appeal be dismissed.

3.    The applicant pay the costs of Mr Stephen Smith and Ms Kim Taylor-Smith (the Directors) of the application for an extension of time and for leave to appeal, such costs to be determined on a lump sum basis.

4.    By 4.00 pm on 9 September 2026, the applicant and the Directors file any agreed proposed minute of orders fixing the amount of the Directors’ costs.

5.    In the absence of agreement:

(a)    By 4.00 pm on 23 September 2026, the Directors file and serve a Costs Summary in accordance with paragraphs 4.10 to 4.12 of the Court’s Costs Practice Note (GPN-COSTS) (Practice Note).

(b)    By 4.00 pm on 7 October 2026, the applicant file and serve a Costs Response in accordance with paragraphs 4.13 and 4.14 of the Practice Note.

(c)    The amount of the lump sum of the Directors’ costs of the proceeding be determined by a Registrar of the Court.

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

REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

1    This is an application for an extension of time and leave to appeal from a judgment of a judge of the Federal Circuit and Family Court of Australia (FCFC) on costs. The primary judge dismissed an application for a third party costs order: Active Skin Pty Ltd v Yey Pty Ltd (No 2) [2026] FedCFamC2G 733 (the Reasons).

2    Briefly, the background is as follows. On 1 July 2019, Active Skin Pty Ltd (ASPL) commenced a proceeding in the FCFC against Yey Pty Ltd (YPL). The proceeding was an appeal against a decision of the Registrar of Trade Marks refusing to register two trade marks which had been the subject of applications lodged by ASPL. On 8, 9 and 10 February 2021, the proceeding was heard by another judge of the FCFC (the trial judge), at the conclusion of which judgment was reserved. On 25 October 2022, the trial judge dismissed the proceeding. On 15 December 2022, the trial judge made an order that ASPL pay YPL’s costs on a party-and-party basis, as agreed or taxed (the Costs Order). In a subsequent letter, YPL’s lawyers stated that YPL had incurred costs of $285,246.05.

3    On 29 November 2023, YPL filed an application for an order that the costs that ASPL was ordered to pay be the subject of a lump sum award. Timetabling orders were made by the trial judge and the application for a lump sum costs order was set down for hearing on 18 April 2024. On 28 March 2024, however, ASPL went into voluntary liquidation. As a result, the hearing of the application for a lump sum costs order was vacated.

4    On 18 November 2024, YPL filed an application for an order that the directors of ASPL, Mr Stephen Smith and Ms Kim Taylor-Smith (the Directors), be jointly and severally liable to pay the costs that were the subject of the Costs Order.

5    On 6 May 2026, the primary judge dismissed the application and published the Reasons.

6    At 6.32 pm on 20 May 2026, YPL lodged an application for an extension of time and for leave to appeal from the judgment and orders of the primary judge. An extension of time was needed because the documents were filed a few hours out of time. The application for an extension of time is not opposed. I consider it appropriate to make an order extending the time to file the application for leave to appeal by one day, to 4.00 pm on 21 May 2026.

7    A draft notice of appeal accompanies the application for an extension of time and for leave to appeal. The draft notice of appeal essentially relies on a single ground. By ground 1, it is contended that the primary judge erred in dismissing YPL’s application for a third party costs order against the Directors in respect of the costs awarded in favour of YPL in the Costs Order. Particulars of that ground are set out in paras (a) to (k). Ground 2 is the corollary of ground 1. By ground 2 it is contended that the primary judge ought to have held that the Directors were jointly and severally liable to pay the Costs Order.

8    An affidavit of Cameron Lang dated 20 May 2026 has been filed by YPL in support of its application.

9    The application has been heard together with the appeal (if leave were granted).

10    At the end of YPL’s oral submissions, and following the luncheon adjournment, I said that I did not need to hear from counsel for the Directors. I made an order dismissing the application for leave to appeal and said that I would provide my reasons later. The following are my reasons.

Applicable principles

11    The principles applicable to an application for leave to appeal are well established. The applicant for leave must ordinarily show both that the decision of the primary judge is attended with sufficient doubt to warrant its reconsideration on appeal and that the applicant would suffer substantial injustice if leave to appeal were not granted (supposing the decision of the primary judge to be wrong): Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; 33 FCR 397 at 398-399.

12    The judgment of the primary judge concerned an issue of costs. This is a discretionary judgment. Accordingly, to succeed in any appeal, YPL would need to show an error of the kind discussed in House v The King [1936] HCA 40; 55 CLR 499 at 505, that is, that the primary judge acted on a wrong principle, was guided or affected by extraneous or irrelevant matters, mistook the facts, or did not take into account some material consideration. These matters may be established if the result is unreasonable or plainly unjust (even though the nature of the error cannot be discovered).

Consideration

13    I will focus on the question whether the judgment of the primary judge is attended with sufficient doubt to warrant its reconsideration on appeal.

14    The main argument presented orally and in YPL’s outline of submissions is that the primary judge adopted an unduly narrow and confined approach to the question of whether to make a third party costs order.

15    YPL submitted that the primary judge erred by focussing on the need for the Court to pierce the corporate veil before he would be prepared to make a third party costs order against the Directors.

16    YPL placed emphasis on the principles discussed by the Full Federal Court in Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50; 200 FCR 154 (Dunghutti) at [83]-[89]. In that case, the Full Court (Keane CJ, Lander and Foster JJ) addressed (at [87]) whether it was a precondition to the exercise of the power to award costs against a non-party that the unsuccessful party is impecunious. The Court rejected that proposition as inconsistent with several decided cases. The Court stated (at [89]) that the “only precondition to the exercise of power would have to be that the non-party has a sufficient connection with the unsuccessful party and the litigation to warrant the Court exercising its jurisdiction”. YPL submitted that his Honour should have applied a test of whether there was a sufficient connection between the Directors and the litigation to warrant the Court exercising its jurisdiction to make a third party costs order.

17    YPL submitted that the primary judge unduly elevated the question of whether the third party was the “real party” in his analysis of whether a third party costs order should be made.

18    YPL was critical of the primary judge’s statement at [47] of the Reasons. In that paragraph, the primary judge said that there were difficulties with the general principles that have emerged from the cases in that they “lack content”. Further, his Honour said that the language of the courts implied the existence of a “broad and ill-defined discretion”. YPL described these statements as extraordinary and submitted that, to the contrary, the cases do provide appropriate guidance.

19    YPL submitted that the primary judge erred in adopting (at [53] of the Reasons) a two-step process by which he first examined the questions which he considered emerged from the judgments of Mason CJ and Deane J, and of Dawson J, in Knight v FP Special Assets Ltd [1992] HCA 28; 174 CLR 178 (Knight) and then, secondly, considered other factors that the parties had submitted were relevant to the exercise of the discretion to make a third party costs order. YPL submitted that the effect of this was to unduly confine the exercise of the discretion.

20    In addition to Dunghutti, YPL relied in oral submissions on Yates Property Corporation Pty Ltd v Boland (No 2) [1997] FCA 760; 147 ALR 685 at 694-695; Skelin v Self Care Corporation Pty Ltd (No 2) [2022] FCA 50 at [12], [16]-[20], [22], [50], [54] and [63]-[64]; MC Wholesaling Pty Ltd v Zheng [2024] VSCA 248 at [155]-[156]; and GTW Investments (Aust) Pty Ltd v Pacreef Investments Pty Ltd (in liq) [2026] VSCA 90 at [13]-[15].

21    Having regard to the primary judge’s reasons as a whole, I am not satisfied that there is sufficient doubt as to the correctness of his decision (in the sense described above) on the basis of the contention that he adopted an unduly narrow or confined approach or otherwise adopted incorrect principles.

22    Insofar as YPL submitted that the primary judge erred by focussing on the need for the Court to pierce the corporate veil (before he would be prepared to make a third party costs order against the Directors), I do not consider this to be a fair reading of the primary judge’s reasons as a whole. The key relevant paragraphs of the Reasons are [56]-[57], which form part of his Honour’s consideration of whether the Directors had an interest in the subject matter of the proceeding. It is apparent that the primary judge was here responding to submissions that had been made by YPL rather than adopting a precondition that was necessary for YPL to satisfy.

23    Insofar as YPL submitted that the primary judge erred by unduly elevating the question whether the third party was the “real party” in his analysis of whether a third party costs order should be made, I make the following observations. First, I accept YPL’s implicit submission that the jurisdiction to make a third party costs order is not limited to cases where the third party is the “real party” or where there has been an abuse of process. Although Mason CJ and Deane J, and Dawson J, in Knight referred on several occasions to costs orders having been made against a third party where they were the “real party”, I do not consider that their Honours were intending to confine the jurisdiction to such cases (and to cases involving an abuse of process).

24    Secondly, although the primary judge did place emphasis on that aspect of Knight, it is important to note his Honour’s more detailed description of what was meant by the expression “real party”. At [39] of the Reasons, the primary judge stated that a third party would be characterised as the real party “where the non-party, first, involves itself in the decisions a party makes in relation to litigating a claim or a defence to a claim; and second, the non-party does so because the determination of the claim or defence will directly affect a legal or equitable interest of the non-party”. Thus, his Honour did not simply ask whether the Directors could be described as the “real parties”; he considered whether they were involved in the decision-making relating to the litigation and whether they had an interest in the subject matter of the litigation. This is confirmed by the heading immediately before [54] of the Reasons: “Did the directors have an interest in the subject matter of the proceeding?”.

25    Thirdly, the primary judge did not confine his consideration (of whether to make a third party costs order) to whether the Directors involved themselves in the decision-making and whether they had an interest in the subject matter of the litigation; he went on to consider the other factors relied on by the parties (see [53] and [61]-[78] of the Reasons). Thus, his Honour considered all relevant factors.

26    Insofar as YPL contends that his Honour adopted an incorrect approach, by breaking up the analysis into two stages (first, whether a third party costs order should be made on the basis of Knight and, secondly, the other factors relied on by the parties) (see the Reasons at [53]), I doubt that the adoption of this structure made a difference to the outcome. Ultimately, his Honour considered all relevant factors. Given that his Honour decided that the Directors did not have an interest in the litigation, it appears unlikely that the outcome would have been different even if he had considered all relevant factors together.

27    Insofar as YPL criticised the primary judge’s statements at [47], I do not consider there to be any substance in this criticism. His Honour was merely observing that the principles set out in the cases did not yield up an obvious answer in the application before him.

28    For the above reasons, in my view the decision of the primary judge is not attended with sufficient doubt (in the sense described above) on the basis of YPL’s contention that the primary judge adopted an unduly narrow or confined approach or otherwise adopted incorrect principles.

29    I will now refer to other submissions made by YPL.

30    YPL referred to a number of documents and factual matters that were said to support the proposition that the Directors had an interest in the subject matter of the litigation. In particular, YPL referred to the absence of formal loan documentation (between the Directors and ASPL) for the money advanced by the Directors to fund the litigation; and the fact that the business was conducted from the family home (rather than from separate premises) and by the Directors personally. However, in my view, YPL did not present a cogent argument as to why his Honour erred in his consideration (at [54]-[59] of the Reasons) of whether the Directors had an interest in the litigation (rather than merely having lent money to the company).

31    YPL placed emphasis on the circumstances in which the Directors caused ASPL to go into liquidation (in March 2024). I accept that the company’s circumstances do not appear to have materially changed between the time of the substantive litigation and the time when it was placed into liquidation. While this supports an inference that the company was impecunious, this does not take the analysis very far. Proceeding on the basis that ASPL was impecunious, it is still not apparent that YPL has a good argument that the primary judge erred in his consideration of whether the Directors had an interest in the litigation. Without a cogent basis to challenge that conclusion of the primary judge, it is difficult to see how YPL could successfully overturn the primary judge’s conclusion.

32    YPL also referred to the asset sale agreement between ASPL and Active Skin Australia Pty Ltd (ASAPL), which was also owned and controlled by the Directors. The asset sale agreement is described at [15] of the Reasons. YPL made a submission to the primary judge, which it repeated during the hearing before me, that the Directors had engaged in “phoenixing” conduct. It is not apparent how these matters (which occurred some time after the substantive litigation) are relevant to the exercise of the discretion to make a third party costs order. I do not consider there to be a cogent argument that the primary judge erred in his consideration of this contention (at [73]-[77] of the Reasons).

33    YPL submitted that the primary judge failed to make factual findings about various matters relied on by YPL, in particular, the circumstances in which ASPL was placed into liquidation and the so-called “phoenixing” conduct. His Honour dealt with YPL’s contentions about these matters at [71]-[77] of the Reasons. His Honour did not necessarily need to make factual findings about every matter raised by YPL in order to deal with its contentions. I am not persuaded that there is a cogent argument that his Honour erred by failing to make factual findings.

34    YPL submitted that the primary judge erred by failing to draw appropriate inferences, for example, as to the reasons why the Directors placed ASPL into liquidation and as to “phoenixing” conduct. Again, his Honour did not necessarily need to make factual findings (or draw inferences) about every matter raised by YPL in order to deal with its contentions. I am not persuaded that there is a cogent argument that his Honour erred by failing to draw inferences.

35    For the reasons set out above, I am not satisfied that the decision of the primary judge is attended with sufficient doubt to warrant its reconsideration on appeal.

36    In light of that conclusion, it is unnecessary to deal with the question of substantial prejudice. It is also unnecessary to deal with the Directors’ proposed notice of contention.

Conclusion

37    It was for the above reasons that I dismissed the application for leave to appeal.

Associate:

Dated:    1 September 2026