Stay subject to undertaking to pursue appeal expeditiously and not deal with some assets
Australia’s Federal Court has stayed the enforcement of an order in a 20 February 2026 judgment for the applicant to pay $36,458,048.44 on his undertaking to pursue the appeal expeditiously and to refrain from dealing with certain assets.
Karas v LK Law Pty LTD (Stay of judgment) [2026] FCA 807 involved a 25 May 2021 separation agreement that explained how the applicant and the first respondent LKPL would part ways after years of practising law together.
LKPL’s principal discovered that the applicant had entered into arrangements with MdR, a London law firm. Under these arrangements, which would take effect on 30 April 2021, MdR would acquire LKHK, while the applicant would become an MdR partner.
The trial addressed:
On 20 February 2026, Judge O’Sullivan ordered the applicant to pay LKPL the $36m sum. The judge found that the separation agreement provisions suggesting that the applicant owned LKHK did not relate to beneficial ownership and that the applicant and LKPL jointly beneficially owned LKHK.
On 20 March 2026, in proceeding SAD58/2026, the applicant filed a notice of appeal. On 18 May 2026, the judge stayed the judgment on the condition that the applicant pay LKPL $5 million within 45 days and give a bank guarantee for an additional $5 million within 30 days.
On 19 May 2026, in proceeding SAD120/2026, the applicant applied for leave to appeal from the 18 May 2026 orders. On 29 May 2026, the applicant brought an interlocutory application seeking to stay the original judgment sum and the conditions imposed on the stay of that judgment.
Regarding order 1 of 20 February 2026, the Federal Court of Australia stayed the enforcement of the judgment on the applicant’s undertaking to pursue the appeal expeditiously and to refrain from dealing with certain of his assets.
Regarding order 2, the court noted that the judge had already stayed the order, which did not directly involve the applicant.
Regarding order 3, to the effect that the separation agreement was unenforceable, the court declined to stay the order at this stage because the court was unclear about the order’s practical effect.
Regarding orders 4 to 8, which disposed of various aspects of the claims and issued costs orders, the court refused to stay the orders.
Regarding orders 9 to 12, which provided for the assessment of costs, the court stayed these orders, as the performance of such orders would be wasteful pending the appeal outcome.
Regarding order 1 of 18 May 2026, which stayed the judgment subject to conditions, the court found it necessary to stay the order.
The court considered the appeal arguable. The court found some rational prospects of success and a real issue regarding the proper interpretation of the separation agreement provisions.
Next, regarding the balance of convenience, the court saw a good reason to stay the judgment debt due to the risk that refusing to stay such judgment debt would render the applicant bankrupt, which would lead to further risks.
In SAD120/2026, the court denied the application for leave to appeal from the orders dated 5 May 2026 and 18 May 2026. Given that it granted the stay on the applicant’s requested terms, the court said the application for leave no longer served any purpose.
