Judge notes he unreasonably rejected firm’s two offers to compromise
The Australian Federal Court has agreed to award indemnity costs to the respondent law firm, CharterLaw Legal Pty Limited (CLL), after dismissing the applicant’s proceeding to set aside a bankruptcy notice that the firm had issued.
CLL – the respondent in Michales v CharterLaw Legal Pty Limited (No 2) (Costs) [2026] FCA 946 – issued offers to compromise under rule 25.01 of the Federal Court Rules 2011 on 19 November 2025 and 16 December 2025.
Under the offers, the court would dismiss the applicant’s application without ordering costs. Both offers explained why his applications would be unsuccessful and were making CLL unreasonably incur legal costs. He rejected both offers.
On 6 March 2026, Justice Perry dismissed the application and three related interlocutory applications. The judge allowed CLL to file submissions on the issue of indemnity costs.
CLL sought indemnity costs for the entire proceedings, including hearings before two registrars. Alternatively, CLL requested the following costs:
Justice Perry of the Federal Court ordered the applicant to pay CLL’s lump sum costs of the proceedings before Justice Perry, including the hearings before Registrar Segal, after 3 October 2025:
The court noted that CLL’s costs of the proceedings before Registrar White, up to 3 October 2025, would be subject to a registrar’s determination on the papers pursuant to orders dated 1 October 2025.
Justice Perry of the Federal Court of Australia considered indemnity costs appropriate due to the applicant’s unreasonable refusal of CLL’s two offers.
The court ruled that the offers complied with r 25’s provisions for offers to compromise and clearly advised the applicant of the possible impacts, including an indemnity cost order, of rejecting the offers.
The court also found that the applicant issued no offers of payment or compromise to CLL, and unreasonably failed to accept CLL’s offers of compromise pursuant to the six factors in Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112.
In its prior judgment, the court had determined that the applicant brought a completely misconceived and unmeritorious application, included scandalous allegations that he should not have made, and increased CLL’s costs of the proceedings through his conduct.
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