Sage v Korogiannis, in the matter of Sage [2025] FCA 1596

1. The debt founding the bankruptcy notice was a default judgment in the amount of $15,850.53 delivered by the Queensland Civil and Administrative Tribunal (QCAT) on 5 December 2024. As appears from what follows, the circumstances surrounding the default judgment are somewhat unusual.

Application to QCAT to set aside the default judgment

1. On 18 December 2024, Mr Sage filed an application in QCAT to set aside the default judgment on the basis, in effect, that Mr Sage had a defence and was unaware that Mr Korogiannis could obtain judgment without a hearing. The application to set aside the default judgment was served on Mr Korogiannis shortly thereafter. On 23 December 2024, Mr Korogiannis served the bankruptcy notice on Mr Sage. In January 2025, Mr Sage commenced these proceedings.
2. On 3 February 2025, QCAT dismissed the application to set aside the default judgment. Mr Sage requested reasons for that decision, which were not delivered by QCAT until 26 May 2025. Those reasons record:

[7] On reviewing the file to provide these reasons, it was discovered that an error was made in the final decision for the set-aside application on 3 February 2025. The error arose from a technical problem with my use of the QCase portal which resulted in an order intended for another matter being accidentally applied to this one.

[8] The first three orders made on 3 February 2025 in this matter should have read:

1. The application to set aside the default decision in this matter, filed by the Respondent on 18 December 2024, is granted.
2. Pursuant to Rule 41 of the QCAT Rules the originating application is deemed to have been given to the Respondent on or before 5 December 2024.
3. The matter is to be listed for mediation on the first available date on notice to the parties.

1. QCAT made orders pursuant to the slip rule in accordance with those extracted in its reasons above (QCAT decision).

Application for leave to appeal and stay the QCAT decision

1. On 21 June 2025, Mr Korogiannis filed an application for leave to appeal the QCAT decision. Mr Korogiannis also applied for a stay of the QCAT decision until the application for leave to appeal was decided.
2. On 7 July 2025, QCAT directed that the application for a stay of the QCAT decision would be determined on the papers after 30 July 2025. QCAT further ordered that a "preliminary issue" as to whether leave to appeal the QCAT decision should be granted would be determined on the papers, unless either party filed an application for an oral hearing by 6 August 2025. Neither Mr Sage nor Mr Korogiannis sought an oral hearing with respect to the application for leave to appeal.
3. On 4 September 2025, I made orders progressing the review application to a hearing on 30 October 2025. On the previous day, 3 September 2025, QCAT refused leave to appeal the QCAT decision and dismissed both the appeal and the application for leave to stay the QCAT decision (QCAT appeal decision). Mr Sage tendered the QCAT appeal decision at the hearing before me on 15 December 2025.

1. An award of costs is in the discretion of the Court: Bankruptcy Act 1966 (Cth), s 32; see also, Federal Court of Australia Act 1975 (Cth). That discretion is "very wide" but must, of course, be exercised judicially: Principal Strategic Options Ltd [2001] FCA 664 at [17] to [18] (Branson J).
2. The general rule in bankruptcy proceedings (as in other proceedings before the Court) is that costs follow the event: Re Skase; Ex parte Donnelly [1992] FCA 429; (1992) 37 FCR 509 at 522 (Drummond J); see also, Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [35] (Gaudron and Gummow JJ), [66] to [67] (McHugh J) and [134] (Kirby J). The purpose of an order for costs is to indemnify or compensate the successful party, not to punish the unsuccessful party: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 543 (Mason J); see also, Ohn v Walton (1995) 36 NSWLR 77 at 79 (Gleeson CJ).
3. A successful party may be deprived of a proportion of its costs, or even required to pay costs to the other party, if the successful party has succeeded only upon a portion of its claim, or failed on issues that were not reasonably pursued, or where the result of the litigation might be described as mixed: Ezy-Fit Engineering Group Pty Limited v Microm Nominees Pty Limited (No. 4) [2025] FCA 411 at [28] (Banks-Smith J), citing Impiombato v BHP Group Limited (No 2) [2025] FCAFC 28 at [13] (Beach and O'Bryan JJ).
4. The Court may also consider the conduct of the litigation by the successful party: Skase at 522. The Court will also have regard to the furtherance of the overarching purpose set out in s 37M of the Federal Court Act and the obligations on parties under s 37N to act consistently with those objectives, and so seek to resolve disputes as quickly, inexpensively and efficiently as possible. In exercising the discretion to award costs, the Court may consider the failure of a party or their lawyer to comply with the overarching purpose: Ezy-Fit at [32], citing Stefanovski v Digital Central Australia (Assets) Pty Ltd (No 2) [2018] FCAFC 113 at [14] (McKerracher, Robertson and Derrington JJ).

1. Mr Sage advances 11 submissions as to why he should be awarded his costs of the proceeding. Those submissions principally concern, in addition to the general rule, matters with respect to the conduct of Mr Korogiannis in serving, and not withdrawing, the bankruptcy notice in the face of the application to set aside the default judgment and seeking leave to appeal the QCAT decision.
2. Mr Sage also relies upon offers he made on 13 January 2025 and 26 February 2025, that Mr Korogiannis consent to an order that the bankruptcy notice be set aside with no order as to costs. That said, Mr Sage does not rely upon the offers to seek an order for indemnity costs: cf, Federal Court Rules 2011 (Cth), r 25.14. Instead, he seeks an order that his costs in the proceeding until 2 July 2025 be fixed in the amount of $19,014.53 and, otherwise, be assessed: Rules, r 40.02. The lump sum is based on a bill of costs Mr Sage's solicitor caused to be prepared.
3. Mr Korogiannis does not put in issue the course of events with respect to the bankruptcy notice. He does, however, emphasise that until 26 May 2025, he was acting on the basis that the application to set aside the default judgment had been refused. Mr Korogiannis also points to alternative steps that might have been taken by Mr Sage to avoid the proceeding, such as payment of the moneys the subject of the default judgment and bankruptcy notice into trust while the application for leave to appeal the QCAT decision was being determined by QCAT.
4. Mr Korogiannis contends that there should be no order as to costs or, alternatively, the costs order ought to be confined to the period between 26 May 2025 (when the QCAT decision was made) and 2 July 2025 (when the Judicial Registrar made the orders referred to at [2] above). Mr Korogiannis also resists a lump sum award and, instead, seeks an order that any costs be assessed.

1. I have concluded, having regard to my impression of the process and outcome of the proceeding, that this is a case in which there are special circumstances which warrant the departure from the general rule. The just outcome is that Mr Korogiannis pay Mr Sage 70 per cent of his costs of the proceeding on a party and party basis, such costs to be assessed if not agreed. That is for the following reasons.
2. As Mr Sage rightly emphasises, the general rule is that costs follow the event. Mr Korogiannis was aware at the time he served the bankruptcy notice that Mr Sage had applied to QCAT to set aside the default judgment on which it was founded. Mr Korogiannis can be taken to have understood that if Mr Sage was successful in that application, then the default judgment on which the bankruptcy notice was founded would no longer exist and the bankruptcy notice would be set aside: cf, Elias v Pascoe (Trustee) in the matter of Milad Elias (Bankrupt) [2006] FCA 802.
3. That said, between 3 February 2025 and 26 May 2025, it appeared to all concerned that QCAT had dismissed the application to set aside the default judgment. During that period, Mr Sage can be taken to have understood (albeit mistakenly) that the application to set aside the bankruptcy notice was liable to be dismissed because the default judgment on which it was founded had been dismissed. Irrespective, Mr Sage persisted with the application to set the bankruptcy notice aside.
4. On 2 July 2025, following the QCAT decision, Mr Sage obtained orders setting aside the bankruptcy notice. He emphasises the terms on which those orders were made, contending that the payment of the moneys into Court was the "price" of avoiding an act of bankruptcy. That submission goes someway to explaining why Mr Sage brought the review application. But it does not explain why he persisted with the review application after 3 September 2025, when the QCAT appeal decision was delivered. By that date, the bankruptcy notice had been set aside, and Mr Sage could have sought an order for the release of the moneys paid into Court on the basis that the QCAT decision setting aside the default judgment had been confirmed: cf, Rules, r 2.42.
5. Notwithstanding, Mr Sage did persist with the review application. It was not until 26 September 2025, that Mr Sage lodged the amended review application which confined the relief sought to an order setting aside the order made 2 July 2025 for the payment of moneys into Court. The submissions he filed that day made no mention of the QCAT appeal decision. Indeed, it was not until the hearing of the review application on 15 December 2025 that Mr Sage (by his counsel) sought to tender the QCAT appeal decision. This was despite a case management hearing before me on 4 September 2025, and orders made 9 September 2025, providing for Mr Sage to file any further affidavit material upon which he relied on the review application by 26 September 2025. In the event, Mr Korogiannis consented to the moneys being released from Court.
6. The conduct of Mr Sage as just described was not consistent with the overarching purpose of facilitating the just resolution of the proceeding as quickly, inexpensively and efficiently as possible: cf, Federal Court Act, s 37M and s 37N. It had the effect of unduly prolonging the proceedings beyond the date on which Mr Sage obtained the order sought by the originating application and was in a position to seek orders for the repayment of the moneys paid into Court or, at the least, to put evidence before the Court that would support such an order being made. It is conduct that, in my view, warrants a departure from the general rule that costs follow the event.
7. How then is that finding to be appropriately reflected in an award of costs? Mr Korogiannis seeks an order that he not pay Mr Sage's costs of the proceeding for defined periods of time. That submission is analogous to a circumstance where there is a mixed outcome for a party on discrete and severable issues of law or fact. In such a case, the Court may exercise the discretion based on an estimate of the time taken by way of evidence or argument on those discrete issues at the hearing: McCasker v OMAD (NT) Pty Ltd (No 4) [2023] NTSC 89 at [36] (Brownhill J), as cited in Ezy-Fit at [29].
8. The courts have, however, guarded against such an approach: Ezy-Fit at [29], citing Australian Trade Commission v Disktravel [2000] FCA 62 at [3] to [4] (French, Kiefel and Mansfield JJ); The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [8] (Emmett, Kenny and Middelton JJ); Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; (2015) 327 ALR 192 at [6] (French CJ, Kiefel, Nettle and Gordon JJ). The reasons for this include that difficulties with the apportionment of costs to issues means that mathematical precision may well be illusory: McCasker at [36].
9. Similar considerations arise here. There are timeframes of conduct that inform the view that I have reached with respect to the exercise of the discretion to award costs. But it would be illusory to approach the exercise of the discretion on that basis because discrete time periods may not necessarily reflect the effect, in terms of time and cost, of the conduct that I have found disentitles Mr Sage to the entirety of his party and party costs. The appropriate course is, instead, to exercise the discretion to award Mr Sage a percentage of his costs. A reduction by 30 per cent reflects my overarching impression and evaluation of the conduct of the litigation by Mr Sage, which in contravention of s 37M and s 37N of the Federal Court Act, unnecessarily added to the cost of the proceeding.
10. Given the conclusion that I have reached with respect to the exercise of the discretion to award costs, this is not an appropriate case in which to make a lump sum award. In any event, the bill of costs put in evidence by Mr Sage is contested by Mr Korogiannis and is not signed by the costs consultant who prepared it as GPN-COSTS requires. Moreover, the bill of costs does not reflect the entirety of the party and party costs said to have been incurred by Mr Sage in the proceeding. For all of those reasons, I will order that the costs are to be assessed, if they cannot be agreed.

I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Longbottom.