Sunflower Care Services Pty Ltd v Commissioner of the NDIS Quality and Safeguards Commission (Costs)

Sunflower Care Services Pty Ltd v Commissioner of the NDIS Quality and Safeguards Commission (Costs) [2026] FCA 261 is a Federal Court decision about who should pay legal costs after a judicial review dispute involving NDIS regulatory action. It is a costs judgment only. The court was not re-deciding the underlying merits in this decision. Instead, it was deciding the reserved costs of the proceeding and several interlocutory applications after earlier orders had already been made.

That point is important for business readers. The judgment is useful because it shows how the Federal Court approaches costs where a case changes shape over time, where one party receives practical relief through undertakings rather than a final merits ruling, and where another party succeeds overall but not on every argument. It is not a complete retelling of the underlying regulatory dispute, but it is a detailed and self-contained explanation of the court’s costs reasoning.

The proceeding involved two applicants: Sunflower Care Services Pty Ltd and Katherine Karunarathna. They filed one originating process and their claims arose from similar facts, but the court said the decisions under review were distinct and the relief sought by each applicant was distinct as well. That mattered because the court did not simply treat them as one combined winner or loser when deciding costs.

Sunflower’s part of the case concerned regulatory steps affecting it. The costs reasons state that the Commissioner had commenced a process to consider suspension or cancellation of Sunflower’s registration or making a banning order against Sunflower. During the litigation, the Commissioner offered undertakings. The court said those undertakings had the effect of giving Sunflower the final relief it had claimed by way of a permanent injunction. In other words, Sunflower obtained a practical outcome in its favour without the court finally deciding whether its review grounds were legally correct.

Even after those undertakings were offered, Sunflower continued to press for a hearing and final determination of the merits. It also pursued an interlocutory application to expand its grounds of review. The court later treated that as significant when deciding costs, because it found this conduct unnecessarily prolonged the first final hearing and required further argument on amendments.

Mrs Karunarathna’s position developed differently. The court said she effectively prosecuted two separate judicial review applications. The first challenged a banning order made on 3 May 2024. The second challenged an amended banning order made on 5 August 2024. The amended order changed the shape of the case. Many grounds in the first application became moot after the amended order was made, but the court said the first application was not futile. In the substantive outcome referred to in the costs reasons, Mrs Karunarathna succeeded in obtaining certiorari quashing the original banning order on one ground and later succeeded in quashing the amended banning order on two substantive grounds.

The proceeding also involved several interlocutory disputes. There had been an interlocutory injunction hearing in June 2024. There was an interlocutory application filed on 24 June 2024 dealing with further amendments. There was also a later interlocutory application, referred to in the orders as filed on 20 November 2024 and in the reasons as filed on 24 November 2024, concerning leave to re-open and further amend. By the time the court came to decide costs in March 2026, it had to assess not just the final practical outcomes, but also how each side had conducted the litigation at each stage.

The central legal question was how the court should exercise its discretion on costs under section 43 of the Federal Court of Australia Act 1976 (Cth). The judge said the usual rule is that costs follow the event, meaning costs are generally awarded based on the overall outcome rather than by counting every issue won or lost. But that is only the starting point. The court also referred to settled principles allowing costs to be reduced, refused or apportioned where success is only partial, where many arguments fail, or where a party’s conduct causes unnecessary cost.

The case was complicated because there was no simple all-or-nothing merits outcome. Sunflower’s grounds were never finally adjudicated because the Commissioner’s undertakings effectively gave it the final injunctive relief it sought. The court said that where there has been no adjudication on the merits, it will rarely, if ever, be appropriate to undertake a hypothetical exercise about who would probably have won. Instead, the court may consider whether the applicant acted reasonably in starting the case and whether the respondent acted reasonably in defending it.

For Mrs Karunarathna, the issue was different. She had succeeded overall in obtaining certiorari against both the original and amended banning orders, but many of her grounds were unsuccessful, superseded by later events or unnecessary to determine. The court therefore had to decide whether she should receive all of her costs, only a proportion, or something else. It also had to decide the costs of the interlocutory injunction application and the amendment applications.

A further issue was the method of quantifying costs. The court considered whether costs should be taxed in the ordinary way or fixed in a lump sum. The judge noted the court’s general preference for lump sum costs orders where practicable, because that can reduce delay and avoid expensive taxation hearings.

The court made a split set of costs orders.

First, there was no order as to the costs of the hearing of the interlocutory relief application reserved in the June 2024 orders. The judge said that although an interlocutory injunction had been granted in Sunflower’s favour after a contested hearing, that did not determine the proceeding in Sunflower’s favour. As to Mrs Karunarathna, the interlocutory order suspending the operation of the banning order had been made by consent because she gave an undertaking in effect equivalent to the banning order. The court considered that the Commissioner had dealt with the injunction application in a way that reduced the issues in dispute, and there was a public interest in encouraging parties to narrow issues.

Second, the applicants were ordered to pay the Commissioner’s costs of the interlocutory application filed on 24 June 2024. The reason was that the Commissioner had consented to the further amendments relating to Mrs Karunarathna, while Sunflower was unsuccessful in its attempt to obtain further amendments to its own grounds of review.

Third, the Commissioner was ordered to pay the applicants’ costs of the later interlocutory application concerning re-opening and further amendment. The court said there was no reason costs should not follow the event on that application, even though the applicants were not completely successful in all the grounds and relief they sought to add.

Fourth, and most importantly, there was no order as to Sunflower’s costs of the proceeding. The judge accepted that Sunflower acted reasonably in initiating the proceeding. But the court also found that after the Commissioner offered undertakings equivalent to the final injunctive relief sought, Sunflower’s conduct unnecessarily prolonged the first final hearing and the amendment dispute. The Commissioner had acted reasonably in defending the proceeding and in proffering undertakings. The court was not prepared to conclude that Sunflower would almost certainly have succeeded if the matter had gone to final determination. The earlier interlocutory injunction showed there was a serious question to be tried, but it did not decide the case. The judge also stressed the public interest in parties narrowing issues rather than being punished for doing so.

Fifth, the Commissioner was ordered to pay 80% of Mrs Karunarathna’s costs of the proceeding, including reserved costs except those dealt with separately. The court held that she was successful overall because she obtained certiorari quashing both the original banning order and the amended banning order. The first application was not futile even though many grounds later became unnecessary after the amended order was made. The court also noted that the Commissioner unsuccessfully applied to re-open and raised complex arguments that prolonged the proceeding. However, the court reduced her recovery because many grounds in the second application failed and introduced factual and legal complexity on issues of marginal merit and importance. The 80% figure also recognised that she was a joint applicant with Sunflower, for whom there was no order as to costs.

Finally, the court directed that the relevant costs be fixed in a lump sum and referred to the Registrar for determination after the parties filed proposed orders and costs material under the Costs Practice Note.

This decision is a practical guide to cost risk in regulatory litigation. A business can start proceedings reasonably and still recover none of its costs if the dispute later narrows and the business keeps pressing issues the court sees as unnecessary. That is what happened to Sunflower. The undertakings gave it practical final relief, but because the merits were never finally decided and the court found Sunflower prolonged the case after that point, there was no costs order in its favour.

The case also shows that overall success does not guarantee full costs. Mrs Karunarathna won the key practical result by having both banning orders quashed, yet she still recovered only 80% because some additional grounds were unsuccessful and disproportionate. For business owners, that means legal strategy should be tied to the commercial objective. If one or two strong grounds can achieve the real outcome you need, adding many weaker grounds may increase hearing time and reduce your eventual costs recovery.

Another lesson is that interlocutory applications are not side issues. Injunction applications, amendment applications and re-opening applications can each attract their own costs orders. A party may do well overall but still lose costs on a particular procedural step. That can materially affect the economics of the case, especially for businesses with limited litigation budgets.

The judgment also contains an important policy point. The court said there is a public interest in parties acting consistently with their duty to narrow the issues in dispute. Businesses should take that seriously. If a regulator offers undertakings, changes position, or issues a replacement decision, you should reassess the case promptly. Continuing to seek a full merits ruling may be justified in some cases, but it carries costs risk if the court later decides the extra fight was unnecessary.

Finally, the court’s preference for lump sum costs orders matters commercially. Lump sum costs can bring faster finality and avoid a long taxation process, but only if the parties have clear records and can present costs summaries efficiently. Businesses involved in Federal Court litigation should keep disciplined cost records from the start.

The costs judgment was delivered on 12 March 2026 and determined reserved costs on the papers under section 20A of the Federal Court of Australia Act 1976 (Cth). The orders required the applicants to file proposed lump sum costs orders and supporting material by 26 March 2026, with any response from the Commissioner due by 9 April 2026. The amounts were then referred to the Registrar for determination.

The reasons also identify key earlier procedural events. An interlocutory injunction decision had been made on 5 June 2024. The first banning order challenged by Mrs Karunarathna was dated 3 May 2024. The amended banning order was dated 5 August 2024. Orders reserving costs had been made on 21 November 2025 in the earlier decision referred to as Sunflower (No 2).

This page is based on the official Federal Court costs judgment in Sunflower Care Services Pty Ltd v Commissioner of the NDIS Quality and Safeguards Commission (Costs) [2026] FCA 261. The judgment itself refers to earlier decisions in the same matter, including Sunflower Care Services Pty Ltd v Commissioner of the NDIS Quality and Safeguards Commission [2024] FCA 589 and Sunflower Care Services Pty Ltd v Commissioner of the NDIS Quality and Safeguards Commission (No 2) [2025] FCA 1442.

Because this page focuses on the costs reasons, it should be read as a costs-focused explainer. It accurately reflects the court’s reasons on costs and the procedural story described there, but it does not attempt to restate every factual allegation or every review ground from the earlier substantive judgments.