Cathro v Chief Commissioner of State Revenue, in the matter of Cubic Interiors NSW Pty Ltd (in liquidation)

This Federal Court decision arose inside a broader insolvency recovery proceeding. A liquidator sued to recover payments allegedly made by companies in liquidation to a number of defendants. The pleaded case was that those payments were insolvent transactions and voidable transactions under the Corporations Act, with recovery sought under s 588FF.

The judgment itself was not about whether those claims would ultimately succeed. Owens J was dealing with a narrower but commercially important question: after several defendants later amended their defences to admit insolvency, who should pay the costs associated with that change and with a separate question process that then became unnecessary?

The answer turned on a practical problem. The plaintiffs had a solvency report dated 1 April 2025 and relied on it in the pleading particulars, but for most defendants it was not provided until 21 August 2025. At the same time, most defendants did not clearly and directly ask for it after proceedings began, even though the pleading referred to it. The Court treated that as a shared failure of cooperation.

The timeline mattered because the plaintiffs argued that the defendants should bear costs once they changed their pleading positions. The proceedings were commenced on 17 April 2025. On 15 May 2025 the matter was ordered to proceed by pleadings, and the statement of claim was filed on 12 June 2025. That pleading alleged insolvency and particularised it by reference to the liquidator's solvency report dated 1 April 2025.

But the report itself was not attached to the affidavit filed with the originating process. Most defendants did not receive it until 21 August 2025, and the complete appendices followed about a week later. The third defendant received it earlier, on 25 June 2025, after making an emailed request that same day. The eighteenth defendant appears to have received it before 21 August 2025 and possibly before filing its defence on 26 June 2025, but the evidence did not establish the exact date.

Several defendants initially did not admit, or denied, insolvency. The first, third, fifth, eighth, fifteenth and eighteenth defendants were identified by the Court as having taken that course in their original defences. The fifth defendant later amended on 15 August 2025 to admit insolvency.

The plaintiffs then moved to have insolvency determined separately and in advance of other issues, filing an application on 26 September 2025. The relevant defendants ultimately either consented to or did not oppose that application. On 17 October 2025 the Court indicated it would make separate question orders, and those orders were made on 23 October 2025.

After that, the remaining defendants progressively shifted to admissions. The first defendant said on 17 October 2025 that it would no longer contest insolvency, although its amended defence was not filed until 21 January 2026. The third defendant informed the plaintiffs and the Court on 23 October 2025 that it would not contest insolvency, and filed an amended defence on 19 December 2025. The eighth defendant amended on 31 October 2025. The fifteenth defendant indicated on 21 November 2025 that it proposed to amend, obtained leave on 19 December 2025, and filed on 29 January 2026. The eighteenth defendant first proposed consent findings on insolvency rather than an amendment, but after the Court indicated on 19 December 2025 that it would not make findings based only on consent, it amended on 22 December 2025.

By December 2025, insolvency was no longer in issue. That is why the judgment is best understood as a dispute about costs consequences of the procedural path the parties took, not a decision on the substantive insolvency allegations themselves.

The plaintiffs sought costs orders against the first, third, eighth, fifteenth and eighteenth defendants. They argued that those defendants should pay costs thrown away by reason of amending their defences to admit insolvency. The plaintiffs also argued that they had achieved substantial success on the separate question application and should receive a favourable costs order on that basis.

The Court accepted the starting point that the ordinary position is that a party given leave to amend a pleading will pay the costs thrown away by the amendment. The usual justification is straightforward: if one party changes the scope of the case, and work is wasted as a result, justice will often require that party to bear the consequences.

But Owens J emphasised that this was only the starting point. The Court had to ask whether these amendments really reflected a change in the scope of the proceeding caused by a forensic reversal, or whether the real cause of the wasted work was something more basic. That more basic issue was the parties' handling of the solvency report.

The Court expressly noted that, absent the insolvency report, the defendants had no information on which they could form a view about the solvency of the companies. That mattered because insolvency was material to the plaintiffs' case. If a party cannot sensibly assess whether a critical allegation is true, a non-admission may be the only realistic pleading response.

The Court therefore approached the issue as one of fairness in context, not as a mechanical application of the amendment costs rule. It also had to consider whether the plaintiffs' framing of events as substantial success on the separate question application was accurate, given that the issue disappeared once the defendants took informed positions after receiving the report.

Owens J declined to make the costs orders sought against the first, third, eighth, fifteenth and eighteenth defendants in connection with the amendments to their defences. The Court also ordered that the costs of the plaintiffs' interlocutory application dated 26 September 2025 were to be costs in the cause.

For the first, eighth and fifteenth defendants, the Court found that when they filed their original defences they had no information enabling them to assess the insolvency allegations. The Court said that, in those circumstances, they could only have admitted insolvency by admitting a fact they did not know to be true, even though it was essential to the asserted liability. Their original pleading positions were therefore not treated as informed forensic choices later abandoned. Instead, the later amendments were treated as the first informed and substantive positions they could take once they had the report.

The Court was critical of both sides. The plaintiffs should have provided the report without being asked. The defendants, once the report had been referred to in the affidavit and statement of claim, should have asked for it directly and promptly. The Court described the parties' reluctance both to hand over the report and to request it as perplexing. Because the issue remained live due to that combined failure, the Court held it was not appropriate to order those defendants to pay costs thrown away by the amendments.

The third and eighteenth defendants were in a somewhat different position because they did have, or may have had, the report before filing their original defences. Even so, the Court did not reach a different costs outcome. For the third defendant, the report had only been provided about two weeks before the defence was due, and the Court did not understand the plaintiffs to suggest it was unreasonable for the third defendant not to have formed a view in that period. For the eighteenth defendant, the evidence did not establish when the report had been provided, so the Court was not satisfied that its original defence reflected an informed and considered forensic choice to contest solvency.

The Court also added a broader reason for refusing the plaintiffs' costs argument. If prompt amendments admitting insolvency were treated as triggering separate adverse costs orders, that could undermine the Court's usual reluctance to make issue-by-issue costs orders within one proceeding. The Court said the coherence of costs should not be fractured by the particular procedural mechanism used to narrow issues.

On the separate question application, the Court rejected the plaintiffs' attempt to characterise events as substantial success. The defendants had not, in the Court's view, capitulated in the face of an impending hearing. Rather, the amended defences represented the first informed positions taken in the proceeding on insolvency. That is why the costs of the separate question application were ordered to be costs in the cause.

For business owners, the practical significance of this case lies in litigation conduct. If your claim depends on a report, expert analysis, accounting reconstruction or other central document, you should think about disclosure strategy early. If you hold the key document and rely on it in your pleading, delaying its provision can affect costs and case management later.

If you are defending a claim, this case shows that a non-admission may be understandable where you genuinely lack the material needed to assess a critical allegation. But the Court also made clear that defendants should not sit back. If the pleading refers to a report, the obvious step is to ask for it clearly and promptly. The Court pointed to r 20.31 as a formal mechanism for obtaining documents referred to in pleadings or affidavits, but also said it was difficult to see why formal recourse should have been necessary here when a simple request in correspondence should have sufficed.

The case is also a reminder that costs are not always driven by formal pleading events alone. A later amendment does not automatically mean the amending party caused all wasted work. Courts may look for the real source of the problem. Here, the real source was the parties' shared failure to cooperate over the solvency report.

Finally, the judgment is useful when considering whether to seek a separate hearing on one issue. A separate question application can be sensible, but if the issue may disappear once a core document is exchanged, the application may not produce the costs result you expect. Before spending money on interlocutory steps, test whether targeted document exchange could narrow the issue first.

This page is based on the Federal Court judgment in Cathro v Chief Commissioner of State Revenue, in the matter of Cubic Interiors NSW Pty Ltd (in liquidation) [2026] FCA 275, delivered by Owens J on 17 March 2026. The judgment is a costs decision in a broader proceeding concerning alleged insolvent and voidable transactions under ss 588FC, 588FE and 588FF of the Corporations Act 2001 (Cth).

Because this is a procedural judgment, it should be read as a case note about costs, pleadings and document handling. It does not provide a final merits determination of the underlying recovery claims. Readers looking for the commercial substance of the alleged transactions should keep in mind that this judgment gives only limited detail on those matters.