LK Law Pty Ltd v Karas (No 6)

This decision is a post-judgment procedural ruling, not the main trial judgment. The court was dealing with what should happen after judgment had already been entered in favour of LK Law Pty Ltd. The main questions were whether the trial judge should recuse himself from hearing the stay application, whether documents filed in the stay proceeding should remain confidential, and whether enforcement of the judgment should be paused while appeals were pursued.

There is one important limit to keep in mind. The published reasons available for this page are cut off before the court's full analysis of Mr Karas' asset position and before the complete final conditions of his stay are visible. So this page can explain the court's reasoning and the broad outcome with confidence, but not every final condition attached to Mr Karas' stay.

Even with that limit, the decision is useful for businesses because it shows how the Federal Court approaches three recurring post-judgment issues: recusal, confidentiality and stays pending appeal. Those issues can materially affect cash flow, recovery timing, settlement pressure and the practical value of a judgment.

The court had already delivered substantive reasons in November 2025 in earlier proceedings between LK Law Pty Ltd and the respondents. After that, the matter returned to court for final orders, interest, costs and any application for a stay of enforcement. On 20 February 2026, judgment was entered in favour of LK Law Pty Ltd against Mr Karas and the fourth respondent, MdR. The stay application was then listed for hearing, and LK Law gave an undertaking not to enforce the judgment until the stay applications were determined.

The immediate procedural conflict arose shortly before the hearing. LK Law's solicitors told Mr Karas' solicitors that he would be required for cross-examination on the stay application. Mr Karas' solicitors responded by saying that the trial judge should recuse himself. Their argument was that the judge had already made adverse credit findings against Mr Karas in the earlier reasons, and that if the judge now had to decide whether there was an arguable appeal, hear cross-examination and assess Mr Karas' reliability again, a fair-minded observer might think the judge could not approach the stay application impartially.

That argument lost much of its force before the hearing. LK Law accepted, for the limited purpose of the stay application, that Mr Karas had an arguable case on appeal. LK Law also said it no longer required him for cross-examination and would not challenge his credit. Once those concessions were made, the court had to decide whether the mere existence of earlier adverse credit findings was enough to require recusal. The answer was no.

At the same time, the court had to decide whether documents filed in the stay proceeding should remain confidential and whether enforcement should be stayed for MdR and Mr Karas. MdR offered a bank guarantee for the full judgment amount. Mr Karas relied on affidavit evidence about his assets, liabilities and the prejudice he said immediate enforcement would cause. The reasons show the court testing that evidence in detail, especially where property was held through trusts or companies.

The first issue was apprehended bias. The court applied the established test from Ebner v Official Trustee in Bankruptcy: whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide. The reasons also referred to later High Court guidance explaining that this involves three steps. First, identify the factor said to create the risk of bias. Second, articulate the logical connection between that factor and the feared departure from deciding the case on its merits. Third, assess whether that apprehension would be reasonable from the perspective of a fair-minded lay observer.

The second issue was confidentiality. The parties had sought confidentiality orders over various documents filed in relation to the stay application under ss 37AF and 37AG of the Federal Court of Australia Act 1976 (Cth). The court had to decide whether any continuing confidentiality order was justified once the matter came on for hearing.

The third issue was whether enforcement should be stayed pending appeal under r 36.08 of the Federal Court Rules 2011 (Cth). The court noted that an appeal does not automatically stay enforcement. A party seeking a stay must show a proper basis for the court to exercise its discretion. The reasons summarise the usual principles: the successful party is prima facie entitled to the fruits of its judgment, but a stay may be granted to prevent injustice if the judgment is later overturned. The applicant needs to show at least an arguable appeal and that the balance of convenience favours a stay. The court also looks at whether there is a real risk of prejudice that cannot later be repaired, whether the appeal would be rendered nugatory without a stay, and whether the judgment creditor is adequately protected by security or other safeguards.

The court refused the recusal application. The judge held that there was no logical connection between the adverse credit findings made in the earlier reasons and the question whether enforcement should be stayed. That conclusion was reinforced by LK Law's concessions that, for the stay application, there were arguable grounds of appeal, that Mr Karas would not be cross-examined, and that his credit would not be attacked. The court said that, objectively assessed, a fair-minded lay observer would not reasonably apprehend that the judge might decide the stay application other than on its legal and factual merits.

On confidentiality, the court refused continuing confidentiality orders. The judge had indicated a preliminary view that the documents filed on the stay application should not remain confidential. No party advanced substantive opposition to that view. The result was that the court was not satisfied any of the documents should remain confidential, and any confidentiality marking on the court file was revoked.

On MdR's stay application, the court granted a stay subject to conditions. MdR's liability had been assessed at AUD$21,399,540.24 inclusive of interest. MdR offered a bank guarantee in that amount. LK Law accepted the guarantee in general terms provided it was in Australian dollars and from a recognised bank. The court was satisfied that a guarantee from National Westminster Bank PLC met that requirement and adequately secured LK Law's judgment against MdR. The court did not require an additional amount for post-judgment interest at that stage, saying that requiring interest to be paid or secured ahead of time would be punitive. However, the court gave liberty to apply later to vary the amount of the guarantee to account for accrued post-judgment interest.

The court also noted that MdR had sought a stay of any costs order, but said there was nothing to enforce until costs were assessed. Whether enforcement of any later costs order should be stayed was left for later consideration if MdR applied again.

On Mr Karas' stay application, the court said the position was more complicated. The reasons show the court examining his affidavit evidence about assets and liabilities, including real property, art, liquid assets, a receivable, and a shareholding. The court also looked closely at whether certain properties held through trusts or companies were really unavailable, and whether they could be used as security or otherwise support the judgment debt. The catchwords and orders make clear that the court decided a stay should be granted in relation to Mr Karas upon satisfaction of conditions, including undertakings not to dispose of or encumber assets and to prosecute the appeal expeditiously. The court also reserved the right to reconsider a partial stay if certain assets were not preserved. Because the available reasons cut off before the full conditions are set out, those conditions should be checked against the complete judgment before anyone relies on them in detail.

One of the most useful parts of this decision for business readers is the court's focus on actual evidence and actual conduct. The recusal application weakened because the factual assumptions behind it changed. Once LK Law accepted arguable appeal grounds for the limited purpose of the stay application, abandoned cross-examination, and disavowed any attack on Mr Karas' credit, two major pillars of the recusal argument disappeared. The court then treated the remaining complaint, namely earlier adverse credit findings, as insufficient on its own.

The stay analysis also turned on evidence, not general assertions. The court referred to principles that speculation or argument is insufficient when asking the court to predict future prejudice or restoration risk. That is why the reasons move into detail about assets, liabilities, trust structures and available security. The court was not prepared to decide the stay application at a high level of abstraction. It wanted a sound foundation for assessing what could happen if enforcement proceeded or was delayed.

The confidentiality ruling is another example. Parties had initially sought interim confidentiality over documents filed in the stay proceeding. But when the court indicated a preliminary view against continuing confidentiality, no party advanced substantive submissions to justify it. The court therefore revoked confidentiality. For businesses, that is a reminder that financial sensitivity alone is not enough. If you want court documents kept confidential, you need to support that request properly and be ready to explain why open justice should give way in the particular circumstances.

For most businesses, this is not a consumer law compliance case in the ordinary sense. It is a litigation management case. Its value lies in showing what can happen after a judgment is entered and before money is actually recovered. If your business wins a judgment, the court starts from the position that you should have the benefit of that judgment. But that starting point can be displaced if the other side shows an arguable appeal and persuades the court that the balance of convenience favours a stay.

If your business is resisting a stay, focus on practical protection. Ask whether the proposed security really covers the judgment debt, whether it is from a reliable institution, whether there is a risk assets will be dissipated during the appeal, and whether delay will make recovery harder if the appeal fails. In this case, the court accepted a bank guarantee from a recognised bank for MdR and considered undertakings and asset preservation in relation to Mr Karas. That shows the court is willing to grant a stay where the judgment creditor is adequately protected.

If your business is seeking a stay, this case shows the importance of detailed evidence. The court will want more than a statement that enforcement would be inconvenient or commercially difficult. It will look for evidence of assets, liabilities, liquidity, ownership structures, prejudice and what can be done to preserve the judgment creditor's position. It will also expect the appeal to be prosecuted expeditiously.

The recusal part of the case is also important for businesses involved in long-running litigation. A judge's earlier adverse findings about a witness do not automatically mean the judge cannot hear later applications involving that witness. The question is narrower and more practical: does the later application require the judge to revisit the same credibility issue in a way that creates a real logical connection to the feared bias? Here, once credibility and arguable appeal grounds were no longer contested on the stay application, the recusal argument failed.

Finally, businesses should read the confidentiality ruling as a warning against assuming that commercially sensitive material will stay off the public record. If confidentiality matters, prepare the application carefully and support it with evidence and submissions from the outset.

The judgment was dated 17 March 2026 and the reasons were published on 18 May 2026. The decision records that the earlier substantive reasons were delivered on 26 November 2025 and that final judgment against Mr Karas and MdR was entered on 20 February 2026. The hearing of the stay application took place on 16 March 2026.

The orders state that enforcement of the judgment entered on 20 February 2026 would be stayed against Mr Karas and MdR upon the relevant conditions being satisfied, that draft orders and undertakings were to be provided within seven days of publication of the reasons, and that liberty to apply was reserved. Costs were also reserved.

Because the available reasons do not show the complete final conditions for Mr Karas, this page should be read as a practical explanation of the court's reasoning and broad outcome, not as a substitute for the full orders if you need to know the exact operative conditions.

This page is based on the Federal Court decision LK Law Pty Ltd v Karas (No 6) [2026] FCA 551. The reasons identify the key procedural topics as recusal, confidentiality and stay pending appeal under the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules 2011 (Cth).

The reasons also refer to earlier related decisions, including LK Law Pty Ltd v Karas (No 4) [2025] FCA 1461 and LK Law Pty Ltd v Karas (No 5) [2026] FCA 129. The underlying substantive dispute is not fully described in this decision, because this ruling is focused on what should happen after judgment rather than on the merits of the original claims.