LK Law Pty Ltd v Karas (No 7)

LK Law Pty Ltd v Karas (No 7) [2026] FCA 669 is a Federal Court decision about the conditions required to pause enforcement of an earlier judgment while appeals proceed. The Court did not give the respondents an unrestricted stay. Instead, it required substantial protection for the successful party, including staged cash payments, bank guarantees and undertakings about assets and related-party debt.

The judge rejected the applicants' fastest proposed payment timetable as oppressive, but also rejected Mr Karas' proposed 120 day timetable because he provided no evidence explaining why that delay was needed. The Court also refused a carve-out that would have allowed monthly repayments on a related-party loan to continue, and it dismissed confidentiality applications because no party pressed them with submissions.

For business owners, the practical point is that a stay pending appeal is often a commercial restructuring exercise in miniature. It can affect cash flow, financing, asset control and internal debt arrangements almost immediately after judgment. If your business wants the benefit of a stay, you should expect the Court to ask what protection the other side will receive and how your proposed timetable is supported.

The parties were already well into litigation. An earlier judgment had been delivered in LK Law Pty Ltd v Karas (No 5) [2026] FCA 129. This later decision did not set out the full underlying commercial dispute in detail. What it did address was the next fight after judgment: whether enforcement should be paused while appeals were pursued, and if so, on what terms.

The applicants were LK Law Pty Ltd, Scipio John Lipman and Lipman Family Pty Ltd. The first respondent was Jason Demetrios Karas. The orders also identify J&A Karas Pty Ltd as the second respondent and Karas LLP as the third respondent. The reasons further explain that a fourth respondent, referred to as MdR, had also sought a stay. That matters because the Court was dealing with more than one stay application at the same time, although the remaining disputes were different for each respondent.

The judge had already provided reasons to the parties on 5 May 2026 dealing with Mr Karas' recusal application and the stay applications. Those reasons were not published immediately because confidentiality issues were raised, and the parties were directed to provide draft orders and undertakings. When the matter came back before O'Sullivan J on 18 May 2026, many issues had been resolved, but not all.

For MdR, the remaining points were largely settled. The parties indicated that the draft orders proposed by LK Law could be made subject to slight amendments reflecting their wish to negotiate the terms of the bank guarantee to be provided by MdR. The time period sought was 28 days, with liberty to apply if no agreement could be reached. The Court made orders accordingly.

For Mr Karas, however, three matters remained contested. The first was the timing of a AUD$5 million cash payment to LK Law. The second was the timing of an irrevocable AUD$5 million bank guarantee from an Australian bank. The third was the wording of an undertaking from Lipman Family Pty Ltd concerning a large loan to LK Law. The Court treated that undertaking as important because it was directed at ensuring that if Mr Karas later succeeded on appeal, money he had paid to LK Law under the stay conditions would still be protected.

The applicants wanted meaningful protection quickly. They proposed that Mr Karas pay AUD$1.5 million within 7 days and AUD$3.5 million within 30 days. Mr Karas wanted 120 days to make the cash payment and 120 days to provide the bank guarantee. The problem for him was evidence. The Court noted that no explanation had been proffered as to why 120 days was needed. Correspondence between the solicitors showed repeated requests for an explanation, but the response was essentially that Mr Karas did not believe he would be able to comply within the shorter periods. The judge said that was not enough.

The Court also focused on preserving the practical value of any money paid under the stay conditions. Lipman Family Pty Ltd was described as by far LK Law's most significant creditor, with a loan of AUD$10,295,268. The Court had already decided that, as a condition of the stay, Lipman Family should undertake not to call in that debt until any final appeal was determined. After the reasons were circulated, the Court was told there was a pre-existing arrangement under which LK Law was making monthly repayments of AUD$30,000 on that loan unless otherwise agreed. LK Law and Lipman Family wanted the undertaking to allow those monthly repayments to continue. The Court refused that carve-out.

The legal issue was procedural, but commercially significant. The Court was not deciding whether the earlier judgment was correct. It was deciding the conditions on which enforcement of that judgment should be stayed pending any final appeal. That required the judge to balance two competing concerns. On one side, the respondents wanted time to pursue appeals. On the other, the applicants were entitled to protection so that the judgment would not become harder to enforce, and so that money paid under any stay arrangement would remain available if the appeal later succeeded.

For Mr Karas, the Court had to decide how quickly he should be required to make a partial cash payment of AUD$5 million and provide an irrevocable AUD$5 million bank guarantee from an Australian bank. The applicants proposed a much faster timetable. Mr Karas proposed 120 days for both. The Court had to determine whether either position was justified on the material before it, and if not, what timetable should be imposed instead.

The reasons show that the Court expected more than a bare assertion that compliance would be difficult. The judge referred to correspondence exhibited to the affidavit of Matthew Selley, a director of the applicants' solicitors, showing that the applicants had asked why Mr Karas could not comply with shorter time limits and had indicated a willingness to engage further on timing. The response from Mr Karas' solicitors did not provide a substantive explanation. At the hearing, reference was made to potential times to sell assets, but there was no detail. The Court said it was therefore completely without information as to Mr Karas' ability to meet the conditions upon which a stay would be granted.

The Court also had to decide whether Lipman Family Pty Ltd, as a major creditor of LK Law, should be allowed to continue receiving monthly repayments of AUD$30,000 under a pre-existing loan arrangement while the appeal process ran. That issue mattered because the Court was concerned to protect Mr Karas from a situation where he paid money to LK Law under the stay conditions, then later succeeded on appeal, only to find that the money had already been absorbed into related-party debt repayments.

Finally, the Court had to deal with confidentiality applications concerning affidavits filed in the stay proceeding. The reasons refer to applications under ss 37AF and 37AG of the Federal Court of Australia Act 1976 (Cth), and the orders dismissed the first respondent's application under s 37AF concerning affidavits sworn 30 January 2026 and 9 March 2026. The practical question was straightforward: should any of those documents remain confidential when no party was actually advancing submissions in support of confidentiality across three hearings?

O'Sullivan J granted a stay of enforcement against the first respondent, except for Orders 5 and 12 in the earlier judgment, but only on strict conditions. Mr Karas had to pay AUD$5 million to LK Law in two instalments: AUD$1.5 million within 21 days of the order, and AUD$3.5 million within 45 days. He also had to provide the applicants' solicitor with an irrevocable bank guarantee issued by an Australian bank in the sum of AUD$5 million within 30 days. If the terms of the guarantee could not be agreed within 21 days, the parties were given liberty to apply on 24 hours' notice for the Court to resolve the issue.

The Court rejected both extremes. It found that the applicants' proposed timetable of 7 days for the first instalment and 30 days for the second was oppressive. The judge accepted that requiring payment that quickly could be oppressive, especially if assets had to be realised. But the Court also rejected Mr Karas' proposed 120 day timetable because he had provided no evidence explaining why he needed that long. The result was a middle course that still gave the applicants meaningful protection.

The Court also ordered a conditional stay for the fourth respondent, again excepting Orders 5 and 12 of the earlier judgment. That stay required the fourth respondent to provide the applicants' solicitor with an irrevocable bank guarantee issued by National Westminster Bank PLC in the sum of AUD$21,399,540.24 within 28 days, in terms to be agreed by the first applicant and the fourth respondent. The applicants were entitled to demand payment under the guarantee to enforce the judgment, post-judgment interest and costs if the fourth respondent's appeal was dismissed or the stay was discharged.

Importantly, the orders provided that if the first or fourth respondent failed to comply with the relevant conditions, the stay would cease to operate. The Court also gave the applicants liberty to apply, after six calendar months, to vary the quantum of the bank guarantees to account for the accrual of post-judgment interest.

On the related-party loan issue, the Court required an undertaking from the second applicant, in his capacity as a director of the third applicant, that Lipman Family Pty Ltd would not call in or otherwise demand repayment of its loan to LK Law until the determination of any final appeal. The Court refused the proposed carve-out for AUD$30,000 monthly repayments. It considered that, over a 12 month appeal period, the total of AUD$360,000 was not particularly significant in the circumstances, and that because LK Law was to receive AUD$5 million in cash, there was no need for those monthly repayments to continue in the short term.

The Court also noted undertakings by Mr Karas to pursue the appeal expeditiously and with all reasonable diligence, to seek an expedited hearing, and not to dispose of, charge, mortgage or otherwise encumber the assets identified in paragraphs 12 to 19 of his affidavit of 9 March 2026, except for ordinary living and business expenses for him and his family and the costs associated with the litigation.

Finally, the Court dismissed the confidentiality application. The judge noted that no party had advanced submissions in support of confidentiality across three hearings. To the extent any documents filed on the stay application were marked confidential, the application for confidentiality was dismissed.

The reasons show that the Court paid close attention not only to the orders sought, but also to the way the parties tried to justify them. The applicants relied on an affidavit from their solicitor, Matthew Selley, sworn 13 May 2026. That affidavit exhibited correspondence showing that the applicants had asked why Mr Karas could not comply with the shorter proposed timeframes. This became important because it demonstrated that the issue had been raised directly and that no meaningful explanation had been provided in response.

The Court referred to a letter dated 8 May 2026 in which the applicants' solicitors asked why Mr Karas could not comply with the proposed time limits and indicated that LK Law was willing to engage further on deadlines. It also referred to a reply dated 12 May 2026 asserting that the applicants' draft orders did not reflect the reasons and stating that Mr Karas did not believe he would be able to comply with the cash payment order proposed by either party within any timeframe. The Court noted that this was a bare assertion. A further letter dated 13 May 2026 again sought an explanation, and a reply dated 15 May 2026 effectively declined to engage on the question. That sequence mattered because it reinforced the Court's view that there was no evidence-based explanation for the 120 day proposal.

The Court also referred to Mr Karas' affidavit sworn 9 March 2026, including the assets identified at paragraphs 12 to 19 of that affidavit. Those identified assets became the subject of an undertaking not to dispose of, charge, mortgage or otherwise encumber them, except for ordinary living and business expenses and litigation costs. That is a practical example of how affidavit evidence about assets can shape the conditions of a stay.

The Selley affidavit also informed the Court about the February 2025 arrangement under which LK Law was making monthly repayments of AUD$30,000 to Lipman Family unless otherwise agreed. Once that arrangement was put before the Court, the judge had to decide whether it should continue during the appeal period. The answer was no. The Court considered the amount involved, the likely appeal timeframe, and the fact that LK Law would receive AUD$5 million in cash under the stay conditions.

On confidentiality, what mattered was not just the existence of a request, but the absence of submissions. The judge noted that confidentiality had been raised earlier and that publication of the reasons had been delayed to allow the issue to be considered. But when the matter resumed, no party advanced submissions supporting confidentiality. That failure was decisive.

For business owners, the first lesson is that an appeal does not itself stop enforcement. If your company loses a case and wants to appeal, the Court may ask what immediate protection the successful party will receive while the appeal is on foot. That protection can take the form of cash, a bank guarantee, undertakings about assets, or restrictions on related-party transactions. In practical terms, a stay can become a financing and risk-management problem as much as a legal one.

The second lesson is that evidence matters. In this case, the Court was not prepared to accept a 120 day timetable simply because it was asserted. If your business says it needs more time because assets must be sold, finance must be arranged, or banking processes take time, expect to support that with evidence. The Court may be willing to avoid oppressive deadlines, but it still needs a factual basis for the timetable it adopts.

The third lesson is that internal funding arrangements can become central. Many SMEs operate with shareholder loans, family loans, director loans or group-company debt. This case shows that the Court may look at those arrangements closely when deciding whether money paid under a stay will remain available if the appeal succeeds. Here, the Court required a major creditor related to the applicants to undertake not to call in its loan, and it refused to allow even modest monthly repayments to continue.

The fourth lesson is about asset preservation. Mr Karas gave undertakings not to deal with identified assets except for ordinary living and business expenses and litigation costs. Businesses should expect that if they seek the benefit of a stay, the Court may want comfort that assets will not be moved, encumbered or dissipated while the appeal is pending.

The fifth lesson is confidentiality. Businesses sometimes assume that sensitive financial material filed in court can simply remain confidential if everyone prefers that outcome. This decision shows otherwise. If confidentiality is important, it needs to be argued for properly. If no one advances submissions in support of it, the Court may dismiss the application.

Can the Court choose a middle position between the parties' proposals? Yes. That is exactly what happened here. The Court rejected the applicants' fastest timetable as oppressive and rejected Mr Karas' 120 day proposal as unsupported, then imposed its own timetable.

Can a stay be lost after it is granted? Yes. The orders expressly said that if the first or fourth respondent failed to comply with the conditions, the stay would cease to operate.

Can the amount of security change later? Yes, at least on these orders. The applicants were given liberty to apply after six calendar months to vary the quantum of the bank guarantees to account for post-judgment interest.

Do undertakings from related entities really matter? Very much so. The undertaking from Lipman Family Pty Ltd was directed at preserving the practical value of money paid under the stay conditions if Mr Karas later succeeded on appeal.

Is this case a guide to the original commercial dispute? Not really. The reasons are detailed on the stay application and related procedural issues, but they do not fully explain the underlying merits dispute decided in the earlier judgment.

The order was made on 18 May 2026. The reasons were published on 28 May 2026. The reasons record that the judge had provided reasons to the parties on 5 May 2026, but publication was delayed because confidentiality issues were raised. The reasons also refer back to an earlier hearing on 18 March 2026 concerning the stay application and confidentiality.

The decision sits in the Federal Court of Australia's General Division, South Australia Registry, within the Commercial and Corporations practice area. It is a post-judgment procedural decision tied to the earlier judgment in LK Law Pty Ltd v Karas (No 5) [2026] FCA 129.