Shaw v The Official Trustee in Bankruptcy (No 2)

Shaw v The Official Trustee in Bankruptcy (No 2) [2026] FCAFC 61 is a Full Court decision about what can and cannot be done after judgment under rule 39.04 of the Federal Court Rules 2011 (Cth). The Court had already dismissed Mr Shaw's appeals and leave application in an earlier judgment. This later decision dealt with two follow-up applications.

The Official Trustee in Bankruptcy asked the Court to vary the costs orders so they expressly preserved the Trustee's right to claim those costs as a cost of administering Mr Shaw's bankrupt estate. Mr Shaw, by contrast, tried to use the same rule to set aside the earlier judgment and orders. The Court allowed the Trustee's limited variation but dismissed Mr Shaw's application.

The decision is useful because it shows the narrow role of post-judgment applications. The Court stressed finality, the strict 14-day rule 39.04 timeframe, and the need to use the power cautiously. It also made clear that a confined clarification of costs may be allowed where it serves the interests of justice and the overarching purpose of the Rules, but a disappointed party cannot use the rule to have another go at the merits.

The parties were John Shaw and the Official Trustee in Bankruptcy. The Court's reasons say that familiarity with the earlier principal judgment was assumed, so this later decision does not retell the full background to the appeals. What it does make clear is that, on 27 March 2026, the Full Court had already dismissed Mr Shaw's two appeals and his application for leave to appeal in related proceedings, and had ordered that Mr Shaw pay the Trustee's costs.

Immediately after judgment was delivered, the Trustee made an oral application seeking leave to apply to vary those costs orders. Mr Shaw was not present when judgment was delivered, and appearances were not required. The Court then directed the parties to file written submissions about the Trustee's application. The Trustee wanted the costs orders changed so they would say that Mr Shaw must pay the Trustee's costs, without prejudice to the Trustee's right to claim those costs as a cost of administering Mr Shaw's bankrupt estate.

That request mattered because Mr Shaw was an undischarged bankrupt. The Trustee wanted the orders to remove doubt about how the appeal costs could be treated in that setting. The Court accepted that this was the context in which the application had to be considered.

The Court also identified a procedural problem for the Trustee. During the hearing of the appeals, the Trustee had not addressed the Court on the form of costs orders it would seek if it succeeded. The Court said that omission was not determinative, but it did call for an explanation. It is inappropriate, the Court said, for a party to say nothing about costs, wait for the outcome, and then ask the Court to vary its orders afterwards.

The Trustee explained that it had assumed there would be an opportunity to address costs after judgment. The Court said that assumption was incorrect. The better course would have been to foreshadow at the hearing that costs orders other than the usual orders might be sought if the Trustee were successful. That would have allowed the Court to decide whether costs submissions should be made at the end of the hearing or after judgment. The Court also said there was no reason why the Trustee could not have addressed the form of costs orders in closing submissions on the hypothesis that it succeeded.

Mr Shaw opposed the Trustee's application. In substance, he argued that the Trustee was trying to improve its position after judgment without showing sufficient prejudice or injustice in the original costs orders. He also argued that rule 39.04 should not be used to revisit costs in this way, that the proposed wording was unnecessary, and that any question of recourse to the estate should not be dealt with without an open hearing or an opportunity for creditors to be heard.

At the same time, Mr Shaw filed his own interlocutory application on 30 March 2026, also purportedly under rule 39.04. He sought an oral hearing, an order setting aside the judgment and orders of 27 March 2026 in one of the proceedings, consequential directions, an order that each party bear their own costs, and an order that the Trustee's costs not be charged to the bankrupt estate. In his supporting affidavit, he said the Court had mistaken key facts and the state of the law, taken irrelevant matters into account, excluded relevant matters and caused a miscarriage of justice.

The Full Court dealt with both applications on the papers. That procedural point matters. There was no oral hearing on these applications. The Court considered the written submissions, affidavit material and other written documents, then gave reasons deciding both applications together.

The legal issue was how far rule 39.04 allows the Federal Court to revisit its own orders shortly after judgment. The rule permits the Court to vary or set aside a judgment or order before entry. It also allows an interlocutory application to be filed within 14 days after entry, in which case the Court may determine the application and, if appropriate, vary or set aside the judgment or order as if it had not been entered. The judgment also states that the Court cannot extend the time fixed by rule 39.04(2) or (3).

The Full Court described the power as discretionary, but limited. It said the discretion is exercised with caution and with regard to the public interest in the finality of litigation. It may be exercised if the Court is convinced it has proceeded on a wrong basis or where there is some matter calling for review. But the rule does not provide an unfettered discretion to re-argue or reconstruct a case, and it is not a backdoor method by which an unsuccessful litigant can obtain, in substance, appellate review.

That framework produced two different questions in this case. First, was the Trustee's proposed change to the costs orders a proper and confined clarification that should be allowed even though it had not been raised during the hearing? Second, had Mr Shaw identified any genuine misapprehension of fact or law, or any other matter calling for review, rather than simply trying to reopen the appeal? The Court treated those as very different uses of the same rule.

The Court allowed the Trustee's application to vary the costs orders. It accepted that the Trustee should have raised the issue during the hearing and said the better course would have been to foreshadow that a different form of costs order might be sought if the Trustee succeeded. Even so, the omission was not fatal. The Court said the real question was whether, on the submissions now made, it was appropriate to exercise the limited power under rule 39.04.

The Court was satisfied that it was appropriate to do so. It held that varying the orders in the way sought by the Trustee would avoid unnecessary dispute about the Trustee's ability to claim the appeal costs as costs of administration of Mr Shaw's estate. Referring to the litigation history described in the principal judgment, the Court concluded that the variation was in the interests of justice because it would limit the potential for further peripheral disputes, extra costs and disproportionate consumption of court resources.

The Court also described the proposed variation as confined and orthodox. In its view, the change clarified the operation of the costs orders in the context of Mr Shaw's status as an undischarged bankrupt and removed doubt that might otherwise lead to further disputation and expense. Consistently with the overarching purpose, the Court vacated the earlier costs orders and replaced them with orders that Mr Shaw pay the Trustee's costs as agreed, or failing agreement, assessed on a lump sum basis, without prejudice to the Trustee's right to claim those costs as a cost of the administration of the bankrupt estate.

The Court took a very different view of Mr Shaw's application. It said his application was, in substance, an attempt to reopen and re-argue matters determined in the principal judgment. His affidavit and submissions largely repeated matters that had already been advanced, or were available to be advanced, at the substantive hearing of the appeals and leave application.

The Court found that Mr Shaw did not identify any misapprehension of fact or law, or any other matter calling for review within the limited scope of rule 39.04. Because of that, the application did not engage the rule at all. The Court dismissed the interlocutory application and ordered that the costs of that application be costs of the appeal.

So the outcome was split. The Trustee obtained a narrow post-judgment clarification of the costs orders. Mr Shaw did not obtain a reopening of the earlier judgment. The distinction turned on the limited nature of the Trustee's request, the Court's view that it would reduce future disputes, and the fact that Mr Shaw's application was really an attempt to re-run the case.

For most businesses, this is not a case about everyday governance. It is a case about litigation discipline. The first practical point is that costs should be treated as part of hearing strategy, not as an afterthought. If you need unusual wording in a costs order, especially where bankruptcy or insolvency may affect how costs are dealt with, raise that issue during the hearing if you can. The Court was willing to help the Trustee here, but it still criticised the Trustee for not raising the point earlier.

The second point is timing. Rule 39.04 contains a strict 14-day period after entry for a party's application, and the judgment notes that this time cannot be extended under the rule. That means businesses and their advisers need to move quickly if a genuine correction or clarification is needed. Waiting too long may shut the door completely.

The third point is finality. If a business owner thinks the Court got the facts or law wrong, the answer is not automatically a rule 39.04 application. This case shows that repeating old arguments, or arguments that could have been made earlier, is unlikely to succeed. Courts are alert to attempts to use post-judgment procedure as a substitute for an appeal or as a way to reconstruct a case after losing.

The decision also shows what may persuade a court to allow a limited variation. The Full Court focused on the interests of justice and the overarching purpose of the Rules. It was influenced by the fact that the proposed change was confined, orthodox and likely to avoid further peripheral disputes, extra costs and disproportionate use of court resources. In other words, a narrow clarification that improves the practical operation of an order may be treated very differently from an application that tries to change the substantive result.

For businesses involved in disputes with insolvency officeholders, or where a founder or director is personally bankrupt, the wording of a costs order can have real consequences. It may affect how costs are claimed, how future disputes unfold and how much additional process is needed after judgment. This case does not decide every insolvency-costs issue, but it does show that the Court may be prepared to clarify the position where doing so is practical, orthodox and efficient.

The judgment is a good reminder that courts look not only at the legal rule being invoked, but also at the conduct of the parties. The Trustee succeeded, but the Court still said its omission required explanation and that its assumption about dealing with costs after judgment was incorrect. That means a party can win a procedural application while still being criticised for how it handled the issue.

For businesses, that translates into a simple discipline point. Keep a clear record of what orders you may need if you win, what fallback wording may be required, and whether any insolvency context changes the usual position. If the issue is important enough to justify a post-judgment application, it is often important enough to be identified before judgment too.

The judgment also shows the value of written submissions. Because both applications were determined on the papers, the written material carried the whole argument. If a matter may be decided without oral hearing, your written submissions need to explain the practical problem, the legal basis for relief, and why the proposed order is confined and justified.

The principal judgment dismissing Mr Shaw's appeals and leave application was delivered on 27 March 2026. The Trustee then sought leave to apply to vary the costs orders immediately after judgment, and Mr Shaw filed his own interlocutory application on 30 March 2026. The Court received written submissions, with the date of last submissions recorded as 13 April 2026. The post-judgment applications were determined on the papers, and the Full Court delivered this judgment on 7 May 2026.

The Court's orders vacated the earlier costs orders and replaced them with revised costs orders in each proceeding, preserving the Trustee's right to claim those costs as a cost of administering the bankrupt estate. Mr Shaw's interlocutory application was dismissed, and the costs of that application were ordered to be costs of the appeal.

This page is based on the published Full Court reasons in Shaw v The Official Trustee in Bankruptcy (No 2) [2026] FCAFC 61. Those reasons are focused on the two post-judgment applications and expressly assume familiarity with the earlier principal judgment, Shaw v The Official Trustee in Bankruptcy [2026] FCAFC 32.

Because the reasons do not restate the full underlying dispute history, this explainer stays close to what the Court clearly decided here: the Trustee's application to vary the costs orders, Mr Shaw's application to set aside the earlier judgment, the operation of rule 39.04, and the Court's emphasis on finality, the interests of justice and the overarching purpose.

General information only. This is not legal advice. If your business is dealing with Federal Court litigation, bankruptcy or insolvency-related costs issues, get advice on the specific orders, timing requirements and procedural options in your matter.