Background
Nicole Atkinson applied to set aside a bankruptcy notice issued on 18 August 2025 by her creditors, Trevor and Dina Jeffery. On 13 April 2026, Justice Markovic dismissed that application and ordered Atkinson to pay the Jefferys’ costs, reserving the question of whether those costs should be assessed on a lump sum basis: Atkinson v Jeffrey [2026] FCA 427. The present judgment addresses that reserved costs question, determined on the papers without an oral hearing.
Before the main hearing, on 20 October 2025, the Jefferys made a Calderbank offer proposing to withdraw the bankruptcy notice, seek no costs, and defer enforcement of their judgment for 42 days in exchange for a charge over Atkinson’s property as security. The letter warned that if the offer was refused and Atkinson failed in her application, the Jefferys would seek indemnity costs. A response was requested by 24 October 2025; none was received and the proceedings continued.
Atkinson’s submissions on the costs question were brief and largely directed at the mechanics of any lump sum assessment — urging party/party rates, a 30% reduction, and limitation of costs to work actually necessary — rather than opposing lump sum assessment itself.
The Court’s Holding
Justice Markovic ordered that Atkinson pay the Jefferys’ costs on a party/party basis up to 24 October 2025, and on an indemnity basis thereafter, with the total to be fixed as a lump sum. The court accepted that lump sum assessment was appropriate to avoid a protracted taxation, consistent with the overarching purpose in s 37M of the Federal Court of Australia Act 1976 (Cth) and the principles discussed in Fewin Pty Ltd v Burke (No 3) [2017] FCA 693.
On indemnity costs, the court was satisfied that the outcome — dismissal of Atkinson’s application with no relief — was clearly less favourable than the Calderbank offer, which would have given her a discharge of the bankruptcy notice, a costs-free exit, and time to pay the underlying judgment. In the absence of any evidence from Atkinson explaining her refusal, the court found her rejection of the offer was unreasonable, triggering indemnity costs from 24 October 2025 (the deadline for response) rather than 20 October as the Jefferys had sought.
The court declined the Jefferys’ request that the judge personally fix the lump sum amount, instead referring assessment to a Registrar. While acknowledging the judge’s familiarity with the matter, Justice Markovic held that the Court’s scarce resources are best deployed by utilising Registrars, who are skilled in costs assessment and whose work serves the broader court population efficiently.
Key Takeaways
- A Calderbank offer that is not accepted — and where the offeree ultimately obtains a worse result — will ordinarily attract indemnity costs from the date the offer expired, provided rejection was unreasonable in all the circumstances.
- Lump sum costs orders are available under s 43(3)(d) of the Federal Court of Australia Act 1976 (Cth) and r 40.02(b) of the Federal Court Rules 2011 (Cth); they are appropriate wherever taxation would be disproportionately burdensome or protracted relative to the case.
- Familiarity with the proceedings is not alone sufficient reason for a judge to personally assess a lump sum rather than referring the task to a Registrar; efficient use of court resources is a countervailing consideration.
- A debtor who litigates a bankruptcy notice set-aside application without accepting a reasonable settlement offer runs a significant risk of indemnity costs across the bulk of the proceedings.
Why It Matters
This decision is a practical illustration of how Calderbank offers operate in Federal Court insolvency proceedings. It confirms that a creditor who makes a genuine, well-structured settlement offer — one that meaningfully resolves the debtor’s position — can shift the costs burden to an indemnity basis if the debtor unreasonably holds out and loses. The judgment also reaffirms the Federal Court’s preference for lump sum costs assessment as a tool for keeping ancillary costs disputes proportionate, rather than allowing them to spawn their own lengthy taxation proceedings.
For practitioners advising debtors facing bankruptcy notices, the case underscores the need to carefully evaluate any Calderbank offer on its merits and to document the reasons for any rejection. Silence in the face of an offer, without evidence of why it was unreasonable to accept, will likely be treated as unexplained refusal — with correspondingly adverse costs consequences.