Background
Mr Jason Demetrios Karas sought a stay of orders made by O’Sullivan J in primary proceedings (SAD 222 of 2021) pending appeal. The stay application was granted on 26 June 2026, with the court’s reasons published at that time. The present decision concerns who should pay the costs of the stay application itself. Mr Karas argued the respondents should pay his costs. LK Law argued either that Mr Karas should pay the respondents’ costs, or that such costs should be “costs in the appeal.”
The Court’s Holding
Justice Perram held that while a stay is an “indulgence” and ordinarily the party seeking it must pay the other side’s costs, a different approach is warranted where the appellant has a reasonable prospect of success on the substantive appeal. To balance these competing principles, the court ordered that the respondents’ costs of the stay application be treated as “costs in the appeal”—a formula with specific legal effect.
Under this order, the respondents’ costs of the interlocutory application form part of the appeal costs. If Mr Karas succeeds on appeal and the respondents are ordered to pay all or some of the appeal costs, Mr Karas will not be liable for the respondents’ stay application costs. Conversely, if Mr Karas loses the appeal and is ordered to pay costs, he will bear the respondents’ stay application costs as part of the overall appeal costs.
Key Takeaways
- A stay is an indulgence ordinarily requiring the applicant to pay the respondent’s costs, but this rule is not absolute.
- Where an appellant has a reasonable prospect of success, fairness may justify ordering that respondents’ interlocutory costs be “costs in the appeal” rather than an immediate liability.
- The “costs in the appeal” formula ensures that if the appellant succeeds, the respondent does not profit from the stay application, while preserving the respondent’s cost recovery if the appellant loses.
- The application for leave to appeal (SAD 120 of 2026) was dismissed as moot, with its costs also treated as costs in the substantive appeal.
Why It Matters
This decision provides important guidance on how Australian courts approach costs of interlocutory stay applications where an appeal is pending. The court’s willingness to depart from the ordinary rule—that the party seeking an indulgence pays costs—reflects a sophisticated understanding of fairness in appellate practice. An appellant pursuing a potentially meritorious appeal should not be penalized by immediate liability for the respondent’s stay costs, yet the respondent should not be left uncompensated if the appeal ultimately fails.
The “costs in the appeal” formula, drawn from earlier authority (Croc’s Franchising Pty Ltd v Alamdo Holdings Pty Ltd [2023] NSWCA 85), offers a practical middle ground. It protects appellants from bearing the full burden of funding their appellate remedies while preserving the respondent’s ability to recover costs if the appeal is dismissed. This approach is likely to be influential in other Australian jurisdictions and demonstrates the court’s attentiveness to costs fairness in complex interlocutory disputes.