Background
The applicants, Morgan John Kelly and Martie Maree Tziotis acting as joint and several special purpose liquidators of the Hastie Group of companies, brought proceedings against their former solicitors, Hall & Wilcox, seeking an assessment of whether the legal costs charged in connection with three sets of underlying litigation — the Receivables Case, the Bank Guarantee Case, and related appeal proceedings — were fair and reasonable. The underlying litigation (Hastie Group Ltd (in liquidation) v Multiplex Constructions Pty Ltd & Ors, VID1277/2017) largely concluded before Middleton J in late 2022 but certain claims involving competing entitlements and set-offs remained unresolved, with settlement negotiations described as ongoing.
On 8 May 2026 Needham J delivered judgment on a contested case management hearing (Kelly v Hall & Wilcox [2026] FCA 567), ruling that separate questions should be determined by the Court before any reference to a costs assessor. Publication of that judgment was deferred at the applicants’ request pending an interlocutory application for suppression of confidential material. The applicants lodged that application on 13 May 2026, identifying four categories of confidential information: legal advice, affidavit evidence and submissions summarising that advice, time-entry narratives in Hall & Wilcox’s itemised invoices, and confidential litigation funding agreements with the Commonwealth.
Two discrete issues therefore came before Needham J on the papers: whether a final suppression and non-publication order should be made over the confidential information under s 37AF of the Federal Court of Australia Act 1976 (Cth), and what separate questions should be framed for determination at a five-day hearing listed for October 2026 before any costs reference.
The Court’s Holding
On the suppression application, Needham J granted the orders until 4:00 pm on 12 February 2027. The Court acknowledged the heavy onus on a party seeking to derogate from the principle of open justice, and confirmed that it must be satisfied that the statutory grounds are made out even where the other party does not oppose. Applying the test summarised in Australian Competition and Consumer Commission v Mastercard Asia/Pacific Pte Ltd (Suppression No 1) [2026] FCA 431, the Court found it reasonably likely that disclosure of the confidential information — including privileged legal advice and the terms of litigation funding arrangements — would give the respondents in the still-live Main Proceedings an unfair forensic advantage in settlement negotiations, and potentially in the proceedings themselves should negotiations fail. A further basis was that parts of the material were already the subject of a suppression order made by the Supreme Court of New South Wales.
On the separate questions, the parties agreed on questions concerning the terms of the retainer and the prospects of success of the three proceedings at relevant times, but disagreed on how to frame the “reasonableness of advice” questions and whether additional questions about specific cost categories should be included. The respondent sought to confine the reasonableness inquiry to the instructions given and the litigation objectives of the Liquidators and the Commonwealth, on the basis that they were experienced and sophisticated litigants. The Court rejected that framing, holding that reasonableness of advice is not limited to those two factors — all relevant circumstances must be available for consideration. Questions 6, 7, and 8 were accordingly framed in broad, unqualified terms. The Court accepted the respondent’s proposed Question 9 (which costs should be referred to the assessor, having regard to the Court’s findings on all prior questions) as a useful gateway question, but rejected the applicants’ proposed Questions 10 and 11 as suffering the same defect as the respondent’s proposed sub-questions — impermissibly focusing the Court’s attention on particular aspects to the potential exclusion of other relevant matters.
Key Takeaways
- A court must independently verify the statutory grounds for suppression or non-publication orders under s 37AF of the Federal Court of Australia Act 1976 (Cth) even when the application is unopposed; the onus remains “very heavy” and the circumstances must be exceptional.
- Confidential commercial and litigation-privilege material may warrant suppression where its disclosure is reasonably likely to provide an opposing party in related live proceedings with an unfair forensic advantage, including in settlement negotiations.
- When framing separate questions about the reasonableness of legal advice, the inquiry should not be artificially confined to the instructions received or the client’s litigation objectives — the full range of relevant circumstances must remain open for consideration at the hearing.
- A broad gateway question identifying which costs should ultimately be referred to a costs assessor, informed by the Court’s findings on all preceding separate questions, is a permissible and useful procedural device to focus the scope of any costs reference.
Why It Matters
This decision offers practical guidance on two recurring procedural challenges in complex commercial litigation. On suppression orders, it reaffirms that even an uncontested application requires the Court to rigorously examine whether the open-justice derogation is justified, and it illustrates how ongoing related proceedings can supply the prejudice necessary to meet the statutory threshold. Solicitors and liquidators conducting parallel litigation or settlement processes should be attentive to this pathway when sensitive strategic documents are in play.
On the framing of separate questions in legal costs disputes, the decision signals that courts will resist attempts by either party to narrow the reasonableness inquiry prematurely. Where a law firm’s advice is challenged, the sophistication of the client does not limit the factors the Court may weigh — a principle with significant implications for disputes involving institutional clients such as insolvency practitioners and Commonwealth-funded litigants. The five-day separate questions hearing provisionally listed for October 2026 will determine which costs, if any, proceed to formal assessment.