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Ogbonna v CTI Logistics Ltd (No 8) [2025] FCA 1525 (3 December 2025)
In October 2025, we published a case note on Ogbonna v CTI Logistics Ltd (No 7) [2025] FCA 1125 ("Ogbonna 7"), where the Federal Court allowed Mr Ogbonna's appeal and found that the sequestration order made against him should not have been made.
The orders made in Ogbonna 7 left a practical question hanging:
If the bankruptcy order is set aside, what happens next, and who pays the legal costs that have built up over years of litigation?
Those "next steps" are dealt with in Ogbonna v CTI Logistics Ltd (No 8) [2025] FCA 1525 ("Ogbonna 8").
Even though Ogbonna 8 is short (16 paragraphs), it is worth reading because it highlights a point:
You can succeed in setting aside a sequestration order and still be ordered to pay a substantial proportion of the other side's costs.
A quick refresher:
- (i) 20 September 2022: A sequestration order was made against Mr Ogbonna in the Federal Circuit and Family Court.
- (ii) 2 November 2023: A vexatious proceedings order meant Mr Ogbonna needed leave to appeal. This leave application was dealt with and costs were reserved.
- (iii) 12 September 2025: The Federal Court allowed the appeal (in Ogbonna 7), but reserved the question as to what orders should be made (including in relation to costs of the proceedings and of certain interlocutory applications heard with the appeal).
- (iv) 3 December 2025: The Court made the consequential orders and costs orders (in Ogbonna 8).
What Ogbonna 8 decided:
Feutrill J dealt with four main issues:
- (i) What orders should now be made, given the appeal was allowed?
- (ii) What should happen with the trustee in bankruptcy, including the trustee's remuneration and expenses?
- (iii) Who pays the costs of (a) the original creditor's petition proceedings (at first instance), (b) the leave application (because of the vexatious proceedings order), (c) the interlocutory applications heard in the appeal, and (d) the appeal itself?
- (iv) How should those costs be calculated? By taxation, or as a lump sum?
The creditor's petition was dismissed
The Court set aside the sequestration order made on 20 September 2022 (3 years earlier) and ordered that the creditors' petition be dismissed.
Mr Ogbonna had to pay 80% of the creditors' costs at first instance
Even though the sequestration order was set aside on appeal, the Court ordered that Mr Ogbonna pay 80% of the petitioning creditors' costs of the first instance proceeding to be fixed on a lump sum basis.
In other words, the Court did not treat the appeal outcome as automatically rewriting the costs outcome for everything that happened below.
Mr Ogbonna also had to pay 80% of the creditors' costs of the leave application
Because a vexatious proceedings order was in place, Mr Ogbonna / the appellant needed leave to appeal. The Court dealt with the costs of that leave application (and other reserved costs) and ordered that Mr Ogbonna pay 80% of those reserved costs to be fixed as a lump sum.
Mr Ogbonna / the appellant had to pay the costs of the interlocutory applications in the appeal
There were other interlocutory applications heard with the appeal, with costs reserved earlier.
The Court ordered that Mr Ogbonna / the appellant pay the creditors' costs of those interlocutory applications on a lump sum basis. In doing so, the Court noted that Mr Ogbonna had to pay the costs of the interlocutory applications because he did not succeed on them overall.
The creditors had to pay Mr Ogbonna's costs of the appeal (if any)
On the appeal costs, the Court took the usual approach: because the appeal succeeded, the creditors should pay Mr Ogbonna's appeal costs (if any).
But the Court also pointed out an important practical limitation: Mr Ogbonna / the appellant was self-represented, and costs are governed by the indemnity principle. This usually means a self-represented party's recoverable "costs" are largely limited to out-of-pocket expenses (e.g., filing fees), rather than professional legal fees.
Therefore, although Mr Ogbonna / the appellant obtained a costs order in his favour for the appeal, the amount recoverable may in fact be modest.
Annulment versus setting aside and why it mattered
The Court also discussed what happens once a sequestration order is overturned, particularly where a trustee has already been appointed.
As Feutrill J noted, a trustee may have already taken steps, incurred expenses, and administered the estate, which raises the question of how the trustee's costs are dealt with once the sequestration order is set aside.
His Honour referred to authorities suggesting there may be a "choice" between:
- annulling the bankruptcy under s 153B of the Bankruptcy Act, or
- setting aside the sequestration order on appeal using the Court's appeal powers (including under s 28 of the Federal Court of Australia Act).
The distinction matters because annulment can affect who ultimately carries the trustee's costs. His Honour also observed that it may be doubtful whether annulment is the right approach where the appeal court has found that the sequestration order should never have been made in the first place.
In this case, the trustee filed submissions but did not seek any costs order, so the Court made no order as to the trustee's costs and proceeded on the basis that the sequestration order should be set aside, and that no order should be made in respect of the former Trustee's remuneration and expenses. Unfortunately this meant that the Court did not need to consider the implications of the Full Federal Court's decisions in Bechara (see our discussion in https://www.matthewsfolbigg.com.au/news/insolvency-restructuring-debt-recovery/bankruptcy-can-go-entirely-wrong-successful-creditor/) or in Samsakopolous [2021] FCAFC 143; or Ghasemi [2021] FCAFC 144, regarding how to apportion the remuneration and expenses of a Trustee between debtor and creditor, in circumstances where the Trustee is removed upon setting aside of the sequestration order. The Court's approach is well set out in those decisions, although the practical applications of this approach is still being worked out in the cases.
Why Mr Ogbonna / the appellant paid 80%
The point on which Mr Ogbonna / the appellant ultimately succeeded was not argued or raised before the primary judge.
From the Court's perspective, that meant the creditors were put to the cost of dealing with grounds of opposition which the (then) bankrupt had raised which did not succeed, at first instance or on appeal. Therefore the first instance proceeding generated costs that were, in effect, wasted and unnecessarily incurred.
That is the key to understanding the outcome:
- The appeal corrected the legal position and set aside the sequestration order.
- But the costs question turned on a different issue: who was responsible for the way costs were generated in the first place?
- The Court was not persuaded that the creditors should carry the bulk of the financial consequences of a first instance dispute that was fought largely on grounds that went nowhere, particularly when the decisive point was only taken later.
Ogbonna 8 is a reminder that costs decisions are not always a simple "winner takes all" outcome. Particularly where litigation has moved through multiple stages from the initial proceedings to appeal, the Court will look closely at how costs were generated and whether they were unavoidable.
Our insolvency, restructuring, and debt recovery team specialises in guiding clients through bankruptcy proceedings. We advise creditors on the full spectrum of bankruptcy matters, from initiating bankruptcy proceedings and filing creditor's petitions to navigating sequestration orders and managing the complexities of enforcement.
Read the full judgment of Ogbonna v CTI Logistics Ltd (No 8) in https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2025/2025fca1525
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or jeffreyb@matthewsfolbigg.com.au
Hayley Hitch on (02) 9806 7434 or hayleyh@matthewsfolbigg.com.au
Stephen Mullette on (02) 9806 7459 or stephenm@matthewsfolbigg.com.au
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
