FEDERAL COURT OF AUSTRALIA Axis Investment Centre Pty Ltd v Mathew [2016] FCA 1562 File number(s): QUD 522 of 2016 Judge(s): GREENWOOD J Date of judgment: 21 December 2016 Catchwords: PRACTICE AND PROCEDURE – consideration of an application for leave to amend the Originating Application and the question of the disposition of the costs associated with that application and related matters Legislation: Federal Court of Australia Act 1976, s 31A Cases cited: Spencer v Commonwealth (2010) 241 CLR 118 Pihiga Pty Ltd v Roche (2011) 1278 ALR 209 Date of hearing: 14 December 2016 Date of last submissions: 14 December 2016 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 49 Counsel for the Applicant: Mr C Johnstone Solicitor for the Applicant: Lander & Rogers Lawyers Counsel for the Respondent: Mr M Stunden Solicitor for the Respondent: Crilly Lawyers ORDERS QUD 522 of 2016 BETWEEN: AXIS INVESTMENT CENTRE PTY LTD ACN 107 287 874 (and others named in the Schedule) First Applicant AND: JOSEPH MATHEW (and others named in the Schedule) First Respondent JUDGE: GREENWOOD J DATE OF ORDER: 21 DECEMBER 2016 THE COURT ORDERS THAT: 1. The applicants file and serve an Amended Originating Application in terms of the proposed Amended Originating Application the subject of the interlocutory application by the applicants which was to be filed on 13 December 2016 and although not filed was nevertheless relied upon by the applicants at a case management hearing on 14 December 2016. 2. The Amended Originating Application contemplated by Order 1 be filed and served by Friday, 13 January 2017. 3. The applicants file and serve an Amended Statement of Claim in respect of the final relief claimed in the Amended Originating Application, by 4.00pm, 27 January 2017. 4. The first, second and third respondents file their Defence by 4.00pm on 10 February 2017. 5. The parties complete discovery by 4.00pm on 3 March 2017. 6. The parties have liberty to apply. 7. The parties have leave to issue, after the completion of discovery, such subpoenas as may be necessary. 8. The proceeding be listed for review at 9.30am on 10 March 2017. 9. The applicants pay the costs of the first, second and third respondents of and incidental to all claims abandoned by the applicants and, for the sake of clarity, those claims are the claims made by the applicants at paragraph 6 of the Originating Application to the extent that the claim sought a declaration, paragraphs 7, 9, 11 and 12 of the Originating Application and paragraph 13 as proposed by the solicitors for the applicants and ultimately abandoned. 10. The applicants pay the costs of the first, second and third respondents of and incidental to their application filed on 29 November 2016 by which those parties sought judgment in the proceeding in respect of paragraphs 6, 7, 9, 11 and 12 of the Originating Application and other orders. 11. The first, second and third respondents have leave to tax the costs the subject of Orders 9 and 10 and recover those costs immediately. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT GREENWOOD J: 1 The immediate questions alive in these proceedings concern the orders to be made in disposition of an interlocutory application which was to be filed by the applicants in the principal proceeding on 13 December 2016. However, the application was not ultimately filed. The application was ultimately made orally against the background of the proposed interlocutory application, at a case management conference on 14 December 2016. By their application, the applicants in the principal proceeding seek leave to amend the originating application so as to make particular amendments to claims 1 to 5 of that application; discontinue the claim for a declaration in para 6 and introduce, in that paragraph, a claim for an order in particular terms (to be mentioned later in these reasons); and, relevantly for these proceedings, discontinue the relief claimed by paras 7, 9, 11 and 12 of the originating application as filed. A further claim (a new para 13) which was to be introduced into the originating application is also now abandoned by the applicants. 2 The applicants in the proceeding are Axis Investment Centre Pty Ltd, Mode Financial Services Pty Ltd and Christopher John Vitale (the "Axis parties"). They were the respondents in proceeding QUD 398 of 2014 ("Proceeding 398") the settlement of which has led to issues in this proceeding. 3 The respondents in this proceeding, as issued, are Dr Joseph Mathew, Kurisummoottil Pty Ltd, Joseph Mathew Super Pty Ltd, Bennett & Philp Pty Ltd and Mr Michael Heath. The first three parties just mentioned were the applicants in Proceeding 398. The remaining two parties were the legal advisers to the first three parties. Issues as between the Axis parties and Bennett & Philp Pty Ltd and Michael Heath have now been resolved. I refer to the first three respondents as the "Mathew parties". 4 The respondents to the present interlocutory application say that they should have their costs of the abandoned claims on an indemnity basis. They also say that they should have the costs of an interlocutory application filed by them on 29 November 2016 by which they sought, pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) ("FCA"), judgment in respect of the claims made by paras 6, 7, 9, 11 and 12 of the originating application, on the footing that the Court ought to be satisfied that the applicants have (and had) no reasonable prospect of successfully prosecuting those claims in the principal proceeding against the respondents: s 31A(2) and s 31A(3); Spencer v Commonwealth (2010) 241 CLR 118 at [25] per French CJ and Gummow J; and [51], [52], [56] and [58] to [60] per Hayne, Crennan, Kiefel and Bell JJ. 5 In order to address these questions, it is necessary to explain the contextual background to the interlocutory application by the applicants for leave to amend and the background relating to the position adopted by the respondents in relation to the s 31A application. The latter application was not pressed by the respondents in view of the application by the applicants for leave to amend. 6 The applicants accept that the respondents' costs of and incidental to the abandoned claims (that is, that part of para 6 relating to the declaration and the claims set out at paras 7, 9, 11, 12 and the putative para 13 claim) are to be paid by the applicants. The applicants also accept that because those claims are not being pressed, they are to be dismissed. The background to the principal proceeding 7 In Proceeding 398, the Mathew parties alleged that they each "lost" money when a director of Redwood Capital Group Pty Ltd and Redwood Securities Pty Ltd, Mr Sunny Madhoji, fraudulently misappropriated funds from bank accounts to which Redwood and Mr Madhoji had been granted third party access by Dr Mathew. The Mathew parties sued the Axis parties for recovery of the loss they claimed to have suffered. They sought orders that the Axis parties pay damages or compensation at law, in equity and pursuant to ss 1041I and 1325 of the Corporations Act 2001 (Cth) (the "Act") and s 12G(f) of the Australian Securities and Investments Commission Act 2001 (Cth) (the "ASIC Act") based on various contended contraventions of the legislation and other breaches of duties said to be owed to the Mathew parties in all the circumstances of the case. The Mathew parties asserted a "no transaction" case in the sense that but for the relevant conduct none of those parties would have invested any monies with Redwood or Mr Madhoji at all. Various defences were asserted by the Axis parties. 8 The hearing of those proceedings came before Dowsett J on 16, 17, 23 and 24 April, 28 and 29 May and 14 September 2015. 9 As part of the loss said to have been suffered by the Mathew parties and made the subject of a claim for damages on the pleaded case, the Mathew parties claimed amounts on account of legal costs said to have been expended by them in attempts to recover the funds said to have been fraudulently misappropriated by Mr Madhoji. The legal costs set out in Annexure A to the amended statement of claim involved three categories of costs. The Mathew parties said that they incurred legal costs in proceedings before the Supreme Court of New South Wales in proceedings called the Macquarie Bank proceedings but conveniently referred to in these proceedings as the "Interpleader Costs": $109,256.35. The second category of costs related to proceedings in the Queensland District Court called the Pavlou proceedings (the "Pavlou Costs"): $80,117.69. The third category involved costs associated with attempted recovery from third parties (the "Third Party Costs"): $12,508.20. 10 On 7 November 2014, Dowsett J ordered that the parties to Proceeding 398 attend and participate in a mediation on or before 27 March 2015. Pursuant to that order, a mediation was convened by a Registrar of the Federal Court on 10 March 2015. Obviously enough, the purpose of the mediation was to enable the parties to explore options for settlement of the dispute. To the extent there may have been any doubt about the matter, the Registrar observed in a letter of 10 February 2015 convening the mediation that: "Parties attending the mediation are advised that the mediation is a confidential process. Additionally, s 53B of the Federal Court of Australia Act 1976 provides that parties may not rely on any disclosure made at the mediation in any subsequent court hearings". 11 Proceeding 398 was settled on 14 September 2015. 12 The settlement is contained in a Deed of Settlement dated 14 September 2015. By that Deed, the Axis parties agreed to pay the Mathew parties an amount of money (which is a confidential figure) within 28 days in full settlement of all claims and a further amount of money (also confidential) in respect of interest. The Axis parties also agreed to pay the costs of the Mathew parties up to and including 1 April 2015 on a standard basis unless otherwise agreed: cl 1.2. The Mathew parties agreed to pay the costs of the Axis parties on and from 2 April 2015 on a standard basis unless otherwise agreed: cl 1.3. The Deed contemplated that Proceeding 398 would be dismissed with no order as to costs. The terms of the Deed were to be treated as confidential. 13 Mr Dudakov, the solicitor for the Axis parties, explains events that occurred after the Deed of Settlement was entered into. He says that on 10 March 2016 he was served with a Bill of Costs said to have been incurred by the Mathew parties and said to give expression to the obligation of the Axis parties contained in cl 1.2 of the Deed. Mr Dudakov says that the Bill of Costs for the Mathew parties includes claims for legal fees and disbursements which had previously been claimed as part of the damages claim in Proceeding 398 that is, the Interpleader Costs, the Pavlou Costs and the Third Party Costs. Mr Dudakov says that the Axis parties contend that these three classes of costs were compromised by the Deed of Settlement. He says that he has requested the Mathew parties to withdraw these three categories of costs from the Bill of Costs. 14 There have been many exchanges between the solicitors for the Axis parties, Lander & Rogers, and Bennett & Philp (the solicitors for the Mathew parties) and also as between Lander & Rogers and the incoming solicitors for the Mathew parties, Crilly Lawyers Pty Ltd (Mr Crilly). It is necessary to examine some aspects of these exchanges. 15 On 19 April 2016, Mr Dudakov and Ms Pelka-Caven pursued their demand that the Mathew parties withdraw all claimed items from the Bill of Costs (including disbursements) relating to the Interpleader Costs. They noted the objection of Bennett & Philp to take that course. Bennett & Philp had contended that any objection to the Bill of Costs should be taken, in the ordinary course, once the estimate, based on the Bill, had issued from the Federal Court by the Registrar. Mr Dudakov and Ms Pelka-Caven said that that proposal presented difficulties because the taxing officer would not have before him or her any basis for identifying those costs within the Bill which might fall within the category of costs described as the Interpleader Costs. 16 In that letter, Mr Dudakov and Ms Pelka-Caven raised another matter of some significance. They said that the Axis parties were "deeply concerned" about the difference between the quantum of the Bill of Costs as delivered $695,897.71 (being costs incurred up to 1 April 2015) and a statement made by counsel (described as counsel's "written statement") to the effect that the party and party costs and disbursements of the Mathew parties up to 10 March 2015 constituted an amount of $365,000.00. Mr Dudakov and Ms Pelka-Caven say that the written statement as to costs of 10 March 2015 was "heavily relied upon" by the Axis parties in making the offer of compromise on 1 April 2015. Although it is not put this way by Mr Dudakov and Ms Pelka-Caven, it seems plain enough that the statement about which concern was expressed was a statement (in writing and probably orally) in or in connection with the mediation which occurred on 10 March 2015. 17 Mr Dudakov and Ms Pelka-Caven say that the "written statement" of counsel was "factored into our clients' decision to compromise the proceedings on 14 September 2015". Mr Dudakov and Ms Pelka-Caven also said in their letter that the conduct of counsel for the Mathew parties amounted to misleading and deceptive conduct and added that the issue raised "ethical concerns in relation to your firm's conduct in not correcting the [written statement] if it was false". Mr Dudakov and Ms Pelka-Caven also observed that the Axis parties did not disagree in principle with a set-off between the two competing costs orders captured by the Deed. However, they observed that because the Axis parties were entitled to payment of their costs "now" (pursuant to a Certificate) and that there were considerable debates to be held about the costs of the Mathew parties (and the contended conduct of Bennett & Philp and counsel), the Axis parties would require payment (rather than a subsequent off-setting exercise) of their costs the subject of the existing Certificate of Taxation (or alternatively the Mathew parties would be required to pay those costs into Court). 18 On 5 May 2016, Bennett & Philp (Mr Bennett) responded to that letter. 19 Mr Bennett observed that the document of 10 March 2015 was marked "without prejudice" and, in any event, things said either in writing or orally, in the course of the mediation, would fall within the prohibition contained in s 53B of the FCA. Mr Bennett observed that the serious allegations made relating to the conduct of the firm and, for that matter counsel, were disturbing. 20 On 15 June 2016, Mr Dudakov and Ms Pelka-Caven pursued issues in relation to Proceeding 398 and said that the Axis parties had been induced to settle Proceeding 398 on the terms of the Deed of Release on the basis of two separate misrepresentations by the Mathew parties, by Bennett & Philp and by counsel for the Mathew parties. As to the first misrepresentation, Mr Dudakov and Ms Pelka-Caven said that the Axis parties had entered into the Deed "on the belief" that they were settling all of the claims of the Mathew parties in the proceeding including the Interpleader Costs, the Pavlou Costs and the Third Party Costs. That belief (apart from any question of how that belief might have come to have been held) turns upon, in part at least, the construction of the terms of the Deed. As to the second misrepresentation, Mr Dudakov and Ms Pelka-Caven said that the Axis parties agreed to pay the legal costs of the Mathew parties up to 1 April 2015 on the basis of counsel's representation that the costs were $365,000.00. Mr Dudakov and Ms Pelka-Caven asserted that the representation was, "made orally as part of your clients' opening address and in writing as 'approximately $365,000'". Mr Dudakov and Ms Pelka-Caven again observed that the Bill of Costs now amounts to $695,879.71. Mr Dudakov and Ms Pelka-Caven then observed: As you would appreciate as officers of the Court, you and your clients' counsel bear a high obligation to be honest and truthful and at all times uphold the highest ethical standards. Your firm and your clients' counsel clearly had an ethical obligation to ensure that the costs claimed at taxation accorded with the representations made as to costs prior to settlement of the Proceedings. Your failure to do so has therefore resulted in the Registrar being misled as to the quantum of the costs agreed at settlement. [emphasis added] 21 Mr Dudakov and Ms Pelka-Caven asserted that nothing in s 53B of the FCA prevented the Axis parties from bringing the contended misrepresentation of the Mathew parties to the attention of the Court. Again, Mr Dudakov and Ms Pelka-Caven contended that the Axis parties would not have entered into the Deed "had they known" that the Interpleader Costs, the Pavlou Costs and the Third Party Costs would be incorporated within the Bill of Costs (as they say they are) or had they known that the costs were $695,879.71 rather than $365,000.00. Mr Dudakov and Ms Pelka-Caven contended that the Deed ought to be set aside, the amounts paid under the Deed disgorged and Proceeding 398 ought to be reinstated before Dowsett J. Mr Dudakov and Ms Pelka-Caven said that the Axis parties were considering bringing a proceeding in which declarations would be sought that the Mathew parties, Bennett & Philip, and counsel for the Mathew parties had engaged in misleading and deceptive conduct in contravention of s 18 of the Australian Consumer Law ("ACL"). The proposed action would also assert an estoppel preventing the Mathew parties recovering costs in excess of $365,000.00 "by reason of the misrepresentations outlined above". 22 Mr Dudakov and Ms Pelka-Caven recognised the seriousness of the allegations they were making and at point 7 of the letter they said this: Given the serious nature of the application and the relief our clients are minded to seek, we consider it appropriate to set out our clients' position in open correspondence as a professional courtesy. As part of that courtesy our client has instructed us not to take any action for 7 days failing which, our clients will take action [as foreshadowed in the letter]. [emphasis added] 23 Plainly enough, the allegations made by the Axis parties and Mr Dudakov and Ms Pelka-Caven to the effect that Mr Bennett together with counsel had failed to discharge an ethical obligation to act in a way which is "honest and truthful and at all times upholds the highest ethical standards" is a serious matter. Bennett & Philp and, no doubt, counsel for the Mathew parties, also regarded those allegations as a most serious matter. 24 On 7 July 2016, the Axis parties filed the originating application in these proceedings by which they sought an order for the stay of the process of estimating the costs of the Mathew parties in accordance with the processes which apply in the Federal Court once a Bill of Costs is filed and served. They also sought a declaration that the Mathew parties are estopped from seeking to recover, as costs, amounts representing the Interpleader Costs, the Pavlou Costs and the Third Party Costs. They sought a declaration that those three classes of costs had been compromised by the Deed and that the Mathew parties were estopped from seeking to recover amounts represented by those three classes of costs. They also sought declarations as to these matters: (a) A declaration that the Mathew parties had engaged in misleading or deceptive conduct in contravention of s 18 of the ACL. (b) A declaration that Bennett & Philp and Mr Michael Heath were knowingly concerned in the contraventions of s 18 of the ACL. (c) A declaration that the Mathew parties were liable to indemnify the Axis parties for any amount of costs in excess of $365,000.00. (d) A declaration that Bennett & Philp and Mr Michael Heath were liable to indemnify the Axis parties for any amount they might be obliged to pay in excess of $365,000.00. (e) An order that the Mathew parties be restrained from recovering any amount in excess of $365,000.00. (f) On an alternative basis, an order pursuant to s 243(b)(i) of Schedule 2 of the Competition and Consumer Act 2010 (Cth) that the Deed of 14 September 2015 be varied to limit the costs to $365,000.00. 25 On 25 July 2016, Mr Crilly wrote a letter to Lander & Rogers advising that Crilly Lawyers were now acting for Dr Mathew. Mr Crilly, in that letter, said that Bennett & Philp had advised Crilly Lawyers that no item relating to the Pavlou Costs or the Third Party Costs was included in the Bill of Costs as filed. As to the stay of the process of the Taxing Officer (Deputy District Registrar) issuing an estimate of the recoverable costs arising out of an assessment of the Bill of Costs as filed, Mr Crilly proposed that the interlocutory stay application be adjourned on the basis that the process of completing the estimate would continue on the footing that any line items in the Bill relating to the Interpleader Costs (the only remaining body of contentious costs) would be set aside or excluded simply for the present purpose of undertaking the estimate. The question of whether those costs were a "claim" for the purposes of the Deed (and thus compromised) would be a question for another day at trial, with one or more directions hearings along the way. 26 The day for a directions hearing was 8 August 2016. 27 The Axis parties said, on 1 August 2016, that they would seek, on that day, an order for the stay of the process of issuing an estimate pending the determination of their originating application. They said they would seek directions orders as to the filing of affidavits. Mr Crilly on 2 August 2016 responded to say that further discussions had occurred with Bennett & Philp and others relating to the earlier proceedings giving rise to the Interpleader Costs. Mr Crilly put a proposal to Lander & Rogers to settle the quantum of the costs overall (including the off-setting costs). 28 On 4 August 2016, Mr Crilly said the Mathew parties would resist the stay order proposed by the Axis parties in view of their proposal to isolate and exclude the Interpleader Costs from the estimate. 29 On 8 August 2016, the Court made an order, by consent, dismissing the originating application as against Mr Michael Heath. The interlocutory application for the stay was dismissed with the costs of that application reserved for later determination. The Court also ordered (Order 3) that within seven days of the Mathew parties notifying the taxing officer that, "those items [in the Bill] relating to and described as 'Interpleader Costs' as agreed between them [and the Axis parties], or failing agreement items relating to the Interpleader costs capped in the sum of $128,471.77 are not to be considered" in the taxing officer's estimate of the Mathew parties' Bill of Costs in Proceeding 398. Order 4 required that within seven days of the receipt of the taxing officer's estimate, the parties (other than Bennett & Philp) confer with a view to resolving the issue of costs in Proceeding 398. Order 5 provides that if no resolution on costs is reached arising out of the order for caucusing, then within 21 days of receipt of the estimate, the matter be re-listed for directions as to orders for expedited pleadings and the setting of the proceeding down for trial. 30 The taxing officer's estimate issued on 5 December 2016. 31 By a letter dated 11 August 2016, Mr Crilly made certain proposals as to the line items to be submitted to the Registrar (as set out in an Annexure A attached to the letter) for the purposes of Order 4. The letter purports to address the directions orders of Monday, 8 August 2016 (mistakenly described as orders made on 5 August 2016). The letter also proposed an overall settlement of the Bill (including off-setting costs). 32 Mr Dudakov and Ms Pelka-Caven responded by a letter dated 15 August 2016. Mr Crilly's letter may have been sent late on 12 August 2016 (by email) to Mr Dudakov and Ms Pelka-Caven. In any event, Mr Dudakov and Ms Pelka-Caven said in their response that it was not clear whether the Annexure A line items were being withdrawn and abandoned by the Mathew parties or whether those line items would be pressed should the Bill ultimately be taxed. The 8 August 2016 order (Order 3) contemplated that the Interpleader Costs would be agreed and isolated from the "estimate" process and if not agreed those costs would be capped at $128,471.77 and excluded from the estimate of the Bill as filed. Other disputes arose about the Annexure A items. 33 Apart from these questions, Mr Dudakov and Ms Pelka-Caven expressed a right of reservation in these terms: 4. As ought to be apparent, our clients also reserve the right to pursue the balance of the orders sought by them in the originating application filed in Proceeding QUD 522 of 2016, including an order for their costs of that application against your clients. 34 Thus, as at 15 August 2016, Mr Dudakov and Ms Pelka-Caven were reserving to the Axis parties the right to pursue the balance of the orders sought in the originating application as filed notwithstanding the orders of 8 August 2016 otherwise known as the 8 August protocol. That relief was rooted in contentions of misleading and deceptive conduct which had been said to be the expression of failures of professional ethical standards including a failure to act with truth and honesty: see [20] of these reasons. 35 On 2 September 2016, Bennett & Philp (Mr Bennett) took up the issue of the remaining relief asserted against that firm based on contended contraventions of s 18 of the ACL and the other matters as pleaded. Bennett & Philp reasserted the position that s 53B and the notion that the contended representations were not made (and not made at all) in trade or commerce were complete answers to the claims and thus those claims on those grounds were "doomed to fail". Mr Bennett said that the purpose of his letter was to provide the Axis parties with an opportunity to terminate the proceedings (in so far as it comprised claims made against that firm). He attached a proposed consent order. He also said that it would be appropriate that a further order be made dismissing the misrepresentation claims against the Mathew parties and directing the Axis parties to file an amended originating application to exclude those claims. On 9 September 2016, Mr Dudakov and Ms Pelka-Caven responded to that letter. They rejected that the remaining claims were doomed to fail and asserted that the authorities Mr Bennett had mentioned in his letter did not support that contention. They also asserted that s 53B is far from absolute in its terms. They also said that the application foreshadowed by Mr Bennett was premature having regard to the orders of 8 August 2016. Mr Dudakov and Ms Pelka-Caven said that the Axis parties would be likely to amend the relief sought in the originating application "to plead further relief against your firm at this time". They also said this: Your letter ignores the second aspect of the claimed relief in circumstances where those matters remain a live issue given that the first to third respondents have not abandoned their claims for those amounts as costs recoverable in the proceeding other than for the purpose of the estimate (despite our client's clear requests that they do so). 36 Mr Bennett responded by email on 15 September 2016. Mr Bennett sought to confirm the elements of an earlier conversation in which Mr Dudakov had said that there would not be any new claims against Bennett & Philp but rather that "if the case continues, you might seek to 'better express' the existing claim". Mr Bennett reasserted his view that the claims could not be maintained and said that the Mathew parties would now proceed with an application for summary judgment. 37 On 9 November 2016, Mr Crilly sent an email to Lander & Rogers (Ms Pelka-Caven) attaching signed consent orders in relation to the discontinuance by the Axis parties of the claims against the fourth respondent (Bennett & Philp). Mr Crilly asserted a right to file an application seeking summary judgment against the Axis parties in relation to those paragraphs of the originating application alleging misleading conduct as against the Mathew parties. Ms Pelka-Caven responded to Mr Crilly on 9 November 2016 observing that it "remain[ed] open to [the Mathew parties] to file any interlocutory applications that they deem necessary …". Ms Pelka-Caven observed that the Mathew parties ought not to assume that the discontinuance against Bennett & Philp had anything to do with the application by them. Rather, the decision to discontinue related to "other factors". Ms Pelka-Caven also observed that the Mathew parties were "in a wholly different position to that of [Bennett & Philp] in relation to [the Axis parties'] application". Ms Pelka-Caven said that any application by the Mathew parties for summary judgment would be "vociferously opposed". 38 By a letter dated 11 November 2016, Mr Crilly drew the attention of Lander & Rogers to the elements of paras 6, 7, 9, 11 and 12 of the originating application as filed. Mr Crilly asserted that the claims for relief arising out of those paragraphs were confronted by the prohibition in s 53B of the FCA and, in any event, the contended representations were not made, it was said, in trade or commerce. The authorities recited by Mr Bennett were also relied upon by Mr Crilly. Mr Crilly asserted that the claims reflected in paras 6, 7, 9, 11 and 12 would thus fail and the purpose of his letter was to provide the Axis parties with an opportunity to amend the originating application to remove those paragraphs so as to avoid future cost, expense and inconvenience being incurred. Mr Crilly suggested that the Axis parties put forward an amended originating application for the consideration for the Mathew parties. Mr Crilly said that in the absence of the Axis parties accepting orders for the granting of leave to amend by striking out paras 6, 7, 9, 11 and 12 of the originating application, the Mathew parties would file an application on 18 November 2016 to address those paragraphs. 39 On 17 November 2016, Mr Dudakov and Ms Pelka-Caven rejected the contention that paras 6 and 7 of the originating application were doomed to fail and took issue with the views of Mr Crilly about the operation of s 53B of the FCA. They also said that the ultimate adjudication of the right to relief as claimed would engage consideration of s 131 of the Evidence Act 1995 (Cth). They suggested that the Court would be likely to take into account the observations of Lander J: Pihiga Pty Ltd v Roche (2011) 1278 ALR 209. They said that the Axis parties would be likely to add to the relief sought in the originating application against the Mathew parties. They said that any application to amend the originating application would be premature having regard to the orders of 8 August 2016. They said that having regard to that process "it is unreasonable to demand that our clients incur the costs of amending the originating application whilst that process is on-going" [original emphasis]. They said that if resolution could not be reached on the costs, the originating application would "remain substantively on foot and directions will be provided by the Court" that would include a short period for proposed amendments to the originating application. 40 On 21 November 2016, Mr Crilly asserted that the Axis parties had the carriage of the proceedings and that since the Axis parties were not prepared to abandon the claims made by paras 6, 7, 9, 11 and 12, it would be necessary in the view of Mr Crilly to address that matter by filing an appropriate application. 41 On 24 November 2016, Mr Crilly sent an email to my Associate (copied to Mr Dudakov and Ms Pelka-Caven) requesting a date for the hearing of an application for summary judgment in relation to the relevant claims. On 24 November 2016, Mr Dudakov sent an email to my Associate copied to Mr Crilly requesting that the proceeding be listed for a case management conference at the next available date at which the Axis parties intended to seek orders in relation to the application foreshadowed by the Mathew parties. At the proposed case management conference, the Axis parties said they would seek an amendment to the originating application. By letter dated 6 December 2016, Mr Dudakov and Ms Pelka-Caven provided Mr Crilly with a copy of the proposed amended originating application. Changes would be made to reflect deletion of any issues in relation to the Pavlou Costs and the Third Party Costs. The claims recited at paras 7, 9, 11 and 12 as against the Mathew parties would be abandoned and deleted. The claims against Bennett & Philp and Mr Heath at paras 8 and 10 of the originating application would be abandoned. The additional claim to be introduced into the proceeding at para 13 would be an order that the Mathew parties are liable to pay damages to the Axis parties for negligent misstatement in such sum as determined by the Court by reference to the difference between $365,000 and such larger sum as might be allowed by way of taxation or, alternatively, an amount of $110,877.30 in respect of the Interpleader Costs. 42 On 29 November 2016, the Mathew parties filed their application for summary judgment under s 31A of the FCA returnable on the nominated date for case management, 14 December 2016. 43 On 13 December 2016, the Axis parties emailed an application for leave to amend the originating application to my Associate. By that application, para 2 would be amended to delete the Pavlou Costs and the Third Party Costs. Consequential amendments would be made to paras 3, 4 and 5. The declaration at Order 6 would be abandoned and in its place the Axis parties would seek an order that the costs payable by them to the Mathew parties under cl 1.2 of the Deed be fixed at $454,184.64. The declarations sought against the Mathew parties at paras 7, 9, 11 and 12 would be abandoned. There would now be no new para 13. The declarations at paras 8 and 10 in relation to Bennett & Philp and Mr Heath would be abandoned. As mentioned earlier, that application was not ultimately filed but made orally at a case management hearing on 14 December 2016. 44 In the face of all of this correspondence and the express reservation of questions notwithstanding the 8 August 2016 protocol as to the quantification of costs, the Axis parties have now abandoned the claims said to be based upon misrepresentations as alleged and as discussed in these reasons which, in turn, were put on the basis that they reflected serious breaches of ethical conduct. Bennett & Philp and Mr Heath and the Mathew parties had a legitimate interest in continuing to address those matters (especially in the face of the express reservation of those matters) reflected in the correspondence. Plainly, the Mathew parties have been put to costs and expense in dealing with the now abandoned claims. 45 However, there has been no adjudication of the merits of any of those claims. It seems to me inappropriate to embark upon any analysis of the merits of the claims in the context of deciding whether the costs ought to be on an indemnity basis or not. As to the costs, plainly enough the Mathew parties ought to have their costs of and incidental to each and every aspect of the abandoned claims. They ought to have the costs of bringing the s 31A application. The Axis parties were given plenty of chances to abandon those claims. They chose to reserve them and press them and add to them. Now, they have abandoned them and the foreshadowed claim 13. 46 Costs have been incurred and wasted unnecessarily. 47 However, in the absence of an adjudication of the merits of the claims and whether they were, in truth, doomed to fail, having regard to all of the relevant matters, I am not satisfied that in the exercise of the discretion under s 43 of the FCA, an order for indemnity costs ought or can be made. 48 The Mathew parties are to have their costs on the usual basis. They should have them now in the sense that they should be entitled to tax and recover these wasted costs as soon as possible. 49 The parties have agreed directions as to the future conduct of the matter. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate: Dated: 21 December 2016 SCHEDULE OF PARTIES QUD 522 of 2016 Applicants Second Applicant: MODE FINANCIAL SERVICES PTY LTD ACN 120 988 543 Third Applicant: CHRISTOPHER JOHN VITALE Respondents Second Respondent: KURISUMMOOTTIL PTY LTD ACN 144 883 778 Third Respondent: JOSEPH MATHEW SUPER PTY LTD ACN 143 323 095 Fourth Respondent: BENNETT & PHILP PTY LTD ACN 132 284 372 Fifth Respondent: MICHAEL HEATH