LPD Holdings (Aust) Pty Ltd & Anor v Phillips, Hickey and Toigo & Ors [2013] QSC 30

Supreme Court of Queensland|2013-02-22|Before: Philippides J

Clayton Utz for the first, fourth, fifth respondents

**[1] The present proceedings were dismissed on 21 November 2012. The issue remaining for determination concerns what costs order should be made.

**[3] The proceedings were commenced on 18 July 2012 by originating application. By the originating application and statement of claim, the applicants sought relief, inter alia, for damages, for oppression under s 233 and s 1324(10) of the Corporations Act 2001 (Cth), declarations concerning allegations of wrongdoing, an order that the company be wound up pursuant to s 461 of the Act and an order that the first and second respondents correct the company's register of members.

[4] On 9 August 2012, the company applied to strike out the originating application and supporting statement of claim. The company's position was that the proceedings were incompetent, a view that the company's solicitors had earlier (by letter dated 31 July 2012) communicated to the applicants' solicitors. In particular, it was stated that the proceedings were flawed as neither of the applicants had standing to seek orders for relief from oppression or winding-up.[1] This was because the applicants were not registered shareholders or contributories at the time the proceedings were commenced.[2]

[5] By letter dated 20 August 2012, the applicants' solicitors responded that LPD's having "come off the register" was inadvertent and that it had become a shareholder again on 15 August 2012. The notion that because of that "very brief hiatus, the proceedings could or should be struck out" was rejected as wrong since LPD remained a "beneficial holder" of shares. The consent of the company was sought to order that the applicants file a new originating application and that the new originating application stand as the originating process in the proceedings, so that time was not wasted by a "purely technical requisition" and so the matter could be progressed on 23 August 2012. LPD's solicitors also asserted that the fact that Mayson was not a member of the company was an "insufficient basis" to strike out its claim.

[6] On 22 August 2012, the company's solicitors responded, pointing out that the applicants did not have standing to bring the proceedings at the time they were commenced. The letter of 20 August 2012 did not address the issue that Mayson had no standing and that there were no steps that could be taken to rectify that matter. Other defects were also raised. The company's solicitors advised that the "proper course in these circumstances is for the Court to bring the current proceedings to an end and your clients commence new proceedings."[3]

[7] On 23 August 2012, the company's strike out application and the applicants' application for directions came before the Court. The company repeated its previously advised view that, because the proceedings were incompetent, the originating application and the statement of claim should be struck out and that new proceedings be commenced.[4] Detailed written submissions were provided in support of that position. The applicants opposed that course and sought orders for the delivery of an amended originating application and statement of claim. Daubney J made orders, inter alia, that the amended documents be delivered for the respondents' consideration, that the strike out application be adjourned pending that delivery and that the applicants pay the respondents' costs thrown away by the adjournment of both applications (with costs being otherwise reserved).

[8] On 13 September 2012 the director respondents reiterated their previous notification to the applicants' solicitors that, given the fundamental defects with the proceedings, indemnity costs would be sought.[5]

[9] On 24 and 25 September 2012, amended pleadings were delivered by the applicants. The applicants' solicitors also advised that it proposed to withdraw the claim made by Mayson and to discontinue against the third respondent.[6] The amended statement of claim, inter alia, contained an amendment striking through Mayson as an applicant, consistent with an acceptance that it had no standing (although that amendment was not reflected in the amended originating application). The proceedings brought by LPD were maintained.

[10] An amended statement of claim was filed on 6 November 2012. The proceeding by Mayson was not discontinued, nor was leave to do so sought.

[11] The company maintained its previous objections and its strike out applications was relisted for hearing on 21 November 2012.

[12] On 6 November 2012, the director respondents filed an application (subsequently amended on 16 November 2012) seeking orders, inter alia, to strike out the originating application and statement of claim and to dismiss the proceeding against them. On the same day the company filed an amended application to strike out, seeking also in the alternative that the proceeding against it be dismissed.

[13] On 12 November 2012, proceedings against the third respondent were discontinued.

[14] On 20 November 2012, the day before the hearing of the respondents' applications, LPD commenced a new proceeding (No 11108/12) seeking substantially the same relief. This was done to overcome what was described as a "technical argument"[7] as to its standing. It was the applicants' position that the new proceeding provided the parties and the court a convenient, just, expeditious and inexpensive vehicle through which LPD could overcome the deficiency caused by its lack of standing so that the parties could use the occasion of the hearing to argue and have decided the real issues in the proceeding.

[15] The new originating application by LPD in proceeding 1108 of 2012 does not include Mayson or the fourth and fifth respondents as parties. Nor does it seek to continue any claim by LPD for damages against the first respondents on behalf of the company.

[16] On 21 November 2012, in addition to the proceedings being dismissed, orders were made for the progress of proceeding 1108 of 2012.**

**[17] The respondents contended that, having persisted in a hopeless case until 20 November 2012, which was effectively abandoned by commencing the new proceeding, an indemnity costs order is warranted in the circumstances of the present case. The respondents ought to be compensated for their true costs of addressing proceedings that had no reasonable prospects of success. The respondents rely on established authority that the discretion to order that costs be paid on an indemnity basis may be exercised where proceedings have been "commenced or continued in circumstances where the applicant[s], properly advised, should have known that [their case] had no chance of success": Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397 at 401 per Woodward J; see also Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 231 and 233 per Sheppard J.[8]

[18] The respondents argued that the applicants' case was commenced and continued in circumstances where the applicants should have known that they had no prospect of success. Even a brief investigation of the relevant facts and law prior to the proceedings being commenced should have revealed that the applicants did not have the requisite standing. This was more so, in the case of Mayson, as it was in fact pleaded that it had ceased to be a shareholder in the company in January 2011. The applicants point to the filing of the new proceedings as a belated recognition that the proceedings were flawed and the concession of senior counsel for the applicants at the hearing on 21 November 2012, the proceedings were "not properly constituted."[9]

[19] The applicants could and should have taken up the company's contention to end the proceedings early and save the subsequent costs. The deficiency in respect of the applicants' standing was drawn to the attention of the applicants from the outset in the letter of 31 July 2012[10] and on subsequent occasions.[11] Despite being made aware of the defects and despite warnings that an indemnity costs order would be sought against them if they persisted with the proceedings,[12] the applicants refused to do that which they eventually conceded was appropriate: commence new proceedings. In those circumstances and given the warnings that indemnity costs would be sought, an indemnity costs order was warranted.[13]

[20] In the alternative, it was submitted if the court was against costs being awarded on an indemnity basis, then costs should be awarded on a standard basis. Since the proceedings were dismissed, there was no reason why costs should not follow the event.**

[21] The applicants contended that there were in fact four events for orders for costs:

(a) the costs of the now dismissed proceedings in light of the commencement of the new proceedings;

(b) the costs of the abandonment of the case against the fourth and fifth respondents;

(d) the costs of the amendment of the statement of claim.

**[22] The applicants argued that the necessity to file a fresh originating application arose only from the "happenstance" that the originating application initiating the proceedings was filed during the very brief period from 5 July 2012 to 15 August 2012 when LPD was not named as a shareholder (although still beneficially entitled to its shares). At the time the proceedings were commenced, LPD had caused its shares in the company to be held by a trustee company (to move to a paperless holding) for "safekeeping purposes and to gain certain tax advantages"[14] and had thereby "inadvertently" caused it to no longer be a member of the company for the purposes of the Corporations Act. This resulted in a "technical deficiency" which in any other proceedings might have been readily cured without the need for fresh proceedings.

[23] The applicants contended that from 20 August 2012, the respondents were on notice that the applicants intended to overcome the "technical deficiency" concerning LPD's standing to bring the proceedings by commencing new comparable proceedings. It was submitted no additional costs were in fact incurred by the discontinuance of the dismissed proceedings and the commencement of the new proceedings because the respondents knew the applicants intended to resolve the issue of standing and the balance of the respondents' complaints remained live in the new proceedings.

[24] Furthermore, because of the filing of the amended statement of claim on 6 November 2012, the respondents were on notice that Mayson's claim was "in effect, discontinued and LPD did not intend to pursue the relief struck out" in that pleading. And on 20 November 2012, LPD addressed the issue of its standing by commencing proceedings 11108 of 2012 which sought relief identical to that sought in the amended statement of claim filed on 6 November 2012.

[25] The applicants proposed, at the hearing of the respondents' applications to strike out on 21 November 2012, that a version of the amended statement of claim filed in this proceeding (with further deletions), be the pleading in the new proceeding and that the matter proceed on the basis that the balance of the respondents' complaints could be the subject of submissions. The applicants asserted that, whilst the respondents at first informed the court that they were happy to proceed on that basis, they ultimately submitted they required time to consider the new proceedings, which submission was accepted resulting in the proceedings being dismissed. The hearing on 21 November 2012 could have proceeded on the basis that the issue of standing had been resolved by the new proceeding, with argument then being addressed to the "real issues" for determination, being whether the relief sought by LPD was in the nature of a derivative claim and thus properly brought under s 236 of the Act and whether LPD could claim damages under ss 233 or 1324(10) of the Act.

[26] But in any event, because the new originating application litigates the same issues that would have been litigated in the dismissed proceedings (but for the inadvertent technicality concerning standing) none of the costs to date will have been wasted. Particularly in light of UCPR 5 and the invitation to consent to the draft orders of 20 August 2012, the respondents' persistence in arguing the "no standing" point was without merit. Accordingly, the appropriate costs order following the dismissal of the proceedings was either that there be no order as to costs or that the parties' costs of and incidental to the proceedings be their costs in the cause in the new proceedings.

[27] It was further argued by the applicants that if the court was inclined to make an order as to costs against the applicants, a review of the authorities disclosed that generally "the ordinary cost rule should only be departed from where the losing party had misconducted itself in relation to the proceeding (such as unduly prolonging the case, or pleading fraud knowing it to be false, or making assertions of fact which are patently groundless, or making wild and contumelious allegations) where the institution of the proceeding was plainly unreasonable". The applicants submitted that the facts did not warrant a departure from the usual order as to costs; the deficiency with respect to LPD's standing was corrected by the time the proceeding was to be heard on 21 November 2012. In this context it was also relevant that the costs (if not all, substantially) incurred by the respondents in preparing for that hearing in the course of the proceeding were not wasted; they remain relevant to the new proceeding.

[28] The applicants also submitted that the following costs order should be made:**

(a) the applicants pay to the fourth and fifth respondents their costs of and incidental to the proceedings, save for the costs that the first respondents would otherwise have incurred;

(b) Mayson pay the respondents' costs of and incidental to its inclusion as an applicant in the proceedings; and

**[29] The respondents' response to these submissions is addressed in the consideration of the applicants' submissions below.

[30] In Colgate Palmolive Sheppard J at 233-234 identified the circumstances which have been thought to warrant the exercise of the discretion to award indemnity costs:**

".... I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes [1989] FCA 540; (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) ... . Other categories of cases are to be found in the reports. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis."

**[31] It is recognised that the categories in which the discretion to award indemnity costs may be exercised are not closed.[15] And the principles identified in Colgate Palmolive operate as a guide to the exercise of the discretion, they "neither define the circumstances in which the discretion is to be exercised nor limit its width."[16]

[32] It was submitted by the applicants that for an order of indemnity costs, there remains a need to demonstrate "some relevant delinquency on the part of the unsuccessful party"[17] or "unreasonable conduct".[18] Reference was made to Rosniak v Government Insurance Office[19] where Mason P (with whom Clarke AJA agreed) held that an order of indemnity costs required evidence of unreasonable conduct on the part of the party ordered to pay costs "albeit that it need not rise as high as vexation".[20]

[33] It was further submitted by the applicants that on an application for indemnity costs on the ground that the plaintiffs' claim was hopeless, groundless or abandoned late; the well-known principles identified in cases such as Colgate Palmolive are more specifically informed by the following principles:[21]**

(a) the discretion to award costs is "absolute and unfettered" but must be exercised judicially: Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd at 400;

(b) each case must be considered on its own particular facts, having regard to the general principles that the usual award of party/party costs to the successful party should be made unless there are special circumstances to justify the making of a different order: Davies J in Ragata Developments Pty Ltd v Westpac Banking Corp [1993] FCA 72 at 3.

(i) allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties: Woodward J in Fountain Selected Meats at 401.

(ii) a proceeding has been commenced or continued in circumstances where the applicant, properly advised, should have known that he or she had no chance of success: Woodward J in Fountain Selected Meats at 401.

(d) there is evidence of particular misconduct that causes loss of time to the court and to other parties: Sheppard J in Colgate Palmolive v Cussons at 233;

(e) for an indemnity costs order, an applicant must demonstrate some relevant delinquency, unreasonable conduct or irresponsible conduct on the part of the unsuccessful party. The mere fact that litigation is complex and is fought fiercely by the unsuccessful party is not a ground for indemnity costs: Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd [1991] FCA 154; (1991) 100 ALR 568, 570-571;

(f) costs should not be used as a de facto vehicle to impose a penalty on an unsuccessful party;

(g) a litigant should not be penalised and thus discouraged from the proper abandonment of claims, even made late: Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242.

[34] As to the last factor, particular reference was made to Huntsman where Kirby P and Mahoney JA stated at 247-248:

"Considerable store was placed upon the late abandonment of the appeals and the acknowledgment that this was said to provide that the appeals were always hopeless. Whilst that argument has force, it would be undesirable for the Court, by its costs orders, to discourage the proper, but late, abandonment of unwinnable appeals or points. Yet this might occur if there were a suggestion that such an act of responsible advocacy would be penalised by the making of a special costs order. ..."[22]

[35] But the applicants acknowledged that in Huntsman it was also stated at 249-250:

"... if the legal representatives of parties to an appeal (particularly perhaps in commercial litigation such as the present) consider that the appeal, or points in it, are obviously hopeless and doomed to fail, they would be well advised to warn their opponents that continued prosecution of the appeal, or the hopeless points, will result in an application to the Court for a special costs order. ... It alerts the opposing party. It activates the provision of advice by that party's legal representatives. Properly proved to the Court, it affords the occasion for making the special order in full knowledge that the risk has been appreciated and the party has pressed on regardless. No such warning was given in the present case."

**[36] In submitting that the statements of principle that inform the exercise of the court's discretion to order indemnity costs were squarely engaged by the circumstances of this case, the respondents rejected the proposition that the applicants appeared to advance that there was a requirement to establish misconduct, delinquency, unreasonableness or irresponsible conduct, in addition to the circumstances identified by Woodward J in Fountain Selected Meats Sales. In that regard, I consider that senior counsel for the company was correct in contending that the examples given by Woodward J in Fountain Selected Meats Sales may be seen as examples of misconduct, delinquency, unreasonableness and improper conduct - one such circumstance and that relied upon by the respondent, was the commencing and continuing a hopeless case.

[37] I am not persuaded that the parties' costs of and incidental to the proceedings should be costs in the cause in the new proceedings. As mentioned, LPD argued that the new proceedings will litigate the same issues that would have been litigated in the dismissed proceeding (save for the shareholder standing issue), so that none of the costs to date will have been wasted. But that argument overlooks the fact that costs were incurred by the respondents in agitating other defects in the various versions of the originating application and statement of claim other than the shareholder standing issue. It may be accepted that the applicants recognised the merit of the other matters raised given the extensive nature of the amendments made (beyond those going to the question of standing) in the final version of the originating application in the new proceedings and the initial originating application in the dismissed proceeding. I therefore agree with the respondents' submissions that the contention that the costs of the initial proceeding have not been wasted cannot be accepted in the light of the differences between the two initiating processes.

[38] As senior counsel for the company submitted, the effect of the order proposed by the applicants that the costs in these proceedings be costs in the cause in the new proceedings would mean that, if the respondents were successful in the new proceedings, they would not be entitled to any of their costs of successfully agitating the various flaws which resulted in the amendments. Indeed, it would also potentially result in LPD recovering its costs for resisting strike out applications, which it has conceded were well founded.

[39] Nor is the applicants' submission that an appropriate order is that they pay the fourth and fifth respondents' costs of and incidental to the proceedings, "save for the costs that the first respondents would otherwise have incurred", an attractive one. Although the fourth and fifth respondents have been deleted as parties in the new proceedings, no explanation was proffered as to why the proceedings against those respondents have not been pursued. It was submitted by senior counsel for the director respondents that the court should proceed on the basis that the applicants accept that their case against those respondents was hopeless. In any event, the applicants' position overlooks that the fourth and fifth respondents are parties separate from the first respondents, and as such are entitled to their costs.

[40] In submitting on Mayson's behalf that it should only be ordered to pay the respondents' costs of and incidental to its inclusion as an applicant in the proceedings and that it should not be subject to an indemnity costs order, senior counsel contended that Mayson's claim was "in effect, discontinued" on 6 November 2012.[23] This calls for an examination of Mayson's conduct both prior and subsequent to 6 November 2012.

[41] It is plain that Mayson and its advisors were aware of its lack of status as a shareholder from the outset, as it was in fact pleaded in the statement of claim filed with the originating application that it had sold its shares. When the matter of its lack of standing was raised by the company's solicitors on 31 July 2012, Mayson's solicitors' response, as already mentioned, was to assert that the fact "that Mayson is no longer a member of [the company] is an insufficient basis to strike out its claim".[24] After the strike out application hearing on 23 August 2012, an indication that the claim by Mayson was to be withdrawn was given on 24 September 2012.[25]

[42] The company's solicitors wrote on 2 October 2012[26] to the solicitors for Mayson, noting that Mayson remained a party to the proceedings and would require leave or consent to discontinue the proceedings, and offering to consent to orders discontinuing the proceedings on Mayson agreeing to pay costs on an indemnity basis, failing which the company would seek an order in those terms. There was no response to that letter.

[43] Mayson did not discontinue the proceedings on 6 November 2012, although the amended statement of claim had Mayson's name struck out. The company submitted that, in those circumstances, the only course open was to pursue the strike out application so as to have the claim brought by Mayson struck out. It was that course that resulted in the dismissal of the proceedings brought by Mayson.

[44] It was submitted on behalf of the company that Mayson and LPD both brought proceedings which were flawed and both applicants should equally suffer the consequence of pursuing hopeless cases. Moreover, the terms of the order sought by Mayson would have the effect of placing it in a position to potentially limit its costs by placing it in a position to argue on a costs assessment that the inclusion of Mayson as an applicant had no real consequence because the same claims were being run by LPD, the other applicant. There is merit in that submission.

[45] In the circumstances of this case, I consider that the appropriate costs order against Mayson is that which is usually made on the dismissal of an applicant's case. That is; that the applicant pay the costs of the respondent of and incidental to the proceedings. The issue as to whether that costs should be ordered to be paid on an indemnity or standard basis is dealt with below.**

**[46] LPD contended that the new originating application was required because of an "inadvertent technicality." This concerned its "temporary absence from the Register of Members."

[47] In respect of the proceeding brought by LPD, senior counsel for LPD conceded that it was "flawed in the sense that LPD was not a shareholder at the time [it commenced the proceedings] and, therefore, they are not properly constituted."[27] I would not in those circumstances characterise LPD's lack of status as a shareholder as a mere technicality; it was a critical matter going to the "heart" of the originating application, as senior counsel for LPD acknowledged, depriving it of standing to bring the proceedings. It appears that a decision was taken to transfer its shares out of LPD's name and into the name of a trustee company, with the result that it gained "certain tax advantages".[28] There is no evidence that the transfer was effected without LPD appreciating that it would no longer be on the share register of the company. It is therefore difficult to understand why LPD's not being a shareholder at the relevant date can be said to be "inadvertent". It knew it was not a registered shareholder for the purpose of the Corporations Act. It brought the proceedings and, despite being alerted to the incompetent nature of proceedings, persisted with its case.

[48] LPD's submission that commencing the new proceedings to overcome the shareholder standing issue "should not have taken the respondents by surprise"[29] does not advance matters in its favour. Nor does LPD's reliance on the request made by its solicitors before the first strike out application hearing on 23 August 2012 for the company to consent to the filing of a new originating application assist matters. As senior counsel for the company noted, consent was sought to the following relevant orders:**

"1. The Applicants have leave forthwith to file in Court an originating application (the new application) identical to the application filed on 18 July 2012;

Contemporaneously with the filing of the new application:

(a) the new application shall stand as the originating application in these proceedings, in lieu of that filed on 18 July 2012;

**[49] The company's response was that such orders did not address the standing issue in relation to LPD, nor did it address other flaws in the proceedings; the appropriate step to take was for the original proceedings to be dismissed and for new proceedings to be commenced. The applicants eventually adopted that course as an appropriate one the day before the second strike out application hearing on 21 November 2012. But as was submitted by the company, LPD failed to explain in its submissions how the orders proposed on 22 August 2012 would have overcome the shareholder standing issue.

[50] Before addressing the issue of whether costs should be awarded on a standard or indemnity basis, I turn to the issue raised by the applicants concerning the hearing on 21 November 2012.

[51] The respondents rejected the applicants' summary of the hearing on 21 November 2012 and the suggestion that the reason that the hearing did not proceed on that occasion was because of a change of position by the respondents in relation to the their proposal that a further version of the amended statement of claim filed in these proceedings (with additional deletions) be taken to be the pleading in the new proceedings. It was said that having initially indicated they were prepared to so proceed, they ultimately submitted that they required time to consider the new proceeding, thereby causing the current proceeding to be dismissed and, by implication, deferring the argument on the strike out application.

[52] It is evident from the transcript that the applicants' contention that the proceeding was dismissed to enable the respondents time to "consider the new proceeding" is not correct. As is apparent from the transcript, senior counsel for the company, at the commencement of the hearing, submitted that the "right outcome"[31] was that the original proceedings be dismissed and that the company be given "an opportunity to go away and consider this new pleading and see if it raises anything materially different".[32]

[53] In the process of arguing for an order that the amended statement of claim filed in these proceedings be taken to be the statement of claim in the new proceedings, senior counsel for LPD accepted that unless the order sought was made, "if that proceeding [was] dismissed then the statement of claim goes".[33] Given that there was no strike out application in the new proceedings[34] as there was no statement of claim, I determined that the appropriate course was that these proceedings be dismissed and that the "usual course" should be adopted in relation to the new proceedings, namely that a statement of claim be filed, a Rule 444 letter be sent and any points in issue be agitated in a subsequent strike out application.[35]

[54] The company's initial willingness to try to salvage some worth from the wasted day by arguing some aspects of the defective pleading was not able to be achieved and should not be counted against it; especially as it became clear that the strike through parts of the document handed up that day by senior counsel for LPD did raise new issues which required consideration. Nor was there any conduct by the director respondents that caused the strike out application to be deferred.

[55] In any event, after the determination that the proceeding should be dismissed as indicated, senior counsel for the applicants stated that although LPD had been content to proceed on the version of the amended pleadings put before the court, the further submissions made by the respondents would be considered and in those circumstances indicated that a fresh statement of claim would be filed in the new proceedings.[36]

[56] In my view, there was nothing in the approach of the respondents which would preclude the exercise of my discretion against an order for costs in their favour, whether on a standard or indemnity basis.

[57] The respondents were entitled to have the proceedings dismissed as counsel for the applicants ultimately conceded. They were fatally flawed in that the applicants lacked standing to institute the proceedings.

[58] The applicants opposed the first strike out application and that the defects could be overcome by subsequent amendments. Even with respect to the proceedings brought by Mayson, they were not discontinued notwithstanding the indication given on 24 September 2012 that Mayson's claim would be withdrawn and there was no response to the company's solicitors' letter of 2 October 2012 requesting that the proceedings be discontinued.

[59] It was only just before the second strike out application hearing that the new proceedings were filed, which was a belated concession of the critical defect as to the standing of both applicants. The amended pleadings also reflected an acceptance of other flaws outlined by the respondents. The filing of the new originating application may be seen as an attempt to circumvent the difficulties caused by the instigation and continuance of the defective proceedings. But it cannot be overlooked that the applicants continued those flawed proceedings, notwithstanding knowledge of their lack of standing, which rendered the proceedings hopeless. Given the circumstances of the continuance of the proceedings in the face of full knowledge of the facts and law which were repeatedly outlined by the respondents, one may be justified in concluding that there was a wilful disregard of those pertinent matters.

[60] This was not a case of abandonment of proceedings upon a party becoming aware of their flawed nature, but rather an abandonment in the context of a second strike out application hearing, with full notification of the defects and warnings as to the consequence of continuing with the proceedings.

[61] The applicants' conduct was unreasonable and improper in pursuing the flawed proceedings despite repeated demands by the respondents to end the proceedings and justifies an order for indemnity costs.

[62] Accordingly, I order that the applicants pay the respondents' costs of and incidental to the proceedings (including reserved costs) on the indemnity basis.**

[1] Affidavit of Erfurt, exhibit CME-04, pp 1 and 2.

[2] See also [11] to [24] of the company's submissions dated 23 August 2012 (Court Document No 15) and [9] of the company's submissions dated 30 November 2012.

[3] Affidavit of Erfurt, exhibit CME-04, p 19.

[4] Affidavit of Erfurt, exhibit CME-04, para [8], p 19.

[5] Affidavit of Alcock, exhibit AMA-04, p 18, Court document 38; Affidavit of Erfurt, exhibit CME-04 documents 6, 7, 9 and 11.

[7] Affidavit of Alcock, exhibit AMA-04, p 20, Court document 38.

[8] See also Smits v Tabone [2007] QCA 337 at [46]- [48]; Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359; Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242; The Beach Retreat P/L v Mooloolaba Yacht Club Marina Ltd & Ors [2009] QSC 84 at [82]- [103].

[10] See Affidavit of Erfurt, exhibit CME-04, document 1 at pp 1 to 8.

[11] See Affidavit of Erfurt, exhibit CME-04, documents 4, 5, 6, 7, 9, 10 and 11.

[12] Affidavit of Alcock, exhibit AMA-04, p 18, Court document 38; Affidavit of Erfurt, exhibit CME-04, documents 6, 7, 9 and 11.

[13] Huntsman Chemical Co Aust Pty Ltd v International Pools Aust Pty Ltd (1995) 36 NSWLR 242, 249-250.

[14] Affidavit of Miller, para 9, Court document 17.

[15] Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 187 (3 May 1991); see also Di Carlo v Dubois [2002] QCA 225, [37].

[16] Ingot Capital Investment v Macquarie Equity Capital Markets (No 7) [2008] NSWSC 199, [26].

[17] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 89-90 per Gaudron and Gummow JJ. See also Botany Municipal Council v Sec. Dep't of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412, 415.

[18] Rosniak v Government Insurance Office (1997) 41 NSWLR 608, 616; see also Di Carlo v Dubois [2002] QCA 225, [38].

[20] Rosniak v Government Insurance Office (1997) 41 NSWLR 608, 616.

[21] cf Macedone Ranges Shire Council v Thompson [2009] VSCSA 209, [13]-[15].

[22] See also Ainger v Coffs Harbour City Council (No 2) [2007] NSWCA 212, [29], Collex Pty Ltd v Roads & Traffic Authority of NSW [2007] NSWLEC 433, [43]; Southern Area Health Service v Brown (No 2) [2004] NSWCA 19, [6].

[23] Para [10] of the applicants' submissions dated 6 December 2012..

[24] Affidavit of Miller, exhibit MJM-01, p 50, document 17.

[25] See Affidavit of Erfurt, exhibit CME-04, p 29.

[26] Affidavit of Alcock, exhibit AMA-04, p 18, document 38.

[28] Affidavit of Miller para [9], document 17.

[29] Para [13] of the applicants' submissions dated 6 December 2012.

[30] Affidavit of Miller, exhibit MJM-01, pp 51-52, document 17.

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