Cassaniti v Katavic

Court of Appeal (NSW)|2023-10-18|Before: Gleeson JA, Kirk JA, Adamson JA, Robb J

Solicitors: McEvoy Legal (Appellants) Kamy Saeedi Law (Respondents) File Number(s): 2022/204856; 2022/261720 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2022] NSWSC 519 Date of Decision: 2 May 2022 Before: Robb J File Number(s): 2019/372019

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

The competing positions on costs

The appellants, Mr Cassaniti and Ms Morvillo, seek separate costs orders with respect to the misleading conduct appeal and the trust claim appeal, as follows: 1. Mr Katavic to pay Mr Cassaniti and Ms Morvillo's costs of grounds 1-14 of the amended notice of appeal; 2. Ms Morvillo to pay Mr Katavic's and Antalija No 4's costs of grounds 15-19 of the amended notice of appeal; and 3. Mr Katavic and Antalija No 4 to pay Mr Cassaniti and Ms Morvillo's costs of the summons seeking leave to appeal.
The appellants do not seek an order for costs against Antalija No 4 in relation to the misleading conduct appeal, on the stated basis that there would be actual prejudice if an order is made against Antalija No 4 than just against Mr Katavic since Ms Morvillo, as trustee of the Cassaniti Discretionary Trust, is a beneficiary of the Antalija Unit Trust of which Antalija No 4 is trustee.
The appellants seek ancillary orders that (i) Mr Katavic pay their costs of the further amended cross-claim (which was dismissed by this Court), (ii) there be no order as to costs of the respondents' notice of motion for security for costs determined by Macfarlan JA on 10 November 2022, (iii) the Registrar pay the sum of $32,500 (seemingly meaning $37,500) of the $75,000 paid into court by the appellants out to the appellants' solicitor, and (iv) there be no costs of the argument as to costs, with the intent that each party pay their own costs.
Mr Katavic and Antalija No 4 (together the respondents), seek orders that the appellants pay 50 per cent of the first and second respondents' costs of (i) the appeal as agreed or assessed, and (ii) the summons seeking leave to appeal as agreed or assessed.

Costs of the appeal

There were two relevant "events" on the appeal, for the purpose of Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1: the success of the misleading conduct appeal and the failure of the trust appeal. The question is whether, given the mixed outcome on the appeal, some other order should be made than the default position that costs follow the event: UCPR, r 42.1. The relevant principles are summarised in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA).
It is not in dispute that the misleading conduct appeal and the trust appeal involved discrete and severable issues. It is on this basis that the appellants seek separate costs orders, going in both directions. It is said that separate costs orders are appropriate given that Mr Cassaniti's involvement on appeal was limited to the misleading conduct appeal, on which Mr Cassaniti and Ms Morvillo succeeded. It is also said that there should be no reduction in the appellants' costs of this part of the appeal because Mr Katavic's case was fatally flawed from conception, being a reference to the causation point on which the appellants succeeded.
The respondents identified what they say were four issues litigated on appeal: (i) the challenge to the primary judge's finding that Mr Cassaniti contravened s 18 of the Australian Consumer Law (ACL), being Sch 2 to the Competition and Consumer Act 2010 (Cth) (grounds 1-5), (ii) the challenge to the primary judge's finding that Mr Katavic relied on Mr Cassaniti's misleading conduct (grounds 6-11), (iii) the challenge to the declaratory relief granted by the primary judge in order (5) below that the unitholders' agreement is void ab initio (the causation point) (grounds 12-14), and (iv) the challenge to the primary judge's failure to find that the $2.075 million was property of the Antalija Unit Trust and Mr Katavic procured or was knowingly involved in a breach of trust (grounds 15-19). It is said that the respondents succeeded on three and the appellants on only one of those issues. It is also said that the four issues were discrete and severable.
The respondents say that the appellants' characterisation of the misleading conduct appeal as "total success", ignores the appellants' failure on grounds 1-5 (misleading conduct) and grounds 6-11 (reliance), which it is said occupied the bulk of written and oral argument on appeal. The respondents also say that the causation point and the basis on which the appellants succeeded on that issue, had no relevance or bearing on the other grounds of appeal with respect to the misleading conduct appeal.
Contrary to the appellants' submissions, the mere fact that they succeeded on the misleading conduct appeal, does not preclude a court from making a special costs order departing from the starting point of costs following the event. Ultimately, as Hodgson JA explained in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121]: In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. ...
As explained in Calvo v Ellimark Pty Ltd (No 2) [2016] NSWCA 197 at [10], in making that assessment of fairness, regard may be had to the extent to which an issue contributed to the trial, and the extent to which it was arguable, however the discretion as to costs is not circumscribed by the binary question of whether or not an unsuccessful claim or defence was reasonably arguable. "The ultimate question - what is the appropriate order to achieve fairness - may, in an appropriate case, require a more nuanced analysis": Calvo v Ellimark Pty Ltd (No 2) at [10].
Nevertheless, contrary to the respondents' submissions, this is not a case in which it is appropriate to make only one set of costs orders in relation to the appeal, rather making separate orders, given the lack of commonality between the parties interested in the misleading conduct appeal and the trust appeal. Although the primary judge found that Ms Morvillo was Mr Cassaniti's nominee in relation to the $2.25 million advanced to Antalija No 4 by an entity associated with Mr Cassaniti (see [133] and [137] of the principal judgment), no submission was advanced by the respondents that Ms Morvillo should be viewed as a nominal appellant and that Mr Cassaniti was in substance the appellant with respect to the trust appeal.
Although separate costs orders should be made, contrary to the appellants' submissions, it is not appropriate to do so by reference to each parties' success or failure on individual grounds of appeal or grounds of notice of contention. The preferable course is to make orders whereby each party pays a percentage of the other (relevant) party's costs. Although that requires determination of both parties' solicitor-client costs, it avoids the first layer of transaction costs on an assessment as to whether particular work relates to particular issues on which the party succeeded or failed. Plainly, this is an area where a broad-brush approach should be applied. In making such as assessment, I proceed on the basis that the separate costs orders should reflect that: 1. the appellants' success on the misleading conduct appeal was limited to the causation point and the notice of contention, and the discrete issues on which they were unsuccessful - misleading conduct and reliance - took up a significant part of the appeal by way of written and oral submissions; 2. although Antalija No 4 was a proper party to the misleading conduct claim both at trial and on appeal, no order for costs should be made against it given its position as trustee, and that the active parties to that claim were Mr Katavic on one side and Mr Cassaniti and Ms Morvillo on the other side; and 3. the respondents' successfully defended the trust appeal and should also have their costs of (i) the misleading conduct and reliance issues, and (ii) the appellants' oral application to further amend the notice of appeal, given the unsuccessful trust appeal.
In my view, the appropriate costs orders in relation to the appeal are that: 1. Mr Katavic should pay one-third of the costs of Mr Cassaniti and Ms Morvillo; and 2. Ms Morvillo should pay 50 per cent of the costs of Mr Katavic and Antalija No 4.

Summons seeking leave to appeal

The appellants say that they succeeded on their application for leave to appeal after Mr Katavic and Antalija No 4 attempted to defeat the appeal by taking the point that leave was required, since the declaration in par [5] of the orders below was interlocutory. It is said that in taking the point, costs were visited upon the appellants, including a contest on the papers as to how the leave point ought to be determined, which Ward P dealt with on the papers by directing that there be a concurrent hearing.
The respondents say that competency of the appeal was properly raised by them pursuant to UCPR, r 51.41. That should be accepted. In the principal judgment, the Court inclined to the view that the declaration in par 5 of the orders below was interlocutory and, to the extent necessary, granted leave to appeal against the first and second respondents.
Given that the appellants resisted the need for leave to appeal with respect to the declaration, there should be no order for costs in relation to the summons for leave to appeal as between the appellants and the first and second respondents.

Costs of the security for costs motion

In ordering the appellants to pay $75,000 by way of security for costs on 10 November 2022, Macfarlan JA ordered that the parties' costs of the respondents' notice of motion be costs in the appeal: Cassaniti v Katavic [2022] NSWCA 230.
Mr Cassaniti and Ms Morvillo say that the appropriate order is that there be no order for costs of the motion, given the mixed result of the appeal.
Mr Katavic and Antalija No 4 say that there is no reason why the costs of the notice of motion should not remain as costs in the appeal. That should be accepted. Each of the respondents has been vindicated in obtaining an order for security for costs against Ms Morvillo, relevantly, Ms Katavic has succeeded on the appeal and obtained a costs order in her favour and Mr Katavic and Antalija No 4 should obtain a costs order on appeal against Ms Morvillo, as proposed at [14] above.
The appropriate order is that Ms Morvillo pay the respondents' costs of the notice of motion filed 5 October 2022.

Disposition of moneys paid into Court

The appellants say that as the appeal had mixed results, half of the security provided pursuant to the orders made by Macfarlan JA ought to be released to the appellants, in recognition that the security was for the costs of the entire appeal and half the appeal succeeded.
The respondents say that the security for costs that was ordered by his Honour should remain with the Court, (i) at least because Ms Katavic already has costs orders in her favour, and (ii) until the Court has made further costs orders and, if favourable to Mr Katavic and Antalija No 4, until those costs orders have been quantified. That should be accepted, given the costs orders already made by the Court in favour of Ms Katavic and the costs orders that I propose should be made in favour of the other respondents.

Costs of the further amended cross-claim

Contrary to the premise of the appellants' submissions, the costs of the further amended cross-claim are outside the scope of the matters in respect of which submissions on costs were directed by the Court by order (9): see [188] of the principal judgment. The costs of the amended cross-claim is a matter for the primary judge when dealing with the remaining issues, including costs of the underlying proceedings.

Orders

For the above reasons, I propose the following orders: CA2022/261720 (Leave to appeal) 1. Subject to order (2) made on 23 May 2023, there be no order as to costs of the summons seeking leave to appeal. CA2022/204856 (Appeal proceedings) 1. The first respondent (Mr Katavic) to pay one-third of the appellants' costs of the appeal. 2. The second appellant (Ms Morvillo) to pay 50 per cent of the first and second respondents' costs of the appeal. 3. There be no order as to costs of the summons seeking leave to appeal as between the applicants and the first and second respondents. 4. The second appellant (Ms Morvillo) to pay the first, second and third respondents' costs of the notice of motion filed 5 October 2022. 5. There be no order as to costs of the argument as to costs, to the intent that each party bears its own costs.
KIRK JA: I agree with Gleeson JA.
ADAMSON JA: I agree with Gleeson JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 October 2023

At a glance

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Legislation Cited (2)

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