Chateau Constructions (Aust) Ltd v Zepinic & Anor

Supreme Court of NSW|2010-02-18|Before: Slattery J

CITATION : Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 6] [2010] NSWSC 538

a. Dismiss the defendant's amended motion of 15 December 2009. DECISION : b. Order the defendants to pay the plaintiff's costs of the proceedings after 3 December 2009. c. Grant liberty to apply.

CATCHWORDS : PROCEDURE - Supreme Court procedure - cross claims - cross claim filed out of time - leave sought to file cross claim after determination of principal claim - whether prosecution of cross claim is barred by Anshun estoppel - COSTS - plaintiff claims costs should follow the event - HELD - no estoppel - but extension of time to file cross claim not granted - pleading embarrassing and principal proceedings determined - costs ordered to follow the event

LEGISLATION CITED : Civil Procedure Act 2005, ss 22, 56 Uniform Civil Procedure Rules rr 9.1, 16.1, 42.1

Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 Chateau Constructions (Aust) Ltd v Zepinic [2009] NSWSC 1339 Chateau Constructions (Aust) Ltd v Zepinic [No 2] [2009] Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 3] Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 4] CASES CITED : Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 5] Chatsworth investments Ltd v Amco (UK) Ltd (1968) 1 Ch 665 CSI International Co Ltd v Archway Personnel (Middle East) Ltd (1980) 1 WLR 1069 Henderson v Henderson (1843) 67 ER 313 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Wood v Cross TV Centre Pty Limited (1962) NSWR 528

Plaintiff: Chateau Constructions (Aust) Limited PARTIES : First Defendant: Milla Zepinic Second Defendant: Vito Zepinic

COUNSEL : Plaintiff: Mr B Ilkovski Defendants: Dr Zepinic (self represented)

Plaintiff: Toomey Pegg Drevikovsky Lawyers SOLICITORS : Defendants: Dr Zepinic (self represented)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST

4643/09 CHATEAU CONSTRUCTIONS (AUST) LTD v MILLA ZEPINIC & VITO ZEPINIC [NO 6] JUDGMENT 1 HIS HONOUR: Chateau Constructions (Aust) Pty Limited ("Chateau"), a builder, is in dispute with Dr and Mrs Zepinic, the owners of residential property in Turramurra ("the Turramurra property"). The proceedings came before me on 28 September 2009, 8 October 2009, 3 December 2009, 21 December 2009 and 18 February 2010. I have already given the following five judgments in this matter: Chateau Constructions (Aust) Ltd v Zepinic [2009] NSWSC 1339 (28 September 2009); Chateau Constructions (Aust) Ltd v Zepinic [No 2] [2009] NSWSC 1338 (8 October 2009); Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 3] [2009] NSWSC 1373 (3 December 2009); Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 4] [2009] NSWSC 1478 (21 December 2009); Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 5] [2010] NSWSC 265 (8 April 2010). 2 In my judgment of 8 April 2010, I left open final decision on the issue of the Zepinics' proposed cross claim, because of a concern that Dr and Mrs Zepinic may be denied procedural fairness unless they had a further opportunity to reply to Chateau's final written submission. (Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 5] [2010] NSWSC 265 at [63]): "I have become concerned upon reviewing the course of written submissions after the hearing on 18 February 2010 that Chateau in its final written submission raised a new and substantial analysis of the degree of overlap between the Zepinics' proposed cross-claim and the allegations previously made in the CTTT proceedings. That material included an analysis of the similarity between the pleadings in the cases. It seems to me that the course of submissions has not permitted the Zepinics an opportunity to reply to that material which I think they should have before I decide the question of whether the cross-claim should be permitted to proceed. This question can be decided separately from the other matters the subject of this judgment. If I do give leave for the cross-claim to proceed, the effect that that may or may not have on the stayed orders for judicial sale can be considered at that time. " 3 The issue of costs was also left open to allow Dr and Mrs Zepinic to advance argument in relation to costs. I did so in the following terms (Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 5] [2010] NSWSC 265 at [110]): "Chateau has been substantially successful in its application before me. The normal applicable principle would be that costs follow the event. I have not yet formally made an order for costs but will do so in accordance with this principle unless Dr and Mrs Zepinic inform me within seven days that they contend some other principle applies and file submissions in support of that position. I will then determine the question of costs in chambers. The orders below do not include a costs order for that reason. Accordingly I make the following orders and declaration based upon the further amended summons." 4 I will now determine these two remaining issues in this order. The Cross Claim 5 The matter for determination is whether the Court should extend time to permit Dr and Mrs Zepinic to file a cross claim. The form of proposed cross claim entitled "Cross Claimants Cross Claim" is on the Court file. It was filed on 17 December 2009, two days after the filing of their notice of motion of 15 December 2009 dealt with by my last judgment and this judgment. Although the notice of motion was placed on the Court file and the applicable filing fee of $749 was paid and the document was stamped by the registry as filed, Chateau contends that it was not open to Dr and Mrs Zepinic to file a cross claim in the proceedings at the time that they did. Chateau also submits that leave should not now be extended retrospectively to allow it to be filed and that in any event the prosecution of the cross claim is futile and it should be struck out because the allegations within it are met by an estoppel. 6 The form of proposed cross claim lodged with the Court on 17 December 2009 named both defendants, Dr Zepinic and Mrs Zepinic as cross claimants. It sought the following relief: 1. "An order that the cross-defendant pay to the cross-claimants the cost of remedying variations, defects, omissions and completing the works, and other damages caused as follows: a) $531,224.00 (inclusive GST) being damages for breach of the Building Contract; b) $93,913.28 for payments to suppliers of materials used in works paid by the cross-claimant which should be paid by cross-defendant; c) $43,368.60 for additional concrete used to increase the size of the dwelling foundations as a result of an unapproved variation; d) Legal costs; e) Interest pursuant to s 100 of the Civil Procedure Act 2005" 7 The proposed cross claim was filed without the taking of any other procedural step. The motion that Dr and Mrs Zepinic filed on 15 December 2009 sought no leave to file the cross claim and made no other reference to it. When the question arose at the hearing on 18 February 2010 whether leave was necessary to file a cross claim, Dr and Mrs Zepinic sought leave to amend the motion to seek orders in the following form. "AMENDED NOTICE OF MOTION 1. Order that the declaration made by the Court on 3 December 2009 be set aside. 2. Order that the indemnity costs order made on 3 December 2009 be set aside and the Plaintiff to pay the Defendants' costs of these proceedings and this Notice of Motion on an indemnity basis. 3. Order that the Further Amended Summons be dismissed. 4. Order that time to file the Cross-claim be extended to 17 December 2009 and that the Defendants may rely on it in these proceedings." 8 Leave to make that amendment was granted. Order 4 of the amended motion raised for determination the present question of whether there is a requirement to extend time to file a cross claim to 17 December 2009 and whether the defendants may propound the proposed cross claim in these proceedings. 9 Chateau's argument that the Zepinics cannot rely upon the proposed cross claim first requires it to be established that the proposed cross claim was filed irregularly. After attempting to make out that its was filing was not regular, Chateau puts two arguments against the extension of time. The first argument is that Dr and Mrs Zepinic are estopped from litigating all the issues on the proposed cross claim in any event. Secondly, Chateau submits that by the date of filing the proposed cross claim, these proceedings were determined. Finally Chateau submits that the Court should not in its discretion allow further time. These reasons deal with each of these steps. Was the Filing of the Form of Cross Claim Regular? 10 Chateau submits that as these proceedings were commenced by Summons that a Cross Summons may be filed before the return day specified in the summons or "within such further time as the Court may allow": Uniform Civil Procedure Rules ("UCPR") Pt 9 r 9.1. Chateau says that no cross summons was filed within that time and the Zepinics have never applied for an extension of time. 11 These proceedings were commenced by summons on 22 September 2009 in the Equity Duty List. Forster J gave leave to file the summons that day. It was made returnable before the Equity Duty Judge on 28 September 2009. The tight abridgement of this return date to well before the usual return day meant that it was impractical for any defendant to file a cross summons within the time required by UCPR 9.1. 12 It would be difficult to find good reasons to oppose an application to extend time in such circumstances, were it made soon after the proceedings commenced. Nevertheless when on 15 December the proposed cross claim was lodged with the Court, ten weeks later, it was lodged without the requisite application for leave under UCPR Pt 9, r 9.1. The proposed cross claim was irregular in two respects. It was filed out of time. It was not in the form of a cross summons. 13 Chateau submit that an extension of time should not be granted. Its first argument is based on an estoppel. Is there an Estoppel? 14 Before considering Chateau's estoppel argument it is necessary to consider the course of the proceedings before the CTTT. 15 The Zepinics filed a cross claim in the CTTT. The course of proceedings before that tribunal resulted in consideration of that cross claim being deferred. It was dismissed other than on the merits. The course of proceedings in the CTTT shows how this happened. The two progress claims, 8 and 9, the basis of the action that Chateau commenced in the CTTT were issued on 28 November 2006 (progress claim 8) and 20 December 2006 (progress claim 9). On 18 January 2007, Chateau lodged its claim in the CTTT against the Zepinics claiming $223,000 alleging non payment of progress claims 8 and 9 and claiming payment of those claims, damages, holding costs and interest associated with the non payment of those claims. On 24 June 2008, Dr and Mrs Zepinic lodged their own claim in the tribunal. Their cross application alleged defective and incomplete work under the contract. In addition to claiming monies for repair of that defective and incomplete work, the cross claim claimed money for loss of rent and reimbursement of money alleged to have been paid to other parties in the building work. 16 The CTTT proceedings were heard before Senior Member Paull on 26 and 27 May 2008 and then on 22, 23 and 24 September 2008. Dr and Mrs Zepinic were legally represented during the May hearing dates but unrepresented for the September hearing. Just before the September hearing commenced, differences arose between Dr and Mrs Zepinic and their then lawyers Messrs Gray and Perkins. On Friday 19 September 2008, the Friday before the resumption of the part heard hearing on Monday 22 September 2008, Dr and Mrs Zepinic's retainer with Gray and Perkins was terminated. 17 On the Monday morning two important applications were decided. First, the CTTT declined Dr and Mrs Zepinic's application for an adjournment of Chateau's claim. Second, Dr and Mrs Zepinic sought to proceed on their cross claim. The CTTT declined to allow the cross claim to proceed and the application by way of cross claim was dismissed. But it was not dismissed on the merits. Senior Member Paull's decisions on this issue after considerable argument on 22 September is set out below: (CTTT transcript p 43/35 to p 44 /33): "So my job is to look at the legal issues and the fact of the matter is as I said before, I knew that there was a big problem and I started raising them in May and it's referred to in my transcript. I think that you cannot proceed with this case, not because I'm saying you shouldn't, but because in the end the New South Wales Supreme Court who I have to follow, have said that while the contract is alive and has not been terminated and you are holding the builder to its obligations to complete the work in accordance with the contract, you cannot sue for defective or incomplete work. That's not to say and in fact if you choose to do so at a later stage, you won't be stopped by my dismissing your application now because I'm not even hearing evidence on that. But ultimately if you and as I've said that you have had lawyers up until last Thursday and the directions I made in May and the matters I raised in May, made it quite clear that they were my concerns and they still are my concerns and having read now that Supreme Court decision of Byron Shire Council, I don't think whether you had a Judge from the High Court representing you or a Queens Counsel, that would change.

While you continue to take this course and that's your decision, that you treat the contract as being on foot. You cannot sue for these matters. I'm therefore going to dismiss your application and you may like to seek some advice, but it would be I think my responsibilities to say that that may not prevent you from bringing future claims if you think there is a problem and in fact Mr Cheney has also sort of suggested that may be the case.

So I'm going to dismiss your application about what you're seeking. I'm going to hear the builder's claim which doesn't mean I won't hear from you because you may have very good reasons and you've got every opportunity to put them to me as to why you haven't paid progress claims eight and nine and that's all I'm going to deal with. I'm going to start tomorrow on that though because I want to set out and I'd like you please Mr Cheney to have regard to this. I don't want us to go all over the place. By dismissing your claim, I haven't said that you're right or wrong about what's done or isn't done with work, I've just said it's too early for me to deal with it. If you want to maintain as you do that the contract's on foot, that the builder's responsible to come back and finish, then you cannot sue for those matters. I will deal with the builder's progress claims eight and nine but I have been looking again at the contract, so what I want it, and there's a lot of evidence filed and witnesses, and thing is I think we've already heard from a couple of the parties, we heard from the engineers.. But in dealing with the builder's claim for progress claims eight and nine seems to me, what I have to know is was the work completed. That is, was it finished in order to justify the builder issuing those claims and I want you Mr Cheney to take lead of that evidence. Whether it be calling people who finished it or didn't finish it or whatever, or their statements. And then you Mr Zepinic will have to tell me why you say according to the contract you were not obliged to pay those claims. And that takes looking at the contract and seeing what the contract says about, if you're issued with a progress claim, when can you or can't you pay it you know that claim? When are you relieved from that obligation." 18 This decision meant that the Zepinics' CTTT cross claim was not determined on the merits. The range of allegations of defective work within it were left for determination to a time when Dr and Mrs Zepinic were not alleging that the contract was still on foot. That has important consequences for the present application. 19 When Senior Member Paull gave her final decision of 18 December 2008, she returned to this issue and summarised what she understood was the result of her determination on 22 September 2008 in the following terms: "At the outset of the proceeding in May 2008, I raised my concern as to the nature of the orders sought, given that both parties continued to maintain that the contract was "on foot".

At the conclusion of the first two days of hearing (at which time the matter was adjourned for further evidence) I made directions requiring both parties to confirm the orders they sought in light of the fact that they maintained that the contract remained alive.

On the 1 of September 2008 the proceedings were listed before me for directions. At that time the Zepinics were still legally represented. I again raised the issue of the ramification of the contracts being "on foot".

Counsel for Chateau advised me that his client had prepared the document requested under my previous directions in relation to this issue. The Zepinics' solicitor advised me that the Zepinics' document complying with this direction would be filed and served on the 3 of September 2008.

On the 15 of September 2008 when I had cause to peruse the Tribunal file, I noted that the Zepinics had yet to file this document. I directed the Registry to write to both parties requiring them to address me on this issue at the commencement of the next allocated hearing date on 22 of September 2008. In particular I drew the parties' attention to Brewarrina Shire Council v Bechaus Civil Pty Ltd & Ors [2005] NSW CA (sic).

When the proceedings commenced on 22 September 2008 both parties continued to maintain that the contract was on foot. (Indeed it came out in the course of the proceedings that Mr McNair of Chateau is continuing to "look after" the Zepinics' property pending the outcome of these proceedings).

As I explained to them, I was of the view that in light of the Brewarrina Shire Council case, it was not open to the Zepinics to seek to sue Chateau for rectification and completion work while the contract was still "on foot".

On hearing from the parties on this issue I dismissed the Zepinics' application after giving my reasons orally. Accordingly, I made the corresponding orders on 22 September 2008. I have addressed the matter briefly here for the sake of completeness and because the Zepinics raise it in some detail, in their written submissions.

I now turn to Chateau's claim." 20 In its supplementary written submissions after the hearing on 18 February 2010, Chateau advanced a document (Attachment A) showing the high degree of correlation between the allegations in the CTTT cross claim and the allegations in the proposed cross claim. Chateau contends that although in the CTTT cross claim, the Zepinics asserted that their detailed matters of complaint were all complaints of defective work, the equivalent allegations in these proceedings had been transformed into allegations of unapproved variations. But in substance Chateau says the allegations are the same and are allegations of defective work. Whatever be the form of action in which they are clothed, Chateau says that the subject matter of those allegations 'belong to the subject of the litigation before the CTTT and [Dr and Mrs Zepinic] exercising a reasonable diligence should have made that allegation at that time': Henderson v Henderson (1843) 67 ER 313 at 319 and Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 602 per Gibbs CJ, Mason and Aickin JJ. 21 An estoppel of the kind identified in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, arises when the subject matter relied upon in the second action was so relevant to the subject mater of the first action, that it would have been unreasonable not to rely upon it in the first action: Anshun at [602]. There are a variety of circumstances where a party may justifiably refrain from litigating an issue in one proceeding and yet wish to litigate the issue in later proceedings. Expense, importance of the particular issue and motives extraneous to the actual litigation are examples: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 603. It has generally been accepted that a party will be estopped from bringing an action which if it succeeds will result in a judgment that conflicts with an earlier judgment: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 603. 22 Chateau's argument fails even before considering the substance of the estoppel which is said to arise. The argument fails because Senior Member Paull made it clear that the CTTT proceedings was not the time for her to deal with disputed allegations of defective workmanship that lay outside what needed to be determined in respect of progress claims 8 and 9. 23 But Chateau's estoppel argument fails for another reason. Chateau contends that the substance of the Anshun estoppel is as follows as is explained in paragraph 53 of its final submissions: "53. The order dismissing the defendant's Cross-claim in the CTTT has not been challenged. That order binds the parties according to its tenor. The tenor of that order is this: the defendants cannot prosecute proceedings the subject of the cross claim whist the contract between the parties remains on foot." 24 Chateau then advances argument to demonstrate that the contract is still on foot notwithstanding the attempts by the Zepinics to issue a notice of breach on 25 August 2009 based upon the matters the subject of the proposed cross claim. Chateau says that the contract is suspended and it has no obligation to rectify the asserted breaches whilst the contract is suspended and that the Zepinics purported termination of the contract is ineffective. 25 There are several problems with this part of Chateau's argument. Senior Member Paull did not make a determination whether or not a contract was still on foot. She merely determined that whilstsover Dr and Mrs Zepinic were asserting it was on foot that because of the Court of Appeal's decision in Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 that she did not regard it as open to the Zepinics to seek to sue Chateau for rectification and completion work in the CTTT. It was a procedural ruling only. It did not determine whether the contract was or was not on foot. A more accurate characterisation of Senior Member Paull's ruling than the one propounded by Chateau is that the Zepinics cannot prosecute proceedings while they are alleging the contract between the parties remains on foot. That was more the tenor of her order. This part of her ruling does not found any estoppels at all. It was not intended to be a final order but merely a procedural ruling which would be displaced or circumvented if and when the Zepinics brought a claim which depended upon a cause of action outside the contract or brought a claim for defective workmanship after terminating the contract. 26 The proposed cross claim is something of a hybrid document. It claims $468,000 for loss of income based on a cause of action in negligence. Although the pleading of that cause of action is embarrassing. It claims $531,224 for damages for breach of the building contract based upon the detailed allegations of defective work but whilst also alleging the contract works are suspended not terminated. This form of pleading is quite surprising given the Zepinics' current assertions that the contract is terminated. For example in paragraph 78 and 79 of Dr Zepinic's affidavit of 3 February 2010 he deposes to sending to Chateau via registered post a "notice of termination of building contract" and that on 9 September 2009 he informed Mr Rick Moy, a certifier from Greenfield Accredited Certifiers of the termination of the building contract with Chateau. Dr and Mrs Zepinic read and relied upon this and other evidence to similar effect. It seems to me that the pleading being propounded simply does not correspond with aspects of the case being put. Quite apart from any questions of estoppel there is good reason why the pleading should not be allowed to be filed and relied upon until Dr Zepinic decides what his case is and propounds a pleading that corresponds with it. This proposed cross claim is not that pleading. 27 Before leaving the question of estoppel, I should note that some estoppels do arise out of the CTTT decision. But they are estoppels which have little to do with the proposed cross claim. Senior Member Paull did determine Chateau's entitlements in relation to progress claims 8 and 9. To determine Chateau's entitlement on these progress claims, Senior Member Paull determined particular defect, incomplete work and variation claims in relation to issues such as kitchen bench tops, a spa motor, a laundry chute, dining room and bathroom paintwork, tiling of the gymnasium, missing tiles from the site, a splashback and contracting with a subcontractor for kitchen work and other issues directly related to the calculation of what was due on progress claims 8 and 9. Within ordinary principles all of these matters would be the subject of an issue estoppel and cannot be re-litigated. However, because I do not permit the proposed cross claim to proceed on other grounds it is not necessary for me to determine the precise overlap between Senior Member Paull's determinations on progress claims 8 and 9 and the proposed cross claim. Were the Proceedings Determined on 3 December 2009? 28 Chateau's final argument opposing the allowance of further time to make a cross claim is based on UCPR Pt 9 r 9.10 that "unless the Court otherwise orders proceedings on a cross claim are to be carried on together with the proceedings from which the cross claim arises." Chateau submits that the rule assumes that: 1. At the time the proposed cross claim is sought to be filed that the proceedings are on foot; and 2. The proposed cross claim arises from those proceedings. 29 Chateau contends that neither of those assumptions applies in this case. It says that the Court made final declaratory orders on 3 December 2009 and has not since set the final orders aside. The only issue remaining is implementing the orders for judicial sale of the property to enforce the charge. Chateau says the proposed cross claim does not arise from what remains of the proceedings. 30 I do not refuse to allow the Zepinics time to make a cross claim on this ground. The principal source of the Court's discretionary power to entertain cross claims is conferred by Civil Procedure Act 2005, s 22. Similar provisions have been held sufficient to permit a cross claim to be filed at any time before satisfaction of the principal judgment; the proceedings come to an end when judgment is satisfied: CSI International Co Ltd v Archway Personnel (Middle East) Ltd (1980) 1 WLR 1069 and see especially LJ Roskill at 1075 C-E. 31 Here the Court's judgment has not been satisfied and would not be satisfied until the Turramurra property were to be sold in accordance with my orders and the proceeds applied to the CTTT money judgment. 32 Moreover the test of connectedness between the cross-claim sought to be advanced and the principal proceedings would probably be satisfied here. The proposed cross claim relates to the same building contract and the same building project as is the subject of the CTTT judgment, being enforced by the charge in these proceedings. 33 But the Court's power to allow a party to make a cross claim is discretionary and the nature of the similarity between the first proceedings and the cross claim is an important factor in the exercise of that discretion: Chatsworth investments Ltd v Amco (UK) Ltd (1968) 1 Ch 665 and see Wood v Cross TV Centre Pty Limited (1962) NSWR 528 at 532 per Walsh J. Cross Claim Conclusion 34 Dr and Mrs Zepinic's submissions of 14 April 2009 make a number of points about the proposed cross claim that do not seem to be material to the matter now in issue. 35 They submit that Chateau is in default of UCPR Pt 16, r 16.1 as it did not file a defence to the cross claim within 28 days of being served with it. But this argument wrongly presupposes that the cross claim has been regularly filed. 36 They further submit that time should be allowed to make the proposed cross claim under Civil Procedure Act s 22 and UCPR Pt 9, r 9.1 because of alleged conduct of Chateau's employees said to amount to "criminal trespass" and that these employees "illegally entered the property" and engaged in "physical assault and abuse". Chateau disputes these allegations. The Zepinics also point to the continuing costs of maintaining security on the property whilst it is occupied by Chateau and the works are suspended. None of these matters assists in deciding the discretionary issue before the Court. 37 I have reached the conclusion that I should not allow further time for Dr and Mrs Zepinic to make a cross claim in the form of the proposed cross claim. There are three reasons for this. 38 First, the Zepinics waited ten weeks before filing the proposed cross claim and did so after deciding to be absent from the proceedings on 3 December 2009. Their absence from the hearing has not been adequately explained. The Zepinics had two months to prepare and seek to file their cross claim, the months of October and November, before the 3 December hearing. They did nothing until after the hearing went against them on 3 December. This is not a case that would allow the Court to exercise its discretion on the grounds that the failure to file and serve, or even foreshadow a cross claim before 3 December was accidental. 39 Second, the form of proposed cross claim is embarrassing and alleges that the contract is still on foot, when before the Court Dr Zepinic was arguing that the contract is at an end (see paragraph [51] of Chateau Constructions (Aust) Ltd v Zepinic & Anor [No 5] [2010] NSWSC 265]. Allowing the Zepinics to proceed on the proposed cross claim that has been lodged with the court would be likely to lead to predictable procedural disorder. This would be incompatible with the overriding purpose of the Civil Procedure Act and the UCPR of facilitating the just, quick and cheap resolution of the real issues in dispute between the parties: Civil Procedure Act s 56. 40 Thirdly, the form of proposed cross claim makes allegations of defects that are not readily managed in a cross claim to an action that commenced as a caveat extension proceeding and now only concerns enforcement by judicial sale of a charge over the Turramurra property. Such allegations would be better managed in the Building and Technology List, where the current standoff between builder still in possession and owner alleging defects can be resolved, unless of course the Turramurra property is sold first.

Costs 41 In my judgment on 8 April 2010 I determined that Chateau had been substantially successful in its application before me. The usual applicable principle is that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs: Uniform Civil Procedure Rules (UCPR) Pt 42 r 42.1. I did not make an order for costs on 8 April 2010. Instead I gave the Zepinics the opportunity to advance submissions to support the application of a different cost principle and a potentially different costs outcome. 42 The Zepinics advanced a short statement of position in relation to costs in their further written submission dated 14 April 2010. In that submission the Zepinics contended that the court should "dismiss payment of any costs referred to in p 109 and p 110 of the Court's judgment of 8 April 2010" unless Chateau is able to complete assessment of its precise costs and serve these on the defendants by 16 April 2010. 43 Nothing that the Zepinics have advanced since my judgment of 8 April 2010 displaces my view that Chateau was substantially successful before me and that the normal principle should apply that costs follow the event. No persuasive submission has been put that some other order should be made. Therefore the result will be an order for costs in Chateau's favour in respect of the hearing before me on 18 February 2010 and in respect of all matters ancillary thereto. 44 The only event that has occurred since my judgment of April 2010 relevant to the issue of costs is the dismissal of the Zepinics' motion to extend time for filing of its proposed cross claim. On that application Chateau has been entirely successful. That outcome does not alter the exercise of my discretion. Rather it supports the conclusion that the appropriate order is that the Zepinics pay Chateau's costs. Accordingly, an order for costs will be made in Chateaus favour on the ordinary basis: UCPR Pt 42 r 42.1.

Conclusions and Orders 45 In the result therefore I have found that the Zepinics' proposed cross claim has not been validly filed in the proceedings and that an extension of time to permit its filing now should not be granted. It is not necessary to make any formal orders in respect of the form of proposed cross-claim on the file. Although it is on the court file without leave. Its existence could be ignored. It will not be determined in these proceedings. 46 I have also found that nothing that the Zepinics have put to the court has persuaded me that as a result of my judgment on 8 April 2010 that costs should not follow the event. Chateau has been substantially successful in its application before the court determined on 8 April 2010 and in respect of the proceedings after my costs orders on 3 December, 2009. A costs order on the ordinary basis in respect of that portion of the hearing will be made in Chateau's favour. Chateau applies today for costs on the indemnity basis. I will give it liberty to apply in relation to that question. 47 Accordingly the court will make following orders:

a Dismiss the defendant's amended motion of 15 December 2009. b Order the defendants to pay the plaintiff's costs of the proceedings after 3 December 2009. c Grant liberty to apply.

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.

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