Comin Enterprises Pty Ltd v Dayroll Pty Ltd

Uniform Civil Procedure Rules 2005 Pt 9 r 9.1(1), LEGISLATION CITED : Pt 6 r 6.19(1), Civil Procedure Act 2005 s 3, s 22

CASES CITED : Walker v Commonwealth Trading Bank of Australia (1985) 3 NSWLR 496 Payne v Young (1980) 145 CLR 609

Comin Enterprises Pty Limited (plaintiff/first cross-defendant) PARTIES : Dayroll Pty Limited (first defendant/third cross-claimant) Sam Peter Cassaniti (second defendant/first cross-claimant) Reliance Financial Services Pty Limited (third defendant/second cross-claimant)

COUNSEL : Mr Carnovale (Plaintiff) Mr Allen (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

15415 of 2005 Comin Enterprises Pty Limited v Sam Peter Cassaniti & 3 others

15417 of 2005 Comin Enterprises Pty Limited v Sam Peter Cassaniti & 3 others

15418 of 2005 Comin Enterprises Pty Limited v Dayroll Pty Limited & 2 others

JUDGMENT 1 HIS HONOUR: Before the court were three notices of motion for hearing. They are interrelated. Comin Enterprises Pty Limited is the plaintiff in each proceeding. At the outset of the hearing, Mr Allen of counsel who appears for Reliance Financial Services Pty Limited (Reliance) and Dayroll Pty Limited (Dayroll) informed the court that orders removing Reliance and Dayroll as defendants and striking out the cross-claims as regards Reliance and Dayroll were consented to in case numbers 15415/05 and 15417/05. These orders have been made. Orders for costs in favour of the plaintiff in each motion were, however, resisted. Before dealing with the question of costs I propose to consider the motion in number 15418/05 in which case there is no agreement that the cross-claim is to be struck out.

The motion in case no 15418 of 2005 2 By a notice of motion filed 15 March 2007 the plaintiff and the first, second, third, fifth, seventh, eight, ninth, tenth, eleventh and twelfth cross-defendants seek orders that: 1. The second and third defendants (Sam Cassaniti and Reliance Financial Services Pty Limited) be removed as parties to the proceedings. 2. An order that the cross-claim filed on 27 February 2007 be struck out. 3 In a statement of claim filed on 2 November 2005 Comin Enterprises Pty Limited as plaintiff commenced proceedings against a single defendant, Dayroll seeking an order for possession of the premises 11 First Street Ashbury (the Ashbury premises). The plaintiff claims that the defendant mortgaged the Ashbury premises to the plaintiff and is in default under the mortgage. 4 On 27 February 2007 the defendant filed a defence. It seems that on the following day orders were made in chambers by a registrar which added Sam Cassaniti (Cassaniti) and Reliance as second and third defendants. The plaintiff had not been notified of the orders sought and was not present when they were made. A cross-claim was filed naming the cross-claimants as Dayroll (first defendant/first cross-claimant), Cassaniti (second defendant/second cross-claimant) and Reliance (third defendant/third cross-claimant). 5 An order was made on 4 October 2007 that the cross-claim be dismissed as regards Cassaniti. The court was informed that Cassaniti became bankrupt on 26 April 2007. 6 During the hearing of the motion, Mr Allen consented to orders being made removing Cassaniti as second defendant and Reliance as the third defendant. As Reliance has been removed as a defendant, Mr Carnovale of counsel who appears for the plaintiff contends that Reliance cannot be a cross-claimant as it is not a party to the proceedings. The plaintiff's argument is founded upon Pt 9, r 9.1 (1) of the Uniform Civil Procedure Rules 2005 (UCPR) which provides: " 9.1 Making of cross-claim (1) A party (the cross-claimant) may make a cross-claim: (a) in proceedings commenced by statement of claim, within the time limited for the party to file a defence, or (b) in proceedings commenced by summons, before the return day specified in the summons, or within such further time as the court may allow." 7 Mr Allen argues that Dayroll's cause of action and that of Reliance are based on the same circumstances. In the defence and cross-claim the defendant has pleaded a right to a set-off which is said to arise from breach of an agreement that advances of money made by the "Cassaniti Group" to entities within the "Comin Group" would be set off against loans made to the "Cassaniti Group" by the "Comin Group". The amount asserted to have been advanced by the "Cassaniti Group" to the "Comin Group" is approximately $11.5 million. For the defendant to succeed on this defence, Mr Allen says that it would be required to prove the indebtedness of the plaintiff or one of the "Comin Group" entities to Reliance and Reliance was accordingly joined as a cross-claimant. The defendant submits that it is open to the court to make an order that Reliance be joined as a party to the cross-claim or to the defence pursuant to Pt 6, r 6.19 (1) UCPR. This rule is in the following terms:

" 6.19 Proceedings involving common questions of law or fact (1) Two or more persons may be joined as plaintiffs or defendants in any originating process if: (a) separate proceedings by or against each of them would give rise to a common question of law or fact, and (b) all rights of relief claimed in the originating process are in respect of, or arise out of, the same transaction or series of transactions, or if the court gives leave for them to be joined."

8 The plaintiff contends that the rule does not allow a defendant who wishes to cross-claim to bring in non-parties as cross-claimants. Should these other parties have an action that is connected with a proposed action of a defendant, the plaintiff argues that action should be the subject of a separate proceeding. 9 Pt 6, r 6.19 replicates, save for minor amendments, Supreme Court Rules 1970 Pt 8, r 2 which was considered to apply only to joinder by a plaintiff. In Walker v Commonwealth Trading Bank of Australia (1985) 3 NSWLR 496, Needham J said at 503: "It was submitted by the mortgagors that the rule applied only to joinder by the plaintiff and the statement of Mason J in Payne v Young (1980) 145 CLR 609 at 618 was relied upon. That certainly appears to be the case, but, additionally, it seems to me that joinder under r 2(a) could be ordered only if some relief is to be sought by the plaintiff against the proposed new defendant." 10 In the present proceedings the plaintiff does not seek relief from Reliance nor could it do so. It seeks an order for the possession of the Ashbury premises over which it holds a mortgage. 11 Mr Allen argues that the term plaintiff is defined in s 3 of the Civil Procedure Act 2005 (the CP Act) to include a person by whom a cross-claim is made and the defendant as the plaintiff on the cross-claim is entitled to seek an order for joinder pursuant to Pt 6, r 6.19(1) UCPR. 12 Section 3 of the CP Act defines the term plaintiff relevantly to mean a person by whom proceedings are commenced, and includes a person by whom a cross-claim is made. The term defendant is defined in s 3 of the CP Act to mean a person against whom proceedings are commenced, and includes a person against whom a cross-claim is made. The defendant in the present proceedings is the defendant in the plaintiff's proceedings for possession and the plaintiff on the cross-claim. The statutory definitions, it seems to me, do not permit an order to be made joining Reliance as a cross-claimant. The reason for this is to be found in s 22 of the CP Act which permits a defendant in the first proceedings (my emphasis) to bring a cross-claim against a plaintiff and a cross-claim against a third party where the cross-claim relates to, or is connected with the subject of the first proceedings. Section 22 provides: " [s 22] Defendant's right to cross-claim (cf Act No 52 1970, section 78; Act No 11 1970, section 15; DCR Part 20, rule 1) 22 (1) Subject to subsection (2), the court may grant to the defendant in any proceedings ( the first proceedings ) such relief against any person (whether or not a plaintiff in the proceedings) as the court might grant against that person in separate proceedings commenced by the defendant for that purpose. (2) Relief may not be granted under this section against a person who is not a plaintiff in the first proceedings unless the relief relates to, or is connected with, the subject of the first proceedings. (3) A person against whom a defendant makes a claim for relief under this section: (a) has the same rights in respect of his or her defence against the claim as he or she would have in separate proceedings commenced against the person by the defendant, and (b) if not already a party to the first proceedings: (i) becomes a party to the first proceedings, and (ii) unless the court otherwise orders, is bound by any judgment (including a judgment by consent or by default) or decision (including a decision by consent) on any claim for relief in the proceedings (including a claim for relief in any cross-claim in the proceedings)." 13 Section 22 does not provide a right to a person not a party to the first proceedings to bring a cross-claim against a plaintiff. The CP Act does not otherwise permit such an action to be commenced. 14 When any provision of the CP Act or any of the UCP Rules are to be interpreted, the court must give effect to the overriding purpose of the Act "to facilitate the just, quick and cheap resolution of the real issues in the proceedings": s 56 of the CP Act. This does not mean that the court is required to attribute to Pt 9, r 9.1 a meaning it plainly does not have. 15 Pt 9, r 9.1(1) is to be read in conjunction with s 22 of the CP Act. A "party" where it appears in that rule means to my mind the defendant in the first proceedings. Rule 9.1(1) does not permit a person not a party to the proceedings to make a cross-claim. Neither Pt 6, r 6.19 (1) nor Pt 6, r 24 (1) allow such a person to be joined as a cross-claimant. It is unnecessary to give detailed consideration to Pt 6, r 24(1) which was raised in argument as Reliance not being a defendant in the first proceedings cannot be joined as a cross-claimant. Reliance is to be struck out of the cross-claim. 16 During oral argument, Mr Allen said that Reliance could be joined as a cross-defendant. That is a matter for the defendant's consideration and does not require present elaboration. Reliance may consider commencing separate proceedings against the plaintiff and seek an order that those proceedings and the current proceedings be heard together. 17 Mr Carnovale complains that the cross-claim does not disclose a reasonable cause of action as it does not plead that the defendant/cross-claimant was part of the "Cassaniti Group". Mr Allen agrees that is correct but says that the name of the company was inadvertently omitted from paragraph 4. The cross-claim, Mr Carnovale further contends, is defective as included in the relief claimed is a declaration that the defendant and Patricia Cassaniti owe no money to the plaintiff/cross-defendant and Patricia Cassaniti is not a party to the proceedings, nor do the defendant's solicitors act for her. 18 The cross-claim is poorly drafted. Patricia Cassaniti should not have been included in the relief sought and her name will be struck out of the first order claimed for relief. The name Dayroll Pty Ltd, however, is included in paragraph 13(b) and its omission from paragraph 4, I am prepared to accept, was due to a lack of care in reviewing the pleading. The defect can be cured by amendment and the overriding purpose of s 56(1) of the CP Act may best be achieved by granting leave to amend the cross-claim. There was no argument before me as to the insufficiency of the balance of the cross-claim. I am, therefore, content to observe for present purposes that the cross-claim as drafted should be carefully considered by Dayroll's legal representatives before the amended pleading is filed. 19 For these reasons, I make orders: (i) That Reliance Financial Services Pty Limited be removed as the second cross-claimant. (ii) That the name Patricia Cassaniti be struck out of paragraph 1 of the relief claimed in the cross-claim. (iii) That the defendant is to file and serve an amended cross-claim on or before 4pm 14 January 2008. (iv) That the defendant is to pay the plaintiff's costs of the motion.

The question of costs on the motions in case numbers 15415/05 and 15417/05 20 Mr Allen says that the orders striking out the cross-claims were consented to without admitting in anyway that the cross-claims were improperly brought by Reliance and Dayroll. He argues for the same reasons advanced in the previous motion that Reliance and Dayroll were entitled to continue the proceedings as cross-claimants. As Cassaniti had been made bankrupt, Mr Allen says, there was no longer any need for the cross-claims to be brought because these proceedings were being dealt with by the sequestration of Cassaniti's estate. Reliance and Dayroll should not be penalised by orders as to costs, Mr Allen submits, because they made a concession which is in the interests of justice. 21 Reliance and Dayroll were not defendants in either proceedings. For the reasons previously given they were not entitled to be joined as cross-claimants or to commence cross-claims.

22 In a letter dated 11 May 2007 (exhibit A) the plaintiff's solicitors notified the solicitors for Reliance and Dayroll that these companies were not entitled to pursue any cross-claim and an order for indemnity costs would be sought. The sole reason I will not make an order that costs be assessed on an indemnity basis is the concession made by Mr Allen at the commencement of the proceedings that the cross-claims were to be struck out. The plaintiff is, however, entitled to the costs of each motion.

Order: (i) That Reliance Financial Services Pty Limited and Dayroll Pty Limited are to pay the plaintiff's costs of the motion in case number 15415/05. (ii) That Reliance Financial Services Pty Limited and Dayroll Pty Limited are to pay the plaintiff's costs of the motion in case number 15417/05. **********

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