Di Lullo v JG King Pty Ltd (No 2)

Cases Cited: Allianz Australia Insurance Limited v Rawson Homes Pty Ltd (No 2) [2021] NSWCA 334
Calderbank v Calderbank [1975] 3 All ER 333
Di Lullo v JG King Pty Ltd [2025] NSWDC 213
Drive My Car Rentals Pty Ltd v Gabriel [2021] NSWCA 73
JR Consulting & Drafting Pty Ltd & Anor v Cummings & Ors [2015] NSWSC 10
Northern Territory v Sangare [2019] HCA 25

Category: Costs

Parties: Adrian Di Lullo (First Plaintiff)
Letticia Di Lullo (Second Plaintiff)
JG King Pty Ltd (Defendant/Cross-Claimant on the First Cross-Claim)
Newpoint Reinsurance Company Ltd (First Cross-Defendant on the First Cross-Claim/Cross-Defendant on the Second Cross-Claim)
Enio Sciessere (Second Cross-Defendant on the First Cross-Claim/Cross-Claimant on the Second Cross-Claim)

Representation: Counsel:
A Barnett (Plaintiffs)
R Size (Defendant/Cross-Claimant on the First Cross-Claim)
T E O’Brien (First Cross-Defendant on the First Cross-Claim/Cross-Defendant on the Second Cross-Claim)
R A Parsons (Second Cross-Defendant on the First Cross-Claim/Cross-Claimant on the Second Cross-Claim)
Solicitors:
Holding Redlich (Plaintiffs)
Champions Lawyers (Defendant/Cross-Claimant on the First Cross-Claim)
HBA Legal (First Cross-Defendant on the First Cross-Claim/Cross-Defendant on the Second Cross-Claim)
Hicks Oakley Chessell Williams (Second Cross-Defendant on the First Cross-Claim/Cross-Claimant on the Second Cross-Claim)

File Number(s): 2022/00133113

Publication restriction: Nil

JUDGMENT

1. Mr Adrian Di Lullo, the first plaintiff, and Ms Letticia Di Lullo, the second plaintiff, (collectively the ‘Di Lullos’) brought a claim against J.G. King Pty Ltd (‘JG King’) in relation to the home building contract entered into with JG King with respect to the building of a home for the Di Lullos. In the claim, the Di Lullos alleged that JG King had breached statutory warranties provided for under s 18B(1) of the Home Building Act 1989 (NSW), had breached its contract with the Di Lullos, and had breached the duty of care imposed on it by s 37 of the *Design and Building Practitioners Act 2020 (*NSW).

2. The judgment in relation to liability was delivered on 13 June 2025. The Court found that JG King is liable to the Di Lullos for the breach of the warranties implied into the building contract by s 18B(1) of the Home Building Act 1989 and for the breach of the duty of care imposed by s 37 of the Design and Building Practitioners Act 2020 (see Di Lullo v JG King Pty Ltd [2025] NSWDC 213 (‘the judgment on liability’)).

3. JG King brought a cross-claim (‘the first cross-claim’) against Mr Enio Sciessere, the engineer who designed the slab for the Di Lullo’s on JG King’s instructions, and against Newpoint Reinsurance Company Ltd (‘Newpoint’), Mr Sciessere’s insurer. JG King was unsuccessful in its cross-claim against Mr Sciessere and Newpoint (see the judgment on liability).

4. Mr Sciessere brought a cross-claim (‘the second cross-claim’) against Newpoint, seeking indemnity from Newpoint in respect of any liability found against him in the first cross-claim. As no liability was attributed to Mr Sciessere in the judgment on liability, this cross-claim will be dismissed.

5. Mr Sciessere and Newpoint’s involvement in this matter has ended.

Mr Sciessere and Newpoint’s applications for costs in relation to the first cross-claim

6. Mr Sciessere seeks an order that JG King pay his costs of the first cross-claim, consistent with r. 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) and the decision of the High Court in Northern Territory v Sangare [2019] HCA 25 at [25]:

25. A guiding principle by reference to which the discretion is to be exercised – indeed, “one of the most, if not the most, important” principle – is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. For example, a successful defendant may be refused its costs on the ground that its conduct induced the plaintiff to believe that he or she had a good cause of action. But in the present case, there was nothing of this kind in the conduct of the appellant in relation to the litigation that might have weighed against the exercise of the discretion in its favour. There was no suggestion of any conduct on the part of the appellant, whether by unreasonable delay or a want of the cooperation required of litigants to ensure the “just resolution of the real issues in civil proceedings with minimum delay and expense”, that might have been taken into account to justify refusing the appellant an order for its costs.

7. Mr Sciessere made an offer of compromise which was served upon JG King on 14 October 2024 under r.20.26 of the UCPR. The offer was an offer that the first cross-claim be dismissed and that JG King and Mr Sciessere each pay their own costs of the first cross-claim. The offer was not accepted.

8. Mr Sciessere seek costs on an indemnity basis from 14 October 2024.

9. Newpoint also made an offer of compromise which was served upon JG King on 14 October 2024 and was expressed to be an offer made pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333. The offer was an offer that the first cross-claim be dismissed against Newpoint and that Newpoint and JG King each bear their own costs of the first cross-claim. The offer was not accepted.

10. Newpoint seeks costs on an indemnity basis from 15 October 2024.

11. JG King does not oppose the order for costs sought by Mr Sciessere and in relation to the first cross-claim, but says, correctly, that the day on which indemnity costs ought to begin should be 15 October 2024, which accords with UCPR r 42.15A(2)(b)(i), which says that indemnity costs in these circumstances should be assessed “from the beginning of the day following the day on which the offer was made”.

12. JG King does oppose the making of an order for costs on an indemnity basis to Newpoint. However, I consider that Newpoint should have its costs on an indemnity basis from 15 October 2024, having regard to the offer of compromise.

13. There will be orders accordingly.

Mr Sciessere and Newpoint’s applications for costs in relation to the second cross-claim

14. Mr Sciessere seeks an order that JG King pay both his costs and the costs of Newpoint in relation to the second cross-claim. Newpoint also seeks an order for costs against JG King in relation to both cross-claims.

15. The applicable legal principles were identified in the defendant’s submissions. They are set out in Drive My Car Rentals Pty Ltd v Gabriel [2021] NSWCA 73 (‘Drive My Car Rentals’) by Gleeson JA with whom Macfarlan JA and Meagher JA agreed, at [93] – [96]:

Principles

93. The Court has a wide discretion with respect to costs conferred by s 98 of the Civil Procedure Act. The general rule contained in UCPR, r 42.1 is that costs follow the event. The ”event” may be characterised in more than one way, but generally the ”event” refers to the result of the claim or counter-claim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA).

94. The principles to be applied in relation to the costs of a third party claim are discussed in Furber v Stacey [2005] NSWCA 242 at [30]-[34] (Hodgson JA) and [108]-[119] (Einstein J). Both Hodgson JA (at [32]) and Einstein J (at [114]) qualified what King CJ had said in Lombard Insurance Co (Australia) Ltd v Pastro (1994) 175 LSJS 448 at 449 was ”a” guiding principle, namely:

12 I think that a guiding principle for the exercise of the discretion in such cases may be formulated as follows. Where the nature of the plaintiff’s claim, or allegations in support thereof, render it reasonable, having regard to the purposes of third party procedure, to bring in the third party, and the third party claim is unsuccessful solely by reason of the failure of the plaintiff to sustain its claim or the relevant allegations, the defendant should ordinarily recover from the plaintiff the costs of the third party claim including those which the defendant is ordered to pay to the third party. The emphasis is on the word “ordinarily”. The discretion is unfettered and a variety of factors may properly enter into the exercise of it. (Emphasis added.)

95. Hodgson JA said at [32] that it may be putting it too highly to say that the result indicated by King CJ in Lombard is the one that ”ordinarily” should follow, and that the ”guiding principle” stated by King CJ needs to be qualified to the extent suggested by Finn J in GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 688; (2003) 201 ALR 55, where having referred to King CJ’s reference to the need for other guiding principles, Finn J continued at [72]-[75]:

[72] Accepting that the ultimate question is whether in the circumstances the costs of the successful third party “ought fairly to be borne” by the unsuccessful applicant: Johnson v Ribbins [1977] 1 WLR 1458 at 1464; a variety of factors has [sic] been relied upon as being indicative of whether or not such is the case. Care, though, needs to be taken with several of these in that they are capable of misleading.

[73] A common consideration in the cases is whether it was “reasonable” or “appropriate” for a respondent to make the third party claim: cf Victoria University of Technology v Tulleth and Tokyo (Victoria) Ltd (unreported, SC of Vic, Beach J, 29 August 1994); Lombard Insurance Co (Australia) Ltd v Pastro (above) per Bollen J. The care that needs to be taken with this is that, while the making of the third party claim may have been justifiable, it may nonetheless be quite inappropriate to pass on the costs of a successful third party to the original applicant. As was observed by Tadgell J in Australian Guarantee Corporation Ltd v De Jager [1994] VR 483 at 500, “[i]t cannot be the inevitable rule that every successful plaintiff will be required to bear the costs of any third party the defendant sees fit to join”. A common instance of where the third party costs will not be passed on is where the third party claim raised “private issues” and the third party was not necessarily joined because of the applicant’s claim: eg Gold Coast Bakeries (Qld) Pty Ltd v Heat and Control Pty Ltd [1992] 1 Qd R 162 at 175; see also Paron v Fry (No 2) [1990] 1 Qd R 550.

[74] A distinct consideration has been whether the applicant’s claim was the catalyst for the third party claim. In Thomas v Times Book Co Ltd [1966] 1 WLR 911 at 920, Plowman J considered that the plaintiff’s claim rendered the third party proceedings “inevitable”: see also Fertinova Australia Pty Ltd v Samardzija (unreported, SC of Qld, MacKenzie J, 10 July 1995). The caution to be sounded with this consideration is that causation alone without regard to the nature of the cross-claim itself seems hardly sufficient to justify a pass on order.

[75] The third, and perhaps the most significant, consideration is the relationship of the nature of the original application to that of the cross-claim being brought. This nexus has been expressed in various ways: for example, does the nature of an applicant’s claim, or do allegations in support of it render it reasonable for the respondent to make in turn the cross-claim that it does: cf the Lombard Insurance Co (Australia) Ltd case, per King CJ; or does the third party claim raise issues private to the parties to it: Gold Coast Bakeries (Qld) Pty Ltd v Heat and Control Pty Ltd (above). Illustrative of the significance of this consideration are the observations made about “string of contracts cases” in L E Cattan Ltd v A Michaelides & Co [1958] 2 All ER 125 at 128:

“In the ordinary way, however, where damages are claimed for breach of contract on one contract in a string of contracts, and the seller brings in his immediate seller as a third party, and the third party brings in his immediate seller as a fourth party, then, provided that the contracts are the same or substantially the same so that the issue whether the goods comply with a description is the same, the defendant (in this case it was the plaintiffs, because it was a counterclaim), if successful, should recover against the plaintiffs not only his costs but any costs of the third party which he has been ordered to pay: the third party in like manner should recover from the defendant his own costs and any costs of the fourth party which he has been compelled to pay, and so on down the string. That is the normal way in which costs should be dealt with in this kind of action where there is a string of contracts in substantially the same terms.”

See also Henry v Australian Guarantee Corporation Ltd [1985] WAR 137. (Emphasis added.)

96. Einstein J agreed with this qualification by Hodgson JA and observed at [115]:

[115] Hence I am in agreement with Hodgson JA that the so-called “guiding principle” stated by King CJ requires to be read with the qualifications suggested by Finn J. I would however emphasize [sic] that whilst the reasonableness of the joinder of the third party may be a necessary pre-condition to the plaintiff being ordered to pay the costs of the third party claim, reasonableness is not to be regarded as a sufficient pre-condition to justify the making of such an order. The matter sounds in what is fair and just between the parties by reference to their conduct in connection with the litigation.

16. JG King accepted that it is appropriate for the Court to order that JG King pay Mr Sciessere’s costs and Newpoint’s costs of the second cross-claim, having regard to the principles set out in Drive My Car Rentals. I agree, and there will be an order accordingly.

17. JG King submitted that the Court should order that the plaintiffs pay JG King’s costs of the first cross-claim against Newpoint and Mr Sciessere, including the costs of the second cross-claim. JG King argued, in its written submissions:

The claim brought by the plaintiffs against JG King alleging that the design and construction of the slab was defective was the catalyst for the claim brought by JG King against Mr Sciessere and Newpoint. The claim brought by JG King sought damages from Mr Sciessere and Newpoint only in circumstances where JG King was found liable to the plaintiffs. The claim failed solely because the plaintiffs failed in their claim against JG King with respect to the design and construction of the slab. And the nature of both claims related to the allegation as to the design and construction of the slab. Accordingly, JG King’s costs of the cross-claim against Mr Sciessere and Newpoint (including the costs JG King has accepted it ought to pay with respect to Mr Sciessere’s cross-claim against Newpoint) “ought fairly be borne” by the plaintiffs. The Court may be fortified in reaching this conclusion in circumstances where the plaintiffs were put on notice of the potential costs consequences of maintaining the claim concerning the slab in the correspondence sent on 22 February 2022.

18. I reject this submission. I bear in mind the general rule that costs follow the event (see r 42.1 UCPR). The plaintiff did not bring proceedings against Mr Sciessere or Newpoint. The involvement in the proceedings of Mr Sciessere and Newpoint related solely to the cross-claim. The only allegations against Mr Sciessere were the allegations in the first cross-claim. JG King’s submission takes too narrow a view of the findings against JG King in the judgment on liability.

19. I do not consider that it would be fair to order that the plaintiffs pay the costs of the cross-defendant. The judgment on liability includes the following, at [182] – [184]:

182. The brief given to Mr Sciessere and Enrik was to design a slab for a house with an H2 classification under AS2870. The Macgregor Report, which Mr Sciessere relied upon for the classification of the site, is described on its frontsheet as a ”Report prepared for JG King Homes”. Given the brief that Mr Sciessere and Enrik had from the Builder, which included the Macgregor Report, and therefore implicitly sought a slab design for an H2 site, it cannot be fairly said that a representation that the house slab design complied with all relevant Codes, Standards and Regulation was a misrepresentation, or that Mr Sciessere was in breach of a duty of care to the Builder in making that representation. The Builder’s allegation that it may suffer loss or damage as a result of relying upon the slab design has not been made out.

183. The Cross-Claim against Mr Sciessere has not been made out.

184. It follows that the Builder’s Cross-Claim against Newpoint and Mr Sciessere’s Cross-Claim against Newpoint, both of which are dependent upon liability being established against Mr Sciessere, fall away.

20. Given those findings of fact, the relationship between the plaintiffs’ claim and the first cross-claim is not such as to render it reasonable for the cross-claim to be brought.

21. This reasoning also applies to the second cross-claim.

22. There will be orders that JG King pay the costs of Mr Sciessere and Newpoint on the first cross-claim and the second cross-claim. Given the offers of compromise made on 14 October 2024, costs will be on an indemnity basis from 15 October 2024.

23. I note that Newpoint argued that all of its costs should be awarded on an indemnity basis because it is the reinsurer, and not the insurer at the relevant time. I do not have sufficient evidence to decide that point, and it was not fully argued as between the parties.

The Di Lullo’s claim for costs against JG King

24. The plaintiffs seek an order for costs in relation to the hearing on liability by way of a gross sum costs order, payable forthwith.

25. The Court of Appeal set out principles to be applied in relation to an application for costs in Allianz Australia Insurance Limited v Rawson Homes Pty Ltd (No 2) [2021] NSWCA 334 at [14]-[17]:

14. Subject to rules of court, costs are in the discretion of the Court (Civil Procedure Act 2005, s 98). UCPR r 42.1 relevantly provides that if the Court makes an order as to costs, the Court is to order that the 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.

15. In Oikos Constructions Pty Ltd t/as Lars Fischer Construction v Ostin & Anor (No 2) [2021] NSWCA 98, I said (with the concurrence of Basten and Macfarlan JJA):

“[11] Rule 42.1 has been construed on the basis that ‘the event’ which costs should prima facie follow can be identified as a judgment for the plaintiff or the defendant on the claim (Baker v Towle [2008] NSWCA 73 at [11]; Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [8]).

[12] This was so, notwithstanding that in relation to a similarly worded rule in England it had been held that, where distinct causes of action were included in the same writ or statement of claim, the defendant was entitled to his costs of a cause of action on which he succeeded, even though the plaintiff was otherwise successful (Myers v Defries (No 2) [1880] 5 Ex D 180) and that the expression ‘the costs shall follow the event’ meant that costs were to be distributed according to the results of the several issues, while the party who was successful on the whole, got the ‘general costs’ (Reid, Hewitt & Co v Joseph [1918] AC 717 at 724-725, 733, 742).

[13] That the relevant “event” should be considered more straightforwardly as whether there was judgment for the plaintiff or for the defendant on the claim can be traced to the judgment of Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 at 16.

[14] In Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, this Court identified the principles to be applied as follows:

‘The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this Court in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows:

Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).

In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal.

If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27].

Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).

A separable issue can relate to ‘any disputed question of fact or law’ before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].

Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.

These principles were applied in City of Canada Bay Council v Bonaccorso Pty Ltd (No 3) [2008] NSWCA 57 at [22] and most recently in Turkmani v Visvalingham (No 2) [2009] NSWCA 279.’

[15] A successful party may be denied the whole of its costs or may be required to pay costs in respect of its failure on particular issues, even though that party did not act unreasonably in raising or defending the issues on which it failed (Permanent Trustee Australia v FAI General Insurance Co (Supreme Court of NSW, Hodgson CJ in Eq 3 June 1998 unrep at 10-11); Short v Crawley (No 40) [2008] NSWSC 1302 at [32]; Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 at [31]).

[16] In Bowen Investments v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107, Finkelstein and Gordon JJ said (at [5]) that if an issue by issue approach produces a result that is fairer than giving the successful party all of his or her costs, notwithstanding his or her failure on particular issues, then the issue by issue approach should be adopted.”

16. Whether ”the event” should be characterised as the result of a particular issue or cause of action, or the overall result of the proceedings, may not be of practical significance once it is recognised that if a particular issue or group of issues is clearly dominant or separable, then it can be appropriate either to deny the successful party its costs in respect of particular issues on which it fails, or to require the otherwise successful party to pay the costs of that issue even though it did not act unreasonably in raising or defending the issues on which it failed. As Finkelstein and Gordon JJ recognised in Bowen Investments v Tabcorp Holdings (No 2) [2008] FCAFC 107 at [5], if an issue by issue approach produces a fairer result, then that approach should be adopted. Mathematical precision is illusory (James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]).

17. Once it is decided that an otherwise successful plaintiff has failed on a separable or dominant issue such that it is not appropriate that the plaintiff receive all of its costs, in deciding how the discretion as to costs should be exercised to achieve fairness, the perspective of both parties should be considered (Oikos Constructions at [28]).

26. The plaintiffs’ claim in this matter has not been finalised. The hearing on quantum is pending.

27. In JR Consulting & Drafting Pty Ltd & Anor v Cummings & Ors [2015] NSWSC 10, Black J said, at [13], after considering the relevant cases:

13. It seems to me that several principles emerge from these decisions. The first is that the general principles as to costs are capable of applying to the determination of a separate issue, including the separate issue of liability, prior to a determination of quantum. The second is that the interests of justice may require that a party that has been wholly or substantially successful be permitted its costs of a separate hearing, rather than be delayed in receiving costs in respect of that hearing. I also recognise that several of the cases to which I have referred involve a position where a single party had been wholly successful in respect of the relevant issue and, in Baulderstone Hornibrook above, where that was not the case, Finkelstein J did not make an order for costs after the hearing of the initial issue. That focuses attention on a matter addressed by the parties in submissions, namely, the extent of their respective success in aspects of the proceedings.

28. The Court has jurisdiction to make an order for costs at this stage, as between the plaintiff and the defendant. However, in all of the circumstances of this matter, I do not consider that it would be appropriate at this stage to make an order for costs in respect of the plaintiffs’ claim, consideration of which is on-going. It is undesirable, at this stage, to predict whether, after the hearing on quantum, when judgment is given, arguments will be available to be heard and decided as to the extent of success of the plaintiffs and the defendant in the matter and the impact of those issues on costs.

29. I will deal with the plaintiffs’ application for costs after final judgment is given.

Orders

30. The following orders will issue:

31. The first cross-claim is dismissed.

32. JG King shall pay the costs of the first cross-claim of Enio Sciessere and Newpoint Reinsurance Company Ltd on the ordinary basis up to and including 14 October 2024 and thereafter on an indemnity basis.

33. The second cross-claim is dismissed.

34. JG King shall pay the costs of the second cross-claim of Enio Sciessere and Newpoint Reinsurance Company Ltd on the ordinary basis up to and including 14 October 2024 and thereafter on an indemnity basis.

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