Lauvan Pty Limited v Bega

The third cross-claim

1. Mr Ciappara brought a third cross-claim against the plaintiffs, Lauvan and Mittabell, as well as the second and third defendants, Aidan Bega and AB Veritas, claiming indemnity or contribution, either pursuant to s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the 1946 Act) or by way of equitable contribution.
2. The third cross-claim only arose for consideration if Mrs Bega succeeded on the second cross-claim against Mr Ciappara in respect of any claims against Mr Ciappara that were non-apportionable under Pt 4 of the Civil Liability Act 2002 (NSW) (Civil Liability Act). Mrs Bega's case was that the only claims against Mr Ciappara that were not apportionable under the Civil Liability Act were the claims for breach of fiduciary duty said to arise otherwise than by a failure to take reasonable care. In oral closing submissions, counsel for Mr Ciappara acknowledged that the claim for statutory contribution under the 1946 Act did not arise on the facts. [2] The claim for equitable contribution was advanced on the basis that Lauvan, Mittabell, Aidan Bega and AB Veritas were co-obligors in respect of a common obligation.
3. In the principal reasons, I concluded at [469] that since Mrs Bega's second cross-claim against Mr Ciappara had failed, the issues raised by Mr Ciappara's defensive cross-claim against the plaintiffs and Aidan Bega and AB Veritas, did not arise.

The costs orders sought

1. Mr Ciappara contended, consistent with the preliminary view expressed in the principal reasons [3] , that he should pay the cross-defendant's costs of the third cross-claim and that Mrs Bega should pay those costs to Mr Ciappara and also pay Mr Ciappara's costs of the third cross-claim.
2. The plaintiffs, Lauvan and Mittabell, adopted Mr Ciappara's submission that Mr Ciappara should pay Lauvan and Mittabell's costs of the third cross-claim.
3. Mrs Bega agreed that Mr Ciappara should pay the cross-defendants' costs of the third cross-claim, but opposed the further costs order sought by Mr Ciappara.
4. As the parties agreed that Mr Ciappara should pay the costs of the cross-defendants to the third cross-claim, the costs dispute is confined to whether any further or other order should be made.

Submissions

1. Mr Ciappara submitted that it was reasonable for him to have brought the third cross-claim, and that it was reasonably foreseeable that he would do so, in circumstances where it appeared that the conduct of each cross-defendant had caused or contributed to the same loss for which Mr Ciappara was allegedly liable, and it was prudent for Mr Ciappara to seek contribution from those parties.
2. Mr Ciappara further submitted that the third cross-claim was wholly prompted by Mrs Bega's cross-claim against him and he therefore should not have to bear the cost of bringing the claim in circumstances where Mrs Bega's cross-claim against him had wholly failed.
3. Mr Ciappara emphasised that the third cross-claim was not dismissed because it lacked merit, but rather that it did not arise in the circumstances where Mrs Bega's cross-claim against Mr Ciappara had failed. He also submitted that the third cross-claim took up little time at the hearing which reinforced the contention that the cost of it should be borne by Mrs Bega.
4. Mrs Bega submitted that the third cross-claim made novel claims against the plaintiffs [4] and also against Aidan Bega and AB Veritas, which were not raised by Mrs Bega on her pleadings. [5] To the extent that the third cross-claim extended beyond the case pleaded by her (in her second cross-claim), Mrs Bega submitted that those matters should not be regarded as reasonable to be raised by a cross-defendant.
5. Mrs Bega further submitted that, contrary to Mr Ciappara's submission, the issues raised by the third cross-claim required witnesses to be recalled and further cross-examined and should not be characterised as taking up "little time" at the hearing.

Relevant principles

1. Section 98(1) of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) provides that subject to the rules of court and to this or any other Act, costs are in the discretion of the Court, and the Court has full power to determine by whom, to whom and to what extent costs are to be paid.
2. Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1 provides 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.
3. In Furber v Stacey, [6] Hodgson JA observed that the usual rule (that costs follow the event) prima facie applies also in the case of cross-claims. His Honour said (citations omitted): [30] The prima facie principle to be applied in relation to cross-claims, as in relation to other matters, is that costs follow the event. Accordingly, the prima facie position in the event that a plaintiff's claim against a defendant fails, and this defendant's cross-claim against a cross-defendant fails, is that the plaintiff pay the defendant's costs of the plaintiff's claim, and the defendant pays the cross-defendant's costs of the cross-claim: …. This prima facie principle is expressed in the District Court Rules Part 39A rule 9 and Part 21 rule 8. The rule to which Hodgson JA's remarks were directed was District Court Rules 1973 (NSW), Pt 39A, r 9, which was repealed on 15 August 2005. It was in similar terms to the successor rule in UCPR, r 42.1.
4. It is not in dispute, as Hodgson JA observed in Furber v Stacey, that it may be appropriate to make further or other orders in relation to third party proceedings, particularly as regards a possible liability of a plaintiff for a cross defendant's costs. [7]
5. In Lombard Insurance Co (Australia) Ltd v Pastro, [8] King CJ drew a distinction between those cases in which a third party claim by a defendant is unsuccessful because the defendant has failed to establish its right to recover from the third party the amount which it is required to pay to the plaintiff, or the amount which it would have been required to pay if the plaintiff's claim had been successful, and those cases where the third party claim fails solely because the plaintiff has failed in its claim against the defendant.
6. As to the latter category of cases, King CJ remarked in Lombard Insurance. [9] If in the circumstances postulated, the plaintiff fails to sustain its allegations, in consequence of which the third party claim is dismissed with costs, the defendant has incurred the costs of the third party claim by reason of the unfounded allegations of the plaintiff. It seems to be fair and just, in those circumstances, that the plaintiff should be required to indemnify the defendant in respect of those costs. 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. …
7. In Furber v Stacey, Hodgson JA stated that he did not consider the remarks of King CJ in Lombard Insurance to be "the" guiding principle in the sense that the result is one that should "ordinarily" follow. [10] Hodgson JA expressed his agreement with Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [11] that the suggested guiding principle required qualification because there are a variety of factors indicative of whether or not the costs of the successful third party "ought fairly to be borne" by the unsuccessful plaintiff. [12] Those factors include: 1. Whether it was "reasonable" or "appropriate" for a defendant to make a third party claim, and even if justifiable, whether it is inappropriate to pass on the costs of the successful third party to the plaintiff; 2. Whether the plaintiff's claim was the catalyst for the third party claim; 3. The relationship of the nature of the original application to that of the cross-claim; 4. Whether the cross-defendant chose to contest some or all of the plaintiff's claim, where it would have been reasonable to leave this entirely to the defendant. [13]

Decision: Costs

1. It is necessary in the present case to distinguish between Mr Ciappara's claims the subject of the third cross-claim against the plaintiffs on the one hand and against Aidan Bega and AB Veritas on the other hand.

Costs of third cross-claim against the plaintiffs

1. For the reasons that follow, I am satisfied that it was reasonable for Mr Ciappara to have brought the third cross-claim against the plaintiffs, and that Mrs Bega should bear Mr Ciappara's liability for the plaintiffs' costs of the third cross-claim and his own costs of the third cross-claim insofar as that claim was made against the plaintiffs.
2. First, Mrs Bega's second cross-claim against Mr Ciappara was undoubtedly the catalyst for the third cross-claim against the plaintiffs.
3. Second, Mr Ciappara's cross-claim against the plaintiffs was based principally on allegations that Mrs Bega had made against the plaintiffs in her defence and which were repeated by Mr Ciappara in the third cross-claim. [14] Insofar as Mr Ciappara made additional allegations against the plaintiffs, those additional allegations did not really feature in the conduct of the trial.
4. Third, the third cross-claim was dismissed simply on the ground that it did not arise in circumstances where Mrs Bega's cross-claim against Mr Ciappara had failed. [15]

Costs of third cross-claim against Aidan Bega and AB Veritas

1. Mr Ciappara's contribution claim relied upon allegations that (a) Aidan Bega and AB Veritas had engaged in misleading or deceptive conduct by representing to Mrs Bega that the $1 million funds would be repaid with interest within six months when they did not have a reasonable basis for making that representation (the particulars of this allegation asserted that the representation was made by Peter Bega acting as agent for Aidan Bega and AB Veritas), [16] and (b) that they had engaged in unconscionable conduct against Mrs Bega by failing to repay the funds advanced by Mrs Bega to AB Veritas, employing undue influence on Mrs Bega to sign the facility agreement and mortgage and retaining the benefit of the seven units in the Allure Apartments. Mr Ciappara pleaded that in each case, the conduct of Aidan Bega and AB Veritas caused or contributed to the same loss for which Mrs Bega sued Mr Ciappara.
2. In Mrs Bega's amended defence to the plaintiffs' claim, the only relevant mention of Aidan Bega is in the particulars of the allegation that the transaction was unjust for the purposes of the Contracts Review Act 1980 (NSW). Those particulars included that Mrs Bega reposed trust and confidence in, among others, Aidan Bega, in relation to business matters. [17] But no particulars were given of any relevant conversation between Mrs Bega and Aidan Bega.
3. I do not consider that the allegations which Mrs Bega made in her defence and second cross-claim made it reasonable for Mr Ciappara to bring the third cross-claim against Aidan Bega and AB Veritas on the grounds advanced in that cross-claim. There was no allegation by Mrs Bega that Aidan Bega or AB Veritas had engaged in misleading conduct inducing her to enter into the transaction with Lauvan and Mittabell, or that Peter Bega had made misrepresentations to her acting as agent for Aidan Bega and AB Veritas. Nor was there any allegation by Mrs Bega that Aidan Bega exercised undue influence to procure her to sign the transaction documents.
4. Although in a general sense, Mrs Bega's second cross-claim might be considered to be the catalyst for the cross-claim brought by Mr Ciappara against Aidan Bega and AB Veritas, the allegations made against those parties by Mr Ciappara were quite different to the matters raised by Mrs Bega in her defence and second cross-claim.
5. I do not consider that it is appropriate to pass on the costs of those successful cross-defendants (to the third cross-claim) to Mrs Bega. Mr Ciappara should bear the costs consequences of this part of the third cross-claim.

Conclusion and orders

1. Mrs Bega should pay to Mr Ciappara the costs which he is liable to pay to Lauvan and Mittabell as cross-defendants to the third cross-claim. Mrs Bega should also pay a proportion of Mr Ciappara's own costs of the third cross-claim insofar as those costs are referable to the unsuccessful cross-claim against Lauvan and Mittabell.
2. The question which arises is how that later costs result should be best formulated to avoid difficulties in the costs assessment process. It seems to me that the preferable approach is to make an assessment of the time spent by Mr Ciappara on the third cross-claim in seeking contribution against Lauvan and Mittabell compared to the time spent on the claim for contribution against Aidan Bega and AB Veritas.
3. In making that assessment, a broad brush approach should be taken without attempting a minute examination of the pages of transcript and submissions devoted to particular issues. I also take into account that there was a degree of overlap between Mr Ciappara's apportionment defence in answer to Mrs Bega's second cross-claim and his claims for contribution the subject of the third cross-claim.
4. In my view, an appropriate assessment would be that Mrs Bega pay 30 percent of Mr Ciappara's own costs of the third cross-claim.
5. Accordingly, I make the following orders: 1. Mr Ciappara pay the costs of the cross-defendants (Lauvan Pty Limited, Mittabell Pty Limited, Aidan Bega and AB Veritas Pty Ltd) to the third cross-claim. 2. Mrs Bega pay to Mr Ciappara the costs which Mr Ciappara is liable to pay pursuant to order (1) to the first and second cross-defendants (Lauvan Pty Ltd and Mittabell Pty Ltd) to the third cross-claim. 3. Mrs Bega pay to Mr Ciappara 30 percent of his own costs of the third cross-claim.

Endnotes

1. Lauvan Pty Limited v Bega [2018] NSWSC 154.
2. Mr Ciappara's submissions 5/06/2017, par 100; Tcpt 7/06/2017, p 560 (36-50).
3. Principal reasons at [474].
4. Third cross-claim, pars 4-7.
5. Third cross-claim, pars 8-19.
6. [2005] NSWCA 242 at [30] (Hodgson JA, Einstein J agreeing).
7. Furber v Stacey at [31].
8. (1994) 175 LSJS 448 at 449 (Lombard Insurance).
9. Lombard Insurance at 450.
10. Furber v Stacey at [32].
11. (2003) 201 ALR 55; [2003] FCA 688 at [72]-[75].
12. Johnson v Ribbins [1977] 1 WLR 1458 at 1464.
13. Furber v Stacey at [33].
14. Third cross-claim, par 3.
15. Principal reasons, par 469.
16. Third cross-claim, par 10(ii); Mr Ciappara did not press the particulars in par 10(i) or (iii).
17. Mrs Bega's amended defence, par 10, particular VIIA. 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: 10 April 2018