Autohaus Hamilton Pty Ltd v Crows Nest Kindergarten Pty Ltd

Legislation Cited: Civil Procedure Act 2005 (NSW), s 60
Local Court Act 2007 (NSW), ss 39, 40, 41
Supreme Court Act 1970, ss 75A, 101
Local Court Rules 2009, r 2.9
Uniform Civil Procedure Rules, rr 29.10, 36.16, 50.10

Cases Cited: Alan K Davies Pty Ltd v Agaiby [2025] NSWSC 1271
ASIC v Sydney Investment House Equities Pty Ltd [2008] NSWSC 814
Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11
Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164
Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33
El-Hadi v Australian Timbers (NSW) Pty Ltd [2021] NSWSC 501
Fink v Fink (1946) 74 CLR 127; [1946] HCA 54
Fisher v Nonconformist Pty Ltd (2024) 114 NSWLR 1; [2024] NSWCA 32
Moneytech Finance Pty Ltd v Diamond Made Pty Ltd (in liq) [2019] NSWSC 259
Re Hair Industrie Penrith Pty Ltd [2015] NSWSC 1278
Rose v Tunstall [2018] NSWCA 241
Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4
Souaid v Nahas [2019] NSWSC 1132

Texts Cited: Nil

Category: Principal judgment

Parties: Autohaus Hamilton Pty Ltd (Plaintiff / Cross-Defendant)
Crows Nest Kindergarten Pty Ltd (First Defendant)
Harry Azoulay (Second Defendant / Cross-Claimant)

Representation: Counsel:
A Fernon SC (Plaintiff / Cross-Defendant)
S Ivantsof (First Defendant and Second Defendant / Cross-Claimant)
Solicitors:
Yates Beaggi Lawyers Pty Ltd (Plaintiff / Cross-Defendant)
Finn Roache Lawyers (First Defendant and Second Defendant / Cross-Claimant)

File Number(s): 2025/00158116

Publication restriction: Nil

JUDGMENT

1. By a further amended summons filed 21 July 2025, Autohaus Hamilton Pty Ltd (Autohaus) seeks to appeal the orders of the Local Court made by Herridge LCM on both 15 August 2024 and 28 March 2025. In the earlier orders, Herridge LCM upheld in part Autohaus’ no case to answer application regarding the first plaintiff below, but rejected that application regarding the second plaintiff below. The primary judge subsequently gave leave to the parties to adduce further evidence on causation of loss. Expert evidence was adduced by Mr Harry Azoulay (who is the second defendant in this appeal) but Autohaus adduced no further evidence. There was then a further hearing on 7 March 2025. After reserving his judgment for several weeks, the primary judge published reasons for judgment on 28 March 2025 and ordered Autohaus to pay Mr Azoulay the sum of $10,000, plus costs and interest.

Background facts summarised

2. The proceedings below were commenced in the General Division of the Local Court by Crows Nest Kindergarten Pty Ltd (CNK) and Mr Azoulay (together, the defendants on the appeal). They sought damages in the sum of $25,414.39 (plus interest) relating to the cost of repair work carried out by Autohaus on a Porsche 996 motor vehicle in 2022 (Porsche). It was alleged that, following the discovery of metal swarf in the oil arising from the failure of the immediate shaft bearing (referred to hereafter as the “IMS bearing”) in 2016, Autohaus replaced the failed IMS bearing with an IMS retrofit product that subsequently shattered, causing damage to the Porsche.

3. In a statement of claim filed 19 June 2023, the plaintiffs claimed that Autohaus had been negligent, including by failure to exercise due care and skill in replacing the IMS bearing, failing to abide by the manufacturer’s recommendations (including a warning which expressly cautioned against removing a failed IMS bearing and replacing it with an IMS retrofit product) and failing to advise the plaintiffs of the manufacturer’s recommendations and warning.

4. CNK was the owner of the Porsche between 2013 and 2018. The Porsche was then subsequently transferred to Mr Azoulay in 2018 for nil consideration. Mr Azoulay is the director of CNK and has 50% ownership of that company. There is a reasonable inference that the vehicle was beneficially owned by Mr Azoulay at all relevant times.

5. On 15 August 2024, being the first day of the hearing below, the Court was asked to rule on Autohaus’ application for judgment for want of evidence under r 29.10 of the Uniform Civil Procedure Rules (UCPR). The primary judge delivered reasons ex tempore and upheld the application in respect of CNK on the basis that there was no evidence that it sustained any loss but rejected the application insofar as it related to Mr Azoulay. Autohaus challenges order 1, which is as follows (without alteration):

1. Persuant to UCPR r 79.10 no case to answer in relation to the 1st Plaintiff’s Claim.

The reference to UCPR 79.10 is plainly incorrect and should be to UCPR r 29.10.

6. The primary judge adjourned the hearing of Mr Azoulay’s claim against Autohaus. Subsequently, on 25 October 2024, both parties were given leave to adduce further evidence on causation of loss.

7. The resumed hearing took place on 7 March 2025 during the course of which Mr Azoulay adduced evidence on causation from an expert witness (Mr Brent Scott). Autohaus adduced no further evidence. At the end of the hearing, the primary judge reserved his judgment and indicated that he would publish his reasons on 27 June 2025. Counsel for Autohaus asked the primary judge whether he expected the parties “to delve into costs at that time”, to which his Honour said that he would normally just order that costs be agreed or assessed.

8. In the events that occurred, the primary judge’s reasons were published on 28 March 2025.

9. On that day, after reviewing the expert evidence on causation adduced by Mr Azoulay and noting that Autohaus had adduced no evidence on that issue, the primary judge made the following orders in relation to Mr Azoulay’s claim (noting that some of the orders are unnumbered):

1. The Court finds for [Autohaus] in relation to the claim by [CNK].

2. [CNK] is to pay [Autohaus’] costs arising from [CNK’s] claim as agreed or assessed.

Judgment:

AutoHaus Hamilton Pty Ltd, First Defendant

is to pay

Harry Azoulay, Second Plaintiff

the sum of

Claim amount: $10000.00

Interest claimed: $1882.14

Filing fees: $0.00

Service fees: $0.00

Solicitors fees: $0.00

Other costs: $0.00

TOTAL: $11882.14

The Court finds for [Mr Azoulay] and [Autohaus] is to pay to [Mr Azoulay]

- the sum of $10,000.00Interest calculated at the prescribed rate pursuant to section 100 of Civil Procedure Act 2005 from 27/10/2022**.**

Costs as agreed or assessed.

Grounds of appeal

10. The appeal purports to involve several questions of law. The grounds of appeal are as follows:

1. The primary judge erred in law in failing to dismiss the Second Defendant’s claim pursuant to UCPR 29.10.

2. The primary judge erred in law in granting leave to the Second Defendant to adduce further evidence on the issue of causation following his dismissal of the Plaintiff’s application under UCPR 29.10 and the Defendants closing their case.

3. The primary judge erred in law in finding the Plaintiff owed a duty of care to the Second Defendant and in failing to determine whether the Second Defendant was vulnerable to any negligence on the part of the Plaintiff.

4. The primary judge erred in law in finding the Second Defendant had established causation between the actions of the Plaintiff and any loss suffered by the Second Defendant.

5. The primary judge erred in law in finding the Second Defendant had established loss suffered.

6. The primary judge erred in law in failing to consider and apply Rules 38 and 39 of Local Court Practice Note Civ 1 and Local Court Rule 2.9 and thereby awarding costs to the Second Defendant as agreed or as assessed and not costs limited in accordance with such Rules.

11. Grounds 1 and 2 relate to the orders dated 15 August 2024. Grounds 3 to 6 relate to the orders dated 28 March 2025. In the hearing before me, counsel for the plaintiff, Mr Fernon SC, indicated that Grounds 4 and 5 were not pressed.

Mr Azoulay’s cross-summons

12. On 18 August 2025, Mr Azoulay filed a cross-summons, with the following grounds:

1. The primary Judge erred in law by failing to award damages to the Second Plaintiff (in the Court below) for the entire engine rebuild in 2022, including the Additional Work (being the additional work that would not have been required had the engine rebuild occurred under the ownership of the First Plaintiff (in the Court below) in 2016).

2 Alternatively, the primary Judge erred in law by limiting the damages awarded to the Second Plaintiff (in the Court below) to the Additional Work.

3 Further, and alternatively, the primary Judge erred in law by applying a discount to the damages awarded to the Second Plaintiff (in the Court below).

4 The primary Judge erred in law by failing to hear the Second Plaintiff (in the Court below) on costs.

13. Only Ground 3 is pressed. Mr Azoulay sought judgment in his favour in the amount of $16,651.01 (incl GST) or, alternatively, judgment in his favour in the amount of $15,137.28, with interest in either case.

Consideration and determination

(a) Scope of appeal

14. Division 4 of Pt 3 of the Local Court Act 2007 (NSW) provides for appeals from the Local Court. A party may appeal to the Supreme Court as of right on a question of law (s 39(1)). Leave is required where an appeal involves a question of mixed law and fact (s 40(1)). There is no provision for an appeal on a question of fact alone, either with or without leave.

15. Section 39 provides for appeals as of right:

Appeals as of right (cf LCA 1982, section 73)

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law.

(2) A party to proceedings before the Court sitting in its Small Claims Division who is dissatisfied with a judgment or order of the Court may appeal to the District Court, but only on the ground of lack of jurisdiction or denial of procedural fairness.

16. Section 40 provides for circumstances in which leave to appeal is required:

40 Appeals requiring leave (cf LCA 1982, section 74)

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.

(2) A party to proceedings before the Court sitting in its General Division who is dissatisfied with any of the following judgments or orders of the Court may appeal to the Supreme Court, but only by leave of the Supreme Court —

(a) an interlocutory judgment or order

(b) a judgment or order made with the consent of the parties,

(c) an order as to costs.

17. If error on a question of law or a question of mixed fact and law is found, s 41 of the Local Court Act provides that the Supreme Court may determine an appeal made under ss 39(1) or 40 in the following ways:

41 Determination of appeals (cf LCA 1982, section 75)

(1) The Supreme Court may determine an appeal made under section 39 (1) or 40—

(a) by varying the terms of the judgment or order, or

(b) by setting aside the judgment or order, or

(c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court’s directions, or

(d) by dismissing the appeal.

…

18. The Court’s jurisdiction is governed by the terms of s 75A of the Supreme Court Act 1970 (NSW), which provide that an appeal from the Local Court to it, not being an appeal under the Crimes (Appeal and Review) Act 2001 (NSW), is an appeal by way of rehearing. As observed by Rothman J in El-Hadi v Australian Timbers (NSW) Pty Ltd [2021] NSWSC 501 at [46] (footnotes omitted) (emphasis added):

While, in some circumstances, the term “rehearing” may involve some ambiguity, fundamentally the first task for the Court, in such an appeal, is to determine the correctness of the judgment from which the appeal has been brought. In so doing, it is the Court’s function to determine whether the judgment below is the result of some legal, factual or discretionary error, or is the result of some significant procedural error.

(b) Question of law

19. Justice Basten emphasised some relevant features of ss 39 and 40 of the Local Court Act in Souaid v Nahas [2019] NSWSC 1132 at [3] (emphasis added):

Sections 39 and 40 of the Local Court Act reflect the conventional view that legal proceedings involve questions of law, questions of fact and questions of mixed law and fact. Such a tripartite classification is never easy to apply in practice. However, what appears not to be appreciated by the structure of the provisions of the Local Court Act is that there is no right of appeal, with or without leave, from findings of fact. The assumption that the application of law to the facts may be a question of ‘mixed law and fact’ will rarely assist an appellant. If the legal principle has been incorrectly identified in the Local Court, that may be established on an appeal as of right. If it be a material error, that will usually result in an order setting aside the judgment below and may involve replacement with a different order, or remittal to the Local Court. It is only in the rare case that the legal principle has been correctly stated, but misapplied to the facts as found, that leave will be appropriate.

20. In Rose v Tunstall [2018] NSWCA 241 at [31] per Payne JA (Basten and Simpson JJA agreeing), it was stated that in an appeal under s 39 of the Local Court Act, when an error of law has been established, the Supreme Court does not have the power to make findings of primary fact. The applicant there appealed to the Supreme Court on a question of law pursuant to s 39(1) of the Local Court Act. The primary judge found that the Magistrate had erred in failing to consider the operation of a provision in the Associations Incorporation Act 1984 (NSW) but dismissed the appeal on the basis that the applicant had not established matters subject to that provision. The primary judge also overturned the Magistrate’s finding that the respondent established a defence. In refusing leave to appeal and to the cross-appeal, Payne JA stated at [32]-[34] (emphasis added):

The primary judge did not have power to determine facts in an appeal limited to a question of law under s 39 of the Local Court Act. Section 41(1) of the Local Court Act did not permit the primary judge to engage in a fact-finding process on the merits of the case. Section 75A [of the Supreme Court Act 1970 (NSW)] must, in accordance with its own terms, have effect subject to the Local Court Act: s 75A(4). The primary judge was not entitled to embark upon any review of the decision-making process of the Local Court beyond that necessary to answer the appropriately identified questions of law.

So far as the application for leave is concerned, if leave were granted the inevitable outcome would be that the decision of the primary judge would be set aside and the matter remitted to the Local Court to make the necessary findings of fact. The same conclusion inevitably applies to the application for leave to cross-appeal. That would involve a fourth examination of the underlying case. It would only be in the most compelling circumstances that this should occur.

Such circumstances are not present here. This is a case of the kind described by Basten JA in Be Financial Pty Ltd where the legal costs already incurred are disproportionate to the amount in dispute. The incurring of additional costs, for a potentially uncertain return, is a factor weighing heavily against a grant of leave. The case does not involve an issue of principle, question of general importance or a reasonably clear injustice. The sum involved, even with interest added, is comfortably under the statutory threshold.

(c) Principles guiding the grant of leave

21. I attempted to summarise some of the principles relating to the grant of leave to appeal pursuant to s 40 in Alan K Davies Pty Ltd v Agaiby [2025] NSWSC 1271 at [47] (noting what is said in respect to the need for proportionality between the amount in dispute and costs where there is a small claim):

The principles guiding the grant of leave to appeal under s 40 of the Local Court Act are similar to those applying to the need for leave under s 101(2) of the Supreme Court Act 1970 (NSW). The principles were relevantly outlined in Styles v Rowley [2023] NSWSC 1053 at [56]–[57], noting in particular what is said regarding the approach that should be taken to small claims:

Unsurprisingly, there was substantial agreement regarding the relevant legal principles. They were recently reaffirmed by the Court of Appeal in Cheng v Motor Yacht Sales Australia Pty Ltd (t/as the Boutique Boat Company) [2022] NSWCA 118 at [15]ff, where Bell CJ (with whom Ward P and Basten AJA agreed) stated that a grant of leave to appeal generally requires the identification of an issue of principle, a question of public importance or a reasonably clear injustice going beyond something that is merely arguable.

Where small claims are involved (as is the case here), it is also relevant to consider that “there must be an early finality and determination of litigation otherwise the costs which will be involved are likely to swamp the money sum involved in the dispute” (Carolan v AMF Bowling Pty Ltd (t/as Bennetts Green Bowl) [1995] NSWCA 69). The importance of there being proportionality between the monetary amount at issue in a proceeding and the costs of the proceeding was noted in Cheng at [20]. Section 60 of the Civil Procedure Act 2005 (NSW) requires that consideration be given to the cost of litigating a matter or issue and the Court’s practice and procedure should be implemented with the object of resolving the issues between the parties in such a way that the cost is proportionate to the importance and complexity of the subject-matter. As Leeming JA observed in Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148 at [44], where the costs of litigation exceed the amount in issue, “[s]uch litigation is a poor candidate for a grant of leave”.

22. Section 101(2)(r)(ii) of the Supreme Court Act provides that an appeal to the Court of Appeal shall not lie, except by leave of the Court of Appeal, unless the matter involves (directly or indirectly) any claim respecting any property having a value of $100,000 or more.

23. The value of the claim before this Court is significantly below the statutory threshold. It may be inferred that the total legal costs involved in the case before the Local Court and the appeal to this Court already involve a sum considerably in excess of the amount in dispute.

24. Section 60 of the Civil Procedure Act 2005 (NSW) provides:

60 Proportionality of costs

In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute.

25. As Basten JA emphasised in Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [39]:

This direction has an important operation in respect of leave applications involving amounts below the statutory threshold. Where, as in the present case, the costs of the trial are disproportionate to the amount in dispute, the incurring of additional costs, for a potentially uncertain return, will be a factor weighing heavily against a grant of leave.

(d) Grounds 1 and 2 of the further amended summons

26. As noted above, Grounds 1 and 2 concern the orders dated 15 August 2024, which relate to r 29.10 of the UCPR and are interlocutory in nature. It is common ground that leave to appeal is required.

27. Rule 29.10 of the UCPR is as follows:

29.10 Judgment for want of evidence (cf SCR Part 34, rule 8; DCR Part 26, rule 8; LCR Part 21, rule 6)

(1) An opposite party may apply to the court to give judgment for the opposite party, either generally or on any claim for relief in the proceedings, on the ground that, on the evidence given, a judgment for the beginning party could not be supported.

(2) Such an application may be made at any time after the conclusion of the evidence for the beginning party in his or her case in chief.

(3) The court may not give judgment under this rule unless the opposite party satisfies the court that, on the evidence given, a judgment for the beginning party could not be supported.

(4) If the opposite party fails to satisfy the court that, on the evidence given, a judgment for the beginning party could not be supported, the opposite party may not adduce evidence or further evidence in the proceedings generally or on the claim for relief concerned, as the case may be, except by leave of the court.

(5) If not all opposite parties apply to the court under subrule (1), the court must not deal with any such application before the conclusion of the evidence given for all parties.

28. Autohaus submits that the evidence required successfully to oppose a no case to answer application was described in ASIC v Sydney Investment House Equities Pty Ltd [2008] NSWSC 814, as adopted in Re Hair Industrie Penrith Pty Ltd [2015] NSWSC 1278. As noted by Hamilton J in ASIC at [14], the assessment of a no case to answer application is based on “the evidence given”.

29. In considering Grounds 1 and 2, it is necessary to summarise the way in which Autohaus presented its no case to answer application below. The then counsel for Autohaus (Ms Nolan) contended that there was no case to answer against either plaintiff for two reasons. First, because special vulnerability had not been pleaded, the Court could not find on the basis of existing evidence that Autohaus breached its duty of care in not advising the plaintiffs to replace the engine as opposed to installing the IMS retrofit. Secondly, the evidence did not establish a causal link between the advice given in 2016 and the damage to the car sustained some 6 years later in 2022. As counsel put it, “it does not follow that the failure to advise caused that loss, because that loss would have, been on the plaintiffs’ case, incurred in 2016…”. In other words, the contention was that the plaintiffs had failed to establish any additional costs incurred in 2022 which would not have been incurred in 2016.

30. Focussing for the moment on the alleged absence of causation of loss as a basis for the no case to answer application, the primary judge indicated to counsel for the plaintiffs that he did not need to be addressed further on that issue, but was more interested in hearing about damages. Counsel responded as follows:

IVANTSOFF: I say, your Honour, with respect, it's superficially compelling, but when one rules into it and applies a counterfactual to it, it underscores the flaw in my friend's argument. The reason is this: the counterfactual is that in 2016, had Mr Azoulay been advised to undertake the rebuild, he would have paid for the rebuild. He would not have paid $4,900 odd for the IMS bearing replacement. That's the loss that has been suffered by the first plaintiff. Whatever the cost would have been to do an engine rebuild, it would not have included that 4,900 that was paid. That money was wasted. It would not have been spent, had the engine rebuild been completed at that point in time.

31. In support of those submissions, counsel pointed to an invoice dated 27 October 2022 (the Invoice). The Invoice related to all the repairs carried out on the vehicle in 2022, which totalled approximately $25,000. The Invoice included numerous individual items. In response to a question from the primary judge, counsel for the plaintiffs confirmed that the claim for damages related to only three of the items in the Invoice as representing expenditure in 2022 which could have been avoided had the engine rebuild been carried out in 2016. Those three items were identified as the cost of sending the engine block to New Zealand ($4804.55), the cylinder head “reco sublet” ($1654.55) and the new crankshaft ($9282.73). These were said to be the additional costs incurred by the plaintiffs resulting from Autohaus’ failure to do an engine rebuild in 2016.

32. After a short adjournment, the primary judge delivered ex tempore reasons in relation to the no case to answer application. His Honour readily accepted that application in relation to the first plaintiff on the basis that there was no evidence of any loss by it in circumstances where ownership of the vehicle was transferred to Mr Azoulay in October 2018.

33. His Honour then turned to consider and determine the application as it related to Mr Azoulay. His Honour found that there was evidence to support the claim that it was negligent of Autohaus to install the IMS retrofit in 2016 instead of replacing the entire engine. He referred to a newsletter dated 27 August 2015 called “AUTOHAUS NEWS” which stated unequivocally that where there is an IMS bearing failure a “complete engine disassembly is required to replace the intermediate shaft and in most cases, complete rebuild or engine replacement is your ONLY option” (emphasis in original).

34. The primary judge also referred to the manufacturer’s instruction manual in which was described the “pre-qualification procedure” for an IMS retrofit and solution. It stated that “The biggest mistake that can be made is assuming that every vehicle is healthy enough to have the IMS retrofit / IMS solution installed” and that the pre-qualification procedure had to be taken seriously.

35. His Honour’s explanation for rejecting the r 29.10 application vis-à-vis Mr Azoulay is captured in the following paragraphs of his Honour’s ex tempore reasons dated 15 August 2024:

I have dealt with these separately, because what I do have, in terms of the literature from AutoHaus themselves and the installation manual from the manufacturers of the retro kit, is the basis upon which to find that there is a causal link between the need to replace the engine and the fact that the retro kit was installed in 2016 and on that basis, therefore, insofar as it relates to the engine rebuild and cost associated with the engine rebuild, THE DEFENDANT'S APPLICATION UNDER 29.10 FAILS BECAUSE I DO FIND THAT THERE IS EVIDENCE FROM WHICH JUDGMENT FOR THE SECOND PLAINTIFF COULD BE SUPPORTED.

However, there is no such evidence in the Court's assessment in relation to those additional items and I asked the plaintiffs' counsel about that and, to his credit, quite candidly he said that those are simply his instructions. I imagine that over time the second plaintiff has become something of an expert in these matters, being a Porsche owner for 11 years or so and having, obviously, done some research, but for the Court's purposes, he does not meet the definition of expert in the Evidence Act and, in any case, has not given evidence on those particular matters and nor could he have done.

To summarise, the defendant's application fails in relation to any losses associated with the need to rebuild the engine, but in relation to the other items, there is no evidence of causation between those losses and the 2016 works. It was argued by the defence that the losses arising from the need to rebuild the engine were simply deferred from 2016 to 2022, but the 2016 loss was suffered by the first plaintiff and not by the second plaintiff.

36. The primary judge’s reference to the “additional items” plainly refers to the cost of the three items in the Invoice which the plaintiffs contended they would not have incurred if Autohaus had rebuilt the engine in 2016. The primary judge was well aware of the Invoice and that these additional items were included in it. The Invoice provided some evidence of loss, but his Honour was concerned that there was no evidence which established that the items were truly additional to the cost of a complete engine rebuild in 2016.

37. That this is a fair reading of the primary judge’s reasons is confirmed by an extract from the transcript below dated 15 August 2024. The transcript records an exchange between the primary judge and counsel immediately after reasons had been published. The exchange related to how Mr Azoulay’s case would now progress following the rejection of the no case to answer application. In particular, there was a discussion as to whether the parties should have an opportunity to adduce further evidence. Ms Nolan submitted that Mr Azoulay was not entitled to adduce any further material. It is important to note the primary judge’s response and, in particular, his Honour’s reference to his finding that, although certain aspects of Mr Azoulay’s claims were “spurious”, they were supported by some evidence, but further evidence was needed in relation to causation (emphasis added):

HIS HONOUR: He's justified in thinking that because that's what I had in my mind. It may be that I'm wrong about that, and I'll hear from you, but the way I've been approaching this is, perhaps, from a criminal perspective, in that I've been treating as an application by you that there's no prima facie case in relation to the - and I've made that finding in relation to certain aspects of the plaintiffs' claim, but not others. If you say to me that I'm precluded from doing that and I misdirected myself, then I'll hear from you. The reason I arrived at that point was because it's not otherwise obvious to me why 29.10 would be there if it wasn't to, effectively, put an end to a spurious claim. I found that certain aspects of this claim are not spurious and that they are supported by the evidence, but I do need further evidence in relation to establishing causation between, as I said, between the events of 2016 and the events of 2022.

38. Autohaus contends that although the primary judge identified the correct test in applying r 29.10 of the UCPR, his Honour seriously misapplied that principle. This was said to relate to the primary judge’s finding that there was no evidence which established a causal link between the “additional items” the subject of Mr Azoulay’s claim for damages in respect of the 2022 repairs and the IMS bearing retrofit in 2016. Autohaus contends that the primary judge should have found that Autohaus had no case to answer in respect of both plaintiffs’ claims.

39. On a fair reading of the primary judge’s ex tempore reasons, as confirmed by the primary judge’s subsequent observations in the transcript, his Honour rejected the no case to answer application in respect of Mr Azoulay because, although the Invoice contained items relating to the work carried out in 2022 which Mr Azoulay said was additional to work which ought to have been carried out in 2016, further evidence was needed to establish that Autohaus’ failure to do an engine rebuild in 2016 had caused Mr Azoulay to incur additional expenditure in 2022.

40. As noted above, this then led to Mr Azoulay retaining Mr Brent Scott as an expert. In his expert report dated 13 December 2024, Mr Scott gave evidence regarding the repairs which he said needed to be carried out on the engine in 2022 that were additional to a standard rebuild. The various items were all included in the Invoice. Mr Scott said that the additional repairs “were required due to the severe damage to the engine, however, for a minor rebuild/reconditioning, these major repairs would not be necessary, with only minor repairs required”. Mr Scott concluded that based on the evidence provided to him and his industry experience “the engine rebuild would have been significantly less expensive if undertaken at the time the IMS bearing failure was detected”.

41. When the hearing resumed on 7 March 2025 (which included Autohaus cross-examining Mr Scott), Mr Azoulay’s counsel explained that the only three items on the Invoice for which damages were then claimed as additional work which would not have been required had the engine rebuild occurred in 2016 were the items relating to the shipping of the engine block to New Zealand ($4,804.55), the extra labour ($1,050.00) and a new crankshaft ($9,282.73), giving a total figure of $15,137.28. One of these items was different from those previously claimed (see at [31] above).

42. For the following reasons, I consider that leave to appeal should not be granted in respect of Grounds 1 and 2. The primary judge properly referred to N Adams J’s judgment in Moneytech Finance Pty Ltd v Diamond Made Pty Ltd (in liq*)* [2019] NSWSC 259 at [161]-[162] in identifying the relevant principle in a no case to answer application as whether, based on the available evidence, a judgment “could not be supported”. Emphasis should be placed on the words “could not” as opposed to “would not”. It is not a question of whether the existing evidence should be accepted, but rather whether the evidence is capable of establishing the matters required for the plaintiff to succeed.

43. As the following extracts from the transcript indicate, there can be no doubt that the primary judge correctly understood the importance, in applying r 29.10, of the distinction between a judgment which “could be supported” and one which “would be supported”:

NOLAN: I don't understand from the Court's reasons why aspects of this invoice are in contention. I don't understand how the Court, with respect, can possibly identify, in the absence of any evidence, of what actually - which of these costs relate to the engine rebuild.

HIS HONOUR: Based on--

NOLAN: You can--

HIS HONOUR: What 29.10 says is that judgment could be supported. It doesn't necessarily say would be supported. I envisaged that there will now be a hearing on causation, on another day, but.

44. The primary judge viewed the Invoice as providing only limited evidence that Mr Azoulay had incurred additional expenditure in 2022 compared with the cost of an engine rebuild in 2016. Further evidence was required to establish the requisite link. Drawing on the distinction between a judgment that “could be supported” as opposed to one which “would be” supported, the primary judge considered that it was appropriate for the parties to have leave to adduce further evidence on causation.

45. I do not consider this is one of those “rare” cases envisaged by Basten JA in Souaid where it is appropriate to grant leave where the primary judge has correctly stated the legal principle but arguably misapplied it to the facts as found. Grounds 1 and 2 of the further amended summons do not identify any issue of principle, public importance or reasonably clear injustice that is more than merely arguable so as to warrant a grant of leave. Rather, those grounds are essentially directed to the primary judge’s fact finding. Merely because there may be some force in Autohaus’ claim that the primary judge erred in his fact finding is insufficient to grant leave to appeal. Autohaus acknowledged that the primary judge appreciated the correct test in applying r 29.10 so no issue arises of there being a question of mixed law and fact.

46. Another important consideration in refusing a grant of leave relates to the disproportionality of the amount in dispute and the costs of the proceeding which, as noted above, must already be considerable and far outweigh the relatively modest sum in dispute which is well below the statutory threshold.

47. Finally, the following observations of Basten JA (with whom Tobias AJA agreed) concerning the policy underlying a requirement to obtain leave in Be Financial at [37] are apposite:

The idea that injustice may be measured on a scale reflects a number of underlying considerations. First, the ability to assess the existence of an injustice in a preliminary proceeding, such as a leave application, is limited. In assessing the merit of a proposed appeal, the court may well apply a vague criterion, such as whether the judgment below is attended by “sufficient doubt”. Secondly, injustice involves a balancing exercise. The delay and cost of further litigation will constitute a form of injustice to the successful party below, whatever the outcome of the appellate process. Thirdly, the entitlement of the parties to justice is not unconditional, but is dependent upon the resources of the court made available by the government and the appropriate allocation of resources by the parties, which may depend upon their individual assessments of the importance of the issues in dispute. The parties may well make disparate assessments in a particular case.

48. Turning now to Grounds 3 and 6 of the further amended summons, I shall explain why both those grounds are rejected.

49. Ground 3 claims that the primary judge erred in law in failing to determine whether Mr Azoulay had a special vulnerability such that Autohaus owed him a duty of care and breached that duty. The difficulty with this ground, even if it relates to a question of law, is that while the need for special vulnerability was raised by Autohaus’ then counsel, Ms Nolan, in the hearing on 15 August 2024 (see at [29] above), the point was not pursued when the matter resumed on 7 March 2025. In closing address on that day, Autohaus’ replacement counsel stated unequivocally that the only two issues requiring determination by the primary judge were “damages and causation”. It is unsurprising, therefore, that the focus of the primary judge’s second reasons for judgment was only on those two issues and no mention is made of “special vulnerability”. The point was effectively abandoned by Autohaus and it should not be permitted to run the point now (see Coulton v Holcombe (1986) 162 CLR 1 at 11; [1986] HCA 33 and Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 284; [1990] HCA 11).

50. Finally, Ground 6 claims that the primary judge erred in law in failing to consider and apply cll 38 and 39 of the Local Court Practice Note Civ 1 (Practice Note) and r 2.9 of the Local Court Rules. Autohaus contends that, under r 2.9(3)(b), the allowable costs in a Small Claims Division following a trial are the amount of costs allowable on entry on a default judgment for an unliquidated claim in the proceeding. Autohaus adds that under cll 39.1-39.3 of the Practice Note, where judgment is obtained in the General Division of the Local Court for less than $20,000 (as is the case here) an order for costs will not be made in an amount that is greater than that which otherwise would have been awarded if proceedings had been determined in the Small Claims Division. Or, if the case has appropriately been brought in the General Division, the amount payable for costs is that payable in the Small Claims Division or 25% in the amount awarded by the Court, whichever is the larger.

51. Autohaus emphasises that the primary judge made no determination as to whether the proceedings had been properly brought in the General Division. In any event, in circumstances where the amount of damages awarded (including costs) amounted to $11,882.14, Autohaus contends that the maximum amount payable for costs should have been 25% of that figure, i.e., $2,970.54.

52. Autohaus contends that the costs order made by the primary judge on 28 March 2025 reveals a clear failure to apply relevant principles because the defendants’ claims should have been brought in the Small Claims Division. Autohaus contends that, since leave to appeal is required in respect of Ground 6, such leave should be granted because of the primary judge’s failure to consider a fundamental principle in respect of costs.

53. It is common ground that Autohaus requires leave to appeal in respect of Ground 6. Although I accept that Ground 6 raises an issue of principle relating to the primary judge’s failure to refer to the Practice Note or the Local Court Rules as described above, that is not determinative of the issue of leave. The Court retains a discretion in the matter. That discretion should not be exercised in Autohaus’ favour in the following circumstances:

(a) It was open to Autohaus to make an application to the Local Court under r 36.16 of the UCPR to set aside or vary the primary judge’s costs order. Autohaus had 14 days from 7 March 2025 to file a notice of motion in respect of costs (r 36.16(3A)). It failed to do so. Instead, it elected to raise the issue as part of its proceedings in this Court. The issue of costs is one which ought to have been agitated promptly in the Local Court, where it could have been dealt with expeditiously and economically. (b) Autohaus’ further amended summons has failed in respect of all the other grounds, which simply serves to highlight that Autohaus should have made an application in the Local Court under r 36.16 seeking a variation of the costs order rather than bringing proceedings to this Court. (c) Another important consideration in the exercise of the Court’s discretion regarding leave is the need for proportionality between the amount in dispute and legal costs (see at [21] above). There is force in Autohaus’ submission before me that there is an element of disproportionality in the primary judge ordering it to pay Mr Azoulay’s costs as agreed or assessed in circumstances where those costs relate to a two-day hearing in the Local Court and are likely to well exceed the relatively modest judgment sum ultimately obtained by Mr Azoulay. But account also needs to be taken of the significant legal costs generated by Autohaus’ decision not to take advantage of the straightforward procedure under r 36.16 and instead pursue more costly proceedings in this Court. That course should not be encouraged by a grant of leave.

Ground 3 of the cross-summons

(a) Extension of time

54. Mr Azoulay seeks an extension of time to file the cross-summons.

55. Rule 50.10(2)(a) of the UCPR provides that a cross-summons must be filed within 28 days after service of the summons commencing the appeal upon the defendant. An application seeking an extension of time must form part of the cross-summons should the defendant file the cross-summons pursuant to sub-r (2)(c), which provides for the defendant to file “within such a further time as the higher court may allow” (r 50.10(3)).

56. Mr Azoulay submits that there is no prejudice to Autohaus because the cross-summons was filed in accordance with consent orders dated 21 July 2025, which provided for Mr Azoulay to file a cross-summons by 18 August 2025, as well as for Autohaus to file its further amended summons.

57. I accept these submissions. I consider that time should be extended.

(b) Ground 3

58. Mr Azoulay submits that the primary judge erred in applying a discount to the damages payable by Autohaus to him. He claims that the primary judge erred in law in three ways: (1) by not affording him procedural fairness; (2) by failing to give reasons as to the legal basis for making the discount; and (3) by applying the wrong legal test.

59. Mr Azoulay seeks the relief in prayers 3(c) or (d) of his cross-summons, being judgment in the sum of $16,551.01 (incl. GST) or, alternatively, $15,137.28 (excl. GST), respectively. It may be noted that these sums are still relatively modest.

60. I am satisfied that each of the three matters described immediately above raise one or more questions of law and Mr Azoulay’s cross-summons properly arises for determination. For the following reasons, however, it should be dismissed.

(i) Procedural unfairness

61. There is no basis for Mr Azoulay’s complaint of procedural unfairness. The possibility of making a discount on damages was squarely raised by the primary judge at the hearing on 7 March 2025 when his Honour asked whether he should take into account that the vehicle had been used for six years. He asked Mr Azoulay’s counsel what the mileage of the Porsche was in 2022 as opposed to 2016. Counsel appreciated that a discount was a possibility because he explicitly submitted that if the primary judge was “inclined to discount it, it would only be for a very minor discount”. The possibility of a discount was squarely on the table, as counsel for Mr Azoulay ultimately accepted before me.

(ii) Failure to give adequate reasons

62. In Fisher v Nonconformist Pty Ltd (2024) 114 NSWLR 1; [2024] NSWCA 32, Kirk JA said at [54]:

… a failure to comply with a legal obligation to give reasons may involve legal error: Pettitt v Dunkley [1971] 1 NSWLR 376 at 382 and 388–389; Raines at [1] (Meagher JA) and [13]–[22] (White JA); Ming v Director of Public Prosecutions (NSW) (2022) 109 NSWLR 604; [2022] NSWCA 209 at [35]–[36], and authority there cited. Basten JA has expressed doubts that a failure to give reasons is a relevant legal error for the purposes of the type of appeal right at issue here, relating to the decision of an administrative decision-maker: Smith at [135]–[138]; Goodwin 2010 at [11]–[22].

63. Here, the relevant issue is whether the primary judge adequately explained why some discount should be made to Mr Azoulay’s damages.

64. It is true that the primary judge did not give detailed reasons in support of the discount, but I consider that the reasons provided were adequate. In particular, under the heading of “Quantum”, his Honour noted that the total cost of the relevant items in the Invoice for which damages were sought was $15,137.28. His Honour then added:

However, as a matter of equity, the Court finds that credit should be given for three and a half years of incident-free roadworthiness attributable to the retrofit between October 2018, when the second plaintiff acquired the vehicle, and April 2022, when it failed. Quantifying that credit is something of an arbitrary exercise, given the dearth of evidence about the likely life of a rebuild, had it occurred in 2016. The situation that the first plaintiff found themselves in, in 2016, was not without precedent.

65. The primary judge then described the history of the vehicle and its mileage before concluding as follows:

What can be safely inferred from the service history of this particular vehicle, however, is a vulnerability to IMS failure which the LN Engineering manual asserts as endemic in the Porsche 996. Having synthesized these facts, which is the best that the Court can do on the available evidence, the Court finds that the partial success of the retrofit should be due to the defendant's liability by approximately one third which, with rounding, reduces the amount due to the second plaintiff for the 2022 rebuild to $10,000

66. In these circumstances, I am not satisfied that Mr Azoulay has established that his Honour’s reasons on this issue were inadequate.

(iii) Wrong test applied

67. Mr Azoulay contends that the primary judge applied the wrong legal test by (a) arbitrarily applying the discount and (b) failing to have regard to the applicable measure of damages in tort. I do not accept either of those contentions.

68. As to the first, the discount was not applied arbitrarily. Rather, the primary judge determined the amount of damages on the basis of the available evidence before him, whatever its shortcomings (see Fink v Fink (1946) 74 CLR 127 at 142 per Dixon and McTiernan JJ; [1946] HCA 54; Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332 at 349; [1994] HCA 4).

69. As to the second matter, I am not persuaded that the primary judge failed to have regard to the applicable measure of damages in tort. Indeed, two of the paragraphs under the heading “Quantum” in the reasons dated 28 March 2025 (see at [64] and [65] above) indicate that the primary judge correctly understood the relevant test and did his best to apply that test in the particular circumstances, having regard to the limited evidence.

70. For these reasons, I would dismiss the cross-summons.

Conclusion

71. For all these reasons, the further amended summons filed 21 July 2025 will be dismissed. Although time will be extended for the filing of the cross-summons, the cross-summons will also be dismissed. There is no reason why the ordinary rule should not apply and costs follow the event. Accordingly, Autohaus will pay Mr Azoulay’s costs of the further amended summons and Mr Azoulay will pay Autohaus’ costs of the cross-summons.

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