Jandson Pty Ltd v Edmonds

HEADNOTE [This headnote is not to be read as part of the judgment] Jandson Pty Limited (the applicant) sought leave to appeal against a decision of the primary judge to award Mr John Edmonds (the respondent) his costs on the ordinary basis following an award to him of damages in the sum of $24,282.75 (excluding interest) in proceedings in the District Court of New South Wales in a claim relating to building defects in the respondent's home. The applicant for leave to appeal was the respondent's builder. The trial leading to the award of damages ran for six days with the respondent originally claiming damages in the sum of $610,501. The sum awarded was approximately 4 per cent of this amount. The respondent succeeded at trial on the issue of brickwork in his home and, in particular, the defective mortar used in its construction. The primary judge accepted evidence led by the applicant that a particular brand of sealant, namely a product known as MortarMend, would satisfactorily rectify the defect. The cost of this mode of rectification was considerably cheaper than alternative means of rectification which had been contended for by the respondent. The applicant only introduced evidence relating to the availability and efficacy of MortarMend shortly before the commencement of the trial and after expert evidence had been exchanged and expert conclaves conducted. In its application for leave to appeal, the applicant argued that the primary judge's award of costs to the respondent was disproportionate to his success in the proceedings and that the primary judge did not deal with an argument to this effect raised by the applicant in its written submissions on costs (the disproportionality argument). The disproportionality argument was not the subject of any oral submission or elaboration before the primary judge when the question of costs was argued on 22 October 2021. Nor was any evidence led before the primary judge as to the respective parties' costs in the proceedings. No attempt was made to seek to link particular costs to particular issues. Nor was there any submission as to what was the relevant "event" that costs should follow, the applicant having sought to frame one of its proposed grounds of appeal by reference to this issue. The primary judge reserved judgment on costs following oral argument with a written judgment on costs being delivered on 25 October 2021. The proceedings were relisted on 8 November 2021 when, pursuant to the slip rule, the primary judge clarified her orders with an amendment being made to them. No point was taken on that occasion that the primary judge had overlooked or failed to deal with the applicant's disproportionality argument, and no application was made to the primary judge to do so. The Court held (Bell CJ, Macfarlan and White JJA agreeing), refusing leave to appeal with costs, that in circumstances where a judge has or is said to have overlooked a particular argument of a party, it is open to that party pursuant to r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) to draw that fact to the judge's attention and invite him or her to address the matter, and ordinarily that will be the preferable and appropriate course to take rather than seeking to raise the matter on appeal: [16]-[20] (Bell CJ); [27] (Macfarlan JA); [28] (White JA). Consolidated Lawyers Ltd v Abu-Mahmoud; Abu-Mahmoud v Consolidated Lawyers Ltd [2016] NSWCA 4; Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; [2017] NSWCA 106; Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654; Nominal Defendant v Livaja [2011] NSWCA 121, considered.

Judgment

1. BELL CJ: This application for leave to appeal relates to a decision by the primary judge to award Mr John Edmonds (the respondent) his costs on the ordinary basis following an award to him of damages in the sum of $24,282.75 (excluding interest) in proceedings in the District Court of New South Wales in a claim relating to building defects in the respondent's home. The applicant for leave to appeal, Jandson Pty Limited (the applicant), was the respondent's builder.
2. The trial leading to the award of damages ran for six days with the respondent originally claiming damages in the sum of $610,501. The sum awarded by way of damages was approximately 4 per cent of this amount. These bare figures, however, mask at least some of the forensic reality of the situation.
3. First, the issue on which the respondent succeeded at trial related to brickwork in his home and, in particular, the quality of the mortar used in its construction. At issue in the trial was not merely the fact of the defect but also the cost of rectification. The primary judge accepted evidence led by the applicant that a particular brand of sealant, namely a product known as MortarMend, which would reinforce the mortar joints, would satisfactorily rectify the defect which her Honour had found to be established. The cost of this mode of rectification was considerably cheaper than alternative means of rectification which had been contended for by the respondent.
4. Critically for present purposes, the applicant only introduced evidence relating to the availability and efficacy of MortarMend shortly before the commencement of the trial. This was after expert evidence had been exchanged and expert conclaves conducted. Thus, although the applicant succeeded in resisting the respondent's case as to the mode of rectification with consequences for the amount of damages awarded, it only did so by reference to evidence introduced at a relatively late stage of the proceedings and shortly prior to the trial.
5. In relation to the fact that the trial took six days, it is necessary to note that the cost of two of those days has already been the subject of a costs order adverse to the applicant following extensive argument as to the admissibility of expert reports.
6. The gist of the applicant's argument before this Court is that the primary judge's award of costs to the respondent was disproportionate to his success in the proceedings and that the primary judge did not deal with an argument to this effect raised by the applicant in its written submissions on costs. In this context, s 60 of the Civil Procedure Act 2005 (NSW) provides as follows: "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." Section 98(4)(b) of the Civil Procedure Act empowers the court to make an order to the effect that the party to whom costs are to be paid is to be entitled to a specified proportion of the assessed costs.
7. In terms, the costs orders sought by the applicant at first instance were as follows (with emphasis added): "(a) That the Plaintiff pay the Defendant's costs of the proceedings on an indemnity basis on and from 11 August 2020. (b) That there otherwise be no order as to costs, save for any previous costs, or in the alternative to (b) above: (c) That the Defendant pay 4% of the Plaintiff's costs up to and including 10 August 2020. (d) All other orders made remain undisturbed."
8. Prayers (a), (b) and (c) were interlinked with prayers (b) and (c) being alternatives but predicated on prayer (a) being made. The significance of the date of 11 August 2020 referred to in that prayer and prayer (c) was that that was the date on which an Offer of Compromise was made and a Calderbank letter sent by the applicant to the respondent. These offers were relied upon by the applicant before the primary judge to found its principal argument on costs, namely that, although the respondent had obtained an award of damages, it was less than the amount offered with the consequence that the respondent should pay the applicant's costs from the date of those offers. This argument was rejected essentially on the basis that the primary judge did not consider that the respondent was given sufficient time to consider the offers prior to their expiry.
9. No application for leave to appeal is brought from that aspect of the primary judge's decision, nor from her Honour's decision (indicated in the course of argument before her) that the respondent should not be deprived of its costs pursuant to r 42.35 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) because he obtained a verdict of less than $40,000.
10. Although the form of costs orders sought at first instance, as set out above, tied any argument based on proportionality to success in respect of the Offer of Compromise or Calderbank letter, the applicant contended that its submission at first instance on proportionality was free standing and did not depend upon success in respect of the Offer of Compromise and Calderbank letter arguments. What the applicant submitted in writing at first instance in relation to proportionality was as follows: "The Court has a wide discretion with respect to costs. In addition to the rejection of the offers made and the fact that the Plaintiff obtained less than $40,000.00, the following matters provide a basis for the costs orders sought by the Defendant: (a) First, there is a significant disproportion between the amount the Plaintiff obtained and the costs of the proceedings. There can be no contest that the modest judgment obtained by the Plaintiff is grossly disproportionate to the costs incurred by both side in the proceedings. In Jones v Sutton (No 2) [2005] NSWCA 203 a Plaintiff that obtained a modest judgment of $5,000.00 after a nine day hearing in the District Court was deprived of costs. There is no reason a similar approach should not be taken in this matter. (b) Second, the Plaintiff's success is also disproportionate compared with the amount claimed. The Plaintiff was awarded less than 4% of the damages claimed in the Statement of Claim. In line with the authorities on the incurring of costs that are disproportionate to the amount finally awarded, such as Il Vizio Corp Pty Ltd v Cashflow Finance Australia Pty Ltd (No 2) [2018] NSWCA 142 at [16], it is submitted that any award of costs in favour of the Plaintiff should be limited to 4% of costs as agreed or assessed."
11. The disproportionality argument was not the subject of any oral submission or elaboration before the primary judge when the question of costs was argued at some length on 22 October 2021. Nor was any evidence led before the primary judge as to the respective parties' costs in the proceedings. No attempt was made to seek to link particular costs to particular issues and no submission was made that costs should be awarded by reference to success or failure on particular issues cf. for example, Roluke Pty Ltd v Lamaro Consultants Pty Ltd (No 2) [2009] NSWCA 21.
12. Nor was there any submission made as to what was the relevant "event" that costs should follow. This was particularly significant given that the applicant sought to frame one of its proposed grounds of appeal by reference to this issue.
13. The primary judge reserved judgment on costs following oral argument with a written judgment on costs being delivered on 25 October 2021 (Edmonds v Jandson Pty Ltd (District Court (NSW), E Olsson SC DCJ, 25 October 2021, unrep)). The proceedings were relisted on 8 November 2021 when the parties sought clarification as to the form of order and, pursuant to the slip rule, the primary judge clarified her orders with an amendment being made to them. No point was taken on that occasion that her Honour had overlooked or failed to deal with the applicant's disproportionality argument, and no application was made to the primary judge to do so.
14. Formal orders, from which leave to appeal is now sought, were entered on 8 November 2021.

Consideration

1. It is correct that the primary judge did not deal in her reasons on costs with any argument based on disproportionality. In the circumstances of the present case, it is not difficult to see how the primary judge may have overlooked the argument, expressed as exiguously as it was and left wholly unelaborated. Indeed, given: (i) the form of orders that were sought (see [7] above), (ii) the fact, as explained above, that they appeared to be tied to success on the Offer of Compromise/Calderbank issue, which her Honour did deal with adversely to the applicant, and (iii) the fact that no reference was made orally to any argument in respect of the disproportionate costs consequences were the usual order as to costs to be made, and no evidence led in support of it, it is not necessarily fair to assert, as was put on the application for leave to appeal, that the primary judge overlooked the argument.
2. Even assuming, for the sake of argument, that it was overlooked, the solution in such a circumstance is not always or even ordinarily by way of appeal. In circumstances where a judge has overlooked a particular argument of a party, it is open to that party to draw that fact to the judge's attention and invite him or her to address the matter. In this context, r 36.16 of the UCPR provides that: "36.16 Further power to set aside or vary judgment or order (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if-- (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it-- (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.
3. In Consolidated Lawyers Ltd v Abu-Mahmoud; Abu-Mahmoud v Consolidated Lawyers Ltd [2016] NSWCA 4 at [39]-[40], Macfarlan JA, with whom Bathurst CJ and Tobias AJA agreed, observed that: "[39] The appellants asserted on the appeal that although this argument had been put to the primary judge, his Honour had not addressed it. Assuming for the moment that this is correct, the appellants should, in my view, have applied to the primary judge pursuant to r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") to set aside or vary his Honour's judgment on the ground that he had not dealt with a significant submission that they had made. That course was particularly appropriate in the present case because there had been a lengthy hearing before the primary judge involving detailed evidence and submissions and the allegedly overlooked point required findings of fact possibly involving questions of credit to be made. The submission (still assuming it was in fact made) was not one that could conveniently be dealt with on appeal in the absence of findings by the primary judge. [40] I do not suggest that parties must always approach a primary judge if it appears that the judge has overlooked a significant point in formulating the Court's judgment. It is however a course that should be adopted in the absence of particular, valid, reasons for not doing so. The primary judge is almost always in a better position than an appellate court to decide an overlooked point and appellate courts are entitled to have the benefit of a primary judge's views about matters in issue on appeal. The requirement in s 56 of the Civil Procedure Act 2005 (NSW) to have regard to the "just, quick and cheap resolution of the real issues in the proceedings" strongly supports the adoption of this course in the absence of particular reasons for the point being taken directly on appeal.
4. So also, in Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; [2017] NSWCA 106 at [74]-[77], Macfarlan JA, on this occasion with the concurrence of McColl JA and Sackville AJA, made much the same point, observing in that case at [75] that "[t]he issue that had arisen could and should have been corrected by asking the primary judge to deal with the point he had seemingly overlooked", albeit noting at [77] that "[a]lthough a r 36.16 application is usually the appropriate course to take, a failure to take it does not preclude a party appealing on the ground that a judge has failed to deal with a significant issue before him or her."
5. In the earlier decision of Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 at [70], Young JA, with whom Allsop P and Macfarlan JA agreed, said that: "In the light of the statutory commands in ss 56 and following of the Civil Procedure Act 2005 and good case management practice and also because the interests of justice demand it, this Court is unlikely to allow an appeal and remit matters for further hearing at first instance where an alleged omission to deal with a point has not been identified and the subject of protest within the 14 days allowed by the rules or the date fixed for short minutes of order to be considered."
6. In Nominal Defendant v Livaja [2011] NSWCA 121 at [23], Basten JA delivering the judgment of the Court, observed that "[w]here an apparent error can readily be addressed without the need to resort to expensive and time-consuming appeal proceedings, that course should be permitted and encouraged." The failure to take that course in the present case bears strongly upon the assessment of whether or not leave to appeal should be granted.
7. In this regard, the primary judge delivered her reasons for costs on 25 October 2021. The orders were not entered immediately and, as explained earlier, the proceedings were in fact re-listed on 8 November 2021 in order to clarify an aspect of the primary judge's reasons. The applicant which, by that date, had had the primary judge's reasons on costs for some 14 days, did not draw to her Honour's attention the fact that she had not dealt with the disproportionality argument, although this was plain on the face of the judgment.
8. In my opinion, leave to appeal should not be granted in circumstances where the applicant had ample opportunity to agitate the failure to deal with the disproportionality argument before the primary judge both prior to the entry of orders on 8 November 2021 and for 14 days thereafter. There was no procedural bar to that course and the primary judge was vastly better placed than this Court to make an informed assessment as to the merits of this argument. So much is reflected in the fact that it was ultimately conceded that even if leave to appeal were granted and the appeal allowed, the matter would need to be remitted to the primary judge. That would only be to add a further layer of costs to these already expensive proceedings.
9. I am also mindful of the fact that one of the principal reasons why the ultimate result was arguably disproportionate to the costs likely to have been incurred was because of new evidence first introduced into the case shortly prior to the hearing. This was a result of the applicant's own actions from which it profited insofar as, prior to the introduction of the evidence that led to the relatively modest verdict, the only means of rectification the subject of any evidence in the case would have resulted in a significantly higher verdict.
10. The applicant's case would have had far more merit if the material relied upon and by reference to which it ultimately succeeded in keeping the damages awarded on the mortar issue to the relatively small sum awarded had been introduced, as it should have been, at a much earlier stage of proceedings.
11. In reaching the conclusion that the interests of justice do not require a grant of leave to appeal, it is not necessary to consider the argument advanced on behalf of the respondent to the effect that any disproportionate costs burden could be ameliorated during the assessment process by reference to s 172(1)(a) of the Legal Profession Uniform Law (NSW). In this context, it may be noted that the decision of this Court in eInduct Systems Pty Ltd v 3D Safety Services Pty Ltd (2015) 90 NSWLR 451; [2015] NSWCA 284 relied upon by the applicant in opposition to the respondent's argument related to s 364 of the now repealed Legal Profession Act 2004 (NSW).
12. In my opinion, leave to appeal should be refused with costs.
13. MACFARLAN JA: I agree with Bell CJ.
14. WHITE JA: I agree with Bell CJ.

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