What happened
Ross Lombardo purchased a twin pack of 9-volt lithium batteries from a Jaycar Pty Ltd retail store in December 2007. The batteries had been imported by Electus Distribution Pty Ltd. One battery was inserted into a toy car remote; the spare was stored in a drawer. On 11 July 2008 Lombardo placed the spare battery in his jeans pocket while intending to replace a smoke-alarm battery. The battery spontaneously disintegrated, producing intense heat, smoke and alkaline burns to his right thigh and ankle.
Lombardo commenced proceedings in the District Court against both the retailer and the importer. He pressed three causes of action against the retailer (breach of the implied condition of merchantable quality under s 71(1) Trade Practices Act 1974 (Cth) and s 19(2) Sale of Goods Act 1923, strict liability under s 75AD TP Act, and fitness for purpose) and two against the importer (ss 74D and 75AD TP Act). The Chinese manufacturer was held to have no Australian place of business, so both defendants were deemed manufacturers under s 74A(4) and s 75AB TP Act.
After a four-day trial in August and November 2010, Sorby DCJ delivered the first substantive judgment on 8 December 2010. He found a “defect” within the meaning of s 75AC TP Act, rejected the s 75AK defence, and entered judgment for $39,281.70 (limited by Part VIB TP Act) against both defendants. Critically, the judge made no determination on the contractual causes of action even though they had been pleaded “further and in the alternative”, fully argued, and the court had been expressly alerted to the different damages regime under the Civil Liability Act 2002.
Lombardo filed a notice of motion within the 14-day window permitted by UCPR 36.16(3A) seeking variation of the judgment so that the contractual claims could be decided. After two further hearings and written submissions the judge delivered the variation judgment on 25 May 2011. He accepted that he had laboured under a misapprehension (referring to Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 and Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457), varied the judgment, found breach of the implied condition of merchantable quality, assessed damages at $46,400 under the Civil Liability Act 2002, and permitted Lombardo to elect the higher sum. However, order (ii) in the 14-paragraph judgment and order (iii) in the 75-paragraph judgment provided that each party bear its own costs of the motion on the stated basis that “Neither party was responsible for the Court’s misapprehension of the law”.
Lombardo promptly sought to be heard on costs. On 24 June 2011 the primary judge delivered a further costs judgment confirming the no-costs order. He distinguished authorities cited by the defendants on the basis that in those cases a party had done something that necessitated the motion. Jaycar and Electus filed a summons seeking leave to appeal the liability findings. Lombardo filed his own application for leave to appeal the costs orders. Both applications were heard concurrently on 26 August 2011. On 14 September 2011 the Court of Appeal (Campbell JA, Young JA and Meagher JA agreeing) dismissed the defendants’ application for leave, granted Lombardo leave on the costs issue, allowed the appeal, set aside the relevant costs orders and substituted an order that the defendants pay Lombardo’s costs of the notice of motion, the leave application and the appeal.
Why the court decided this way
Campbell JA’s reasoning proceeds from a clear identification of the judicial error and its costs consequences. The primary judge had been addressed on both statutory and contractual claims and on the materially different damages regimes yet delivered a judgment determining only the TP Act claims. That omission constituted a failure to carry out the judicial duty that was not the fault of either party ([57]). The motion to vary was therefore not an application for an indulgence but an invitation to the judge to do what he should have done initially ([67]).
The Court treated the costs of rectifying that error as one of the ordinary vicissitudes of litigation. Campbell JA listed familiar vicissitudes—listing before a slow judge, interpreter delays, witness illness, vacated fixtures, matters not reached, judicial death or illness—and observed that extra costs generated by them are borne in accordance with the usual rule that costs follow the event ([59]-[60]). A judicial error not induced by a party is no different. The principle receives statutory expression in UCPR 42.1 and is reinforced by the statements of Gleeson CJ in Ohn v Walton (1995) 36 NSWLR 77 at 78-79 and McHugh J in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [69] that the successful party should be reimbursed absent conduct making reimbursement unjust ([58]).
The Court drew an explicit analogy with appellate practice. When an appeal court corrects a judicial error, the appeal is treated as a separate “event” and the successful appellant ordinarily receives the costs of the appeal even if a new trial is ordered and the ultimate outcome remains uncertain (Brittain v Commonwealth (No. 2) [2004] NSWCA 427). The fact that the correction occurs before the same judge rather than on appeal supplies no reason for a different costs outcome ([62]). The Suitors’ Fund Act 1951 was noted as providing only limited statutory relief in some cases of systemic imperfection, confirming rather than undermining the proposition that such costs remain the subject of ordinary costs orders ([63]).
Because the primary judge’s costs decision rested on an incorrect application of principle, House v The King error was established and the Court re-exercised the discretion. The defendants should have consented once the motion was filed; their opposition based on Autodesk principles was correctly rejected by the primary judge but still generated costs that, following the event, they must bear ([68]-[69]). The financial importance to Lombardo was amplified by the operation of ss 338 and 340 Legal Profession Act 2004 and the offer of compromise, but the decision did not rest on that consideration alone ([49]-[50]).
The liability leave application was refused on conventional grounds: no issue of principle or general public importance arose from the preference for Mr Cox’s evidence over Professor Hibbert’s on the timing of internal short-circuit and thermal runaway, the sum in issue was modest (approximately $23,000 per defendant), and it was not “reasonably clear” the primary judge was wrong ([46]-[48], applying Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69).
Before and after state of the law
Prior to this judgment the law contained the general rule in UCPR 42.1 and the statements of principle in Ohn v Walton and Oshlack, but there was scope for divergent approaches to the costs of applications to vary judgments under the slip rule or UCPR 36.16 when the variation corrected an omission by the court itself. Some first-instance decisions had treated any motion to re-open as an indulgence attracting adverse costs consequences even where the need for the motion arose from judicial oversight rather than party default. Authorities concerning plaintiffs who had omitted to plead or prove matters were sometimes applied without sufficient attention to whose conduct had actually necessitated the further hearing.
The Court of Appeal clarified that a judicial error not brought about by any party is to be assimilated to the ordinary vicissitudes of litigation. The costs of rectifying it therefore prima facie follow the event. A motion to correct such an error is not properly characterised as seeking an indulgence. The judgment also reinforced that the principles must be applied consistently so that like cases are decided alike (echoing Gleeson CJ in Ohn v Walton at 78). The explicit analogy to appellate costs practice provides a coherent framework: the motion to vary is treated as a discrete event in the same way an appeal is treated as a discrete event.
After the decision, costs applications arising from judicial omissions that were not induced by party conduct are to be approached on the footing that the successful party on the motion will ordinarily recover costs. The Suitors’ Fund Act 1951 remains available in the limited statutory categories but does not displace the ordinary rule. The decision also confirms that the Autodesk test for re-opening is concerned with whether the court proceeded on a misapprehension not attributable solely to the moving party’s neglect; once that test is satisfied, the costs consequence is separately governed by UCPR 42.1 as explained in this judgment.
Key passages with plain-English translation
Paragraph [57]: “By the First Substantive Judgment failing to determine the contractual causes of action that had been pleaded and argued, in circumstances where it had been pointed out in submissions that the method of assessing damages for the contractual causes of action differed from the method of assessing damages for the statutory causes of action, the judge failed to carry out his judicial duty. The Plaintiff was in no way responsible for there being a need to seek a variation of the First Substantive Judgment. Equally, as the judge recognised, the Importer and the Retailer were not responsible for there being occasion to bring the Notice of Motion.”
Plain English: The judge simply forgot to decide part of the case even though everyone had argued it and pointed out the damages would be different. That mistake was the court’s alone. Neither Lombardo nor the companies caused the problem that required the extra hearing.
Paragraph [61]: “It is an inevitable part of our legal system that on occasions a judge will act in error. If the error of the judge is not one that has been brought about by one of the parties … the costs of rectifying that error should, prima facie, be treated as one of the vicissitudes of litigation. Therefore, the costs of rectifying the error should prima facie follow the event.”
Plain English: Judges make mistakes sometimes. If the mistake is not anyone’s fault, the cost of fixing it is just one of the normal risks of litigation. The winner of the fix-up application should normally get their costs.
Paragraph [67]: “A party who, after the court has failed to perform its duty, asks that the court do what it should have done in the first place, is in no way seeking an ‘indulgence’.”
Plain English: Asking a judge to finish the job he was supposed to do is not asking for a favour. It is simply asking the court to complete its own work.
Paragraph [46]: “an applicant for leave must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at.”
Plain English: It is not enough to say the trial judge might have got it wrong. You need a legal question of principle, something important to the public, or a clear injustice before the Court of Appeal will hear a small-case appeal.
What fact patterns trigger this precedent
The precedent is triggered whenever a court delivers a judgment that fails to determine a pleaded and argued cause of action, a party brings a timely motion under UCPR 36.16 (or analogous power) to invite the court to complete its task, the motion succeeds, and the unsuccessful party resists on the basis that the moving party is seeking an “indulgence”. It applies with particular force where the primary judge has been expressly alerted to the omitted issue and to any differing legal consequences (such as different damages statutes) during the original hearing. The precedent governs the costs of that motion and any subsequent appeal from the costs decision.
It does not apply where the need for the further hearing is caused by a party’s own neglect or default, where the motion is brought outside the UCPR 36.16 window, or where the court has already determined all causes of action but a party merely wishes to re-agitate the merits. The principle is limited to genuine judicial omissions, not to cases in which a party has failed to lead evidence or advance a submission that could reasonably have been expected at the original hearing. Because the Court emphasised that the defendants should have consented once the motion was filed ([68]), the precedent is also engaged where a party opposes a plainly meritorious variation application and thereby generates additional costs that would not otherwise have been incurred.
How later courts have treated it
The judgment applies and follows the principles stated in Ohn v Walton, Oshlack v Richmond River Council, House v The King, Autodesk Inc v Dyason (No 2) and Carolan v AMF Bowling Pty Ltd. It treats those authorities as establishing a coherent costs philosophy that judicial error not induced by a party is a vicissitude to be dealt with under the ordinary “costs follow the event” rule. The Court’s assimilation of judicial error to other litigation vicissitudes (listed at [59]) is presented as a logical extension of the statements of Gleeson CJ and McHugh J rather than a departure from them. The analogy to appellate costs practice (Brittain v Commonwealth (No. 2)) is used to reinforce, not to qualify, the UCPR 42.1 starting point.
The decision confirms that the Autodesk test is concerned only with the threshold for re-opening and does not dictate the costs consequence once re-opening is granted. It distinguishes earlier cases in which a plaintiff’s conduct had necessitated the motion, thereby narrowing the circumstances in which a successful moving party will be deprived of costs. The emphasis on consistency of principle (“like cases will be decided in a like manner”) signals that subsequent courts should not readily invent new exceptions to UCPR 42.1 when the underlying cause of the extra hearing is judicial oversight. The judgment’s treatment of the Suitors’ Fund Act 1951 as confirmatory of, rather than contradictory to, the ordinary costs rule provides a statutory-contextual anchor for future decisions.
Still-open questions
The judgment leaves open the precise boundary between a judicial error and a situation in which a party’s pleading or submissions are so unclear that the omission can be laid at that party’s door. Although the Statement of Claim here expressly pleaded the claims “further and in the alternative”, less precise pleadings may generate debate about whether the judge’s misapprehension was “attributable solely to the neglect or default of the party seeking the re-hearing” (Autodesk at 302, adopted at [27]).
Another open question is the costs consequence where a defendant opposes a variation motion on grounds that, while ultimately unsuccessful, were reasonably arguable and advanced in good faith. The Court observed that the defendants “should have consented” once the motion was made ([68]), but did not decide whether partial success on discrete issues within the motion, or the existence of a genuine dispute about the Autodesk criteria, could justify a different costs outcome.
The interaction between this principle and offers of compromise or Calderbank letters served in respect of the variation motion itself is not addressed. Nor is the position where the variation increases the damages only modestly yet triggers a disproportionate costs liability because of the operation of the Legal Profession Act caps. The Court noted the financial importance to Lombardo of crossing the indemnity-costs threshold but expressly declined to rest its decision on that consideration.
Finally, the decision assumes the motion is brought within the UCPR 36.16(3A) window. The position where a party seeks to re-open after that period, relying on the inherent jurisdiction or other rules, and the costs consequences that then follow, remain for future cases. The Court’s insistence that the principles be applied consistently suggests these questions will be resolved by returning to the core propositions in [56]-[64] rather than by creating ad hoc exceptions.