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[2011] NSWCA 284
mixed. Defendants' summons for leave to appeal on liability dismissed with costs. Leave granted to plaintiff to appeal the 24 June 2011 costs judgment; appeal allowed. Orders (ii) and (iii) made 25 May 2011...
A battery bought from Jaycar exploded in Ross Lombardo's pocket and burned him. He sued the shop and importer under both consumer protection legislation and ordinary sale of goods rules. The District Court judge ruled only on the legislation claim and gave him about $39,000. Lombardo pointed out the judge had missed the contract claim (which used different damages rules and would produce more money) and asked the judge to fix the judgment. The judge did so, raising the award to $46,400, but said each side should pay its own costs of that extra hearing. On appeal the Court of Appeal refused the companies permission to challenge the finding that the battery was faulty (the amount was too small and the expert evidence dispute did not raise any big legal question). But it allowed Lombardo's appeal on costs, ruled that a judge's own mistake is simply one of the normal risks of going to court, and ordered the companies to pay Lombardo's costs of the application to fix the judgment because he had won it and neither side had caused the mistake.
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2,603 words · generated 24/04/2026
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.
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).
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.
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.
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.
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.
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.
Lombardo Representation: Counsel C T Barry QC; J E Rowe (for Jaycar Pty Ltd & Electus Distribution Pty Ltd) D R Toomey (for Mr Lombardo) Solicitors John Carmody & Co (for Jaycar Pty Ltd & Electus Distribution Pty Ltd) Beilby Poulden Costello (for Mr Lombardo) File Number(s): 2010/422970 Decision under appeal Jurisdiction: 9101 Citation: N/A Date of Decision: 2010-12-08 00:00:00 Before: Sorby DCJ File Number(s): 2009/1812
Judgment 1CAMPBELL JA : This judgment concerns two applications for leave to appeal, relating to different aspects of an action in the District Court. Each has been listed on the basis that it is a concurrent hearing of the application for leave to appeal and, if leave is granted, of the appeal. 2Mr Ross Lombardo (" the Plaintiff ") bought a "twin pack" of 9-volt lithium batteries in December 2007 from the store of Jaycar Pty Ltd (" the Retailer "). The batteries in question had been manufactured in China, and imported into Australia by Electus Distribution Pty Ltd (" the Importer "). Soon after purchase Mr Lombardo placed one of the batteries into the control device of some toy cars belonging to his sons. He stored the other battery in a drawer in his home office, where it remained. 3On 11 July 2008 the Plaintiff noticed a "chirping" sound coming from a smoke alarm in his house. Recognising that sound as an indication that the battery in the smoke alarm needed replacing, he took the spare battery from the drawer in which it had been stored and placed it in his jeans pocket. He was then distracted from his intended course of replacing the smoke alarm battery immediately. Soon after, he heard a "pop" sound and felt "intense heat" on the left side of his right leg. Smoke came from his jeans. It turned out that the battery in his pocket had disintegrated, and the disintegrating battery had caused burns to his right thigh and ankle. Those burns were a mixture of flame and alkaline burns. 4The Plaintiff sued both the Retailer and the Importer. He ultimately pressed three different causes of action against the Retailer. The first was for breach of an implied term (arising under both s 71(1) Trade Practices Act 1974 (Cth) (" TP Act ") and s 19(2) Sale of Goods Act 1923 (" SG Act ") in the contract of sale that the batteries were of merchantable quality. The second was a statutory liability of the Retailer under s 75AD TP Act . The third was for breach of an implied term in the contract of sale that the batteries were fit for the purpose for which they were acquired, arising under s 71(2) TP Act and s 19(1) SG Act . 5The judge made no decision concerning the implied warranty of fitness for purpose. However no complaint is made about his failure to do so, so I shall make no further mention of it. 6The causes of action ultimately pressed against the Importer were both statutory counts. One arose under s 74D TP Act , while the other arose under s 75AD TP Act . Relevant Provisions of the TP Act 7All the provisions of the TP Act that were sued on in the present case have been repealed with effect from 1 January 2011, but there is no dispute that the present case should be decided by reference to the TP Act as it stood prior to that repeal. 8Section 71 TP Act occurred in Part V, Division 2 - "Conditions and warranties in consumer transactions" . Section 66(2) provided that, in that Division: "Goods of any kind are of merchantable quality within the meaning of this Division if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances." 9Section 71(1) TP Act provided: "Where a corporation supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality, except [in circumstances not presently relevant]." 10Section 74D TP Act appeared in Part V, Division 2B - "Actions against manufacturers and importers of goods" . Section 74A(4) provided that, in that Division: "If: (a) goods are imported into Australia by a corporation that was not the manufacturer of the goods; and (b) at the time of the importation the manufacturer of the goods does not have a place of business in Australia; the corporation shall be deemed, for the purposes of this Division, to have manufactured the goods." 11The judge held that the Chinese manufacturer of the battery that injured the Plaintiff had no place of business in Australia, and that in consequence both the Importer and the Retailer were deemed to be the "manufacturer" of the battery for the purposes of the TP Act . That conclusion is not now disputed. 12Section 74D TP Act provided: "(1) Where: (a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (b) a person ... supplies the goods (otherwise than by way of sale by auction) to a consumer; (c) the goods are not of merchantable quality; and (d) the consumer ... suffers loss or damage by reason that the goods are not of merchantable quality; the corporation is liable to compensate the consumer ... for the loss or damage and the consumer ... may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction. ... (3) Goods of any kind are of merchantable quality within the meaning of this section if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to: (a) any description applied to the goods by the corporation; (b) the price received by the corporation for the goods (if relevant); and (c) all the other relevant circumstances." 13Section 75AD TP Act occurred in Part VA - "Liability of manufacturers and importers for defective goods" . Section 75AB extended the provisions of (relevantly) s 74A(4) to Part VA. 14Section 75AC TP Act provided: "(1) For the purposes of this Part, goods have a defect if their safety is not such as persons generally are entitled to expect. (2) In determining the extent of the safety of goods, regard is to be given to all relevant circumstances including: (a) the manner in which, and the purposes for which, they have been marketed; and (b) their packaging; and (c) the use of any mark in relation to them; and (d) any instructions for, or warnings with respect to, doing, or refraining from doing, anything with or in relation to them; and (e) what might reasonably be expected to be done with or in relation to them; and (f) the time when they were supplied by their manufacturer. (3) An inference that goods have a defect is not to be made only because of the fact that, after they were supplied by their manufacturer, safer goods of the same kind were supplied. (4) An inference that goods have a defect is not to be made only because: (a) there was compliance with a Commonwealth mandatory standard for them; and (b) that standard was not the safest possible standard having regard to the latest state of scientific or technical knowledge when they were supplied by their manufacturer." 15Section 75AD TP Act provided: "If: (a) a corporation, in trade or commerce, supplies goods manufactured by it; and (b) they have a defect; and (c) because of the defect, an individual suffers injuries; then: (d) the corporation is liable to compensate the individual for the amount of the individual's loss suffered as a result of the injuries; and (e) the individual may recover that amount by action against the corporation; ..." 16Section 75AK TP Act also appeared in Part VA. Section 75AA provided that, in that Part, a "liability action" included an action under s 75AD. Section 75AA also provided that, in that Part, "action goods" , in relation to a liability action means the goods whose supply and defect is alleged in the action. 17Section 75AK TP Act provided: "(1) In a liability action, it is a defence if it is established that: (a) the defect in the action goods that is alleged to have caused the loss did not exist at the supply time; .... (2) In this section: supply time means: ... (b) in relation to other goods-the time when they were supplied by their actual manufacturer." Provisions of the SG Act 18Section 19 of the SG Act provided: "Subject to the provisions of this Act, and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows: ... (2) Where goods are bought by description from a seller who deals in goods of that description (whether the seller be the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that if the buyer has examined the goods there shall be no implied condition as regards defects which such examination ought to have revealed. ..." The Course of the District Court Proceedings 19The trial of the District Court proceedings took place over four days in August and November 2010. The primary judge delivered judgment on 8 December 2010 (" the First Substantive Judgment "). In it, the judge held there was a "defect" in the battery. 20His Honour then rejected a defence that the Retailer had raised under s 74AK(1) TP Act . There was evidence that it was possible for disintegration of the battery to be caused by a defect in its manufacture, or by other matters. The only specific other matters identified as possible causes of the disintegration of the battery were: attempting to recharge it; dropping or mishandling it; or an external short circuit arising from the terminals of the battery coming into contact with a metal object such as a coin in the Plaintiff's pocket. The judge accepted that the Plaintiff (who was a handyman/painter by trade) had extensive experience with batteries. He accepted the evidence of the Plaintiff about the history of the battery from the time of purchase to its disintegration. The judge noted that it had not been put to the Plaintiff in cross-examination that the battery had been dropped or mishandled in any way. The judge took the view that whether other members of the Plaintiff's family may have used the battery and returned it to its storage place in the Plaintiff's home office was "mere speculation" . The judge accepted expert evidence from Mr Simon Cox, an expert called by the Plaintiff, to the effect that he had examined the disintegrated battery under a microscope and could see no evidence on the terminals of the battery of there having been any short-circuit between those terminals. 21Thus, because the Retailer was a deemed manufacturer of the battery, there was a "defect" in the battery, that defect had caused injury to the Plaintiff, and the Retailer's defence under s 74AK(1) failed (the defect being in manufacture), the Plaintiff was entitled to a verdict against the Retailer. 22The Importer had not filed a Defence. The judge found that, by reason of the Importer being a deemed manufacturer and there being a defect in the battery that caused injury to the Plaintiff, the Plaintiff was entitled to a verdict against the Importer. 23His Honour then calculated the damages, in accordance with the statutory limitations on quantum of personal injury damages that are required by Part VIB TP Act . He ordered that there be a verdict and judgment against both defendants in the sum of $39,281.70, and ordered both defendants to pay the Plaintiff's costs of the trial as agreed or assessed. 24That was far from the end of the litigation. The Plaintiff filed a Notice of Motion seeking a variation of the judgment given on 8 December 2010. There was no dispute that the Notice of Motion was filed within the time allowed by UCPR 36.16(3A). 25The basis upon which Mr D Toomey, counsel for the Plaintiff both in the court below and in the present applications, sought the variation of the judgment was that, even though the Plaintiff had sued for breach of contract, the judge had not determined that claim. Further, Mr Toomey submitted that the damages for breach of contract would be determined in accordance with the Civil Liability Act 2002 , and would result in a higher quantum of damages than the quantum that the judge had already assessed under Part VIB TP Act . It is common ground that before the First Substantive Judgment was delivered Mr Toomey had addressed the judge on both the TP Act and the contractual causes of action. It is also common ground that Mr Toomey had drawn the judge's attention to there being different ground rules for assessment of damages under the Civil Liability Act to those that applied concerning Part VIB TP Act . 26Counsel for the Importer and the Retailer in the court below opposed the Notice of Motion seeking variation of the judgment. We are informed that the Notice of Motion involved the preparation of written submissions, and hearings on two separate days. 27The judge determined that Notice of Motion by a judgment delivered on 25 May 2011 (" the Variation Judgment "). He accepted that the appropriate principle upon which the court should act, in deciding whether to vary the judgment, was that stated in Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 302, namely that the precondition for the court revisiting a judgment already delivered was: "... that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the re-hearing." 28His Honour also said: "Since the motion was filed, some research led me to the authority of Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 499 where Gibbs J said: '...if a party claims relief on two different legal grounds, but the facts on which the relief is sought on each ground are identical, and the relief sought on each ground is the same in substance if not in form, there is only one matter for determination.'" 29His Honour's conclusion, at [12]-[13], was: "...I have decided in the interest of justice, together with the fact that the causes of action were not pleaded in the alternative, I should consider the Plaintiff's claim under the contract, and if he is successful, the only verdict to be entered will be that relating to the higher amount, if any between both causes of action, the Plaintiff indicating he would choose the higher amount. I will therefore pursuant to Part 36 Rule 36.16(1) of the UCPR vary my original judgment and consider the Plaintiff's claim in contract and give judgment in that claim." 30His Honour's order at [14] concerning the costs of the Notice of Motion seeking the variation was: "ii Each party to pay its own costs. Neither party was responsible for the Court's misapprehension of the law." 31Also on 25 May 2011, the primary judge delivered revised reasons for judgment concerning the Plaintiff's claims (" the Second Substantive Judgment" ). Those reasons were identical to the First Substantive Judgment, except that they made clear that the damages of $39,281.70 were awarded for "the Plaintiff's claim under the TP Act " . The judge then, in three additional pages of reasoning, went on to hold that there had been a breach of the implied term of merchantable quality, arising from the attributes of the battery by reason of which he had held that "defect" existed. The judge assessed the total damages in accordance with the Civil Liability Act at $46,400.00. The judge continued: "73. ... and I award this sum to the Plaintiff for his claim for breach of contract under the SG Act . 74. The Plaintiff is not entitled to double compensation for the same injury and is entitled to decide which of the two set of damages he will accept, and I was advised it would be the higher amount of the two claims, which is the sum of $46,400 for breach of contract. Orders 75. My orders are: i. There will be a verdict and judgment against both the Defendants in the sum of $46,400.00 ii. Both Defendants will pay the Plaintiff's cost of the trial as agreed or assessed. iii. The costs of the motion to vary the judgment are to be borne by each party; ..." 32The judge's order that each party should pay its own costs of the Notice of Motion was made without having heard submissions on that topic. The Plaintiff applied promptly to be heard concerning the appropriate order for costs of the Notice of Motion. Argument on that question took place on 8 June 2011. Mr Toomey submitted that the Plaintiff should receive the costs of the Notice of Motion. Counsel for the Retailer and the Importer contended that the Plaintiff should pay their costs of the Notice of Motion. 33Also on 8 June 2011 there was argument about the appropriate order for costs of the action. The judge made an order concerning the costs of the action on 8 June 2011, for reasons not before us on these applications. He delivered his decision concerning the costs of the Notice of Motion on 24 June 2011 (" the Costs Judgment "). 34By 8 June 2011 the judge had been informed that the Plaintiff had made an offer of compromise on 30 July 2010 in the amount of $45,000. As the judge recorded in the Costs Judgment: "Following argument on 8 June 2011, I determined that costs associated with the cause of action for breach of contract under the Sale of Goods Act 1923 (NSW) (" SG Act " ) should be part of the costs order I made when handing down the principal judgment on 8 December 2010. I further ordered that the costs be paid on an ordinary basis up to and including 30 July 2010, and thereafter on an indemnity basis." 35In the Costs Judgment, the judge declined to alter the order that he had made without the benefit of argument concerning the costs of the Notice of Motion. He rejected a submission that the Plaintiff should pay the costs of that motion because the Plaintiff was seeking an indulgence. Counsel for the Importer and the Retailer referred the judge to various authorities concerning that point. In those authorities, ultimately successful parties had been ordered to pay some costs of the opposite parties. However, the judge distinguished those authorities, on the ground that in those cases: "... the Court was able to point to where a Plaintiff or his or her solicitors had failed to do something which initiated a motion to be brought before the court." 36His Honour's reasons for not requiring the Importer and the Retailer to pay the costs of the Notice of Motion were: "6. In the matter before me, the Plaintiff / Applicant brought the motion for variation pursuant to the UCPR on the basis of a misapprehension of the law on my part, specifically, that as the claim under the Trade Practices Act 1975 (Commonwealth) (" TP Act ") and the SG Act arose out of the same set of factual circumstances, resulting in the same injury and loss and damage, I needed only to determine one claim. I concluded following that argument that both claims should be determined and went on to consider the Plaintiff / Applicant's claim under the SG Act for breach of contract which resulted in a higher figure for non-economic loss than under the TP Act , and therefore a higher overall sum under the SG Act which the Plaintiff / Applicant chose to accept. 7. My failure to determine the Plaintiff / Applicant's claim for breach of contract at first instance was not the fault of the Plaintiff / Applicant, nor was it the fault of the Defendant / Respondent." The Applications for Leave to Appeal 37The Importer and the Retailer bring one of the applications for leave to appeal. In it they seek leave to challenge the judge's findings concerning liability under the TP Act and for breach of contract (" the Liability Application for Leave to Appeal "). The essential challenge that is sought to be made is to the judge's finding that the battery was defective. There is no challenge to the judge's awarding the same quantum of damages against both the Retailer and the Importer. Leave to appeal is required because the judgment or order that is challenged involves a matter at issue amounting to less than $100,000: s 101(2)(r) Supreme Court Act 1970 . 38The second application for leave to appeal is brought by the Plaintiff. He seeks to challenge the judge's decision concerning the costs of the Notice of Motion to vary the First Substantive Judgment (" the Costs Application for Leave to Appeal "). Leave to appeal is required pursuant to s 101(2)(c) Supreme Court Act , because the judgment or order challenged is one "as to costs only which are in the discretion of the Court" . Leave to appeal is also required under s 101(2)(e) Supreme Court Act , because the judgment or order challenged is interlocutory. The Liability Application for Leave to Appeal 39I have earlier mentioned that the Plaintiff called evidence from Mr Simon Cox, an expert. The Retailer and the Importer called expert evidence from Professor David Hibbert. 40It was common ground that the battery consisted of three cells, which were connected in series. Each cell contained an anode consisting of lithium metal, a cathode consisting of manganese dioxide, and a porous polymer film known as a separator that contained an electrolyte gel. In ordinary operation, a device intended to be powered by the battery is connected to both a terminal on the outside of the battery that connects with the anode of a cell, and another terminal on the outside of the battery that connects to the cathode of a cell. Electrons then flow through the device, from the anode to the cathode. 41It was possible for there to be an internal short circuit in a cell of the battery, if electrons became able to cross the separator. Such an internal short circuit could generate exothermic reactions, and ultimately result in the cell igniting and battery exploding as a consequence of a process called "thermal runaway" . 42Mr Cox's opinion was that the cause of the failure was probably a manufacturing fault relating to either contamination or some physical defect associated with assembly of the battery. In Mr Cox's opinion, either of these manufacturing faults resulted, with time, in electrons becoming able to cross the separator, resulting in thermal runaway occurring. While Mr Cox was not specific about the type of defect that there might have been in the separator, it was at least consistent with his view that that defect might have been one that allowed electrons to cross the separator for the first time, or cross the separator at a greater rate, some months after the battery was manufactured. 43Professor Hibbert was of the view that it was physically impossible for an internal short circuit to occur months after the battery had been manufactured. In his view, if the separator was defective there were two possible scenarios. In the first, electrons would cross the separator and cause thermal runaway very soon after the battery was manufactured. Alternatively, the electrons would cross the separator very slowly, at a rate not sufficient to cause thermal runaway. However in this second scenario, the electrons in the lithium would have become depleted after a period of months. 44The judge set out the nub of the opinion of both experts, including the portion in which Professor Hibbert said he had not done any detailed calculations. The judge ultimately accepted Mr Cox's opinion. 45Mr C T Barry QC, counsel for the Retailer and the Importer on the present applications (but not in the court below), submits that leave to appeal should be granted because the judge failed in a fundamental judicial duty to give reasons for preferring one expert opinion to another. 46I do not intend to consider whether the judge failed to give adequate reasons. In Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69 (followed in Zelden v Sewell [2011] NSWCA 56 at [22]), Sheller JA said that an applicant for leave must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at. Cole J relied on a principle that where small claims are involved, it is important that there be early finality in determination of litigation, otherwise the costs that will be involved are likely to swamp the money sum involved in the dispute. Kirby P recognised that ordinarily it was appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond what being merely arguable. 47The present case involves no question of principle that is subject to any doubt, and no issue of general public importance. The dispute has already consumed significant time, and no doubt significant costs, in the court below. It is not "reasonably clear" that the judge's conclusion about liability is wrong. The damages in question are not close to the $100,000 cut-off point below which leave is needed. Indeed, when there are two companies each liable for the damages, the amount of damages for which each is liable, on the facts established in this appeal, is of the order of $23,000. 48In my view it is not appropriate to grant leave to appeal concerning liability. The Costs Application for Leave to Appeal 49Mr Toomey correctly points out that, as it eventuated, it was of substantial financial importance to the Plaintiff that the judge decide the case on both the statutory and the contractual causes of action on which the Plaintiff had sued. Section 338 Legal Profession Act 2004 imposes a very significant limitation on the costs that can be recovered if the amount recovered on a claim for personal injury damages does not exceed $100,000. Section 340 Legal Profession Act creates an exception to that limitation, permitting costs to be assessed on an indemnity basis if a party to a claim for personal injury damages makes a reasonable offer of compromise that is not accepted. The effect of the judge granting the application to vary the judgment was that the Plaintiff received damages that exceed the amount of the offer of compromise that he had made. The Plaintiff thereby became entitled to an order for indemnity costs. Thus, the importance to the Plaintiff of re-opening the judgment considerably exceeded the difference between the amount of damages awarded in the First Substantive Judgment and the amount awarded in the Second Substantive Judgment. Mr Toomey submits that if the Plaintiff does not receive an order for costs concerning the Notice of Motion to vary the judgment, the comparatively modest award of damages that he received will be significantly eroded by the costs of that application. 50I recognise the force in that submission. However, I will not rest any decision about whether to grant leave to appeal against the Costs Judgment on the financial importance to the Plaintiff of bringing and succeeding in the Notice of Motion to vary the judgment. 51Section 98 Civil Procedure Act 2005 provides, so far as relevant: "(1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, ..." 52Uniform Civil Procedure Rule 42.1 provides: "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." 53As the primary judge's decision concerning the costs of the application to re-open was a discretionary decision, it is capable of being corrected by this Court only in the circumstances laid down by House v The King (1936) 55 CLR 499. One such circumstance is if the judge has made an error of principle. 54In my view, as will appear, the Costs Judgment was arrived at by an incorrect application of principle. Further, notwithstanding the significant difficulty that often confronts a litigant seeking leave to appeal concerning a question of costs alone, the principle is one of sufficient importance as to justify the grant of leave to appeal. 55As Gleeson CJ said in Ohn v Walton (1995) 36 NSWLR 77 at 78, the principles that govern the making of an order for costs "need to be identified so that, so far as possible, like cases will be decided in a like manner." 56The relevant principle concerns the way in which the court should treat, for the purposes of an order for costs, costs that have been incurred by reason of an error on the part of the court, where that error has not been brought about by conduct of any party to the litigation. 57By 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. 58As Gleeson CJ said in Ohn v Walton at 79: "The usual rationale of making a costs order is that it is just and reasonable that the successful party should be reimbursed for costs incurred, in the absence of grounds connected with the charge or conduct of the proceedings which makes it unjust or unreasonable that there should be such reimbursement." To similar effect is McHugh J's statement of principle in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [69]. The principle is given statutory force by UCPR 42.1. 59There are numerous vicissitudes of litigation that can affect the costs of litigation, for reasons that are not the fault of any party to the litigation. Examples of such vicissitudes are:
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: 14 September 2011
Jaycar Pty Limited
Lombardo
(1993) 176 CLR 300
(1936) 55 CLR 499
(1995) 36 NSWLR 77
(1998) 193 CLR 72
(1981) 148 CLR 457
[1998] HCA 11
Defendants' summons for leave to appeal on liability dismissed with costs. Leave granted to plaintiff to appeal the 24 June 2011 costs judgment; appeal allowed. Orders (ii) and (iii) made 25 May 2011 set aside and replaced with order that defendants pay plaintiff's costs of the notice of motion to vary the 8 December 2010 judgment. Defendants ordered to pay plaintiff's costs of the leave application and appeal.