Larsen v Tastec Pty Ltd

Application to set aside part of Order 2 and to amend Order 3(b)(ii)

1. It is convenient to address Prayers 1(a) and (b) of the notice of motion together as they are both concerned with the costs of the proceedings in the court below. The combined effect of these amendments, if made, would be to reinstate the primary judge's costs order and leave only the costs of the remitted proceedings outstanding (although the respondents also contended that the Larsens should pay the costs of the remitter).
2. In support of the variation to Order 2, the respondents submitted that this Court's decision to set aside the costs order below was inconsistent with its decision to remit the matter based only on the Larsens' success on Ground 1A, and the primary judge's failure to consider the relevant comparative task when assessing damages. The respondents contended that the Larsens did not ask the primary judge to undertake that comparative task, describing their claim for damages on that basis as a "mere assertion" and relying on the limited extent of the Larsens' written submissions below on the ACL claim. The respondents also contended that the discretionary matters on the basis of which the primary judge made the costs order were not challenged on appeal; the costs order itself was not challenged; and the basis on which damages are now sought was not put to her Honour in the trial. It followed, in their submission, that it was inappropriate to set aside the primary judge's costs order, in circumstances where even if her Honour had reached a different conclusion on the Larsens' misrepresentation case, the damages they now claim would not have been awarded.
3. As to the variation sought to Order 3(b)(ii), the respondents submitted that the Larsens' claim for damages was run differently on appeal than in the proceedings before the primary judge. At first instance, the Larsens claimed damages for breach of contract (being the cost of rectifying the alleged defects) and damages and/or compensation under the ACL, and did not make a separate claim for the reliance damages. Describing the remitter as a "second bite of the cherry" for the Larsens, the respondents submitted that they should bear the costs of those proceedings. We pause here to note that notwithstanding this submission, the variation sought did not extend to requiring the Larsens to pay the costs of the remitted proceedings.
4. Relatedly, the respondents submitted that the "dictates of finality and justice" support the variation in the sense that Larsens were effectively being released from the case that they ran before the primary judge, contrary to the principle in cases such as University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481; [1985] HCA 28 at 483. They also submitted that the increased costs of the remitted hearing, which were the result of it needing to be heard before a different judge, were only necessary because of the negative credit findings made in respect of the Larsens.
5. In response to the application to set aside part of Order 2, the Larsens disputed the respondents' submission that they did not take issue in the appeal with the primary judge's costs order. They referred to this Court's express reference, at J [161], to the argument they advanced about the costs of the proceedings below and submitted that the respondents were on notice that costs were in issue and had the opportunity to address it in written and oral submissions. The Larsens submitted that there was thus no basis for Order 2 of this Court to be reopened pursuant to r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR").
6. Alternatively, the Larsens submitted that if the Court were to engage in a review of Order 2 it should nonetheless be affirmed for a number of reasons. First, this Court had concluded that the primary judge erred in a manner that warranted setting aside the order entering verdict and judgment for the respondents. In those circumstances, it was appropriate to also set aside her Honour's costs order, the basis for which was the respondents' success in those proceedings. Secondly, contrary to the respondents' submissions the Larsens were not only successful on Ground 1A, but also on Ground 1 (the determination of that ground being in their favour in the event that it was relevant to costs: J [9], [136]). Relatedly, and again contrary to the respondents' submissions, the Court did not determine Ground 3 against the Larsens but found it unnecessary to deal with the ground. Ground 1 occupied a significant part of both the hearing in the District Court and her Honour's reasons.
7. Thirdly, the Larsens disputed the respondents' submission that they did not seek the relief that they sought on appeal in the court below, giving references to where damages were sought on that basis before the primary judge. They also took issue with the characterisation of only a "small part" of their written submissions in the District Court being directed to the ACL claim.
8. As to the application to vary Order 3(b)(ii), the Larsens reiterated that the costs of the District Court proceedings (including of the forthcoming remitter) were squarely in issue in the appeal and that there was no basis under r 36.16 of the UCPR to reopen the issue. Alternatively, they submitted that this Court would not vary Order 3(b)(ii) in the manner sought. The Larsens submitted that in circumstances where the judgment entered in favour of the respondents was set aside, it was appropriate to set aside the costs order that had been made on that basis. To the extent that there were any matters that affected the general principle that costs follow the event (including the time spent in the District Court on the unsuccessful defects case), those matters could be considered as part of the costs determination in the remitted hearing.
9. Additionally, the Larsens took issue with the respondents' submission that the primary judge's error as to the appellants' misrepresentation case was due only to their failure to make a separate claim for reliance damages, and that remittal to the District Court was only necessary because of the Larsens' conduct. They submitted that the remitted hearing was essential due to the various errors the primary judge made in determining the misrepresentation case. Finally, the Larsens disputed, as contrary to both fact and this Court's findings, that they were seeking to "re-run" their damages case on a new basis not put to the primary judge. Having regard to their submissions in the District Court, the Larsens submitted that the damages case relied on in the appeal was put below and nothing in this Court's reasons contradicted that fact.
10. It is unnecessary to engage with the preliminary issue raised by the Larsens as to whether the respondents have established a basis for the application under r 36.16, because we would not make the variations sought in any event. The setting aside of the order entering verdict and judgment for the respondents in the proceedings below (which is not challenged on the motion), necessarily raises for consideration the correctness of the accompanying costs order. That order was made on a basis that has proved, at least in some respects, to be erroneous. Rather than attempt to determine what order to make in the place of the costs order of the primary judge, at a point when not all of the issues have been finally determined, the preferable course is for the District Court, seized with the remitted matter, to consider all questions of costs once it has determined the issue that is the subject of remittal. To the extent that the respondents' submissions concerned the costs of the remitted hearing, it is obviously appropriate that those matters be dealt with by the judge hearing the remitter. The arguments made by the respondents about why they should not have to pay any costs with respect to the original hearing before the primary judge, or with respect to the remitted hearing, can be made to the Court on remitter which, no doubt, will take them into account.

Application to set aside Order 4

1. By prayer 1(c) of the notice of motion, the respondents sought to set aside Order 4, which required them to pay the appellants' costs of the appeal. The respondents raised three main arguments in this regard: 1. The order did not reflect the respondents' success on the grounds of appeal concerning defects (Grounds 3 and 4), which occupied the most time in the District Court. 2. The Larsens had abandoned the aspect of Ground 3 relating to the Cracking Damage and should bear the costs consequences of that abandonment. Relatedly, the respondents submitted that the only reason the misrepresentation case (Ground 1A) occupied so much time in the appeal was because of the "abandonment" of Ground 3, and success on Ground 1A did not warrant departure from the costs consequences that should be associated with that abandonment. They also argued that measuring success for the purposes of a costs order by reference to hearing time was an "unreliable gauge", such that the amount of time spent on Ground 1A (due to the capitulation on Ground 3) did not justify the costs order ultimately made. 3. In any event, the Larsens' success in their misrepresentation case was only partial and required a remittal to the District Court in respect of relief under the ACL. In those circumstances, the respondents submitted that in the interests of fairness, at a minimum each party in the appeal should bear its own costs.
2. The Larsens submitted that the order made by this Court was consistent with the general principle that costs follow the event, and took into account that they had not succeeded on all grounds of appeal, a matter which was expressly noted at J [160]. It was also clear that Ground 1A was considered the most significant of the grounds on appeal, both in terms of the time it occupied during the hearing and the proportion of the Court's reasons dedicated to the determination of that ground. As to Ground 3, the Larsens submitted that the ground had not been "abandoned" and they disputed that the respondents were successful on that ground. Accepting that they did not press the Cracking Damage aspect of that ground on appeal, the Larsens noted that was but one aspect of Ground 3. The remainder of which was pressed but, as they accepted during the hearing, the relief they sought by Ground 3 overlapped with that sought by Ground 1A, so that if they succeeded on the latter it would be unnecessary to determine the former. The Court proceeded on that basis: J [5], [8]. It followed, in the Larsens' submission, that the argument that there should be costs consequences tied to the abandonment of Ground 3 was without merit.
3. Further, to the extent that the respondents were correct that the costs of the appeal should take into account the nature of the costs incurred prior to the hearing, the Larsens submitted that this did not warrant intervention with Order 4. They submitted in this regard that: the majority of the parties' submissions were directed to Grounds 1 and 1A, on both of which the Larsens succeeded; the respondents conceded the overlap between Ground 3 and the successful Ground 1A; and significant costs were incurred before the hearing in relation to the respondents' objection to the application for an extension of time in which to file the notice of appeal, which was abandoned within the first minute of oral submissions and should not have been made.
4. The Court has a broad discretion as to costs: Sims v The Commonwealth (No 2) [2023] NSWCA 30 at [6]; Ryde Developments Pty Ltd v The Property Investing Alliance Pty Ltd [2018] NSWCA 40 at [6]. The principles concerning the making of costs orders in cases involving multiple issues, some successful and some unsuccessful, are well settled and were summarised in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38].
5. By any measure, Ground 1A was the most significant ground in the appeal, both in terms of the relief sought and the resources allocated to it. A not insignificant amount of resources was also allocated to Ground 1 (on which the Larsens' arguments were accepted); and to Ground 3. As to the latter, we do not accept the respondents' characterisation of Ground 3 as "abandoned". True it is that the Larsens did not press part of the ground, relating to the Cracking Damage, but it was otherwise pressed. The reason the Court did not determine Ground 3 was because it was unnecessary to do so, having regard to the conclusion on Ground 1A and the overlap of that ground and those aspects of Ground 3 which did not concern the Cracking Damage.
6. Contrary to the respondents' submissions, the context and significance of the Larsens' approach to Ground 3 does not call for a special costs order. As to the other issues on which the Larsens were unsuccessful, namely Grounds 2, 4 and 6, they did not feature significantly in the appeal, either by way of written or oral submissions. Having regard to all of the circumstances and noting the Court's broad discretion, no variation to Order 4 is warranted.

Application to vary Order 1

1. Finally, there is no reason to vary Order 1 to read "Appeal allowed in part", as sought by the respondents. The conclusion on Ground 1A supported the grant of relief which the appellants sought, namely that the orders of the primary judge entering verdict and judgment for the respondents, and subsequently awarding costs in favour of the respondents, be set aside. Notwithstanding that the appellants did not succeed on all grounds of appeal, the Court determined that it was appropriate to grant the relief sought. There was no error in the manner in which that conclusion was expressed in Order 1.

Conclusion

1. The respondents' notice of motion should be dismissed with costs. The Larsens sought costs on an indemnity basis, contending that the respondents had failed to establish any reason to reopen the Court's orders and "[fell] foul of the prohibition against using the jurisdiction as a backdoor method to re-argue their case". Whilst there is some force in that contention, we do not consider that the respondents' arguments were so unreasonable as to warrant an award of indemnity costs.
2. The Court's order is that the respondents' application to vary the orders of the Court dated 9 March 2023 is dismissed with costs.

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