Lobster and Co Trading Pty Ltd v TLC Industries Pty Ltd

Supreme Court of NSW|2024-03-21|Before: Davies J

nal: Local Court of NSW Jurisdiction: Common Law Citation: Nil Date of Decision: 02 June 2023 Before: Manea LCM File Number(s): 2023/291554

Judgment

The plaintiff commenced proceedings in the Small Claims Division of the Local Court on 9 February 2022 seeking judgment for $6,039.77 together with interest and costs. The basis of the claim was said to be the supply by the defendant of 55 wood folding utility tables that were defective. The amount claimed was the cost of the tables.
On 24 May 2022, the plaintiff filed an amended statement of claim in the General Division of the Local Court claiming damages. The amended claim also concerned the supply of the allegedly defective tables but claimed for the cost of replacing the tables elsewhere and the cost of hiring tables for the plaintiff's business until the new tables became available. The ultimate claim for damages made was in the vicinity of $11,500 which constituted the difference between what had been paid to the defendant of $6,039.77 and the amount paid for the replacement tables, together with an amount of $2,937 for the cost of renting tables in the meantime.
The proceedings were heard on 6 March 2023 by Magistrate Manea, and her Honour delivered her reasons on 2 June 2023 dismissing the claim. Submissions were made about costs, and on 16 August 2023 the Magistrate made an order that the plaintiff pay the defendant's costs of $15,000 together with disbursements of $6,130.88.

Factual background

The plaintiff operates a food and beverage business in various locations around Australia. In early December 2021 the plaintiff enquired into the purchase of tables for its business. The plaintiff made enquiries at the defendant's website being www.dshop.com.au. The plaintiff found a particular table described as a Grace Steel and Wood Folding Utility Table Square 80cm (oak). The evidence from the plaintiff's director was that the website said of this table: A versatile, sturdy table, simple yet elegant. Designed with a solid steel frame with a stylish wooden top, this table is perfect for any application. With a stylish wood grain, generous 80cm tabletop, this table is a modern, sleek addition to any home. (emphasis added)
On the basis of that description, the director of the plaintiff believed that the table could be used as a sitting table for the plaintiff's business. On 13 December 2021, by an online chat arrangement, an employee of the plaintiff asked the defendant for a quote for 55 of the tables. Later that day the defendant sent a quote to the plaintiff containing a 10% discount. Accordingly, on 14 December 2021 the plaintiff placed an order with the defendant through its website to purchase 55 of those tables at a cost of $6,039.77.
The tables were delivered on 22 December 2021 but were not used immediately. They were stored. On 12 January 2022, the tables were taken out of storage and used in the plaintiff's business on the terrace at the Arts Centre in Melbourne. The plaintiff's director said that he was present for the set up and first day of trading of the business, and that it was a fine and sunny day.
He said: As the Tables were being set up for trade, I immediately observed that in most cases the Tables: 18.1 had deformed / or (sic) warped tops, 18.2 had tops where the timber veneer was separating from the particle board substrate, 18.3 had tops that had separated from the steel leg frame, i.e. the screws in the top had failed resulting in the top coming apart from the base.
The director annexed photos of the "types of defects" he described, but the Magistrate ruled that limited weight should be given to those photographs because there was no evidence of when they were taken.
The director also said in his affidavit: 21. As the Plaintiff continued to use the Tables in its Business over the following 3-4 weeks each progressively suffered from the defects identified in paragraph 18 above and became unusable. The use of the tables was in both an indoor and outdoor setting however the Tables were not exposed to rain or stormwater or adverse weather conditions etc. The defects in the Tables were present no matter what environment or setting they were established and used in. The compressed particle board was compromised or defective and would not hold screw threads and would not keep its composure.
The Magistrate ruled that limited weight should be given to that paragraph. There is no appeal in relation to the evidence rulings.
The director said that he subsequently made enquiry on the defendant's website to locate a telephone number with which to make contact with someone from the defendant. He said he could not locate a telephone number. Internal documents of the defendant disclosed that a person called Lachlan from the plaintiff accessed an online chat with the defendant on 2 February 2022 where he asked if there was a phone number he could have to call regarding a previous order. A person called Renelyn from the defendant said that she would be happy to assist him but they did not have phone support. She said they could help via chat or email. Nothing more was heard until the statement of claim was served on 11 February 2022.
The director said that as a result of the defects in the tables the plaintiff was not able to use them for the business. He said that whilst the plaintiff searched out and located new tables, it required rental tables from time to time (to make up the shortage of useable tables). He said the plaintiff incurred $2,937.73 in rental costs. He said the plaintiff subsequently located replacement tables at a cost of $14,171.00.
The defendant's evidence, by Christopher Vella, the director of the defendant, confirmed the order by the plaintiff of the tables, provided various screenshots of pages from the defendant's website relevant to the tables purchased, dealt with correspondence and contact between the plaintiff and the defendant, and also set out in some detail the quality control procedures adopted by the defendant for its goods generally and for the particular goods purchased by the plaintiff. The evidence was that the defendant engaged a related company, Apex QC Pty Ltd to provide quality control services. Examples of reports were annexed to the affidavit.
Mr Vella's affidavit said: 13. On or around 6 December 2021, Apex QC undertook an inspection of the Product Titled: Grace Steel and Wood Folding Utility Table Square 80 cm (Oak) ('Product') at the Defendant's Brisbane warehouse. The Quality Control Report included an inspection of 10 random units of the Product in respect of but not limited to its functionality, appearance, dimensions, accuracy of display images and the product itself, any other relevant considerations. A copy, of the Quality Inspection Report dated 6 December 2021 appears at page 63 of Exhibit CV-1. 14. I confirm that at page 12 of the Quality Control Report it was found that "No defects [were] detected. Product is functional and performs as advertised". 15. I attempted to contact Issac Porter the author of the Quality Control Report, but I have been unable to make contact with him since he left the employment of Apex QC.
Mr Vella's affidavit said that the tables left the Brisbane warehouse of the defendant on 17 December 2021, and they were to be shipped, at the plaintiff's request, to 96 David Road, Castle Hill. Mr Vella said that at the time of leaving the warehouse, all the boxes were in good condition. He annexed photographs of the boxes leaving the warehouse.
Mr Vella also said in his affidavit that the tables could be found on the defendant's website through the following links: Home/furniture/kitchenanddiningfurniture/diningtableandchairs/gracesteeland woodfoldingutilitytablesquare80cm(oak)
He said the description was as follows: A versatile, sturdy table, simple yet elegant. Designed with a solid steel frame with a stylish wooden top, this table is perfect for most applications. With a stylish wood grain, generous 80cm tabletop, this table is a modern, sleek addition to any home. (emphasis added)
That description also accords with what appears on the quality control report dated 6 December 2021. Mr Vella also said that the defendant's website had not changed since 13 December 2021.
In its amended defence to the amended statement of claim, the defendant agreed that the plaintiff purchased the tables from the defendant's website at a cost of $6,039.77. The defendant said that the section of the website from where the tables were purchased was under the heading "Kitchen and Dining Furniture" and "Dining Table and Chairs", implying that the tables were intended for residential purposes, and said that the tables were not located within the "Outdoor" section of the website.
The defendant agreed that there was an implied term that the tables were of merchantable quality, free from defects, safe and durable, but denied that there was an implied term that they were fit for purpose and use by the plaintiff for seating customers and were suitable for outdoor use. The defendant said further that the plaintiff had used the tables outdoors for apparent commercial use, and had left the tables outdoors where they had been subjected to harsh weather conditions.
The defendant said further that pursuant to cl 6.7b of the Return Policy, cl 6.5 of that policy did not apply to goods damaged as a direct or incidental result of misusing the goods.

The Magistrate's reasons

The learned Magistrate's reasons were brief and may be set out in full: HER HONOUR: This matter was a hearing before me on 6 March 2023 and Ms Nolan appeared for the plaintiff and Mr Teoh(?) (sic) on that occasion for the defendant. I have the benefit of my notes that I took on the day, but also of a transcript of the evidence which is 59 pages. The plaintiff commenced proceedings in the Small Claims Division for damages for breach of an agreement for the purchase of 55 folding tables. It was said there was an express or alternatively implied term that the tables be of merchantable quality fit for purpose and use by the plaintiff for seating customers free from defects suitable for outdoor use, safe and durable. The purchase was entirely online and hence in writing subject to any terms implied by law. The terms of sale are in evidence. The purchase was done by clicking through various options of goods for sale. The plaintiff says the goods were delivered on 22 December 2021, properly stored and when opened and used in January 2022, began to show signs of rapid deterioration. As they could not make satisfactory contact online, they almost immediately sued on 9 February 2022. The claim, as amended, was for short-term rentals and the cost of more expensive replacements. The evidence was that the rentals were $2,937 were obtained and later replacements at a cost of $14,171. The evidence of the extent of the defects when each came about, what was rented and when, what efforts were made to buy replacement tables that were made and why they had to spend twice the original cost was sparse. The defendant says they did randomised quality control checks through a related company and the goods were free from defects. They deny the goods were designed for outdoor or commercial use. In accordance with the usual practice in small claims matters, there was no cross-examination of the two witnesses. I must make factual findings on the balance of probabilities without the assistance of cross-examination. I did read the transcript, though, and reread, of course, all the pleadings in arriving at my decision. The contract is in writing. The item was reached by going through the kitchen and dining category. It refers to being suitable for any home. I see no suggestion of any warranty about outdoor or commercial use. The defendant had evidence of quality control, which was not affected by being prepared for the purposes of litigation. I accept it is reliable. The evidence of the photos taken by the plaintiff do not contain any imbedded data showing the defects were straight from the box, as opposed to being affected by time used outdoors, perhaps in wet weather or by heavy or commercial use. On the balance, I am not persuaded that the plaintiff has made out its case of receiving defective goods. The evidence is sparse and contrary to the quality control evidence. The plaintiff's single witness is uncorroborated by other evidence and lacks detail. For a plaintiff to succeed I must feel an actual persuasion the evidence is accurate and reliable. I also note the evidence of damage is lacking. The evidence of rentals is: 1. One table for $85 (and 20 chairs). 2. Second invoice for six tables for $210 plus delivery. 3. Eight tables for $400 plus umbrellas and an extension of time not clearly referable to the tables plus delivery et cetera which apparently included the umbrellas. As to the purchases: 1. Invoice for two different types of tables not bought until June and delivered to Melbourne. 2. Two different types of tables bought in September. 3. Two types of tables bought in October and delivered to Adelaide. These records do not support the plaintiff's case that the 55 tables were mostly seriously damaged out of the box and needed immediate replacement on a short-term basis followed by wholesale replacement. In addition, they lead me to conclude that I am not satisfied these rentals or purchases represent the measure of damages for any defects in the tables. They are not a majority of the tables are different and, insofar as they are rentals, seem to be part of a different rentals unrelated to the alleged defects, namely, chairs and umbrellas. The purchases also do not line up with the plaintiff's evidence and seem to relate to different kinds of tables. The excess over the cost of the original tables would, in any event, also be excluded by the limitation of liability clause in the contract (terms of use p 3). That limits claims to repayment of goods purchased. THE CLAIM IS DISMISSED. (emphasis added)

Grounds of appeal

The grounds of appeal in the amended summons were these: 1. The Court below erred as a matter of law or as a matter of mixed law and fact by: a. failing to construe the relevant contractual terms and conditions between the parties as including: i. a commercial warranty of 3 months in accordance the DShop Website Terms of Use as appeared at pages 1- 6 of the exhibit FA-1 to the affidavit of Farshad Amirbeaggi. (the Commercial Warranty); ii. an implied terms as the (sic) merchantable quality and the fitness of the goods for purpose (the Implied Term); and b. find that the Commercial Warranty and or the Implied Term rendered the Defendant liable for the plaintiffs loss and damage. 2. The Court below erred as a matter of law or as a matter of mixed law and fact: a. in failing to transfer the proceeding to the Small Claims Division and hear and determine the matter exercising the Small Claims Division jurisdiction of the Court; and/or b. despite s 37 of the Local Court Act 2007 (NSW) determining and awarding costs of the proceedings based on the provisions of Part G of Local Court Practice Notice: Civil Civ 1; or c. ordering costs contrary to the provisions of Part G of Local Court Practice Note: Civil Civ 1. Clause 38.2
Ground 2(a) was not pursued by the plaintiff.
Grounds 2(b) and (c) involved questions in relation to costs. Leave is required for consideration of such grounds pursuant to s 40(2)(c) of the Local Court Act 2007 (NSW).

The hearing before the Magistrate

Although the statement of claim was initially filed in the Small Claims Division, the amended statement of claim was filed in the General Division as was necessary because what was sought were damages at large. However, when the matter came before the Magistrate for hearing, counsel for the plaintiff sought that the proceedings should be transferred back to the Small Claims Division because of the actual amount claimed. The Magistrate ruled, however, that the matter was to remain in the General Division.
A reading of the transcript tends to suggest that those acting for the defendant had assumed that the director of the plaintiff would be present and could, therefore, be cross-examined. However, no notice had been given for him to be there, and he was not there. After an exchange involving the Magistrate and both counsel, counsel for the defendant said that, to avoid wasting time, he would not press his application for cross-examination. The plaintiff had not required the defendant's director, Mr Vella, for cross-examination.
In that regard, the Magistrate was in error in saying in her judgment, In accordance with the usual practice in small claims matters, there was no cross-examination of the two witnesses. That error is not without significance, because the failure to cross-examine the plaintiff's director must be given some consideration in considering what evidence was to be accepted.

Consideration

The website terms of use of the defendant relevantly provided: When you shop from Dshop, you have peace of mind knowing that your product is covered by a warranty. Dshop extends a guarantee for all its items of up to 12 months. Commercial use is covered for up to 3 months. … Our liability under this warranty is subject to us being satisfied that a defect was caused by defective workmanship and was not caused by other factors beyond our control, including but not limited to any neglect, misuse or excessive use. Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. The warranties and product support that we offer and provide under our Terms and Conditions are in addition to the consumer guarantees under the Australian Consumer Law. … Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled at our election to a refund or to have the goods repaired or replaced if goods fail to be of acceptable quality and the failure does not amount to a major failure. Our liability under this warranty is subject to us being satisfied that a defect was caused by defective workmanship and was not caused by other factors beyond human control, including but not limited to any neglect, misuse, or excessive use. If you believe an item is faulty, you may have rights to a remedy under the Australian Consumer Law. These rights are not impacted by the change of mind policy or limited by a defined timeframe other than the time for rejection of goods with a major failure. Once a return is authorized, as you can appreciate, we will need to assess the product to determine the nature of the issue and how we can help you, be it a refund, store credit, exchange, or repair. Where an item is damaged through misuse or abnormal use, Dshop is not liable, and you may not be entitled to a refund or replacement. Our liability to the customer (and any party claiming through the customer against us) for any claim for loss or damages (including legal expenses) made in connection with the contract (including the supply of goods described in the contract) whether in contract, tort (including negligence), under the statute, in equity or otherwise shall be strictly limited as follows (except to the extent that the law prohibits such a limitation) (i) for any liability arising from Goods not meeting the specification or which are said to be otherwise defective or deficient, our liability is limited to the cost of replacement of those Goods as soon as reasonably practicable, or the repair of those goods or the repayment (or allowance) of the Purchase Price of those Goods … Any claim by the customer regarding defective, non-conforming, or damaged goods must be made in writing within seven days of the delivery of the Goods unless a more extended period is expressly agreed to by us in writing.
Section 54 of the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law ("ACL") relevantly provides: 54 Guarantee as to acceptable quality (1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are of acceptable quality. (2) Goods are of acceptable quality if they are as: (a) fit for all the purposes for which goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and (c) free from defects; and (d) safe; and (e) durable; as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3). (3) The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods.
"Consumer" is defined in s 3(1) of the ACL as follows: 3 Meaning of consumer Acquiring goods as a consumer (1) A person is taken to have acquired particular goods as a consumer if, and only if: (a) the amount paid or payable for the goods, as worked out under subsections (4) to (9), did not exceed: (i) $40,000; or (ii) if a greater amount is prescribed for the purposes of this paragraph - that greater amount; or (b) the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or (c) the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads.
Section 2C of the Acts Interpretation Act 1901 (Cth) defines "person" as including a body corporate.
In addition, s 19 of the Sale of Goods Act 1923 (NSW) provides: 19 Implied condition as to quality or fitness 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: (1) Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether the seller be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose. (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. (3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. (4) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.
An analysis of the Magistrate's reasons demonstrates errors relevant to ground 1 of the appeal.
First, the Magistrate noted that the purchase was subject to any terms implied by law, but her Honour said nothing further about such terms or why they might have been relevant to a determination of the plaintiff's claim. On the face of the plaintiff's evidence, the tables had defects from the outset, and would not have satisfied the statutory requirements. The defendant submitted that the delay between delivery and opening the packaging was significant because the plaintiff did not show that the tables were defective when they were delivered. It is clear, however, from para 17 of the plaintiff's director's affidavit that the tables had been stored in their packaging since delivery, and only for a 3 week period. In the absence of evidence of neglect or misuse, the principle of continuity applies.
There was at least an evidentiary onus on the defendant to demonstrate that the cause of the damage was neglect, misuse or excessive use. That was because those matters amounted to an exception to the express warranty that was otherwise provided in the terms and conditions. Moreover, the defendant pleaded misuse in para 10 of its defence but no such evidence was led. As has been noted, the plaintiff's director was not cross-examined about the storage of the tables between 22 December 2021 and 12 January 2022, but what evidence there was on the topic was found in para 21 of the plaintiff's director's affidavit (at [13] above), and that evidence was to the contrary of misuse.
The Magistrate did not make any determination about whether or not the tables breached the statutory warranties. The defendant's criticism that the plaintiff had not clearly pleaded the statutory warranties should be rejected. What was contained in par 7 of the amended statement of claim largely mirrored the wording of s 54 of the ACL and otherwise referred to fitness for purpose and merchantable quality, terms which appear in s 19 of the Sale of Goods Act. Counsel for the plaintiff (and counsel or the defendant, for that matter) at the trial made express reference to the guarantees in the ACL. The plaintiff's counsel also made a submission to the Magistrate about the Sale of Goods Act. In failing to determine how the statutory warranties applied to the claim, the Magistrate was in error.
Secondly, her Honour also said that she saw no suggestion of any warranty about outdoor or commercial use. The defendant says in its written submissions on appeal that it cannot identify anywhere in the Magistrate's decision that the three month warranty for commercial use was ignored or misconstrued. Such a submission flies in the face of the Magistrate's statement that "I see no suggestion of any warranty about outdoor or commercial use". In the same way, the defendant's further submission that "there was never a warranty made about the tables being suitable for commercial use" appears to overlook the fact that the lack of fitness and merchantable quality of many of the tables was alleged to have been in place prior to any use of the tables. The plaintiff's director's affidavit refers to the tables having problems when they were first removed from the packaging. Whether they were used for domestic or commercial use is therefore irrelevant because it was not the use that brought about their alleged poor condition.
Some of the tables were said to have deteriorated in the weeks after they were first used. The defendant seeks to rely on the following statement on its website: Neither we nor any third parties provide any warranty or guarantee regarding the accuracy, timeliness, performance, completeness, or suitability of the information and materials found or offered on its website for any particular purpose. The defendant submitted on the appeal that this was an express disavowal that the items could be used for commercial or outdoor use.
The defendant must have known that the tables were purchased for commercial use by reason of the number ordered. Further, the order did not occur without some actual knowledge on the part of the defendant. The enquiry about a quote, followed by a discount, presumably for bulk, meant that the defendant was on actual notice that commercial use was intended.
The defendant does not point to anywhere on the website where it is said that the tables were unsuitable for outdoor use. The suggestion appears to come only from the fact that there was a separate part of the website headed "Travel and Outdoors", whereas these tables were to be found under the heading "Furniture". Absent a clear warning about outdoor use, the implied statutory warranties must apply even to the tables which were not defective on opening of the packaging.
Subject to the implied statutory warranties, the fact that the tables were intended for commercial use is probably only relevant to the limited 3 month express warranty given by the defendant rather than the usual 12 month warranty. But the claim was made within the 3 month period in any event. In concluding that there was no warranty about commercial use, the Magistrate was in error.

Question of law or mixed law and fact?

It next needs to be determined whether these errors constituted questions of law or involved questions of mixed law and fact.
In Orr v Hunter Quarries Pty Ltd [2022] NSWCCA 39 Beech-Jones CJ at CL (as his Honour then was), with Walton and Price JJ agreeing, said at [14]: The description in Cobar Management of the form of question that may be posed as "pure question[s] of law" appears to be synonymous with the meaning of "a question of law alone" which is often the subject matter of appeals (see for example Crimes (Appeal and Review) Act 2001, s 52(1)). Such a question is one that must "be stated and considered separately from the facts with which it may be connected in a given case" (Williams v R (1986) 161 CLR 278 at 287; [1986] HCA 88 per Gibbs CJ, Wilson and Dawson JJ) and does not include a ground that involves a mixed question of fact and law such as an error in the application of a legal principle (R v PL [2009] NSWCCA 256 at [25] and [26] per Spigelman CJ; "PL (No 1)"). That said, whether or not a question submitted raises such a question is to be addressed as a matter of form not substance. For example, the questions that were submitted to this Court in NSW Food Authority v Nutricia Australia Pty Ltd [2008] NSWCCA 252 at [13] were framed by the first instance judge in terms that commenced "Did I err in law in finding …". However, they were addressed by this Court at a level of principle and not by reference to the particular facts of the case. In any event the approach stated in Cobar Management, being a recent decision of a five-member Court, must be applied.
The errors alleged in the grounds of appeal in appeal ground 1 were said to have arisen from a failure of the Magistrate to construe relevant contractual terms, and then to find that the express and implied terms rendered the defendant liable to the plaintiff. It is difficult to see how those errors could be other than questions of mixed law and fact. In the first place, the question was whether there was to be found in the defendant's conditions and warranties any form of warranty for goods when purchased or used for commercial use. That involved a question of fact.
Secondly, the enquiry was whether the condition of the tables meant that they did not comply with s 54 of the ACL and s 19 of the Sale of Goods Act. That involved a factual determination at a number of levels, bearing in mind subs (2) and (3) of s 54. The exercise also involved an application of legal principle, whether the statutory provisions applied, having regard also to the definition of "consumer" in s 3 of the ACL. The questions involved could not be stated and considered separately from the facts.
Accordingly, leave was needed under s 40. That means that the original summons filed was liable to be struck out as incompetent. The defendant's motion was appropriately brought, and it was necessary for the plaintiff to seek to amend the summons. When costs are considered, the defendant will be entitled to the costs of its motion, and the plaintiff must pay costs thrown away by the grant of its motion.

Should leave be granted?

That leaves for determination three further matters. First, since leave is required to appeal, consideration needs to be given to principles concerning the grant of leave. In Lee v New South Wales Crime Commission [2012] NSWCA 262; (2012) 224 A Crim R 94, Bathurst CJ (Macfarlan and Barrett JJA agreeing) said at [12]: The principles upon which leave to appeal is granted are well established. Ordinarily it is only appropriate to grant leave concerning matters that involve issues of principle, questions of general public importance or where it is reasonably clear there has been an injustice in the sense of going beyond it being reasonably arguable that the primary judge was in error: Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69; Zelden v Sewell [2011] NSWCA 56 at [22]; Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46]; GKD v Director of Department of Family & Community Service [2012] NSWCA 219 at [10]; Be Financial Pty Ltd v Das [2012] NSWCA 164 at [32]-[34].
In Ackerman v Morgan [2019] NSWSC 1250 Walton J, having set out various extracts of judgments from the High Court and the Court of Appeal concerning what needed to be shown for a grant of leave to appeal, summarised the principles in a case involving an appeal from the Local Court at [53]: The relevant principles may be summarised as follows: (1) An applicant for leave must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at, and 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: Carolan. [Carolan v AMF Bowling Pty Ltd t/as Bennetts Green Bowl [1995] NSWCA 69] (2) Ordinarily it is 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 is merely arguable: Jaycar [Jaycar Pty Ltd v Lombardo [2011] NSWCA 284] at [46]. (3) The leave requirement is a preliminary procedure "recognised by the legislature as a means of enabling the Court to control in some measure the volume of appellate work requiring its attention": Coulter [Coulter v The Queen (1988) 164 CLR 350; [1988] HCA 3] at 356 (Mason CJ, Wilson and Brennan JJ). Whilst that was a criminal matter, the statement is clearly applicable to civil, as well as criminal, appellate jurisdiction: Be Financial [Be Financial Pty Ltd v Das [2012] NSWCA 164] at [32]-[36] (per Basten JA, with Tobias AJA agreeing). (4) A requirement of leave to appeal is intended to act as a filter to ensure that unsuitable appellant proceedings are not able to be brought, with the demands they place upon the resources of the Court and the burden they place upon other parties and the delays which they cause to other litigants: Chapmans [Chapmans Ltd v Yandell [1999] NSWCA 361] at [11] per Fitzgerald JA (with whom Mason P and Davies AJA agreed). (5) An application for leave is not a proceeding in the ordinary course of litigation but a preliminary procedure: Collins v The Queen (1975) 133 CLR 120 at 122; [1975] HCA 60. (6) Section 58 of the Civil Procedure Act applies and requires the Court to consider "the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction": s 58(2)(b)(vi). Leave should be granted only where there are substantial reasons to allow an appellate review (Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564; [2000] FCA 1572, such as where there is an error of principle which, if uncorrected, will result in substantial injustice.
In addition to entering a verdict for the defendant erroneously, the Magistrate also ordered the plaintiff to pay costs of $15,000 plus disbursements of $6,130.88. The prima facie position under cl 38.2(c) of the Local Court Practice Note No 1 is, where the proceedings are transferred from the Small Claims Division to the General Division, the maximum costs that can be awarded is $2,500. The Court may otherwise order.
The result was that on a claim for $11,461.86, the plaintiff was unsuccessful and was ordered to pay an amount in costs which was almost double the amount of the claim. Where error has been found in the substantive judgment, those errors taken with the costs order amount to a sufficient injustice to grant leave to appeal.

The costs order

The second matter concerns the costs order made by the Magistrate. If the proceedings are remitted to the Magistrate, the costs order will be set aside by reason of the errors found when dealing with the substantive matters. If this Court varies the terms of the judgment by finding for the plaintiff, it will be necessary to set aside the costs order to take account of that result.
Since error has been found, and leave to appeal will be granted, it is not strictly necessary to determine whether there was error in the costs assessment. However, two things should be said. First, the Magistrate provided no reasons for her determination of the costs. The costs were argued on 2 June 2023 following delivery of reasons on the substantive claim. At the conclusion of the argument the Magistrate directed written submissions be forwarded to the Court, and following consideration of those her Honour said she would make a decision. I note that, during oral argument, the Magistrate said, [I]n my view it is appropriate to grant costs to the defendant in the sum of $2,500.
In any event, reasons should have been provided; the more so, when the Practice Note provided a prima facie requirement which could only be departed from if the court otherwise ordered, and that appears to have been at least the preliminary view of the Magistrate.
Secondly, cl 35.1 of the Practice Note provides: The Court will seek to ensure that party/party costs (including disbursements) remain proportionate. Where costs were found to be almost twice the amount in issue, it is difficult to see how the costs could be said to be proportionate.

Should the matter be remitted?

The third matter concerns what course this Court should take as a result of the errors which have been found.
Two things suggest that the proceedings should not be remitted to the Local Court. First, the amount in question means that a further hearing in the local Court would scarcely be consistent with the requirements of s 56 of the Civil Procedure Act 2005 (NSW). Other errors made by the Magistrate would require a complete rehearing. The principal other error was the Magistrate's determination that the plaintiff had not made out its case on the balance of probabilities. That was said to be because the evidence was sparse and contrary to the quality control evidence which the Magistrate accepted was reliable. The Magistrate also said that the plaintiff's evidence was uncorroborated.
It was not suggested by the defendant at the trial that there was any other witness that could have been called by the plaintiff, so that a Jones v Dunkel inference could be drawn by some lack of corroboration. The unchallenged evidence of the plaintiff's director was that the tables were in the condition as set out at [11] above. The Magistrate also had evidence that the photographs showed the condition of the tables when they were first taken out of the packaging. Although the photographs were challenged, they were admitted by the Magistrate, albeit with limited weight, whatever that might have meant in the circumstances. There was no evidence to suggest that the director was not telling the truth in saying that the photos showed the condition of the tables when they were unpacked.
It is difficult to see how the quality control evidence could derogate from the plaintiff's evidence when the quality control procedures involved only a sampling of the goods. Further, the evidence that the packaging was unimpaired when it left the defendant's premises says nothing about the condition of the tables inside the packaging. In the absence of any cross-examination of the plaintiff's director, and where the only opposing evidence was of undamaged packaging and quality control evidence, the Magistrate was in error in rejecting the evidence of the plaintiff's director.
Secondly, since there was no cross-examination of the deponents of the affidavits before the Magistrate, this Court is in as good a position to determine the matter as a magistrate in the Local Court on a remitter.
There is no reason to reject the unchallenged evidence of the plaintiff's director. For that reason, there is also no reason to give limited weight to the photos taken of the tables where the evidence was that the photos were of the types of defects the director had set out in para 18 of his affidavit. As noted earlier, there was at least an evidentiary onus on the defendant to demonstrate that the cause of the damage was neglect, misuse or excessive use, and the defendant must have known that the tables were purchased for commercial use by reason of the number ordered.
On all of that evidence, the Magistrate should have found that the tables were covered by the defendant's express warranty for 3 months and by the implied statutory warranties. Under the express warranty offered, the plaintiff was entitled to replacement "and compensation for any other reasonably foreseeable loss or damage". When the defendant knew the tables were purchased for commercial use, reasonable compensation would include the cost of hiring tables until replacements were obtained.
The plaintiff's director annexed to his affidavit invoices which were said to be in respect of the purchase of replacement tables and for the hire of tables in the meantime. These consisted of an invoice from Apex Co Pty Ltd dated 21 September 2022 for $4,608.03 in respect of 16 tables and an invoice from Brayco Commercial Pty Ltd dated 6 October 2022 for $4,525 in respect of 20 tables. There was a third invoice from Adage Furniture in respect of 20 tables at a cost of $5,038, but this invoice was not put forward before the Magistrate and at the hearing of the appeal it was expressly abandoned.
There were invoices for hiring tables (a) dated 17 February 2022 from Hampton Event Hire for an amount of $1,561.20 (an amount which did not include umbrella hire referred to in the invoice); (b) dated 14 February 2022 from Harry the Hirer for $580.63, and (c) dated 24 January 2022 from Innovative Hiring for $85 for a table together with half of the delivery and damage waiver charges plus GST which total $187.
These amounts for replacement and hire total $11,461.86.
No submissions were made to the Magistrate on behalf of the defendant concerning the quantum of the claim. The matter was argued only on the issue of the liability of the defendant by reason of the use of the goods, the warranties and whether there was an evidentiary onus on the defendant to prove neglect, misuse or excessive use, in terms of the exception to the express warranty.

Conclusion

For the reasons I have given, the plaintiff needed leave to appeal. That justified the defendant in filing its motion to dismiss the appeal as incompetent. However, on the plaintiff's motion I granted leave to the plaintiff to amend its summons to seek leave to appeal. The costs of those motions, and any costs thrown away by reason of the amendment, should be borne by the plaintiff.
The plaintiff has, however, been successful in demonstrating error on the part of the Magistrate and in obtaining leave to appeal to set aside the Magistrate's orders. The plaintiff is entitled to its costs in that regard and to have its costs at first instance. Further, the defendant is entitled to a certificate under the Suitors' Fund Act 1951 (NSW) provided it is not an excluded corporation under s 6(7) of the Act.
Rather than making separate costs orders in relation to each of the notices of motion and the appeal, I propose to offset the costs orders so that the defendant will be ordered to pay 90% of the plaintiff's costs of the appeal.
I make the following orders: 1. Grant leave to the plaintiff to appeal. 2. Uphold the appeal. 3. Set aside: 1. the judgment of Magistrate Manea in the Local Court given on 2 June 2023; and 2. the judgment of Magistrate Manea in the Local Court given on 16 August 2023. 1. Judgment for the plaintiff in the sum of $11,461.86. 2. The defendant is to pay the plaintiff's costs of the hearing in the Local Court in the sum of $2,500. 3. The defendant is to pay 90% of the plaintiff's costs of these proceedings. 4. The defendant is to have a certificate under the Suitors' Fund Act 1951 (NSW) if otherwise entitled.

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: 03 May 2024

Suitors' Fund Act 1951(NSW)s 6

Local Court Act 2007(NSW)ss 39, 40

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