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1 On 16 May 2006 the Court gave judgment in this matter,[1] effectively reversing the order of the trial judge in favour of the respondent in relation to its claim against the appellant, but confirming his Honour's order that the appellant's counter-claim be dismissed. At the time of giving judgment, the Court's provisional view was that, in essence, all costs - on appeal and below - should lie where they fall. Because the parties could not have been fairly expected to address the Court on the question of costs immediately after the reasons for judgment were handed down, we directed that the order of the Court not be authenticated until after the parties had the opportunity to file written submissions on the costs issue within the timetable set down by us. It was made plain that the matter would be determined by us on papers. In the event, the parties provided respective comprehensive written submissions on the costs issue.

2 The appellant's essential case was that, because it was substantially successful in the appeal, it was entitled to all of its costs of the appeal in accordance with the general rule that a party in the position of a successful defendant should have its costs, as was recognised by Atkin, L.J. in Ritter v. Godfrey.[2] The pursuit of the counter-claim, said the appellant, added little to the complexity and length of the appeal (and the trial) so that, as a matter of substance, it should be treated as a successful defendant and, thus, have its costs. The appellant contended that, on appeal and below, it proceeded on the basis that if it succeeded in establishing that the heating elements were not fit for the relevant purpose it would succeed in its defence to the claim and in the counter-claim. That is why, the appellant said, almost all of its oral and written submissions in the appeal were directed to the judgment made in the respondent's claim and not to the dismissal of its counter-claim. The appellant further contended that the Court's declaration that the respondent was entitled to a certificate under the Appeal Costs Act 1998 reflected the appellant's success in the appeal.

3 As to the costs of the proceeding below, the appellant claimed that its expert evidence during the trial was relevant to its defence to the respondent's claim and that this material would have been adduced even in the absence of its counter-claim. Consequently, the appellant submitted, at least its costs and disbursements in relation to its expert evidence at the trial should be paid by the respondent.

4 On the other hand, the respondent's principal case was that, in accordance with the general rule that costs follow the event, there should be no order as to the costs of the appeal or the trial. In essence, the respondent said that there were two such "events", namely, the determination of the respondent's claim and the appellant's counter-claim which, it was pointed out, was a proceeding in its own right. It was said that the claim and counter-claim were, broadly, of equal importance in the proceeding, and that in its submissions on the costs question the appellant has impermissibly sought to minimise the importance of the counter-claim. It was then put that, since each party was successful in defending the other's claim, each was notionally entitled to its costs in accordance with the general rule and such result, it was said, would be broadly achieved if the Court were to order that there be no order as to costs of the appeal or the trial.

5 That the resolution of the question of costs is in the Court's discretion is made plain by the provisions of s.24 of the Supreme Court Act 1986 and Rule 64.24 of the Rules of Court. And, as Bray, C.J. said in Cretazzo v. Lombardi,[3] this discretion is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and that it cannot be exercised on grounds unconnected with the litigation. Generally, the costs of an appeal, like the costs of a trial, follow the event[4] and where there is a mixed outcome in the proceeding, such as here, the apportionment of the comparative importance of the relevant claims in the proceeding - here, the claim and the counter-claim - can only be carried out on a broad basis, it being primarily a matter of impression and evaluation rather than arithmetic precision.[5] It is also the case that the function of an order for costs is compensatory.[6]

6 We have analysed the costs issue again in light of these principles and the parties' submissions and have come to the firm view that we should exercise our discretion in that regard by ordering that the respondent pay 25 per cent of the appellant's costs of the appeal, but that otherwise the costs should lie where they fall. We have come to this conclusion primarily for the following reasons. First, we do not accept the appellant's contention that it should have the whole of its costs of the appeal because we consider that the counter-claim assumed greater significance in terms of occupying the Court's time than the appellant would have it. We are of the view that it could not be fairly said that, on appeal, the parties' argument was limited to an examination of the circumstances relevant to the judgment given on the respondent's claim. Importantly, once Ashley, J.A. alerted the appellant to the requirement that, if it were to succeed in its counter-claim, it would need to establish a causal link between the cost of the repairs and breach by the respondent that led to the need for them, the argument by both parties on the counter-claim took up a good proportion of the hearing. Nevertheless, in recognition of the fact that, for obvious reasons, the appellant had to bring the appeal and the hearing of it was largely taken up by the consideration of the judgment that concerned the respondent's claim, we think, as has been noted, that the appellant should have 25 per cent of its costs of the appeal. Had it not been for those factors, the Court would have ordered that all costs should lie where they fall.

7 Secondly, in relation to the trial, we consider that, in general terms, the counter-claim was almost as substantial and time consuming in the proceeding as the respondent's claim. It is obvious enough that during nearly the whole of the trial the appellant pressed its case on the basis that its damages arising from the respondent's breach of contract amounted to over $160,000 and the documentary evidence in support of that was considerable. It was only toward the end of the hearing that the quantum was limited to $30,000. And whilst it is true that, essentially, the appellant may have (wrongly) thought that proof that the units were not fit for the relevant purpose would also establish its counter-claim, it did adduce, and it relied on, evidence that sought to demonstrate the extent of the early failures, the reasons for them, and the extent of the resultant repairs and their costs, all of which was relevant to the counter-claim. Such evidence included that of Messrs Osterberg and Wadsley, and that of Mr Walton. Moreover, the evidence of Messrs Aughton and Naudé was also material in this context. Furthermore, we consider it relevant for present purposes that it was the appellant's counter-claim, as then quantified, on which it ultimately wholly failed, that compelled the transfer of the respondent's claim from the Magistrates' Court to the County Court thereby significantly increasing the costs of the trial.

8 We also consider that, given that the appeal against the decision of his Honour relating to the respondent's claim succeeded, it is appropriate to grant the respondent an indemnity certificate pursuant to s.4 of the Appeal Costs Act 1998 in respect of its costs relating to that aspect of the appeal. The granting of such a certificate did no more than reflect the respondent's lack of success in that part of the appeal.