Jaycar Pty Ltd v Lombardo

[2011] NSWCA 284

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Jaycar Pty Limited v Lombardo [2011] NSWCA 284

Hearing dates:

26 August 2011

Decision date:

14 September 2011

Before:

Campbell JA at [1]
Young JA at [71]
Meagher JA at [72]

Decision:

1. Dismiss the summons seeking leave to appeal filed by Jaycar Pty Limited and Electus Distribution Pty Limited dated 4 March 2011, with costs.

2. Grant leave to appeal to Ross Lombardo concerning the judgment delivered in the court below on 24 June 2011.

3. Deem the draft Notice of Appeal contained in the White Book concerning that application to be filed.

4. Set aside the orders made in the court below on 24 June 2011.

5. In lieu thereof:

(i) Set aside order (ii) made by the court below on 25 May 2011 (in the reasons for judgment comprising 14 paragraphs delivered that day) and order (iii) made by the court below on 25 May 2011 (in the reasons for judgment comprising 75 paragraphs delivered that day); and

(ii) In lieu thereof order that the defendants pay the costs of the Plaintiff of the Notice of Motion to vary the judgment delivered on 8 December 2010.

6. Order Jaycar Pty Limited and Electus Distribution Pty Limited to pay the costs of Ross Lombardo of the application for leave to appeal referred to in Order 2 hereof, and of the resulting appeal.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

APPEAL - costs - right of appeal - jurisdiction of the Court of Appeal - Supreme Court Act 1970 s 101(2)(r) - whether leave to appeal required - where small sum involved, no question of principle and no issue of general public importance - whether reasonably clear that the judge's conclusion about liability was wrong -

COSTS - UCPR 42.1 - costs follow the event - whether exception to general rule where costs have been incurred by reason of an error on the part of the court and that error has not been brought about by conduct of any party to the litigation - whether Notice of Motion to vary judgment is an indulgence where judgment does not determine all the claims before the court

Legislation Cited:

Civil Liability Act 2002
Civil Procedure Act 2005
Legal Profession Act 2004
Sale of Goods Act 1923
Suitors' Fund Act 1951
Supreme Court Act 1970
Trade Practices Act 1974 (Cth)
Uniform Civil Procedure Rules 2005

Cases Cited:

Arena Management Pty Ltd (Receiver & Manager Appointed) v Campbell Street Theatre Pty Ltd [2011] NSWCA 128
Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300
Brittain v Commonwealth (No. 2) [2004] NSWCA 427
Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69
House v The King (1936) 55 CLR 499
Ohn v Walton (1995) 36 NSWLR 77
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Zelden v Sewell [2011] NSWCA 56

Category:

Principal judgment

Parties:

Jaycar Pty Ltd
Electus Distribution Pty Ltd
Ross 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

1. CAMPBELL 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.

1. Mr 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.

1. On 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.

1. The 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 Act1974 (Cth) (" TP Act ") and s 19(2) Sale of Goods Act1923 (" 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 .

1. The 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.

1. The 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

1. All 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.

1. Section 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."

1. Section 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]."

1. Section 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."

1. The 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.

1. Section 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."

1. Section 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.

1. Section 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."

1. Section 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; ..."

1. Section 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.

1. Section 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

1. Section 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

1. The 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.

1. His 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.

1. Thus, 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.

1. The 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.

1. His 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.

1. That 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).

1. The 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 Act2002 , 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 TPAct .

1. Counsel 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.

1. The 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."

1. His 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.'"

1. His 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."

1. His 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."

1. Also 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; ..."

1. The 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.

1. Also 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 ").

1. By 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 Act1923 (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."

1. In 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."

1. His 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

1. The 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 Act1970 .

1. The 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

1. I 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.

1. It 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.

1. It 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" .

1. Mr 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.

1. Professor 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.

1. The 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.

1. Mr 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.

1. I 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.

1. The 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.

1. In my view it is not appropriate to grant leave to appeal concerning liability.

The Costs Application for Leave to Appeal

1. Mr 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 Act2004 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.

1. I 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.

1. Section 98 Civil Procedure Act2005 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, ..."

1. Uniform 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."

1. As 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.

1. In 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.

1. As 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."

1. The 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.

1. 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.

1. As Gleeson CJ said in Ohn v Waltonat 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.

1. There 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:

• The case is listed before judge A rather than judge B, and hearings before judge A tend to proceed at a slower pace than hearings before judge B;

• Evidence needs to be taken through an interpreter, which slows the pace at which the case proceeds;

• A witness becomes ill, necessitating an adjournment;

• A case that has been fixed for hearing on a particular date has that fixture cancelled, to enable the court to attend to an urgent matter;

• A matter is not reached in a running list;

• The judge dies or becomes ill, requiring the hearing to start again before another judge.

1. Such vicissitudes are regarded as part of the ordinary costs of running litigation. Any extra costs that arise by reason of them are dealt with in accordance with the principle in UCPR 42.1. That such a vicissitude has arisen is not a reason for departing from the principle that costs follow the event.

1. 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 (or by some other person who is amenable to the jurisdiction that the court now has to make costs orders against non-parties (cf Arena Management Pty Ltd (Receiver & Manager Appointed) v Campbell Street Theatre Pty Ltd[2011] NSWCA 128 at [21]-[25])) the costs of rectifying that error should, prima facie, be treated as one of the viscissitudes of litigation. Therefore, the costs of rectifying the error should prima facie follow the event.

1. This principle is well established in the basis upon which appellate courts make costs orders. Allegations that a judge has made an error make up the daily diet of the Court of Appeal. However, if such an allegation turns out to be correct, the fact that it was a judge who made the error provides no reason for the Court of Appeal to make no order for the costs involved in remedying that error. The bringing of an appeal is a separate " event" to the trial concerning which the appeal is brought, and the application of UCPR 42.1 thus justifies the party who succeeds on that " event" prima facie receiving the costs of that event, ie of the appeal. Thus, if the appropriate way for the Court of Appeal to remedy the error in the court below is to set aside the judgment and enter a judgment for a different party, UCPR 42.1 requires that the costs of both the trial and the appeal be awarded to the party who was successful on the appeal, unless there is reason to do otherwise. If the appropriate way for the Court of Appeal to remedy the error in the court below is to order a new trial, the usual order is that the successful appellant receive the costs of the appeal, and that the costs of the first trial abide the event of the second trial, unless there are special circumstances warranting a different order: Brittain v Commonwealth (No. 2)[2004] NSWCA 427. But, relevantly for the present case, the party who succeeded on the appeal should, prima facie, receive the costs of the appeal, regardless of the fate of the new trial.

1. The Suitors' Fund Act1951 provides some limited relief concerning some of the circumstances in which imperfect functioning of the legal system results in a litigant incurring costs that would not have been incurred had the system operated perfectly. The imperfect functioning includes not only a judgment being set aside on appeal, but also the occurrence of other (but by no means all) vicissitudes of litigation that cause litigants to incur costs, but are not the fault of any of the parties. However, the Suitors' Fund Act proceeds on the basis that a party to the litigation has been ordered to pay costs that have arisen as a consequence of the imperfect functioning of the legal system. The statute itself recognises that imperfect functioning of the legal system is not a reason why costs incurred as a consequence of that imperfection should not be the subject of an order for costs. Rather, it recognises that, in the limited circumstances in which the Act applies, it is appropriate for a partial indemnity to be made available from public funds to the party required to bear those costs. The application to vary the First Substantive Judgment was not, however, one of the sorts of circumstances when the Suitors' Fund Act could apply.

1. In the present case, the motion to vary the judgment was made to the same judge who had pronounced the judgment. In substance, it was an invitation to the judge to recognise and to correct his own error. Further, the judge, correctly, recognised that he had been in error and corrected the error. The application bears a close analogy to an application to an appellate court to send a matter back to a trial judge to deal with a matter that the judge has failed to deal with - which is a limited kind of order for a new trial. That the invitation to correct a judicial error is made to the judge who made the error, rather than to an appellate court, provides no reason for applying a different principle to that which an appellate court applies concerning the costs of an appeal. The motion to vary the judgment in the present case was a separate "event" , that should have attracted its own order for costs, just as an appeal is a separate "event" to the trial from which the appeal is brought.

Re-Exercise of the Discretion

1. As the judge has made an error of principle in exercising a discretion concerning costs, this Court should re-exercise the discretion.

1. In [12] of the Variation Judgment the judge said that "the causes of action were not pleaded in the alternative" . On the basis of that remark Mr Barry submits that the judge's error was a misapprehension as to the law which had been induced by the manner in which the Plaintiff had pleaded his case. I do not accept that submission. The Statement of Claim shows that the contractual claims were pleaded "further and in the alternative" . However, more important than this pleading nuance is that the submissions to the judge made clear that the measures of damage were different. The judge was right in holding that his error was not the fault of either party.

1. When the question of whether the Plaintiff should receive his costs of the Notice of Motion to vary was argued in the court below, the Importer and the Retailer argued that the Plaintiff was seeking an "indulgence" by the Notice of Motion to vary. While the judge rejected that argument, for the reason I have set out at [35] above, there was another more fundamental reason why the argument should have been rejected. 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" .

1. The judge had failed to perform his duty and the judgment should have been re-opened. In my view, these facts were so clear that the Importer and the Retailer should have consented to the application for variation once it was made. The argument put by counsel for the Importer and the Retailer to the primary judge, that the application should be refused in accordance with the principles of Autodesk Inc v Dyason , was rightly rejected by the judge.

1. The Plaintiff succeeded on the Notice of Motion. Application of the principles earlier identified in this judgment leads to the conclusion that the judge should have ordered that the Retailer and the Importer pay the costs of the Plaintiff of the Notice of Motion.

Orders

1. I propose the following orders:

1. Dismiss the summons seeking leave to appeal filed by Jaycar Pty Limited and Electus Distribution Pty Limited dated 4 March 2011, with costs.

2. Grant leave to appeal to Ross Lombardo concerning the judgment delivered in the court below on 24 June 2011.

3. Deem the draft Notice of Appeal contained in the White Book concerning that application to be filed.

4. Set aside the orders made in the court below on 24 June 2011.

5. In lieu thereof:

(i) Set aside order (ii) made by the court below on 25 May 2011 (in the reasons for judgment comprising 14 paragraphs delivered that day) and order (iii) made by the court below on 25 May 2011 (in the reasons for judgment comprising 75 paragraphs delivered that day); and

(ii) In lieu thereof order that the defendants pay the costs of the Plaintiff of the Notice of Motion to vary the judgment delivered on 8 December 2010.

6. Order Jaycar Pty Limited and Electus Distribution Pty Limited to pay the costs of Ross Lombardo of the application for leave to appeal referred to in Order 2 hereof, and of the resulting appeal.

1. YOUNG JA : I agree with Campbell JA.

1. MEAGHER JA : I agree with Campbell JA.

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Decision last updated: 14 September 2011