Wong v Felsch

[2025] NSWDC 264

District Court

New South Wales

Medium Neutral Citation:

Wong v Felsch [2025] NSWDC 264

Hearing dates:

15 July 2025

Date of orders:

18 July 2025

Decision date:

18 July 2025

Jurisdiction:

Civil

Before:

Cole DCJ

Decision:

1.   The defendant is to pay the costs of the plaintiff on the ordinary basis.

Catchwords:

COSTS — defendant seeks the imposition of a cap on costs after judgment has been entered – defendant seeks an issue by issue approach to be applied to the costs order

Legislation Cited:

Civil Procedure Act 2005

Home Building Act 1989

Uniform Civil Procedure Rules

Cases Cited:

Access Training Group Ltd v Jane [2024] NSWCA 204

Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304

Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107

Drummond and Rosen Pty Ltd v Easey & Ors (No 2) [2009] NSWCA 331

Lahoud v Lahoud [2006] NSWSC 126

Leda Pty Ltd v Weerden & Anor (No 2) [2007] NSWCA 283

Northern Territory of Australia v Sangare (2019) 265 CLR 164

Nudd v Mannix [2009] NSWCA 327

Oikos Constructions Pty Ltd t/as Lars Fischer Constructions v Ostin & Anor (No 2) [2021] NSWCA 98

Oshlack v Richmond River Council (1998) 193 CLR 72

Sze Tu v Lowe (No 2) [2015] NSWCA 91

Category:

Costs

Parties:

Mimi Wong (Plaintiff)
David Felsch (Defendant)

Representation:

Counsel:
D Hand (Plaintiff)
G Carolan (Defendant)

Solicitors:
DEA Lawyers (Plaintiff)
Roberts Crosbie Mortensen Lawyers (Defendant)

File Number(s):

2021/324126

Publication restriction:

Nil

JUDGMENT

1. This judgment deals with an application by the plaintiff for an order for costs against the defendant on the ordinary basis, with interest. The defendant agrees that the plaintiff is entitled to an order for costs in its favour, but says that it should be for a proportion only of the plaintiff’s costs (22% is suggested) or that the quantum of costs should be capped at $85,000.

2. The plaintiff, Ms Wong, owns a residential property in New South Wales (‘the property’). She entered into two successive written contracts with the defendant, Mr Felsch, for the restoration and renovation of the house on her property. Mr Felsch undertook work on the property in 2014 and 2015.

3. On 15 November 2021, Ms Wong commenced proceedings in the Supreme Court against Mr Felsch alleging breach of contract and breach of the statutory warranties in the Home Building Act 1989. Ms Wong alleged that Mr Felsch’s building work on her property was defective.

4. Mr Felsch applied twice to have the proceedings transferred to the District Court. On the first occasion, he was unsuccessful. On the second occasion, the proceedings were transferred to this Court. The order made by the Supreme Court with respect to costs was:

2.   Costs of this application are to be costs in the cause in the NSW District Court.

5. The matter was referred to a referee by this Court.

6. The referee, Mr Goldstein, conducted a three day hearing, and subsequently produced his report to the Court on 26 February 2025.

7. Mr Goldstein’s report was adopted by the Court under rule 20.24 of the Uniform Civil Procedure Rules (‘UCPR’) by order on 11 April 2025.

8. Judgment for the plaintiff was given on 10 April 2025 in the sum of $131,330.

Submissions for the plaintiff

9. The plaintiff submitted that the defendant denied liability and resisted the plaintiff’s claim throughout the proceedings.

10. The plaintiff relied on the principle that costs should follow the event, in the absence of disentitling conduct (Oshlack v Richmond River Council (1998) 193 CLR 72 and Northern Territory of Australia v Sangare (2019) 265 CLR 164 at [25] (‘Sangare’)). There was no suggestion of disentitling conduct.

11. The plaintiff’s claim was a claim for breach of contract and breach of statutory warranties with respect to a series of allegedly defective works carried out by the defendant. The plaintiff submitted that, although not all of the works alleged to be defective were found to be defective by the referee, and although not all of the works alleged to be defective were the subject of a finding that an award of damages should be made, nonetheless, the plaintiff was successful in the litigation, and had been awarded damages for breach of contract. The plaintiff referred the judgment of Gleeson JA in Sze Tu v Lowe (No 2) [2015] NSWCA 91 (‘Sze Tu’) who said, at [37] - [40]:

37.   Costs are not awarded by way of punishment of the unsuccessful party but, rather, “are compensatory in the sense that they are awarded to indemnify to successful party against the expense to which he or she has been put by reason of the legal proceedings”: Latoudis v Casey [1990] HCA 59; 170 CLR 534 at 543 (Mason CJ); Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [67]; Mahenthirarasa v State Rail Authority of NSW (No 2) [2008] NSWCA 201; 72 NSWLR 273 (Mahenthirarasa (No 2))at [8] (Basten JA; Giles and Bell JJA agreeing). It follows that the inquiry as to what costs order should be made is primarily directed to the position of the successful party: Latoudis v Casey at 542; Mahenthirarasa (No 2) at [9].

38. The starting position is s 98 of the Civil Procedure Act 2005 (NSW) which provides that, subject to the rules of court, costs are in the discretion of the Court including by whom, to whom and to what extent costs are to be paid. Reference should also be made to r 42.1, Uniform Civil Procedure Rules 2005 (NSW) (UCPR), which provides that if the Court makes any order as to costs, it should be in terms that costs follow the event unless it appears to the Court that some other order should be made as to the whole or part of the costs.

39.   How “the event” should be defined will depend upon the nature of the litigation. Generally the “event” refers to the event of the claim and may be understood as referring to the practical result of a particular claim: Windsurfing International Inc v Petit [1987] AIPC 90-441 at 37,861 – 37,862 (Waddell J).

40.   In a proper case, the party that is successful overall may be deprived of part of its costs, or ordered to pay the costs of a discrete issue. The circumstances in which this may occur are not limited to cases where it was unreasonable for the successful party to raise the issue on which it failed: Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 615D. The relevant principles were reviewed by this Court in Elite Protective Service Pty Ltd v Salmon (No 2) [2007] NSWCA 373, and summarised in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA), as follows:

•   Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1996, unreported).

•   In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal.

•   If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27].

•   Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).

•   A separable issue can relate to “any disputed question of fact or law” before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].

•   Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272.

12. In this matter, it was submitted, there was, in a sense, a single issue, which was that the defendant was in breach of his contract with the plaintiff and in breach of statutory warranties under the Home Building Act 1989, in that some of his building work was defective. To the extent that it could be said that each individual defect alleged in the proceedings constituted an “issue”, the plaintiff argued that none of the alleged defects which had been found not to have been proven, or in relation to which no damages had been awarded, had been shown by the defendant to be dominant or separable. It had not been shown by the defendant that any such issue took up a significant portion of the hearing before the referee.

13. The plaintiff relied upon the evidence of two expert witnesses before the referee; a building consultant and a quantity surveyor. Those expert witnesses gave evidence in relation to the alleged building defects concerning which damages were awarded and the alleged building defects which were not found to be defects, or in relation to which no damages were awarded.

14. The plaintiff seeks interest on costs pursuant to s 101(4) and (5) of the Civil Procedure Act 2005.

Submissions for the defendant

15. In the written submissions provided in the defendant’s case, it was asserted that the fact that the proceedings were commenced in the Supreme Court, and later transferred to the District Court, “resulted in the costs of this litigation exceeding what should be regarded as reasonable”.

16. The defendant also submitted that the referral of the matter to a referee, first by the Supreme Court and subsequently by the District Court, over the objection of the defendant on the basis of his limited financial resources, imposed an additional costs burden on the parties. The defendant submitted that the most appropriate forum for the matter was the Civil and Administrative Tribunal of New South Wales. The defendant argued that the “additional costs incurred in commencing the proceedings in the Supreme Court should be disallowed”.

17. The defendant said that a claim for breaches of an oral contract for work undertaken in the attic of the house after the completion of the second written contract was abandoned at the hearing before the referee.

18. The defendant said that the plaintiff’s building expert inspected the house on nine separate occasions and produced four reports. The number of inspections was characterised as “excessive”.

19. The quantity surveyor produced two reports, the second of which quantified the cost of the rectification of the defects at $591,809.44, exclusive of GST, which is well in excess of the ultimate award of damages.

20. The defendant submitted that the referee had awarded damages with respect to 15 of the 42 defects identified by the plaintiff’s building expert. The defendant said this represented “in simply terms, 35% of the number of defects allegedly identified”.

21. The defendant submitted that the damages ultimately assessed by the referee constituted 22% of the amount claimed.

22. The defendant referred to estimates of the plaintiff’s costs and disbursements which had been provided to the defendant’s solicitors from time to time. On the basis of information provided in 2024, together with the accounts rendered by the referee, it was submitted, in the hearing on costs, that the plaintiff’s costs claim may exceed $600,000. It was submitted that costs of that order would be “far above what would be reasonable for proceedings of this nature”.

23. The defendant referred to rule 42.4 of the UCPR:

42.4   Power to order maximum costs

(1)  The court may by order, of its own motion or on the application of a party, specify the maximum costs that may be recovered by one party from another.

(2)  A maximum amount specified in an order under subrule (1) may not include an amount that a party is ordered to pay because the party—

(a)  has failed to comply with an order or with any of these rules, or

(b)  has sought leave to amend its pleadings or particulars, or

(c)  has sought an extension of time for complying with an order or with any of these rules, or

(d)  has otherwise caused another party to incur costs that were not necessary for the just, quick and cheap—

(i)  progress of the proceedings to trial or hearing, or

(ii)  trial or hearing of the proceedings.

(3)  An order under subrule (1) may include such directions as the court considers necessary to effect the just, quick and cheap—

(a)  progress of the proceedings to trial or hearing, or

(b)  trial or hearing of the proceedings.

(4)  If, in the court’s opinion, there are special reasons, and it is in the interests of justice to do so, the court may vary the specification of maximum recoverable costs ordered under subrule (1).

24. The defendant cited Nudd v Mannix [2009] NSWCA 327 in support of the proposition that the Court has power to order the capping of costs at the end of the hearing.

25. The defendant cited Oikos Constructions Pty Ltd t/as Lars Fischer Constructions v Ostin & Anor (No 2) [2021] NSWCA 98, in which White JA (Basten and MacFarlan JJA agreeing) referred, with approval, to the same passage from Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (‘Bostik’) that was quoted in Sze Tu at [40], which is set out in full, above, at [11].

26. The defendant relied particularly upon the principles that:

• it may be appropriate to deprive a successful party of costs or a portion of costs if the matters upon which that party was unsuccessful took up a significant part of the trial, whether by evidence or argument, and

• that the Court has a wide discretion in relation to costs which should be liberally construed, and

• where there is a mixed outcome in proceedings, the question of apportionment is a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation.

27. The defendant argued that the capping of a costs award at $85,000 would be an outcome which would be proportional with the damages award and would reflect the plaintiff’s “modest degree of success” in the proceedings.

28. It was submitted that the limitation of the costs award would be an appropriate way of acknowledging the “time and effort expended [by the defendant] in meeting many claims of obviously dubious merit”.

29. At the hearing, the defendant referred to the decision in the Full Federal Court in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 (‘Bowen’) of Finkelstein and Gordon JJ who said, at [3] – [5]:

3   We think there is force in the argument that the appellant should not benefit from the usual rule that costs follow the event. For many years the traditional rule has been that the winner (once the winner is properly identified) is entitled to recover his costs of the trial. It sometimes happens that there is a departure from the traditional rule and the costs order takes account of the success of the parties on particular issues. But to date the award of costs on an - 2 - issue by issue basis has only been accepted in limited cases and then only when the circumstances are exceptional.

4 This approach is, if we may be permitted to say so, quite unfair. Its effect is that a winner is entitled to all of his costs even if he raises a plethora of issues on which he is unsuccessful. The unfairness of the traditional rule has been recognised in England where, following Lord Woolf’s interim report, Access to Justice (June, 1995) [at para 25.22], the Civil Procedure Rules were modified to require the judge to have regard to the circumstance (if it occurs) that the unsuccessful party has succeeded on some issues: see r 44.3(4)(b). In Western Australia, the Supreme Court Rules provide that costs should follow the event of each pleaded cause of action: see r 66(2)(a). This is narrower than the English approach but certainly more reasonable than adherence to the traditional rule.

5    We do not believe there is any need to wait for a change in the Federal Court Rules to adopt an issue by issue approach here. Costs are in the court’s discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied. It is not suggested that such an approach requires a precise arithmetical apportionment of the costs as between the winner and loser of discrete issues. No doubt the assessment will often be rough and ready. But it will have the virtues of both fairness and reasonableness, which are often lacking in the application of the traditional rule.

30. The defendant submitted that the decision in Bowen was cited with approval in Access Training Group Ltd v Jane [2024] NSWCA 204 (‘Access Training’) by Ward P, with whom Payne JA agreed.

Consideration

31. Many of the arguments in the present case were discussed in Access Training by Ward P at [182] – [192]:

182. Both parties accept that the starting point for an award of costs is the broad discretionary power in s 98 of the Civil Procedure Act, which is conferred “[s]ubject to rules of court and to this or any other Act” (see s 98(1)). One such relevant rule is r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the general rule that costs follow the event. What is required is that the Court be satisfied that, in the particular circumstances of the case, a departure from the general rule is justified.

183.   Where there are a number of issues in the proceedings on which there have been varying degrees of success, it will not always be easy to identify the “event” for the purpose of the application of the general rule as to costs following the event. In the present case, this was complicated by the fact that there were two sets of proceedings (with different thought related parties) and, at least on first blush, mixed success in both sets of proceedings.

184.   In the 2019 proceedings, as noted earlier, Holdings’ primary claim was an entitlement to the recovery of $1.7 million as money had and received by reason of a total failure of consideration (on the basis that there had been no execution of the Share Sale Agreement). Its alternative claim was based on recovery of that amount pursuant to the Share Sale Agreement. The Jane Defendants denied any obligation to repay the amount but also pleaded a defence of set-off pursuant to that the Share Sale Agreement.

…

186.   What then is the relevant “event” for the purpose of the general rule as to costs? As already noted, the difficulty of ascertaining such an event where there are multiple issues in proceedings has been recognised in a number of cases (see Owners Strata Plan No 64970 v Austruc Constructions Ltd (No 5) [2010] NSWSC 568 per Bergin CJ in Eq at [22], for example, her Honour there referring to Lenning v Alexander Proudfoot Co World Headquarters [1991] NSWCA 172 and Hooker v Grilling (No 2) [2007] NSWCA 214 at [25]).

187.   In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20, Young J (as his Honour then was), having accepted that where there are multiple issues it may be appropriate for the court to assess the costs on each issue or to make a reduction in the costs which the successful party obtains because of that party’s losses on separate issues, said (at 22) (in an approach later cited by Barrett J (as his Honour then was) in Golding v Vella (No 2) [2001] NSWSC 731 at [8]):

The cases, however, show that it is unwise to be too technical about what is meant by “event” or “issue” in this context. The judgment of Thomas J in Colburt v Beard (1992) 2 QD R 67 gives abundant examples which establish this point. In particular one does not look at issues as if they were pleaders’ issues but approaches the matter with a broad brush. (my emphasis)

188.   The rationale underlying the general rule is reflected in the observation made by Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 (at 16) that:

… trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.

189.   As against this, the rationale underlying a departure from the ordinary costs rule appears to be that where there are multiple issues the application of the general rule may involve hardship where a party succeeds on some issues but not others(James v Surf Road Nominees (No 2) [2005] NSWCA 296, per Beazley, Tobias and McColl JJA (at [32]) citing Waters v P C Henderson (Aust) Pty Limited per Mahoney JA (Court of Appeal (NSW), Kirby P, Mahoney and Priestley JJA, 6 July 1994, unreported) (Waters)).

190.   There is thus a tension between the accepted general rule that a successful party should have the whole costs of the proceeding (including the costs of an issue on which it has failed) (as noted in Windsurfing International Incorporated v Petit (1987) AIPC 90-441 (Windsurfing)) and the recognition that in an appropriate case a costs order may be formulated to reflect the degree of success on distinct issues (see for example Lavender View Regency Pty Ltd v North Sydney Council (No 2) [1999] NSWSC 775 per Rolfe J; Uniline Australia Ltd(ACN 010 752 057) v S Briggs Pty Ltd(ACN 007 415 518) (No 2) (2009) 232 FCR 136; [2009] FCA 920 per Greenwood J; Leallee v Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518 per Price J; Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403 per Slattery J at [36]).

191.   This highlights the complaint by the cross-appellants that in the present case his Honour did not address the circumstances in which an apportionment of costs as between the different issues was here considered appropriate. Relevant circumstances in which apportionment across different issues have been said to include: where a successful party has, in respect of one or more issues, “unfairly, improperly, or unnecessarily increased the costs” (Waddell J, as his Honour then was, in Windsurfing); where the bulk of the time has been taken on an issue on which the unsuccessful party had succeeded (Mahoney JA in Waters; Toohey J in Hughes v Western Australian Cricket Assn (1986) ATPR 40-748); where a particular issue or group of issues is clearly dominant or separable (Mahoney JA in Waters; McColl JA in Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373). See also the summary of principles in Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 by Hammerschlag J (as his Honour then was), there referring to the relevant authorities collated by White J (as his Honour then was) in Short v Crawley (No 40) [2008] NSWSC 1302, at [28]–[32] as to when the general rule may be displaced.

192.   The purpose of costs orders is, compensation not punishment (Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59) and ultimately, as Finkelstein and Gordon JJ observed in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5], fairness should dictate how the costs discretion is to be exercised.

Transfer from Supreme Court

32. The Civil Procedure Act 2005 provides, with respect to the transfer of proceedings from a higher to a lower court, in s 148:

148   Proceedings after transfer

(1)  Subject to the rules of court applicable in the lower court, any proceedings with respect to which a transfer order takes effect continue in the lower court—

(a)  as if the proceedings had been duly commenced in the lower court on the date on which they were commenced in the higher court, and

(b)  as if any cross-claim in the proceedings had been duly made in the lower court on the date on which it was made in the higher court.

(2)  For the purposes of any proceedings continued in the lower court, any admission duly made in the higher court is to be treated as if it had been duly made in the lower court.

(3)  Subject to the rules of court applicable in the lower court, the power of the lower court to make orders as to costs includes a power to make orders with respect to the costs of—

(a)  the application for, and the making of, the transfer order, and

(b)  any step taken in the proceedings before the transfer order was made.

33. The defendant applied to the Supreme Court on two occasions to transfer the proceedings to the District Court. On the first occasion, the application was refused. On the second occasion, the application was granted. Section 148(1)(a) of the Civil Procedure Act 2005 contemplates that the proceedings, upon transfer from a higher court to a lower court, will continue in the lower court as if they had been commenced in that court. On the basis of the material before me, it appears that the proceedings have continued in the District Court in the manner contemplated by s 148. There is nothing before me to indicate that the fact of the transfer led to increased costs being incurred in the proceedings, apart from the costs of the transfer applications, which, as I have said, were applications by the defendant.

Referral to referee

34. The plaintiff applied for the reference to a referee. The defendant opposed the application on the basis of his limited financial means.

35. The proceedings were referred to a referee, ultimately, by Judge Weber SC on 17 May 2024. The reference was made pursuant to Part 20, Division 3 of the UCPR.

36. Given that the reference was made by order of the Court, I do not consider that it can be characterised as disentitling conduct by the plaintiff in the context of the plaintiff’s costs application. In addition, it did not unfairly, improperly or unnecessarily increase the costs to the parties. The defendant complained of the referee’s invoice, saying that a trial before a judge would not have been as expensive, but no evidence was put forward to substantiate that assertion. The processes of a referee are not precisely comparable to a trial in the District Court.

37. I reject the contention that the plaintiff’s successful application to refer the proceedings to a referee is a basis for imposing a limit on an award of costs in the plaintiff’s favour.

The attic claim was abandoned at the hearing before the referee

38. The abandonment of the claim in relation to the work performed by the defendant in the attic was made at the beginning of the hearing before the referee, as I understand it.

39. The consequence of the abandonment of the claim in relation to the attic works was that it occupied very little of the referee’s time during the hearing and very little consideration in the referee’s report (see paragraph 42 of the referee’s report).

40. No information was provided as to the costs unnecessarily incurred in relation to the attic claim. The defendant has not established that the events in relation to the abandonment of the attic claim were sufficiently significant to dictate departure from the general rule that costs follow the event in the proceedings. The outcome of these proceedings was judgment for the plaintiff and an award of damages in the sum of $131,330. The outcome followed the adoption by the Court of the finding that the defendant was in breach of his contract with the plaintiff and in breach of the statutory warranties under the Home Building Act 1989.

The plaintiff’s building inspector undertook 9 inspections and wrote 4 reports

41. A concern was expressed on behalf of the defendant that the experts who gave evidence for the plaintiff before the referee, particularly the building expert, may have rendered invoices for excessive amounts.

42. This is an issue to be explored in the negotiation of the quantum of costs, if a negotiation takes place, or by way of argument before the assessor.

The defendant calculates that the plaintiff only succeeded on 22% of the defects claimed

43. As I have said, it was submitted on behalf of the defendant that the plaintiff succeeded in relation to only 22% of the defects alleged, and failed on the balance. I note that, in addition to abandoning the attic claim, the plaintiff also abandoned its claim in relation to six alleged defects in her written submissions to the referee.

44. I bear in mind that it is clear from Bostik that it may be permissible to consider the question of whether an order should be made limiting the costs order in this matter on the basis that each alleged defect could be characterised as a separate issue. However, in this matter, there is no evidence that any offer of settlement was ever made by the defendant. It was indicated in submissions that the defendant fought the matter all the way. In those circumstances, a process to determine whether the defendant had breached his contract with the plaintiff, and whether the defendant was in breach of statutory warranties under the Home Building Act 1989 had to be undertaken, be it by way of a hearing before the referee or a trial.

45. I do not consider that simply counting the alleged defects in relation to which damages were awarded, and expressing them as a percentage of the total number of defects claimed, provides me with information on the basis of which it would be appropriate to depart from the general rule that costs follow the event. I bear in mind what was said in Bostik, which is that mathematical precision is illusory. The counting of the alleged defects in relation to which damages were awarded, and the expression of them as a percentage of the total number of defects claimed, does not establish that any particular defect or set of defects was ‘dominant or separable’, or that any particular defect or set of defects ‘unfairly, improperly or unnecessarily increased the costs’ or occupied the bulk of the time at trial (see Access Training at [191]).

46. As far as I can tell from the material before me, including the referee’s report, the plaintiff had support from her expert witnesses for each of the alleged building defects. At the beginning of the hearing before the referee, she apparently abandoned the attic claim. It seems that her claims in relation to six other alleged defects were abandoned after the cross-examination of her experts. There is no basis, on the material before me, upon which I could find that her conduct in either withdrawing those claims or in proceeding with the balance of her claims, “unfairly, improperly or unnecessarily increased the costs”. It has not been shown that the bulk of time has been taken on an issue on which the plaintiff did not succeed. Apart, perhaps, from the attic claim, which was withdrawn, the plaintiff, relying on her experts, had no apparent basis, at the beginning of the hearing before the referee, upon which to determine that certain defects were likely to be dominant and that others were separable. This is not a case in which the defendant has made an offer, pointing out the flaws in the plaintiff’s case in relation to specified allegations.

The defendant is concerned that the plaintiff’s costs could exceed $600,000

47. As I have said, the defendant expressed concern that the plaintiff’s costs claim could exceed $600,000 and that such a sum would be grossly disproportionate to the damages awarded.

48. A contest as to the reasonableness of the quantum of the plaintiff’s claim for costs is a matter for the assessor in the event that the quantum of costs is not agreed.

The defendant seeks to have a cap imposed on the costs

49. The defendant seeks an order capping the plaintiff’s costs at $85,000. I have rejected the basis for the calculation of the cap sought. Fundamentally, the plaintiff had to prove that the defendant was in breach of contract or in breach of the statutory warranties under the Home Building Act 1989. She succeeded in that. There is nothing before me to suggest that the defendant made any offer, or in any other way sought to bring the proceedings to an end in an economical way.

50. The defendant has not established that it would be appropriate to cap the plaintiff’s costs claim. The quantum of costs is a matter for the assessor. A cogent way of arriving at an appropriate cap has not been advanced.

Interest

51. In the summons which commenced the proceedings in the Supreme Court, the plaintiff seeks interest on costs “at the prescribed rate from the dates on which the costs were paid, pursuant to section 101(4) and (5) of the Civil Procedure Act 2005 (NSW)”. In other words, the plaintiff seeks an order for the payment of pre-assessment interest on the costs payable to her under a costs order in her favour.

52. The Civil Procedure Act 2005 provides, in s 101(4) - (7):

101   Interest after judgment

…

(4)  Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs.

(5)  Interest on an amount payable under an order for the payment of costs is to be calculated, at the prescribed rate or at any other rate that the court orders, as from the date the order was made or any other date that the court orders.

(6)  This section does not authorise the giving of interest on any interest payable under this section.

(7)  In this section, a reference to the prescribed rate of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section.

53. The plaintiff referred to the decision of the Court of Appeal in Leda Pty Ltd v Weerden & Anor (No 2) [2007] NSWCA 283 and in Drummond and Rosen Pty Ltd v Easey & Ors (No 2) [2009] NSWCA 331. In both of those matters, an order for pre-assessment interest on costs was made. Neither of those matters involved residential building work under the Home Building Act 1989.

54. In Lahoud v Lahoud [2006] NSWSC 126 at [82], Campbell J said:

…There is no requirement, before an order for payment of interest on costs is made, for the Court to be satisfied that the circumstances of the case are out of the ordinary.

55. The Civil Procedure Act 2005, in s 101(5) confers a discretion upon the court to specify a date from which interest must be paid. That discretion must be exercised judicially.

56. In this matter, I have no information as to the plaintiff’s arrangements for the payment of her legal costs. There is no evidence before me as to the quantum of those costs, though submissions have been made about assertions as to their quantum at prior points in time during the proceedings. I am asked to assume that the plaintiff has paid costs from time to time over the three and a half year period that has elapsed since she filed a summons in the Supreme Court on 15 November 2021.

57. I note that rule 36.7(1) of the UCPR provides:

36.7   Payment of interest

(1) The prescribed rate at which interest is payable under section 101 of the Civil Procedure Act 2005 is—

(a)  in respect of the period from 1 January to 30 June in any year—the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced, and

(b)  in respect of the period from 1 July to 31 December in any year—the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced.

58. I bear in mind the provisions of the Civil Procedure Act 2005 in Part 6, Division 1. In all of the circumstances of this matter, the making of an order for pre-assessment interests on costs would not be conducive to the just, quick and cheap resolution of the question of costs. The order sought could give rise to disputes between the parties as to what is intended and as to the information that must underlie the calculation.

59. Acknowledging that a matter need not be out of the ordinary in order for pre-assessment interest to be ordered, it seems to me that there must be some reason to depart from the usual order set out in s 101 of the Civil Procedure Act 2005, and no reason has been advanced that satisfies me that the order the plaintiff seeks would be appropriate in all of the circumstances.

Summary

60. It has not been established by the defendant that fairness dictates that a departure from the general rule that costs follow the event should be made.

61. It has not been established by the plaintiff that I should exercise the discretion to order pre-assessment interest on costs. In the absence of an order, the plaintiff is entitled to interest on costs in accordance with the terms of s 101(4) and (5) of the Civil Procedure Act 2005.

62. There will be an order in the following terms:

1.   The defendant is to pay the costs of the plaintiff on the ordinary basis.

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Decision last updated: 18 July 2025