Supreme Court New South Wales Medium Neutral Citation: Precision Flooring Pty Ltd v Armstrong [2022] NSWSC 1006 Hearing dates: On the papers Date of orders: 16 August 2022 Decision date: 16 August 2022 Jurisdiction: Common Law Before: Walton J Decision: The plaintiff should bring in Short Minutes of Order reflecting this decision within 3 days of publication of the judgment. Catchwords: COSTS – appeal – Civil Procedure Act 2005 (NSW) s 98 – Uniform Civil Procedure Rules 2005 (NSW) r 42.1 – discretion as to costs – costs should follow the event – order as to costs of appeal – costs of Local Court proceedings Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Competition and Consumer Act 2010 (Cth) Local Court Act 2007 (NSW), s 41 Suitors' Fund Act 1951 (NSW), s 6(1) Uniform Civil Procedure Rules 2005 (NSW), r 42.1 Cases Cited: IAG Ltd t/as NRMA Insurance v Abiad [2018] NSWSC 1603 Insurance Commission of Western Australia v Gargoura [2020] NSWSC 1786 Moseley v AB (No 2) [2017] NSWSC 1812 Precision Flooring Pty Ltd v Armstrong (Unrep, Local Court of New South Wales, Baptie LCM, 25 October 2019) Precision Flooring v Armstrong [2021] NSWSC 844 Category: Costs Parties: Precision Flooring Pty Ltd (Plaintiff) Sandra Armstrong (Defendant) Representation: Counsel: D Feller SC (Plaintiff) E Peden SC with T Bateman (Defendant) Solicitors: Vincent Young (Plaintiff) McLean & Associates (Defendant) File Number(s): 2019/365342 Judgment 1. By a summons filed on 20 November 2019, which was subsequently amended by leave of the Court on 2 July 2020 ("the amended summons"), Precision Flooring Pty Ltd ("the plaintiff") appealed from, and to the extent necessary sought leave to appeal from, the judgment and orders delivered and made by Baptie LCM on 25 October 2019 ("the appeal"), by which her Honour awarded Ms Sandra Armstrong ("the defendant") damages of $63,570: Precision Flooring Pty Ltd v Armstrong (Unreported, Local Court of New South Wales, Baptie LCM, 25 October 2019) ("Precision Flooring No 1"). 2. The proceedings in the Local Court of New South Wales were commenced by the plaintiff. By an amended statement of claim filed on 1 April 2019, the plaintiff claimed the sum of $23,202.90 for breach of an agreement between the plaintiff and the defendant whereby the plaintiff would supply and install various timber products and install timber stairs at the defendant's property at Roseville. 3. The plaintiff claimed that the defendant's conduct in failing to pay progress payments, as and when they fell due, was a repudiation of the agreement between the parties, which had resulted in loss and damage for the plaintiff. 4. The defendant filed an amended statement of cross-claim on 22 December 2018 in which it was pleaded, inter alia, that the plaintiff (the cross-defendant on the cross-claim) was in breach of the Competition and Consumer Act 2010 (Cth) ("the Consumer Act") and the Australian Consumer Law ("the ACL") as the plaintiff had failed to supply goods, under the agreement between the plaintiff and the defendant, that: 1. were of acceptable quality; 2. were reasonably fit for the disclosed purpose; 3. corresponded with their description; and 4. corresponded with their sample in quality, state, or condition. 1. The particulars of those pleadings included: A. the timber flooring that was supplied by the Cross Defendant pursuant to the Agreement was of an inferior type in that: i. it was too thin: ii. contained inconsistent edging and rough finishes: and iii. was of a different type and size as described in the Agreements B. the timber flooring that was supplied by the Cross Defendant pursuant to the Agreements was of an inferior type in that: i. cracks appeared in the timber: and ii. warps and burs appeared in the timber. 1. It was pleaded that the plaintiff guaranteed to the defendant that the services supplied under the agreement would, inter alia, be: 1. rendered with due care and skill; 2. reasonably fit for purpose; 3. of such a nature and quality, state or condition that they might be reasonably expected to achieve the result expected by the cross-claimant (the defendant) and supplied within a reasonable time. 1. The plaintiff also pleaded breaches of the Consumer Act and the ACL, with respect to services as follows: 19. In breach of the Consumer Act and the ACL, the Cross Defendant failed to supply services to the Cross Claimant under the Agreements that were: a. rendered with due care and skill; b. reasonably fit for purpose; c. of such nature and quality, state or condition that they might be reasonably expected to achieve the result expected by the Cross Claimant; d. supplied within a reasonable time. 1. Baptie LCM gave judgment for the defendant essentially upon the basis that the plaintiff had supplied and installed timber flooring and stairs in the defendant's home which were not fit for purpose: Precision Flooring No 1. 2. Baptie LCM ordered the plaintiff to pay the defendant the sum of $63,570 and otherwise dismissed the plaintiff's claim. The plaintiff was ordered to pay the defendant's costs. 3. The plaintiff appealed the whole of the judgment in Precision Flooring No 1. However, the specific challenge was based on grounds concerning the timber flooring. The following are those grounds: 1. The Local Court erred in law in finding that: (a) both experts conceded that there was some noticeable distortion in the manufactured timber (at [47]); (b) Mr Powell agreed that there was distortion in the flooring (at [53]); (b1) the stained areas cannot be adequately dealt with by 'spot' fixing (at [54]): (c) the flooring was, in general, not fit for purpose (at [53]); (d) the only appropriate remedy is to remove and replace the entire floor area (at [54]), because; (e) those findings were made without evidence; (f) those findings were made in breach of the rules of procedural fairness; (g) those findings were not supported by adequate reasons; and (h) the findings described in sub-paragraphs (c) and (d) above were infected by the erroneous findings described in sub-paragraphs (a), (b) and (b1). 1. By the written submissions of the defendant, who resisted the appeal, the issues on the appeal were essentially distilled to three issues corresponding to grounds 1(e) - (h) on the appeal. These were represented by the following questions (addressed in the order of the submissions of the parties): 1. were certain findings of the Local Court Magistrate made without evidence (grounds 1(e)); 2. were findings of the Local Court Magistrate made without adequate reasons (ground 1(g)); and 3. was there a breach of procedural fairness (ground 1(f)). 1. Ground 1(h) was to the affect that the errors in law in the findings in grounds 1(a), (b) and (b1) had infected the findings in Precision Flooring No 1 at [53] and [54]. As such, it was considered under the first issue. Collectively, those three issues shall hereinafter be referred to as, "the grounds of appeal". 2. In Precision Flooring v Armstrong [2021] NSWSC 844 ("Precision Flooring No 2"), the Court found that the plaintiff established the no evidence and inadequate reasons grounds (grounds 1(e) and (g) above). 3. The Court made the following orders ("the Orders") on 22 December 2021: (1) Appeal allowed. (2) Set aside the following orders made below: (a) the order that the plaintiff pay the defendant the sum of $63,570. (b) the order that the plaintiff pay the defendant's costs. (3) Remit the matter to the Local Court for determination in accordance with law. 1. The question of costs was reserved, and the plaintiff was directed to bring in Short Minutes of Order including draft orders for the resolution of any issues as to costs within 7 days of the publication of Precision Flooring No 2. 2. On 22 December 2021 the Court made orders and directed the parties to file and serve submissions on the question of costs of the Appeal and the Local Court proceedings by 3 February 2022 and to indicate whether the question of costs may be determined on the papers. On application by the parties, the Court extended the date for compliance with this direction to 10 February 2022. 3. Both parties agreed to having costs determined on the papers. This is my judgment as to the issue of costs of the appeal and the Local Court proceedings. Precision Flooring No 2 1. The following passages from Precision Flooring No 2 are relevant to the determination of the issue of costs of the appeal: 16 Some observations may be made in that light as to the course of the appeal. 17 The defendant correctly contended that the amended summons brought a challenge to the whole of the judgment below but that, in substance, the appeal was brought against particular findings, namely, Precision No 1 at [47], [53] and [54], which only concerned the issues of distortions to the timber flooring laid by the plaintiff. 18 In written submissions, the defendant took the course of meeting the appeal by reference to the impugned findings identified in the grounds of appeal (namely, grounds 1(a) to (d)) under a series of headings corresponding to those findings rather than, by those headings engaging with the errors of law asserted in grounds 1(e) to (h). 19 The defendant then dealt with grounds broadly in the order dealt with in grounds 1(a) to (d), commencing with grounds 1(a) and (b) together. It was submitted, in this respect, that grounds 1(a) and (b) were findings of fact. It was submitted that the plaintiff attempted to convert them into "something more" by claiming they were made without evidence or contrary to procedural fairness or without adequate reasons. It was submitted that such suggestions would fail. 20 It was submitted that it was assumed that there was no claim for judicial review of the Local Court Magistrate's decision as there has been no compliance with r 59.3(4) of the Uniform Civil Procedure Rules 2005 (NSW). 21 I agree with the plaintiff's written submissions in reply that, by this process, the defendant's written submissions tended to conflate the issues of no evidence to support a finding of fact and the adequacy of reasons. As I will discuss, contrary to the defendant's written contentions, both of those issues concern questions of law. 22 Similarly, with respect to ground 1(c) (and (b1)), the defendant submitted that the plaintiff required leave to appeal with respect to the finding that the timber floor was not fit for purpose because the issue raised by the plaintiff concerned the application of legal principle to the facts of the case (a similar issue arose with respect to ground 1(b1)). It was contended that the "leave ought to not be granted because there is no doubt as to the correctness of the Local Court decision and the quantum of the judgment demonstrates the understanding of the matter being further litigated". The defendant then turned to the correctness of the judgment below. 23 As to ground 1(d), the defendant submitted this was a mixed question of fact and law and required leave, which should not be granted. 24 The approach of the defendant tended to, at least in written submissions, overlook that the gravamen of the appeal was not that the factual findings were simply erroneous but rather were made without evidence (with respect to Precision Flooring No 1 at [47] and [53]) and without adequate reasons as to all of the nominated paragraphs of the judgment in the grounds of appeal (there was a further question of procedural fairness). 25 Nonetheless, the plaintiff's written reply submissions tended to engage, in terms, with the defendant's submissions including the structure of the defendant's submissions whilst drawing attention back to the grounds of substantive grounds of appeal. Somewhat unusually, the defendant filed a reply to that reply. … 29 The discussion of the submissions of the parties as to those grounds is derived from the oral submission of the parties and distilled from the written submission of that were referable to grounds 1(e) to (h). … 45 The plaintiff's challenge to the judgment below, in this respect, was fixed upon those parts of Precision Flooring No 1 at [47] and [53] as earlier emphasised in this judgment by the italicisation relied upon by the plaintiff… The plaintiff contended that those passages of the judgment below represented a determination by the Local Court Magistrate that Mr Powell had conceded there was distortion in the flooring and, in the result, it was a common position between the experts on that issue. 46 The plaintiff contended there was no evidence that supported that element of the reasoning of the Court below and, further, that this was an important factor in her Honour concluding that there was a distortion in the floor boards such that all floorboards should be removed in rectification. 47 The plaintiff made the following additional submissions as follows as to distortion in the floor (this issue also has a relationship to the issue of rectification): (1) There were two core areas of disagreement between the experts. The first was whether there was moisture damage evident in the floor and the second, which was related to the first, was whether there was any "cupping" in the floor. Another question was whether the appropriate method of rectification of any area of the floor which showed imperfection, in the form of spotting and staining, should be rectified by re-staining or alternatively by replacing sections of the floor which were not capable of being repaired by spot fixing (to which I shall refer to below). (2) Again, at [43] of Precision No 1, her Honour referred to Mr Powell being shown a board in the course of cross-examination that had been kept in the garage at the defendant's premises. Whilst it was accepted that this Court may not infer from the judgment below that the board was kept in the garage because it was defective as having been culled, it was submitted that "the Magistrate seems to have inferred something from that which is not in evidence". (3) Again at [43], her Honour refers to Mr Powell's evidence where he stated, as to the board in question, "This board here, will cause crowning not cupping". Senior counsel for the plaintiff, Mr D Feller, submitted that Mr Powell's evidence did not involve a concession that the piece of timber shown to him represented the floor as laid. There are two further important aspects of the evidence referred to by the Local Court Magistrate. First, the claim brought by the defendant was that the floor as laid exhibited cupping not crowning. Secondly, Mr Powell's evidence was that the piece of timber in question, insofar as it was not flat, was exhibiting signs of crowning as opposed to cupping. (4) In the light of this submission, it was contended: Now, by referring to the concession in terms of the manufactured timber, the Magistrate in my respectful submission was blurring the distinction in Mr Powell's evidence between the unlaid piece from the garage and the timber which had been laid about which Mr Powell had made no such concession. So there seems to be this transition in the logic from a particular specimen to the generality of the floor, which then subsequently appears to infect the logic and the conclusions that are later made. But we say that the finding that Mr Powell conceded, that there was some noticeable distortion in the manufactured timber, is not one that is supported by Mr Powell's evidence. (5) The finding in Precision No 1 at [53] was also not supported by the evidence. There is no evidence that Mr Powell agreed that there was some distortion in the flooring. What is being considered in this passage by Local Court Magistrate is not the sample of timber but the whole of the flooring as laid. That is because the paragraph commences: "In relation to the rest of the flooring". There is no evidence that Mr Powell agreed there was some distortion in the rest of the flooring. He denied the product was exhibiting cupping consistent with excessive moisture and the Local Court Magistrate seems to be dealing with the question of cupping at [53]; such that the inconsistencies in the flooring that her Honour appears to be dealing with concern the question of cupping. (6) From that submission, the following proposition was advanced by the plaintiff: So having found that there was cupping, partly because Mr Powell agreed there was, or there was distortion I should say, she says, "There's no other...fit for purpose." Now, the fact that the flooring is not fit for purpose cannot be an explanation for the inconsistencies. The fact that the flooring is not fit for purpose is a conclusion that must follow a premise. So the fact that the floor is not fit for purpose is a conclusion that follows the premise that the floor has inconsistencies. It's not the other way around, except it's expressed the other way around, so it's just meaningless. (7) It was then submitted that [53] of the judgment displays a clear error of law, in that it is not supported by the evidence and the conclusion drawn is not supported by the evidence. The last sentence of [53] is a non sequitur. 48 Further, in support of those contentions, the plaintiff relied upon other aspects of the evidence bearing upon Mr Powell's opinions; namely, the Powell Report, the joint conclave Scott Schedule ("the Scott Schedule"), evidence given by Mr Powell before the Local Court, together with evidence given by Mr Ryan and Mr Phillip Armstrong (the husband of the defendant). … 50 It was contended that the Powell Report, therefore, made it clear that the flooring installed was of a commercially acceptable standard. Further, it was contended that the reference to the flat appearance of the floor was a negation of the proposition that "cupping" was present. In support of this latter contention, reference was made to the evidence of Mr Powell in cross-examination, as follows: PEDEN: It's the case that you did not take any photos of the floor or do any measurements on the floor to establish that it was flat, as opposed to cupping? WITNESS POWELL: I didn't take any photos of it but I had a look at that. I assessed the dimension of the boards and the flatness of individual boards when I was there the first time - there at the time of the first report, of preparing the first report. … WITNESS POWELL: We spoke about a few things while we were sitting at the table and Mr Ryan and I got up and we walked around and we were looking back towards the front door, the front of the house, and I walked down the hall 45 a distance, towards the stairs, and that's - at that point we had a difference of opinion about whether the floor was flat or not. I explained what we were looking at and the - so the flatness of the floor is affected by-- … The Defendant's Submissions 55 The defendant contended that Baptie LCM provided adequate reasons by making the findings of fact necessary to determine issues of want of fitness for purpose and the appropriate remedy if the timber floor was not fit for purpose. One issue in dispute was the levels of moisture and whether the flooring was negatively impacted by the existence of moisture. It was contended that both Mr Powell and Mr Ryan had taken moisture readings at the home. Mr Ryan's expert opinion was that the flooring was negatively impacted by moisture because of the moisture readings he took and the visual appearance of cupping. 56 Mr Powell's evidence concerning the use of a moisture meter and his results were preferred to those of Mr Ryan. However, that was the not the whole of the evidence of the experts concerning the impact of moisture on the flooring. There was no "oven dry test" carried out, which would have been conclusive of the existence of moisture in the flooring. Mr Powell considered such a test unnecessary. 57 Mr Ryan gave evidence that he had seen "cupping" in the timber and provided a photo of the timber to demonstrate that issue. Mr Powell took no photos of the same area, but denied there was cupping. Baptie LCM gave the parties the opportunity of further inspecting the site and carrying out further tests, and the plaintiff did not take that opportunity. 58 The defendant was correct to submit that in Precision No 1 at [47] Baptie LCM drew a distinction between the expert evidence concerning the use of a moisture meter and the results deriving therefrom (where the Local Court Magistrate had exhibited a preference for Mr Powell's evidence) and other concessions as to the destruction of the timber floor, namely, the issue of cupping and crowning. 59 As to the latter consideration, the defendant submitted that "both experts considered there was distortion in the timber at the defendant's home". 60 Adjusting for an amendment made to the written submissions of the defendant in support of that proposition, during the course of oral submissions, the defendant placed reliance upon the following unchallenged findings by Baptie LCM concerning Mr Powell's evidence: (1) He expected that the flooring would be delivered wrapped in plastic with "the idea… to maintain the moisture content from production to the time of installation". (2) A number of the boxes of flooring were damaged and the timber also appeared to be damaged. (3) He had not been told when preparing his report that the timber was not tested for moisture when it was delivered or when it was delivered to the home, nor laid. (4) Mr Powell considered that the type of flooring would "crown" if affected by moisture. (5) He agreed that a piece of timber shown to him in cross-examination (which had come from the defendant's garage) evidenced some distortion in the form of "crowning". 61 As to the last consideration, the defendant pointed to the evidence of Mr Powell where he, it was contended, conceded there was crowning the floorboard from the defendant's home that he was shown to the effect that the floorboard was effected by moisture. 62 It was further submitted in reply that: [38] The Primary Judge concluded that it was not possible to rectify the discolouration damage without replacement of the flooring because of the following compelling reasons recorded at J[48]-[49]; CB51: a. She preferred Mr Ryan's evidence about removal being the appropriate solution, because of the difficulty in removing sections of tongue and groove and unlikelihood of a uniform finish if only patching is done; b. The Plaintiff had made a number of attempts to rectify the white marks; c. Mr Powell agreed that the dark marks were more pronounced than was apparent in his report: T121:38-32;CB175. 64 Senior counsel for the defendant, Ms E Peden, who appeared with Mr T Bateman of counsel, made the following oral submissions as to [47] of the judgment below: (1) It was contended that: There was a wealth of evidence given by the experts about moisture and cupping and crowning. I submit, what her Honour is saying is it is possible that they are both right and it was not necessary for her to conclude that one was right and one was wrong. I will make that good. Her Honour does conclude, "It would appear that both concede...at least some noticeable distortion in the manufactured timber." What she is concluding in paragraph 47 is all of the matters, which have been identified previously in the judgment concerning the risk of damage to the timbers that were present in the home and were laid. This is, in a sense, picking up on all of those previous paragraphs. It is not suggested by the defendant that Mr Powell maintained his position that there was no cupping, that is not put by us. Instead we say it was entirely open to the primary judge to conclude that Mr Powell had noticed distortion in the piece of timber he had been shown, as had been recorded in paragraph 43, which only came four paragraphs earlier. That makes sense. Mr Ryan's evidence was that there was cupping on the flooring and that's not in dispute either as we have already been over. (2) By reference to [47] and [53] of Precision No 1, it was submitted: Then what occurs in relation to the distortion issue is at paragraph 53 of the judgment her Honour records, "Mr Powell agrees there is some distorting in the flooring" that is just merely a repetition of paragraph 47. It is recorded, "He denies the product exhibited cupping". So, there is no question her Honour didn't understand or didn't record the evidence. She knew Mr Powell said, no cupping; but he did agree that a piece of timber was crowning…. It is correct that Mr Powell agreed that there was some distortion, as I have been over. (3) Reference was then made to [47] of Precision No 1 and whether, it was submitted, Baptie LCM intended that the view of cupping or crowning on a floor was subjective and that even with some distortion of that view, the product would be commercially acceptable. The defendant stated, however, that question is whether it was "aesthetically acceptable to a customer" (4) Turning specifically to [53] of Precision No 1, it was contended: I submit, what her Honour was doing in paragraph 53 by indicating that there is no other explanation for the inconsistencies in the flooring was referring to the experts subjective understanding of "cupping" or "crowning". She did not reject Mr Ryan's evidence that he could see cupping, even though Mr Powell said he could not. The inconsistencies in the flooring were explained by the fact it was not fit for purpose, which was also consistent and logical with the previous findings about the state of the timber when delivered and the possibility of there being an impact on what was delivered. Therefore, it was not fit for purpose. (5) As to staining, it was submitted that the question of "staining" was "clearly separate" to the issue of floor moisture. By reference to [48] of the judgment, it was submitted that staining was sufficient to sustain the remedy of replacement. As to staining, her Honour at [48] stated she preferred the evidence of Mr Ryan. She does not elaborate on that preference but it is submitted the conclusion is supported by the plaintiff had attempted to rectify the floor with sanding and further staining. (6) In the event the Court found there was no evidence to sustain that conclusion that Mr Powell had made the concession in question, the appeal would not succeed because that finding was not essential to the ultimate finding by the Court. 65 Those submissions corresponded to parts of the defendant's submissions in reply as follows: 19. The lay evidence also supports the Primary Judge's conclusion that the floor boards were imperfect and stained, which, as McHugh J indicated, is a permissible approach to determining a factual issue, such as fitness for purpose. The lay evidence included: a. The unchallenged evidence of Mrs Armstrong that: i. "there are a number of boxes that have damage to them, some of which looks like it has also damaged the timber itself': CB283; ii. she had "serious concerns regarding the finish, stains and marks on the timber flooring and the Plaintiff's attempt to cover up the issues": CB284; b. the extensive email chains between the Plaintiff and the Defendant in relation to the rectification of the staining caused by the Plaintiff's workers: CB334-358; c. The evidence of Mr Armstrong that: i. He "observed the Plaintiff's employees and contractors preparing the timber flooring products inside the Premises, causing damage to the timber flooring products... ": CB:389; ii. He considered it unacceptable that the "floors [had] marks and stains all over them from methylated spirits that have been applied to the, which has ruined the finish... " CB:391. 66 In the final disposition of this question, I have had regard to the defendant's submissions as to the adequacy of reasons, which were summarised under the corresponding heading below. Conclusion: The First Ground 72 Whilst the plaintiff variously referred to the illogicality or irrationality of the decision making below, the ground of judicial review relied upon, in that respect, was squarely based upon there being no evidence to support the impugned findings (see the discussion of relationship between those grounds of judicial review: D'Amore v Independent Commission Against Corruption (2013) 303 ALR 242; [2013] NSWCA 187 ("D'Amore") at [235] (per Basten JA); see also Brennan v New South Wales Land and Housing Corporation (2011) 83 NSWLR 23; [2011] NSWCA 298 at [93] (per Basten JA), citing Amaba Pty Ltd v Booth [2010] NSWCA 344 at [23]). As earlier mentioned, in my view, the attack in that respect was not upon a finding of fact per se but the ground was formulated as a point of law based upon there being no evidence to support the finding: see Workers Compensation Nominal Insurer v Hill [2020] NSWCA 54 at [82] (per Simpson AJA). However, it is ultimately necessary to analyse the impugned finding to determine whether the ground of appeal does, in fact, invoke that principle: Capital Carpets Pty Ltd v Schwartz Family Co Pty Ltd [2016] NSWSC 1753 at [52] (per McCallum J). 73 The absence of material capable of supporting a finding on a material issue constitutes an error of law: Kostas v HIA Insurance Services Pty Ltd t/as Home Owners Warranty (2010) 241 CLR 390; [2010] HCA 32 ("Kostas") at [91]; D'Amore at [224]. Thus, a tribunal which decides a question of fact when there is no probative evidence to support the finding makes an error of law (not a factual error): Kostas at [91] and [92]; Bruce v Cole (1998) 45 NSWLR 163 ("Bruce") at 188-189. 74 What amounts to material that "could" support a factual finding is ultimately a question for judicial decision (Kostas at [91]). Evidence in this respect means material which could rationally affect the decision-maker's assessment of the probability of the facts in issue: D'Amore at [235]. … 80 In my view, the findings of Baptie LCM which were impugned under these grounds may be properly understood as follows: (1) An intermediate finding that there was a common conclusion by the experts that there was "at the very least, some noticeable distortion in the manufactured timber" (Precision No 1 at [47]). Given her Honour's expressed understanding of Mr Powell's opinion in that paragraph of the judgment below, the plaintiff was correct to submit that a finding was made that Mr Powell had made a concession to that effect. The concession was in relation to what Mr Powell had referred to as an "engineered board" or a "manufactured board" and was distinguished (both in the evidence below and the first instance decision) from the timber flooring as laid. (2) The ultimate finding in Precision No 1 at [53], which, in my view, contained the following elements: (a) Given [53] was concerned with distortion and having regard to the preceding paragraphs, namely, [50]-[52] (by reference to the overall floor as distinguished from the stairs), the immediately preceding discussion of distortion (vis-à-vis the engineered board at [47]) and the identification of issues at [29], it is clear that the opening words "In relation to the rest of the flooring" was a reference to the timber flooring as laid and not the manufactured or engineered timber board(s) delivered to the premises or the particular piece of timber shown to Mr Powell (which had been located in the garage. So much is also clear from [54], Baptie LCM is addressing overall deficiencies (as I will discuss below) in the timber as laid. Further, in Mr Powell's evidence as set out in [47] of the judgment below, he draws a distinction between "board in service" and "an engineered board". He attributed the latter description to the board he was shown during the course of giving evidence. (b) Mr Powell had agreed there was a distortion in the timber flooring as laid; even though he disputed there was any cupping, as such. (c) There would appear to be "no other explanation for inconsistencies in the flooring, except that the flooring is not fit for purpose". 81 As to the last mentioned element of the finding, the plaintiff was correct to submit that there is an apparent illogicality (see (c) in the preceding list) as presumably the premise for the conclusion that the flooring was not fit for purpose was that there were inconsistencies in the flooring. However, the substance of what Baptie LCM found at [53] (and there seems to be no dispute in this respect) was that the timber floor as laid is not fit for purpose. 82 The foundation for that conclusion is clouded by the non sequitur to which I have referred above. However, there can be little doubt that Baptie LCM reasoned to a finding that the flooring was not fit for purpose from the existence of inconsistencies or distortions in the floor as laid. In the result, the reference to there being "no other explanation for the inconsistencies in the flooring" relates, in my view, to the first sentence of the paragraph. 83 As the first sentence of [53] impliedly (at least) recognises the dispute as to the existence of distortions in the timber floor boards as between the experts and Baptie LCM nowhere in her judgment explicitly resolves that dispute, it should be concluded that the basis for the reasoning in the second sentence (as to the existence of inconsistencies and the absence of fitness for purpose) was that which her Honour expressly relied upon in the first sentence, namely, the concession made by Mr Powell as found at [47]. The defendant seems to accept that process of analysis and refers to an acceptance of crowning by Mr Powell, although the defendant also contended that Baptie LCM also took into account damage in the packaging (to which I will return below). 84 In the light of that analysis, I may now return specifically to the no evidence ground as confined by the plaintiff to [47] and [53] of the judgment below. … 88 However, the same conclusion does not follow with respect to [53] of Precision No 1. Here, Baptie LCM was concerned with the flooring as laid as a whole not a sample of engineered board from the defendant's garage. 89 The only concession made by Mr Powell was that extracted in [43] of Precision No 1 but that concession did not extend to the floor as laid. Nor, in my view, was there any evidentiary basis, upon the extract of Mr Powell's evidence appearing at [43] of Precision No 1 and the concession contained therein, to infer that there were distortions in the floor as laid. 90 It follows that there was no evidence that Mr Powell had conceded that there was a distortion in the laid floor. In fact, there was no concession by Mr Powell that the timber boards, as laid, were other than flat. There was no basis in the evidence to infer from that concession that the timber floor boards as laid were distorted or inconsistent. 91 Given that I have concluded that Baptie LCM's conclusion at [53] was solely predicated upon the concession made by Mr Powell, there was no evidence to support the conclusion reached therein. 92 It may be, as submitted by the defendant, that the question that Baptie LCM had to resolve on the cases put was whether the floor was "aesthetically acceptable to the consumer" but, so far as distortion of the timber floor was concerned, that issue hinged upon whether the floor was "flat", the very subject to the impugned finding in [53]. … 95 The finding in [53] was pivotal to the ultimate findings below for two reasons. First, as mentioned, I accept the submission made by the plaintiff that the finding by Baptie LCM that Mr Powell agreed that there was some distortion in the floor was an essential step leading to the ultimate finding that there was "that the flooring is not fit for purpose". 96 Secondly, it is true that there is a separate issue of staining and that the Local Court Magistrate made findings at [54] as to the removal and replacement of sections of flooring to which I will return (see [48] and [49] of the findings below and findings made as to the need for rectification in that respect), but it does not follow that, for the purposes of the finding in favour of replacement, the finding is severable from the findings as to distortion in [53]. The Local Court Magistrate introduced [54] by the words "In addition" and refers to "the two issues" causing the Court to conclude replacement is the "only appropriate remedy". When read with the balance of [54], in my view, Baptie LCM found that replacement was the only appropriate remedy due to the cumulative effects of distortion and staining. 97 Thus, the finding at [53], materially contributed to the determination as to the remedy in [54] vis-à-vis the replacement of the floor as well as the finding that the timber floor was not fit for purpose. 98 In the circumstances, the plaintiff has thereby established grounds 1(e) and (h). The error is such as to be of significance to the ultimate disposition of the matter below and should, therefore, result in orders consistent with the relief claimed by the plaintiff. … The Defendant's Submissions 101 The defendant advanced the following submissions: (1) The challenge alleges inadequate reasons were provided in reaching findings of fact, in order to seek to establish an available appeal concerning a matter of law. The factual findings challenged are: (a) distortion in the timber; (b) floor not fit for purpose; and (c) floor could not be fixed by "spot staining". (2) Baptie LCM clearly identified the key matters relied on to reach those findings of fact as explained below. (3) As to distortion there was no need to refer to the precise location in the evidence by the Court below, because there was an unchallenged finding that Mr Powell had agreed that there was distortion on a piece of timber that had been in the defendant's home, which was obviously part of the "flooring" material that was used in the provision of flooring by the plaintiff. Her Honour recorded that Mr Powell did not agree he had seen "cupping consistent with excessive moisture", which clearly evidences that the Court understood the difference between those different forms of distortion. … 126 As to [54], I accept the submission of the plaintiff that the judgment below does not adequately deal with the dispute between experts on the issue of replacement. No reasons were given as to the finding about spot fixing in a context where Mr Powell had opined that spot fixing, carried out properly, could rectify the staining problem. Nor is there adequately exposed in the reasoning why Mr Ryan's evidence was preferred to Mr Powell's in relation to the difficulty of removing stains of the tongue and grove floors. 127 As to the reference to the floor being "unfinished" in Precision Flooring No 1 at [54], it is unclear as to how, if at all, that finding relates to the issue of rectification. 128 There was a further issue raised by the plaintiff as to [54] of Precision Flooring No 1 under this ground, namely, whether the Court below found that either the distortion or staining would be sufficient to sustain the conclusion as to remedy or whether the cumulative effect of those factors was necessary to reach the conclusion in [54]. 129 On the basis of the findings earlier made as to the effect of [54] of Precision Flooring No 1, I would not sustain this aspect of the challenge to the reasoning in that paragraph. In other words, the words "in addition" and "the two issues have caused the Court", in that paragraph, were found to have reasonably exposed her Honour's reasoning in that paragraph so as to indicate that her Honour considered that the combination of the factors of staining and distortion resulted in finding that the appropriate remedy was the replacement of the floor. 130 If that conclusion were not correct then it may well be that the reasons had not adequately exposed the basis for the conclusion reached as to replacement. There would, in that event, be no explanation as to why Baptie LCM concluded that each of the two matters was a sufficient condition for the requirement of removal and replacement of the entire affected floor area. A further question unresolved by the reasons in that event would be how the requirement of the defendant for the floor to be "bespoke" or "beautiful" should have resulted in the rectification by replacement of the timber floor as opposed to the rectification proposed by Mr Powell. 131 However, I do not consider that her Honour gave reasons as to the finding that spot fixing was not an adequate means of rectifying stained areas. This issue was disputed between the experts and, in particular, Mr Powell gave evidence as to the question. No foundation was provided for that aspect of conclusion in [54] – the earlier conclusion reached at [49] was also given without adequate reasons. 132 The plaintiff has established ground 1(g) with respect to the findings in [54] of Precision Flooring No 1 as to spot fixing (ground 1(g) read in conjunction with ground 1(b1)) and thereby established an error of law. That conclusion was important to the disposition of the amended cross-claim, as it concerned one of the two factors justifying replacement, namely, staining. I note that, if a challenge was made based upon [49] of the judgment below or if the alternative scenarios discussed above as to [53] or [54] operated, then I would have also found the ground established, in those wider respects. THE LEGISLATION AND RULES 1. The powers of the Court as to costs are set out in s 98 of the Civil Procedure Act 2005 (NSW) ("Civil Procedure Act") in the following terms: 98 Courts powers as to costs (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, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount. 1. Part 42 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") sets out the rules with respect to costs. Rule 42.1 is extracted below: 42.1 General rule that costs follow the event 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. GENERAL PRINCIPLES 1. Before turning to the question of costs in the context of the issues raised on the present application, I will address the general principles associated with costs orders. 2. The general principles, with respect to costs orders, were set out in Moseley v AB (No 2) [2017] NSWSC 1812 at [65]-[79], extracted below: [65] The court's primary task is to determine whether the facts of the case or specific costs provisions impact upon the court's jurisdiction to make costs orders. Unless there are statutory provisions to the contrary, the court's discretion to determine such issues is unfettered: Civil Procedure Act 2005 s 98(1) (extracted above at [59]). [66] The central and overriding principle in this regard is that of doing justice to the parties in each particular case. This involves a heavily contextual assessment that focuses upon the conduct of the litigation itself. A discretion exercised on grounds unconnected with the litigation, or on no grounds at all, is arbitrary or capricious rather than fair or just (see Peters v Peters (1907) 7 SR (NSW) 398 at 399 (per Street J); Cretazzo v Lombardi (1975) 13 SASR 4 at 11 (per Bray CJ); Scharer v Counting Instruments Ltd [1986] 1 WLR 615 at 621 (per Buckley LJ). [67] The discretion must be exercised judicially and "according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy": Williams v Lewer [1974] 2 NSWLR 91 at 95. [68] This discretion may be exercised whenever the circumstances warrant, having regard to the scope and purpose of the s 98 of the Civil Procedure Act: Oshlack v Richmond River Council (1998) 193 CLR 72; Hamod v State of NSW [2011] NSWCA 375 at [813]. However, the discretion must be exercised on a principled basis (see Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 at [11]), and in accordance with the principles of proportionality: Civil Procedure Act s 60. [69] In Oshlack v Richmond River Council, McHugh J observed the discretion, whilst unfettered, is not to be applied without guidance or qualification (at [65]-[67]): The discretion must be exercised judicially [65] Although the statutory discretion is broadly stated, it is not unqualified. It clearly cannot be exercised capriciously. Importantly, the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation. In this manner, the law has gradually developed principles to guide the proper exercise of the discretion and, in some cases, to highlight extraneous considerations which, if taken into account, will cause the exercise of the discretion to miscarry. Consistent with the aim of justice, the law could not have developed otherwise. As Mason CJ said in Latoudis it does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity. [66] By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs. As Devlin J said in Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co (No 2), when setting aside an arbitrator's costs award: the arbitrator is not directing his mind to one of the most, if not the most, important of the elements which ought to affect his discretion, namely the result of the case. Prima facie, a successful party is entitled to his costs. To deprive him of his costs or to require him to pay a part of the costs of the other side is an exceptional measure. The combined force of the sentiments recognised above by Mason CJ, regarding the need for consistency in order to avoid injustice, and by Devlin J, regarding the most significant factor affecting the costs discretion, provides the jurisprudential basis for the important principle commonly referred to as the "usual order as to costs". The usual order as to costs [67] The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. [70] Equally, the "general rule" (or "usual order as to costs") does not amount to a fetter on the court's discretion. The terms of r 42.1, "unless it appears to the court that some other order should be made", clearly envisage that the court may, in its discretion, make a costs order other than one following the event. [71] The most common circumstance in which the general rule may be displaced is evidence of disentitling conduct on the part of the successful party: Oshlack v Richmond River Council at [40] and [69]; G R Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263. The disentitling conduct does not necessarily need to amount to misconduct; it may simply be any conduct "calculated to occasion unnecessary expense": Lollis v Loulatzis (No 2) [2008] VSC 35 at [29]; Keddie v Foxall [1955] VLR 320 at 323–4. [72] In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA addressed the principles of fairness underlying the making of a costs order, which may at times warrant departure from the general rule (at [121]): [121] In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach. [73] Further factors identified as relevant to informing judicial discretion were identified in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [97]-[98] (per Campbell JA) (see also, Oshlack v Richmond River Council at [69] (McHugh J); and Ritter v Godfrey [1920] 2 KB 47). They include, but are not limited to, the following: (1) whether the successful party effectively invited the litigation; (2) whether the successful party unnecessarily protracted the proceedings (3) whether the successful party succeeded on a point not argued before a lower court; (4) whether the successful party prosecuted the matter solely for the purpose of increasing the costs recoverable; and (5) whether the successful party had obtained relief which the unsuccessful party had already offered in settlement of the dispute. [74] The onus lies on the losing party to establish a basis for any departure from the general rule: Waterman v Gerling (Costs) [2005] NSWSC 1111 at [10]. Only in an exceptional case would a successful party both be deprived of costs and also ordered to pay the opponent's costs: Arian v Nguyen (2001) 33 MVR 37. [75] The fact that the proceedings involve some public interest aspect does not, of itself, necessarily warrant departure from the general rule that costs follow the event: Oshlack v Richmond River Council at [90] (McHugh J); Re Kerry (No 2) [2012] NSWCA 194 at [13], [15]; CSR Ltd v Eddy (2005) 226 CLR 1. [76] Where there is a divergence of authority on a particular issue, this may be a factor, but in Rinehart v Welker (No 3) [2012] NSWCA 228 the importance of the subject matter did not provide a basis for refusing costs to the successful party in private litigation (at [15]). [77] The Court should, however, have careful regard to the facts of the case: EKO Investments Pty Limited v Austruc Constructions Ltd [2009] NSWSC 371 at [18]–[23]; Knight v Clifton [1971] Ch 700 at 725. [78] Additionally, in a case where there are multiple issues litigated, the Court may, in the exercise of its discretion, order that a successful party have only part of its costs. It may be appropriate to order that a successful party be deprived of costs or a portion of the costs if the matters upon which that party is unsuccessful took up a significant part of the trial, either by way of evidence or argument: see Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. [79] The appropriate starting point, nonetheless, remains the presumption under r 42.1, and the enquiry then becomes whether in the exercise of the court's discretion, the presumption should be displaced, or whether some other order is to be preferred. SUBMISSIONS OF THE PARTIES The Plaintiff's Submissions 1. In summary, the plaintiff's submissions as to costs of the appeal were as follows: 1. The appropriate costs order is that the defendant pay the plaintiff's costs of the appeal as agreed, and if the parties are unable to agree, as assessed. 2. Pursuant to s 98 of the Civil Procedure Act costs are in the discretion of the Court, which has full power to determine by whom, to what extent and on what basis costs are to be paid. The general discretion is fettered, however, by the general rule in the UCPR r 42.1 that costs follow the event, unless it appears to the court that some other order should be made. This is the foundation of the "reasonable expectation" a successful party has of being awarded costs against the unsuccessful party. 3. The prevailing approach adopted by the courts is that the relevant event is the claim or cross-claim and the successful party should have the costs of the proceedings and not merely the costs of issues on which the party succeeded. The discretion to apportion costs is exercised in only the most exceptional circumstances, bearing in mind the risk of otherwise discouraging litigants from canvassing all material issues for fear of an adverse costs order. 4. The plaintiff succeeded on all issues raised by it with the exception of ground 1(f) alleging a denial of procedural fairness. However, it is clear from the attention given to that ground in the Court's judgment that it was a discrete and limited point that occupied little of the Court's time in the hearing or the judgment. 5. Ground 1(b1) was added to the appeal grounds by amendment allowed by the Court at the commencement of the hearing. The defendant's objections to this amendment were that no explanation had been provided for the late service of the proposed amendment and that in any event the additional matter was not affected by lack of adequate reasons. In the end result, the additional ground did not take the defendant by surprise, did not add to the burden of the case and was not by itself determinative of the outcome. It follows that the amendment should not in any way affect the general rule that the costs of the appeal should follow the event. 1. With respect to the costs of the Local Court proceedings, the plaintiff submitted that: 1. Section 41(1)(c) of the Local Court Act 2007 (NSW) provides that the Court may determine the appeal by setting aside the judgment or order of the Local Court and remitting the matter to the Local Court for determination in accordance with the Court's directions. 2. On 22 December 2021 the Court made Order 3 that "the matter is remitted to the Local Court for determination in accordance with law." 3. The final orders for the costs of the proceedings in the Local Court will depend on which party ultimately succeeds. However, the plaintiff has to-date incurred substantial costs in and associated with the Local Court hearing that resulted in the judgment the subject of this appeal. 4. Without attempting to foresee the future procedural path the matter will take in the Local Court in compliance with Order 3, or what additional legal services the plaintiff will therefore require, the Court is able to protect the plaintiff against any costs it has incurred or will incur in the Local Court in connection with the impugned judgment which are or will be wasted. 5. Accordingly, it is submitted that the Court should order or direct that the defendant pay the costs the plaintiff has incurred or will incur in the Local Court in connection with the remittal pursuant to Order 3 which are or will be wasted. The Defendant's Submissions Costs of the Appeal 1. The defendant accepted that, if the general principle were to apply, costs would follow the event and the plaintiff would be entitled to costs. However, the defendant submitted that the general rule should not apply in this case and instead each party should bear its own costs of the appeal. 2. In support of those contentions, the defendant submitted: 1. The appeal succeeded because of error on the part of the Magistrate below. It can be accepted that some kind of error on the part of a judicial officer is an element of every successful appeal. However, the three issues on appeal in Precision Flooring No 2 went to matters uniquely within a judicial officer's remit: the sufficiency of evidence to make a finding, the giving of adequate reasons for a finding, and the according of procedural fairness to the parties. 2. The plaintiff succeeded on grounds 1 and 2, and on ground 1(h). Ground 3 was not made out. The defendant did not bear responsibility for the grounds on which the plaintiff succeeded. The defendant obviously had an interest in the determination of the proceeding below in her favour, but this does not mean that she had any interest in her Honour making errors of the kind alleged and indeed established. This Court's judgment does not suggest that the defendant urged her Honour on that course, or otherwise contributed to it. 3. The matter has not been finally determined, as it has been remitted to the Local Court for re-hearing. The proceedings arose from a contractual relationship that commenced in mid-2017. Proceedings were commenced in 2018 and, by reason of the error below and the consequent remittal, the merits of the dispute are yet to be determined some four years later. 4. The sum in dispute between the parties is also small. The plaintiff initially sought the sum of $17,883.34 for invoices allegedly unpaid by the defendant. While the sum it claimed has varied from time to time, and the defendant put on a cross-claim, the plaintiff ultimately pursued to hearing two unpaid invoices with a total value of just under $22,000. That sum is just above the threshold for the Small Claims Division. 5. The effect of this is that both parties have been put to the time and expense of a trial, an appeal, and now a re-trial for a dispute over sum that is entirely disproportionate to the costs of the litigation (see the Civil Procedure Act s 60), over the course of several years. The hearing and determination of the appeal added over a year to the timeline. In these circumstances, the defendant submitted that it would be unjust to impose on either party the burden of bearing the other's costs without a determination of their claims on the merits. 1. With respect to the costs of the Local Court proceedings, the defendant submitted, in summary, that: 1. Order 2(b) of the orders set aside the costs order in the defendant's favour below. Accordingly, there is at present no order for costs of the Local Court proceedings. In its submissions on costs, the plaintiff seeks an order that the defendant pay its costs incurred in the Local Court 'which are or will be wasted'. The defendant opposes that order. Her position is that the costs of the Local Court proceeding should be costs in the ultimate cause, to be determined by that Court once the substantive claims are determined on remittal. 2. Both parties have incurred substantial costs to date, and both parties have incurred and will incur costs to be thrown away by reason of the Magistrate's error. None of the factors the plaintiff has raised as to why it should have its costs below is unique to the plaintiff, and so there is no reason why the Court should take steps to "protect" the plaintiff against costs in the proceeding at first instance (including on remittal) any more than it should protect the defendant. 3. Further, it is not appropriate for any order to be made as to costs of the Local Court proceedings as there has been no determination on the merits. There is, as yet, no 'event' to which the ordinary rule as to costs can be applied. Nor can this Court sensibly determine, prior to a decision on the merits, what costs at first instance have been wasted in the Local Court, let alone those which 'will be wasted' in a trial that is yet to take place, and which will no doubt take its own forensic course. 4. In any case, this Court does not have before it material that would enable it to decide the appropriate order for costs at first instance. To decide that issue, the Court would need to be addressed on and determine the costs consequences of: 1. the exchange of various offers and counteroffers to settle the proceeding that passed between the parties and whether it was reasonable for the parties to reject them (matters on which there is no evidence before the Court, and which cannot in any event be assessed until there is a determination on the merits); 2. the plaintiff's concession on the day of hearing as to the quantum of its claim, the effect of which is that the plaintiff's claim could have been brought in the Small Claims Division rather than the General Division, which would have significantly reduced both parties' costs; 3. the proportionality of costs to the ultimate result (which again, cannot be determined at this stage because there is no evidence before the Court as to the parties' costs at first instance and no determination on the merits). 1. In the event that the Court is minded to make an order for costs of the first instance proceeding, the defendant seeks the opportunity to put on evidence and detailed written submissions on that point, and to be heard at an oral hearing. 1. In the event that the Court orders the defendant to bear some or all of the plaintiff's costs, the defendant requested that the Court make an order pursuant to s 6(1) of the Suitors' Fund Act 1951 (NSW) ("Suitors' Fund Act"). 2. Regarding the Suitors' Fund Act, the defendant submitted: 19 Where an indemnity certificate issues, the respondent is ordinarily entitled to be paid from the Fund an amount equal to the appellant's costs of the appeal, once they have been ordered and paid: Suitors' Fund Act s6(2)(a). The defendant is also entitled to some of its own costs: s6(2)(b). The maximum payable from the Fund for any appeal to this Court is $10,000: Suitors' Fund Act s2A(b). 20 The facts of Director of Public Prosecutions (NSW) v Hughes (No.2) [2017] NSWSC 773 resemble this case. The appeal succeeded as the Magistrate below had erred in finding the DPP was required to prove an element of an offence, where that was not correct. The DPP and the Court accepted that the respondent had not contributed to that error. Bellew J made an order for costs but granted the respondent a certificate under s6(1) of the Suitors' Fund: at [10]-[11]. 21 See also Director of Public Prosecutions v Zheng [2021] NSWSC 131 at [132] (Walton J) and Insurance Commission of Western Australia v Gargoura [2020] NSWSC 1786 (Adamson J). In each of these cases, the error giving rise to the successful appeal was an error on the part of the judicial officer or Tribunal member below. The defendant submits that the same order is appropriate in this case, for the reasons set out at [6]-[8] and at [9]-[11] above. 22 As to the points raised at [9]-[11], the defendant notes the observations of Harrison J in IAG Ltd t/as NRMA Insurance v Abiad [2018] NSWSC 1603 at [7]- [9]. There, his Honour ordered a certificate in circumstances where the costs of the litigation might have 'wholly or even substantially neutralised any benefit that (the parties) might otherwise become entitled to' once the matter was finally determined. That same consideration is apposite here. CONSIDERATION Costs of the Appeal 1. The proposition which is implicit in submissions of the defendant in this respect was that the general rule that costs follow the event, does not ultimately fetter the courts discretion because the terms of UCPR r 42.1, by use of the words, "unless it appears to the Court that some other order should be made" envisaged that the court may, in its discretion, make a costs order other than one following the event. That contention may be accepted. Further, the central and overriding purpose in determining apportionments for costs is to do justice to the parties in each particular case. That involves contextual assessments, the focus being on the context and outcome of the litigation. 2. In this matter, the plaintiff was successful in its appeal and obtained orders that the appeal be allowed and the Local Court be set aside both with respect to the sum awarded and the requirement for the plaintiff to pay the defendant's costs. 3. Whilst the plaintiff was only successful in making out two of the three central issues identified by the parties for the appeal, there is no proper basis, in my view, for the apportionment of costs, in any part, in favour of the defendant with respect to the issue with which the plaintiff was unsuccessful namely, ground 1(f) (alleging a denial of procedural fairness). This ground occupied little of the hearing of the appeal as was reflected in the judgment of the Court in Precision Flooring No 2. The primary issues occupying attention on the appeal were those about which the plaintiff was successful. 4. There was a debate during these proceedings about the addition of ground 1(b). However, the additional ground did not add to the burden of the case and was not determinative of the outcome. That ground should not affect the general rule of costs that costs of the appeal should follow the event. 5. Whilst the defendant accepted that a successful appeal from the Local Court necessarily involves some kind of error on the part of the judicial officer below, it was contended that the errors demonstrated in this case were uniquely within "the judicial officers remit". It was submitted that the defendant did not bear responsibility for the grounds on which the plaintiff succeeded. 6. The difficulty with that contention, however, is that the defendant robustly contested the three issues which were identified by the parties for the disposition of the appeal. A substantial amount of time on the appeal as to the no evidence point related to the extensive submissions made by the defendant in that respect. Further, the findings made by the Magistrate which were the subject of the no evidence point were not remote from the contest between the parties in the Local Court proceedings to which the no evidence point related. So much is evidenced from the earlier extracts from the judgment in Precision Flooring No 2 in this judgment. 7. As the defendant properly conceded, she obviously had an interest in the determination of the proceedings below in her favour which attracted a finding, albeit erroneously, in her favour. The fact that the proceedings had been remitted and there will be a further trial as to the merits of the dispute between the parties will, have a bearing upon my judgment as costs of the Local Court proceedings. However, I do not consider that it is a matter that should result in the successful appellant being deprived of costs of the appeal. 8. It is also true that the amount being contested is of a relatively low value, but the sum contested is above the threshold for a Small Claims Division in the Local Court and part of the time and expense occupied in the resolution of the dispute so far is the contribution of the defendant by her cross-claim. 9. It is not in my view unjust to impose upon the defendant the burden of costs of the appeal when the defendant, as I have mentioned, strenuously contested the appeal including as to issues of law and was unsuccessful, in all relevant respects, the purposes of determining costs. 10. In the circumstances, the plaintiff should have the costs of the appeal as agreed or in default as assessed. The Local Court Proceedings 1. The matter has been remitted to the Local Court to be determined in accordance with law. Final orders for costs in the proceedings in the Local Court will depend upon which party ultimately succeeds. 2. The plaintiff contended that it had incurred substantial costs in and associated with the Local Court hearing that had resulted in judgment in the appeal. It was submitted that the Court should protect the plaintiff against any costs that it has incurred or will incur in the Local Court in conjunction with the impugned judgment which are or will be wasted. 3. However, my view there is to give considerable force to the defendant's submission as to the question of costs of the Local Court proceedings. 4. The result of the orders is that there are presently no orders for costs of the Local Court proceedings. Both parties have incurred and will incur costs thrown away in consequence of the determination on the appeal and the remittal to the Local Court. I agree with the submission of the defendant that none of the factors that a plaintiff has raised as to why it should have its costs below is unique to the plaintiff. No reason has been advanced as to why the Court should take steps to protect the plaintiff against costs of the proceedings at first instance, including on remitter, any more than the Court should protect the defendant, in that respect, where the merits of the dispute in the Local Court proceedings have not yet been determined. 5. Nor do I consider it as feasible for the Court to determine the question of costs of the first instance proceedings prior to a decision on the merits of the dispute in the Local Court. I also accept that there is a paucity of admitted material before the Court to properly decide the issue of costs at first instance at this stage. 6. In my view, the appropriate order with respect to the costs of the Local Court proceedings should be costs in the cause of the Local Court proceedings on the remitter. The Suitors Fund 1. Section 6(1) of the Suitors' Fund Act provides as follows: 6 Costs of certain appeals (1) If an appeal against the decision of a court: (a) to the Supreme Court on a question of law or fact, or (b) to the High Court from a decision of the Supreme Court on a question of law, succeeds, the Supreme Court may, on application, grant to the respondent to the appeal or to any one or more of several respondents to the appeal an indemnity certificate in respect of the appeal. 1. Section 2(1) of the Suitors' Fund Act relevantly provides: 2 Definitions (1) In this Act, unless the context or subject matter otherwise indicates or requires: Appeal includes any motion for a new trial and any proceeding in the nature of an appeal. Corporation has the same meaning as it has in the Corporations Act 2001 of the Commonwealth. Costs, when used in relation to an appeal in respect of which an indemnity certificate is granted, includes: (a) the costs of the application for the indemnity certificate but, except as provided by paragraph (b) of this definition, does not include costs incurred in a court of first instance, (b) where a new trial is ordered upon the appeal, the costs of the first trial. Court includes such tribunals or other bodies as are prescribed. Director-General means: (a) the Director-General of the Attorney General's Department, or (b) any person employed within that Department who is authorised in writing by the Director-General to exercise the powers and perform the functions of the Director-General under this Act. Fund means the Suitors' Fund established under this Act. Indemnity certificate means an indemnity certificate granted under section 6 (1), (1A) or (1AA) or 6B. Land and Environment Court means the Land and Environment Court constituted under the Land and Environment Court Act 1979. Legally assisted person has the meaning ascribed thereto in section 4 (1) of the Legal Services Commission Act 1979. Sequence of appeals means a sequence of appeals in which each appeal that follows next after another appeal in the sequence is an appeal against the decision in that other appeal. Supreme Court means the Supreme Court of New South Wales or a judge thereof. (2) This Act applies to and in respect of: (a) a court, (b) an appeal to or from a court, (c) proceedings or actions before a court, and (d) a decision of a court, exercising State or federal jurisdiction. 1. Section 6(2A) provides: (2A) The maximum amount payable from the Fund for any one appeal is: (a) $20,000 in the case of an appeal to the High Court, or (b) $10,000 in the case of any other appeal. 1. The foundational criteria for an application under the Suitors' Fund Act applies in the present case. There is an appeal from a Court, namely the Local Court of New South Wales to this Court on a question of law. The plaintiff was successful. The maximum payable from the fund in this case is $10,000. 2. I do not consider that the present matter falls into the class examined by Adamson J in Insurance Commission of Western Australia v Gargoura [2020] NSWSC 1786. However, it does appear to be a proper basis to an indemnity certificate in this case upon the principles discussed by Harrison J in IAG Ltd t/as NRMA Insurance v Abiad [2018] NSWSC 1603 at [7]-[9]. There is a risk in the present matter that the costs of the litigation might have wholly or even substantially neutralised benefit that the parties might otherwise become entitled to once the matter is fairly determined. 3. In the circumstances, I consider that the Court should order the defendant be granted an indemnity certificate under the Suitors' Fund Act. CONCLUSION 1. In all the circumstances, the plaintiff should have costs of the appeal as agreed or assessed. All costs of the Local Court proceedings should be determined in that Court such that costs would, in substance, be costs in the cause of the Local Court proceedings. The defendant should have an indemnity certificate under the Suitors' Fund Act. DIRECTIONS 1. The plaintiff should bring in Short Minutes of Order reflecting this decision within 3 days of the publication of the judgment. ********** 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: 25 August 2022