Precision Flooring Pty Ltd v Armstrong

1. [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. [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. [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. [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. (1)

      were of acceptable quality;

   2. (2)

      were reasonably fit for the disclosed purpose;

   3. (3)

      corresponded with their description; and

   4. (4)

      corresponded with their sample in quality, state, or condition.

5. [5]

   The particulars of those pleadings included:

6. [6]

   It was pleaded that the plaintiff guaranteed to the defendant that the services supplied under the agreement would, inter alia, be:

   1. (1)

      rendered with due care and skill;

   2. (2)

      reasonably fit for purpose;

   3. (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.

7. [7]

   The plaintiff also pleaded breaches of the Consumer Act and the ACL, with respect to services as follows:

8. [8]

   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.

9. [9]

   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.

10. [10]

    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:

11. [11]

    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. (1)

       were certain findings of the Local Court Magistrate made without evidence (grounds 1(e));

    2. (2)

       were findings of the Local Court Magistrate made without adequate reasons (ground 1(g)); and

    3. (3)

       was there a breach of procedural fairness (ground 1(f)).

12. [12]

    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”.

13. [13]

    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).

14. [14]

    The Court made the following orders (“the Orders”) on 22 December 2021:

15. [15]

    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.

16. [16]

    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.

17. [17]

    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. [18]

   The following passages from Precision Flooring No 2 are relevant to the determination of the issue of costs of the appeal:

THE LEGISLATION AND RULES

1. [19]

   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:

2. [20]

   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:

GENERAL PRINCIPLES

1. [21]

   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. [22]

   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:

SUBMISSIONS OF THE PARTIES

1. [23]

   In summary, the plaintiff’s submissions as to costs of the appeal were as follows:

   1. (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. (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. (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. (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. (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.

2. [24]

   With respect to the costs of the Local Court proceedings, the plaintiff submitted that:

   1. (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. (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. (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. (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. (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.

3. [25]

   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.

4. [26]

   In support of those contentions, the defendant submitted:

   1. (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. (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. (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. (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. (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.

5. [27]

   With respect to the costs of the Local Court proceedings, the defendant submitted, in summary, that:

   1. (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. (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. (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. (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:

   5. (5)

      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.

6. [28]

   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”).

7. [29]

   Regarding the Suitors’ Fund Act, the defendant submitted:

CONSIDERATION

1. [30]

   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. [31]

   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. [32]

   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. [33]

   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. [34]

   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. [35]

   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. [36]

   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. [37]

   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. [38]

   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. [39]

    In the circumstances, the plaintiff should have the costs of the appeal as agreed or in default as assessed.

11. [40]

    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.

12. [41]

    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.

13. [42]

    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.

14. [43]

    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.

15. [44]

    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.

16. [45]

    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. [46]

   Section 6(1) of the Suitors’ Fund Act provides as follows:

2. [47]

   Section 2(1) of the Suitors’ Fund Act relevantly provides:

3. [48]

   Section 6(2A) provides:

4. [49]

   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.

5. [50]

   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.

6. [51]

   In the circumstances, I consider that the Court should order the defendant be granted an indemnity certificate under the Suitors’ Fund Act.

CONCLUSION

1. [52]

   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. [53]

   The plaintiff should bring in Short Minutes of Order reflecting this decision within 3 days of the publication of the judgment.