Arkbay Investments Pty Ltd v Habib & Ozvic Enterprises Pty Ltd; Habib & Ozvic Enterprises Pty Ltd v Arkbay Investments Pty Ltd

[2003] NSWADT 143

CITATION:	Arkbay Investments Pty Ltd v Habib & Ozvic Enterprises Pty Ltd; Habib & Ozvic Enterprises Pty Ltd v Arkbay Investments Pty Ltd [2003] NSWADT 143
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Arkbay Investments Pty Ltd (application 025044; respondent to applicationj 025017) (Lessor) RESPONDENT Fadi Habib & Ozvic Enterprises Pty Ltd (application 025044; applicant in application 025017) (Lessees)
FILE NUMBER:	025044; 025017
HEARING DATES:	22/11/2002, 19/12/2002, 19/03/2003
SUBMISSIONS CLOSED:	04/02/2003
DATE OF DECISION:	06/16/2003
BEFORE:	O'Connor K - DCJ (President); Griffiths G - Member; Owens B - Member
APPLICATION:	Costs - Jurisdiction - mediation agreement - non compliance
MATTER FOR DECISION:	Jurisdiction; Claim; Costs
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Taylor Farms v Calkos [1999] NSWSC 186 Fine Real Estate Network Pty Ltd v Howell (No 2), 9 December 1997, unreported Gray v State of Victoria [2000] VCAT 1281 Stelridge P/L v Hand Bags International P/L [2000] VCAT RT8
REPRESENTATION:	APPLICANT H Woods, barrister RESPONDENT P Rosier, solicitor
ORDERS:	1. Amended Application 025017 dismissed.; 2. In relation to Application 025044, the Tribunal has jurisdiction.; 3. The respondents to pay the applicant the sum of $8645.69.; 4. The respondents pay the lessor applicant’s costs incurred as agreed or as assessed since 15 April 2002 in respect of both applications, in accordance with Part 11 of the Legal Profession Act 1987, taking account of the comments made at paras [110-111].

DELIVERED EX TEMPORE

Date of Decision: 19 December 2002 (ex tempore), 19 March 2003 (ex tempore), 16 June 2003 (as to costs)

1 The following reasons for decision contain (with some revisions) a record of two ex tempore decisions in this matter and a reserved decision on costs.

2 The background is that the lessees of retail shop premises (Mr Habib and Ozvic Enterprises, principal Mr Najjar) initiated proceedings in the Tribunal under the Retail Leases Act 1994 (the Act) by application filed 6 February 2002 against the lessor, Arkbay Investments P/L: application 025017.

3 The application did not attach the required Certificate of Failed Mediation from the Retail Tenancy Unit. On 12 February 2002 in response to an application by the lessees the Tribunal made interim orders, including referring the matter to the Retail Tenancy Unit. The parties had solicitors present at the RTU mediation which occurred later that day, giving rise to a mediation agreement dated 12 February 2002. The terms of settlement included an agreement that the lessees pay in respect of alleged unpaid rent the amount of $9194.41. The lessor agreed to provide a new lease commencing 1 March 2002 in respect of the premises in King Street, Newtown.

4 The cheque was dishonoured. The lessees did not continue in occupation. On 15 April 2002 the lessors commenced proceedings in the Tribunal, making a retail tenancy claim for payment of the amount of $9194.41: Application 025044.

5 Since then the two applications have been dealt with together. On 15 September 2002 the lessees filed an Amended Application in respect of proceedings no 025017 seeking a declaration by the Tribunal that the mediation agreement was void and of no effect; that the lessor had not been entitled to re-enter into possession without notice and terminate the lease; and that the lessees were not obliged to pay any outgoings pursuant to the lease commencing 1 March 1999. The application included an unconscionable conduct claim. That led to the proceedings then part-heard being aborted as they were no longer properly constituted.

6 The two applications were transferred to the present Panel. The hearing recommenced on 22 November 2002 and 19 December 2002 as to jurisdiction. Following the ruling on jurisdiction, only one application remained on foot, the lessor’s application no 025044, and that was heard and determined on 19 March 2003. As the lessor’s application only involved a retail tenancy claim, the advisory members of the Panel – required to sit in unconscionable conduct claims – were discharged.

7 At the close of the proceedings on that day the lessor made an application for costs. The following reasons set out the ex tempore rulings on jurisdiction (given on 19 December) followed by the ex tempore decision given on the lessor’s claim (given on 19 March 2003) and the reserved decision in relation to costs.

(1) Jurisdiction

8 There are some minor revisions in the following text of the ex tempore reasons.

9 The question that I am first asked to address arises in respect of application 025044 which is made by Arkbay Investments. The question is whether the Tribunal has jurisdiction under the Act to entertain an application that arises from the breakdown, or alleged breakdown, of a mediation agreement. The mediation agreement was entered into on 12 February 2002 and the terms are among the papers.

10 It was a detailed mediation agreement. It had as its immediate background an application for relief made by the lessees (the respondents to the present application) (see file no 025017 of the Tribunal). That application had been lodged on 6 February 2002. The dispute was referred to mediation by the Retail Tenancy Unit and on 12 February a mediation agreement was entered into.

11 The lessees essentially contend that the dispute between the parties up to that date, 12 February 2002, was resolved by the mediation agreement and if there is any issue of non-compliance on their part of its terms those matters should be dealt with as arising by way of breach of a contract or compromise. The submission is an attractive one in the sense that it means that finality is afforded in respect of the dispute that was the subject of their application 025017.

12 It does not preclude, as I see it, the lessees or lessor coming before the Tribunal in relation to any new problems that may have arisen.

13 On the other hand, Mr Woods for the lessor, Arkbay Investments, refers to the breadth of the language of the Act in conferring jurisdiction on the Tribunal to deal with retail tenancy disputes. In this case his submission essentially is that a claim that a party to a mediation agreement has failed to pay monies under that agreement, where the agreement is one between a lessor and a lessee who have been operating under a lease that was subject to the Act, is a dispute within the jurisdiction of the Tribunal:

‘ "retail tenancy dispute" means any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates.’
14 So that the debate in the case is really what interpretation should be given to the use of the terms ‘in connection with the use or occupation of the retail shop to which the lease or former lease relates.’

15 Mr Rosier for the lessees argues essentially that the matter that is now sought to be put in issue is a matter that arises in connection with the mediation agreement, not in connection with the use or occupation of the retail shop to which the lease or former lease relates.

16 There are good arguments both ways on the matter as I see it. My view is that the issue ought be resolved in favour of Mr Woods' submission.

17 I say that largely on the basis of the authority that he referred to today and which I appreciate Mr Rosier did not have any great opportunity to consider. The case is Taylor Farms v Calkos [1999] NSWSC 186, a decision of David Kirby J of the Supreme Court on 12 March 1999. It is very apposite because it deals with the very provisions that are in issue in this case and he deals with a situation which is analogous to the situation that we have in this case. At para [62] of his decision his Honour refers to the proceedings before the Commercial Tribunal out of which the appeal to the Supreme Court arose. (I might add the Commercial Tribunal is the Tribunal which previously exercised the jurisdiction we are now exercising here today.) Then his Honour refers at paras [69 to 71] of his decision to what he sees as the role of the then Tribunal in respect of issues to do with the breakdown of mediation agreements.

18 At [71] Kirby J states:

‘… where a contract between retail landlord and tenant (such as a contract made in settlement of litigation relating to the occupancy of the premises) creates liabilities and obligations ‘in connection with the use or occupation of the retail shop to which the lease relates’ (s 63(1)), then a dispute concerning such liabilities and obligations is a ‘retail tenancy dispute’ the Tribunal has jurisdiction’.
19 It is also pertinent I think to take note of the extracts from the Second Reading Speeches and Parliamentary Debate to which Kirby J refers in paras [20] and onwards especially paras [28] and [29]. They indicate an intention as best I can discern on the part of the Parliament that really any aspect of retail tenancy relationship be dealt with in the statutory tribunal unless there are obvious limitations. At that time in the history of this jurisdiction there were some obvious limitations, one or two of which were the subject of the decision in Taylor .

20 In para [29] these words are used by the Minister:

‘Should mediation fail, one or both parties will now be able to approach either the Commercial Tribunal or to a court to seek an order.’
21 I recognise that those words were said in the circumstance where there has been an attempt at mediation and the parties have been unable to reach agreement and a certificate was furnished by the unit. That was, I take it, the primary focus of those comments. But it does seem to me that those words could also have been said in support of the view that a mediation that was thought to have been successful but is later found to be failing should also entitle the injured party to bring a claim into the Tribunal.

22 My view is that what we are dealing with is in essence a claim that alleges non-compliance with the terms of an agreement (which happens to be a mediation agreement) but one nonetheless that is ‘in connection with the use or occupation of the retail shop to which the lease or former lease relates’. Therefore they are claims that are amenable to scrutiny by the Tribunal.

23 Now, I should add that there may be circumstances in which the matter sought to be re-agitated in respect of a mediation agreement is minor, inconsequential, trivial or not of great significance. In such a case it may be that some consideration would need to be given as to whether the Tribunal should proceed to deal with such a matter. There remains a question of discretion as to whether a technically-available application should be entertained. I make those observations influenced by dicta of Young J in Fine Real Estate Network Pty Ltd v Howell (No 2), 9 December 1997, unreported. There he alluded to the principles that operate usually in the court system to do with not lightly allowing matters that have been the subject of terms of settlement to be revisited in the substantive jurisdiction out of which the settlement arose.

24 But what his Honour does indicate in that case is that there does seem to be some facility even in the ordinary court system to bring back a settlement as part of the substantive jurisdiction. It is not an unknown occurrence but obviously it is a matter to be dealt with cautiously. I would be concerned if, what might be called, relatively minor issues connected with non-compliance with settlements easily found their way back into this Tribunal as fresh applications under the Retail Leases Act. These are really observations for another day. They are not essential to the decision that I am making today.

25 So that is the ruling - that the Tribunal has jurisdiction.

26 There are other factors (to which I alluded to in argument) that favour my conclusion. One is that the situation ought to be avoided where the parties find themselves agitating concerns over their relationship in different tribunals or courts. Secondly, there are costs issues obviously lying in the background. If one party who is seeking to enforce, let’s say a money term in a mediation agreement, is forced off to the ordinary courts to enforce that term well then there are costs risks on both sides that are greater than the costs risks that are normally faced here.

27 There is utility in taking a reasonably liberal view of the jurisdiction in line with that of Kirby J. This approach fits with the remedial nature of the retail leases legislation. These are additional factors that point in favour of the statutory construction that I have adopted.

28 Finally, I simply note that it follows from these comments that it is not essential, as I see it, that one establishes that there was a variation of the lease affected by a mediation agreement in order to keep open the possibility one might be able to bring any dispute that arises out of the variation back before the Tribunal. Obviously that is one possibility that is open as a way of founding jurisdiction.

29 The oral reasons ended at that point.

(2) The Applicant/Lessor’s Claim

30 The question then arose as to what the ruling meant for the amended application in matter 020517. It was agreed that it was open to the lessees to put before the Tribunal any issues that the lessees had as to non-compliance with the terms of the lease as varied by the mediation agreement. This, in effect, meant issues dealing with the implementation of the mediation agreement.

31 It was considered that these could readily be dealt with by discontinuing the lessees’ application; and have them put by way of reply or defence to the lessor’s application, application no 025044. Mr Rosier advised that this course was acceptable; and formally discontinued the application. The Tribunal indicated that it would mark the amended application discontinued/withdrawn. Directions were then given as to the further conduct of the matter, as follows:

1. Respondents (the lessees) to file and serve a reply by 7 February 2003 and to file and serve any additional evidence by 14 February 2003.

2. Applicant to file and serve any further material by 28 February 2003

32 A reply was filed on 7 February 2003. At hearing a number of aspects of the reply were not pursued.

33 The evidence at hearing comprised an affidavit of the agent for the lessor, Steve Kremisis of The Professionals Newtown, real estate agents, sworn 29 May 2002, who also gave oral evidence at hearing; a further affidavit from Mr Kremisis sworn 15 November 2002; an affidavit from Peter Clinch, solicitor for the lessor, sworn 22 November 2002; an affidavit from Mr Victor Najjar, director of Ozvic, one of the two lessees, sworn 4 September 2002, most of which was not read, who also gave oral evidence; an affidavit from Mr Fred Habib sworn 4 September 2002, most of which was not read or not allowed, who also gave evidence; the cheque dishonour notice in respect of the payment of $9,914.41 dated 26 February 2002; the Tenant Ledger Report, which went to the question of the adjustments to be made to the amount of $9,914.41 in accordance with the mediation agreement; and the text of the mediation agreement.

34 The following reasons for decision were delivered ex tempore on 19 March 2002. (There are some minor revisions.)

35 The case that the applicant (lessor) brings before the Tribunal in effect seeks to enforce a mediation agreement for the payment of money. The amount that was specified in the mediation agreement is $9194.41. That has been varied in the application, as it has been presented today to a lower amount, $8645.69.

36 The order that is sought by the applicant is an order in terms of s 72(1)(a) of the Act that:

‘A party to the proceedings pay money to a specified person, whether by way of debt, damages or restitution.’
37 The relevant term of the agreement obliged the lessee as follows:
‘(4) Mr Najjar & Mr Habib agree to pay Arkbay P/L $9194.41 … before the new lease is executed by the lessor subject to any adjustments required to account for non rent payments made, such as GST payments which were not required to be paid under the existing lease.’
38 Mr Woods for the applicant essentially contends that this is a free standing term in an agreement that has many terms and can be separately enforced.

39 Mr Rosier, for the lessee, opposing the claim, puts his case in one of two ways, that is,

(1) that the conditions that are contained in the agreement relating to other matters (for example, outgoings statement, pre-lease inspection) qualify the obligation to which his clients committed themselves to pay the sum that I have mentioned

(2) alternatively, he simply argued that there had been a failure to perform by the applicant the obligations which lay on the applicant under the agreement.

40 I understood (2) to be his preferred approach, though Mr Woods tended to seek to join issue with him in terms of the earlier version of the argument, i.e. that the payment of the money was subject to various conditions.

41 We have got relatively limited evidence going to all these matters.

42 As I have understood the evidence, the following is the case. The parties entered into the mediation agreement in a careful way, and with good advice. Each side was represented by solicitors, and they had the services of the Retail Tenancy Unit. The mediation agreement which resulted is a relatively comprehensive agreement of its kind.

43 It is obvious that it is an attempt to settle a range of issues that have been in dispute between the parties, which is often the case in retail tenancy disputes.

44 The next step of significance is that Mr Najjar, one of the directors of the respondent company (the lessee), tendered a cheque for the full amount set out in the mediation agreement, which was $9194.41, and did so subject to conditions as to when the presentation of the cheque was to occur. He presented the cheque to Mr Kremisis, the agent for the lessor/applicant.

45 Mr Kremisis' understanding of those conditions was that he agreed with Mr Najjar not actually to present the cheque for payment until 22 February, which was 10 days later. Mr Najjar (of the lessee) confirms that there was a delay period built into the understanding between the parties. The bank issued a notice of dishonour on 26 February.

46 Mr Najjar was unable to specify with any clarity at what point of time the funds were to be released. He thought it was probably 28 February, or 1 March, as those were the dates upon which the new lease would be likely to commence.

47 Separately, he has informed us in the course of questioning at the Tribunal today that he had an arrangement with his bank manager to keep an eye out basically for this cheque, and to let him know if it was presented. That arrangement would appear to be at odds, at least somewhat, with the understanding that Mr Kremisis had of the situation.

48 The new lease was furnished to Mr Najjar under cover of a letter dated 18 February from the applicant's solicitors. There has been some debate as to when precisely that letter was received. But it would appear from our various calculations that 18 February was the Monday following the Tuesday 12 February mediation agreement, and on either view as to how long it takes for these letters to be received, it should have been received around the Tuesday or Wednesday of the week in which it was sent.

49 In support of his clients’ reply to the lessor’s application, the submission has been made by Mr Rosier, based on the evidence, that there was some unreasonable delay involved in the preparation and presentation of the lease thereby failing to meet the key term of the agreement binding the lessor.

50 In my view that submission is plainly unsustainable. In my view, the required work was done by the solicitor within a reasonable period of time after the mediation. The applicant was moving reasonably to secure what plainly was a significant matter within the context of the dispute. That is, giving the respondents some certainty that there would be a new lease, and providing them in a reasonably timely way with the contents of the proposed new lease for consideration.

51 In further support of the respondent/lessees reply it is also said that there was a problem surrounding the question of adherence to clause 7 of the lease, which states:

‘Prior to the new lease being signed the parties will meet on site and inspect the items, which Mr Habib and Mr Najjar consider to be defects, which require attention.’
52 Then the next words that I see as being significant:
‘The agreed items will be listed and any items over which there is a dispute will be resolved by an independent third party appointed by the parties.’
53 Then the clause goes on to deal with the situation that might apply failing agreement on those matters: referral to the Registrar, Retail Tenancy Unit for appointment of an arbitrator.

54 Mr Woods' position is basically that it is not relevant to the consideration of this matter by the Tribunal that we get into a close analysis of that clause. He argues that each clause is independent of the other in this agreement. Mr Rosier essentially argues that they are inter-dependent, and that a failure to perform any significant obligation amounts to a failure to perform the contract, warranting repudiation. There is force, as I see it, in Mr Woods' view.

55 On the other hand, I think out of deference to the way the case has been run by Mr Rosier I should make some comments on this matter. It seems to me that cl 7 is a very complete term, which in fact has its own mechanism for dealing with matters in dispute between the parties over the question of attention to defects. Also, in my view that clause, as well as the entire agreement, has to be interpreted in a commercial setting. These are parties that are in an economic relationship with each other, and these are parties that are each in their own way sophisticated in business.

56 Whether or not Mr Kremisis was present at any site meeting (a matter in dispute), it is clear on the evidence of Mr Najjar alone that some steps had been taken immediately after the mediation agreement to seek to ascertain what the defects were. [It is agreed that there was a meeting about the defects soon after the agreement was executed.] It may be that what Mr Najjar says occurred [Mr Kremisis not attending and a list not being made] was not the most appropriate way for the applicant to go about things. He may have seen that conduct as - if his version of the matter is correct - as rude, and unco-operative.

57 On the other hand, if Mr Kremisis' version of these events is correct, then steps were taken quickly to identify the items in dispute. Negotiations occurred as to which defects would be rectified and which ones would not be.

58 It does not seem to me to be necessary, in the way that was pressed in the course of cross-examination and submissions, that there be some detailed written list of defects [and if that does not occur there is a fatal non-compliance with the agreement]. It may be that that is what most people would expect.

59 But this is an environment in which people are actively dealing with each other by way of oral interchanges. They are bringing people with skill on to site [see evidence of Mr Najjar]. It does not, I think, matter fundamentally whether the list is obtained in writing. In any event, I do not think it is necessary for me today to reach a conclusion as to precisely who was present at this first meeting about the defects.

60 It is plain there was a meeting about the defects. The matter was under notice. The meeting may not have been the kind of meeting Mr Najjar would have liked to have had occur.

61 He is a person of commercial acumen. This is an agreement made in a commercial setting. In my view he should at that point have made known his concerns in an appropriate way, in this instance probably through his solicitor, to the applicant on that matter.

62 So, as I see it, the case simply can not be sustained in the way in which Mr Rosier puts it, that there was any failure of performance as at 28 February 2002 in relation to this mediation agreement, so great as to justify it being repudiated by the respondent.

63 The more likely explanation, I think, [for the respondents’ decision to stop payment of the sum agreed] is the one that emerged given in answer to questions by me by Mr Najjar. That is that he regretted having entered into the agreement within hours of doing so. That unfortunately is an experience that many people in the community have had, both in commercial settings and consumer settings over the years. The law of contract is clear that later regrets are not sufficient to justify walking away from a considered bargain, especially a bargain of this kind, between commercial parties of some sophistication.

64 So it appears to me that, on the evidence today and the material that has been presented, there is no reason why the Tribunal should not give effect to the particular term of the agreement that the applicant relies on, cl 4. It continues to stand.

65 It is the case, obviously, that once the respondents vacated the premises it then became impossible for the applicant to continue to perform a number of the obligations into which it had entered. It can not be held to account in that regard.

66 On the other hand, obviously, the applicant was and remains in a position to identify the adjustments that should properly be made against the primary amount agreed to be paid, and it has done that. Consequently it has reduced its claim today.

67 Whether it has done the process of calculation of the adjustments accurately was an issue that occupied some time today, but there is no point being made of that at this stage. It is accepted that the sum the applicant has allowed is at least as much as the respondents are entitled to.

68 So for those reasons the Tribunal's order is that sought by the applicant, which is that the respondent pay the applicant the sum of $8645.69.

(3) Applicant’s Application for Costs

69 Following delivery of the above reasons, Mr Woods for the applicant informed the Tribunal that the applicant had offered (by fax dated 27 August 2002) to settle the matter upon payment of a sum lower than that awarded by the Tribunal and tendered the relevant correspondence.

70 The provision relevant to the award of costs in retail leases proceedings is, by virtue of s 77A of the Retail Leases Act 1994, s 88 of the Administrative Decisions Tribunal Act 1997 (the ADT Act) which provides:

‘ 88. Costs

(1) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs.

(2) The Tribunal may:

(a) determine by whom and to what extent costs are to be paid, and

(b) order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis.

(3) However, the Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs.

(4) In this section, "costs" includes:

(a) costs of or incidental to proceedings in the Tribunal, and

(b) the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application.’

71 Mr Woods made the following submissions:

72 (a) In accordance with the nature of these type of matters the initial dispute was properly resolved by way of conciliation. There was a requirement for a payment of money, a cheque was tendered, payment on that cheque was stopped. The applicant commenced these proceedings properly. Subsequent to the applicant commencing these proceedings the respondent put on an application traversing the history of the matter again. There were substantial appearances required as a consequence, including 18 April 2002, 30 May 2002, 17 June 2002, 22 July 2002, and 14 August 2002.

73 (b) An offer was made in August 2002. Two days’ hearing were required on the motion by the respondent to strike out the applicant's claim for want of jurisdiction. (Mr Woods was not instructed by a solicitor on the second of those days.)

74 (c) Substantial preparation was required for that hearing. It was noted that there had been non-compliance by the respondents with the directions given for the hearing of the substantive claim.

75 (d) On top of over nine mentions there had now been three effective hearing days. Each of those hearing days have involved counsel, and each of those hearing days have occurred at a point in time after an offer was made for an amount less than has been ordered to be paid.

76 It is those circumstances Mr Wood submitted that these factors took the case out of the ordinary course. In any case this it was submitted was not a typical claim. The claim was seeking enforcement of a mediation agreement. It was simply a claim to get monies agreed to be paid pursuant to a mediation or settlement agreement.

77 The order formally sought by the applicant was for legal costs in connection with matter no 025044 (the respondent’s application) as from 15 April 2002; and matter no 025017 from 15 April 2002 to 18 December 2002.

78 The applicant filed further written submissions in elaboration on 21 March 2002. The applicant referred to the history of these proceedings; and attached a chronology. The proceedings on any view have been on any view tortuous.

79 The applicant contended that the continued pursuit of application 025017 by the respondents untenably prolonged the proceedings. The applicant claimed that it sought to re-agitate matters that preceded the mediation agreement, matters which had been resolved at that point. The applicant, the Tribunal notes, has not objected to any claims that can be said to involve breach on its part of the mediation agreement being continued to be pursued.

80 The applicant submitted that its claim was not complex, and noted that it was successful. The applicant referred again to the numerous directions hearings that have been listed, sometimes vacated, sometimes held that form the history of this matter.

81 The chronology presented by the applicant is in accord with the Tribunal file.

82 In reply to the above submissions Mr Rosier for the respondents filed written submissions. Mr Rosier acknowledged the general principles developed in the Tribunal, and in particular in the retail leases jurisdiction, in relation to the special circumstances that may give rise to an order for costs. Drawing on the principles found in s 109 of the Victorian Civil and Administrative Tribunal Act 1998 (the VCAT Act) which have been cited with approval by this Tribunal he contended that the respondents did not conduct themselves in a fashion which did not disadvantage the other party; they did not fail to comply with any order of the Tribunal; and there were no applications for adjournments on any of those grounds.

83 Mr Rosier contended that the point in relation to whether retail leases mediation agreements were enforceable in the Tribunal was an unclear one. The respondents had put an arguable case on this matter, as had been acknowledged by the Tribunal. They should, he asserted, not be punished by a special order for costs for doing that. This was reasonable conduct connected with the litigation. He referred also to other grounds listed in the VCAT Act which were not present here.

84 As to the question of the offer, Mr Rosier recognised that ‘the fact of an offer in the nature of a Calderbank letter will no doubt be a factor in determining whether the circumstances of the case are such as to warrant an order for costs’. He gave various reasons as to why that should not be a determinative factor.

85 In my view the failure to accept the offer must be regarded as a significant factor favouring a finding of a special circumstance sufficient to justify the exercise of the costs discretion. In my earlier decisions on this subject, at first instance and at Appeal Panel level, it has not been necessary to deal with the question of the effect of settlement offers.

86 This issue is directly addressed by the VCAT Act, and it is instructive. Section 112 of the VCAT Act provides that there is a presumption that there will be an order for costs in proceedings other than review proceedings where a settlement offer has been made which is not accepted by the other party, and if in the opinion of the Tribunal the orders made by the Tribunal are not more favourable to the other party than the offer. There are also provisions going to the characteristics that must be possessed by an offer that will be taken into account for these purposes – it must be without prejudice and open for acceptance for a reasonable period of time (not less than 14 days): see ss 113, 114. Unless the Tribunal orders otherwise, the rule is that the party who did not accept the offer is to pay costs incurred by the offering party after the offer was made.

87 VCAT exercises the comparable retail leases jurisdiction in Victoria and its experience is relevant. The issue of the effect of settlement offers has been considered on several occasions in the transport accident compensation and domestic building jurisdictions. See generally, Pizer in Annotated VCAT Act (2001) at [4098]; and the VCAT web-site. VCAT has also recognised that care must be displayed in applying the thinking that surrounds the non-acceptance of Calberbank letters to cases that are not of a commercial character: Gray v State of Victoria [2000] VCAT 1281.

88 In a retail leases case (one where ultimately no award was made), Judge Davey made the following useful general comments on the way the exceptional costs discretion should be approached in a multi-jurisdictional tribunal (Stelridge P/L v Hand Bags International P/L [2000] VCAT RT8 at [4]):

‘There are obviously substantial differences between for example a planning dispute, a claim under the Equal Opportunity Act and an inter partes commercial dispute relating to a retail tenancy or a building dispute. Clearly the latter types of dispute are much more likely to come within one of the categories set out in s109(3) and so attract an order for costs. A complex commercial dispute is much more like to result in a costs order in favour of a successful party than for example a case before the Anti Discrimination List. That will be so because of the characteristics that may often accompany typical disputes in such Lists and not because of any inherent property of the particular List. In my opinion the proper approach to the question of costs is not a List approach but rather a case by case approach. It should also be noted that the balance of Division 8 is taken up with the sections dealing with settlement offers and the consequences of making a successful settlement offer in relation to costs. Subject to the discretion of the Tribunal a successful offer of settlement means the offeror -
"is entitled to an order that the party who did not accept the offer pay all costs incurred by the offering party after the offer was made"
In my opinion the fact that the settlement offer provisions are found in the same division in juxtaposition to the section dealing with costs is indicative of a scheme to encourage parties to settle by offering a costs carrot. One objective of this scheme is to encourage more cases to settle prior to the hearing and thus save the parties cost and expense. In furtherance of that objective the Tribunal should be careful to avoid the situation where a List is regarded as one where the costs normally follow the event.’
89 The Victorian approach provides a helpful guide to the exercise of the costs discretion in this instance. While it is true that there was an arguable question on the question of the Tribunal’s jurisdiction in relation to the enforceability of the terms of retail leases mediation agreements, it was one that had already been addressed by the Supreme Court in analogous circumstances.

90 While it can be said in isolation to have been an arguable question, it is one, in my view, that should never have been canvassed had the lessees dealt properly with the concerns they had in relation to the mediation agreement, and dealt realistically with the settlement offer.

91 The respondents were first to bring this dispute to the attention of the Tribunal. A mediation agreement was reached in the circumstances described elsewhere in these reasons. The mediation agreement was not honoured by the respondents. It was a straight-forward agreement. The term requiring payment of back rent was in settlement of substantial alleged arrears. The applicant was prepared to grant a new lease. A mechanism was provided in the mediation agreement for resolution of any difficulties in relation to the steps to be taken in relation to existing defects, being issues that formed part of the grounds for application 20517.

92 There was no justification for the respondents not dealing with the defects issue by reference to the mechanism provided in the agreement. Subsequently the applicant sought to recover the payment due under the agreement. Such a course of action was to be expected – the issue as to jurisdiction was artificial in the sense that even if successful it could not terminate the lessor’s claim at law. The lessor could simply then have recommenced proceedings in a court of competent jurisdiction. In that sense it was a tactical application.

93 In the letter of compromise, the applicant made an offer which took account of possible adjustments and allowed something more. It was a reasonable offer reasonably made. At that point the matter should have been resolved.

94 The VCAT rule is that the offer must be open for 14 days. The present offer (Ex H in the proceedings) was open for 7 days until 3 September 2002. This difference does not, in my view, stand in the way of the offer in issue being considered. There is no suggestion of an oppressively short period. The offer was formally refused by solicitor’s letter dated 4 September 2002 (see attachment to applicant’s further submissions in relation to costs).

95 I am satisfied that this circumstance (the refusal of the offer on legal advice) gives rise to a situation in which the respondents should be protected from costs incurred in pursuit of their claim from the last date for acceptance of the offer, 2 September 2002.

96 There is then the further issue of whether the proceedings were unduly protracted. In light of the foregoing conclusion, this issue is of most importance in relation to the period 15 April-2 September 2002.

97 The first attendance before the Tribunal in respect of application 025044 occurred on 18 April 2002. On that occasion the Member refused to deal with an application made there and then by the applicant to enforce the mediation agreement, on the basis that the lessees who appeared in person should get legal advice. I have considered whether the lessees should be exposed to the applicant’s costs of that attendance. My conclusion is that they should.

98 On the next occasion, 30 May 2002, there was no appearance by the lessees. There is no explanation on the Registry file for that occurrence. The next date, 7 June 2002, is also vacated at the request of the respondents.

99 In mid-June 2002 the application no 025017 is revived. The two applications are listed for hearing before another Member.

100 That hearing proceeded on 4 July 2002, and included video evidence. The matter resumed on 14 August 2002. On 9 August 2002 the solicitor for the lessees advised that the claim was to be amended to include an unconscionable conduct claim.

101 On 14 August 2002 the matter was adjourned due to late service by the respondents of their affidavit material. The foreshadowed amended application in matter no 025017 was filed on 7 September.

102 The part-heard matter was relisted before the Member and resumed on 18 October 2002. The Member advised that in light of the unconscionable conduct claim the Tribunal was no longer properly constituted, and he was not qualified to hear the matter.

103 Accordingly the matter was listed before the present Panel, and the matter was adjourned part-heard at the close of proceedings on 22 November 2002.

104 The applicant’s essential position is that the revival of application 025017 impeded the disposal of the proceedings. In my view, there can be no doubt that this is correct. Further the variation of the claim to include an unconscionable conduct claim had the effect of aborting the proceedings before the Member when they were part heard. This may not have been in the contemplation of the lessees or their solicitor. It results from a legislative policy that requires differentiation in the constitution of the Tribunal as between retail tenancy claims and unconscionable conduct claims. Nonetheless it is the case that ultimately the unconscionable conduct claim was not pursued. In these circumstances the lessees should be exposed to the costs of the aborted proceedings.

105 The way in which the lessees have conducted themselves in these proceedings is not to be commended.

106 The retail leases jurisdiction stands apart from the usual position in commercial disputes jurisdictions where the losing party is required to meet the costs of the successful party. Though it often does not, this sanction should operate as an incentive to the timely and focused conduct of litigation. It is even more important in a jurisdiction where the successful party can not normally look forward to a costs order that the proceedings be conducted in a timely and focused way.

107 This plainly did not occur on this occasion. The way in which the proceedings developed after 12 February 2002 was directly attributable to the lessees’ decision to stop the cheque and then not to address their other concerns (in particular defects) by the mechanism laid down in the agreement, or by return (if the lessor agreed) to the Retail Tenancy Unit.

108 In my view the applicant has conducted itself properly at all stages in this matter, and has not contributed in any significant way to the exacerbation of the proceedings. Mr Rosier states in his submissions that the applicant was responsible for two adjournments but does not identify them.

109 As I read the file, a solicitor only was involved until Mr Woods of counsel appeared at the hearing on jurisdiction which commenced on 22 November 2002.

110 In a tribunal environment multiple-legal representation should not be encouraged. In my view, care should be shown (even where (as here) the losing party is seen as having not conducted their case in an appropriate way) in exposing the party against whom a costs order is made to the costs of two lawyers for the other side. In a tribunal environment most, if not all cases, should, in my view, be capable of being conducted with only one lawyer being present in the hearing room. I accept that on occasions it may also be necessary to have an assistant present. In the present matter, the solicitors for the applicant recognised this point; and did not attend on at least one of the days of Mr Woods’ attendance.

111 On this occasion, I am satisfied that the lessees should meet the costs of counsel and that there should be a partial allowance for the costs of any solicitor’s attendances (not more than 50 per cent) at the hearings where Mr Woods appeared. I have also noted that Mr Woods’ involvement in the proceedings has been relatively limited.

112 Subject to those comments, in my view the lessees should be required as submitted by the applicant to meet the applicant’s costs as incurred after 15 April 2002.

ORDERS


1. Amended Application 025017 dismissed.

2. In relation to Application 025044, the Tribunal has jurisdiction.

3. The respondents pay the applicant the sum of $8645.69.

4. The respondents pay the lessor applicant’s costs incurred as agreed or as assessed since 15 April 2002 in respect of both applications, in accordance with Part 11 of the Legal Profession Act 1987, taking account of the comments made at paras [110-111].