Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd ( No 2)

[2007] NSWADT 58

CITATION:	Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd ( No 2) [2007] NSWADT 58
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT/CROSS RESPONDENT Armstrong Jones Management Pty Ltd RESPONDENT/CROSS APPLICANT Saies-Bond & Associates Pty Ltd
FILE NUMBER:	055169, 065015
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	22 December 2006
DATE OF DECISION:	15 March 2007
BEFORE:	Chesterman M - ADCJ (Deputy President); Harrison B - (Advisory) Non Judicial Member ; Griffiths G - (Advisory) Non Judicial Member
CATCHWORDS:	Claim for compensation for pre lease misrepresentations - Costs - Unconscionability
MATTER FOR DECISION:	Costs
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Evidence Act 1995 Retail Leases Act 1994
CASES CITED:	Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd [2006] NSWADT 323 Calderbank v Calderbank [1975] 3 All ER 333 Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31 Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 Prasad & Anor v Fairfield City Council (RLD) [2002] NSWADTAP 2 Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43
REPRESENTATION:	APPLICANT/CROSS RESPONDENT Corrs Chambers Wesgarth, solicitors RESPONDENT/CROSS APPLICANT J Bond, agent
ORDERS:	The Respondent/Cross Applicant's application for a costs order is dismissed

Introduction

1 This decision relates to an application for the costs of proceedings in the Retail Leases Division between a lessor, Armstrong Jones Management Pty Ltd (‘Armstrong Jones’), and a lessee, Saies-Bond & Associates Pty Ltd (‘Saies-Bond’). The lease was of retail shop premises in a shopping centre in Alexandria owned by Armstrong Jones and was governed by the Retail Leases Act 1994 (‘the RL Act’). It came to an end after a period of about ten months, when Armstrong Jones repossessed the premises on the ground of non-payment of rent.

2 In a judgment delivered on 13 November 2006 (Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd [2006] NSWADT 323), the Tribunal determined the various competing claims brought against each other by the parties to these proceedings. It upheld a claim by Saies-Bond for compensation under s. 10 of the RL Act based on a pre-lease misrepresentation made to it by an agent of Armstrong Jones. It expressed the opinion that the making of this misrepresentation also constituted unconscionable conduct for which Armstrong Jones was liable under s. 62B of the RL Act. It dismissed a number of other claims brought by Saies-Bond. It also dismissed a claim by Armstrong Jones for rent, outgoings and promotional levy due under the lease and for damages in lieu of rent.

3 The Tribunal ordered that Armstrong Jones should repay to Saies-Bond, with interest, an amount of $40,695 that Armstrong Jones had drawn down under a bank guarantee provided under the lease.

4 The judgment also set out directions for the filing of applications and submissions regarding costs. Pursuant to these directions, on 11 December 2006, Saies-Bond filed an application, with supporting submissions, for its costs of the proceedings, assessed on an indemnity basis. On 22 December 2006, Armstrong Jones filed submissions denying any liability for costs.

5 Since the case brought by Saies-Bond included a claim of unconscionable conduct under the RL Act, the Tribunal is constituted in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997. It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only.

6 Saies-Bond submitted that there were eight grounds on which a costs order in its favour should be made. Each of these will be discussed separately. But it is convenient first to summarise the basic principles governing costs awards in the Retail Leases Division.

Relevant principles regarding costs

7 If costs are to be awarded, the requirement of ‘special circumstances warranting an award of costs’ set out in s 88(1) of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’) must be satisfied. Section 77A of the RL Act makes this provision applicable in retail tenancy proceedings conducted in the Tribunal.

8 According to the case-law on s 88(1) in its application to proceedings under the RL Act (see eg Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81, Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164, Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31 and Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43), ‘special circumstances’ are ‘circumstances that are out of the ordinary, but without having to be extraordinary or exceptional’. It is not enough that the circumstances are ‘special’: they must also ‘warrant’ an order for costs. On account of the ‘commerciality’ of the Retail Leases Division, the interpretation of ‘special circumstances’ differs significantly from the interpretation that might be adopted in any other Division of the Tribunal. While a finding of ‘serious unfairness’ or ‘grossly unreasonable conduct’ on the part of the party resisting an order for costs is not a prerequisite to determining that there are ‘special circumstances’, it is a highly relevant consideration.

9 Amongst the various types of situation that have been held to constitute ‘special circumstances’ in retail leases cases, three are relevant in the present case.

10 The first of these is where the proceedings instigated, or the grounds of defence raised, by the party against whom a costs order is sought are found to have lacked any real prospect of success and therefore to have been unmeritorious.

11 The second is where (a) the successful party in the proceedings has made an offer of compromise of the dispute before the conclusion of the proceedings; (b) the unsuccessful party has unreasonably rejected the offer; and (c) the terms of the offer were more favourable to the unsuccessful party than the orders made by the Tribunal. The Tribunal has held this situation to constitute ‘special circumstances warranting an award of costs’ by way of analogy with costs rules in the Supreme and District Courts and the principles laid down in Calderbank v Calderbank [1975] 3 All ER 333.

12 Thirdly, ‘special circumstances’ may be discernible through an examination of the way in which the case has proceeded in the Tribunal. As stated in the Tribunal’s Practice Note 12 (October 2006), the Tribunal may take into account the following matters:-

- whether a party has conducted the proceeding in a way that disadvantaged another party to the proceeding by conduct such as -
(i) failing to comply with an order or direction of the Tribunal without reasonable excuse;

(ii) failing to comply with this Act, the regulations, the rules or an enabling enactment;

(iii) asking for an adjournment as a result of (i) or (ii);

(iv) causing an adjournment;

(v) attempting to deceive another party or the Tribunal;

(vi) vexatiously conducting the proceeding;

- whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding.

13 The first ground put forward by Saies-Bond in its submissions was that Armstrong Jones was ‘vexatious’ in causing Saies-Bond to incur costs unreasonably by attending two interlocutory hearings, in both of which Saies-Bond was successful. These hearings both related to summonses to produce documents that the Tribunal had issued.

14 In support of this contention, Saies-Bond relied on the Appeal Panel’s judgment in Prasad & Anor v Fairfield City Council (RLD) [2002] NSWADTAP 2. Although the paragraph that Saies-Bond cited was [38], the Tribunal finds more helpful the following observations of the Panel at [40] (to which Saies-Bond referred at a later stage of its submissions):-

It may not have been consistent with the reasonable conduct of litigation for various preliminary applications to have been made. They may have had the effect of elongating and making more costly the proceedings. There may have been failures to comply with directions giving rise to unnecessary delay and additional professional attendances on the Tribunal.

15 As Armstrong Jones pointed out, however, in its submissions, Saies-Bond was not wholly successful at the first of these hearings, and its success at the second hearing was on a ground that it did not itself put to the Tribunal.

16 The first hearing, on 24 March 2006, concerned a summons issued to Armstrong Jones at the request of Saies-Bond. Armstrong Jones raised objections to the width of the summons. In its orders, the Tribunal narrowed the scope of three out of the five categories of documents required to be produced and left intact the remaining two categories. It also gave directions for the filing of evidence.

17 At the second hearing, on 5 May 2006, Mr Spring, an agent assisting Saies-Bond, argued that a summons to produce issued to him at the request of Armstrong Jones should be set aside under s. 126A of the Evidence Act 1995. After hearing argument from both parties and adjourning for a short period to consider its decision, the Tribunal set aside the summons, but under a different section (s. 120) of this Act. At this hearing, it also gave directions for the filing of evidence.

18 The Tribunal agrees with the submission by Armstrong Jones that its conduct in relation to these two interlocutory applications cannot be described as vexatious or unreasonable. In one of them, it was successful in part and in the other its contentions were at least arguable. The directions given at both hearings assisted in the progress of the proceedings, and could not have been formulated without the attendance of both parties.

19 The Tribunal accordingly rejects this ground in Saies-Bond’s application for costs.

Alleged refusal to negotiate in the context of mediation

20 Saies-Bond’s second ground was that Armstrong Jones ‘refused to negotiate’. Saies-Bond’s submissions referred in this connection to Armstrong Jones having been sent notification of a mediation of the parties’ dispute at the Retail Tenancy Unit on 1 August 2005, together with ‘a summary of Saies-Bond’s grievances’.

21 In response, Armstrong Jones pointed out that it had attended the mediation at the Retail Tenancy Unit and had previously made two offers to Saies-Bond in order to assist Saies-Bond to meet its obligation to pay rent.

22 It may well be that Armstrong Jones did not attend the mediation with any real desire, or indeed expectation, that it would result in a settlement of the dispute. But Saies-Bond did not point to any evidence establishing this proposition. It could not, of course, rely on what occurred at the mediation proceedings themselves, since s. 69 of the RL Act declares that any statement or admission made in these proceedings is inadmissible in any legal proceeding.

23 The two offers of assistance made by Armstrong Jones are mentioned in the Tribunal’s judgment of 13 November 2006 (see Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd [2006] NSWADT 323 at [250 – 251, 340]). It is likely that since Saies-Bond was in a precarious financial situation at this stage, they were not of great practical value. Their relevance in the present context is marginal.

24 The mere fact that a mediation under the RL Act failed does not entitle the party that ultimately succeeds before the Tribunal to claim that there are ‘special circumstances warranting an award of costs’ in its favour. Even an alleged ‘refusal to negotiate’ in the context of mediation – which in this case has not been established by evidence – falls well short of the forms of unreasonable or vexatious conduct described in the passage from the Tribunal’s Practice Note quoted above. This ground is rejected.

Alleged refusal to negotiate following failed mediation

25 The evidence relied on in support of this ground, which again alleged a refusal to negotiate, was as follows. After the unsuccessful mediation proceedings on 1 August 2005, the solicitor then acting for Saies-Bond sent a further letter to Armstrong Jones setting out Saies-Bond’s grievances. A memorandum dated 17 August 2005 passing between the chief executive officer of Armstrong Jones and the manager of the shopping centre in which the leased premises were situated was annotated with the words ‘we reject any claim’.

26 The Tribunal cannot see any reason why the opposition to Saies-Bond’s claims reflected in this internal working document of Armstrong Jones gives grounds for a costs order under s. 88 of the ADT Act. As pointed out in Armstrong Jones’ submissions, a refusal to settle a dispute before trial could not of itself constitute ‘special circumstances’. It would be otherwise if the party concerned were maintaining a stance that was clearly without merit (see [10] above). But that is not the position here. This ground is rejected for much the same reasons as the preceding ground.

Failures to comply with the Tribunal’s directions

27 In support of this ground (the fourth), Saies-Bond relied on the following matters. At the hearing of 5 May 2006, Armstrong Jones was directed to file and serve all its evidence by 10 May. It in fact did so on 12 May (a Friday), except for one affidavit. It filed and served this affidavit on Monday 15 May, which was the first of the five hearing days on which the substantive issues in the case were tried. As a result, Saies-Bond claimed to have been severely disadvantaged in preparing for the cross-examination of Armstrong Jones’s witnesses.

28 Armstrong Jones’s response was to point to failures by Saies-Bond itself to comply with directions. These were as follows: (a) Saies-Bond filed and served its evidence on damages on 12 May 2006, instead of the stipulated date of 13 April and (b) it filed and served its written submissions (following receipt of the evidence from both parties) on the afternoon of 20 June, instead of the stipulated date of 7 June. The hearing day at which these submissions were considered by the Tribunal was 21 June.

29 In the Tribunal’s opinion, these failures by both parties to abide by the Tribunal’s directions are regrettable. As became clear to the Tribunal at the hearing, they did have the effect of prolonging the proceedings.

30 In the absence of further evidence, however, it could not be said that these failures by Armstrong Jones were so unreasonable as to warrant an order for costs being made against it. They were, moreover, matched by comparable failures on the part of Saies-Bond.

31 If (contrary to the Tribunal’s opinion) the defaults of both parties in this respect were to be characterised as unreasonable, there would again be no grounds for awarding costs. The approach to be adopted would be as outlined by the Appeal Panel in Prasad & Anor v Fairfield City Council (RLD) [2002] NSWADTAP 2 at [36]. The Panel said:-

As we see it, the principle for which s 88 stands is that each party should bear their own costs if their conduct in the litigation has been reasonable. If that standard of reasonable conduct is adhered to, then no costs order should be made against the unsuccessful party. There is another possibility. Both parties may have failed to conduct their cases reasonably, each deserves an order against the other but the degree of dereliction is equal leading to no order being made.

32 For these various reasons, the fourth ground in Saies-Bond’s application is rejected.

Alleged failure to respond fully to summons

33 The fifth ground advanced by Saies-Bond was that Armstrong Jones failed to provide a complete answer to the summons to produce documents that it had received from the Tribunal.

34 At the first of the interlocutory hearings described above, this summons, as amended, was made returnable on 7 April 2006. According to Saies-Bond, Armstrong Jones failed to include in the documents that it then produced a statement of the outgoings chargeable to Saies-Bond under the lease. This statement was instead annexed to an affidavit filed on 11 May 2006, only four days before the hearing.

35 In reply, Armstrong Jones submitted that this assertion by Saies-Bond was not made at the hearing itself and that there was no basis for it.

36 In the Tribunal’s opinion, this ground should be rejected, though for a different reason. This is that there is insufficient evidence to show that the statement of outgoings, in the form in which it was tendered as an annexure to an affidavit, was in Armstrong Jones’s possession at the time when it was required to answer the summons. It is undated, and could well have been prepared just before the affidavit was sworn.

Failure to respond to offer of settlement

37 Saies-Bond’s sixth ground was that Armstrong Jones unreasonably failed to respond to a Calderbank offer of settlement that Saies-Bond made in February 2006. While indicating in its submissions that the amount for which Saies-Bond was prepared to settle exceeded the amount awarded to it, Saies-Bond argued that Armstrong Jones nonetheless made no attempt to settle the case until just before the commencement of the hearing in May 2006. Saies-Bond also submitted that the fact that its offer ‘included a drastically reduced amount for wages not paid’ during the ten months of the lease should be taken into consideration in relation to ‘special circumstances’ because ultimately its ‘quantum of losses were not heard by the Tribunal’.

38 In its submissions on these matters, Armstrong Jones pointed out that Saies-Bond’s offer in February 2006 was to accept the sum of $85,000 in full settlement and that this was nearly twice the amount awarded to it in the Tribunal’s decision in the proceedings.

39 The criteria for determining whether the rejection of an offer of settlement constitutes ‘special circumstances’ under s. 88 are set out above at [11]. The Tribunal agrees with AJA’s submission that these criteria are not satisfied by the aspects of the parties’ negotiations on which Saies-Bond relies.

Reasonable refusal by Saies-Bond of Armstrong Jones’s offer of settlement

40 In relation to this seventh ground, Saies-Bond submitted that it was reasonable on its part to reject Armstrong Jones’s offer of settlement. It pointed out that in making this offer Armstrong Jones requested the withdrawal of all of Saies-Bond’s claims, but indicated that it would press on with its own claim.

41 It is clear from the statements of principle set out above at [7 – 12] that this aspect of the pre-trial communications between the parties does not provide any support to Saies-Bond’s contention that ‘special circumstances’ exist ‘warranting an award of costs’ in its favour.

Not pursuing other tenants at the shopping centre

42 The eighth and last ground advanced by Saies-Bond was that Armstrong Jones did not take proceedings to evict any of the other tenants at the shopping centre, even though the majority of them were in significant arrears of rent. In consequence, Saies-Bond was forced to incur unnecessary legal costs in defending itself.

43 The Tribunal agrees with a submission by Armstrong Jones that the nature of its dealings with other tenants at the centre was wholly irrelevant to whether it should be liable for costs in these proceedings. It accordingly rejects this ground.

Concluding observations

44 Saies-Bond’s submissions referred to a number of Tribunal decisions on ‘special circumstances’ that are not mentioned in this judgment. In the Tribunal’s opinion, these decisions, while relevant to the determination to be made, do not significantly enlarge on or elaborate further the principles that have already been set out.

45 Armstrong Jones’s submissions raised a number of other matters in opposition to Saies-Bond’s application. It is not necessary to discuss them here.

46 In addition to rejecting individually each of the eight grounds put forward in Saies-Bond’s application for costs, the Tribunal finds that these grounds, when considered in conjunction, similarly do not constitute ‘special circumstances’ under s. 88 of the ADT Act.

47 This application for a costs order is therefore dismissed.