Aspen Funds Management Limited v Hurst & Lim Pty Ltd

[2009] NSWADT 286

CITATION:	Aspen Funds Management Limited v. Hurst & Lim Pty Ltd and Ors [2009] NSWADT 286
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Aspen Funds Management Limited RESPONDENT Hurst and Lim Pty Limited
FILE NUMBER:	095027
HEARING DATES:	8 September 2009
SUBMISSIONS CLOSED:	8 September 2009
EXTEMPORE DECISION DATE:	8 September 2009
BEFORE:	Molloy G - Judicial Member
CATCHWORDS:	Ex parte hearing principles
LEGISLATION CITED:	Civil Procedure Act, 2005 Retail Leases Act, 1994
CASES CITED:	AON Risk Services Australia Ltd v. Australian National University [2009] HCA 27 Caltex Refining Co Pty Ltd v. Maritime Services Board of NSW (1995) 36 NSWLR Law Society of NSW v. Gallagher [1999] NSWADT 8.Solomon & Anor v. Singh (No. 3) [2006] NSWADT 120
REPRESENTATION:	APPLICANT D Fitzpatrick, Barrister RESPONDENT R King, Solicitor
ORDERS:	1.I order the First, Second and Third Respondents to pay to the Applicant $34,860.51 2.No order as to costs.

REASONS FOR DECISION

1 On 8 September 2009 I heard and determined this matter. On that day I delivered an ex tempore Judgment.

2 The Respondents have requested written reasons to be provided. There are two methods of compliance with the law in this regard: firstly, one can simply adopt the ex tempore reasons, with appropriate spelling/paragraph alterations or, secondly, one can prepare a full written Decision. I have opted for an amalgam, namely adoption of the ex tempore decision with insertion of additional material in a way of further explanation and fleshing out the original Decision. The result is, of course, the same.

3 The Applicant commenced proceedings in this Tribunal by Application for Original Decision filed 27 February 2009. In that Application the Applicant sought an order that the First, Second and Third Respondents pay to the Applicant $36,130.39, interest said to be pursuant to clause 5 and costs pursuant to clause 17.1(b) of the lease and the costs of this application.

4 The proceedings came before the Tribunal by way of directions on a number of occasions, namely 2 April 2009 when the Tribunal was informed that there were settlement discussions taking place, again on 16 April 2009 when the Tribunal was again informed that settlement discussions were taking place, similarly again on 14 May 2009, again on 28 May 2009 and, pausing at that point, on all those previous occasions as far as I can see from the Tribunal’s file and records the adjournments for further directions were made by consent.

5 The matter next came before the Tribunal on 25 June 2009. Both parties were again represented and on that occasion “By Consent Orders” were made directing the Respondent file and serve its Response by 8 July 2009, the Applicant to file and serve its evidence by 29 July 2009, the Respondent to file and serve its evidence by 19 August 2009 and the matter was listed for further directions on 20 August 2009.

6 On 20 August 2009 and by consent the proceedings were set down for hearing today at 2.00pm and the Applicant was to file and serve its evidence by 27 August 2009.

7 It is plain from that recitation of history that these proceedings were set down without the Respondents filing any Response or Defence and without the Respondents filing and serving any evidence. Indeed the proceedings came before the Tribunal for hearing with counsel representing the Respondent but with no Response/Defence having been filed and the Respondents not filing any evidence.

8 The Applicant by consent moves the Tribunal on an Amended Application for Original Decision filed 4 September 2009 in which it seeks an order that the Respondents, that is, the First, Second and Third Respondents, pay to the applicant $48,979.28, which sum is set out in annexure “A” to the Amended Application and which annexure “A” is a “Statement of Outstanding Amounts” produced by Knight Frank Australia Pty Limited, Statement date 31 August 2009, and in which the total amount outstanding is said to be $48,979.28. Otherwise the Amended Application seeks the same orders as in the original Application.

9 The Tribunal had before it by way of evidence an affidavit by a Mr Trent Logue sworn 27 August 2009 [Exhibit “A”] in which he says he is the asset manager employed by the Applicant. He deposes to a lease between what he describes as the Applicant’s predecessor in title, namely GPT Funds Management 2 Pty Limited, over the demised premises which are Shop GDO11, Homemaker City, Castle Hill. The lease itself was for a term of five years commencing 23 December 2005, terminating 22 December 2010, containing an option for renewal for a period of five years and in which the First Respondent is the lessee and the Second and Third Respondents are described jointly and severally as the covenantors, ie the guarantors.

10 Mr Logue’s evidence in paragraphs 3 and 4 of his affidavit seeks to summarise, without objection, the terms of the lease that relevantly apply to the matters in issue and in paragraph 5 Mr Logue swears, again without objection, that the First Respondent “is indebted to the Applicant in the sum of $48,979.28 pursuant to the lease.” He then annexes to his affidavit, again without objection, “a true copy of an arrears report in respect of the premises showing the amount owed by the First Respondent to the Applicant.”

11 The First, Second and Third Respondents appear through counsel today and have taken issue with the evidence that has been placed before the Tribunal by the Applicant and submit that the Applicant has not discharged the burden or onus of proof such that presumably the Application should be dismissed.

12 The Respondents have made a number of submissions, all of which are said go to show that the Tribunal is unable to rely upon the material put in evidence by the Applicant and the Respondents have tendered as Exhibit “1” a tax invoice from Knight Frank Australia Pty Limited to the First Respondent dated 1 July 2009 which shows as at 15 June 2009 a payment received by the Applicant by direct deposit $2,500, and a total amount outstanding of $51,130.47 as at 1 July 2009. I shall refer back to that Exhibit in a moment.

13 The first submission on behalf of the Respondents is that the Statement, that is, the arrears report, does not show all payments made and all amounts due. It was submitted that in a matter like this entries on such a statement should show a comprehensive statement as to amounts due, with credits and debits, such that, as I understood the argument, this Statement does not show all payments made and therefore this Tribunal cannot be satisfied that the amount claimed is the correct amount.

14 It seems to me that there is an essential problem with that submission, and it’s a problem that goes to the heart of most but not all of these submissions made by the Respondents, and that is this: the Statement itself is titled “Statement of Outstanding Amounts”, it is clearly directed to the First Respondent by the agent or leasing agent for the Applicant and the amount set out in the column on the right-hand side is under the heading “Outstanding Amount” such that I am of the view that, absent evidence to the contrary and some sort of analysis, the document itself upon which the Applicant relies simply shows the net debits after taking into account any credits. There is no doubt that the tax invoice 1 July 2009 [Exhibit “1”] shows a credit of $2,500 and there is no doubt that credit does not show up on the Statement annexed to Exhibit “A”. But that having been said the amount of the Statement in Exhibit “A” as at 1 August 2009 is stated to be $48,979.28 and the amount of the invoice Exhibit “1” as at 1st of July 2009, some one month earlier, is $51,130.47. It seems to me that there is a necessary inference to enable the Tribunal to conclude that the Statement annexed to the affidavit Exhibit “A” is in fact a statement that shows the net amount due having taken into account credits or payments made.

15 It was also submitted that when one looks at that Statement one sees the first thirteen entries are balances as at 31st of December 2008 and that somehow that is said to constitute some sort of unreliability in that document. I confess I am unable to see that argument nor do I understand it because whatever may be the position the sworn unchallenged evidence led on behalf of the Applicant is that the First Respondent is so indebted and that the Statement exhibited is a true copy of the arrears report. And there is no doubt in my mind that the arrears report is a document prepared by the Applicant’s leasing agent and there is not the slightest suggestion made from the bar table or from anywhere else that the content of the document is not true in that the amounts specified are not the amounts that are truly allocated to the particular items. There is no suggestion of fraud, there is no suggestion of some sort of innocent or other mistake, such that it is clear that in the absence of such evidence the Tribunal can comfortably rely upon the Statement annexed to Exhibit “A” as specifying the correct amounts as against the particular items.

16 It was submitted that there was no evidence that the Applicant had satisfied section 22 Retail Leases Act. Section 22 deals with recovery of outgoings from a lessee. The relevant sub-section is (1) which reads as follows:-

“22(1) The lessee under a retail shop lease is not liable to pay any amount to the lessor in respect of any outgoings except in accordance with provisions of the lease that specify:

a) the outgoings that are to be regarded as recoverable,

b) how the amount of those outgoings will be determined and how they will be apportioned to the lessee, and

c) how those outgoings or any part of them may be recovered by the lessor from the lessee.”

17 The difficulty with that argument again is that the Applicant asserts compliance by its affidavit in normal form and in my opinion absent some form of traversal or some proper challenge which is normally done by way of affidavit material and subpoena then the Tribunal ought not to travel down the path agitated by the Respondents.

18 It was also submitted that the relevant clause of the lease is clause 13.6 which obliges the Applicant as lessor to “work out (the lessee’s) estimated operating expenses based on the gross lettable area in the premises in proportion to the gross lettable area in the centre or” otherwise as specified in the clause. It was submitted there was no evidence of that exercise actually occurring and therefore there was no evidence demonstrating the Applicant’s entitlement. It was submitted that either the lease should have specified the proportion (which is quite common, I observe) or it was submitted there should be evidence as to how the proportion or fraction or percentage of outgoings is calculated.

19 It was also submitted that there was no evidence of compliance with the clauses 13.4 (which obliges the Applicant as lessor to give the lessee its best estimate of operating expenses on or before 31 May in each year) and 13.5 (which obliges the Applicant to give the lessee a statement of actual operating expenses on 31 January and 31 July in each year during the term of the lease) or sections 27 (which obliges the lessor to give a lessee a written estimate of outgoings) and 28 (which makes special provision relating to outgoing statements) of the Retail Leases Act.

20 Both of these submissions [in 18-19] suffer from the same problem that I have sought to identify in [17]. I shall deal with this more fully below.

21 It was further submitted that there was no evidence to indicate how the interest claim was calculated. It was submitted that the items that appear in the Statement annexed to Exhibit “A” were under the heading “Interest/Loan Repayments” and as such somehow the Tribunal should be invited to conclude that the amounts claimed were something to do with loan repayments.

22 But that’s not what the items say. What the items say is by description “Interest/Loan Repayments” and then they refer to “Interest on Arrears”. Indeed there is one item 1 June 2009 invoice 8400988 also stated to be “Interest/Loan Repayments” which in fact is a claim for legal fees in $511.25. I am clearly of the view that the items as specified have absolutely nothing to do with loan repayments; that was simply an item in the computer and is properly to be regarded as interest on arrears and absent any evidentiary material to the contrary the Tribunal should accept the appellation “Interest on Arrears.”

23 It was then said that there was no evidence establishing the covenant clause liability. Reliance was placed upon clause 48.3. It’s important to remember that the original lessee was GPT Funds Management 2 Pty Limited and that the Applicant has acquired the interest of GPT Funds Management 2 Pty Limited in the demised premises. It was submitted that clause 48.3, which provided: “If we, (GPT) sell or assign all or part of our interest in the centre we may also assign the benefit of the covenantor’s obligations in this clause.” And it was submitted that although the Applicant is the successor entitled there was no evidence that there was an assignment of the benefit of clause 48.3. Indeed on one view there is no evidence of any assignment at all because all the Applicant’s witness says is that he describes GPT as the Applicant’s predecessor in title.

24 The difficulty with that submission is simply this: there is not the slightest jot of evidence lead by the Respondents, and there is not the slightest analysis of documentation which would have been available to the Respondents by way of subpoena or notice to produce, and in my opinion it is not the appropriate course of action to adopt in this Division to attempt to conduct a case without proper evidence lead by the Respondent in these circumstances.

25 The next difficulty that confronts the Respondents is evidentiary (again, bearing in mind this is a case where no response/defence has been filed and no sworn evidence presented by or on behalf of any Respondents) – the evidence of Mr Logue presented effectively ex parte and without objection and summarised in his affidavit was that by the lease the Second and Third Respondents agreed to be bound as parties to the lease, that they were liable to the Applicant if the First Respondent breaches the lease, that they agreed to pay to the Applicant the amount of its loss and that each of the Respondents and each of the Second and Third Respondents were liable for the obligations under the lease individually and together with each other. The sworn material asserted, again without objection, the First Respondent was indebted to the Applicant in the amount claimed and it must therefore follow, on that evidence, unchallenged and not traversed, that the Second and Third Respondents are liable.

26 The further difficulty that confronts the Respondent today is that, as I see it from the file, the Applicant comes today to the Tribunal seeking orders against the Second and Third Respondents, otherwise known as guarantors, under the covenant clause (correctly summarised by Mr Logue above), has sought those orders since the beginning and leads evidence which in my opinion would permit this Tribunal to make a finding that all things were done that should have been done that would have entitled the Applicant to conduct these proceedings against the Second and Third Respondent. This may not be the right case in which to enter into a dissertation about the duties of Respondents and indeed Applicants in this Tribunal but in an ex tempore judgement of mine in matter number 075175 Akora (Bondi Junction) Pty Limited v Buttrose on 2 December 2008 I observed at page 5: “The current proceedings, although commenced 24 September 2007, have yet to have the benefit of a formal Response or Defence or any Cross-Application. The Respondent was directed on 6 November to file and serve by tomorrow 3 December all affidavits upon which he would seek to rely, a formal Response and any Cross-Application. Courts and tribunals are now tending towards visiting an obligation on parties to proceedings to co-operate in the presentation of their cases. A starting point may well be the Civil Procedure Act 2005, section 56-59, in particular section 56(3). Courts are now also tending towards the view that those in positions of authority ought not to put obstacles in the way of parties seeking to agitate arguments against those authorities. I mention these general principles without going into them in detail.” And I indicated in that matter that I would expect the parties to co-operate and move the matter forward in an orderly direction.

Principles on Ex Parte Hearings

27 The High Court in AON Risk Services Australia Ltd v. Australian National University [2009] HCA 27 recently emphasised the important point that the efficient disposal of the business of courts must require some positive control by courts (and, may I say, tribunals) in the interests of reasonable efficiency and the orderly conduct of matters. There is also a concomitant view that, at least as regards statutory authorities, such authorities and government instrumentalities should act in accordance with the concept of the “model litigant”. It would seem that this concept is rooted, in any event, in common law and, so it seems to me at least, it ought properly to apply to civil litigation. To simply turn up on the day of hearing, without having filed any Defence or Response or any affidavits and seek to take evidentiary points on what is effectively on ex parte hearing flies in the face of, in my respectful opinion, the appropriate course of conduct by a Respondent/Defendant in the current legal milieu of up-front disclosure of documents, defence, position and even argument. Indeed, those principles underline the principle of discovery and that of not taking the other party by surprise. Sanctions apply for failure to give discovery, for failure to give full discovery or insertion of documents in the discovery bundle after inspection. It seems to me that if a Respondent proposes to run an argument that asserts against an Applicant some sort of breach or some sort of lack of entitlement then that ought to be done by way of proper affidavit material with proper documentation. It would not have been difficult for the Second and Third Respondents to have issued a notice to produce or subpoena seeking the necessary documents from which a conclusion may have been drawn that somehow or other there was a failure to comply with clause 48.3 of the lease.

28 It is important to remember, in my opinion, that in this Division of this Tribunal matters are often heard in circumstances where there is no appearance by or on behalf of a respondent, alternatively no material filed by or on behalf of the respondent. The Tribunal is then left in the position of having to deal with the matter upon the sworn evidence filed on behalf of the applicant. That evidence is, in this case, in Exhibit “A”. That evidence makes it plain that the amount due is the amount claimed, although ultimately it will not be the amount that is so ordered by this Tribunal.

29 In my opinion it is common in this Division where there are hearings ex parte or where a party seeks a judgment by default to summarise the claims. This is the case now before the Tribunal where there was no Defence filed, no Response, no evidence in reply, no subpoenas issued and no request made for production of any document that would, or might, have supported the Respondent’s case, and although I allowed into evidence Exhibit “1” it seems to me for the Respondents or any of them to seek to conduct their case and make submissions in the way in which they have requires more than some submissions from the bar table no matter well presented those submissions may be; unless it is starkly claimed that on a hearing such as this the evidence is so totally defective that an order should not be made. In any event and even in those circumstances the Tribunal would expect that notice be given to those representing the other party that those arguments are to be advanced and that documentation is to be produced which will support those arguments.

30 I wish to make this point adequately clear: the evidence of Mr Logue, although in summary form, and to whose affidavit he annexed the lease, clearly summarises the obligations of the parties under the lease and is clearly based upon the covenants in the lease, particularly the clear covenant by the Second and Third Respondents. That evidence was allowed in without objection, as it ought properly to be in an ex parte/default application/hearing. After all, no issue was raised in the pleadings by the Respondents nor in any evidentiary material, that would have impinged upon the Applicant’s sworn evidence and the correctness of the summaries. Indeed, on one view, the Respondents simply abandoned the field by not having filed any pleadings, traversals/ evidence. In those circumstances an applicant is entitled, in my respectful opinion, to come to this Tribunal seeking judgment by way of an ex parte hearing or, alternatively, by default. Unless there is something glaringly obvious that would disentitle a moving applicant to (effectively) judgment by default then, upon basic proof that is enough and the applicant is entitled to its judgment. This Division deals with civil claims and, unless there is a serious dispute about liability or quantum (normally flagged by the filing of a Response/Defence and affidavits) then the Applicant is entitled to proceed on the unchallenged material; and if that material is sufficient then the Applicant is entitled to judgment. That is not to say that in an appropriate case the Tribunal will not be vigilant, even in the absence of a Respondent, to ensure that the case is properly proven, even if it is only by way of summary, but where those conditions are satisfied that, in my respectful opinion, is enough. The Tribunal will, of course, be alert to ensure, even in the absence of a Respondent, that it has appropriate jurisdiction and that the various items asserted to make up the claim are appropriately proved in accordance with the principles which I have endeavoured to set out above.

31 A tender was made earlier today of a number of documents which were said to show credits made but it was plain that counsel for the Applicant had not seen those documents and was not really in a position to answer them other than by reference to the fact that the Statement annexed to it today showed net amounts due as distinct from credits and debits (which I think is correct). But if an argument is to be run from the bar table with documentation and without evidence and without any Defence or Response then in my opinion proper notice has to be given to the other party so that the hearing can proceed in an orderly fashion.

32 Finally, I wish to make this point: it is just not good enough for a disputing Respondent to turn up on the day fixed for hearing, not having filed any Response, Defence or any affidavit material, and seek to argue that the Applicant is not entitled to the relief sought. If a Respondent wishes to challenge the evidence then the Respondent should file an appropriate Response/Defence setting out the assertions that the Respondent wishes to challenge or make such that the Applicant is not taken by surprise when the Applicant seeks to conduct its ex parte hearing and such that the Applicant, upon receipt of the Response/Defence will know of the arguments sought to be agitated by the Respondent and can therefore have the opportunity to make good any perceived deficiencies in its evidence. This is not a Tribunal that should permit trial by ambush and the orderly conduct of its proceedings in this Division must require a challenging Respondent to make plain its challenge up-front so that, rather than setting the matter down to be heard ex parte the matter ought properly be set down as a hearing with appropriate argument.

Other Issues

33 In my opinion the Applicant has proved its case save as to one matter. The Applicant sought in its Application and Amended Application the payment of legal costs and GST thereon. Numerous items in the Statement annexed to Exhibit “A” are specified as legal fees or similar appellation. I expressed the view during the course of argument that a claim for legal costs or legal fees incurred prior to the commencement of proceedings in this Division would need to be properly supported by material which would show firstly, the legal entitlement to claim those fees against the other party and secondly, the power of this Tribunal to make such an order (see, for example, Solomon & Anor v. Singh (No. 3) [2006] NSWADT 120 at [26]), and thirdly, the render of an appropriate account and fourthly, the claim thereof and finally, and most importantly, evidence that would demonstrate the legal fees were properly incurred, properly payable and properly chargeable against the other party.

34 There is considerable authority for that view. The primary authority in my view is Caltex Refining Co Pty Ltd v. Maritime Services Board of NSW (1995) 36 NSWLR 552 (8 June 1995), a decision of the New South Wales Court of Appeal. That case made plain that The Land and Environment Court could not simply make an order for the payment of lump sum costs without there being evidence before it which showed the reasonableness and entitlement of those costs. It is not unreasonable for a party seeking costs orders to be made by a court to come up to the court on the hearing day with prior notice given to the other party with a detailed bill in reasonably assessable form so that the presiding judicial officer will be able to assess with his or her expertise the entitlement to the costs as claimed. Indeed in my experience that is not an uncommon course of action but in this case the course was not adopted but rather the items were simply included in the statement of outstanding amounts.

35 Reference should also be made to Law Society of NSW v. Gallagher [1999] NSWADT 8. That case demonstrates, along with Caltex Refining, that the Tribunal has jurisdiction to make a lump sum costs order provided that the relevant material (as specified above at [33]) is available that would enable the Tribunal to found such a lump sum order.

36 Counsel for the Applicant has accepted that position and by Exhibit “B” he has prepared a schedule of legal fees and GST thereon referred to in the outstanding account and the total thereof is $14,118.77. In my opinion that amount ought not to be included such the total amount payable by the First, Second and Third Respondents is net $34,860.51.

Orders

1. I order the First, Second and Third Respondents to pay to the Applicant $34,860.51.

2. No order as to costs.