De Costi Seafoods (Franchises) Pty Ltd v Broadway Shopping Centre Sydney Pty Ltd
[2011] NSWADT 40
•02 March 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: De Costi Seafoods (Franchises) Pty Ltd v Broadway Shopping Centre Sydney Pty Ltd [2011] NSWADT 40 Hearing dates: 15 December 2010 Decision date: 02 March 2011 Jurisdiction: Retail Leases Division Before: M Chesterman, Deputy President
N Fagg, Non-judicial Member (Advisory)Decision: 1. The Applicant is to pay the Respondent's costs of the proceedings, as agreed or assessed under the Legal Profession Act 2004.
2. Those costs are to be paid on an indemnity basis as from 8 December 2010.
Catchwords: Costs - indemnity costs Legislation Cited: Administrative Decisions Tribunal Act 1997
Anti-Discrimination Act 1977
Retail Leases Act 1994Cases Cited: Ashenhurst v Optima Property Developments Pty Ltd [2006] NSWADT 143
AT v Commissioner of Police [2010] NSWCA 131
Barsoum v Glebe Administration Board (No 2) [2002] NSWADT 174
Calderbank v Calderbank [1976] Fam 93
Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164
Haralovic & Carr v. Law Society of NSW (No 2) [2007] NSWADT 97
Rae v Commissioner of Police, NSW Police (No 2) [2010] NSWADT 254
Rucom Pty Ltd & Anor v Multiplex & Ors [2010] NSWADT 1
Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71
Torchia v Swanton [2010] NSWADT 142Category: Costs Parties: De Costi Seafoods (Franchises) Pty Ltd (Applicant)
Broadway Shopping Centre Sydney Pty Ltd (Respondent)Representation: Counsel
S Stanton (Applicant)
G Mahony (Respondent)
The Lease Police (Applicant)
Corrs Chambers Westgarth (Respondent)
File Number(s): 105015
REASONS for decision
Introduction
This decision relates to an application for costs made by the Respondent following discontinuance by the Applicant of proceedings that it had instituted under the Retail Leases Act 1994 ('the RL Act').
The Applicant is De Costi Seafoods (Franchises) Pty Ltd ('De Costi'). Its managing director, Mr George Costi, is also a director of De Costi Seafoods (Holdings) Pty Ltd.
The Respondent is Broadway Shopping Centre Sydney Pty Ltd ('Broadway'). It is one of a group of companies controlled by Mirvac Ltd ('Mirvac').
De Costi's decision to discontinue the proceedings was notified to the Tribunal, in circumstances outlined below, shortly after the luncheon adjournment on the first day (15 December 2010) of a hearing scheduled to take place over two days.
One of the grounds on which De Costi sought relief was that Broadway had engaged in unconscionable conduct. Accordingly, the Tribunal has been constituted in these proceedings in accordance with clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). It has been constituted by a Deputy President who is a member of the Retail Leases Division, assisted by an appropriately qualified member (Non-judicial Member Fagg), acting in an advisory capacity only. Because no second advisory member was available to assist at the hearing, the Tribunal has proceeded with only one such member. At the commencement of the hearing, it drew the parties' attention to the fact that it was authorised to do so by sub-paragraph (4)(a) of clause 4 of Schedule 2, Part 3B.
Outline of De Costi's claim
In or about February 2004, Broadway granted a lease ('the Lease') of premises (Shop G05) in the Broadway Shopping Centre to De Costi for a term commencing on 9 February 2004 and concluding on 8 February 2010. The Lease was governed by the RL Act. It contained no option to renew.
The permitted use in the Lease was as follows: 'The retail sale of fresh and cooked seafood. Trading as "De Costi Seafoods".'
In its Application to the Tribunal, filed on 11 February 2010, and in written evidence filed before the hearing, De Costi alleged as follows:-
(1) On 20 July 2009, Broadway notified De Costi that it did not intend to renew the Lease after its expiry.
(2) In subsequent conversations, Ms Manuela de Rossi, an employee of Broadway, notified Mr Ange Kondos of Leasewise, who were agents for De Costi, that the reasons for the non-renewal were the sales performance of the business carried on by a franchisee in Shop G05 and the operational capacity of this franchisee, Warraboo Pty Ltd ('Warraboo').
(3) In the course of further conversations and email correspondence, Ms de Rossi represented to Mr Kondos that Broadway would renew the Lease if De Costi bought out Warraboo and operated the business as a 'company store'. These representations were false and misleading.
(4) In reliance on these representations, De Costi purchased Warraboo's business. The consideration for the purchase was the release of debts amounting to $462,181.01 owed by Warraboo to De Costi and the payment of a further sum of $19,086.95 for the right to take possession of the shop and for fitout. This transaction was effected by a Deed, executed on 21 August 2009, between four parties: De Costi, De Costi Seafoods (Holdings) Pty Ltd, Warraboo and Mr Antony Read (a director of Warraboo).
(5) Having invited Leasewise to finalise the commercial terms of a new lease on 2 September 2009, Broadway changed its mind and advised De Costi that it would not renew the Lease.
De Costi claimed (a) that Broadway's representations to the effect that it would renew the Lease were false and misleading, (b) that Broadway's conduct in this regard was both unconscionable and misleading or deceptive, (c) that De Costi acted in reliance on these representations, and (d) that as a result of so doing it suffered financial loss. It sought damages in the sum of $400,000.00, which is the largest amount that the Tribunal may award under the RL Act (see section 73).
De Costi's Application and a number of witness statements prepared in support of it were filed by the Lease Police Pty Ltd ('the Lease Police'), of Kew, Victoria. The person responsible within this organisation was Mr Kondos. In a statement signed by him, he described himself as 'a Licensed Agent and Tenant Advocate'.
In a Defence filed on 15 July 2010, Broadway denied making the representations on which De Costi's claim was based.
Events leading to De Costi's withdrawal of its Application
In a letter to Mr Kondos at the Lease Police, sent by email on 8 December 2010, Corrs Chambers Westgarth, Lawyers ('Corrs'), who acted for Broadway, expressed concern that a letter dated 29 July 2009 from Mr George Costi to Mr Read had only recently been provided to them. Corrs claimed that this letter, which they described as a 'critical piece of correspondence', should have been produced by Mr Kondos or by De Costi in compliance with a Summons to Produce that had been issued by the Tribunal on 5 July 2010.
Corrs' letter of 8 December 2010, which was headed 'Without prejudice except as to costs', quoted the following extracts from Mr Costi's letter of 29 July 2009 to Mr Read:-
On the outset, we must highlight our disappointment that Broadway Shopping Centre has given us notice that they do not intend to offer us a new lease...
Given Mirvac's current position, our financial controller suggested during the meeting [this was a meeting at De Costi's head office on 27 July 2009] that in order to minimise your losses to consider the option of De Costi's taking over your business for the remainder of the lease term with the hope that we can increase the business performance and have Mirvac reconsider their position and give us another lease term....
I highlight to you that this offer does expose the Franchisor to considerable risk, because there is no guarantee that they will renew our lease even if we inform them that we will run the business under corporate ownership.
Corrs' letter also quoted the following extract from the recitals to the Deed dated 21 August 2009 ('the Deed') between De Costi, De Costi Seafoods (Holdings) Pty Ltd, Warraboo and Mr Read:-
WHEREAS...
C. The head lessor of the premises known as Shop G5 ("Premises"), De Costi Seafoods at the Broadway Shopping Centre has given written notice to [De Costi] in accordance with the Retail Leases Act 1994 that it does not propose to offer a new lease of the premises.
D. The lease for the Premises will expire on 8 February 2010.
In their letter of 8 December 2010, Corrs made the following assertion regarding Mr Costi's letter of 29 July 2009:-
... the letter... makes plain that your client's claim against our client has no merit. Further, it is clear that you and your client have had knowledge of the existence of this letter during the whole of these proceedings and have commenced and maintained these proceedings in circumstances where you knew, or ought to have known, that your client's claim was doomed to fail.
The matters advanced by Corrs in support of this assertion included the following: (a) De Costi's Application to the Tribunal would fail unless it could establish that Broadway had represented itself as willing to renew the Lease if De Costi bought out the franchise from Warraboo; (b) De Costi had to show that Broadway made this representation before the date (21 August 2009) on which De Costi, by signing the Deed, incurred its liability to buy out the franchise; (c) the only representations made by Broadway before this date were to the effect that it did not propose to renew the Lease, which was due to expire on 8 February 2010; and (d) De Costi was 'now estopped from disputing any allegation of fact contained in the Deed on the principles of Estoppel by Deed which provides that a solemn and unambiguous statement in a Deed must be taken as binding on any party who made it'.
In their letter, Corrs also maintained that De Costi's claim for damages was subject to a further flaw for the following reasons: (a) the debt of Warraboo that was waived under the Deed was owed not to De Costi, but to De Costi Seafoods (Holdings) Pty Ltd; (b) the latter company was not a party to the Lease or to these proceedings; and (c) De Costi therefore did not have standing to bring these proceedings or to claim the damages sought in the Application.
Corrs' letter contained the following further passages:-
...in order to avoid the costs associated with a hearing, our client is willing to settle the claim on the terms set out in this letter. We put you on notice that if your client fails to accept this offer, we will make an application at the commencement of the hearing on 15 December 2010 that your client's claim should be summarily dismissed. Although the Tribunal is in most cases a "no-costs" jurisdiction, we will also seek special orders requiring that your client pay our client's costs of defending the claim. Currently those costs are $34,387.31 including Counsel's fees....
In light of these significant factual and legal matters, your client's Application is doomed to fail. The Respondent is prepared to offer to resolve the claim on the following basis:
1. the Application filed in the Administrative Decisions Tribunal on 11 February 2010 is dismissed; and
2. each party to pay its own costs of the proceedings.
This offer is open until Friday, 10 December 2010 at 4.00 pm. The offer is made in accordance with the principles enunciated in Calderbank v Calderbank (1976) Fam 93. If the Applicant does not accept the offer but ends up worse off than if the offer had been accepted, the letter will be relied upon for the matter of costs. In addition, a costs order in the nature of indemnity costs will be sought against the Applicant.
The offer thus made by Broadway was not accepted.
At the commencement of the hearing on 15 December 2010, Ms Mahony, who appeared for Broadway, applied for an order under section 73(5)(a) of the ADT Act striking out De Costi's Application on the ground that it was 'lacking in substance'.
The arguments advanced by Ms Mahony were in essence those advanced by Corrs in their letter of 8 December 2010. In particular, she argued that Mr Costi's letter of 29 July 2009 and the above-quoted recitals from the Deed revealed the true reason why De Costi bought the franchise for the shop back from Warraboo. De Costi's reason for doing this was not, she said, that it believed that Broadway had promised to renew the Lease if the shop returned to 'company ownership'. Instead, De Costi bought back the franchise in the hope that this would induce Broadway to renew the Lease.
The Tribunal determined, however, that the two items of evidence on which Ms Mahony relied did not undermine De Costi's case to such an extent that summary dismissal was warranted. It accepted submissions by Mr Stanton, counsel for De Costi, to the effect that (a) the summary dismissal of an application under section 73(5)(a) should not be ordered unless the grounds for so ordering were very strong and (b) the totality of the evidence in the matter would have to be examined before De Costi's claim could be held to be 'lacking in substance'.
Following this ruling by the Tribunal, Mr Stanton gave an opening address and tendered documentary evidence on behalf of De Costi, then called Mr Costi as a witness.
During cross-examination, Mr Costi stated that he alone had prepared the witness statement that he had signed and that no-one had 'written it for him'. Ms Mahony then pointed out that in this statement the text of a conversation alleged to have occurred between him and Mr Kondos on a particular day was exactly the same as could be found in Mr Kondos's witness statement. She also showed him a copy of an email message from Mr Kondos to him, which included the phrase 'I attach a draft statement...' Mr Costi's attempts to explain why he had nonetheless claimed to have prepared his statement without any assistance were not convincing.
Ms Mahony then sought to tender the copy of the email message from Mr Kondos, together with other messages involving Mr Costi and Mr Kondos.
At this point, Mr Stanton inquired as to the provenance of this material. He observed that a question of client legal privilege seemed to have arisen. He added that his legal assistance to De Costi was provided on a direct access basis. The hearing was then adjourned for the luncheon break.
When the hearing resumed, Mr Stanton advised the Tribunal that he had discovered that the Lease Police had produced to Corrs a copy of its file in the matter, thereby waiving De Costi's client legal privilege.
Mr Stanton further advised the Tribunal that for this reason he had been instructed to withdraw De Costi's Application.
Ms Mahony indicated that her client raised no opposition to this step, but would be seeking an order for costs. Both representatives stated that they were in a position to make submissions on this question without significant delay.
The Tribunal admitted into evidence a copy of the letter sent by Corrs to Mr Kondos on 8 December 2010 and received a short outline of submissions on costs that Ms Mahony had prepared. The remainder of the hearing was occupied with oral argument on this question.
The parties' submissions on costs
Ms Mahony submitted that Broadway should be held to be entitled to its costs of these proceedings and that the costs should be paid on an indemnity basis from 8 December 2010, being the date on which the letter from Corrs to Mr Kondos was sent by email.
She argued that although under section 88(1) of the ADT Act (which is applicable by virtue of section 77A of the RL Act) the 'starting point' is that each party should bear its own costs, there were good grounds for holding that it would be 'fair', within the meaning of section 88(1A), to make a costs order in Broadway's favour.
So far as relevant here, subsection (1A) states:-
(1A) 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 it is fair to do so having regard to the following:...
(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,
(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,
(d) the nature and complexity of the proceedings,
(e) any other matter that the Tribunal considers relevant.
Ms Mahony relied specifically on paragraphs (c) and (e). Referring to Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71, she argued that paragraph (e) 'requires the Tribunal to consider the whole of the proceedings for relevant matters that impinge on the issue of costs'. Her written submissions included the following list of matters that she claimed to be relevant:-
1. Broadway made a preliminary application that the claim had no tenable basis in fact and ought to be dismissed.
2. De Costi was put on notice of this application by Corrs' letter of 8 December 2010.
3. Broadway provided very thorough reasons in that letter as to why De Costi's Application was doomed to fail.
4. Broadway made an offer of compromise inviting De Costi to withdraw the proceedings on the basis that each party paid its own costs.
5. That offer was not accepted, forcing Broadway to prepare for the hearing and appear at the hearing.
In oral submissions, Ms Mahony added a claim that if the hearing had proceeded, further material put before the Tribunal would have confirmed that De Costi's case was without merit.
Ms Mahony submitted further that the specific events leading to De Costi's withdrawal of its Application should not be deemed relevant. She added that if however the Tribunal thought them relevant, it should take the view that Mr Costi, being a 'sophisticated person', could readily have engaged a qualified legal practitioner, and should not be permitted to plead as some sort of excuse the fact that his agent, a 'non legal person', made an error in producing the Lease Police's file on the case to Broadway's solicitors.
In submissions in reply, Ms Mahony added that the real reason why De Costi withdrew its Application could well have been its realisation that it was not faring well in presenting its case and that the Tribunal, while rejecting Broadway's application for summary dismissal of the proceedings, had expressed doubts about the strength of this case.
The authorities to which Ms Mahony referred included the following passage in Rucom Pty Ltd & Anor v Multiplex & Ors [2010] NSWADT 1 at [37]:-
So, it is plain to me that, not only is this Division a commercial division dealing with commercial issues between lessors and lessees in a retail lease environment, but, and in addition, proceedings should only be commenced in this Tribunal after very careful consideration of the merits of the case: see Trust Company of Australia Ltd v. Craig [2005] NSWADT 65 at [44]. After all, commencing proceedings without such consideration inevitably results in considerable expense being incurred by the other party and one might not unreasonably ask: "why should the other party have to bear those expenses when the proceedings should not have been commenced in the first place?"
In maintaining that the Tribunal should award indemnity costs as from the date of Corrs' letter to Mr Kondos, Ms Mahony relied again on the Tribunal's decision in Rucom v Multiplex . Her written submissions included the following extract from paragraph [59]:-
The Tribunal clearly has power to make such an award: see s.88(2)(a); Barsoum v. Glebe Administration Board (No. 2) [2002] NSWADT 174; and Peng v. Chief Commissioner of State Revenue [2009] NSWADT 295 at [104-116]. It is clearly discretionary and, as such, must be exercised judicially. There is no need for me to review the law in detail: suffice it to say that in order to support an award of indemnity costs the Tribunal needs to be satisfied that there is "a sufficient or unusual feature", or some "relevant delinquency" bearing a relevant relation to the conduct of the case - see for example Colgate Palmolive Co v. Cussons Pty Ltd (1993) 46 FCR 225 at 233-234; Oshlack v. Richmond River Council [1998] 193 CLR 72; White ACT (in liq) v. G B White [2004] NSWSC 303 at [11]; and Liverpool City Council v. Estephen [2009] NSWCA 161 at [95].
The reasons, according to Ms Mahony, why indemnity costs were appropriate were as follows: (a) Corrs' letter had provided De Costi with an opportunity, which it rejected, to withdraw from the proceedings without paying any of Broadway's costs; (b) because this offer 'revealed Broadway's hand', it was in effect an offer of compromise, the rejection of which gave grounds for indemnity costs in accordance with the well-known decision in Calderbank v Calderbank [1976] Fam 93; and (c) Mr Kondos, in his witness statement, had made inflammatory statements alleging improper conduct on Broadway's part.
The main proposition advanced in Mr Stanton's submissions was that De Costi withdrew its Application immediately after it made the highly significant discovery that because a copy of the Lease Police's file had been provided to Corrs, the privilege to which De Costi was entitled had been waived. He submitted that De Costi had 'vacated the field of battle' at the earliest possible moment, in accordance with the following dictum of the Tribunal in Rucom v Multiplex at [65]:-
... parties have an obligation to carefully, and consistently, examine their case and, where it doesn't "stack up" then find some way of vacating the field of battle: see, for example Law Society f NSW v. Jayawardena [2008] NSWADT 187; Law Society of NSW v. Martin [2008] NSWADT 305 at [76]; and Salon Today [ Salon Today Pty Limited v. MMIR Pty Limited [2009] NSWADT 71] at [51-52].
Mr Stanton argued also that Corrs' letter to Mr Kondos was not a Calderbank letter because it only indicated that Broadway would not seek costs. This did not amount, he said, to a genuine compromise of De Costi's claim.
In this connection, the Tribunal drew his attention to a passage (extracts from which are quoted below) in Torchia v Swanton [2010] NSWADT 142 at [37 - 47]. Here the Tribunal held that an award of indemnity costs could be based on a failure by the unsuccessful party to take heed of a 'warning letter' from the successful party, even though this letter did not offer a genuine compromise of the dispute.
In response, Mr Stanton argued that the purpose of the letter from Corrs was to foreshadow an application by Broadway for summary dismissal of the proceedings, and that despite the matters outlined in the letter this application was unsuccessful.
Discussion and conclusions
Should costs be awarded? Two preliminary observations may be made regarding the approach to be adopted in determining this matter.
First, in a recent case relating to section 88 of the ADT Act, AT v Commissioner of Police [2010] NSWCA 131, Basten JA, delivering the judgment of the Court of Appeal, referred at [33] to 'the force of the general principle that each party should bear its own costs in the Tribunal, a principle applicable at both first instance and before the Appeal Panel'. He then said:-
Although an order varying the general rule may be made "only if" the relevant criterion is satisfied in a particular way, there is a relatively low hurdle for an applicant seeking an order. The criterion of "fairness" will take into account the compensatory purpose of an award of costs, which will generally favour the successful party. The circumstances in which fairness may be identified are indicated by the specific attributes listed in sub-s (1A), but subject to the generality of paragraph (e), read in its context. Other considerations will no doubt include the nature of the jurisdiction of the Tribunal which is invoked and the objects identified in s 3(b)-(g) of the [ADT Act]. (emphasis added)
Secondly, paragraph (d) of subsection (1A) of section 88 requires the Tribunal to take account of the 'nature' of the relevant proceedings when determining 'fairness'. In cases applying an earlier criterion of 'special circumstances warranting an award of costs' (the amending legislation substituting 'fairness' became operative on 1 January 2009), it was consistently held that because of the 'commerciality' of proceedings in the Retail Leases Division the interpretation of the phrase 'special circumstances' should differ significantly from the interpretation that might be adopted in any other Division of the Tribunal. The Tribunal's decision in Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 provides an example.
While in the present case the Tribunal has been assisted considerably by the arguments (prepared at relatively short notice) and the authorities put before it by counsel, it considers that a further specific aspect of the case law interpreting section 88 of the ADT Act is of primary importance in this case.
In Rucom Pty Ltd & Anor v Multiplex & Ors [2010] NSWADT 1, the Tribunal said at [55]:-
In addition, I would refer to Haralovic & Carr v. Law Society of NSW (No 2) [2007] NSWADT 97 where [the] Tribunal made this observation at [30]: 'A recognised category of "special circumstances" - see eg Trust Company of Australia Ltd v. Craig & Ors [2005] NSWADT 65 at [44-45] and Nawi No. 3 Pty Ltd & Ors v. ING Management Ltd [2005] NSWADT 235 at [23] - is where a party, having commenced a proceeding in the Tribunal, withdraws it without good reason before the commencement of the hearing. This is not an "ordinary" circumstance, and the fact that the other party or parties have been put to significant expense in conducting preparations that turn out to be unnecessary has been held sufficient to "warrant" a costs order.'
The three cases mentioned in this passage were decided under the former criterion of 'special circumstances warranting an award of costs'. But more recent cases decided under the new criterion of 'fairness' display the same attitude towards a party who commences proceedings, then withdraws them without good reason before the hearing commences. Two examples may be cited.
First, in Torchia v Swanton [2010] NSWADT 142, the applicant lessee filed a retail tenancy claim and an unconscionable conduct claim under the RL Act against the respondent lessor, seeking damages in the amount of $134,896.00. After three directions hearings had been conducted, the respondent filed a notice of motion, accompanied by a substantial affidavit, seeking an order dismissing the proceedings, or in the alternative permanently staying them. The ground stated in the notice of motion was that the disputed matters about which the applicant complained had been resolved in Heads of Agreement that the parties had signed following mediation by the Retail Tenancy Unit. After the notice of motion had been set down for hearing in Lismore, the applicant discontinued the proceedings.
In upholding the respondent's application for her costs to be paid by the applicant, the Tribunal said, at [30] and [36]:-
30 The real issue, in my opinion, is very simple: commencement of proceedings, engagement of legal representation by a respondent/defendant, and discontinuance of those proceedings. Putting aside the Heads of Agreement the Applicants commenced proceedings in this Tribunal. They filed in support of their Application detailed documentation but did not file any sworn material, notwithstanding directions so to do. The Respondent engaged legal representation - in my opinion the Respondent was quite justified in obtaining the services of a solicitor and counsel. The amount in issue was not inconsiderable and clearly the legal issues required more than considerable attention. Various directions were made, various warnings were issued by myself and Fox JM, and yet it was not until after the filing of the Notice of Motion and the "final" Directions Hearing before the Motion would be set down for hearing at Lismore, that the Applicants abandoned the field of battle and withdrew the proceedings. By that stage the Respondent had sought and obtained legal advice, legal representation, no doubt had the benefit of various conferences, had prepared, filed and served a very detailed affidavit and were clearly gearing up for a legal stoush at Lismore. Considerable legal costs had been incurred.
36... I am firmly of the opinion that the commencement of proceedings and their subsequent withdrawal, absent disentitling factors, should result in a costs order under Section 88. There will be circumstances where such an order should not be made where disentitling factors are proven. To withdraw proceedings for "commercial reasons" (as in Trust Company v. Craig ), or, as in this case, for no reason at all that is expressed to the Tribunal, and after more than considerable legal costs had been incurred by the Respondent, clearly indicates the fairness of making a costs order within the terms of Section 88(1A).
Secondly, in Rae v Commissioner of Police, NSW Police (No 2) [2010] NSWADT 254, the applicant, having commenced proceedings under the Anti-Discrimination Act 1977 and given the respondent every reason to believe that he would pursue them at a forthcoming hearing, withdrew them three days before the commencement of the hearing. The respondent applied for costs under section 88 of the ADT Act. The Tribunal said, at [81]:-
The withdrawal of proceedings under the [ Anti-Discrimination Act ] by the applicant shortly before the scheduled hearing provides grounds for the making of a costs order against him or her under section 88(1A) of the ADT Act (in its current form) unless there are reasonable grounds justifying the withdrawal at such a late stage. This form of conduct by the applicant can properly be regarded as an instance of 'prolonging unreasonably the time taken to complete the proceedings' under paragraph (b) of section 88(1A). Alternatively, it should be treated, in the light of case law interpreting the earlier costs provisions, as a relevant consideration under paragraph (e).
At [82 - 94], the Tribunal considered whether two grounds put forward by the applicant for withdrawing the proceedings at such a late stage were reasonable. It held that they were not, and accordingly determined that his conduct in withdrawing them fell within paragraphs (b) and (e) of section 88(1A), thereby providing grounds for an award of costs against him. That decision, it should be noted, is under appeal.
In the present case also, it is appropriate to ask whether the grounds on which De Costi withdrew its Application at such a late stage - after the hearing had commenced - were 'reasonable'. Mr Stanton argued that the late discovery that privilege in relation to the contents of the Lease Police's file had been waived in error constituted the grounds for withdrawing, and that these were reasonable grounds. Ms Mahony maintained that the real reason for the withdrawal might well have been the realisation by De Costi that its case was faring badly.
In the Tribunal's judgment, De Costi, on whom the onus lies, has not demonstrated that its conduct in delaying until the hearing had commenced before withdrawing its Application was based on reasonable grounds. It is evident that the disclosure of the file by the Lease Police to Corrs occurred some time before the hearing. The Lease Police must have known that it had occurred, even though they appeared not to have realised its significance. To the extent that their failure to do so provides grounds for their permitting the case to proceed to trial, these were not reasonable grounds.
Equally, if the 'real' reasons why the proceedings were withdrawn so late in the day were, as Ms Mahony argued, that De Costi was concerned about the progress of its case, and/or that De Costi was increasingly coming to realise that Corrs' letter of 8 December 2010 to Mr Kondos drew attention to serious weaknesses in its case, these are also not 'reasonable grounds'. The factual matters underlying both these possible grounds were known to Mr Costi and/or to Mr Kondos by, at the latest, the date of the letter from Corrs.
With regard to Ms Mahony's argument based on paragraph (c) of section 88(1A), the Tribunal's first observation is that because the matter never proceeded to a full hearing, it cannot make a final determination that De Costi's case had 'no tenable basis in fact or law' (cf. similar rulings by the Tribunal in Torchia at [29] and Rae at [103]). It considers, however, that the arguments put by Corrs in their letter of 8 December 2010 received strong support in the material accompanying that letter (notably Mr Costi's letter of 29 July 2009 to Mr Read) and that, at the least, De Costi's claim faced formidable obstacles. While these circumstances may not be sufficient to engage the operation of paragraph (c), what can be said is that this is not a situation in which a discontinuing party against whom costs are sought appeared to have strong chances of success at the time when it decided to withdraw its claim.
It is significant also that, as in Torchia v Swanton , the amount claimed by the present applicant, De Costi, is substantial ($400,000) and the amount of legal costs incurred by Broadway in preparing to defend the proceedings is likely to have been substantial. Corrs, in their letter of 8 December 2010 to Mr Kondos, quoted the figure of $34,387.31 for the costs thus far.
In the Tribunal's opinion, these aspects of the matter - primarily, De Costi's failure to demonstrate that it had reasonable grounds for withdrawing its Application at the distinctly late stage when it chose to do so - warrants an award of costs in Broadway's favour pursuant to the criterion of 'fairness' in section 88(1A).
Should indemnity costs be awarded? With regard to Broadway's claim that costs should be paid on an indemnity basis as from the date of Corrs' letter to Mr Kondos, the Tribunal agrees with Mr Stanton's submission that this letter was not a ' Calderbank letter' because it did not contain a genuine offer of compromise. This conclusion accords with a number of decisions on comparable letters made with reference to section 88 of the ADT Act: see for example Ashenhurst v Optima Property Developments Pty Ltd [2006] NSWADT 143 at [17], [18] and [28]; Rae v Commissioner of Police, NSW Police (No 2) [2010] NSWADT 254 at [104 -105].
In Torchia v Swanton [2010] NSWADT 142, however, the Tribunal awarded indemnity costs on the ground that the applicant had rejected an offer by the respondent in very similar terms to that contained in Corrs' letter to Mr Kondos. The following passages, drawn from paragraphs [37], [40], [45], [46] and [47] of the Tribunal's decision, sufficiently explain its reasoning:-
37 The Respondent applies for costs to be awarded on an indemnity basis. The Respondent submits, and it is the fact, that the Applicants "have been on notice for the whole of the proceedings that an order for costs would be sought". The Applicants relied upon the concession by the Respondent that the relevant initial letter 19 June 2009 did not amount to "a Calderbank offer". The letter was from the Respondent's solicitors to the Applicant and which asserted that the Section 71 claim was "an attempt to relitigate" the original dispute which had been "resolved at mediation", the Section 71A claim "sets out no grounds for a claim of unconscionable conduct" and warning the applicants that if they pursued their "application and are unsuccessful, we (the respondent) shall seek costs against you from the date of this letter" but if the application was withdrawn within 14 days no such costs order would be sought.
40 It is my respectful view that Calderbank has got absolutely nothing to do with this issue now before the Tribunal. Thus, even if a letter such as the 19 June letter is not a Calderbank letter or a Calderbank offer, it constitutes a very clear warning to the applicants and very fairly gives them an opportunity to withdraw, and importantly, without costs penalty. Such letters are not uncommon and it does not follow, in my respectful view, that because such a letter is not specified to be a Calderbank letter, or does not meet the Calderbank requirements, that costs, and indemnity costs, should not flow as a consequence of the failure of the Applicants to heed the warning fairly given.
45 There is no doubt that this Tribunal has power to make costs orders on an indemnity basis. Barsoum [ Barsoum v. Glebe Administration Board (No 2) [2002] NSWADT 174] is adequate authority for that proposition; similarly, Rucom Pty Limited v. Mutiplex [2010] NSWADT 1. Indeed, in Rucom there was a careful analysis of the law relating to indemnity costs from [59 ff]. It is plain that the Tribunal "needs to be satisfied that there is "a sufficient or unusual feature", or some "relevant delinquency" bearing a relevant relation to the conduct of the case...
46 It is my view that the withdrawal of the proceedings in all the circumstances I have been at pains to set out above is "a sufficient or unusual feature" that would support an award of indemnity costs. In my view the Tribunal needs to look at the whole of the issues raised, starting from the commencement of the proceedings, the letter 19 June 2009, the continuation of the proceedings, the filing of a Motion seeking dismissal, various Directions Hearings and the ultimate abandonment of the proceedings without any reason being given.
47 There should be an award of costs on an indemnity basis.
In the Tribunal's opinion, this reasoning accords with the authorities on indemnity costs and is applicable to the circumstances of the present case. Indemnity costs should therefore be awarded.
The Tribunal would add one general observation. Despite the opinion expressed in the first sentence of paragraph [45] of Torchia , the approach taken by the courts in Calderbank v Calderbank [1976] Fam 93 and in the many cases following this decision is, in the present Tribunal's respectful opinion, significant for situations such as arose in these proceedings. The underlying proposition is that the unreasonable rejection by the losing party of an offer to bring the proceedings to an end without further costs being incurred should always be brought into consideration when determining a costs application. However, the specific principles that were stated and applied by the court in Calderbank should not be applied mechanically to applications made to the Tribunal under section 88 of the ADT Act. They should operate by analogy only. The reason for this is simple. The line of authority stemming from Calderbank governs costs awards in jurisdictions where, prima facie, costs 'follow the event'. Under section 88, the starting point is that the parties pay their own costs, and the Tribunal should only make a costs order when it is 'fair' to do so.
In Torchia , payment of all of the respondent's costs was ordered on an indemnity basis. In the present case, Broadway's application for indemnity costs was limited to its costs incurred after the sending of the letter of 8 December 2010. In the Tribunal's opinion, an order thus limited is appropriate.
For the foregoing reasons, the Tribunal orders as follows: (a) the Applicant is to pay the Respondent's costs of the proceedings, as agreed or assessed under the Legal Profession Act 2004; and (b) those costs are to be paid on an indemnity basis from 8 December 2010.
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Decision last updated: 08 March 2011
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