Estasy v Challenger Property Nominees
[2013] NSWADT 290
•18 December 2013
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Estasy v Challenger Property Nominees & anor [2013] NSWADT 290 Hearing dates: On the papers Decision date: 18 December 2013 Jurisdiction: Retail Leases Division Before: K Rickards, Judicial Member Decision: 1. The application for an order awarding interest is dismissed.
2. The parties are to bear their own costs of the proceedings.
Catchwords: Interest, Costs Legislation Cited: Retail Leases Act 1994; Administrative Decisions Tribunal Act 1997: Cases Cited: Dykes and Wildie v Heatherway Pty Ltd [2007] NSWADT AP 26 Category: Principal judgment Parties: Ezzat Estasy and Carol Estasy (Applicants)
Challenger Property Nominees Pty Limited (First Respondent)
Challenger Listed Investments Limited (Second Respondent)Representation: Emil Ford Lawyers (Applicant)
Henry Davis York (Respondents)
File Number(s): 135017
REASONS FOR DECISION
Background
The Applicants are the lessees of a retail shop located within the Kings Langley Shopping Centre in western Sydney, New South Wales ("the premises"). The Respondents are the owners and lessors of the premises.
The original Application filed in these proceedings sought:
(1) A declaration that the previous valuation of the "current market rent" payable under the subject lease for the period 1 July 2009 to 30 June 2011 provided by the valuer Lydia Awad on15 February 2010 did not comply with section 19 of the Retail Leases Act 1994 (the "RL Act") and was therefore not binding upon the parties;
(2) An order that there be another retail valuer appointed by the Tribunal to carry out another valuation of the "current market rent" payable for the period 1 July 2009 to 30 June 2011;
(3) An order for payment by the Respondents of the "difference" between the rent actually paid by the Applicants over that period and the new market rent for that period as now assessed;
(4) An order that the Respondents pay interest to the Applicant in respect of any such "difference", and;
(5) An order that the Respondents pay the Applicant's costs of these proceedings.
The Application was subsequently amended to seek additional declaratory and restraining orders to:
(1) permit the Applicants to continue to have a St George Bank automatic teller machine ("the ATM") within the premises, and;
(2) restrain the Respondents from terminating the lease by reason of the presence of the ATM at the premises.
Following commencement of these proceedings, the Respondents agreed that the valuation provided by Ms Awad should be set aside and that a new valuer should be appointed to again assess the "current market rent" for the premises for the period 1 July 2009 to 30 June 2011 (referred to below within this decision as "the relevant period"). The Tribunal then appointed Mr Lance Kenny to undertake this valuation ("the Kenny valuation").
By reason of the Kenny valuation, it transpired that the Applicants had paid a total amount for rent far in excess of what they should have paid over the relevant period.
The Kenny valuation was completed on 15 October 2013. On 7 November 2013, the Respondents paid the sum of $81,884.15 to the Applicants which was the amount assessed by them, based upon the Kenny valuation, to be the due amount of overpayment of rent which was repayable.
The Respondents subsequently gave their consent to the presence of the ATM at the premises.
On 7 November 2013 the parties advised the Tribunal that the only remaining issues between them were the orders for costs and interest sought by the Applicants.
The Respondents contend that the parties should each bear their own respective costs given the circumstances surrounding this matter, and that there should be no order for payment of interest.
Consideration of the evidence and submissions establishes the following outline of facts and events.
Outline of Facts and Events
The subject retail lease of the premises ("the lease") commenced on 1 July 2006 and contained a 5 year term with a 5 year option period.
On 24 August 2007 the Applicants entered into a licence agreement with St George Bank for the installation of the ATM. The licence agreement, which was submitted to the Applicants under cover of a letter dated 18 July 2007 from the solicitors acting for St George Bank, indicated that the bank did not require the Applicants to obtain the Respondents' consent for the installation of the ATM because the standard reference to the need for such consent as set out within clause 7 of the agreement was crossed out and deleted. There is no evidence to indicate that the Respondents' consent had previously been sought to this arrangement or that formal notification was made to them.
On 1 July 2009 a rent review was required under the terms of the lease, and this was subsequently arranged to be undertaken by the valuer Lydia Awad.
In a letter to the Applicants dated 17 September 2009, the Respondents' agent CBRE noted that a St George Bank ATM had been installed within the premises but that there were no records relating to such installation or to any approval by the Respondents. This letter asked the Applicants to provide "confirmation of approval". There is no evidence of any response by the Applicants to this letter.
On 15 February 2010 Ms Awad completed her valuation which, in general terms, increased the rent payable as and from 1 July 2009 by a factor of approximately 24%. The Applicants then commenced paying this higher rent.
Notice of exercise of the option to renew the term of the lease from 1 July 2011 was later given by the Applicants; this meant that a further assessment of "current market rent" was required to be undertaken in order to determine the new rent payable for the new term. The new rent valuation which was then undertaken determined that the rent payable for the renewed term of the lease from 1 July 2011 was to be decreased by a factor of approximately 38%. A review of this determination was subsequently obtained by the Respondents through the Tribunal, which confirmed the determination.
The Applicants then commenced paying this new lower amount of rent as and from 1 July 2011. Over a year later on 23 August 2012, in a letter sent to the Respondents, they complained about the level of payment for outgoings which was then being sought from them by the Respondents. This letter also complained that the 2010 rent valuation provided by Ms Awad had been incorrect, and stated that the Applicants should therefore have been paying a much lower rent than that assessed by Ms Awad during the relevant period.
On 12 February 2013 the solicitors who now represent the Applicants wrote to the Respondents' agents CBRE and asserted that the Awad valuation had not complied with the requirements of the RL Act, in particular the factors set out within section 19(1) (a). It was also stated that this non-compliance had been identified within the reports containing the subsequent valuations which had been undertaken in July 2011 upon renewal of the lease. Within this letter, agreement was sought from the Respondents that the Awad valuation be set aside, that another valuation be undertaken of "current market rent" payable for the subject period, and that the Respondents repay to the Applicants any difference between the amount paid by the Applicants and the "current market rent" assessed as payable.
Notwithstanding the nature and scope of the concessions which were being sought from the Respondents within the above letter, it was also indicated that, in the absence of agreement by the Respondents, proceedings would be commenced in the following 2 to 3 days.
The present Application was then filed on 14 February 2013.
By letter dated 25 February 2013 the Respondents' solicitors sought particulars of the alleged non-compliance of the Awad valuation with section 19(1)(a) of the RL Act. In response to this request, a communication was sent by the Applicant's solicitors on the same day stating simply that:
"With respect, a plain reading of the legislation, in light of relevant cases, will provide the answers you are looking for.
It may be of assistance for you to look at the Decision of the Tribunal in Hunt v Cassaran [2012] NSWADT 193. In particular paragraphs 28 and following may provide the assistance you require..."
On 28 February 2013 these proceedings were listed for directions. Orders were made by consent of the parties that the Applicants were to file and serve submissions on or before 28 March 2013, the Respondents were to file and serve submissions on or before 11 April 2013, and the Application was to thereafter be determined "upon the papers" without any hearing.
On 15 March 2013 the Respondents' solicitors wrote to the Applicant's solicitors and asked for evidence of consent to the installation of the ATM at the Premises. In reply, the Applicant's solicitor advised in a letter dated 19 March 2013 that:
"We propose to respond formally to the request for details relating to the ATM by Friday, 22 March 2013 and we will assume that no steps will be taken to terminate the lease."
Notwithstanding the above advice, the Applicants did not in fact provide any further response to the Respondents' enquiry about the ATM but instead filed the Amended Application seeking the additional orders set out above in paragraph 3.
On 26 March 2013, following the filing of the Amended Application, it was determined by me in chambers that the previous orders for filing and service of submissions should remain on foot and that a decision as to whether or not determination of the proceedings should still proceed "on the papers", be deferred until after 11 April 2013.
On 28 March 2013 the Respondents' solicitors advised of their instructions to consent to the setting aside of the Awad valuation and to have a new valuation undertaken for the relevant period.
On 16 May 2013 the Tribunal appointed Mr Lance Kenny as valuer to undertake valuation of the "current market rent" payable for the relevant period. It appears that Mr Kenny suffered a degree of ill health over the ensuing weeks and his valuation report was not published until 15 October 2013.
On 23 July 2013 the Respondents' solicitor wrote to the Applicant's solicitor advising that the Respondents would provide formal consent to the ATM licence upon the basis that the Amended Application was withdrawn and each party bear its own costs in relation to the ATM issue. Another letter was later sent on 5 November 2013 by the Respondents' solicitors indicating the formal consent of the Respondents to the ATM.
As outlined above in paragraphs 5 and 6, the Kenny valuation determined that the market rent properly payable for the relevant period was significantly less than the amount which had in fact been paid by the Applicants. The total amount of such overpayment was calculated by the Respondents to be $81,884.15 and this sum was accordingly paid by them to the Applicants on 7 November 2013.
Claim for Additional Repayment of Rent
At paragraph 64 of the Applicant's submissions, a complaint is made that: "the amount to be repaid to the Applicants can be accurately identified. The amount is $82,804.11. It should be noted that on 7 November 2013 the amount of $81,884.15 was paid by the Respondents to the Applicants. It is unclear what this amount represents."
The Respondents' schedule of calculation of the rent repayable to the Applicants has been provided as an attachment to their submissions. The calculations appear accurate and clearly set out the manner in which the amount repaid to the Applicants was calculated. The set of calculations provided by the Applicants are comparatively unclear; despite their repeated insistence that an additional amount of approximately $920 is still due to be repaid, it is difficult to discern how this has been arrived at or why the calculations of the Respondents are wrong.
It should also be noted that these proceedings were referred for a decision "on the papers" upon the basis that the only issues remaining in dispute were interest and costs. It is inappropriate for the Applicants to now "at the heel of the hunt" seek to agitate the issue of whether the Respondents have repaid the correct amount of rent. The amount in issue is in any event modest and, as set out above, the calculations of the Respondents are preferred over those of the Applicants.
Interest
The Tribunal may, in its discretion, award interest pursuant to the powers conferred upon it by section 72A of the RL Act:
72A Power of Tribunal to award interest
(1) When the Tribunal orders on a retail tenancy claim or an unconscionable conduct claim that a person pay money to another person, the Tribunal may order that there is to be included, in the amount ordered to be paid, interest at a specified rate on the whole or any part of that amount for the whole or any part of the period between when the cause of action arose and when the order takes effect.
(2) If the whole or part of an amount claimed under a retail tenancy claim or an unconscionable conduct claim is paid during proceedings in the Tribunal on the claim, prior to or without an order for payment being made in respect of the claim, the Tribunal may order that interest be paid at a specified rate on the whole or any part of the money paid for the whole or any part of the period between when the cause of action arose and the date of the payment.
(3) The rate of interest specified by the Tribunal under this section must not exceed the rate at which interest is payable on a judgment debt of the District Court.
(4) This section does not:
(a) authorise the giving of interest on interest, or
(b) apply in relation to any debt on which interest is payable as of right whether by virtue of any agreement or otherwise, or
(c) affect the damages recoverable for the dishonour of a bill of exchange.
(5) On a claim for the payment of money, the Tribunal may not order the payment of interest under subsection (1) in respect of the period after the date on which an appropriate settlement sum (or the first appropriate settlement sum) has been offered unless the special circumstances of the case warrant the making of such an order.
(6) For the purposes of subsection (5),
"appropriate settlement sum" is a sum offered by a party in settlement of a claim for the payment of money where the amount ordered to be paid (including interest accrued up to and including the date of the offer) does not exceed the sum offered by more than 10 per cent. Subsection (5) does not prevent an award of interest for the period before the settlement offer is made.
At paragraphs 23 of the Respondents' written submissions and following, only section 72A(1) is recited in support of their submission that, because there has been no Tribunal order for payment of money, the Tribunal cannot now make an award of interest. The provisions of section 72A(2) (see above) defeat this contention. Although a precise amount of money was not claimed in these proceedings, it was claimed that the previous Awad valuation was defective, that a new alternative valuation should be ordered, and that any amount of money identified as overpaid rent by reason of the new valuation should then be repaid by the Respondents. Within a short period of time after publication of the Kenny valuation, an amount of money identified as overpaid rent was repaid by the Respondents and the provisions of section 72A(2) were therefore enlivened.
Determination as to whether interest should be paid by the Respondents and, if so the amount of interest to be paid, fundamentally rests upon consideration of the form and nature of the Applicants' cause of action for repayment of overpaid rent, when that cause of action actually arose, and the steps taken to advance the Applicants' claim.
The fundamental purposes of an award of interest must first be considered, which are: to protect the true value of any amount owing to a party; to provide an element of profit to the party to whom money is owed so as to compensate for foregone notional income, and to deter delay in payment of a debt. In addition to these considerations, account should also be had of any unreasonable or unexplained delay by a party in seeking recovery of any amount claimed to be owed.
The above approach was also approved by the Appeal Panel in Dykes and Wildie v Heatherway Pty Ltd [2007] NSWADT AP 26:
"54 Assessment. The primary function of compensation by way of interest, whether deriving from the contract or by way of judgment interest, is to protect the creditor against the erosion in value of the amount owing. Insofar as the rate is set above the inflation rate, it builds in a profit element to the creditor; and acts as a deterrent against slow payment. In ordinary circumstances the creditor should be entitled to interest for the whole period between the time of first default and the time of the order.
55 The Tribunal appears to have taken the approach that it ought to enforce the provisions of the lease up until 9 January 2004, but after that the question of awarding any further interest became discretionary. In our view the grant of relief under either s 72(1)(a) or s 72A is discretionary.
56 It is most undesirable that a creditor move against a debtor long after the default has ended (in this instance on 1 July 2000). We endorse the view to which Mr Zipser drew our attention expressed in Metro Meat Ltd v Werlick(1993) Aust Torts Reports 81-242 (South Australian Supreme Court (Full Court)) per Olsson J:
'There have been a number of pronouncements of judges of this court bearing upon the approach proper to be adopted towards the allowance of interest in situations in which there has been delay on the part of a plaintiff in prosecuting proceedings ... It seems to me that a clear balance of authority does favour the disallowance of interest in respect of any significant period of time during which there has been inexplicable tardiness on the part of the plaintiff in prosecuting his claim'."
The Applicants had a cause of action to seek to set aside the Awad valuation from the date of its publication. The Applicants later contended through their solicitor's letter sent to CBRE on 12 February 2013 that the valuation reports undertaken in early 2011 had identified fault or statutory non-compliance within the Awad valuation. Their dissatisfaction with the Awad valuation was also expressed in their own letter sent to the Respondents on 23 August 2012. However, until such time as the Kenny valuation was published on 15 October 2013, the Applicants had no cause of action for repayment of overpaid rent because, although it had been claimed that the Awad valuation was non-compliant and in error, there had been no new determination that the market rent payable for the relevant period was lower than the amount actually paid by the Applicants, and accordingly there was no cause for repayment of any overpaid rent, until that time.
Even if a cause of action for recovery of overpaid rent had arisen before publication of the Kenny valuation, the absence of any fault or liability on the part of the Respondents for the overpayment of rent, coupled with the unexplained delay on the part of the Applicants in taking any steps to obtain advice or undertake action despite their long-standing disquiet about the amount of rent they were paying, gravitate against the order for interest sought by the Applicants.
Repayment of overpaid rent was effected by the Respondents on 7 November 2013, which was 23 days after publication of the Kenny valuation. This is well within the usual 28 day period which is afforded to parties who are required to make payment pursuant to court or tribunal orders. The Tribunal accordingly finds that no interest should be awarded in these proceedings.
Costs
The principles which govern costs orders by the Tribunal are set out at section 88 of the Administrative Decisions Tribunal Act 1997:
88 Costs
(1) Each party to proceedings before the Tribunal is to bear the party's own costs in the proceedings, except as provided by this section.
(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:
(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings by conduct such as:
(i) failing to comply with an order or direction of the Tribunal without reasonable excuse, or
(ii) failing to comply with this Act, the regulations, the rules of the Tribunal or any relevant provision of the enactment under which the Tribunal has jurisdiction in relation to the proceedings, or
(iii) asking for an adjournment as a result of a failure referred to in subparagraph (i) or (ii), or
(iv) causing an adjournment, or
(v) attempting to deceive another party or the Tribunal, or
(vi) vexatiously conducting the proceedings,
(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.
(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 a basis set out in Division 11 of Part 3.2 of the Legal Profession Act2004 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.
In considering whether it is fair to make a costs order in accordance with the provisions of section 88, the starting point is that there is to be no order for costs unless the Tribunal is persuaded that it is fair to do so. In considering whether this statutory presumption should be displaced in these proceedings, a number of factors have been taken into account and are set out below.
Two associated factors which should be considered are that these proceedings were commenced after only very short notice had been given to the Respondents, but after a significantly long period of time had passed after the Awad valuation and also after the relevant period which was the subject of the proceedings.
Another relevant matter to take into account is that, within a relatively short period after the time that these proceedings were commenced, the Respondents agreed to the Awad valuation being set aside and a new valuation being undertaken. A considerable amount of potentially wasted time, delay and expense for each of the parties and the Tribunal was avoided by this step being taken at an early stage.
Another relevant factor is the decision of the Applicants to amend the Application without warning to seek declaratory and injunctive orders in respect of the ATM when the Respondents were still awaiting a promised reply by the Applicants to their enquiry about the ATM and in circumstances where the Respondents had evinced no intention to take any action in relation to the ATM adverse to the interests of the Applicants. The Tribunal considers that the filing of the Amended Application was premature and unnecessary.
The Calderbank offer which was made on behalf of the Applicants is, given the decision not to award interest, ineffective and cannot displace the statutory presumption that each party bears its own costs of these proceedings.
There is also nothing, in the Tribunal's view, about the behaviour of the Respondents prior to or during these proceedings which would justify departure from the principle that the parties bear their own costs of the proceedings. Accordingly, the Applicant's application for a costs order is refused.
ORDERS
1. The application for an order awarding interest is dismissed.
2. The parties are to bear their own costs of the proceedings.
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Decision last updated: 18 December 2013
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