Garces v TMG Argyle Pty Ltd

[2011] NSWADT 101

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation:	Garces v TMG Argyle Pty Ltd and another [2011] NSWADT 101
Hearing dates:	On the papers
Decision date:	13 May 2011
Jurisdiction:	Retail Leases Division
Before:	P. H. Molony, Judicial Member
Decision:	Order that the respondents pay the applicant's costs of this proceeding, such costs, in default of agreement, to be assessed on a basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 .
Catchwords:	Retail leases - costs
Legislation Cited:	Administrative Decisions Tribunal Act 1997 Evidence Act 1995 Retail Leases Act 1994
Cases Cited:	AT v Commissioner of Police [2010] NSWCA 131 Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 Gpi Leisure Corporation Ltd (in Liq) v Yuill [1997] NSWDC 258 Jonamill Pty Ltd v Alramon Pty Ltd (No 2) (RLD) [2010] NSWADTAP 3 Pochi and Minister for Immigration and Ethnic Affairs [1979] AATA 64 Rucom Pty Ltd and Anor v Multiplex & Ors [2010] NSWADT 1 Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71
Category:	Costs
Parties:	Rui Alberto Garces (Applicant) TMG Argyle Pty Ltd and AMCO Argyle Pty Ltd (Respondents)
Representation:	Applicant - G Lucarelli Respondent - Mr Ramirez, Agent Applicant - Macquarie Partnership Lawyers Respondents – Speed & Tracey
File Number(s):	105107

REasons for decision

Background

1. On 26 October 2010 Mr Garces, as sub-lessee of shop premises at which he conducts a Caf , filed an application for an original decision in the Retail Leases Division of the Tribunal, together with an application for an urgent interim order. The respondents were named as TMG Argyle Pty Ltd and AMCO Argyle Pty Ltd as sub-lessors. The application for an original decision, among other things, sought orders declaring a notice of breach dated 11 October 2010 of no effect, relief against forfeiture, and orders relating to the supply of reasonable air-conditioning.

1. The application for urgent interim orders, among other things, sought an order restraining the respondents from terminating the lease. The application for urgent interim order was heard on 4 November 2010. By consent the Tribunal made orders retraining the respondents from terminating the lease, from taking possession of the shop, and requiring the respondents to provide air-conditioning to the shop within 21 days. The Tribunal also made directions requiring the respondents to serve signed witness statement by 18 February 2011, and to make available for inspection and copying by the applicant certain specified documents. The application was listed for further directions on 3 March 2011.

1. A mediation took place on 20 December 2010 but was unsuccessful.

1. At the directions hearing on 3 March 2011 the parties were all legally represented. The respondents had not complied with the directions made on 4 November 2010: no witness statements had been filed, and inspection of the documents had not taken place. Mr Kleinberg, who appeared for the respondents on that occasion sought additional time in which to comply. This was resisted by the applicant, who also sought to agitate an issue relating to the air-conditioning system at the caf , which he said blew hot air, making it useless. The respondents sought to address this problem, by agreeing to have an air-conditioning report prepared.

1. After considerable debate between the parties, I made orders that the respondents 'serve signed lay witness statements by 4pm on 17 March 2011, and any expert statement by 24 March 2011. I made it clear to Mr Kleinberg that this was an indulgence by the Tribunal, and that further indulgences were unlikely to be granted. I also ordered that the respondents were to provide the applicant with a copy of the air-conditioning report. On the application of the applicant I granted leave to issue a summons to produce to the Sydney Harbour Foreshore Authority and the City of Sydney Council, with respect to a development application (DA 040-03-08) made concerning the shop premises. I adjourned the application to a further directions hearing on 31 March 2011.

1. On 10 March 2011 the respondents emailed to the applicant's solicitors an unsigned report from Haden (Air-Conditioning and Electrical Engineering) dated 4 March 2011, apparently written by Mr Taino, Area Manager. It advised that a technician had attended the site and found that the air-conditioning is working within design parameters and is operating as expected in its application.

1. On 29 March 2011, under cover of a letter headed without prejudice, addressed to the applicant's solicitors, the respondents noted that attempts to arrange a further mediation had failed, due to the applicant's refusal to participate. A certificate of failed mediation issued on 23 March 2011 was enclosed. The letter then advised -

Your client on 11 October 2010 was issued with a Notice of Breach by our solicitors Lands legal. We advise that this notice has now been withdrawn and we are not seeking to exercise any action in accordance with this notice. ...

The letter went on to advise that there remained issues about the odours emitted from the caf and invited the applicant to participate in a mediation about that issue. The letter also enclosed a copy of the air-conditioning report.

1. On 31 March 2011 the respondents were not legally represented, but were represented by an agent, Mr Ramirez. He consented to orders being made that effectively put an end to the proceedings, save for the issue of costs. Those orders were -

1. The Tribunal orders and declares that the purported notice of breach dated 11 October 2010 issued by the Respondents to the applicant with respect to the applicant's sub-lease of the Shop is of no force or effect.

2. The Tribunal orders and declares that the applicant's current use of the Shop (as defined) is a permitted use in accordance with the sub-lease between the applicant as sub-lessee and the respondents as sub-lessors.

3. The interim orders 1,2,3 and 4 made on 4 November 2010 are dissolved.

4.The Tribunal notes that on 4 November 2010 it ordered the respondent sub-lessors to provide air-conditioning to the Shop within 21 days, that such order remains on foot and that the proceedings are otherwise concluded, save as to costs.

5. In these Orders "Shop" means the Vintage Caf, being shops R2 and R3 at 34-52 Harrington Street, The Rocks, Sydney, part of folio identifiers 11/773812, 14/773812, 24/773812, 28/773812, 29/773812, 30/773812.

1. The Applicant sought an order that the respondents pay his costs of the proceedings. Mr Lucarelli, who appeared for the application, provided written submissions on the issue and addressed me on the costs issue. Because I was concerned that Mr Ramirez did not have the understanding necessary to properly respond to the issues raised in those submissions, I declined to determine the issue at that time. Instead I required the respondents to file and serve "any submissions and evidence relied on in support concerning costs by 4pm on 14 April 2011". I considered this should give Mr Ramirez sufficient time to obtain advice and formulate an appropriate response. I allowed the Applicant to file submissions and evidence in reply by 29 April 2011.

1. During that hearing I allowed the applicant to rely on the respondent's letter of 29 March 2011, despite the fact that it was headed without prejudice. I did so on the basis that the letter was not covered by the privilege in s 131 (1) of the Evidence Act 1995 because it was not an attempt to negotiate a settlement of a dispute. Rather it was written advice that the respondents were no longer relying on the Notice of Breach which led the applicant to institute proceedings, together with a suggestion about mediation in relation to a matter not the subject of the proceedings. I did not regard the letter as an offer or attempt to negotiate a settlement; rather it was a capitulation: Gpi Leisure Corporation Ltd (in Liq) v Yuill [1997] NSWSC 258.

Submissions

1. In his original submissions on costs Mr Lucarelli submitted that by issuing the Notice of Breach the respondents threatened to terminate the applicant's sub-lease. This led the applicant to commence the proceedings, in order to seek protection against threatened conduct. Now, nearly five months after the proceedings were commenced, the respondents have withdrawn that notice.

1. In the intervening period, the applicant submitted, that the respondents had ignored every procedural order made by the Tribunal and had failed to offer any explanation for doing so.

1. The applicant suggested that 'perhaps' the real reasons for the respondents' withdrawal of the Notice of Breach may be that evidence of their plans to redevelop the shop had been found. There is no evidence that this is the respondents' motive; the submission is speculative.

1. The applicant submitted that in the circumstances the respondents should pay its costs.

1. In their written submissions the respondents made a series of assertions concerning the nature of the dispute between the parties being essentially unchanged from start to finish. The submissions set out, under the heading chronology of events, a series of events concerning that dispute and how each party had acted in the course of it. This was objected to by the applicant on the basis that the submissions were unsupported by evidence, which the respondents had been given an opportunity to adduce. While the Tribunal is not bound by the rules of evidence (s 73(2) Administrative Decisions Tribunal Act 1997) it is required to reach conclusions based on the material before it which is logically probative: Pochi and Minister for Immigration and Ethnic Affairs [1979] AATA 64 per Brennan J. There is no evidence that provides a basis for this part of the respondents' submissions.

1. The respondents submitted that, since the failed mediation in December, the applicant has refused to participate in a second mediation that the respondents had sought to arrange 'since 7 March 2010.' This refusal, it was submitted, was relevant to the consideration of costs. In response the applicant produced letters from his solicitors to the respondent's solicitors dated 8 March 2011, and to the respondents dated10 March 2011. It is apparent from reading that correspondence that the applicant did not refuse to participate in a further mediation (indeed a meeting was arranged for 14 March), but was insistent that the respondents' legal representatives also attend.

1. The respondents submit that the applicant's reliance on their failure to file statements of evidence by 18 February 2011, as directed, fails to take into account the fact that the may not have relied on any evidence, additional to that already filed by the applicant. Further they say that delay in filing evidence was occasioned by the applicant's failure to provide use and occupation consents requested of him. As the applicant points out in reply, this submission is inconsistent with that put by the respondent's counsel on 3 March 2011, when seeking an extension of time in which to comply with the directions. At that time no explanation was advanced for the delay.

1. The respondents say that the failure to provide inspection to documents in accordance with the orders made on 4 November 2010 is due to the fact that they were not the sub-lessors at the time the documents were created, and do not have them. In reply the applicant says that this statement is unsupported by evidence and that the respondent never advised the applicant that they had nothing to produce.

1. Finally the respondents argue that the applicant does not point to any disadvantage he has suffered as a result of manner in which the they have conducted the litigation, or evidence that they have occasioned unnecessary costs.

The discretion to award costs

1. Section 77A of the Retail Leases Act 1994 provides that -

The Tribunal may award costs under section 88 of the Administrative Decisions Tribun a l Act 1997 in respect of proceedings commenced by an application made under this Part.

1. Section 88 of the ADTA provides -

(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 Act 2004 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.

1. In AT v Commissioner of Police [2010] NSWCA 131 the Court of Appeal considered the power to award costs under s 88 of the Administrative Decisions Tribunal Act 1997 . In delivering the judgment of the Court Basten JA said, at [33]"

... 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. 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 Tribunal Act .

1. In Jonamill Pty Ltd v Alramon Pty Ltd (No 2) (RLD) [2010] NSWADTAP 3 the Appeal Panel pointed out that s 88(1)(d) referred to the 'nature' of the proceedings and noted that proceedings in the Retail Leases Division have long been accepted as having a 'commerciality' to them. This justified a different interpretation being given to the criterion of special circumstances, which applied under s 88, before its amendment to its present form: Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 and Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81. As the amendments introduced the criterion of 'fairness' in place of 'special circumstances' the Panel commented, at [27] that, " there are good grounds for believing that costs orders should be more readily obtainable."

1. The Panel noted that in Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71 (a case within the Retail Leases Division), the Tribunal said, at [72] -

What the Parliament has done, in its January 2009 amendments, is recognise that there is a need for this Tribunal to be more flexible and widen the scope of a litigant's entitlement to costs. This is a concept generally that is now accepted in this Division, and certainly touched upon by the Court of Appeal in Cripps , and the result of this re-assessment by the Parliament is a different test, a test of fairness, having regard to a number of parameters/factors.

1. The Panel also referred, with approval, to Rucom Pty Ltd and Anor v Multiplex & Ors [2010] NSWADT 1, where the Tribunal in proceedings under the RL Act, said, after referring to the Gizah and Salon Today that 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, in addition, proceedings should only be commenced in this Tribunal after very careful consideration of the merits of the case:... 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?"

1. In considering applications for costs under s 88 of the Administrative Decisions Tribunal Act 1997 therefore the commercial nature of the proceedings in the retail leases division is a matter which the Tribunal may take into account under s 88(1)(d) when determining whether it is fair to make a costs order.

Consideration

1. The issue in this case is, whether in the circumstances, it is fair to depart from the general principle that each party bear their own costs, having regard to the factors set out in s 88(1A). In my opinion there are a number of factors that point to it being fair to depart from the usual rule in this case.

1. The first of these is the commercial nature of the proceeding in the in Retail leases division, which is a factor to be taken into account under sub-section (1)(d). The second is the compensatory nature of an award for costs in favour of a successful party, especially in a commercial context (sub-section 1(e)). Both of these are usually to be found where there is a successful party in proceedings in the division.

1. In this case, however, there is a qualitative difference to the usual case in that the successful outcome obtained by the applicant is as a result of the respondents' capitulation and withdrawal of the notice of breach, which led to the instigation of the proceedings. As the respondents issued the notice of breach and have since consented to an order that it is "of no force and effect" I conclude that the respondents' reliance on the notice was weak and unlikely to succeed. This is the third factor under s 88(1A)(e).

1. The fourth factor, relates to the respondents failure to comply with the Tribunal's procedural directions made on 4 November 2010 and 3 March 2011. The reality is that the respondents have never filed any evidence in compliance with those directions, and, until the filing of the costs submissions, have not offered any explanation for their failure to do so. Similarly, while they have now advanced an explanation for the failure to comply with the direction regarding inspection of documents, the reality is that there is no evidence of them ever advising the applicant that they did not hold the documents. It is clear that the respondents have failed to comply with a number of the Tribunal's directions, made on two separate occasions: this is a factor under s 88(1A)(1).

1. Fifthly, in two respects, I am satisfied that the respondents have been responsible for delaying the proceedings: a factor under s 88(1)(b). The first concerns the defence of the proceedings from October 2010 to March 2011, given the subsequent capitulation. The second is their prolongation of the proceeding by failing to comply with directions. If the respondents had complied with the directions made on 4 November 2011, a second directions hearing (for the purpose of considering the course of the proceedings after the respondent filed its witness statements) would not have been necessary.

1. The respondents submit that the applicant has refused to partake in a second mediation and point to this as reason for not making a costs order. As I have already indicated the applicant was prepared to participate in a second mediation, and had participated in the first, providing legal representatives were present. Given that the parties were involved in litigation before the Tribunal, I do not consider this was unreasonable. I do not accept that the applicant refused to participate as alleged.

1. As already indicated, I consider the respondents chronology and submissions relating to the cause of the dispute to be no more than assertions, and not based on evidence from which I could draw any logically probative conclusion.

1. Finally, the respondents submitted that the applicant had not pointed to any disadvantage suffered as a result of the manner in which they conducted the litigation. I reject that submission. The respondents issued the notice of breach that led to the litigation. That litigation has concluded with the respondents agreeing to an order that the notice is of no force or effect, and other orders which amount to a complete capitulation by them. By their conduct in issuing such a notice they precipitated the litigation. Their defence of it, and their failure to comply with the Tribunal's directions, have prolonged the litigation.

1. In my view, when all these factors are taken into account, they point to the conclusion that it is fair to award costs in this case. I consider that those costs should relate to the whole of the proceeding.

Conclusion

1. There will be an order that the respondents pay the applicant's costs of this proceeding, such costs, in default of agreement, to be assessed on a basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 .

I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.

Registrar

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Decision last updated: 13 May 2011