Gill & Ors and Wildnight Pty Ltd
[2008] WASAT 135
•16 JUNE 2008
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: GILL & ORS and WILDNIGHT PTY LTD [2008] WASAT 135
MEMBER: DR B DE VILLIERS (MEMBER)
HEARD: 26 MAY 2008
DELIVERED : 16 JUNE 2008
FILE NO/S: CC 1302 of 2006
CC 1298 of 2006
CC 1300 of 2006
CC 1301 of 2006
CC 1303 of 2006
CC 1304 of 2006
BETWEEN: SANTHOK SINGH GILL
CHARNJIT KAUR GILL
LIN LI ZHANG
CHENG LI
PHU LUONG
THUY TIEN LUONG
HUA ZHANG
QING LIN
PENG PENG YENG
ApplicantsAND
WILDNIGHT PTY LTD
Respondent
Catchwords:
Cost application Principles to consider when awarding costs Offer to settle Calderbank principles
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 12(2)(c)
State Administrative Tribunal Act 2004 (WA), s 55, s 87(1), s 87(2), Pt 2, Div 5 and Div 6
State Administrative Tribunal Rules 2004 (WA), r 40, r 41, r 42
Result:
Orders made for costs to be paid
Category: B
Representation:
Counsel:
Applicants: Mr C Martin
Respondent: Mr D Tong
Solicitors:
Applicants: Chris Martin & Associates
Respondent: Vincent Partners
Case(s) referred to in decision(s):
Bilek and Vata Investments Pty Ltd [2005] WASAT 153
Calderbank v Calderbank [1975] 3 WLR 586
Chew and Director-General of the Department of Education and Training [2006] WASAT 248
Clifford and Shire of Busselton [2007] WASAT 89 (S)
Gill and Ors and Wildnight Pty Ltd [2008] WASAT 84
Pearce and Anor and Germain [2007] WASAT 291 (S)
Quah and AMP Life Limited [2005] WASAT 169
Summerville and Department of Education and Training and Ors [2006] WASAT 368 (S)
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The applicants sought an order for costs following their successful application against the respondent.
The applicants contended that the matters had been determined in their favour, the settlement offer they had made was not accepted, the credibility of the evidence of the respondent was questioned, and the matter should not have progressed to a hearing.
The respondent contended that the applicants withdrew from an earlier agreement, that costs were wasted due to amendments to the application, and that if costs were awarded, only such expenditure incurred after the letter of settlement should be taken into account.
The Tribunal found that costs should be awarded.
Background
The Tribunal granted leave on 17 April 2008 in the matter Gill and Ors and Wildnight Pty Ltd [2008] WASAT 84 (Gill) for an application to be made for costs. This followed the favourable findings the Tribunal made in regard to the issues raised by the applicants in the commercial tenancy dispute with the respondent.
The parties were given an opportunity to make written submissions in regard to the cost application.
Mr Martin, on behalf of the applicants, filed a written submission on 9 May 2008, and Mr Tong, on behalf of the respondent, filed a written submission in reply on 15 May 2008.
The hearing occurred on 26 May 2008 during which Mr Martin and Mr Tong made further oral submissions. Mr Tong also tendered an affidavit dated 26 May 2008 of Mr Robert Guerrini, counsel who assisted the respondent during mediation.
The Tribunal's decision was reserved on the same day.
Orders sought by the applicants
The applicants sought an order for the respondent to pay all or part of their costs of $27,775 professional fee plus incidentals amounting to $1,029.40.
The respondent sought an order to dismiss the application or, in the event that cost orders were made, to calculate costs only from the date of 17 January 2008.
Submissions
The submissions of Mr Martin on behalf of the applicants can be summarised as follows:
•Although the Tribunal is principally an own-cost jurisdiction, the State Administrative Tribunal Act 2004 (WA) (SAT Act) allows for the award of costs. This is reflected in several cases before the Tribunal where costs have been awarded to the successful party. This is consistent with the regime that applied to the previous Commercial Tribunal.
•There are several reasons why costs should be awarded in these proceedings. Those reasons outweigh the considerations raised by the respondent in favour of an own-cost outcome.
•The applicants are "unsophisticated operators" who have been successful in their application against a powerful landlord who resisted, without good reason, their application to enforce their contractual rights.
•The Tribunal in the Gill matter made adverse comments in regard to the conduct and evidence of the landlord, Mr Robert Guerrini, during the course of the proceedings. The Tribunal preferred the evidence of the applicants to those of Mr Guerrini.
•The Tribunal made critical comments of the time wasted by Mr Guerrini during the hearing when he allowed substantial time to be spent in evidence on the background to the acquisition of a television, only to concede the matter while he was under cross‑examination.
•The respondent had not "paid due respect" to the provisions of the legislation and, as a result, the proceedings were prolonged unnecessarily. This is particularly the case with the claim regarding the air‑conditioner.
•The applicants did not agree to a settlement that was purportedly reached on 19 March 2007, and the affidavit of counsel for the respondent, Mr Robert Guerrini, should either not be admitted into evidence or, if it is admitted, it should be regarded as only his version of events and not representative of the views of both parties.
•The applicants made several attempts to settle the matter as is indicated in their final letter of offer dated 17 January 2008.
•If a cost order is made, it should not be limited to the period after 17 January 2008 since the applicants had incurred costs prior to that date in regard to the proceedings in the Tribunal.
•In regard to the calculation of costs, Mr Martin submitted that the total fees payable by the applicants pursuant to a cost agreement amounts to $27,775 in respect of professional fees and $1,029.40 in respect of disbursements.
The submissions of Mr Tong on behalf of the respondent can be summarised as follows:
•It is agreed that although the Tribunal is essentially an own-cost jurisdiction, costs can be awarded and have been awarded in the past.
•There are several factors in these proceedings that mitigate against a cost order, and even if an order were made, cost should only be calculated as from 17 January 2008 when the final offer to settle was made by the applicants.
•The applicants contributed to the high costs of the proceedings by filing six separate applications and by making amendments to their claim during the course of the proceedings. As a result, the respondent had to amend its response on several occasions.
•The applicants withdrew from an agreement that was reached on 19 March 2007.
•Due to the costs wasted by the respondent to amend its response to the application, the respondent is also entitled to a cost order. The respondent's cost should be offset against the costs of the applicants.
•If costs were awarded, it should be calculated only from 17 January 2008, since that was the day upon which the last offer of settlement was presented to the respondent. Such an approach would be consistent with the principles set out in Calderbank v Calderbank [1975] 3 WLR 586. Costs, if any, should further be limited to inter-party costs incurred for purposes of the proceedings before the Tribunal and should not include solicitor-client costs.
Statutory framework
Section 87(1) and s 87(2) of the SAT Act states as follows:
"Costs of parties and others
"(1)Unless otherwise specified in this Act, the enabling Act, or an order of the Tribunal under this section, parties bear their own costs in a proceeding of the Tribunal.
(2)Unless otherwise specified in the enabling Act, the Tribunal may make an order for the payment by a party of all or any of the costs of another party or of a person required to produce a document or other material on the application of the party under section 35."
Consideration
The Tribunal is, in essence, an own‑cost jurisdiction. This means that each party should expect to be responsible to bear its own costs at the conclusion of proceedings. This principle is encapsulated in s 87(1) of the SAT Act. Parties in proceedings before the Tribunal should therefore, as a general rule, not expect a cost order to flow from a determination.
This principle, however, cannot be construed to mean that under no circumstances would costs be awarded, or that the Tribunal is statutory barred from granting costs. Section 87(2) of the SAT Act explicitly allows and foreshadows that the Tribunal may, in appropriate circumstances, award costs. Part 2 Div 6 of the State Administrative Tribunal Rules 2004 (WA) (SAT Rules) sets out how a settlement offer may be made and orders for costs if a settlement offer is rejected.
It is therefore clear that, although the Tribunal does not as a point of departure award costs, it is within its discretion to award costs if the circumstances justify such an order.
The question then is, when does the Tribunal award costs and when does it decline to do so?
Since its inception, several decisions have been handed down by the Tribunal in regard to costs: refer, for example to the decisions of Bilek and Vata Investments Pty Ltd [2005] WASAT 153; Quah and AMP Life Limited [2005] WASAT 169; Chew and Director-General of the Department of Education and Training [2006] WASAT 248; Summerville and Department of Education and Training and Ors [2006] WASAT 368 (S) and Clifford and Shire of Busselton [2007] WASAT 89 (S).
These and other decisions were recently analysed and discussed by the Tribunal's Deputy President, Judge Chaney, in the matter of Pearce and Anor and Germain [2007] WASAT 291 (S) (Pearce). The decision was handed down on 9 May 2008.
In Pearce, his Honour set out the following principles for the consideration of costs applications by the Tribunal:
(i)The starting point of the Tribunal is that it is a "no cost" jurisdiction ([8]).
(ii)The cost regime that was applicable to the previous Commercial Tribunal does not apply to the State Administrative Tribunal ([11]).
(iii)The objectives of the State Administrative Tribunal are furthered by its being essentially a "no cost" jurisdiction ([17]).
(iv)Where there is a genuine dispute and the respective rights are unclear and parties seek a determination, the "starting point remains that each party should expect to pay their own costs" ([24]).
(v)The Tribunal does have the power to award costs, and it is not appropriate to "delineate the particular circumstances" in which the discretion to award costs would be exercised favourably ([22]).
(vi)Some of the factors (not an exhaustive list) that may contribute to the Tribunal making a cost order are for example ‑
a.A party has conducted itself unreasonably, particularly where the conduct leads to unnecessary costs to the other party.
b.A party has conducted itself inappropriately, particularly where the conduct leads to unnecessary costs to the other party.
c.Where credibility of evidence is at the heart of a matter.
d.Where the application undermine the integrity of proceedings under the relevant Act.
e.The relative weakness of a case, it being incredible or implausible or "obviously unmeritorious".
f.If a party has to embark in proceedings to "vindicate its clear contractual entitlements". ([22] ‑ [24])
The Tribunal accepts these principles as a sound basis for determining the cost application of the applicants in these proceedings.
When these principles are applied to the facts under consideration by the Tribunal, I am satisfied that the Tribunal should exercise its discretion in favour of the application for costs. It would, in the mind of the Tribunal, for reasons set out below, constitute a severe injustice to the applicants if they were not awarded at least a portion of the costs of the proceedings.
The Tribunal will now reflect on the orders it made in regard to each of the disputes in the Gill matter to explain the reasons why a cost order is appropriate.
Television dispute
In regard to the concession Mr Guerrini made by acknowledging that the applicants had already paid for the television, the Tribunal has already commented on the time and costs that he had caused to be wasted by making the concession at such an advanced stage of the hearing (Gill [26] ‑ [27]). The entire response of the respondent to the television issue was without grounds, unnecessary and pointless. In its final offer for settlements letter of 17 January 2008, the applicants placed on record that, as far as they were concerned, there "is no real dispute about the television set" and the matter could be settled "as long as the owner gives us credit for the money already received". Mr Guerrini nevertheless chose to resist the application and allowed each of the witnesses to be examined and cross‑examined in detail in regard to the television. It was only when he was called as a witness that he admitted under examination by the Tribunal to the accuracy of the evidence of the applicants and conceded the point. The matter should never have been litigated. Mr Guerrini's conduct was unnecessary, unreasonable and without justification. A cost order for the wasted time is therefore warranted.
Air-conditioner
The dispute about the repair/maintenance/replacement of the air‑conditioners was fruitless in light of the provisions of s 12(2)(c) of the Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA) (CT Act). As explained in Gill at [88], there was no basis for the respondent to rely on the lease to claim contributions from tenants to a "plant or equipment" that belongs to a landlord. The CT Act clearly provides such a provision in a lease is void. The applicants also pointed these provisions out to the respondent in their final offer for settlement, but the respondent nevertheless chose to resist the application. The applicants, in their letter of 17 January 2008, stressed that the "defence of allowing air conditioning cost is hardly convincing, and an inspection of the invoice would obviously show whether it is a capital replacement or a repair." The respondent should have known that, in light of the explicit statutory provisions, he bears responsibility for the maintenance, repair and replacement of the air‑conditioners, and that any provision in the lease to the contrary is void. Mr Guerrini's resistance to the application was ill‑considered, unmeritorious and in blatant disregard for statutory provisions. His reluctance to provide proper documentation in regard to the air‑conditioners, and to provide a coherent explanation for expenditure, further exacerbated the poor and unjustifiable position he had taken. In essence, he had a weak and indefensible position. A cost order for wasted time is therefore warranted.
Material change to lettable area
The question if sufficient notice had been given of the purported material change of the bakery area from a tenantable area to common area was complicated by the lack of documentation provided by the respondent, and Mr Guerrini's inconsistent and unreliable evidence. The Tribunal, for reasons explained in Gill, at [63] ‑ [67], rejected his evidence in its entirety. The Tribunal found as follows in regard to Mr Guerrini's evidence:
"Mr Guerrini, on the other hand, appeared to be less than open in his evidence. He spoke in a guarded manner, was sometimes evasive and became argumentative. He was often less than cooperative and forthcoming, and the Tribunal had to encourage him more than once to fully respond to questions. His lack of cooperation was reflected in his decision, only in the final stages of the hearing, to acknowledge the payments he received for the television. He only made this concession after all the applicants had been subjected to intense cross‑examination on the very topic. Mr Guerrini's explanation that he told the applicants informally that they could use the bakery for storage is not supported by any evidence other than his own. He could not refer to specific dates or occasions when he had the purported discussions, and he did not produce evidence from other tenants, who were not part of the application, to support his contention … In summary, Mr Guerrini's uncorroborated recollection of events was in such stark contrast to those of the applicants that the Tribunal cannot but come to the conclusion that their evidence should be preferred. The Tribunal therefore rejects the contention that the evidence of Mr Guerrini should be preferred to those of the applicants." ([63] ‑ [67])
The dispute regarding the bakery area was not an example of a genuine commercial dispute. It rather appeared to be an example of a proprietor attempting to use or maximise his position to the detriment of tenants, and in doing so, he was willing to give unreliable and incomplete evidence to the Tribunal. The site inspection, in itself, clearly demonstrated the weakness of the argument that the bakery area was used as a storage area by the applicants or that it was available to them for use. The evidence of the applicants further exposed the unreliability of Mr Guerrini's evidence. The Tribunal does not accept the contention of Mr Tong that the applicants had caused costs to be wasted by amendments to their application. The issues were clear to the respondent and the witness statements of the applicants were consistent, but Mr Guerrini, on behalf of the respondent, chose to give unreliable evidence which was not supported by any facts. In doing so, time and resources were wasted in preparation as well as in the hearing. A cost order for wasted time is therefore warranted.
Statement of operating expenses 2004/05
The Tribunal is satisfied that this dispute gave rise to a serious matter that had to be heard, and that the parties were in a genuine dispute. The issue raised new dimensions that have not previously been considered by the Tribunal, and I accept that both parties had put meritorious arguments for consideration. No cost order should therefore be made in regard to time used to prepare and hear this matter. A proposal to settle the dispute was, however, contained in the letter of 17 January 2008.
In light of the foregoing, it is therefore appropriate that orders be made for the cost application to succeed.
Calculation of costs
Mr Martin filed a cost sheet which reflects the cost agreement he had entered into with the applicants. Costs were calculated at $275 per hour exclusive of GST. The cost sheet does not separate solicitor‑client costs from inter‑party costs but it does refer to work done in the course of preparing proofs, finalising witness statements, preparation for hearing, and drafting of submissions for purposes of the hearing and hearing.
Mr Martin acknowledged that not all of the costs should be awarded since some of them relate to solicitor‑client costs and costs incurred in the course of mediation. He contended, however, that costs should not only be calculated as from 17 January 2008, as was suggested by Mr Tong. Substantial costs were incurred in preparation for the hearing prior to 17 January 2008, and that should also be reflected in the order.
Mr Tong contended that costs should only be calculated from 17 January 2008 in accordance with the so‑called Calderbank principles. Mr Tong did not make any further submission in this regard, nor did he propose what the amount should be if indeed the Calderbank principles were applied. Neither of the parties made submissions in regard to the SAT Rules (Pt 2 Div 5 of the SAT Act), which deals with settlements.
A Calderbank offer is, in essence, a written proposal between legal representatives in which an offer of settlement is made, the terms of which, in the event that the matter proceeds to trial, are not to be disclosed to the Tribunal except on the question of costs. Where an outcome is as favourable or more favourable to the author of a Calderbank letter than the offer itself, that author may tender the letter as evidence of the offer, in support of a submission that costs should be awarded in favour of the author. (Refer to Calderbank v Calderbank [1975] 3 All ER 333 in The Weekly Law Reports, October 31 1975). (Calderbank) Encyclopaedic Australian Legal Dictionary (LexisNexis Butterworths).
In Calderbank, the essence of the principle was summarised as follows:
"I have reached the conclusion that that was an offer which in the circumstances of this case the husband ought to have accepted … " (p 596).
In many instances in Australia, the Calderbank principle is reflected in statutes and rules. This is in recognition of the desire of the legislature to encourage parties to settle their differences without the need for litigation. The same applies to the SAT Act.
The SAT Rules deal with principles that, in essence, enshrine the Calderbank principles.
Rule 40 of the SAT Rules deals with an offer to settle, r 41 of the SAT Rules deals with acceptance of a settlement officer, and r 42 of the SAT Rules deal with an order for costs if a settlement offer is rejected.
The purpose of these rules is obvious.
Rule 40 encourages parties to engage in settlement negotiations as a substitute for litigation. Parliament sought to create a regime whereby a party could be rewarded with a cost order if the outcome of litigation is not less favourable than the party has offered. Rule 40 therefore provides an incentive to parties to make reasonable offers to each other. This is consistent with the objectives of the Tribunal to resolve disputes as quickly and with as little cost as possible to parties. A sanction in the form of a cost order may follow if it appears that a party has rejected a settlement without good reason.
There is no format in the SAT Act with which the settlement offer must comply. There is also no need for the settlement offer to refer to the SAT Rules. The offer must, however, be drafted in a way that, if accepted, an agreement comes into being. It must therefore be specific enough to settle issues in dispute if it is accepted.
In these proceedings, a written offer was made by the solicitor of the applicants on 17 January 2008 to the solicitor of the respondent. The letter complied in some respects with the requirements of r 40 but, in other respects, it was not specific enough to constitute a final offer as envisaged by the rule. For example ‑
•The acceptance of Mr Alistair Millar's measurements was specific enough to be accepted.
•The proposal regarding the television was specific enough to be accepted.
•The exchange regarding the air‑conditioner was not specific enough, and envisaged further exchange of information and continuation of the proceedings.
•The proposal for dealing with the operating expenses statement 2004/05 was specific enough to be accepted.
•The proposal regarding the bakery area was specific enough to be accepted.
The offer to settle was not accepted by the respondent.
Rule 42 determines the procedure if a settlement is rejected. Rule 42(2) provides that the Tribunal, in determining the costs to be awarded, must take into account if the respondent rejected an offer more favourable than the Tribunal's order.
The Tribunal is satisfied that the orders made were not more favourable to the respondent than the offer made to the applicants on 17 January 2008. The proceedings could and should therefore have been averted ‑ in the spirit of Calderbank, the Tribunal concludes that the "offer ought to have been accepted."
The Tribunal is of the view that costs to the amount of $9,157.50 should be awarded. This comprises some inter‑party costs prior to the settlement offer and all inter‑party and hearing costs after the settlement offer.
The calculation of costs is based on the following activities accounted for in the schedule of costs prepared by Mr Martin:
•3/10/07 proofs $550.00
•10/12/07 proofs $275.00
•14/12/07 proofs $275.00
•All costs after the settlement offer of 17 January 2008:
$8,057.50.
The Tribunal rejects the contention that costs were wasted due to six separate applications being filed. The Tribunal made orders at the earliest opportunity for a lead matter, and following that, there was no requirement to file separate responses.
Admissibility of mediation notes
The affidavit of Mr Robert Guerrini, legal representative of the respondent at the time of mediation, contains a summary of the purported compromise that was reached between the parties on 19 March 2007.
Mr Tong contended that this affidavit was admissible and should be taken into account by the Tribunal as evidence that the applicants withdrew from a settlement that had been reached.
The Tribunal rejects this contention.
First of all, "evidence of anything said or done in the course of a compulsory conference or mediation is not admissible at any later stage of the proceedings." (s 55 of the SAT Act). With the SAT Act being so unequivocal about the privileged nature of mediation discussions, the Tribunal is surprised that Mr Tong sought not only to rely on the content of mediation discussions but, further, that he also sought to submit the personal notes made during mediation by Mr Guerrini, as legal representative, into these proceedings.
The Tribunal finds that the affidavit of Mr Robert Guerrini dated 26 May 2008 is not admissible.
Secondly, even if the affidavit was admissible, the content is merely a reflection of Mr Guerrini's understanding of the discussions and does not bind any party. Little, if any weight, can therefore be attached to it.
Summary of findings
The Tribunal therefore finds that the application for costs should succeed and that an amount of $9,157.50 should be awarded.
Orders
1.The application for costs succeeds.
2.The respondent must pay to the applicants an amount of $9,157.50 within 30 days from the date of these orders.
I certify that this and the preceding [54] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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DR B DE VILLIERS, MEMBER
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