Ginninderra Properties Pty Ltd v Gelonese

[2017] ACTSC 362

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:

Ginninderra Properties Pty Ltd v Gelonese

Citation:

[2017] ACTSC 362

Hearing Date(s):

10 November 2017

DecisionDate:

13 December 2017

Before:

Robinson AJ

Decision:

See [34] below.

Catchwords:

APPEAL – PROCEDURE – Costs – error in Court below – opportunity to be heard of costs – construction of clause in lease – whether clause in lease is inconsistent with the Leases (Commercial and Retail) Act 2001 (ACT).

Legislation Cited:

Leases (Commercial and Retail) Act 2001 (ACT), ss 17, 19, 154, 155

Cases Cited:

Coulton v Holcombe (1986) 162 CLR 1

Parties:

Ginninderra Properties Pty Ltd (Applicant)

Vince Gelonese (Defendant)

Representation:

Counsel

Mr S Whybrow (Applicant)

No appearance (Defendant)

Solicitors

Minter Ellison (Applicant)

No appearance (Defendant)

File Number(s):

SCA 41 of 2017

Decision under appeal: 

Court/Tribunal:             ACT Magistrates Court

Before:  Magistrate Morrison

Date of Decision:         28 April 2017

Case Title:  Ginninderra Properties Pty Ltd v Vince Gelonese

Court File Number(s):   CL 25 of 2014

Robinson AJ:

Background

1. Ginniderra Properties P/L has appealed pursuant to s 155 of the Leases (Commercial and Retail) Act 2001 (ACT) to the Supreme Court from orders made by Magistrate Morrison in a reserved judgement given on 28 April 2017.

1. In those proceedings he heard a dispute between Ginniderra Properties Pty Ltd as landlord and Mr Gelonese as tenant.

1. It is not necessary to set out the dispute between the parties to any great extent by reason of the limited issues on appeal.

1. The trial judge found a judgment for the landlord comprising of unpaid rent, unpaid outgoings, loss of rent and outgoings from termination to reletting and a proportion of the costs of the landlords works. To this sum he added interest and gave judgment in the sum of $270,622. The trial judge then dismissed the tenant’s counterclaim and made an order that there be no order as to costs as to the proceedings.

The Appeal

1. The Amended Notice of Appeal only appeals from the order that there be no order as to costs.

1. On the hearing of the appeal before me there was no appearance by the tenant. I was satisfied that he had notice of the appeal and I embarked on the hearing but I will reserve liberty to the tenant to apply for an order to set aside the orders from this judgment should sufficient cause and utility be shown to any judge of the Court.

1. The appeal has two planks to it. First, there is a complaint as to the procedure adopted by the trial judge. Second, there is a challenge to his reasoning process in construing s 154 of the Leases (Commercial and Retail) Act.

Grounds of Appeal

1. The grounds were-

(a) His honour erred in finding at [75] of the Decision that Ginniderra Properties had only made a claim for contractual costs and not an alternative claim for costs pursuant to the Court’s discretionary power to make an order for costs under either section 154 or the Rules.

(b)   His Honour erred in dismissing Ginninderra Properties’ claim for costs on the basis that no amount was specified for the claim for costs and no supporting evidence was presented (see [77] and [80] of the Decision)

(c)   His Honour erred in:

(i) finding at [79] of the Decision that a provision in a lease which extends to obliging a tenant to pay the costs of proceedings is inconsistent with section 154 of the Act and therefore void to that extent; and

(ii)    dismissing Ginninderra Properties claim for costs on this basis (see [80] of the Decision)

(d)   His Honour erred in not giving Ginninderra Properties an opportunity to:

(i)     be heard on the question of costs; and

(ii)    tender evidence in support of an application for costs, including an offer of compromise made under Part 2.10 of the Rules,

once Ginninderra Properties claim had been decided in its favour.

1. In addition to these grounds the landlord sought to tender further evidence on appeal on two issues. The first was on costs actually incurred by the landlord. The second was a notice of compromise served upon the tenant.

The Course of the Trial

1. The trial judge heard the matter over two days, 2 June 2016 and 9 September 2016. On that last date the trial judge directed the parties to file written submissions and carved out the issue of quantum on the cross claim. He said-

All right, so I make that order, so effectively I’m making an order for a separate issues hearing, and then I make the directions in terms that I had indicated earlier, that written submissions are to be filed and served as follows…. and the proceedings then be adjourned to a date to be fixed. That will be for the purposes of a decision on the claim and counterclaim, but noting, having regard to the order I made for a separate issues hearing, that if I find against the plaintiff on the claim and in your favour on the counterclaim, there will then be a separate hearing to determine the quantum of your counterclaim.

1. As far as I can see there was no discussion between the parties and the bench on this last date as to how and when the question of costs under s154 would be dealt with.

1. The landlord’s subsequently filed written submissions and sought-

costs on an indemnity basis in accordance with clause 6.1.6 of the [Agreement for Lease] and clause 20.4 of the Lease.

1. The reference to clause 20.4 appears to be a typographical error and clause 21(e) was intended.

1. Previously, in a document filed, which stood as the statement of claim, the landlord had claimed-

Costs in accordance with clause 21(e) of the Sub-lease

1. Unfortunately the trial judge seems also to have made a typographical error in identifying the correct clause, the subject of controversy. At [74] of his judgment set out below, he references clause 8.7.

1. On 28 April 2017, after having reserved for some time, the trial judge handed down a written judgement setting out his reasons and made orders in accordance with that judgment. As recounted above, one order made was that there was to be no order as to costs. The trial judge did not hear the parties on the issue of costs or any other issue on that occasion.

The Findings on Costs

1. It is convenient to set out the trial judge’s findings on the question of costs at [69] to [80] of his judgment.

69The Plaintiff's claim includes a claim for costs. I did not receive detailed submissions on costs at the hearing.

70Section 154 of the Leases (Commercial and Retail) Act 2001 provides that each party to any proceeding under the Act must bear their own costs unless the Court makes an order about costs.

71Whilst the discretion implicit in this provision is not constrained by any requirement that special or exceptional circumstances be demonstrated, there must be some identifiable factor or factors sufficient to justify a departure from the normal rule. – see Uangis v IPEX ITG Ply Ltd [2005] ACTCA 28.

72No submissions were made in the written submissions on behalf of the Plaintiff as to any identifiable factors sufficient to justify departure from the normal rule, insofar as a claim for costs in the exercise of the Court's discretion Is concerned.

73There is authority for the proposition that where there is a contractual right to costs, the discretion to award costs should ordinarily be exercised so at to reflect that contractual right (see for example Gomba Holdings Ltd v Minories Finance (C.A.) [1993] Ch 171 at 194) but such authorities are not in the context of a statutory provision such as s154.

74The Plaintiff’s claim for costs is not, in any event, expressed to be sought pursuant to the exercise of the Court's discretion to order costs. Rather, it is expressed in the written submissions as being “on an indemnity basis in accordance with clause 6.1.6 of the Lease". It was pleaded in the Amended Statement of Claim as a claim for costs pursuant to clause 8.7 of the Lease, but nothing turns on that for present purposes.

75Framed as It is, the Plaintiff's claim for costs is one for an amount claimed to be owing by virtue of the express agreement by the Tenant to pay the costs as set out in the Lease, rather than pursuant to the Courts discretionary power to make an order for costs under s154. It is in effect a liquidated claim for monies asserted to be owing by the Tenant under the Lease.

76    A claim for costs made on that basis faces two difficulties.

77The first is that, pleaded in that fashion, the claim requires evidence to be presented at hearing as to the amount of costs asserted to be payable so that an appropriate award can be made in satisfaction of the liquidated claim. No amount was specified for the claim for costs and no evidence was presented to support any amount in respect of the claim.

78The second and more fundamental difficulty, insofar as what is claimed is asserted to represent costs of the proceedings, stems from the effect of section 19 of the Act which provides that, if a provision in a lease is inconsistent with the Act, then the provision is void to the extent of the inconsistency.

79Against the background of section 154 requiring that each party to proceedings bear its own costs (absent an order otherwise), a provision in a lease which extends to obliging a tenant pay the costs of proceedings is inconsistent with the Act and therefore void to that extent.

80    In the circumstances I find against the Landlord on its claim for costs of the proceedings.

1. A number of matters should be noted.

1. First, it does not appear to be in issue that the Leases (Commercial and Retail) Act is engaged in this dispute. (See s 17 of the Act.)

1. Second, s 154 of that Act is as follows-

The parties in a proceeding under this Act must bear their own costs unless the Magistrates Court or Supreme Court makes an order about costs.

Section 19 of the Act provides that-

If a provision in a lease is inconsistent with this Act, the provision is void to the extent of the inconsistency.

1. Third, although there can be doubt as to the ambit of the word “proceeding” in any given legal context, it would seem to apply, in the present case, to the prosecution of the claim initiated in the Magistrates Court by the landlord and the prosecution of the cross claim initiated by the tenant in that Court

1. Fourth, a body of jurisprudence has developed in the application of s 154 to the effect that the starting position is that each party must bear their own costs unless factors can be identified to depart from this starting position. It is not necessary to identify, in this regard, special or exceptional circumstances but merely circumstances taken separately or together sufficient to justify a departure from this starting position.

1. Fifth, because it will be necessary to identify factors sufficient to justify a departure from the starting point under s 154 of the Act it is likely that this will be better able to be done once the findings of the court are known. It is at this time that the discretion is able to be exercised and it might only be at that time that it would be clear that a party would be in a position to even apply for an order under s 154 given that the mere outcome of the proceedings does not dictate the result of the discretion. The fact that there is no prayer for relief specifically pleaded under s 154 of the Act in the initiating process would not foreclose an application after the publication of reasons. There is a further reason why the discretion should be exercised after giving the parties an opportunity to be heard on costs. One or more of those parties may wish to bring to account matters such as Notices of Compromise and Calderbank letters which would or might have weight in the exercise of the discretion depending upon the circumstances. It is, of course, improper to bring the fact of such a communication to the notice of the trial judge before his or her decision.

1. Sixth, it is clear enough that the “costs” in s 154 is a reference to the costs of the proceedings. That is not the same as “costs” which could be sued for under the contract between landlord and tenant if a contractual provision permitted it.

1. For example, in the lease between these parties clause 21(e) is in the following terms-

In connection with this lease and any document or matter in connection with it, the Tenant must pay promptly on demand, the Landlords reasonable costs, charges and expenses relating to any legal advice given on this lease in relation to the enforcement of this lease or because the Tenant breaches this lease.

There may be other provisions of the Leases (Commercial and Retail) Act which have the effect of cutting down the impact of this clause but it is not cut down, as a matter of construction, because it is inconsistent with s 154 of the Act through the impact of s 19 of the Act.

1. If the landlord obtains advice from a local solicitor in relation to the enforcement of the lease in the sum of $1000 he is able to recover the $1000 from the tenant as a debt. At least s 154 of the Act does not preclude this. If the tenant does not pay the sum on demand then the landlord can bring a proceeding. Section 154 may well then apply to the costs of this proceeding to recover the $1000.

1. In a more complicated case what is a contractual claim may be more difficult to distinguish from the costs of proceedings.

Resolution

1. In my view the trial judge was in error in not giving the parties an opportunity to be heard on costs pursuant to s 154 of the Act. Although the discretion in s 154 does not work in the same way as the discretion in a jurisdiction where usually costs follow the event, there is no less reason to give the parties an opportunity to be heard on costs. I am not in a position to exercise a discretion in relation to this matter and it is apparent that the tenant proposes to lead further evidence on this issue being a letter dated 3 November 2015 addressed to the tenant, albeit that the letter has an error of law in it. That error, however, may not rob it of all efficacy. It is also possible that the landlord will seek to make justification for an order from the unsuccessful cross-claim propounded by the tenant. In addition, there may be other factors properly to be taken into account in the exercise of the discretion under this section.

1. Subject to any interlocutory directions given by the trial judge, a contractual claim for legal costs would ordinarily be proved in the same way as any other claim. Evidence of expenditure linked to its purpose should be led in the trial together with the evidence of all other claims. Cross-examination can be undertaken. Waivers of privilege can be worked out.

1. Although it is not precisely clear, the claim as formulated by the landlord, failed to differentiate between those matters which could properly be claimed on a contractual basis as opposed to claiming the costs of the proceedings.

1. Because the claim was formulated in this way, as an indemnity representing the costs of the proceedings, the trial judge was correct to dismiss it as being inconsistent with the Act.

1. I have given thought to whether I should remit this part of the claim back to the trial judge to be dealt with as if it properly differentiated between those matters which could be truly claimed on a contractual basis. I have determined not to do so for, in effect, the landlord would be pursuing a new case having had an opportunity to present its propounded cause of action and also its evidentiary case on that cause of action (see, for example, Coulton v Holcombe (1986) 162 CLR 1, 8).

1. I will allow the appeal and remit the matter back to the trial judge in order for the trial judge to afford the opportunity to the parties to be heard on the question of costs under s 154 of the Act. It may well be that the parties do not take up that opportunity in which case the trial judge should merely confirm his orders.

Order

1. I make the following orders:

(a)Grant leave to the Respondent to set aside these orders should the Respondent show sufficient cause and utility to a Judge of this court.

(b)Order that the proceedings be remitted to the trial judge to afford the parties the opportunity to be heard on the question of costs under s 154 of the Act, and for that purpose, allow as further evidence in the proceedings a letter dated 3 November 2015 addressed to the Respondent.

(c)Otherwise dismiss the appeal and application to tender further evidence.

(d)Order that the costs of the appeal be reserved.

I certify that the preceding thirty-four [34] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Robinson.

Associate:

Date: