Handcock v Salemon Enterprises Pty Ltd (in liquidation) (No 2)
[2009] NSWADT 72
•3 April 2009
CITATION: Handcock & ors v Salemon Enterprises Pty Ltd (in liquidation) & anor (No 2) [2009] NSWADT 72 DIVISION: Retail Leases Division PARTIES: APPLICANTS
Francis Charles Handcock
Anthony John Wilkins
Maureen Joan WilkinsFIRST RESPONDENT
Salemon Enterprises Pty Ltd (in liquidation)SECOND RESPONDENT
Albert SalemonFILE NUMBER: 085102 HEARING DATES: 23 February 2009 SUBMISSIONS CLOSED: 23 February 2009
DATE OF DECISION:
3 April 2009BEFORE: Rickards K - Judicial Member CATCHWORDS: compensation for breach of lease, costs LEGISLATION CITED: Retail Leases Act 1994
Administrative Decisions Tribunal Act 1997
Legal Profession Act 2004CASES CITED: Chauhan –v- Demertjis & Anor (2008) NSW ADT 304
Kondos & Anor. –v- Citadin Pty Ltd (2003) NSW ADTAP7
Hayden Fowler Corbett Jessop –v- Toro Constructions Pty Ltd (2008) NSWCA 178
Lemoto –v- Abel Technical Pty Ltd (2005) NSWCA 153REPRESENTATION: APPLICANT
RESPONDENT
In person
No appearanceORDERS: 1. The Application against the First Respondent is dismissed
2.The Second Respondent is to pay the sum of $14,137.46 to the Applicants
3.The Second Respondent is to pay the Applicants’ costs of these proceedings upon a party/party basis as agreed or assessed, but not to include costs incurred by the Applicants in respect of proceedings in the Local Court or costs incurred by the Applicants in respect of the Notice of Motion filed in these proceedings by the Second Respondent
4.The solicitor for the Second Respondent, Mr Bobi Damcevski, is to personally pay any legal costs of the Applicants in respect of the Notice of Motion filed by the Second Respondent in these proceedings upon a party/party basis, as agreed or assessed.
INTRODUCTION
1 The Applicants were the lessors of premises located at Levels 1 and 2, 9 Normic Avenue, Blaxland. (“the premises”).
2 The First Respondent was the lessee of the premises and the Second Respondent was the guarantor of the First Respondent’s obligations under the relevant Lease.
3 The premises were used by the First Respondent for the selling and hiring of video tapes and DVDs and other like products. Such use falls within the definition of “retail shop business” set out within Schedule 1 of the Retail Leases Act 1994 (“the RLAct”).
4 The subject retail lease agreement (“the Lease”) was dated 28 April 2001 and expired on 25 March 2006 with a five year option to renew. It is apparent that by early 2006 the First Respondent had fallen into significant arrears.
5 By letter dated 10 March 2006 the Applicants, through their then solicitors, offered to enter into an agreement with the First Respondent upon various terms including agreement that occupation under the Lease would continue for a further two month period until 10 May 2006. The First Respondent thereafter remained in occupation beyond 25 March 2006.
6 On 18 April 2006 the Second Respondent advised the Applicants that the premises had been vacated and that the keys to the premises were available to be collected. An inspection subsequently took place on 21 April 2006 when both the Second Respondent and the Applicants Handcock and Wilkins were in attendance.
7 The Applicants claim that the Respondents breached the terms of the Lease and failed to pay rent, failed to undertake certain painting work, failed to remove fixtures and fittings and rubbish, and failed to reinstate lighting at the car park of the premises.
8 The Applicants originally commenced proceedings in the Local Court at Penrith. It appears that two sets of proceedings were commenced at Penrith with the first set being discontinued, and the second set of proceedings being transferred by consent to this Tribunal, following application made by the Respondents.
9 Two separate mediation appointments were made which the Respondents failed to attend.
10After the proceedings had been transferred to this Tribunal, the Second Respondent filed a Notice of Motion on 10 July 2008 seeking orders that the proceedings be struck out and that the Applicants pay costs. In summary, the Second Respondent’s argument in support of the motion to strike out was that there had to be a proven default by the First Respondent before the Second Respondent became liable under the guarantee set out within the Lease, and that the Applicants could not prove default because the First Respondent had been placed into liquidation on 27 February 2008.
11The Second Respondent’s motion was heard before Judicial Member Molloy on 26 August 2008 and dismissed by decision made on 28 November 2008. Costs of the motion were reserved, and the Applicants, apart from the principal relief which they seek, also now request orders for costs of the proceedings including an order that the solicitor for the Respondents, Mr Damcevski, personally pay costs of the unsuccessful motion.
12 The Applicant, Mr Handcock, represented himself and the two other Applicants at the hearing before me. There was no appearance by the Respondents.
13 In the early course of the hearing, Mr Handcock sought an order that the Application be dismissed as against the First Respondent.
The Applicants’ Claim for Payment of Compensation
14 During the course of the hearing, Mr Handcock referred me to paragraphs 18 and 19 of the Statement of Claim filed on 26 November 2007 at the Penrith Local Court, as setting out the items of compensation for which payment was sought by the Applicants from the Second Respondent.
15 Mr Handcock also referred me to his affidavit sworn 3 July 2008 and its annexures which further detail these various components of the compensation sought by the Applicant.
16 The Applicants claim the cost of reinstating the lighted signage in the car park of the premises. Although originally the Applicants claimed a higher sum in respect of the subject electrical work needed, I was taken by Mr Handcock to an electrician’s invoice which showed that the cost of same was $768.97. I accept that this is an appropriate expense of the Applicants which the Second Respondent must pay pursuant to the provisions of clause 17.3 of the Lease.
17 The Applicants claim the sum of $8,940 in respect of painting of the downstairs and upstairs of the premises, and say that they are entitled to payment of this sum because the First Respondent was required to repaint the inside of the property in the last 3 months of the Lease period pursuant to Clause 7.3.3 of the Lease and that Special Condition 4 of the Lease also required the First Respondent to repaint the interior of the premises prior to the expiration of the first term of the Lease.
18 This claim by the Applicants for the cost of painting the premises cannot succeed for a number of reasons. The amount of $8,940 comes from a quotation given by a painter by the name of Mr Guenther Weil in a written quotation dated 12 June 2007. The Applicants concede that this quotation was never proceeded with and that in fact part of the premises was repainted by the Applicant themselves, with the balance of the premises remaining unpainted because the Applicants still await advice of colour choice from a subsequent tenant. The appropriate approach to be taken in assessing the Applicants’ claim following breach of the covenant to repaint, is to assess the cost of rectification. This is clearly pointed out in clause 7.5 of the Lease which provides that “if the tenant does not do the work, the landlord can do it and the tenant must reimburse the landlord for the cost of the work”.
19 Unfortunately, the Applicants have done some of the painting work but have provided no evidence of the cost of such work, and have allowed the remainder of the painting work not to be done. In such circumstances, the rectification has not been fully completed, and the cost of the partial rectification has not been proved.
20The Applicants also claim the sum of $4,200 in respect of work done by the Applicants themselves in removing rubbish and unwanted fixtures and cleaning up the premises. This sum is calculated at a claimed rate of $30 per hour over the total of 140 hours said to have been worked by Mr Handcock and Mr Wilkins over the period 21 April 2006 to 24 August 2006.
21 Again, there is also some difficulty for the Applicants in respect of this component of the claim. In a letter sent by the Applicants’ then solicitors McPhee Kelshaw to the Respondents’ solicitors dated 24 May 2006 (which appears as Annexure “G” to the affidavit of Mr Handcock sworn on 3 July 2008) it is said that, as at that date the Applicants had undertaken a number of jobs which the Respondents should have carried out, including “the cleaning, disposal of unwanted plant, fittings, fixtures and signage” and that the remaining work which the Respondent now had to do was to reinstate the car park sign and light. This letter indicates that all work in relation to removal of unwanted fixtures, fittings and the like had been completed as at 24 May 2006. There is also no explanation as to how the hourly rate of $30 was arrived at. Mr Handcock submitted that this figure was an estimate made by the Applicants as to what a fair hourly rate would be for this work. Given the state of the evidence, and the obligation of the Respondents to pay the reasonable costs of the Applicants in undertaking this cleaning and removal work which the Respondents should have performed, the appropriate approach is to allow the sum of $1,065 being the value of the work at the rate claimed by the Applicants for the period 21 April through to 22 May 2006.
22 The Applicants claim the sum of $450 in respect of the claimed cost of servicing of the air conditioning at the premises, but it was conceded that this figure was only an estimate by the Applicants because no account or quotation had been sought or obtained and also because the air conditioning system had been reconfigured soon after the premises were vacated by the First Respondent. I disallow this component of the claim, because it is a speculative expense which has not been incurred and is unlikely in any event to be incurred.
23 The Applicants have also sought a specific sum as compensation for their legal costs said to be incurred in “enforcing the Lease Conditions against the Defendant” as well as the costs of filing with the Retail Tenancy Unit. The Applicants have also separately sought an order that the Second Respondent pay their costs of these proceedings, and I will deal with this issue of costs later within this decision.
24 The Applicants also claim “compensation for preparation, work and travelling from Wollongong to Sutherland” in respect of the mediation hearings. This is also a claim which may or may not fall within any entitlement which the Applicants may have in the event that any order is made for payment of their legal costs.
25 The Applicants also claim the sum of $13,975.28 in respect of unpaid rent. The applicable daily rate for rent was $383.76, and the Applicants’ claim is based upon unpaid rent for six days up to and including 21 April 2006 when the property inspection took place, together with a further one month being the due notice period which the Applicants assert was required under the terms of the Lease.
26 In the Defence filed in the Local Court, the Respondents contended that notice of vacation of the premises was given on 18 April 2006 and that by that time there was an agreement between the parties which had simply extended the term of the tenancy of the premises to cover the period 10 March 2006 to 10 May 2006, with only one week’s notice required.
27 Based upon the communications between the parties, and the terms of the letter from the Applicants’ solicitors dated 10 March 2006, I am satisfied that the agreement reached between the parties included terms that, after the date of expiry of the initial Lease period, the First Respondent would continue to occupy the premises for an exact period of two months until 10 May 2006, and that it would continue to be responsible for payment of all proper rent and for meeting all other obligations as set out within the original Lease. As such, I do not agree with the contention of the Respondents that only one week’s rent was payable in lieu of notice, nor do I agree with the contention made by the Applicants that payment of rent for one full month as and from 21 April 2006 was due and payable by the Respondents.
28 I accept from the material before me that rent was unpaid for the 16, 17 and 18 April 2006 and that notice was given on 18 April 2006 on behalf of the First Respondent that the premises were vacated. The Second Respondent is liable for payment of rent for the period 16 April 2006 until 10 May 2006 being the end of the agreed extended term of occupation of the premises by the First Respondent. At the applicable daily rate of $383.76, this equates to a total sum of $9,210.24 for the period of 24 days.
29 Accordingly, I find that the primary amount of compensation payable to the Applicants is the sum of $11,044.21. To this sum should be added an amount for interest which I have calculated pursuant to the rates as set out within Schedule 5 of the Uniform Civil Procedure Rules to be the sum of $3,113.25
Claim by the Applicants that the Second Respondent Should Pay the Costs of These Proceedings
30 It was conceded by Mr Handcock during the course of the hearing that the Applicants should not be entitled to that part of their costs which related solely to the institution of proceedings in the Penrith Local Court.
31 The criteria to be applied in deciding whether or not an order for costs should be made in proceedings before the Tribunal are set out within section 88 of the Administrative Decisions Tribunal Act 1997. This section was amended in January 2009 and gives the Tribunal the discretion to award costs, “but only if it is satisfied that it is fair to do so …”. Section 88(1A) sets out a number of factors which the Tribunal may take into account in exercising its discretion, but also permits the taking into account of “(e) any other matter that the Tribunal considers relevant”.
32 The claim as originally made by the Applicants has not fully succeeded. However, the evidence admitted in these proceedings indicates that an offer was made by the Applicants to the Second Respondent on 3 May 2006 on terms that if payment of the sum of $6,000 was made to the Applicants, the signage at the premises reinstated and the fittings and rubbish removed, the dispute between the parties would be settled. In deciding whether it would be fair to make an order for payment of costs, the failure of the Respondents to accept this reasonable offer should be taken into account.
33 Previous decisions in respect of the terms of the former section 88 of the ADT Act as to what constituted “special circumstances” for the purpose of considering a costs order also have relevance to this costs determination, as these decisions also deal with a number of the relevant criteria set out within the amended section.
34 Consideration of the discretion to order costs should also include the terms of the Defence filed in the Local Court on behalf of the Respondents which properly took issue with at least some of the aspects of the claim made by the Applicants. The Defence was certainly not one which could be described as totally untenable and which might therefore become a factor to be taken into account in considering a costs order.
35 An important factor which should be taken into account pursuant to section 88(1A)(b) and (c) of the ADT Act is the additional work and delay involved in these proceedings caused by the motion to strike out filed on behalf of the Second Respondent, which was ultimately dismissed by Judicial Member Molloy. In summary, the submissions made on behalf of the Second Respondent in support of the motion were that the Tribunal lacked jurisdiction to deal with this dispute and that the proceedings should be struck out because any liability of the Second Respondent was contingent upon default by the First Respondent which in turn could not be proved. In his decision, Judicial Member Molloy described these submissions as being without merit. Having now perused the submissions then filed on behalf of the Second Respondent, I must respectfully agree with Judicial Member Molloy’s unequivocal dismissal of the motion, and I also take into account the large amount of material filed in the motion, the time spent in its determination, and the resultant delay in finalisation of these proceedings.
36 Failure to attend a mediation where it would otherwise appear appropriate to do so, as is the situation here, is also a factor which should be taken into account when considering whether a costs order should be made (see, for example, the decision of the Tribunal in Chauhan v Demertjis (2008) NSW ADT 304). The Respondents have failed to satisfactorily explain why there was no attendance at the arranged mediation appointments.
37 In summary, although the claim of the Applicants has not been fully made out, they have nevertheless succeeded in obtaining an order for payment of a sum which significantly exceeds the amount which they offered to accept from the Respondents prior to the proceedings being initiated, the Respondents have shown apparent disregard for the mediation process, and the Respondents have unnecessarily prolonged these proceedings by making an application which was essentially untenable. In these circumstances, and adopting the language used by Santow J in Cripps v Dawson (2006) NSW CA81, I consider that it would be seriously unfair to the Applicants if the Second Respondent was not ordered to pay their costs of the proceedings.
Application by the Applicants that Mr Bobi Damcevski as Solicitor for the Second Respondent pay the Applicants’ Costs of the Notice of Motion
38 I have already summarised the motion brought by the Second Respondent, and have also outlined the decision made by Judicial Member Molloy in dismissing the motion.
39 The Applicants have sought an order that the solicitor for the Second Respondent should personally pay the costs of the Notice of Motion. This application is based upon two grounds:
a.that the Notice of Motion was filed by the solicitor in circumstances where, contrary to the requirements of section 345 of the Legal Profession Act 2004 the claim as made within the Notice of Motion did not have reasonable prospects of success
b.that the solicitor had acted in the proceedings without proper instructions from the Second Respondent but had instead taken instructions from members of the Second Respondent’s family.
40 In the course of the hearing before me, Mr Handcock conceded that the second ground above was unsustainable.
41 The Applicants contend that this Tribunal has the power to award costs against the solicitor pursuant to the provisions of section 88(2) of the ADT Act which give the Tribunal discretion to determine by whom and to what extent costs are to be paid in respect of any proceedings. The decision of the Appeal Panel in Kondos & Anor v Citadin Pty Ltd (RLD) (2003) NSW ADTAP7 at paragraph 21 affirms that the Tribunal does have the power to make orders for costs against non parties and, in that decision, the Appeal Panel proceeded to make an order against a lay advocate who had appeared in those proceedings. The Appeal Panel also had this to say:
“(35) We have little doubt that had a solicitor conducted himself or herself in a similar manner they would have been met by a similar application, and, in addition, issues of the adequacy of their professional conduct may have arisen. The importance of the role of professional discipline in ensuring adherence to proper norms of conduct in litigation is recognised in Damjanovic v Maley at (74) – (75) per Stein JA.”
42 Although section 88(2) permits the Tribunal to make an order against a legal representative, consideration must also be given to the provisions of sections 345, 348 and 349 of the Legal Profession Act (the “LP Act”). Section 345 provides that a law practice must not provide legal services on a claim or defence of a claim for damages unless “a legal practitioner associate responsible for the provision of services concerned reasonably believes on the basis of provable facts and a reasonably arguable view of the law that the claim or the defence (as appropriate) has reasonable prospects of success”.
43 Section 348 of the LP Act provides that an order may be made directing the legal practitioner concerned or his or her practice to repay to their client the whole or any part of any adverse costs order made, or directing the legal practitioner to pay another party in the proceedings.
44 Section 349 provides that if the court hearing proceedings on a claim for damages finds that the facts established by the evidence before the court do not form a basis for a reasonable belief that the claim or defence had reasonable prospects of success, there is a presumption for the purposes of the Act that such legal services were provided without reasonable prospects of success. This presumption is rebuttable and the legal practitioner seeking to rebut it bears the onus of establishing that at the time of provision of the services there were provable facts that provided a basis for a reasonable belief that the claim or defence had reasonable prospects of success.
45 Despite the language of the above sections referring to the power of a “court” I am satisfied, based upon the terms of the ADT Act and the previous decision of the Appeal Panel in Kondos (supra), that this Tribunal is empowered to make an order against a legal practitioner pursuant to section 348 of the LP Act.
46 The proper approach to be taken in determining an application under section 348 is described within the judgment of Mr Justice Basten in Hayden Fowler Corbett Jessop v Toro Constructions P/L (2008)NSW CA178 as follows:
“17 …. its clear purpose is to discourage practitioners from bringing before the courts matters of fact which should not properly be alleged or claims based upon a legal principle which is not reasonably arguable. …however, the too ready imposition of such sanctions may undermine the statutory purpose (including by increasing litigation) or may have other unintended consequences for the proper role of legal practitioners in the administration of justice with respect to damages claims. The purpose would be undermined to the extent that litigants were forced to proceed in person without professional assistance and to the extent that litigants who might have arguable claims were unable to pursue them.
18. The importance of making orders under section 348 only in circumstances where a clear case has been made out is a protection against overuse of the power which, if called in aid, improperly, will pit the interests of the practitioner against those of his or her client.
19. It is no doubt inevitable that a power of this kind, if invoked, will give rise to “satellite litigation”. Such litigation will, however, be minimised if it is borne steadfastly in mind that the power should only be availed of in clear cases. There will also be a tendency, of which the Courts must be conscious, for litigants to seek to recover costs from solicitors for the opposing party, where that party would otherwise be responsible for the costs, but may not be worth pursuing.
47 In Corbett, His Honour then went on to note that the need for this power to be exercised “with care and discretion and only in clear cases” had been identified by the English Court of Appeal in Ridehalgh v Horsfield (1994) CH205 at 229, and in other authorities referred to with approval by Her Honour Justice McColl in Lemoto v Abel Technical Pty Ltd (2005) NSW CA153.
48 In considering whether a costs order should be made against the legal practitioner acting on behalf of the Second Respondent in respect of the motion, I should here repeat my agreement with Judicial Member Molloy that this motion filed on behalf of the Second Respondent in the proceedings was devoid of merit.
49 The findings of Judicial Member Molloy raise the presumption that the Second Respondent’s motion did not have reasonable prospects of success.
50 The solicitor for the Second Respondent was placed on notice of the subject application that he bear the costs of the Notice of Motion, and he has filed submissions in response. I have received some limited assistance from these submissions.
51 The solicitor’s submissions point out that the Applicants twice filed an originating claim in the Local Court when it was apparent that the Tribunal was deemed to be the proper venue. The submissions also point out that the Respondents obtained a costs order against the Applicants for this reason. This is a correct and proper factor to be taken into account in relation to the costs of the proceedings generally, but is irrelevant to the issue of costs of the Notice of Motion.
52 A further matter raised by the solicitor is that the Applicants are self represented and have therefore not incurred legal costs. This contention may or may not be correct. The Applicants may or may not be entitled to payment of the costs paid to their solicitors in the early stages of the proceedings or to the lawyer Mel Bloom who apparently has provided some advice but has not appeared in the proceedings.
53 Unfortunately, the submissions filed by the solicitor do not go very far in addressing the issue of whether the Notice of Motion had reasonable prospects of success. The submissions recite the warning of Mr Justice Barrett in Lemoto (supra) that “the legislation is not meant to be an instrument of intimidation” but barely address at all the issue of whether the solicitor had reasonable grounds for believing that the Motion had any reasonable prospects of success. The only submissions offered by the solicitor in relation to the merits of the Motion are as follows: “the Judicial Member has deliberated on the law correctly. There was never an argument there … respectfully the solicitor for the Second Respondent submits that the Judicial Member has not fully taken into consideration the practical aspect of continuing with the substantive part of the proceedings. The Second Respondent’s defence has been compromised as all documentary evidence is held with the liquidator (presumably). This will become more apparent in due course.”
54 Within the foregoing submission, the solicitor seemingly conceded the correctness of Judicial Member Molloy’s decision but then appeared to argue that continuation of proceedings was of itself unfair to the Second Respondent due to unavailability of documentary evidence. The accuracy of this contention is questionable, but in any event does not go to the principal issue of whether, at the time of filing the Notice of Motion, the solicitor held a reasonable belief based upon a reasonably arguable view of the law that the motion had reasonable prospects of success. As such, the presumption raised by Judicial Member Molloy’s findings is not rebutted.
55 Notwithstanding the possibility that the Applicants may not have incurred any actual legal costs in respect of the Notice of Motion, I accordingly consider it appropriate that the solicitor should pay any reasonable legal costs which may have been incurred by the Applicants in respect of the Notice of Motion, upon a party/party basis.
ORDERS
- 1. The Application against the First Respondent is dismissed
2. The Second Respondent is to pay the sum of $14,137.46 to the Applicants
3. The Second Respondent is to pay the Applicants’ costs of these proceedings upon a party/party basis as agreed or assessed, but not to include costs incurred in respect of proceedings in the Local Court or costs incurred in respect of the Notice of Motion filed in these proceedings by the Second Respondent
4. The solicitor for the Second Respondent, Mr Bobi Damcevski, is to personally pay any legal costs of the Applicants upon a party/party basis in respect of the Notice of Motion filed by the Second Respondent in these proceedings as agreed or assessed.
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