| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA) CITATION : HEAD and ZIMMERMANN INVESTMENTS PTY LTD [2009] WASAT 61 (S) MEMBER : MR T CAREY (MEMBER) HEARD : DETERMINED ON THE DOCUMENTS DELIVERED : 8 APRIL 2009 SUPPLEMENTARY
DECISION : 9 JULY 2009 FILE NO/S : CC 1159 of 2008 BETWEEN : BRIAN HEAD Applicant
AND
ZIMMERMANN INVESTMENTS PTY LTD
Respondent
FILE NO/S : CC 1767 of 2008 BETWEEN : ZIMMERMANN INVESTMENTS PTY LTD Applicant
AND
BRIAN HEAD
Respondent
(Page 2)
Catchwords: Landlord and tenant - Retail shops - Costs - Exercise of discretion - Assessment of reasonable costs Legislation: Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 11(1)
State Administrative Tribunal Act 2004 (WA), s 87(1), s 87(2) Result: Order for costs of $9,000 (exclusive of GST) Category: B
Representation: CC 1159 of 2008 Counsel:
Applicant : Mr J Eastoe
Respondent : Mr M Levitan
Solicitors:
Applicant : Jonathan Eastoe, Solicitor
Respondent : Melvyn Levitan
CC 1767 of 2008 Counsel:
Applicant : Mr M Levitan
Respondent : Mr J Eastoe
Solicitors:
Applicant : Melvyn Levitan
Respondent : Jonathan Eastoe, Solicitor
(Page 3)
Case(s) referred to in decision(s):
Head and Zimmermann Investments Pty Ltd [2009] WASAT 61
J & P Metals Pty Ltd and Shire of Dardanup [2006] WASAT 282 (S)
Pearce and Germain [2007] WASAT 291 (S)
Summerville and Department of Education & Training [2006] WASAT 368 (S)
(Page 4)
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision 1 The lessee of commercial premises succeeded before the Tribunal in relation to three questions referred for determination. He sought an order for his legal costs. 2 The Tribunal considered the circumstances in which it might be appropriate to exercise its discretion to award costs, and the correct approach to adopt in arriving at the amount of costs to be awarded in a proper case, by reference to its previous decisions. On considering the relevant factors, the Tribunal concluded that the applicant was entitled to a costs order, limited to costs reasonably incurred in relation to the respondent's claim that there was no valid lease currently operating. 3 Although no bill of costs referable to the particular scale relied upon by the applicant was filed, the Tribunal made its own assessment based upon an itemised account of actual charges and applying a series of discounts. In the result, the respondent was ordered to pay costs of $9,000.
Relevant background 4 On 8 April 2009, the Tribunal delivered its decision on three questions referred to it by the parties. Those questions were: 1) whether the rent review clause in the written lease between the parties was void for breach of a requirement of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Retail Shops Act) requiring such a clause to specify a single basis on which the review is to be made; 2) whether it was the intent of the clause, in the event that the rent review provision was invalid, to substitute another mechanism for rent review; and 3) whether two deeds of extension of lease were valid (in order to determine whether the lessee's current occupation was pursuant to the terms of a written lease or as an overholding tenant). 5 The first question was the subject of application CC 1159 of 2008, brought by Mr Head (applicant) (Head application). Both the second and third questions were the subject of application CC 1767 of 2008, brought by (Page 5)
Zimmermann Investments Pty Ltd (respondent) (Zimmermann application). The two applications were treated as one consolidated matter, which was the subject of the Tribunal's decision of 8 April 2009, published as Head and Zimmermann Investments Pty Ltd [2009] WASAT 61 (principal decision). 6 In the principal decision, the specific rent review clause in the original lease was found to be invalid, the remainder of the rent review clause was found not to operate so as to substitute any other rent review mechanism, and the deeds of extension were found to be valid. The applicant's case in relation to each of the three questions was thus vindicated. In light of this outcome, the applicant sought an order for his costs. The parties were directed to file written submissions and supporting documents relating to the costs application, and they have done so. This decision is made on the basis of the filed documents.
Costs in the Tribunal - general principles 7 In a decision of the then Deputy President (now President) of the Tribunal in Pearce and Germain [2007] WASAT 291 (S) (Pearce), the then Judge Chaney was concerned with a costs application in a matter under the Retail Shops Act. His Honour noted that the starting point was that the Tribunal is a 'no costs' jurisdiction (see s 87(1) of the State Administrative Tribunal Act 2004 (WA) (SAT Act)). This is, however, subject to a broad discretion conferred by s 87(2) of the SAT Act to award costs. His Honour noted (at [22]) an earlier Tribunal decision (Summerville and Department of Education & Training [2006] WASAT 368 (S) per Justice Barker) in which it was said that it was not appropriate to delineate the particular circumstances in which the discretion to award costs would be exercised favourably, but then went on to identify a number of factors which may contribute to the Tribunal making a costs order. 8 At [24] in Pearce, Chaney J said: ... decisions on costs might serve to promote certainty and responsibility in parties to their contractual responsibilities. That does not mean that there is a presumption that costs will follow the event. Rather, where it is necessary for a party to a retail shop lease to take proceedings in the Tribunal to vindicate its clear contractual entitlements, and to incur costs in doing so, it will "often not be unreasonable for an award of costs to be made". The position is the same where costs are incurred in defending an obviously unmeritorious claim. Where, however, there is a genuine dispute between the parties to a lease, their respective rights are unclear (Page 6)
and one or both seek determination of their rights in the Tribunal, the starting point remains that each party should expect to pay their own costs ... 9 In my view, the distinction drawn by his Honour between a party having to vindicate its clear contractual entitlements or to defend an obviously unmeritorious claim, on the one hand, and a genuine dispute in which one or both of the parties seek determination of their rights in the Tribunal, on the other, is particularly apposite in this case. So, where uncertainty has arisen based on a genuine doubt over the correct legal position on one or more issues pertaining to a leasehold relationship, the parties should not be inhibited by the disincentive of a potential costs order against the party who is ultimately unsuccessful from approaching the Tribunal to have the dispute determined. However, where the legal position on an issue or issues arising under a lease is clear, and therefore, should not be the subject of dispute, then a party whose conduct imposes upon the other party the need to seek confirmation from the Tribunal, or to incur costs in opposing an untenable claim, may well be the subject of a costs order against it. 10 Assuming there is to be an order for costs, the question will then arise as to how the calculation of those costs is to be approached. Some guidance on this question is to be derived from another decision of the Tribunal in J & P Metals Pty Ltd and Shire of Dardanup [2006] WASAT 282 (S) per Chaney J and Member Ms M Connor, (J & P Metals Pty Ltd) and in particular the following passage at [38]: The procedures of the Tribunal are designed to achieve the objectives prescribed by s 9 of the SAT Act. The Tribunal strives to ensure that its procedures are proportionate to the nature of the matters in issue. On occasions, matters before the Tribunal are difficult and complex, sometimes involving lengthy hearings. … In the unusual event that an order for costs is made by the Tribunal, the Tribunal's obligation to minimise the costs to parties will be reflected in the costs assessed by the Tribunal as recoverable. That approach reflects an expectation that representatives of parties before the Tribunal will approach a proceedings [sic] in a way that minimises costs to their clients. If clients choose to approach proceedings before the Tribunal in a way which substantially increases costs for them, it will be a rare case where that increase in costs will be recoverable through a favourable costs order.
Consideration 11 The parties' respective submissions on costs touch upon a variety of issues, including the factors to be taken into account along the lines of those discussed in Pearce and other decisions; pre-application negotiations between the (Page 7)
parties; the consequences for the parties of the principal decision; the conduct of the parties in the course of the Tribunal proceedings; and the proper scope of, and basis for, any costs award. Although I have considered each of the matters raised by the parties, I will restrict myself in these reasons to indicating those factors which are to my mind significant in reaching the decision I have, and, to the extent that the costs application has been successful, in determining the amount of the costs to be awarded. I do not wish to compound what has been a relatively tortuous history of disputation between the parties with a lengthy dissertation on costs, when a concise statement of the essential factors and an explanation for the ultimate outcome should be all that is required. 12 I consider that the sole question raised by the Head application, and what was described in the principal decision as the second referred question under the Zimmermann application, both fit the description in Pearce of a genuine dispute between the parties to a lease, in respect of which both parties sought determination of their rights in the Tribunal. Although, with the benefit of hindsight (namely, the principal decision) it is easy to be critical of the position previously adopted by the unsuccessful party, there is no requirement for parties to only contend for positions which, for example, have a better than 50% prospect of being vindicated. It is also often true that the arguments finally relied upon in the context of court or tribunal proceedings are settled upon only subsequent to commencement of the proceedings, enabling a proper assessment of the relative strengths of the competing arguments only at that time. Further, as has been pointed out, the issue of the validity of the express rent review provision in the lease having regard to s 11(1) of the Retail Shops Act was purely a legal one admitting of only a 'Yes' or 'No' answer; as a result, it could be determined quite efficiently upon the documents, without the need for a hearing nor any investigation of competing evidence or the like. As the reasons for decision of the Tribunal disclose, the second referred question under the Zimmermann application demanded a somewhat more detailed analysis. However, in my view, although not ultimately successful, it was not unreasonable for the respondent to raise such an alternative claim and have it determined by the Tribunal at the same time as the Head application. 13 I turn then to the other question raised by the Zimmermann application of the validity of the deeds of extension of lease. (Page 8)
14 This issue represented a further alternative claim by the respondent that, regardless of the outcome of the rent review issues, the applicant's status as lessee was not, as he had understood, pursuant to the second of two extensions of lease, but rather, as an overholding lessee under the original lease. The initial point to be made is that the outcome of the claim was of significant moment to the applicant. Were the claim to succeed, it would mean that his assumed security of tenure, pursuant to a written extension of lease document, would be lost. The claim having been made on the respondent's behalf by its lawyer; the applicant was quite entitled to resort to his own legal representation in an attempt to ward off the attack on his legal rights. 15 As described in the principal decision at [31], the respondent relied upon some eight grounds to support its claim. Those grounds are dealt with in the principal decision at [33] - [56], which contain a series of findings adverse to the respondent's arguments. The findings go to the legal bases upon which reliance was placed and the failure of the evidence to support any such ground. Taken together, in my view, the findings demonstrate the quality (or lack thereof) of the respondent's arguments fitting the description of 'obviously unmeritorious'. The arguments were suggestive of either a lack of appreciation or acceptance of the clear legal position, or a preparedness to rely upon a range of tenuous arguments for tactical advantage. Either way, this is the type of claim which is to be discouraged in the Tribunal by an appropriate order for costs consistent with the Pearce considerations. 16 What then is an appropriate award in the circumstances of this case? 17 It was submitted by the applicant that the respondent should be ordered to pay the applicant's proper and reasonable costs (including costs in respect of negotiations prior to the commencement of the proceedings and the costs of attending mediation conferences) to be assessed under item 32 of the Legal Practitioners (Supreme Court) (Contentious Business) Determinations 2006 and 2008 (Determinations). However, despite being directed to include in its submissions in support of a costs order 'particulars of the costs claimed', the applicant filed no bill of costs by reference to the Determinations. Rather, an itemised account of the actual costs charged to the applicant by his solicitor spanning the period July 2007 until April 2009 was provided, showing a total costs figure of $29,489 exclusive of GST. The itemised account covered the entirety of legal services provided to the applicant, including, apparently, all costs charged in relation to both the Head application and the Zimmermann application. (Page 9)
18 I have decided, in the interests of bringing these matters to finality and to avoid further costs to the parties, to determine a reasonable figure for costs doing the best I can on the basis of my knowledge of the SAT litigation and the documents filed in respect of the costs application. The alternative, to further delay the matter to enable a bill to be filed in accordance with the relevant scale, would in my estimation be wholly unsatisfactory. In setting myself such a task, it has not been possible to arrive at a reconstruction of the itemised account provided to accord with the appropriate scale (which I am satisfied would be either or both of the Determinations applicable at material times based on the consequences to the applicant if the claim succeeded), and my approach will be to refer to the itemised account and apply to it a number of discounts, the reasons for which I shall explain, to arrive at a final figure. I do note that the hourly rates applied in the itemised account are reasonable having regard to the maximum rates prescribed by the Determinations. 19 A significant part of the account relates to the period prior to the commencement of either of the SAT proceedings. Based on items of correspondence within the applicant's bundle of documents in respect of costs, it is clear that a substantial part of the pre-application attendances concerned negotiations directed to rectification of both the original lease and second extension deed, arising partly from the asserted (and subsequently confirmed) invalidity of cl 2.05, but also to overcome other perceived omissions not the subject of either application. As such, despite the applicant's assertion to the contrary, in my view, none of the quite extensive costs incurred prior to the commencement of the Head application qualify for reimbursement. Helpfully, the itemised account provides details of hours spent before and after 1 July 2008, shortly prior to the issue of the Head application, as that was the date of a change of solicitor's hourly rate. When the pre-1 July 2008 hours are excluded, the costs figure reduces to approximately $20,000. 20 In considering an appropriate amount to be paid by the respondent in respect of the single issue which I have found to justify the making of a costs order, a number of further discounts apply. The first is to remove the solicitor - client margin inherent in the applicant's solicitor's account. Doing the best that I can on the basis of the information provided, I believe a 25% discount to be appropriate, resulting in a figure of $15,000. 21 The second discount reflects that the questions as to the validity of the rent review provision and construction of the remainder of the clause remained the subject of dispute in the Tribunal. It is also the case, however, that subsequent to the issue of the Zimmermann application, the significant majority of work required of the applicant's (Page 10)
legal representative was directed to the respondent's new arguments that the deeds of extension were invalid. This is clear when one considers the contents of the parties' statements of issues, facts and contentions and witness statements. The additional discount in respect of this item will be 20%, reducing the figure to $12,000. 22 The final discount to be applied is by reason of what I will refer to as the 'SAT factor'. The SAT factor is the subject of the passage from J&P Metals Pty Ltd reproduced earlier in these reasons. The applicant's own submissions in support of its costs application appear to recognise the existence of such a factor by noting (albeit in support of a submission that had the respondent acted differently, the dispute would have been averted and the costs would have been substantially less) that the applicant's legal fees of over $30,000 compared with what is said to be a $3,803 subject-matter, being the alleged overcharge resulting from the application of the invalid rent review clause. As I have indicated, the actual subject-matter of the respondent's claim which gives rise to the costs liability concerned the applicant's security of tenure. However, the sentiment expressed in the applicant's submissions that it 'flies in the face of SAT's objectives for costs to exceed the amount of the claim' aptly summarises the Tribunal's desire that parties availing themselves of the Tribunal's processes should themselves exercise restraint in the manner in which they conduct themselves. 23 By reason of the application of the SAT factor, the $12,000 figure is reduced by a further 25% to $9,000. There will be an order for costs in favour of the applicant in that sum.
Order The respondent shall pay to the applicant costs fixed at $9,000 (exclusive of GST) within 14 days of this order or as otherwise agreed between the parties. (Page 11)
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