Heatherway Pty Ltd v Dykes & Wildie (No 2)

[2007] NSWADT 196

CITATION:	Heatherway Pty Ltd v Dykes & Wildie (No 2) [2007] NSWADT 196
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT/CROSS RESPONDENT Heatherway Pty Ltd FIRST RESPONDENT/FIRST CROSS APPLICANT Peter James Dykes SECOND RESPONDENT/SECOND CROSS APPLICANT Paul Richard Wildie
FILE NUMBER:	045145, 065059
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	25 July 2007
EXTEMPORE DECISION DATE:	25 July 2007
DATE OF DECISION:	29 August 2007
BEFORE:	Chesterman M - ADCJ (Deputy President)
CATCHWORDS:	Claim for payment of money - Unconscionability
MATTER FOR DECISION:	Costs
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Limitation Act 1969 Limitation of Actions Act 1958 (Vic) Retail Leases Act 1994 Retail Leases Amendment Act 2005
CASES CITED:	Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31 Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81, Dykes and Wildie v Heatherway Pty Ltd (RLD) [2007] NSWADTAP 26 Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164 Heatherway Pty Ltd v Dykes & Wildie [2006] NSWADT 354 Kindful (Australia) Pty Limited v Country Villa Holdings Pty Limited (No 2) [2006] NSWADT 357 Prasad & Anor v Fairfield City Council (RLD) [2002] NSWADTAP 2 Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43
REPRESENTATION:	APPLICANT M Easton, barrister RESPONDENT B Zipser, barrister
ORDERS:	Subject only to the costs order made on 18 April 2005, there will be no order as to the costs of the proceedings at first instance in this matter.

Introduction

1 This judgment deals with costs applications made by the parties on both sides of these proceedings.

2 The proceedings comprise (a) a retail tenancy claim, instituted under the Retail Leases Act 1994 (‘the RL Act’) by the Applicant/Cross Respondent, Heatherway Pty Ltd (‘Heatherway’), and (b) an unconscionable conduct claim, instituted under the same Act by the Respondents/Cross Applicants, Mr Peter Dykes (‘Dykes’) and Mr Paul Wildie (‘Wildie’).

3 Since the proceedings include an unconscionable conduct claim, the Tribunal must be constituted in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’). It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified non-judicial members of that Division acting in an advisory capacity only.

Factual background

4 Heatherway owned a fast food sales business at Coffs Harbour, together with the premises in which the business was situated (‘the Premises’). Since 1993, it had conducted this business under a franchise agreement made with Burger King Corporation (a company incorporated in Florida, USA) and Hungry Jacks Pty Ltd (‘Hungry Jacks’).

5 At all relevant times, Heatherway was controlled by Mr David Cox (‘Cox’), who resides in Victoria.

6 By an agreement made on or about 31 August 1998, governed by the law of Victoria, Heatherway sold the business to a company called North Coast Foods Pty Ltd (‘NCF’). The sale was expressed to be subject to (a) NCF obtaining, before completion of the sale, both Burger King’s consent to the sale and an assignment of Heatherway’s rights and liabilities under the franchise agreement to NCF; and (b) the execution of a lease of the Premises.

7 Between the time at which this agreement was negotiated and signed and 9 February 2000, NCF was owned and controlled by Dykes and Wildie.

8 On 7 December 1998, the sale was completed even though Burger King’s consent had not been obtained, and NCF paid the balance of the agreed purchase price to Heatherway.

9 On or about 8 December 1998, Heatherway and NCF executed a lease (‘the Lease’) of the Premises to NCF. It was stipulated to run from 8 December 1998 to 8 December 2008. It was governed by the law of New South Wales and fell within the provisions of the RL Act. Pursuant to a clause in the Lease, Dykes and Wildie were guarantors of NCF’s obligations under the Lease.

10 NCF fell into substantial arrears in its payment of the rent due under the lease. By February 2000, these arrears were in excess of $70,000.

11 On 9 February 2000, Dykes and Wildie sold their shares in NCF to Mr Barry Hammond and Ms Yvonne Hammond.

12 On or about 31 May 2000, a lengthy document headed ‘Agreement dated 31st May 2000’ (‘the May 2000 agreement’) was signed by Cox under the seal of Heatherway, by Cox under the seal of a company called Power Image Pty Ltd and by Ms Hammond under the seal of NCF. It purported to provide, amongst other things, for the sale of the Coffs Harbour business by Heatherway to NCF. It did so even though, according to the agreement made on 31 August 1998 and completed on 7 December 1998, Heatherway had already sold the business to NCF.

13 The May 2000 agreement contained two clauses which, according to arguments advanced by Dykes and Wildie, extinguished any pre-existing liability on their part under the guarantee in the Lease. It provided also for a new lease of the Premises to be granted by Heatherway to NCF, with a commencement date of 1 July 2000. But no such lease was ever prepared or executed.

14 On or about 26 June 2003, NCF went into liquidation.

The course of this litigation

15 On 9 June 2004, Heatherway commenced proceedings in the Supreme Court of Victoria against Dykes and Wildie. The Statement of Claim alleged that NCF owed to Heatherway (a) $316,187.30 on account of unpaid rent, (b) $10,004.23 for rates and (c) interest, payable under a clause in the Lease. It further alleged that Dykes and Wildie were liable to pay these amounts on demand pursuant to the guarantee in the Lease and that a demand had been made in a letter to them dated 17 June 2003.

16 On 20 September 2004, on the application of Dykes, the Supreme Court of Victoria ordered by consent that the proceedings be transferred to the Supreme Court of New South Wales. Costs were reserved.

17 On 18 November 2004, by consent, the Supreme Court ordered that the proceedings be transferred to the Tribunal, as a retail tenancy claim. Again, costs were reserved.

18 On 25 April 2005, the Tribunal, constituted by Judicial Member Fox, declined to grant an application by Dykes and Wildie for an order striking out Heatherway’s claim for want of prosecution. The Tribunal ordered that on or before 5 May 2005 Heatherway should file and serve particulars that had previously been requested. It also ordered that Heatherway should pay to Dykes and Wildie the costs of their application.

19 On 23 November 2005, Heatherway filed an Amended Statement of Claim in the Tribunal. For present purposes, two amendments made to the original Statement of Claim are significant. First, the Amended Statement of Claim contained a new allegation that on or about 31 May 2000 Heatherway entered into a ‘new lease’ of the Premises to NCF, stipulated to commence on 1 July 2000. Secondly, it asserted that ‘in the premises’ the guarantees given by Dykes and Wildie related to NCF’s performance of its obligations under the Lease until 30 June 2000 only. It accordingly substituted a distinctly smaller amount ($122,703, comprising $80,720, as the principal sum owed on account of rent, and $41,983, as interest) for the amounts originally claimed.

20 On 10 April 2006, Dykes and Wildie filed by way of cross claim in the Tribunal an unconscionable conduct claim against Heatherway. It asserted that Heatherway had acted unconscionably in seeking to enforce the guarantee clause in the Lease. It sought an order on this ground that they should not be liable to pay any money to Heatherway under the guarantee.

21 These two claims were heard in the Tribunal on 11 and 12 May 2006. Written submissions were filed subsequently.

22 On 14 December 2006, the Tribunal delivered its decision on these two claims (Heatherway Pty Ltd v Dykes & Wildie [2006] NSWADT 354). It upheld Heatherway’s retail tenancy claim and dismissed the unconscionable conduct claim made by Dykes and Wildie.

23 The Tribunal held that Dykes and Wildie were jointly and severally liable to pay to Heatherway the sum of $122,703, comprising $80,270 for unpaid rent and $41,983 for interest due on the unpaid instalments or rent up to 9 June 2004, the date of commencement of proceedings in the Supreme Court of Victoria. It rejected a claim by Heatherway for interest under s. 72A of the RL Act for the period since 9 June 2004.

24 Dykes and Wildie appealed against this decision. Having heard the appeal on 4 April 2007, the Appeal Panel delivered its decision on 22 May 2007 (Dykes and Wildie v Heatherway Pty Ltd (RLD) [2007] NSWADTAP 26). The Appeal Panel ordered that the amount payable by Dykes and Wildie on account of interest should be halved, thereby reducing the judgment debt to $101,261.50. It rejected the other grounds of appeal.

25 In its decision at first instance, the Tribunal directed that applications and submissions relating to costs should be filed within specified periods of time. It stated that unless any submission to the contrary was made, the issue of costs would be determined without a hearing, pursuant to s. 76 of the ADT Act. In subsequent correspondence with the parties’ representatives, it indicated that these steps should be deferred until after the decision of the Appeal Panel. Since the latter decision was handed down, the parties have filed submissions as to the costs of both the first instance proceedings and the appeal.

26 The present judgment deals with the costs of the first instance proceedings only.

27 Somewhat unusually, both the successful party (Heatherway) and the unsuccessful parties (Dykes and Wildie) have applied for costs. At various points in the submissions by Dykes and Wildie, it is argued that if the matters relied on by them are held to be insufficient to support a costs order, they should in the alternative be treated as reasons for not awarding costs to Heatherway.

28 In these circumstances, the most convenient way in which to deal with these costs applications is by discussing in turn the particular aspects of the proceedings which are relied on as a basis for either or both of the applications. After a review of the legal principles governing costs in these proceedings, this approach will be followed, commencing with the matters on which Heatherway, the successful party, based its application.

Principles relating to costs

29 Section 88(1) of the ADT Act states: ‘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 there are special circumstances warranting an award of costs.’ Section 77A of the RL Act makes this provision applicable in retail tenancy proceedings conducted in the Tribunal.

30 The case-law on s 88(1) in its application to proceedings under the RL Act (see eg Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81, Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164, Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31, Prasad & Anor v Fairfield City Council (RLD) [2002] NSWADTAP 2, and Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43) establishes the following principles. ‘Special circumstances’ are to be defined as ‘circumstances that are out of the ordinary, but without having to be extraordinary or exceptional’. It is not enough that the circumstances are ‘special’: they must also ‘warrant’ an order for costs. On account of the ‘commerciality’ of the Retail Leases Division, the interpretation of ‘special circumstances’ differs significantly from the interpretation that might be adopted in any other Division of the Tribunal. While a finding of ‘serious unfairness’ or ‘grossly unreasonable conduct’ on the part of the party resisting an order for costs is not a prerequisite to determining that there are ‘special circumstances’, it is a highly relevant consideration.

31 Among the various types of situation that have been held to constitute ‘special circumstances’ in retail leases cases, two are relevant to the present case.

32 First, ‘special circumstances’ may be held to exist where the proceedings instigated, or the grounds of defence raised, by the party against whom a costs order is sought are found to have lacked any significant prospect of success and therefore to have been unmeritorious.

33 Secondly, as stated in the Tribunal’s Practice Note No. 12 (October 2006), ‘special circumstances’ may be discernible through an examination of the way in which the case has proceeded in the Tribunal. The Tribunal may take into account the following matters:-

· whether a party has conducted the proceeding in a way that disadvantaged another party to the proceeding by conduct such as -

(i) failing to comply with an order or direction of the Tribunal without reasonable excuse;

(ii) failing to comply with this Act, the regulations, the rules or an enabling enactment;

(iii) asking for an adjournment as a result of (i) or (ii);

(iv) causing an adjournment;

(v) attempting to deceive another party or the Tribunal;

(vi) vexatiously conducting the proceeding;

· whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding.

The institution and maintenance of proceedings in the Supreme Courts of Victoria and New South Wales

34 In the submissions prepared on behalf of Heatherway by Mr Easton of counsel, the first matter alluded to was the fact that these proceedings were initiated in a jurisdiction (that of the Supreme Court of Victoria) in which costs follow the event, and were transferred out of this jurisdiction on the application of Dykes and Wildie.

35 Mr Easton argued that these matters amounted to ‘special circumstances’ warranting an award of costs to Heatherway, the successful party. In making this submission, he relied on the following dicta in the Tribunal’s judgment in Kindful (Australia) Pty Limited v Country Villa Holdings Pty Limited (No 2) [2006] NSWADT 357 at [39]:-

It was also submitted that the commencement of the proceedings in the Supreme Court was a “special circumstance”. The proceedings appear to have been, on the very next day, transferred to this Tribunal. There may have been some costs incurred by the Defendant/Lessor in relation to these proceedings and the incurring of those costs would, in my view, be “special circumstances” simply because in the Supreme Court costs would normally follow the event such that where the proceedings are incorrectly commenced in that Court it would be more than likely that a defendant would have otherwise been entitled to a costs order. There is no need to make any final determination on that point (although I think it has merit) because in my opinion the whole of these proceedings had no merit in that point the proceedings from their inception were completely untenable and doomed from the outset to fail and should have been recognised as such.

36 The argument put by Mr Zipser, counsel for Dykes and Wildie, was however that because Heatherway chose to sue in ‘the wrong jurisdiction’ (i.e., Victoria), it should pay the costs, which were ‘wasted costs’, incurred by Dykes and Wildie during the period (September to November 2004) when the proceedings were in the Supreme Court of Victoria and subsequently the Supreme Court of New South Wales. He argued that this was the correct conclusion to be drawn from the dicta in Kindful. In the alternative, he submitted that these matters were a factor militating against any award of costs to Heatherway.

37 In the Tribunal’s opinion, the Supreme Court of Victoria does indeed appear to have been an inappropriate forum, since the Premises were situated in New South Wales and the Lease was expressed to be governed by the law of this State. No compelling reason why a Victorian court was preferable has been put before the Tribunal. The Tribunal would not treat Cox’s residence in Victoria or the fact that the sale of the business from Heatherway to NCF was governed by Victorian law as compelling reasons.

38 Furthermore, the Lease was agreed on both sides to be governed by the RL Act. The case therefore fell within the ‘general principle’ stated in s. 75(2) of this Act, namely, that ‘retail tenancy disputes should be dealt with by the Tribunal rather than by a court’. This principle underpinned the decision of the Supreme Court of New South Wales to order, pursuant to s. 75(1), that the proceedings be transferred to the Tribunal.

39 In the Tribunal’s opinion, the dicta in Kindful do not govern the issue of costs in the present proceedings because they relate to a materially different situation. In Kindful, the plaintiff/lessee who had elected to sue in the Supreme Court rather than the Tribunal was ultimately the unsuccessful party, against whom a costs order was being sought. The dicta go no further than to suggest that plaintiffs who choose a forum in which costs follow the event might, in effect, be hoist with their own petard if their case, after a transfer to the Tribunal, proves unsuccessful. They might encounter a Tribunal ruling that their decision to invoke such a forum initially constituted ‘special circumstances warranting an award of costs’.

40 Having regard particularly to the ‘general principle’ stated in s. 75(2) of the RL Act, the present Tribunal rejects Mr Easton’s submission that the dicta in Kindful are of assistance to Heatherway. Heatherway sued as plaintiff in a forum where costs follow the event. The proceedings were later transferred to the Tribunal under provisions designating it as being, generally speaking, the preferable forum. In contrast to the situation in Kindful, Heatherway, the plaintiff, was successful. But by virtue of s. 77A of the RL Act and s. 88 of the ADT Act (see [29] above), an award of costs in a retail leases case decided in the Tribunal is dependent on proof of ‘special circumstances’. If Heatherway, as the successful party, could invoke its initial choice of a less preferable forum as amounting, without more, to ‘special circumstances’, the evident purpose of the legislature in enacting ss. 75 and 77A would be thwarted.

41 The Tribunal is sympathetic to Mr Zipser’s contention that costs incurred by Dykes and Wildie on account of Heatherway’s decision to commence proceedings in the Supreme Court of Victoria should be paid by Heatherway. The decision to sue in Victoria, for which no compelling justification has been advanced, prolonged the proceedings and presumptively occasioned extra costs to Dykes and Wildie.

42 On the other hand, as matters transpired, Heatherway’s decision to commence proceedings elsewhere than in the Tribunal conferred on it one significant benefit which it might or might not have foreseen at the time. This is that according to a ruling made by the Tribunal (which was not challenged on appeal) it was therefore able, on account of a legislative anomaly, to claim the benefit of a statutory limitation period of six years instead of three years and rebut a claim that the proceedings were statute-barred (see Heatherway Pty Ltd v Dykes & Wildie [2006] NSWADT 354 at [105 –117]). On this score, it is at least arguable that its initial choice of a forum other than the Tribunal was not unreasonable.

43 A further matter on which Heatherway might have relied to justify its decision to commence proceedings elsewhere than in the Tribunal is that at the relevant time (June 2004) its claim was for significantly more than the maximum amount ($300,000) that the Tribunal was then empowered to award in a case under the RL Act. The strength of this argument is, however, seriously weakened by the fact that in November 2005 Heatherway reduced the amount of its claim to $122,703.

44 For these reasons, the Tribunal’s conclusion is that Dykes and Wildie have established that there are ‘special circumstances’ warranting an award of costs in their favour, to the extent that their costs in these proceedings were increased on account of the institution by Heatherway of proceedings in the Supreme Court of Victoria, instead of the Supreme Court of New South Wales or the Tribunal.

45 It should be noted at this point, however, that in the court records delivered to the Tribunal following the Supreme Court’s order for transfer in November 2004 there is nothing to suggest that the unnecessary costs incurred by Dykes and Wildie on account of Heatherway’s choice of a forum in Victoria were substantial.

Dykes’ and Wildie’s reliance on the May 2000 agreement as a ground of defence

46 Mr Easton submitted that the various contentions unsuccessfully raised by Dykes and Wildie in reliance on the May 2000 agreement were, and should have been known from the outset to be, ‘fundamentally flawed’ and ‘hopeless’. Moreover, he said, the cross-examination of Cox, Heatherway’s only witness, was unreasonably lengthy on account of the determination of Mr Zipser, who appeared for Dykes and Wildie, to establish these contentions. In consequence, there was insufficient time within the two-day hearing for counsel to make oral submissions after both sides had closed their cases. Furthermore, the passages dealing with the May 2000 agreement in the written submissions filed after the hearing were unreasonably lengthy.

47 In making these submissions, Mr Easton referred to observations by the Tribunal at first instance (see Heatherway Pty Ltd v Dykes & Wildie [2006] NSWADT 354) at [71], [143], [159], [163] and [166 –167] and by the Appeal Panel (see Dykes and Wildie v Heatherway Pty Ltd (RLD) [2007] NSWADTAP 26) at [32], [34 – 35].

48 In addition to denying these assertions, Mr Zipser made the following points: (a) prior to the hearing, Heatherway’s legal representatives did not at any stage claim that the arguments of Dykes and Wildie based on the May 2000 agreement were ‘fundamentally flawed’ or ‘hopeless’; (b) the principal ground on which these arguments were rejected by the Tribunal and by the Appeal Panel had not in fact been raised by Heatherway in its submissions after the hearing; (c) the parts of Cox’s cross-examination which were alleged to be unreasonably lengthy had not been identified; and (d) Mr Easton’s cross-examination of Dykes, the principal witness called by Dykes and Wildie, lasted for much the same period of time as Mr Zipser’s cross-examination of Cox.

49 Having examined the relevant passages in the two judgments on which Mr Easton relied and in the transcript of the hearing, the Tribunal’s conclusion is that Mr Easton’s submissions on this matter should be rejected. Its reasons are as follows.

50 While ultimately both the Tribunal and the Appeal Panel held that the May 2000 agreement provided no defence to Dykes and Wildie, the Tribunal in its judgment commented expressly on the ‘remarkable’ character of the agreement (at [143]) and stated that it had ‘given careful consideration to the wide range of issues raised by this unusual situation’. It was required to engage (at [161 – 162]) in close examination of two clauses in the agreement that might, at first sight, have appeared sufficient to exonerate Dykes and Wildie from liability under the guarantee. At no point did it or the Appeal Panel suggest that the contentions of Dykes and Wildie based on the agreement were wholly unmeritorious. In addition, as Mr Zipser pointed out, Heatherway’s submissions in the substantive proceedings did not refer to the line of reasoning that ultimately prevailed.

51 The Tribunal further considers that there was no disproportion between the lengths of time occupied in the cross-examinations of Cox and Dykes respectively such as to suggest that the former cross-examination unreasonably prolonged the proceedings or caused unnecessary costs to be incurred.

The cross claim instituted by Dykes and Wildie

52 Mr Easton submitted that Dykes and Wildie should also have known, from the outset, that the unconscionable conduct claim filed and maintained by them was ‘hopeless’. He argued that because this claim protracted the proceedings, gave rise to ‘extensive legal argument’ and caused Heatherway to incur additional costs in rebutting it, this conduct by Dykes and Wildie constituted ‘special circumstances’ warranting an award of costs against them.

53 Mr Easton described the ‘extensive legal argument’ that had been necessitated by the unconscionable conduct claim as argument ‘about consequential matters, such as time limits and so on’.

54 In support of his contention that the unconscionable conduct claim was ‘hopeless’, Mr Easton relied on the passages in the Tribunal’s judgment (Heatherway Pty Ltd v Dykes & Wildie [2006] NSWADT 354 at [183], [186], [188]) in which, as he put it, the Tribunal ‘comprehensively disposed of each ground’ of the claim. He also relied on the Tribunal’s conclusion at [189] that the criteria for ‘unconscionable conduct’ under the RL Act, as stated in the Court of Appeal judgment in Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583, had ‘evidently not been satisfied’. These criteria are to the effect that conduct is not unconscionable within the meaning of the RL Act unless it is ‘highly unethical’ and involves ‘a high degree of moral obloquy’, had ‘evidently not been satisfied’.

55 The only argument made by Mr Zipser in response to these submissions was that, in so far as there were ‘extensive legal arguments’ about time limits, they were caused by Heatherway’s four-year delay (from mid-2000 to mid-2004) in commencing proceedings. For this reason, Mr Zipser argued, any costs order relating to this aspect of the case should be against Heatherway, not Dykes and Wildie.

56 In the Tribunal’s opinion, the unconscionable conduct claim clearly lacked merit, for the reasons set out at [179 – 192] in its earlier judgment (Heatherway Pty Ltd v Dykes & Wildie [2006] NSWADT 354). The behaviour of Heatherway to which the claim adverted fell well short of being ‘highly unethical’ or of involving ‘a high degree of moral obloquy’.

57 An important element contributing to this assessment of the claim is that it was instituted in April 2006, more than four months after Heatherway, in its Amended Statement of Claim, had reduced the amount that it sought from Dykes and Wildie under the guarantee from more than $300,000 to $122,703. This lower figure comprised arrears of rent ($80,270) and interest ($41,983) payable by NCF under the Lease between its commencement in December 1998 and 30 June 2000. As the Tribunal pointed out at [182 – 183], a substantial proportion – about $70,000 – of these arrears amounting to $80,270 accrued during the period (from December 1998 to February 2000) when Dykes and Wildie controlled NCF. For a lessor to claim arrears of rent from guarantors who are in control of the lessee during the period when the arrears accrue can scarcely be characterised as ‘highly unethical’ behaviour, involving ‘a high degree of moral obloquy’.

58 A further matter of relevance here is that Dykes and Wildie filed their unconscionable conduct claim after the Court of Appeal had delivered its judgment in Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557. The relatively stringent criteria laid down authoritatively in that case for determining ‘unconscionable conduct’ under the RL Act had formed part of the law for some eight months.

59 For these reasons, the Tribunal’s conclusion is that Heatherway has established that there are ‘special circumstances’ warranting an award of costs in its favour, to the extent that its costs in these proceedings were increased on account of the institution and maintenance by Dykes and Wildie of their unconscionable conduct claim.

60 The Tribunal does not, however, accept Mr Easton’s assertion that ‘extensive legal arguments’ were occasioned by the unconscionable conduct claim. In fact, this component of the proceedings received very little attention in the parties’ written submissions following the hearing. The numbers of paragraphs devoted to it in Heatherway’s submissions were three (out of 35) in the initial submissions and five (out of 25) in the submissions in reply. In only two out of these eight paragraphs was the matter of time limits raised.

61 In these proceedings, the ‘extensive legal arguments’ that were required with regard to time limits pertained to the proceedings instituted by Heatherway, not to the unconscionable conduct claim. The Tribunal does not, however, accept Mr Zipser’s contentions that the need for these arguments was created by Heatherway’s delay in suing and that this constituted ‘special circumstances warranting an award of costs’ against Heatherway. As the Tribunal’s judgment makes clear ((Heatherway Pty Ltd v Dykes & Wildie [2006] NSWADT 354 at [95 – 117], the principal reason why this issue required extensive legal argument was that the relevant provisions are difficult to interpret in a satisfactory manner.

62 It may be added here that Heatherway’s delay in suing had adverse financial consequences for it in another context within these proceedings. It was the main reason why the Appeal Panel, varying the Tribunal’s decision at first instance, awarded interest to Heatherway over a period of only two years (see Dykes and Wildie v Heatherway Pty Ltd (RLD) [2007] NSWADTAP 26 at [54 – 62]).

Heatherway’s delay in reducing the amount of its claim

63 Mr Zipser submitted that Heatherway’s delay from June 2004 until 23 November 2005 in acknowledging that it was not entitled to claim under the guarantee with respect to arrears of rent after 30 June 2000 constituted ‘special circumstances warranting an award of costs’ against it.

64 He pointed out that on a number of occasions before November 2005 Mr Tiernan, the solicitor acting for Dykes and Wildie, had argued in letters to Heatherway’s solicitors that a new lease of the Premises to NCF was created by or pursuant to the May 2000 agreement, with the consequence that any subsequent default in rent by NCF did not fall within the scope of the guarantee. But it was not until the Amended Statement of Claim was filed on 23 November 2005 that Heatherway acknowledged this. In this document, Heatherway alleged for the first time that on or about 31 May 2000 it entered into a ‘new lease’ of the Premises to NCF, stipulated to commence on 1 July 2000. Implicitly, this was the reason why in the same document Heatherway abandoned its claim under the guarantee with respect to arrears of rent accruing after that date.

65 Mr Easton’s submissions did not deal expressly with this issue.

66 It may fairly be asked why, if in November 2005 this ‘new lease’ could be acknowledged to have existed, this acknowledgment could not have occurred earlier. There is nothing to suggest that the evidentiary material on which it was founded was not available to Heatherway at all relevant times. In the Tribunal’s opinion, Heatherway did indeed persist for an unreasonable period, without any apparent justification, in maintaining a claim for more than double the amount that it ultimately sought to recover in the proceedings.

67 For these reasons, the Tribunal’s conclusion is that Dykes and Wildie have established that there are ‘special circumstances’ warranting an award of costs in their favour, to the extent that their costs in these proceedings were increased on account of Heatherway’s insistence between June 2004 and November 2005 that NCF’s defaults in rent payments after 30 June 2000 fell within the scope of the guarantee.

68 Once again, however, the Tribunal notes that the amount of these costs would appear not to be substantial. Annexed to Mr Zipser’s submissions on costs were copies of letters dated 13 July 2004, 16 March 2005, 12 April 2005 and 8 November 2005 from Mr Tiernan to Heatherway’s solicitors, in which this particular aspect of Heatherway’s claim (amongst others) was raised. It cannot be assumed that the costs occasioned by Heatherway’s delay were limited to those arising from this correspondence. But the Tribunal has before it no other evidence relating to the scale and nature of these costs.

Heatherway’s failure to explain its case before the hearing

69 Lastly, Mr Zipser argued that ‘special circumstances’ arose from the fact that while Dykes and Wildie, through letters dated 8 November 2005, 25 January 2006 and 8 May 2006 from Mr Tiernan to Heatherway’s solicitors, had pointed out defects in Heatherway’s claim (with the result that this claim was amended) and had ‘put their case’ to Heatherway, Heatherway had never done likewise. In consequence, Dykes and Wildie had never had an opportunity to ‘consider’ Heatherway’s case before the hearing commenced.

70 In the Tribunal’s opinion, this aspect of the pre-trial correspondence between the parties, without more, could not amount to ‘special circumstances’.

The Tribunal’s conclusions

71 The Tribunal has decided (at [44] and [67]) that to the extent that Dykes’ and Wildie’s costs were increased by two discrete aspects of Heatherway’s conduct of these proceedings, there are ‘special circumstances warranting an award of costs’ to Dykes and Wildie. But it has also (at [59]) reached an equivalent decision in Heatherway’s favour, with regard to an aspect of Dykes and Wildie’s conduct of the proceedings.

72 In each of these three instances, the Tribunal has noted that the amounts of costs involved appear not to be substantial.

73 As the Tribunal understands s. 88(1) of the ADT Act (the text of which is set out above at [29]), a finding that there are ‘special circumstances warranting an award of costs’ does not of itself oblige the Tribunal to make such an award. This finding is expressed as a pre-requisite only. If this pre-requisite is satisfied, the Tribunal ‘may’, not must, award costs.

74 In the present circumstances, the Tribunal considers that an award should not be made. A significant reason is the risk that the process of assessing three relatively insubstantial components of the parties’ costs of the proceedings may lead to expense that largely if not wholly outweighs the net benefit to be gained by any party.

75 For these reasons, subject only to the costs order already made by the Tribunal on 18 April 2005 (see [18] above), there will be no order as to the costs of the proceedings at first instance in this matter.