Murar v Usagi Ya Pty Ltd (No 2) (RLD)

[2005] NSWADTAP 57

Appeal Panel - Internal

CITATION:	Murar v Usagi Ya Pty Ltd (No 2) (RLD) [2005] NSWADTAP 57
PARTIES:	APPELLANT Eva Murar RESPONDENT Usagi Ya Pty Ltd
FILE NUMBER:	059019
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	09/08/2005
DATE OF DECISION:	11/15/2005
DECISION UNDER APPEAL:	Usagi Ya Pty Ltd v Murar [2005] NSWADT 36
BEFORE:	Chesterman M - ADCJ (Deputy President); Molloy GB - Judicial Member; Weule B - Non Judicial Member
CATCHWORDS:	costs
MATTER FOR DECISION:	Costs
FILE NUMBER UNDER APPEAL:	045025
DATE OF DECISION UNDER APPEAL:	02/23/2005
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164 North Eastern Travelstops Pty Ltd v Bradley & Ors (RLD) (No 2) [2005] NSWADTAP 17 Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43 Usagi Ya Pty Ltd v Murar [2005] NSWADT 36 Usagi Ya Pty Ltd v Murar (RLD) [2005] NSWADTAP 26 Wood & Anor v Bergman (No 2) [2003] NSWADT 175
REPRESENTATION:	APPELLANT A S Monzo, barrister RESPONDENT M Lee, solicitor
ORDERS:	1. The Appellant’s application for costs in relation to the appeal is dismissed; 2. The Appellant is to pay 50% of the Respondent’s costs of the appeal, as agreed or assessed

The subject matter of this decision

1 In this judgment, we deal with two applications for the costs of an appeal heard by us in proceedings under the Retail Leases Act 1994 between a lessor, Ms Eva Murar, and a lessee, Usagi Ya Pty Ltd (‘Usagi Ya’). The proceedings were initially set in train by Usagi Yar, whereupon Ms Murar filed a cross claim.

2 The appeal itself concerned a costs order in Usagi Ya’s favour that had been made by the Tribunal at first instance, constituted by Mr B Donald, Judicial Member.

The Tribunal’s decision

3 In its decision, delivered on 23 February 2005 (Usagi Ya Pty Ltd v Murar [2005] NSWADT 36), the Tribunal resolved the substantive dispute between the parties by holding that Ms Murar was liable to pay the sum of $18,343.63 to Usagi Ya. This sum represented a substantial proportion of a security deposit that Usagi Ya had paid to Ms Murar when it became the lessee by assignment of retail shop premises owned by her.

4 Ms Murar’s cross claim included a claim (‘the fire damage claim’) for compensation for damage to the premises caused by a fire. The Tribunal held this to be a claim without merit, because District Court proceedings brought by Ms Murar against Usagi Ya with respect to this damage had been settled and the matter was clearly res judicata between them. In addition, the Tribunal dismissed most, though not all, of some other claims for damages for breach of the lease that Ms Murar had put forward in her cross claim.

5 These rulings of the Tribunal were not challenged on appeal.

6 In its decision, the Tribunal held also that Ms Murar should pay Usagi Ya’s costs of the proceedings, as agreed or assessed. At [46 – 49], it explained its reasons in the following terms:-

46 In this case the Lessee has been successful on all issues save for some relatively small adjustments, particularly in relation to the installation of the roof beam.

47 By far the major claim was for the unrecovered fire loss which had already been litigated between the parties. In order to save costs I made an initial ruling dismissing that claim which avoided the need to take evidence. However my decision to take that course indicated that I judged that claim as clearly without merit. Had that claim not been pursued, there must have been a far greater chance that the dispute for effectively half the sum claimed by the Lessor could have been settled by negotiation.

48 The other claims (excluding the vinyl flooring claim which could only have been raised after termination), had not been raised with the Lessee during the term of the Lease even though they dated from the time of the restoration of the building some two years before. The Lessor declined to call the witness most likely to have its best evidence on the flooring claim.

49 All of those factors in my view constitute special circumstances taking this case out of the ordinary. In my opinion the Lessee in these circumstances should be entitled to recover its costs as agreed or assessed.

7 In appealing against this costs order, Ms Murar put forward two grounds. These were (a) that the Tribunal made it without giving the parties an opportunity to make submissions on costs, thereby breaching the requirement imposed on the Tribunal by s 73(4)(c) of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’) to ‘ensure that the parties have the fullest opportunity practicable to be heard or otherwise have their submissions considered in the proceedings’; and (b) that the order was not justified, since the requirement of ‘special circumstances warranting an award of costs’ in s 88(1) of this Act had not been satisfied.

8 In a decision delivered on 10 June 2005 (Usagi Ya Pty Ltd v Murar (RLD) [2005] NSWADTAP 26), we allowed this appeal in part. We upheld Ms Murar’s first ground, to which counsel for Usagi Ya raised little opposition, and for that reason set aside the Tribunal’s award of costs to Usagi Ya (Order No 2 in its decision). We ruled that it was appropriate for us to determine the issue of what costs, if any, should be awarded with respect to the proceedings at first instance, instead of remitting this issue for determination by the Tribunal.

9 We then expressed our agreement, at [40], with the Tribunal’s conclusion that the fire damage claim brought by Ms Murar was a claim ‘clearly without merit’. We note here that argument on this issue occupied a significant proportion of both the written and oral submissions in the appeal.

10 We accordingly reached the same conclusion as the Tribunal with regard to the costs associated with the fire damage claim (which henceforth we will call ‘the fire damage costs at first instance’). We held that there were indeed ‘special circumstances warranting an award’ of these costs in Usagi Ya’s favour, within the meaning of s 88 of the ADT Act.

11 In so deciding, we set out, at [13 ], the following principles regarding costs:-

13 According to the case-law on s 88(1) in its application to proceedings under the RL Act (see eg Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164, and Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43), ‘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.

12 At [14], we quoted the following passage from Wood & Anor v Bergman (No 2) [2003] NSWADT 175 (also at [14]):-

14 In Alessa [i.e., Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150], it was said also, at [5-6], that where an application to the Tribunal lacked any conceivable merit in fact or law, this could constitute ‘special circumstances’ justifying a costs order under s 88 in favour of the successful respondent…. In such a case, the purpose of the costs order would be to prevent the ‘gross abuse’ of the Retail Leases Act by frivolous, vexatious and misconceived proceedings.

13 We differed from the Tribunal, however, with regard to the costs otherwise arising in the proceedings at first instance. Henceforth, we will call these ‘the remaining costs at first instance’. We explained our position as follows, at [44 – 48]:-

44 We accept a submission by Mr Monzo [counsel for Ms Murar] that there was no evidence before the Tribunal to support its conclusion that, if the fire claim had not been pursued, there would have been a ‘far greater chance that the dispute could have been settled by negotiation’. As the Tribunal itself pointed out, what would have remained for resolution was still a claim for ‘effectively half the sum’ that had initially been included in the cross claim. In fact, the Tribunal made its ruling that Ms Murar could not succeed on the fire damage claim at an early stage of the hearing, but there was no evidence of any subsequent attempt by either side to settle. While we make due allowance for Mr Hyde’s argument [as counsel for Usagi Ya] that this was a very late stage for settlement negotiations, the fact remains that the Tribunal’s ruling did not prompt either side to undertake them.

45 As we have pointed out at [15] above, the unreasonable rejection of an offer of compromise may give grounds for an award of costs under s 88. But the defining features of this recognised category of ‘special circumstances’ are very different from a somewhat speculative finding, not supported by specific evidence, that persistence by a party in one unmeritorious component of a multi-faceted claim significantly reduced the chances of settling the whole claim.

46 As has been pointed out many times in cases under s 88, ‘special circumstances warranting an award of costs’ against a party do not arise merely because that party has been wholly or substantially unsuccessful. Except with regard to the fire damage claim and the vinyl flooring claim, the issues on which Ms Murar failed were ones on which the Tribunal, having heard lay and expert evidence on both sides, found the case put by Usagi Yar to be the stronger.

47 Finally, we see no reason why the fact that a lessor delayed more than two years before raising an issue with a lessee is relevant to the issue of ‘special circumstances’, particularly when the lessor-lessee relationship remained in existence during all but seven months of that period.

48 We cannot discern any other ground on which ‘special circumstances’ might be said to have arisen.

14 In the result, our orders were as follows:-

1. The appeal is allowed.

2. Order No. 2 in the decision of the Tribunal dated 23 February 2005 is set aside.

3. In lieu of this Order, the Appellant is to pay the Respondent’s costs, as agreed or assessed, that are referable to the Appellant’s pursuit of the claim for loss and damage set out in paragraphs 8 – 10 of her cross claim.

4. Unless an application with supporting submissions is filed in the Tribunal within 28 days, there will be no order on the costs of the appeal. If any such application is filed, the opposing party’s submissions must be filed within a further 28 days. In the absence of any request for a hearing, the matter will be determined ‘on the papers’.

15 The claim of the Appellant (Ms Murar) referred to in our Order No 3 was the fire damage claim.

The two applications for costs incurred in the appeal

16 On 8 July 2005, Ms Murar filed an application, with supporting submissions, for the costs of the appeal ‘save as to costs referrable in (sic) the findings and determinations of the Appeal Panel culminating in Order 3 of its decision of 10 June 2005’. Her application was, therefore, for her costs of the appeal proceedings except in so far as they arose out of her challenge to the Tribunal’s decision regarding the fire damage costs at first instance.

17 On 5 August 2005, Usagi Ya filed an application, with supporting submissions, for 75% of its costs of the appeal.

18 On 24 August 2005, the solicitors for Usagi Ya sent to the Tribunal copies of (a) a letter to them dated 23 August from Ms Murar’s solicitors, objecting to Usagi Ya’s application for costs on the ground that it had been filed outside the 28-day time-limit stipulated in Order No 4 in our decision on the appeal; and (b) their response (dated 24 August) to this letter, in which they argued that the time-limit had not in fact been infringed.

19 On 25 August 2005, the solicitors for Ms Murar wrote to the Tribunal setting out their objection, on the ground just mentioned, to Usagi Ya’s application for costs. Their letter stated also that if however the Appeal Panel was minded to entertain this application out of time, ‘whether pursuant to leave or otherwise’, they sought leave to make submissions in reply.

20 In our opinion, Usagi Ya’s application for costs was not out of time. It constituted ‘the opposing party’s submissions’ within the terms of our Order No 4 and was duly filed (on 5 August) within 28 days after the date of filing of Ms Murar’s application (8 July).

21 Pursuant to leave, Ms Murar’s solicitors filed on 8 September 2005 further submissions responding to Usagi Ya’s application for costs.

22 In the outcome, we have before us applications from each of the parties to the appeal for an award of part of the costs of the appeal. It is convenient to deal with them separately.

Ms Murar’s application

23 This application by Ms Murar was, it will be recalled, for her costs of the appeal proceedings except in so far as they arose out of her challenge to the Tribunal’s decision regarding what we have called ‘the fire damage costs at first instance’ (see [10] above).

24 Her counsel, Mr Monzo, argued in his written submission that, except in relation to this aspect of the Tribunal’s decision, Usagi Ya’s ‘opposition to the Appeal’ was without merit. Mr Hyde, representing Usagi Ya in the appeal, had not disputed that the Tribunal’s costs order as a whole was open to challenge on grounds of natural justice. The relevant ‘opposition’ by him, therefore, was to Ms Murar’s contention in the appeal that the Tribunal erred in finding that there were ‘special circumstances’ warranting an award of what we have called ‘the remaining costs at first instance’ (see [13] above).

25 Mr Monzo argued that, in dealing with the remaining costs at first instance (and indeed the fire damage costs), the Tribunal had adopted a reasoning akin to ‘costs follow the event’. Such an approach was clearly incorrect, in the light of the wording of s 88(1) of the ADT Act and the authorities interpreting this provision. Usagi Ya, he submitted, should have appreciated that a costs decision was clearly erroneous if, to quote the terms of our judgment in the appeal (at [45]), it was based on:-

a somewhat speculative finding, not supported by specific evidence, that persistence by a party in one unmeritorious component of a multi-faceted claim significantly reduced the chances of settling the whole claim.

26 For these reasons, in Mr Monzo’s submission, Usagi Ya’s opposition to Ms Murar’s appeal was ‘clearly unmeritorious’, in so far as it challenged the Tribunal’s order relating to the remaining costs at first instance. He argued that having found to this effect we should make an award of the costs of the appeal in Ms Murar’s favour, except to the extent that costs were incurred by virtue of her disputing the merits of the Tribunal’s decision relating to the fire damage costs at first instance.

27 The necessary outcome of Mr Monzo’s argument would be that, in order to escape an award of costs, Usagi Ya should have conceded that the Tribunal erred not only in procedural terms – that is, in making a costs order without giving the parties an opportunity to make submission on the matter – but also on the merits of its decision regarding the remaining costs at first instance. But we do not think that this is correct, for two reasons.

28 The first and most compelling reason is that in our judgment the Tribunal’s decision regarding the remaining costs at first instance was not ‘clearly unmeritorious’. Having set aside the Tribunal costs order on procedural grounds and decided that we ourselves should determine afresh the issue of the costs at first instance, we reached a contrary conclusion regarding this particular component of those costs. While we were critical of the Tribunal’s approach on this specific matter, we did not treat it as wholly untenable. It follows that Usagi Ya’s attempt to defend the Tribunal’s approach was not so unjustifiable as to warrant a finding of ‘special circumstances’.

29 Secondly, Ms Murar’s persistence throughout the appeal with her challenge to the Tribunal’s award of the fire damage costs at first instance had the consequence that an appeal hearing had to take place. The concessions that, according to Mr Monzo, Usagi Ya should have made would not have been sufficient to avert this result.

30 For these reasons, we dismiss Ms Murar’s application for an award of part of her costs of the appeal.

Usagi Ya’s application

31 It will be recalled that Usagi Ya’s application was for a proportion (75%) of its costs of the appeal. In the written submission by Ms Lee, solicitor for Usagi Ya, it was implicit that this figure of 75% purported to reflect the proportion of the costs of the appeal that should be attributed to Ms Murar’s challenge to the Tribunal’s decision regarding the fire damage costs at first instance.

32 Ms Lee argued that since in the Tribunal’s decision and in our decision on appeal the fire damage claim was held to be clearly unmeritorious, this challenge by Ms Murar to the Tribunal’s decision regarding the costs associated with this claim should equally be assessed as unmeritorious, providing the grounds for a finding of ‘special circumstances’ within the meaning of s 88(1) of the ADT Act.

33 In his submissions responding to this application, Mr Monzo pointed out that Usagi Ya’s concession that the Tribunal’s costs order was liable to be set aside on procedural grounds was not explicitly made until the hearing of the appeal. He argued that since, as he had claimed in support of Ms Murar’s application for costs, Usagi Ya’s opposition to ‘the whole of’ her appeal was ‘unmeritorious’, there should be no question of her paying any part of Usagi Ya’s costs.

34 In resolving this issue, the important point to bear in mind is that, while in view of the Tribunal’s procedural error we were bound to set aside its costs order, our conclusion regarding the fire damage costs at first instance was the same as it had reached and was reached on the same grounds, namely, that the fire damage claim was clearly unmeritorious.

35 We agree with Ms Lee that in consequence, Ms Murar’s challenge on appeal to the Tribunal’s decision regarding the costs associated with this claim should equally be regarded as unmeritorious.

36 It is open to us to hold that for this reason ‘special circumstances’ were present, warranting an award of costs in this appeal against Ms Murar. It is not to the point that she successfully challenged the validity of the Tribunal’s costs order on the ground of an error of law. This is because it was clearly apparent that, so far as the fire damage costs at first instance were concerned, the Appeal Panel would simply substitute an order in the same terms.

37 Similar reasoning was adopted by the Appeal Panel in North Eastern Travelstops Pty Ltd v Bradley & Ors (RLD) (No 2) [2005] NSWADTAP 17. In that case, which like the present case was decided under the Retail Leases Act 1994, the error of law committed by the Tribunal at first instance was to fail to deal with a question of interpretation of an agreement for lease. But the Appeal Panel found that the arguments put forward by the Appellant with regard to this question were clearly without merit, and therefore dismissed the appeal.

38 In its decision on the costs of the appeal, the Appeal Panel said, at [36]:-

In our judgment, taking all these factors into account, the lack of real merit in the arguments advanced by the Appellant on the key issue of interpretation constitutes ‘special circumstances warranting an award of costs’ under s 88(1) of the ADT Act. This is the case even though we held the Tribunal to have committed an error of law by not dealing with this issue, thereby necessitating that it be resolved on the appeal. Our view, in essence, is that it could have been predicted with sufficient certainty that resolution of the issue, following due consideration, would not alter the outcome of the proceedings.

39 In the present case, the decision under appeal – that is, the Tribunal’s award of the whole of the costs at first instance to Usagi Ya – was altered by our decision in the appeal. But the Tribunal’s decision regarding the fire damage costs at first instance was not altered, the reason being that Ms Murar’s challenge to it lacked merit.

40 We accordingly consider, following the reasoning adopted in North Eastern Travelstops Pty Ltd v Bradley, that Usagi Ya should have such proportion of the costs of the appeal as can fairly be attributed to Ms Murar’s challenge to the Tribunal’s decision regarding the fire damage costs at first instance.

41 Although, as we said above at [9], argument on the merits of the fire damage claim ‘occupied a significant proportion of both the written and oral submissions in the appeal’, an award of 75% of the costs would be excessive. Unlike Bradley, this is not a case where no appeal at all should have been brought. In fact, the appellant, Ms Murar, succeeded in part.

42 What should be estimated is the proportion of the overall costs of the appeal that could have been saved if Ms Murar had chosen not to challenge before and during the hearing the Tribunal’s decision regarding the fire damage costs at first instance. We would assess this proportion at 50%.

Our orders

43 For the foregoing reasons, we order as follows:-

1. The Appellant’s application for costs in relation to the appeal is dismissed.

2. The Appellant is to pay 50% of the Respondent’s costs of the appeal, as agreed or assessed.