O'Neill v Henry (No 2) (Costs) (RLD)

[2010] NSWADTAP 54

Appeal Panel - Internal

CITATION:	O'Neill v Henry (No. 2) (Costs) (RLD) [2010] NSWADTAP 54
PARTIES:	APPELLANT Jeffrey Raymond O'Neill RESPONDENT Jamie Michael Raymond Henry
FILE NUMBER:	099066
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	8 July 2010
DATE OF DECISION:	30 July 2010
BEFORE:	O'Connor K - DCJ (President); Molloy G - Judicial Member; Weule B - Non-Judicial Member
CATCHWORDS:	COSTS – Appellant`s application for costs of appeal and first instance proceedings – Whether Appeal Panel`s costs discretion can deal with both sets of proceedings – Application granted – Administrative Decisions Tribunal Act 1997
DECISION UNDER APPEAL:	O'Neill v Henry [2009] NSWADT 254
FILE NUMBER UNDER APPEAL:	085214
DATE OF DECISION UNDER APPEAL:	09/30/2009
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Civil Proceedings Act 2005 Legal Profession Act 2004 Retail Leases Act 1994
CASES CITED:	B & L Linings Pty Ltd v Chief Commissioner of State Revenue (No 5) [2010] NSWADTAP 21 Chand v Rail Corporation of New South Wales (No 3) [2010] NSWADTAP 11 Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 O'Neill v Henry (RLD) [2010] NSWADTAP 40
REPRESENTATION:	APPELLANT R Murphy, Patey and Murphy RESPONDENT No appearance
ORDERS:	That the respondent pay the appellant's costs of the proceedings before the Retail Leases Division and the Appeal Panel as agreed; and, if not agreed within 28 days, as assessed under the Legal Profession Act 2004.

1 In its decision delivered 9 June 2010 (O'Neill v Henry (RLD) [2010] NSWADTAP 40) this Appeal Panel upheld the appellant's appeal, and gave the following direction in relation to the appellant's foreshadowed application for his costs in respect of both the Appeal Panel proceedings and the proceedings before the Retail Leases Division:

7. Appellant to file and serve submissions as to costs within 14 days; Respondent to file and serve reply within a further 14 days. Decision to be made without further hearing, on the papers, as permitted by the Administrative Decisions Tribunal Act 1997, s 76.

2 The appellant filed his submissions on 24 June 2010. The respondent has not filed any submissions.

The Rule

3 The Retail Leases Act 1994 (RL Act), s 77A, adopts as its rule the general rule laid down by s 88 of the Administrative Decisions Tribunal Act 1997 (ADT Act). The ordinary rule in retail leases matters is that each party bears their own costs. It is subject to an exception.

88 Costs

(1) Each party to proceedings before the Tribunal is to bear the party’s own costs in the proceedings, except as provided by this section.

(1A) 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 it is fair to do so having regard to the following:

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings by conduct such as:

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

(ii) failing to comply with this Act, the regulations, the rules of the Tribunal or any relevant provision of the enactment under which the Tribunal has jurisdiction in relation to the proceedings, or

(iii) asking for an adjournment as a result of a failure referred to in subparagraph (i) or (ii), or

(iv) causing an adjournment, or

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

(vi) vexatiously conducting the proceedings,

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,

(d) the nature and complexity of the proceedings,

(e) any other matter that the Tribunal considers relevant.

(2) The Tribunal may:

(a) determine by whom and to what extent costs are to be paid, and

(b) order costs to be assessed on a basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis.

(3) However, the Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs.

(4) In this section, costs includes:

(a) costs of or incidental to proceedings in the Tribunal, and

(b) the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application.

The Submissions

4 The appellant refers first to the following matters in support of its application for an award of costs against the respondent in respect of both the original proceedings before the Tribunal and the Appeal Panel proceedings:

(i) The claim was substantially successful.

(ii) The respondent refused to engage in mediation which deprived the appellant of the opportunity to settle the proceedings.

(iii) At no time prior to settlement of the proceedings did the respondent make any attempt to settle or make any offer of compromise.

(iv) The outcome of the appeal proceedings.

5 The submissions then address more specifically the factors listed in s 88(1A):

(i) The respondent failed to comply with the Tribunal's directions as to filing of evidence, failed to attend a mediation, gave oral evidence at the Tribunal hearing which had not previously been the subject of any written evidence and failed subsequently to attend the Appeal Panel hearing.

(ii) This conduct prolonged the proceedings and caused the appellant to incur considerable expense and inconvenience.

(iii) The Appeal Panel's decision at [68] and [69] is noted. The Appeal Panel said:

68 In our view, leave should also be given to reconsider the unconscionable conduct claim. There were two instances, at least, of seriously unacceptable conduct. Mr Henry chose to effect a lockout in circumstances where Mr O’Neill’s payments of rent were up-to-date and not in arrears or default and without giving any warning or notice. There was a failure by Mr Henry to allow Mr O’Neill back into the Premises to recover stock and equipment. However, we do not have any evidence of damage in the nature of any pain and suffering, humiliation, distress or the like as a result of that unconscionable conduct.

69 It was also submitted that Mr Henry’s unexplained failure to engage in mediation amounted to unconscionable conduct. Mr O’Neill was thereby left with only one means through which he could seek vindication of his position, the filing of a claim in this Tribunal. We are inclined to the view, and without the benefit of any detailed submissions on the point, that failure to engage in mediation under either or both s 66 and s 74 may not fall within the sphere of unconscionable conduct, but may be a factor relevant to costs in appropriate circumstances. See, for example, Trust Company of Australia Ltd v. Craig [2005] NSWADT 65 at [17-20]; Cripps v. G & M Dawson Pty Ltd [2006] NSWCA 81, especially at [60]; Tennant v Moukhlina (No 2) [2009] NSWADTAP 74; and Rucom v Multiplex [2010] NSWADT 1.

(iv) The appellant was at all times legally represented and incurred considerable expense. If he were to receive no recompense by way of an order for costs the benefit of the damages award would be lost entirely to legal fees. The smallness of the award of damages should not be seen as relevant in that respect, citing Alramon Pty Ltd v Lifuli Pty Ltd (No 2) [2010] NSWADT 49.

6 The final submission is that the totality of the respondent's conduct was out of the ordinary and grossly unreasonable in his failing to seek a resolution of the appellant's claim and allowing the matter to proceed as it did. The submission rely on the comments of Santow JA in Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 at [60], there applying the terms of the exception as it was previously drafted ('special circumstances'):

…In my view it suffices that the conduct of [the appellants] in relying upon their status as the registered proprietors of the freehold and the doctrine of indefeasibility of title to wrongly deny registration and consequent assignment of the lease, so acted as by their conduct to give rise to special circumstances; that is circumstances that were clearly out of the ordinary and grossly unreasonable so far as the Respondent tenant was concerned. On the other hand, the Tribunal correctly concluded that the Respondent, through no fault of his own, has been placed in the situation where it has been forced to pursue this litigation. Yet it (the Tribunal) still failed to find special circumstances. With respect, I consider that the Tribunal was in error in failing to conclude that special circumstances here applied. For this purpose, it suffices that the circumstances are out of the ordinary. They do not have to be extraordinary or exceptional. While a finding of “serious unfairness” is not a prerequisite to determining that there are special circumstances, it is none the less a highly relevant consideration.

Consideration

7 While the respondent may have seen it otherwise, the respondent entered into a retail shop lease with the appellant. The retail leases legislation has, as its primary method of dispute resolution, a State operated mediation service headed by the Registrar, Retail Tenancy Disputes, with the fees payable by the parties to the mediator set at a modest rate as compared to general market rates for mediation of commercial disputes. A dispute can only proceed in the Tribunal if the Registrar has certified that mediation has failed to resolve the matter or if the Tribunal is 'otherwise satisfied that mediation … is unlikely to resolve the dispute or matter' (RL Act, s 68(1)). One of the grounds for issuing a certificate is that a party has refused to take part in or has withdrawn from mediation (s 68(2)).

8 This was, in our opinion, a case with a narrow compass that was eminently suited to resolution by mediation. The respondent acted peremptorily in locking out the appellant. He failed to give the respondent an opportunity to re-enter and collect those items of his that remained on the premises. He did not respond to reasonable attempts to resolve the matter, including not engaging in mediation. He left the appellant with the choice of abandoning what the appellant saw as his just claim, or proceeding in the Tribunal. In our view, the submissions on these points are well founded. Moreover, it is close to an abuse of process for the respondent to do what occurred here, and first show his hand on the occasion of the hearing. This conduct denies to applicants the opportunity to have prior notice of the case that might be made against them, and perhaps consider settlement.

9 Section 88 of the ADT Act sets out several considerations that may be taken into account in deciding whether it is 'fair' to override the ordinary rule that each party bear its own costs and make a costs order. They give emphasis to the importance of fair conduct of litigation. The ADT Act provisions do not focus so much on the events that precede the commencement of litigation. The Court of Appeal in Cripps gave weight to those events. We agree with the appellant's submissions that the pre-litigation events are relevant to this case. The respondent behaved in a way that ignored the central place of mediation in the resolution of retail lease disputes, and in effect forced the appellant to litigate.

10 In this case the appellant was a lessee taking on his first business lease. The respondent, on the other hand was a well-established business operator. There was, as is often the case, an imbalance in commercial experience.

11 In our view, it is fair in the circumstances of this case to make an award of costs in favour of the appellant covering the proceedings before the Tribunal and the Appeal Panel.

12 There has been some conflict in recent Appeal Panel decisions over the question of whether the power vested by s 88(1A) in the Tribunal to 'award costs in relation to proceedings before it' is to be read so as to limit the Appeal Panel to awards of costs only in respect of the proceedings before the Appeal Panel, with the Divisional Tribunal to deal with any application for the costs of the proceedings before it. (The Appeal Panel is, if there is any doubt as to this matter, an element 'of the Tribunal', see definition of 'Appeal Panel', ADT Act, s 4(1).)

13 In Chand v Rail Corporation of New South Wales (No 3) [2010] NSWADTAP 11, the Appeal Panel favoured the narrower view. In B & L Linings Pty Ltd v Chief Commissioner of State Revenue (No 5) [2010] NSWADTAP 21, a differently constituted Panel favoured the broader view.

14 The Appeal Panel in B & L Linings did not accept the interpretation in Chand on the ground that it failed to take into account the terms of s 88(4)(b) which defines 'costs' to include 'the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application'. This definition was seen as supporting an approach that allows for a global costs order to made by the Appeal Panel.

15 In our view, the later interpretation is to be preferred. We note that such an interpretation is consistent with the approach expressly allowed under the new civil procedure rules now operating in the general court system, and with Court of Appeal practice: see, further, Civil Proceedings Act 2005, s 98(6). Such an approach is also consistent with the procedural obligation of the Tribunal under s 73 of the ADT Act to act as quickly as is practicable (s (5)(a)). While sometimes it will be preferable to remit a costs application relating to first instance proceedings to the Divisional Tribunal for determination, often it will be better to dispose of the issue as part of the Appeal Panel's orders so as to bring an end to the case in the Tribunal and avoid any additional costs and delay for the successful party. This is such a case.

Order

That the respondent pay the appellant's costs of the proceedings before the Retail Leases Division and the Appeal Panel as agreed; and, if not agreed within 28 days, as assessed under the Legal Profession Act 2004.