Pearce & Anor and Germain
[2007] WASAT 291 (S)
•9 MAY 2008
| JURISDICTION | : | STATE ADMINISTRATIVE TRIBUNAL |
| STREAM | : | COMMERCIAL & CIVIL |
| ACT | : | COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA) |
| CITATION | : | PEARCE & ANOR and GERMAIN [2007] WASAT 291 (S) |
| MEMBER | : | JUDGE J CHANEY (DEPUTY PRESIDENT) |
| HEARD | : | 22 AUGUST 2007 |
| DELIVERED | : | 6 NOVEMBER 2007 |
| SUPPLEMENTARY | ||
| DECISION | : | 9 MAY 2008 |
| FILE NO/S | : | CC 3592 of 2005 |
| BETWEEN | : MURRAY GRAHAM PEARCE |
MARGARET EVA PEARCE
Applicants
AND
TERRANCE ANTHONY GERMAIN
Respondent
| FILE NO/S | : | CC 3714 of 2005 |
| BETWEEN | : TERRANCE ANTHONY GERMAIN |
Applicant
AND
MURRAY GRAHAM PEARCE
MARGARET EVA PEARCE
Respondents
Catchwords:
Costs - Commercial tenancy - Principles to be applied - Relevance of provision in lease requiring payment of costs by lessees - Whether unjust not to order unsuccessful lessees to pay costs - Whether lessees' conduct of proceedings warrants order for costs
Legislation:
Commercial Tenancies (Retail Shops) Agreements Act 1985 (WA)
Commercial Tribunal Act 1984 (WA), s 17
Equal Opportunity Act 1984 (WA)
Guardianship and Administration Act 1990 (WA), s 16
Land Administration Act 1997 (WA)
Legal Practitioners (Magistrates Court)(Civil Jurisdiction) Determination 2006
(WA)
Property Law Act 1969 (WA), s 81(9)
State Administrative Tribunal Act 2004 (WA), s 9, s 88, s 89
State Administrative Tribunal Rules 2004 (WA), r 42, r 43
Strata Titles Act 1985 (WA), s 81(7), s 103H(8)
Victorian Civil and Administrative Tribunal Act 1988 (Vic), s 109(3)
Result:
Lessor's application for costs dismissed
Category: A
Representation:
CC 3592 of 2005
Counsel:
| Applicants | : | Mr I Morison |
| Respondent | : | Mr P May |
[2007] WASAT 291 (S)
Solicitors:
| Applicants | : | Lander Hynes |
| Respondent | : | Peter May |
CC 3714 of 2005
Counsel:
| Applicant | : | Mr P May |
| Respondents | : | Mr I Morison |
Solicitors:
| Applicant | : | Peter May |
| Respondents | : | Lander Hynes |
Case(s) referred to in decision(s):
Australia's Country Homes Pty Ltd v Vasiliou (unreported) VCAT, Young M,
5 May 1999
Bilek and Vata Investments Pty Ltd [2005] WASAT 153
Blunt & Anor and Pal & Anor [2007] WASAT 194
Blunt & Anor and Pal & Anor [2007] WASAT 264
Chew and Director-General of the Department of Education and Training [2006]
WASAT 248
Clifford and Shire of Busselton [2007] WASAT 89 (S)
Firestar Enterprises Pty Ltd and Town of Vincent [2007] WASAT 100
Pearce & Anor and Germain [2007] WASAT 291
Pearce and Anor and Germain [2006] WASAT 305
Quah and AMP Life Limited [2005] WASAT 169
Summerville and Department of Education and Training & Ors [2006] WASAT
368 (S)
Vasiliou v Australia's Country Homes Pty Ltd (1999) VSC 462
Wenpac Pty Ltd v Allied Western Australian Finance Limited (SCWA, Library
No 940051, delivered 1 February 1994)
Western Australian Planning Commission and Shim [2007] WASAT 262 (S)
[2007] WASAT 291 (S)
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
1 The lessor of premises in Prince Street, Busselton succeeded in part
of his claim against the lessees after a hearing by the Tribunal in August 2007. He sought payment of his costs by the lessees on a full indemnity basis.
2 The Tribunal examined the principles which apply in relation to the
costs of proceedings under the Commercial Tenancies (Retail Shops) Agreements Act 1985 (WA). In doing so, the Tribunal disagreed with aspects of the approach taken to applications for costs under that Act in some earlier decisions of the Tribunal.
3 The Tribunal considered the significance and effect of a clause, in
the lease the subject of the dispute, which required payment by a lessee of costs and expenses of the lessor resulting from a default under the lease. In the particular circumstances of this case, the Tribunal considered that the existence of that clause was a relevant factor to be taken into account in exercising a discretion in relation to costs. The Tribunal also considered claims that the lessees had acted unreasonably or inappropriately in the conduct of the proceedings, but considered that the lessees' conduct did not provide a basis for an order for costs being made against the lessees.
4 Having regard to the provisions in the lease, the Tribunal made an
order that the lessees pay so much of the lessor's costs as related to the
lessees' breach of the lease.
The claim for costs
5 By reasons for decision published on 6 November 2007, the Tribunal
determined cross-applications by each of the lessees and lessor of retail premises located at 22 Prince Street, Busselton. The lessees, Mr and Mrs Pearce, had claimed damages for certain alleged breaches of the lease. Those claims were unsuccessful. The lessor, Mr Germain, was partially successful in his claim for payment of various amounts of money on the basis of a breach of the lease by the lessees. The Tribunal's reasons are published as Pearce & Anor and Germain [2007] WASAT 291.
6 Following delivery of the Tribunal's decision, Mr Germain applied
for orders that Mr and Mrs Pearce pay his costs of the proceedings on an
indemnity basis. The orders sought by Mr Germain were as follows:
[2007] WASAT 291 (S)
"1. [Mr and Mrs Germain] are to pay the applicant's costs of the proceedings numbered CC 3592 of 2005 and CC 3714 of 2005 including the reserved costs; 2. The costs payable by [Mr and Mrs Pearce] to [Mr Germain] are all of [Mr Germain's] costs except insofar as they are an unreasonable amount or have been unreasonably incurred; and 3. In the event that such costs are not agreed:
(a) Within 30 days after the making of this order [Mr Germain] is to file and serve a bill of costs; and (b) The matter thereafter be set down before a member of the Tribunal for assessment of the amount of costs so payable by [Mr and Mrs Pearce] to [Mr Germain] using (by analogy) the Supreme Court costs scale."
7 Mr Germain seeks costs on the basis that he contends that it would,
by reason of the terms of the lease agreement, be "unjust" if he did not recover his costs of the proceedings, and on the basis that Mr and Mrs Pearce's conduct of the proceedings involved the pursuit of unmeritorious claims and was, in all circumstances, such as to justify an order for costs being made against them.
The applicable principles
8 As the Tribunal has reaffirmed on numerous occasions, the starting
point in relation to costs in the Tribunal is that the Tribunal provides a "no costs jurisdiction" – see s 87(1) of the State Administrative Tribunal Act 2004 (WA) (SAT Act). Notwithstanding that general position, s 87(2) of the SAT Act confers on the Tribunal a broad jurisdiction to award costs in appropriate cases.
9 There have been a number of decisions of the Tribunal concerning
the approach to the award of costs in proceedings under the Commercial Tenancies (Retail Shops) Agreements Act 1985 (WA) (CTRSA Act). In Bilek and Vata Investments Pty Ltd [2005] WASAT 153, the Tribunal noted that, prior to the existence of the State Administrative Tribunal, jurisdiction under the CTRSA Act was exercised by the Commercial Tribunal pursuant to the Commercial Tribunal Act 1984 (WA) (CT Act).
[2007] WASAT 291 (S)
Section 17 of the CT Act empowered the Commercial Tribunal to make such order for costs as it thought fit. The CT Act was repealed by the State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA) with the result that this Tribunal is invested with the jurisdiction previously exercised by the Commercial Tribunal.
10 The Tribunal considered that a factor in favour of an award of costs
in the case before it was that it was the general practice in the Commercial Tribunal for costs to follow the event subject to relevant discretionary considerations. It also considered that the fact that the dispute concerned "a commercial venture" was a relevant factor. The Tribunal also had regard to those two factors in Quah and AMP Life Limited [2005] WASAT 169. The outcome differed in each of those cases on the basis that the parties in Quah were, by comparison with those in Bilek, commercially sophisticated and on the basis that Quah involved a dispute in relation to leases for a significant rental in one of Perth's prime shopping centres. The factors identified in Bilek were also considered, and implicitly accepted, in Blunt & Anor and Pal & Anor [2007] WASAT 264 by Member Hawkins. In my view, both of the factors identified in Bilek as favouring a costs order require critical analysis.
11 Having considered the statutory regime which applied to commercial
leases prior to 1 January 2005, and the general practice in relation to costs before the Commercial Tribunal, the Tribunal in Bilek concluded that "the discretion under s 87(2) is sufficiently broad to enable the Tribunal to take into account the practice which was followed in the exercise of the applicable jurisdiction prior to 1 January 2005." It also observed that the repeal of the CT Act, with the result that there is no longer any specification in relation to costs applying to proceedings under the CRTSA Act, "may well be … an unintended consequence". With respect, I would reach a different conclusion.
12 The Tribunal correctly noted that the general legislative scheme
effected by the State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA) was to transfer jurisdiction to the State Administrative Tribunal from various other bodies "with as little consequential amendments as were necessary". While that was the general approach taken by the legislation, a clear legislative objective in the statutory scheme was to repose jurisdiction in a new Tribunal governed by the provisions of the SAT Act. In particular, the object was to repose jurisdiction in a Tribunal with the objectives specified in s 9 of the SAT Act, with practices and procedures governed by the SAT Act, including the approach to costs prescribed by s 87, s 88 and s 89.
[2007] WASAT 291 (S)
Section 87 of the SAT Act is expressed to be subject to the provisions of an enabling Act. Some enabling Acts have retained provisions in relation to costs - for example, see Guardianship and Administration Act 1990 (WA) s 16; Strata Titles Act 1985 (WA) s 81(7) and s 103H(8). While I acknowledge that the jurisdiction of the Commercial Tribunal was not limited to applications under the CTRSA Act, I do not consider that there is any reason to conclude that the change in provisions relating to costs of proceedings under that Act was not fully intended as part of the establishment of the State Administrative Tribunal.
13 I note that the proceedings in Quah were initially commenced in the Commercial Tribunal but transferred to the State Administrative Tribunal under the transitional provisions. In those circumstances, I accept that the practices in relation to an award of costs before the former Tribunal might be a relevant consideration in relation to the question of costs of the proceedings ultimately completed in this Tribunal. I do not otherwise consider, however, that the general practice in relation to costs in proceedings before the Commercial Tribunal is now a relevant factor in relation to the exercise of discretion under s 87(2) of the SAT Act.
14 The proposition that the commercial nature of the dispute is a
relevant factor was explained by the Tribunal in Bilek in the following
way at [14]:"There is something to be said for the approach that decisions on costs in commercial disputes should be made to promote certainty and responsibility in parties to their contractual obligations; Vasiliou v Australia's Country Homes Pty Ltd (1999) VSC 462. Consequently a successful party might reasonably expect that a costs award would be made in its favour."
15 Vasiliou v Australia's Country Homes Pty Ltd (1999) VSC 462 is a decision of the Supreme Court of Victoria in which leave to appeal against a decision of the Victorian Civil and Administrative Tribunal was refused on the basis that the appeal was out of time and lacked merit. The question of costs was not mentioned in the Supreme Court decision. The Tribunal's reference was no doubt intended to be a reference to the first instance decision by VCAT in Australia's Country Homes Pty Ltd v Vasiliou (unreported) VCAT, Young M, 5 May 1999. That decision is mentioned in Pizer's Annotated VCAT Act, 2nd ed, at [4039.1] as having considered s 109(3)(e) of the Victorian Civil and Administrative
[2007] WASAT 291 (S)
Tribunal Act 1998 (Vic). Section 109(3) of that Act deals with the factors of which VCAT is required to be satisfied before making a costs order. Section 109(3)(e) specifies that the Tribunal must have regard to "any other matter that the Tribunal considers relevant". According to Pizer, the Australia's Country Homes case considered that the costs power should be exercised "to assist and strengthen proper commercial relationships in domestic building contracts and to minimise litigation". The commentary continues:
"Thus, although emphasizing that there is no rigid presumption on costs in the Tribunal, the VCAT found that it should make its decision on costs in inter partes commercial disputes, particularly domestic building disputes, so as to promote certainty and responsibility in parties to their contractual obligations to each other. As a result, the VCAT held that a substantially successful party in the domestic building list is entitled to a reasonable expectation that a costs award will be made in its favour".
It is clearly that decision which influenced the Tribunal in Bilek.
17 For my part, I do not consider that, to the extent that it suggests a
presumption that a "successful" party in commercial disputes in the Tribunal will obtain a costs award, the approach suggested in Australia's Country Homes should apply generally to the exercise of discretion under s 87(2) of the SAT Act. Nor do I consider it helpful to examine at which end of the commercial spectrum the particular dispute falls or the relative levels of sophistication of the parties. That is not to say that the subject matter and surrounding circumstances of the dispute are irrelevant to the discretion. It seems to me, however, that there is no reason in principle that there should necessarily be a greater likelihood of costs orders being made in proceedings between substantial financial entities than in proceedings between parties of limited means. I accept, as the Tribunal suggested in Bilek and Quah, that an approach that promotes accessibility to the Tribunal is desirable. In my view, as a general proposition, that objective is fostered by the usual "no costs" position in the Tribunal and adherence to the Tribunal's objectives found in s 9 of the SAT Act.
18 Proceedings under the CTRSA Act fall within the Tribunal's original
jurisdiction. The Tribunal has discussed the proper approach to costs in other areas of its original jurisdiction. In Clifford and Shire of Busselton [2007] WASAT 89 (S) and Western Australian Planning Commission and Shim [2007] WASAT 262 (S) costs orders were made in relation to
[2007] WASAT 291 (S)
proceedings for compensation for compulsory acquisition of land under the Land Administration Act 1997 (WA). In Summerville and Department of Education and Training & Ors [2006] WASAT 368 (S) costs were awarded in relation to an unsuccessful claim under the Equal Opportunity Act 1984 (WA) (EO Act).
In Clifford, the President of the Tribunal said at [54] - [56]:
"Ordinarily, where a citizen feels obliged to commence a proceeding in the Tribunal for compensation under the LA Act they are dissatisfied with and have rejected an offer of compensation made by a resuming authority. If they succeed in their claim in the Tribunal, it would seem fair and reasonable that the Tribunal should ordinarily exercise its discretion under s 87(2) and award the applicant the costs of those proceedings. This is because, putting it simply, ordinarily if the applicant succeeds, it will have been demonstrated to the Tribunal that the applicant was not offered fair compensation by the resuming authority and was obliged to commence and maintain the proceedings in order to gain justice. It would seem unreasonable for an applicant to have to fight to gain fair compensation only to have to deduct from the compensation the costs incurred in obtaining the award.
Of course what should be recognised as "success" in every case requires some further consideration. If the applicant does not succeed in obtaining a compensation award following a hearing that betters the original compensation offer made by the resuming authority, it can hardly be said that the applicant was successful in the proceedings. Indeed it could be said in such a case that the applicant has maintained an unjustified proceeding and so should have to pay the respondent its costs for the trouble and expense of defending the claim.
Either way it really is a question of fairness: on the one hand, in the case of a successful applicant it is fair that they should ordinarily receive their costs when they are put to the trouble and expense of proving that their claim is right, over the reticence of the resuming authority to recognise the rightness of the claim; on the other hand, it is fair that an applicant who does not establish that a resuming authority's offer was not right, should have to pay the resuming authority's costs given the
[2007] WASAT 291 (S)
trouble and expense to which they have put the resuming
authority."
20 It might be thought that the observation that "it is fair that [a party]
should ordinarily receive their costs when they are put to the trouble and expense of proving that their claim is right" is applicable to any proceedings in the Tribunal's original jurisdiction where compensation or other relief is claimed on the basis of an alleged infringement of a legal right.
21 There are however two aspects of compulsory acquisition cases
which do not commonly apply to other areas of the Tribunal's original jurisdiction. One is that compensation cases are brought because of the unilateral exercise of the coercive power of the State to deprive someone of their property (or at least the ultimate threat of the exercise of that power). The second is that the process leading to the institution of proceedings before the Tribunal inevitably involves the making of offers and counter-offers which are clearly relevant to the exercise of discretion under s 87(2) - see s 87(2) of SAT Act and r 42 and r 43 of the State Administrative Tribunal Rules 2004 (WA).
22 In Summerville, Barker J observed that s 87 does not identify factors to be taken into account by the Tribunal in exercising its jurisdiction under s 87(2), and it is not appropriate for the Tribunal to attempt finally to delineate the particular circumstances in which the discretion to award costs will be exercised. Costs orders have most commonly be made in the Tribunal in circumstances of the type identified by Deputy President Judge Eckert in Chew and Director-General of the Department of Education and Training [2006] WASAT 248 at [85], being circumstances where a party has conducted itself unreasonably or inappropriately, particularly where that conduct gives rise to unnecessary costs being incurred by the other party.
In the context of the EO Act, Barker J said in Summerville at
[35] - [37]:
"One can understand that in circumstances where a sexual harassment complaint is totally without foundation and the application is dismissed on that basis – where credibility is at the heart of the matter – that may well be a proper ground upon which a tribunal decides to award costs. After all, the EO Act, and other Acts like it, is not intended to provide a mechanism for the maintenance of baseless accusations against innocent
[2007] WASAT 291 (S)
persons. Given the often lengthy nature of hearings that arise in such circumstances, and the need often felt by responding parties to obtain legal representation to vindicate their reputations, it will often not be unreasonable for an award of costs to be made. In doing so, a tribunal would be acting to ensure that such proceedings do not undermine the integrity of proceedings under an Act, the matter of great concern identified by Murphy J in Penfold v Penfold.
In relation to the question of an incredible or implausible case that has no foundation in fact, or a case that is adjudged as being so weak that it should not have been maintained, the relative weakness of the unsuccessful party's case has also resulted in the award of costs against that party: see Gonsalves v MAS National Apprenticeship Services [2007] VCAT 64, in which the applicant's sexual harassment claims were described at [15] as based on a "flimsy premise". See also Styles v Murray Meats Pty Ltd [2005] VCAT 2142 at [21]. These latter Victorian cases, however, it should be noted, were decided by reference to s 109(3) of the Victorian Act which requires the Victorian tribunal to consider "the relative strengths of the parties' cases".
Nonetheless, in my view, proceedings that should not have been maintained against a party because there really was no case to answer, is a fact that may be taken into account by this Tribunal in deciding whether to award costs against the unsuccessful party who maintained that case."
24 In my view, the approach that should be taken to costs in
proceedings under the CTRSA Act should reflect the approach explained by Barker J in Summerville. That is consistent with the reliance by the Tribunal in Bilek on the proposition drawn from Australia's Country Homes, that 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 and one or both seek determination of their rights in the Tribunal,
[2007] WASAT 291 (S)
the starting point remains that each party should expect to pay their own
costs, unless there are circumstances of the type identified in Chew.
The applicant's contentions
In submitting that it would be unjust not to award costs in favour of the applicant, Mr Germain relies on cl 9.2 of the lease which provides:
"the lessee shall pay all costs, charges and expenses (including but without limiting the generality of the foregoing solicitors, architects, surveyors and valuer's costs and fees) incurred by the lessor by reason of any default of the lessee hereunder and of and for the purposes of and incidental to the compliance by the lessor with the provisions of section 81 of the Property Law Act 1969."
26 Mr Germain submits that the lease having been drawn by the lessees'
solicitors, Mr and Mrs Pearce must be taken to have known of the
existence and effect of cl 9.2.27 Mr Germain also argues that Mr and Mrs Pearce's conduct of the
proceedings justifies the making of a costs order. The conduct identified
is:
•
the fact that Mr and Mrs Pearce commenced the proceedings with their claim which was ultimately unsuccessful,
•
at the time of commencement of proceedings, Mr and Mrs Pearce knew of the provisions of cl 9.2 of the lease,
•
the Pearces were represented by solicitors throughout the proceedings,
•
an offer was made on 1 August 2005 by Mr Germain claiming damages of $18,331.39 but the Pearces made no attempt to resolve the matter following that offer,
•
the Pearces' claim for relief against forfeiture was found (by ruling on a preliminary issue) to be beyond the jurisdiction of the Tribunal,
•
the Pearces pursued a claim for estoppel which was abandoned in the written submissions filed after the hearing,
•
the Pearces maintained a claim that formal notice of breach by non-payment of rent was required which Mr Germain claims was unreasonable given the provisions of s 81(9) of the Property Law Act 1969 (WA),
[2007] WASAT 291 (S)
• the Pearces made a claim for unconscionable conduct notwithstanding that the amendments to the CTRSA Act giving the Tribunal jurisdiction to deal with unconscionable conduct in relation to retail shop leases only came into effect on 11 May 2007.
Mr and Mrs Pearce's submissions
28 The Pearces contend that they should not be ordered to pay any of
Mr Germain's costs. They note that they were successful on a number of issues, and in particular they note that Mr Germain succeeded in only two of the 34 different items of damages claimed, and the Tribunal did not find Mr Germain's evidence reliable. In the circumstances, the Pearces contend that each party should bear its own costs.
Clause 9.2 of the lease
29 A claim for costs on the basis of cl 9.2 of the lease has always been
maintained by Mr Germain. The claim was clearly enunciated in his Statement of Issues, Facts and Contentions, and the particularised claim for damages included an item for "legal fees incurred to date" in the sum of $3,685.50. I disallowed that claim (at [92] of my substantive reasons) on the basis that there was no evidence concerning the fees claimed, and I was unable to ascertain whether or not the amount claimed was properly related to the default of the lessees which I had found to have occurred. Had it been possible to relate the legal fees to the failure by Mr and Mrs Pearce to make the May 2005 rent payment, those fees would have been recoverable under cl 9.2, and would have formed part of the damages awarded to Mr Germain.
30 Mr Germain submitted that costs should be awarded on an indemnity
basis. He submitted that the unreported decision in Wenpac Pty Ltd v Allied Western Australian Finance Limited (SCWA, Library No 940051, delivered 1 February 1994) is authority for the proposition that where a clause such as cl 9.2 of the lease exists, costs of proceedings in relation to the lease should be awarded on an indemnity basis. I do not accept that submission. The decision in Wenpac concerned a clause in a deed of assignment which required an assignee of a lease of certain goods to "indemnify and keep indemnified the assignor" and a bank "against any claim or liability whatsoever in relation" to the lease or the goods the subject of the lease. The court considered the nature of a contract of indemnity and considered whether the various claims that were made were claims in respect of the lease or the goods the subject of the lease. It is not accurate to describe cl 9.2 as an indemnity of the type considered in Wenpac. The decision turned wholly on the nature and breadth of the
[2007] WASAT 291 (S)
clause under consideration. It is of little assistance in consideration of the
exercise of discretion under s 87(2) of the SAT Act.31 In Blunt & Anor and Pal & Anor [2007] WASAT 194, the Tribunal considered that an agreement as to the payment of costs between the parties "has the effect of circumventing a discretion imposed on the Tribunal under the SAT Act". The Tribunal drew support for that proposition from the decision in Firestar Enterprises Pty Ltd and Town of Vincent [2007] WASAT 100 where, in granting a planning approval, a local government imposed a condition that the applicant for approval pay the local government's costs for earlier proceedings in the Tribunal concerning the same property. The Tribunal concluded that that condition was not imposed for a proper planning purpose, and was invalid. There would have been no basis upon which the Tribunal would have ordered the payment of costs by the applicant in the earlier proceedings, and it was in that context that the Tribunal concluded that the ulterior purpose in imposing the condition was to circumvent the Tribunal's jurisdiction.
32 That is a somewhat different position from here, where parties to a
lease have agreed to a provision in the nature of cl 9.2. Nevertheless, if the clause catches the costs of proceedings in the Tribunal, it would, on Mr Germain's argument, effectively remove the Tribunal's discretion.
33 Clause 9.2 is not, however, specifically directed to proceedings
before the Tribunal. There may be a whole range of costs which might be incurred by a lessor following a default by a lessee which do not involve any proceedings before the Tribunal. For example, there may be costs of remedying a failure to keep premises in good repair, costs of issuing notice of default, costs of failure by the tenant to comply with statutory notices or obligations, and so on. The lessor has the right to recover those costs as a contractual entitlement as part of its substantive relief.
34 Costs of proceedings in the Tribunal are regulated by s 87 of the
SAT Act. Subject to the SAT Act, an enabling Act, or an order under s 87(2), the statute determines that parties bear their own costs. Clause 9.2 does not displace the operation of s 87. The existence of the clause does not circumscribe or fetter the Tribunal's discretion under s 87(2). Where, as in this case, the lessor has maintained a contractual entitlement to payment of the costs, and that claim has been disallowed, the lessor should not be entitled to reagitate that claim as a factor for consideration in the exercise of the Tribunal's discretion under s 87(2).
[2007] WASAT 291 (S)
35 Even if I were wrong in that approach, it would not follow that
Mr Germain should recover all of the costs of the proceedings. The contractual entitlement is to the recovery of fees and costs "incurred by the lessor by reason of any default by the lessee". In these proceedings, the lessees' complaints of default extended beyond the non-payment of the May 2005 rent. Claims were made in relation to alleged defaults in failing to keep the premises in good repair and condition, failing to maintain the premises, making alterations without consent, damaging the leased premises, and directing unauthorised signage. None of those defaults were established. The proceedings also involved the issues raised by the lessees in their unsuccessful claim. Clause 9.2 of the lease does not give the lessor any entitlement to costs of defending proceedings brought by the lessees. The issue as to non-payment of the May 2005 rent occupied a relatively small part of the proceedings.
The Pearces' conduct of the proceedings
36 Several of the complaints made by Mr Germain about the conduct of
the proceedings by the Pearces relate to questions of law unsuccessfully argued by the Pearces. Several of those related to the question of the extent of the Tribunal's jurisdiction to grant relief of an equitable nature. Complaint is also made of what was said to be unreasonable submissions in relation to notice requirements and unconscionable conduct.
37 The question of the Tribunal's jurisdiction to grant relief against
forfeiture was the subject of a preliminary hearing before the Hon R Viol, Supplementary Deputy President of the Tribunal - see Pearce and Anor and Germain [2006] WASAT 305. An order was made that the costs of the preliminary issue were reserved.
38 In my view, the attempt to seek relief against forfeiture was not
unreasonable or inappropriate. The extent of the Tribunal's jurisdiction under the CTRSA Act was, at that time, attended by some uncertainty, and it was reasonable for the lessees to pursue their argument.
39 While the claim for estoppel was abandoned only after the evidence
did not support the claim as formulated in the Pearces' contentions, it did not involve any substantial time at the hearing nor significant additional preparation for Mr Germain's representative. Similarly, the claim in relation to notice requirements occupied little time at hearing and little, if any, additional analysis of the law beyond that which inevitably required consideration in the proceedings. The claim for unconscionable conduct, which is briefly dealt with at [77] of my substantive reasons, occupied
[2007] WASAT 291 (S)
little time at hearing, and is unlikely to have involved Mr Germain in any
additional expenditure.40 Both parties pursued arguments and claims which were unsuccessful.
They did so in the context of a relationship which, I observed at [8] of my substantive reasons, appears to have completely broken down. Much of the hearing focused on events in late 2004. It is probably accurate to say that neither party was "successful" in relation to their various claims flowing from those events. I would not conclude that either party's conduct was, in relation to the matters on which they were unsuccessful, any more or less reasonable than the conduct of the other. I am not inclined to make an order for costs on the basis of inappropriate or unreasonable conduct on the part of the Pearces.
The lessor also seeks to rely on an offer made on 1 August 2005 claiming damages of $18,331.39, being less than the amount ultimately recovered in the proceedings. Normally, the making of an offer to settle matters on terms less favourable than those ultimately achieved at a hearing, would constitute a significant factor in favour of an order for costs. It is necessary, however, to have regard to the terms of the letter of 1 August 2005. That letter simply advises that "as of the date of this letter" "the damages which my client intends claiming against you … [are] $18,331.39". A breakdown then follows. The letter concludes by stating:
"Please note that these damages are subject to:
1. Clearance of your cheque dated 1 June 2005 referred to in my letter of 26 July; 2. All additional legal expenses which my client continues to incur all of which will be claimed against you once the full extent of the damage is known after a new tenant is found for the premises."
43 The letter is not an offer to accept the sum specified in full and final
satisfaction of the claim. It is simply advice as to the amount of damages at that point. The letter was written less than three months after the default, when the rental under the lease was still continuing. In my view, the letter does not constitute an offer to accept something less favourable than what was ultimately recovered. Properly construed, it is not an offer at all. It is not a factor which favours an order for costs in favour of the lessor.
[2007] WASAT 291 (S)
44 With respect to the unsuccessful claims by the Pearces, I would not
be inclined to award costs. The Tribunal found that, contrary to his assertion, Mr Germain entered the premises and carried out works without the consent of the lessees in December 2004. That entry provided the basis of the lessees' claim. The conduct of the lessor, whilst unauthorised, was found by the Tribunal not to constitute a breach of the covenant of quiet enjoyment. It cannot be said, however, that the bringing of the claim was unreasonable, even though it was unsuccessful. The respective rights of the parties in relation to the subject matter of the Pearces' claim were not clear. Their relationship had broken down. It was reasonable that they sought determination by the Tribunal of their competing claims. The fact that Mr Germain succeeded in relation to a claim for a subsequent breach of the lease does not make unreasonable the conduct of the lessees in pursuing their claim in relation to the events in late 2004.
Conclusion
For the above reasons, the application that Mr and Mrs Pearce pay Mr Germain's costs should be dismissed.
| Orders | |
| 46 | The application for an order that Mr and Mrs Pearce do pay Mr Germain's costs is dismissed. |
| I certify that this and the preceding [46] paragraphs comprise the reasons for decision of the State Administrative Tribunal. | |
| ___________________________________ | |
| JUDGE J CHANEY, DEPUTY PRESIDENT |
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