Plant v Meriton Properties Pty Ltd (No. 2) (Costs) (RLD)

[2010] NSWADTAP 20

Appeal Panel - Internal

CITATION:	Plant v Meriton Properties Pty Ltd (No. 2) (Costs) (RLD) [2010] NSWADTAP 20
PARTIES:	APPELLANT Wayne Douglas Plant RESPONDENT Meriton Properties Pty Ltd
FILE NUMBER:	099037
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	20 November 2009
DATE OF DECISION:	31 March 2010
BEFORE:	O'Connor K - DCJ (President); Molloy G - Judicial Member; Harrison B - Non-Judicial Member
CATCHWORDS:	Retail Leases – Costs of Appeal – Administrative Decisions Tribunal Act 1997, s 88
DECISION UNDER APPEAL:	Meriton Properties Pty Ltd v DCM Leases-Five Pty Ltd [2009] NSWADT 121
FILE NUMBER UNDER APPEAL:	085163
DATE OF DECISION UNDER APPEAL:	05/26/2009
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Legal Profession Act 2004 Retail Leases Act 1994
CASES CITED:	Abigroup Ltd v Sandtara Pty Ltd [2002] NSWCA 45 Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd [2001] NSWADTAP 31 Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 Meriton Properties Pty Ltd v DCM Leases-Five Pty Ltd (No 2) [2010] NSWADT 11 Meriton Properties Pty Ltd v DCM Leases-Five Pty Ltd [2009] NSWADT 121 Plant v Meriton Properties Pty Ltd [2009] NSWADTAP 62 Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27 Skiwing Pty Ltd v Trust Company of Australia Ltd (No 4) [2004] NSWADT 162 Solomon v Singh (No 3) [2006] NSWADT 120 Tennent v Moukhlina (No 2) (Costs) (RLD) [2009] NSWADTAP 74 Toll (FGCT) v Alphapharm Pty Ltd [2004] HCA 52; (2004) 291 CLR 265 World Best Holdings Limited v Sarker (No 2) (RLD) [2009] NSWADTAP 55
REPRESENTATION:	APPELLANT D Leamey, solicitor RESPONDENT T Maltz, counsel / K Mihail, company solicitor
ORDERS:	That the Appellant pay the Respondent’s costs of and in connection with the appeal, as agreed or assessed under the Legal Profession Act 2004.

1 This decision deals with the respondent’s application for the appellant to pay its costs of a failed appeal arising from a retail lease dispute.

2 The respondent, Meriton Properties Pty Ltd, is a lessor who applied under the Retail Leases Act 1994 (RL Act) for orders enforcing a personal guarantee given by the director of a lessee company, Mr Plant. The Retail Leases Division of the Tribunal granted the application. It made orders for damages totalling $114,944.56, inclusive of interest in the sum of $4,940.08 against the First Respondent, the named lessor, DCM Leases-Five Pty Ltd, and, critically, made the same order against the Second Respondent, Mr Plant: Meriton Properties Pty Ltd v DCM Leases-Five Pty Ltd [2009] NSWADT 121 (26 May 2009). The lessor had foreshadowed an application for costs, and the Tribunal gave directions in that regard.

3 Mr Plant’s appeal was heard on 15 October 2009 and dismissed by decision published 23 October 2009: Plant v Meriton Properties Pty Ltd [2009] NSWADTAP 62. The lessor (the respondent to the appeal) had foreshadowed an application for costs of the appeal. The Appeal Panel set a timetable for directions, and indicated that it would deal with the matter without a further hearing, as permitted by s 76 of the Administrative Decisions Tribunal Act 1997 (ADT Act) unless there was an objection. The lessor filed its submissions in support of its application on 3 November 2009. Under the timetable the guarantor had until 17 November 2009 to file any submissions in reply. There have been none filed.

4 The Tribunal below issued its decision on the lessor’s costs application on 11 January 2010: Meriton Properties Pty Ltd v DCM Leases-Five Pty Ltd (No 2) [2010] NSWADT 11. The lessor had filed its submissions in accordance with the timetable. Neither the First Respondent, the company nor Mr Plant filed any submissions in reply. The Tribunal ordered that the First Respondent pay the Applicant’s costs as agreed or assessed; but declined to make an order against the Second Respondent, Mr Plant. The company had taken no active part in the original proceedings. The Tribunal noted at para [17] of its first decision that ‘since it appears that [the company] has no assets, the orders being made against it are likely to be of little or no practical benefit to Meriton’.

5 This decision deals with the lessor’s application for the costs of the appeal. In its submissions filed 3 November 2009, the lessor also relied on its submissions on costs filed 16 June 2009 with the Tribunal below.

6 The RL Act gives the Tribunal power to award costs (s 77A and ADT Act, s 88(3)). It adopts the provisions of s 88 of the ADT Act. As from 1 January 2009 an amended version of the original s 88 has been in effect (set out below). The major change appears in sub-section (1A). Previously the Act provided that the Tribunal ‘may award costs … but only if it is satisfied that there are special circumstances warranting an award of costs’. Now the key words read ‘but only if it is satisfied that it is fair to do so’, and various factors that might be relevant are set out. In the old provision there was no list of possibly relevant factors.

‘ 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.’

7 This provision is applicable to these proceedings even though they were instituted prior to 1 January 2009: see ADT Act, Sch 5, cl 43(2)(i).

8 The power to award costs, it will be seen, is by way of exception to the usual principle that in proceedings in this Tribunal each party is to bear its own costs.

9 Care needs to be shown in not allowing the ‘fairness’ exception to become a vehicle for introducing into the Tribunal the usual court practice of making orders for costs that follow the event.

10 In its submissions to the Tribunal below, the lessor referred to the strength of its case, which it described as ‘overwhelmingly strong’. It submitted that the proceedings were complex, referring to arguments mounted by the director in relation to jurisdiction; estoppel; and the nature of the objective analysis required by the law of contract. It noted under the heading ‘any other matter’, the commercial nature of these proceedings, and the prominence that has been given to this consideration in a number of costs judgments in the Retail Leases Division under the old s 88, citing, for example, Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27 at [13]; and Skiwing Pty Ltd v Trust Company of Australia Ltd (No 4) [2004] NSWADT 162 at [11]. See also, Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164; and Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 at [60] per Santow JA.

11 The lessor also submitted that the terms of the Lease itself were relevant. By virtue of cll 39.2 and 39.3 the guarantor is liable to indemnify the lessor for its costs incurred in connection with the lease, including legal costs, dealt with in turn by cl 11.1(f)-(g) of the Lease.

12 The submissions refer to Abigroup Ltd v Sandtara Pty Ltd [2002] NSWCA 45, a commercial lease case. The Court ruled that its discretion to award costs was not fettered in any way by a contractual provision going to that matter. However, a party could make an application for an order enforcing such a term in the contract: per Stein JA at [9]. This Tribunal has held, consistently, that the question of costs in retail tenancy proceedings is to be determined solely by reference to s 88: see, for example, Solomon v Singh (No 3) [2006] NSWADT 120 at [28].

13 In its decision the Tribunal below canvassed these submissions. It stated that it did not regard Mr Plant’s original defence as lacking any merit. It referred to his attempts in the first round of negotiation and exchange of contractual documents to not have imposed on him any personal liability. Mr Plant had previously dealt with the lessor in relation to the same premises on the basis, which it had accepted, that he would not give a personal guarantee. The Tribunal clearly had some sympathy for Mr Plant’s case to the effect that he had not understood from the way his assistant, Mr Scott, had handled dealings with the lessor’s solicitors subsequently that he had ultimately signed pages referred back for signature in a way that gave rise to a binding personal guarantee.

14 In line with previous authority, it considered that the principles stated in Abigroup did not apply to retail leases regulated by the RL Act. It emphasised the terms of s 7 of the RL Act. In its view, the intent of the RL Act, as reflected in s 7, is to render ineffective contractual provisions as to costs of proceedings where they are inconsistent with the regime established by the Act. Section 7 provides:

‘This Act operates despite the provisions of a lease. A provision of a lease is void to the extent that the provision is inconsistent with a provision of this Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease.’

15 The Tribunal concluded:

‘39 The broad outcome of these deliberations is that a significant disparity in the relative strengths of Meriton’s and Mr Plant’s cases, being a factor to be taken into consideration under section 88(1A)(c), is the only specific matter of any importance that Mr Maltz has identified in these proceedings within the list contained in section 88(1A). I have rejected his assertion that Mr Plant’s case was weak to the extent that it had ‘no tenable basis in fact or in law’.

40 There will, of course, always be some disparity between the strengths of the cases of the successful party and the unsuccessful party in litigation. The mere existence of such a disparity is not enough to displace the presumption, stated in section 88(1) of the ADT Act, that in Tribunal proceedings to which section 88 applies each party should pay their own costs. The key question is whether such disparity as exists is of sufficient scale to have this effect.

41 The difficult decision that I have to make now is accordingly whether the disparity in the relative strengths of the parties’ cases in the present proceedings, considered in the light of the general principles (outlined above) governing the interpretation of section 88, is substantial enough to justify departing from the presumption stated in section 88(1) and making an order for costs against Mr Plant.

42 After a deal of hesitation, I have concluded that this is not the case. Meriton has not persuaded me that it would be ‘fair’ to make such an order. Its application for a costs order against Mr Plant should be dismissed.’

16 In World Best Holdings Limited v Sarker (No 2) (RLD) [2009] NSWADTAP 55 (29 September 2009), the Appeal Panel noted:

‘15 Though not determinative, the making of a costs order at first instance, when the ordinary rule is that there be no costs order, is a factor which weighs in favour of making the same order on appeal if the appeal is unsuccessful. …’

17 On the other hand, as Appeal Panels recognised in cost applications brought under the old s 88, the liberality that might be appropriate at first instance in declining to award costs ought not extend equally to the appeal level: see, for example, Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd [2001] NSWADTAP 31 at [13]. The Appeal Panel recently repeated this view in the context of the new provision: Tennent v Moukhlina (No 2) (Costs) (RLD) [2009] NSWADTAP 74:

‘66 An appeal involves a second round of proceedings in the Tribunal. The liberality that is usually shown in not awarding costs at first instance in the Tribunal does not apply with equal force to the exercise of the right of appeal. Both sides are put to considerable further expense.’

Consideration

18 Here there are two experienced commercial parties in dispute. Mr Plant’s evidence before the Tribunal was that he was managing director of a business operating a chain of 25 franchised doughnut and coffee shops across New South Wales, and that most of the leases that he takes out are with large retail lessors such as Westfield, AMP, Stockland and the State Government of NSW (see Exhibit 1).

19 Mr Plant’s ordinary business practice, according to his evidence, has been not to furnish a personal guarantee to lessors in respect of default by a franchisee/assignee introduced by him. He feels that he was dealt with inappropriately by the lessor’s solicitors in the way his amendments to the contractual documents seeking to give effect to that practice were overridden by them. He states that he did not understand that the process that then ensued between the lessor’s solicitors and his personal assistant might lead to a contract under which he had given a guarantee.

20 While the Tribunal below expressed some sympathy for the position in which Mr Plant found himself, its reasons were, we think, very clear and in accordance with authority, especially the decision of the High Court in Toll (FGCT) v Alphapharm Pty Ltd [2004] HCA 52; (2004) 291 CLR 265.

21 Mr Plant, on his evidence, left critical dealings, as many chief executives must do, to the care of a delegate. On his evidence, he ended up signing to a personal guarantee unwittingly. That is a risk that goes with delegation and against which senior managers must guard. The circumstances here were, in our view, quite comparable to what occurred in Alphapharm. While no adverse finding was entered by the Tribunal below, it is plain that his defence was always going to be a difficult one to make, when his delegate (his personal assistant, Mr Scott) was not produced to give evidence. Given Mr Plant’s background and experience, it was, we think, testing the boundaries of credulity to raise defences such as non est factum to dispute the binding effect of the instrument he signed.

22 Both at first instance and on appeal, both parties have been represented. An appeal involves a prolongation of proceedings. In this case, there was, in our view, little strength to the appeal.

23 Mr Plant has avoided an award of costs in relation to the first instance proceedings. In our view a similar outcome should not apply to the appeal.

Order

That the Appellant pay the Respondent’s costs of and in connection with the appeal, as agreed or assessed under the Legal Profession Act 2004.