S.H.I.F.T. Whitsunday Pty Ltd v McLean Cooke Pty Ltd (No 2)
[2012] QCAT 396
•30 August 2012
| CITATION: | S.H.I.F.T. Whitsunday Pty Ltd v McLean Cooke Pty Ltd (No 2) [2012] QCAT 396 |
| PARTIES: | S.H.I.F.T. Whitsunday Pty Ltd (Applicant) |
| v | |
| McLean Cooke Pty Ltd (Respondent) |
| APPLICATION NUMBER: | RSL087-10 |
| MATTER TYPE: | Retail shop leases matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Cairns |
| DECISION OF: | Mark Johnston, Member Don McBryde, Member |
| DELIVERED ON: | 30 August 2012 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. S.H.I.F.T. Whitsunday Pty Ltd to pay Mclean Cooke Pty Ltd’s costs of and incidental to the proceedings against Mclean Cooke Pty Ltd, including reserved costs, on a standard basis to be assessed on the District Court scale of costs. 2. Mclean Cooke Pty Ltd shall deliver to S.H.I.F.T. Whitsunday Pty Ltd an itemisation for costs referring to the relevant items contained in the District Court scale of costs. 3. If within 14 days of that delivery, the parties have not agreed on an amount of costs, the costs shall be assessed by Hickey and Garrett, Legal Costs Assessors, Level 21, 141 Queens Street, Brisbane, 4000. 4. S.H.I.F.T. Whitsunday Pty Ltd shall pay Mclean Cooke Pty Ltd’s costs (as agreed or assessed) within 14 days of such agreement or assessment. |
| CATCHWORDS: | COSTS – Jurisdiction Queensland Civil and Administrative Tribunal Act 2009, s 100 Lyons v Dreamstarter Pty Ltd [2011] QCATA 142 |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act).
REASONS FOR DECISION
Background
The Respondent leased part of the ground floor of the building within Lease A in Lot 297 on Plan SP 184769, Parish of Conway (being at the Shute Harbour Ferry Terminal, Whitsunday Drive, Shute Harbour). The Respondent operates a café known as “Chocolate Starfish” from the premises.
The Applicant is the lessor of the subject property and in turn leases the property from the Whitsunday Shire Council.
The parties approached the Registrar of the Retail Shop Leases Registry to appoint an independent expert valuer to determine the market rent payable under the lease between the Applicant and the Respondent in relation to the subject property.
The Registrar appointed Mr Sheehan a specialist retail shop leases valuer as the retail shop valuer under the Retail Shop Leases Act 1994 to undertake a review to determine the market rental as at 1 December 2007.
Mr Sheehan undertook the valuation of the market rental and produced a valuation report. In that valuation Mr Sheehan assessed the market rental as $2,500 per annum. Mr Sheehan had also documented the process by which he determined the market rent.
The Applicant filed an application with QCAT under the Retail Shop Leases Act 1994 seeking relief arising out of a retail shop lease dispute. An order was made that the parties were permitted legal representation in the proceedings.
The matter eventually proceeded to a hearing in Cairns on 5 August 2011.
The Respondent seeks its costs incurred in defending the application, pursuant to section 102 of the QCAT Act.
Entitlement to costs
The Applicants seek that no costs be given or if granted that they be on a standard basis and not an indemnity basis.
It is material to the application for costs that the matter had not been commenced before QCAT commenced on 1 December 2009.
Section 100 of the QCAT Act provides that “other than as provided under the QCAT Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceeding.”
The proceeding arises out of a retail shop leases dispute.
Deputy President Kingham, in Lyons v Dreamstarter Pty Ltd [2010] QCAT 447 (14 September 2010) stated that the jurisdiction to award costs “allows the Tribunal to make an order as to costs that is justified in the circumstances. It is a broad general discretion which must be exercised judicially, not upon irrelevant or extraneous considerations but upon facts connected with to leading up to the litigation.”
The QCAT cost provisions (Ch 2, Pt 6, Div 6) commence with s 100 which, on its face, indicates a plain intention that costs orders will not be an integral feature of QCAT’s operations:
‘other than as provided under this Act or an Enabling Act, each party to a proceeding must bear the party’s own costs for that proceeding’.
However, under s 102 the Tribunal may make an order for costs ‘…if the Tribunal considers the interests of justice require it to make the order’: s 102(1). Under s 102(3) in deciding whether to award costs the Tribunal may have regard to certain matters including:
- Whether a party in a proceedings is acting in a way that unnecessarily disadvantages the other party;
- The nature and complexity of the dispute;
- The relative strengths of the claims made by each party;
- The financial circumstances of the parties;
- Anything else the Tribunal considers relevant.
As the QCAT Appeal Tribunal has observed about these provisions, the question that will usually arise in each case in which costs are sought is whether the circumstances relevant to the discretion inherent in the phrase ‘the interests of justice’ points. They must be such to be so compellingly to a costs order that they overcome the strong contra-indication against costs orders contained in s 100 as per Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412 at paragraph [29].
Discussion of evidence
The factors material to the discretion here include the nature of the dispute which involved a challenge to a valuation provided by a specialist retail valuer under the Retail Shops Lease Act 1994; the existence of varying reports from valuers as to the actual market rental for the leased premises; and the fact that both parties sought to be represented by virtue of s 43 of the Act.
In relation to the first of those matters, the Retail Shop Leases Act 1994 sets out a process to resolve disputes. The parties followed that process and a valuation was obtained by a specialist retail valuer.
The Applicant was seeking to go behind the valuation obtained pursuant to the provisions of the Act. The Applicant has put the Respondent, who was willing to abide the valuation of market rental obtained pursuant to the Act, to the trouble of defending the Applicant’s proceedings. This is a decisive factor in looking at the interests of justice. Why has this hearing been necessary when the Act provides mechanisms to resolve disputes? The facts are that the Applicant would not accept the market rent determined by the specialist retail valuer in accordance with the Act and required the Respondent to pay an amount above the market rent valuation. In doing so the Applicant clearly acted in a way that disadvantaged the Respondent. The existence of differing professional opinions over particular matters such as valuation takes the matter outside what would normally be expected of a lay person to deal with. These matters are by their nature complex matters.
The right to be represented in a proceeding before the Tribunal is also limited by virtue of s 43 of the QCAT Act. Section 43 refers to representation in a “proceeding” before the Tribunal and provides that the main purpose of the seclusion is to “have parties represent themselves unless the interests of justice requires otherwise”.
The Tribunal was satisfied that it is appropriate to allow the parties to be legally represented due to the complexity of the matters in this issue. Those factors are persuasive that the matter did have a degree of complexity and difficulty.
In addition the Tribunal notes that the Respondent was forced to protect its tenancy by paying $78,010.02 in overpayments. It would appear that the Applicant has used it position to require the payment of monies which the Tribunal found to have no basis. This was clearly from the evidence a substantial impost on the Respondent.
Submissions
The Respondent submits that the Tribunal has power to award costs pursuant to section 102 of the QCAT Act, in the interests of justice.
The Respondent refers to the application of the case of Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412 where the President identified the relevant matters. Firstly, that the power to award costs must be discerned from the statute which prescribed the occasions and conditions for its exercise. Secondly, that if the matter’s complexity justified legal representation, it would not be in the interests of justice to deny the successful party its costs reasonably incurred to achieve a successful outcome.
The Respondent contends that this was a complex retail shop leases dispute which involved both parties being represented by a solicitor.
The Respondent also refers to the conduct of the Applicant in not cross-examining Mr Sheehan the valuer regarding his valuations when called at the hearing. This was notwithstanding the Applicant was seeking to impeach the validity of the valuation. The Applicant finally conceded that there were no issues with Mr Sheehan’s methodology.
In addition, the Respondent refers to an offer of settlement that was made by the Respondent on 16 June 2011 to settle the dispute on the basis:
a. The Applicant pay the Respondent $73,000 within 14 days;
b.Upon the Applicant paying the $73,000 the Respondent waives its rights to the difference between overpaid rent and payment of the $73,000 being an amount of $5,000.
The Respondent maintains that the offer was made as a Calderbank offer (see Calderbank v Calderbank [1975] 3 All ER 333).
The Respondent contends that it was more successful than a counter offer made by the Applicant and was more successful than the offer it made to the Applicant.
The Respondent asks for indemnity costs on the basis of being more successful than the offer of the settlement it made to the Applicant.
Applicant’s Submissions
The Applicant rightfully submits that s 100 “more plainly” indicates that, in the QCAT Act, the legislature has turned its face against awards of costs in this Tribunal.
The Applicant rightfully submitted that the President correctly identified the appropriate consideration under the QCAT Act, when it sought to depart from the position otherwise mandated by s 100:
“whether the circumstances relevant to the discretion inherent in the phrase ‘the interests of justice’ point so compellingly to a costs award that the overcome the strong contra-indication against cost orders in s 100 Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412 at paragraph [29].”
The Applicant contends that the circumstances of this case are not so compelling to an award of costs.
Conclusions
The Tribunal was required to consider very carefully the evidence of the Applicant and the Respondent before making its decision and it is quite clear, that this was a complex matter.
The engagement of legal representatives by both the parties was because of the complexity of this matter. The Tribunal accepts the Respondent’s submission in this regard and notes that two solicitors appeared to represent the Applicant at the hearing. The Applicant was seeking to invalidate a valuation obtained pursuant to the Retail Shop Leases Act 1994. The Applicant was seeking to invalidate the specialist retail valuer’s valuation of market rent. This is not a matter of costs following the event. This is an unusual situation. The Applicant’s conduct was such that in effect it challenged the process laid down the Retail Shop Leases Act 1994 to resolve such disputes. This is highly relevant. The Respondent accepted the mechanisms of resolving the valuation dispute and the Applicant sought in effect to challenge the process.
Where a party seeks to go outside the normal process which was laid down by the Act this is a major factor from a justice interest’s perspective when the Applicant fails. The Applicant effectively challenged the umpire’s decision and failed.
The Respondent has been put at significant extra costs because the Applicant did not agree with the valuation provided by the specialist retail valuer. This involves for the first part the significant over payment of rent; and secondly the costs involved in defending the application brought by the Applicant. The Tribunal strongly believes that this is a significant factor in determining the interests of justice.
The Tribunal would like to make it very clear that it is not awarding costs because the Respondent won the case. There are several factors that the Tribunal has accepted that place this matter within the interests of justice contra-indication against costs orders.
Calderbank Offer
The Applicant rightly contends that the offer made by the Respondent was made (on 16 June 2011) a relatively short time before the hearing, and well after most of the costs in the proceedings had been incurred.
Section 65 of the QCAT Rules requires an offer to be in writing which clearly this offer was. The Calderbank case is well known, but in any event, it is clear on its face that this was an offer to settle the matter in issue which the Applicant did not accept.
The Applicant rightfully contends that regulation 86(2) restricts the award of costs to the costs incurred after the offer was made.
The Applicant referred to the Court of Appeal decision Velvet Glove Holdings Pty Ltd [2011] QCA 312. The dispute before the learned trial judge that is relevant to this matter was whether costs should be awarded to be assessed on a standard basis or an indemnity basis when a Calderbank offer had been made. The Honourable Justice Philippides who wrote the lead judgment noted at paragraph 104:
The learned trial judge referred to the established principles applicable to the consideration of an indemnity costs order on the basis of a refusal of a Calderbank offer, including those set out in Colgate Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 and Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298. Her Honour noted that it is well accepted that a party who unreasonably refuses to accept a Calderbank offer, on terms more favourable than the court’s subsequent order, may be ordered to pay indemnity costs. Her Honour had regard to the factors that are relevant to assessing reasonableness set out in Hazeldene’s Chicken Farm Pty Ltd. In concluding that Velvet Glove’s rejection of the Calderbank offer was unreasonable such that it was appropriate that indemnity costs be ordered.
The Court of Appeal overturned that decision in paragraph 106:
I am unable to discern the element of unreasonableness displayed by Velvet Glove in refusing to accept the Calderbank offer. It was made at a time when both claims brought by Velvet Glove were unresolved and in circumstances where MIM, in resisting a summary determination of Velvet Glove’s claim, pointing to asserted that the issues disputed were of a complex nature. Nor would I characterise the construction of the contract advanced on behalf of Velvet Glove is one that was so lacking in merit as to be an arguable, such that its conduct in rejecting the Calderbank offer should be viewed as unreasonable, and the learned trial judge did not so characterise Velvet Glove’s case. In those circumstances, I consider that the discretion to order indemnity costs miscarried. I would order that the costs order of the learned trial judge be varied so that MIM’s costs are to be paid on a standard, rather than an indemnity basis.
The Tribunal accepts the Applicant’s submission that there was no discernible element of unreasonableness displayed by Applicant in refusing to accept a Calderbank offer. In those circumstances the Tribunal is constrained in exercising the discretion to order indemnity costs. However it is in the interests of justice that settlement offers are both promoted and taken seriously when made. Otherwise it would undermine the purpose of making offers of settlement if there were no consequences for refusing an offer that turned out to be better than the decision of the Tribunal. This was another factor in the Tribunal deciding that this was within the interests of justice contra-indication against costs orders.
Findings
The Tribunal finds that:
a.the matter was complex and arguable points raised by both sides;
b.both sides were granted legal representation which occurred both at the hearing in the Cairns and throughout the preparation of the matter;
c.the Applicant did not accept market rent established by the Specialist Retail Valuer pursuant to the provisions of the Retail Shops Leases Act;
d.the Respondent had made a Calderbank offer to the Applicant's which was better than the decision handed down by the Tribunal;
e.the Applicant has placed the Respondent in a position of financial hardship with the requirement that it make an over payment of rent in the sum of $78,010.02;
f.the Applicant has acted in a way that unreasonably disadvantaged the Respondent by requiring the Respondent pay rent above the rate determined by the Specialist Valuer;
g.at the end of the hearing the Respondent was successful with its defence which shows that it had a stronger case then the applicant;
h.the Respondent has demonstrated that it is an appropriate case in the interests of justice to award costs against the Applicant; and
i.the District Court scale costs on a standard basis is appropriate under the circumstances
The cases require that if a successful party is to be deprived of their costs there must be very good reasons why it is just do so.
McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at paragraph 69 explains the position as follows:
“… Subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or defendant… The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party, the successful party would not have incurred the expense which it did. As between the parties, fairness dictates the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation… The traditional exceptions to the usual order as to costs focus on conduct of the successful party which disentitles it to the beneficial exercise of discretion… A court might properly depart from the usual order as to costs and successful party its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes a matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in a settlement of the dispute… There are few, if any, exceptions to the usual order as to costs outside the area of disentitling conduct.”
Given the outcome of the decision and the reasons for that decision the Tribunal cannot find any special circumstances which would justify a different order to an order that S.H.F.T. Whitsunday Pty Ltd pay the Respondent its costs of defending the Application.
Orders
S.H.I.F.T. Whitsunday Pty Ltd to pay Mclean Cooke Pty Ltd’s costs of and incidental to the proceedings against Mclean Cooke Pty Ltd, including reserved costs, on a standard basis to be assessed on the District Court scale of costs.
Mclean Cooke Pty Ltd shall deliver to S.H.I.F.T. Whitsunday Pty Ltd itemisation for costs referring to the relevant items contained in the District Court scale costs.
If within 14 days of that delivery, the parties have not agreed on an amount of costs, the cost should be assessed by Hickey and Garrett, Legal Costs Assessors, level 21, 141 Queen Street, Brisbane 4000.
S.H.I.F.T. Whitsunday Pty Ltd shall pay Mclean Cooke Pty Ltd’s costs (as agreed or assessed) within 14 days of such agreement for assessment.
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