Solomon v Singh (No 3)

[2006] NSWADT 120

CITATION:	Solomon & Anor v Singh (No. 3) [2006] NSWADT 120
DIVISION:	Retail Leases Division
PARTIES:	APPLICANTS Isaac Solomon, Sara Cooper and Elizabeth Oxman RESPONDENT Dr Raghubir Singh
FILE NUMBER:	035094
HEARING DATES:	30/01/2006 & 17/02/2006
SUBMISSIONS CLOSED:	02/17/2006
DATE OF DECISION:	04/21/2006
BEFORE:	Molloy GB - Judicial Member
CATCHWORDS:	Costs
MATTER FOR DECISION:	Costs
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Cripps v G&M Dawson P/L [2006] NSWCA 81 Gizah Pty Limited v AXA Trustees Limited (No2)[2001] NSWADT164 Petria Pty Limited v Makhoul[2005] NSWADTAP 12 Randi Wiks Pty Limited v Pokana Pty Limited (RLD)[2003] NSWADTAP27 Sotiropoulos v Mattana Coiffure Pty Limited (No2)[2004] NSWADTAP 43 Stefopoulous v Manikas (No3)[2004] NSWADT 172 Taylor v Sciberras [2004] NSWADT 104 Thalassa Pty Limited v Hawkesbury River Marina Pty Limited (RLD)[2005] NSWADTAP 48
REPRESENTATION:	APPLICANT S Bell, Counsel RESPONDENT M Watts, Counsel
ORDERS:	1. The Respondent to pay the costs of the Applicant, including the costs of the costs application, as and from 7 June, 2004

Background:

1 The Applicants are owners of premises known as Shop T12 (“the premises”) at the Eagle Vale Market Place shopping centre, Gould Road, Eagle Vale. The Respondent was one of the guarantors of the lessee of the premises. On 2 April 2002 the lessee vacated the premises and on 1 August 2002 the premises were re-let.

2 The Applicant claimed damages for breach of the lease against the Respondent Dr Singh as guarantor. The Respondent did not dispute the quantum of rental arrears ($14,758.00), the outgoings ($59,576.38), nor the interest ($5,850.31) – a total of $80,184.69. The Respondent (however) disputed, not so much the quantum of the loss of rent claimed by the Applicant ($93,725.27) but rather the fact that in his submission the Applicant had not mitigated that loss – that was the primary issue the subject of evidence and cross examination in a hearing before me on 3, 4 and 8 November 2005. The Respondent also challenged the claimed leasing commission ($6,600.00) and a claim for legal fees ($74,351).

3 By Decision 16 December 2005 (Solomon & Anor v Singh [2005] NSWADT295 I determined that the Applicants were not entitled to the claimed leasing commission of $6,600, were not entitled to the legal fees ($74,351) save that the Applicant was entitled to any portion of the legal fees that maybe properly proved to have been incurred by the Applicant not connected with the proceedings in this Tribunal and with regard to the claim for loss of rent ($93,725.27) I determined that, on the question of mitigation,

“the appropriate rental of the premises achievable in July – August 2002 would have been $360.00 per square metre (gross).” [67].

4 I directed the parties to bring forward Short Minutes in conformity with my reasons for decision and this the parties did on 30 January 2006 when I entered judgment for the Applicants in $139,983.45 made up as follows:

a) Rental Arrears $14,758.00

b) Interest on Rental Arrears $ 5,850.31

c) Outgoings $59,576.38

d) Loss of rent $72,611.72

e) Legal costs of termination of Lease $ 737.50

f) Less contribution from Co-Guarantor (Dr Sood) $ 13,550.00.

5 I also reserved costs.

6 It can be seen from the above break up of the judgment that the claimed Rental Arrears, Interest and Outgoings were not disputed and formed part of the judgment. The item for “loss of rent” was reduced from the amount claimed ($93,725.27) to $72,611.72 in accordance with my determination. Similarly, the legal costs were reduced from $74,351.00 to $737.50 and the amount of leasing commission was not included.

7 To some extent therefore it could be not unreasonably said that the Respondent had a significant victory. Although it is true that the Respondent did not dispute, and did not pay (an important point), the amounts not in dispute (rental arrears, interest and outgoings, in total $80,184.69) the Respondent was significantly successful in reducing the claim for “loss of rent” by an amount of $21,113.55. The Respondent was also significantly successful in having the whole claim for leasing commission disallowed and the vast bulk of the claimed legal fees also disallowed. In fact, when one does the mathematics, the claim by Applicants, initially $241,310.96, was reduced to $139,983.45, a reduction of $101,327.51.

8 On the other hand, it is true that the Applicants were successful in that the Respondent did not dispute the rental arrears, the interest component and the outgoings (in total $80,184.69) and although other matters were in dispute, one significantly reduced (loss of rent), one disallowed completely (leasing commission) and one more than significantly reduced (legal costs), overall the Applicants were successful. In the primary issue the subject of most of the evidence the Respondent could be said to have been significantly successful in that the claim for loss of rent was considerably reduced, his argument in relation to mitigation being substantially successful.

COSTS APPLICATION

9 The Applicants have applied for an order that the Respondent pay their costs of the proceedings. As I understood the submissions the Applicants put their arguments threefold:

a) By Lease clause 27.2 the Respondent as guarantor accepted liability and provided an indemnity to the Applicant. This clause was in the following terms:
27.2 The Guarantor is liable for and indemnifies the Landlord against all liability or loss arising from and cost incurred in connection with a breach or non-compliance by the Tenant of the any of the Tenant’s obligations in this or in any extension or renewal of this lease.

10 It was submitted that this was part of the lease contract for commercial premises between persons in commerce and dealing with each other commercially and at arms length and as such it is a contractual term that ought to be enforced by the courts and tribunals of the land. It was submitted that clause 27.2 is in itself a “special circumstance warranting an order for costs” given the commercial nature of the relationship between the parties, the commercial nature of the proceedings in this Tribunal, was a lease contract freely and willingly signed and the clause should not be ignored but rather given force and effect as a “special circumstance” in its own right.

b) Secondly, the rental arrears, the outgoings and the interest (in total $80,184.69) were not disputed, should have been paid and that circumstance itself amounts to a “special circumstance”. It was submitted that the Applicants had no choice other than to commence the proceedings because, although there was no dispute relating to those items, the Respondent did not pay them. It was only “at the written submissions stage of the proceedings (17 November 2005) that (the Respondent) admitted owing any money to the Applicants…. (and) the true position of the Respondent only became apparent after the very late service of Mr Gunning’s report (the Respondent’s expert) (26 November 2005) and after the hearing.”. It is important to remember that the formal Application to this Tribunal was filed 17 August 2003 such that the Respondent was aware from shortly after that time of the nature of the case asserted against him and the quantification of the particulars.

c) Thirdly, and bearing in mind that the formal Application was filed 17 August 2003 and the Respondent’s Defence was signed 30 June 2004, by letter 24 May 2004 the solicitors for the Applicant wrote to the solicitors for the Respondent a “Without Prejudice Save as to Costs” letter in the following terms:

“we are instructed by our clients to offer to settle the proceedings on payment by the defendants the total sum of $90,000.00 in full and final settlement of the proceedings. This offer is intended to be an offer based on the principles of Calderbank v Calderbank [1976] Fam93 and will be relied upon in respect to the issue of costs. The above offer is open for acceptance until Friday 4 June 2004 at 5.00 pm after which it will automatically lapse.”

11 This letter was said to amount to a “Calderbank letter” and the failure to accept it, having regard to the final judgment of this Tribunal in $139,983.45 and the commerciality of this Division of this Tribunal, is in itself a “special circumstance” which warrants the making of a cost order, the final judgment of this Tribunal being more favourable to the offeror than the non-accepted offer.

RESPONDENT’S SUBMISSIONS

12 The costs application was strenuously defended. The solicitor for the Respondent filed a detailed extensive affidavit of eight (8) pages with 168 pages of annexures. Detailed written and oral submissions were made. It was submitted that the legislative intent of the Administrative Decisions Act 1997 and the Retail Leases Act 1994 in relation to costs was that absent special circumstances this Tribunal should be a “no costs” jurisdiction. The principal submission was that

“special circumstances cannot be present if a party has acted reasonably in the conduct of the case or conversely if the party seeking costs has acted unreasonably.”

13 It was submitted that on the facts the Applicants had “acted unreasonably and (had) not assisted (and in fact frustrated) in the process that otherwise might have led to a more sensible resolution of the case and to an early resolution” and that it was “clear especially in the context of the (ultimate) finding that the Applicants failed to mitigate, it is clear that the Respondent acted reasonably in his conduct of the case.”

14 It was further submitted that the Respondent at no time denied that certain amounts were in fact owing to the Applicants but that rather the fundamental issue was the obligation to mitigate, in which issue the Respondent was successful.

15 In relation to the Calderbank letter the Respondent submitted that firstly, it was issued a long time after the proceedings were commenced; secondly, it was left open for a relatively short period of time (11 days); thirdly, “it was an offer made at a time when the Respondent was not in a position to reasonably understand the true market rental of the premises at the time of the new lease… and at a time when no independent expert had been appointed”; fourthly, “it was made at a time when the Respondent (correctly) understood that so far as the history of the shopping centre was concerned no lease had ever been entered into a rental below the prior lease rental; fifthly, “it was made at a time when the Applicants had on a number of earlier occasions not complied with their obligations to produce lease disclosure statements, being statements which may (or may not) have given a truer picture of the rental history of the shopping centre”.

16 The basic submission was that the Respondent acted reasonably in rejecting the Applicants’ Calderbank letter. The Respondent relied on a passage from Sotiropoulos v Mattana Coiffure Pty Limited (No 2) [2004] NSWADTAP 43 where the Appeals Panel addressed the Calderbank principle and whether the rejection by the offeree was unreasonable and submitted that where the rejection by an offeree is reasonable then Calderbank does not apply.

17 It was submitted that the Respondent acted reasonably in rejecting the Applicants’ Calderbank offer because firstly, the Applicants had “on a number of earlier occasions not complied with their obligation to produce lease disclosure statements, being statements which may (or may not) have given a truer picture of the rental history of the shopping centre”, secondly, that by letter 7 June 2004 the Respondent offered to “resolve” the proceedings on the basis that he pay the Applicants $45,000.00 (being the Respondent’s estimate of “ rent arrears, interest and an allowance of perhaps 3 months leasing up period is unlikely to exceed that sum” and on the basis that the Applicants indemnify the Respondent against any claim for contribution by his co-guarantor should the Applicants pursue the matter further. The counter-offer in the letter 7 June 2004 was stated to “lapse automatically if not accepted by 5.00 pm” on 11 June 2004 (I observe that was only 4 days in circumstances where there the Respondent complained about the “relatively short period of time” of 11 days extended to him by the Calderbank letter!).

18 The Respondent also relied upon a letter written by his solicitors 6 May 2004, referring to a mediation, requesting a copy of various calculations, stating that the expertise of the Applicants’ expert was not supported by documentation such that “this makes it difficult for us to assess your clients’ claim”, seeking the appointment of an independent valuer to assess the “likely market rental value, following lease determination, and how long it could reasonably been expected it would take to find a new lessee.” The letter put forward the proposition that the parties could agree that the report of the suggested independent valuer “would be jointly tendered in these proceedings though the parties would retain the right to challenge the report” and that the legal advisors for the Respondent viewed “this as potentially a way of bringing the parties closer together” and they awaited the response of the Applicants as to whether or not they were “prepared to undertake such an exercise.” The lawyers for the Applicants responded on the very same day (6 May 2004) stating that the Applicants do “not agree to the appointment of an independent expert.”; thereafter they made the Calderbank offer 24 May 2004.

19 The Respondent submitted that the rejection by the Applicants of the appointment of an independent valuer “did not proffer any alternative proposal or offer (such that) in the context of the failure to mitigate by the Applicants the Respondent was left not certain as to what the correct market rental was, the only indication available to him being that on every occasion a new lease rental was never below the prior lease rental.” It was also submitted that “it must be remembered that never at any stage was it suggested that the old lease rental was in any way inflated or above the prevailing market rate when the lease was entered into, nor was there any suggestion by the Applicants (or subsequent evidence) that circumstances had changed to make the old lease rental not reflective of the market rental.”

20 Although the proceedings had in fact commenced on 17 August 2003 it was not until 8 August 2005 that the Respondent sought the appointment of an independent expert. The expert, Mr Gunning, provided his expert report 26 October 2005.

21 In these circumstances the Respondents submitted that the delay in obtaining his expert’s report was substantially contributed by the failure of the Applicant “to properly disclose documents in a timely way in these proceedings”. There is no need for me to refer to the factual details raised in support of that submission simply because this was argued before Judicial Member Fox on 19 August and 8 September 2004 and on that day the learned Judicial Member ordered that the Applicants pay the Respondent’s costs for preparation for the hearing (then listed for that date) and the hearing on that date as a result (as I understand it) of the Applicants’ non-compliance with a second Summons to Produce Documents.

22 The real question however is precisely what documents the Respondent was seeking. This is revealed by particulars supplied in his solicitor’s letter 9 September 2004 to the solicitors for the Applicant. The documents sought to be produced went back in time to 1995. For example, for Shop T2 the Respondent sought production of all leases and lease disclosure documents for the period 1995 – 1998. Similarly for Shop T3. For Shops T4 – T10 inclusive the Respondent sought lease disclosure documents going back to 5 September 1995 and not more recent than 4 September 2000. Only a few were truly closer in time (bearing in mind that the lessees vacated the premises on 2 April 2002 and that the premises were re-let under a lease for 3 years commencing 1 August 2002). Although it is true that many lease disclosure documents had not been produced to the Respondent as at 9 September 2004 the only lease documents not produced in time proximate to July-August 2002 was the lease for Shop T16 commencing 24 May 2002. I note the other lease document that was outstanding was that for the Kiosk commencing 11 March 1996 for a 5 year term.

23 It was further unchallenged that by letter dated 15 September 2004 the solicitors for the Applicants advised that their clients “have complied with the Summons to Produce… (and they confirmed) that neither we nor our clients have or have had in its possession the documents you seek.” On 30 September 2004 the first Applicant swore on oath that he was the person “directly involved in the leasing of (the premises)” and that (inter alia) with regard to Shop 16 and with regard to the Kiosk that neither did he have those documents in his possession or custody, that he believed they “were never in my possession, custody or control”, that he believed “all documents in respect of the (premises) were in the possession of (his expert Mr Kinley, the manager of the centre)”, but neither he or Mr Kinley were able to “find any of the documents in question” and to the best of his “knowledge, information and belief neither I nor the applicants in these proceedings nor any other persons on our behalf, knows how it is that the outstanding documents … were never and/or are no longer in our possession.” There were also two separate affidavits from the second and third Applicants respectively both sworn 14 October 2004 to like effect. But, by affidavit sworn 14 September 2005, almost three years after the first return date for the relevant Summons (3 December 2003), the first Applicant gave detailed evidence relating to his knowledge of the whereabouts of certain documents, primarily lease disclosure documents. Relevantly, in respect of many of these lease disclosure documents he expressed the belief that “no disclosure statement exists”, for Shop T16 the relevant Disclosure Statements were produced and there was not production of any disclosure document relating to the McDonalds tenancy. Relevantly, however, there was no reference at all in this affidavit to the asserted outstanding lease in respect of the Kiosk; but with regard to Shop T16 the first Applicant deposed (in paragraph 8) that he had “read (the schedule prepared by the Respondent and to which I have referred above) and note that the lease for shop 16 has been provided to the solicitors for the respondent and therefore does not remain “outstanding”.” None of the Applicants were called, nor gave evidence and although the Respondent submitted that “no sensible explanation was offered in the affidavit for late production (remembering the lease disclosure documents were required by legislation to be retained)” the matter was not taken further.

24 The expert evidence on behalf of the Respondent was given by Mr Malcolm Gunning by affidavit sworn 1 November 2005. In providing his opinion he stated that he had “undertaken the following activities:

i. Visited shop T12 …. and inspected the Eagle Vale Shopping Centre…. and its immediate surrounds;

ii. Reviewed the lease history for the Centre which has been obtained from the records available to me by my instructing solicitor which were provided to him by the landlords;

iii. Obtained information concerning the relevant uses allowed by zoning, for the Premises;

iv. Compared rentals obtained for premises within the Centre with rentals obtained for other premises in other shopping centres located in the surrounding catchment area; and

v. Read the affidavits of Mr Bruce Kinley sworn 2 August 2004 and Mr Isaac Solomon sworn 2 August 2004.”

25 Mr Gunning expressed the opinion that “a rental of $600 per square metre (gross) for the Premises was achievable in July – August 2002”. He then said “my opinion is based upon the current and rental history of the Centre” and he referred to annexures A and B to his expert report. Annexure A was a schedule which set out the rents for the various shops for certain periods of time. Annexure B was a schedule styled “Rent and Analysis and Application” which described for each shop the lettable area, the rate per square metre and the gross annual rent for each shop. It is significant that nowhere in his affidavit does he specifically refer to (and understandably so) rental periods that were other than current, ie current as at July-August 2002. In other words, Mr Gunning did not go backwards in time to analyse rent that was payable at a time earlier than July 2002 but rather took the most recent annual rental for each shop after July-August 2002 as his benchmark. For example, for shop T7 he took the rent 5 September 2002 – 4 September 2003 as the benchmark and took that across to Annexure B. He adopted a similar methodology to the other shops as well save that for the Kiosk he appears to have taken the dates 12 March 2002 – 13 March 2003 as the relevant period. Then, in Annexure B he makes this statement: “All rents recorded have been extracted from title searches and disclosure statements provided by the Respondents’ solicitor and extrapolated accordingly to reflect the then current market conditions at the time.”

26 In reply counsel for the Applicant noted that documents were produced by the Applicants on or about 12 March 2004. These documents included the Kiosk lease, numerous disclosure statements and either leases or variation of leases. There is no need for me to enumerate them other than to observe that it was not suggested that those documents were not the relevant documents such that the Applicant submitted that there was more than enough information provided as at that date to enable the Respondent to have formed at least an opinion such that when the Calderbank offer was made (24 May 2004) the Respondent would have been able to have formed a reasonable opinion as to whether he should have accepted it or not. The Applicant also submitted that when the counter-offer was made (7 June 2004 in $45,000.00) there was at that time no request for production of additional documents and when in fact that request was made (9 September 2004) the documents requested were in fact irrelevant and “not helpful to the Respondent’s case”.

COSTS LAW

27 No party sought to challenge the now settled law pertaining to the award of costs in this Division. It is now settled that the combination of Retail Leases Act 1994 Section 77A and Administrative Decision Tribunal Act 1997 Section 88 empowers the Tribunal to “award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs. In order to fall within the meaning of “special circumstances” the Tribunal “must find circumstances that are out of the ordinary, but without having to be extraordinary or exceptional” and the Tribunal must also find that “those special circumstances would warrant an award of costs” (see Gizah Pty Limited v AXA Trustees Limited (No2)[2001] NSWADT164 at[29], Randi Wiks Pty Limited v Pokana Pty Limited (RLD) [2003] NSWADTAP 27; Sotiropoulos v Mattana Coiffure Pty Limited (No2) (RLD) [2004] NSWADTAP 43, in particular [7] and [8]; Petria Pty Limited v Makhoul [2005] NSWADTAP 12, in particular [19] and [20]; and Thalassa Pty Limited v Hawkesbury River Marina Pty Limited (RLD)[2005] NSWADTAP 48 at [9] and [10]. The most recent decision on costs can be found in that of the Court of Appeal (13 April 2006) Cripps v G&M Dawson P/L [2006] NSWCA 81.

ANALYSIS

28 The Applicants’ first submission was that (effectively) clause 27.2 of the lease entitled the Applicants to claim the costs of the proceedings. This clause it was said was in itself a “special circumstance” and warranted an award of costs. I am not of that opinion. The Administrative Decisions Tribunal Act 1997, section 88 (1) makes it plain that the Tribunal “may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award for costs.” In my opinion it cannot be said that the provision in a lease that contractually requires a lessee and/or guarantor to be liable to indemnify a lessor against all liability or loss arising from any cost incurred in connection with a breach or non-compliance by the lessee of any of the lessee obligations in the lease or any extension or renewal of the lease is a circumstance that is “out of the ordinary, but without having to be extraordinary or exceptional”. Rather, such clauses are quite ordinary and common and would no doubt otherwise apply save for the provisions of section 88. Section 88 is directed to proceedings in the Tribunal. Whatever one may feel as to its fairness it requires the Tribunal to apply itself to the circumstances of the hearing before it to see whether there are “special circumstances” in connection with the proceedings in the Tribunal. In my opinion it is important to recognise that section 88 is directed to proceedings in the Tribunal such that one cannot look outside those proceedings searching for “special circumstances”. Taylor v Sciberras [2004] NSWADT 104 that Tribunal, sitting in the Equal Opportunity Division, held that there were special circumstances which it set out at [161] and [162] in the following terms:

161 Cases in this area have made it clear that “special circumstances” depend very much on the circumstances of the particular case, and have set very broad parameters as to how they should be determined. Whilst the section clearly suggests that the general rules should be that costs are not awarded, exceptional circumstances have been found to exist in a broad range of situations.

162 The Tribunal has formed a view that this case falls into that category because of the following factors -

i. The exacerbation of the sexual harassment and its impact by the persistent and continuing conduct of the respondent. He has carried on a merciless campaign to ensure that the Applicant cannot “move on” from the events which have occurred.

ii. The greater impact of the respondent’s sexual harassment given the power imbalance between the parties.

iii. The attempts by respondent to pursue the applicant in other forums such as an unsuccessful attempt to recover an alleged debt owed to the respondent by the applicant.

29 In my respectful opinion that Tribunal misdirected itself. Firstly, it held that “special circumstances” needed to be “exceptional circumstances” and in my opinion that is contrary to the decided case law. Secondly, the enumerated special circumstances were not in fact special circumstances in connection with or related the proceedings in the Tribunal – rather, they were circumstances that the Tribunal identified outside the Tribunal proceedings which may well have sounded in damages in that Division but could not (in my very respectful opinion) have constituted “special circumstances” within the meaning of section 88. Indeed, that Tribunal in fact awarded damages to the Applicant.

30 I would also make reference to Sotiropolos at [33] where the Appeals Panel said:”… to the extent that the Tribunal’s reference to “tardiness” on the part of Sotiropolos indicates that it was prepared to treat behaviour unconnected with the conduct of the proceedings as relevant to determining “special circumstances”, it was in error.”

31 In Cripps v G & M Dawson P/L [2006] NSWCA 81 the Court of Appeal had reason to look at an application for costs by a lessee. In that case the lessee sued for damages for breach of contract in circumstances where the initial breach(es) was not in dispute and the primary argument related to the assessment and the remoteness of damages. There is no need to go into the details of the damages argument. The relevance of Cripps for present purposes is in relations to costs.

32 The foundation of the breach can be found in paragraph [5] of the judgment where the Court said: “Cripps as lessor wrongfully refused consent to the assignment of the lease, having earlier wrongfully refused to register the lease. That led to the cancellation of the sale (of the business for $130,000) and the associated agreement. The tenant some ten months later …. sold the business …. for only $28,000 and claimed damages for the price difference, being $102,000.” The Court, having identified the basis for the whole proceedings, then made these observations relating to costs:

56 Here, the special circumstances relied upon by Dawson (the lessee), said to be out of the ordinary, are twofold. First, Cripps failed to recognise the existence of Dawson’s lease, refusing to register it without proper cause.

57 Second, taking advantage of that failure, and being fully on notice of Dawson’s need for the lease to be registered and consent to its assignment given so that the sale of his business could proceed, in breach of the Act and of the lease Cripps withheld consent to that request for assignment of the lease. This was notwithstanding that Dawson had complied with the requirements of the Act, including in particular s41 thereof, covering consent to assignment. The result was the lost sale to Kilbane and the consequent damage.

58 Thus the commencement of the proceedings was prompted by the need to ensure that the lessor recognised both the existence of the lease and the obligation to consent to its assignment.

59 There followed five hearing days before the Tribunal at first instance, with further hearing days before the Appeal Panel, strenuously contested.

60 It is not necessary to determine whether in the circumstances the appellant committed equitable fraud. In my view if suffices that the conduct of Cripps and Jones, in relying upon their status as the registered proprietors of the freehold and the doctrine of indefeasibility of title to wrongly deny registration and consequently 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 one hand, the Tribunal correctly concluded that the respondent, through no fault of its own, has been placed in the situation where it has been forced to pursue this litigation. Yet it 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 prerequisite to determining that there are special circumstances, it is nonetheless a highly relevant consideration.

33 In my opinion the Court of Appeal was extending the range of “special circumstances” thus far accepted by the Tribunal but only to the extent of accepting that conduct of a party which causes the commencement of proceedings that is so unmeritorious and so lacking in justification and was so unarguably wrong that it could not possibly be justified constituted “special circumstances” to warrant a cost order against that party in respect of those proceedings which the innocent party so grossly wronged was obliged to commence. The conduct was so connected to the proceedings in the Tribunal that it fell within the general principles thus far enunciated in previous decisions of this Tribunal.

34 In my opinion the first argument advanced by the Applicant must therefore fail.

35 Secondly, the Applicant submitted that there were a number of items asserted by the Applicant that were not disputed by the Respondent. The Respondent’s liability to pay those identified items (namely the rental arrears at $14,758.00, the outgoings of $59,576.38 and the interest of $5,850.31) was not disputed and that in itself amounted to a “special circumstance”. Again, I am unable to accept that submission. It is often the case that a debtor will not dispute certain items, and even not pay those items, pending entry of judgment. This is a typical case where the primary issue in dispute was something other than the undisputed items, in this case the obligation to mitigate. It was to that issue that most of the evidence was directed and although there two other significant items (namely the leasing commission $6,600.00 and the legal fees $74,351.00), both of which were determined adversely to the Applicants, in my opinion the amount of hearing time and preparation for hearing time relating to those two latter items was minimal and did not significantly affect or prolong the hearing which was primarily directed to the mitigation evidence and argument.

36 In my opinion the non-admission or even acceptance of part of a claim does not of itself constitute a “special circumstance”. That does not mean that in a particular case such a circumstance may well amount to a “special circumstance”, eg where there is a hearing over a minor amount in dispute where the major items particularised are not in dispute, but even in this situation one would need to look very carefully to see whether a non-admission or an acceptance was in fact “out of the ordinary, but without having to be extraordinary or exceptional”.

37 Before dealing with the third leg of the Applicants’ submissions (the Calderbank argument) it is convenient to deal with the Respondent’s submission that I should make a cost order in his favour because of the conduct of the Applicants in not making full and frank disclosure, in circumstances where there was a “long history of drip feeding of disclosure” such that the “proceedings were elongated” and where there was disclosure almost three years after the issue of the appropriate summons for production. Judicial Member Fox in fact made a costs order against the Applicants in relation to this very matter. It was submitted that the late disclosure of documents “may have changed dramatically the Respondent’s approach”. It was said that the outstanding documents enumerated in the letter 9 September 2004 were significant because they demonstrated “in all cases the new lease arrangements were at least as attractive as the old ones”.

38 It seems to me however that whatever may have been the dilatory approach of the Applicants in making disclosure the fact is that all of the documents referred to in the letter 9 September 2004 turned out to be irrelevant, “not helpful to the Respondent’s case” and effectively not relied upon by the Respondent’s expert Mr Gunning nor by the Respondent in evidence or argument. In my opinion it would be not unfair to say that Mr Gunning’s expert report relied substantially upon his analysis of relevant current rental in the documents originally supplied by the Applicants 12 March 2004. Indeed, in my respectful opinion, that was the correct approach. Past history may have been interesting but when Mr Gunning was searching for achievable rental which was achievable in July – August 2002 what was relevant was the state of play at that time, not at some previous time. All of that material had in fact been produced as at 12 March 2004. That was the relevant time such that in forming an opinion as to the achievable rental the material was in fact in the hands of the Respondent as at 12 March 2004. This is an important finding because once one accepts that situation then the Respondent’s position was capable of reasonable crystallisation so that he could then, or shortly thereafter, have applied himself to the commerciality of the proceedings and address the commercial aspects that were subsequently thrust before him. To some extent he did this by his counter-offer of $45,000.00 on 7 June 2004. I reject the suggestion that the Applicants made “no reasonable attempt to mediate” and that the Applicants “provided no alternative calculations” for the simple reason that all the material relevant to the commercial calculations and the formation of any rental opinion had been provided to the Respondent as at 12 March 2004, that there had been negotiations between the parties (the Applicant offering to settle for $90,000.00 and the Respondent offering to settle for $45,000.00) and for the reason that presumably the Respondent was of the view that any mediation would have resulted in the Applicants accepting a figure less than $90,000.00 where as in effect the judgment of this Tribunal resulted in a verdict of $139.983.45.

39 I also reject the submission that the Respondent acted reasonably in making the suggestion of appointment of a joint valuer (see [9] above) such that this would disentitle the Applicants to any costs order – in my opinion that suggestion 6 May 2004 did not progress the matter at all and did not have the potential (if this is relevant) to resolving the issues in all the circumstances.

THE CALDERBANK OFFER

40 The Applicants’ primary submission was that the non-acceptance of the Calderbank letter 24 May 2004 was a “special circumstance” which “warranted an order for costs” simply because if it had been accepted then the case would have finished there and then and there would not have been the need for a three day hearing, a reserved judgment and a two day hearing on the question of costs. In Sotiropolous the Appeals Panel observed that there was an argument that a Calderbank offer if not accepted, was necessarily a “special circumstance” if its rejection “was unreasonable” [28]. The parties proceeded on the basis that one party may reasonably reject, or not accept, a Calderbank offer such that the usual Calderbank costs penalty would not apply because of the reasonableness of that party. The Respondent submitted in this case that its rejection, or non-acceptance, of the Calderbank letter 24 May 2004 was reasonable in all the circumstances (which I have set out above).

41 In my opinion this argument fails for the simple reason that, as I have found above, the Respondent had in his possession as at 12 March 2004 sufficient material upon which he could form an opinion as to the rent reasonably achievable for the premises at the relevant time. In Gizah I made these observations:

45. However, there is a third aspect of this litigation that must be put into the balance. The Applicants relied upon an affidavit of its solicitor which showed that prior to the proceedings being commenced the Applicant made an offer to settle at a figure less than ultimately ordered. During the proceedings themselves the Applicant made two further offers to settle, again in each case less than the amount ultimately ordered. In both cases such offers were either rejected or not replied to. In addition of the first day of the hearing the Respondent made an offer and again it was considerably less than the amount ultimately awarded.

46. In commercial matters offers to settle, where properly made, are matters to be taken into account on the question of costs. A party responding to such an offer needs to weigh up, by a cost-benefit analysis, the commercial desirability of proceeding with the litigation. Calderbank letters, formal offers of compromise and offers to settle are all matters to be weighed in the balance. In this particular case the Applicant put forward three offers to settle, one prior to commencement of legal action, all of which were rejected, by silence or formal rejection. The Respondent’s settlement offer was plainly inadequate and bore little or no relationship with the losses suffered by the Applicant.

42 In Barsoum v Glebe Administration Board (No2) [2002] NSWADT 174 I dealt extensively with Calderbank at [28]-[43]. At [40] I accepted that “the totality of the authorities indicates that there is no prima facie presumption arriving out of an offer that it is not accepted where the party not accepting the offer of compromise achieved no better result at trial, rather it is a factor to be taken into account in determining whether the offeree acted unreasonably.” At [16] I said that “this Division of the this Tribunal deals with commercial disputes. In the context of the Tribunal, this Division is therefore fairly unique. To some degree its jurisdiction supplants that of the Supreme Court and parties who come before it must be aware, indeed acutely aware, that their dispute is one critically of a commercial nature. So, when looking at making offers of compromise, settlement offers, when discussing the matter, considering mediation and so on, each party needs to be acutely aware of the commercial nature of the dispute and the need to resolve that dispute on a commercial basis if it is at all possible.” I adhere to the views that I expressed in Gizah and Barsoum. No criticism of my approach was made by the Appeals Panel in Randi Wicks. See also Gizah at [33]-[34].

43 Costs do simply do not follow the event in this Division but because of its commerciality “special circumstances” might more readily be found in a retail tenancy dispute (Stefopoulous v Manikas (No 3) [2004] NSWADT 172 at [7]). This case is one those. I am unable to see any reason at all why, in the context of this dispute, recognizing that the proceedings were commenced in August 2003, that the Defence was signed on 30 June 2004, that all relevant material sufficient to form an opinion had been supplied to the Respondent no later than 12 March 2004 and where the Calderbank offer of $90,000.00 was made 24 May 2004 and not accepted but rather rejected by letter 7 June 2004 with a counter-offer of $45,000.00 (which “settlement offer was plainly inadequate and bore little or no relationship with the losses suffered by the Applicant” – Gizah at [46]) this is a classic case where the Calderbank principles should apply and there should be an order for costs in favour of the Applicants.

44 It is also relevant to highlight that the Respondent’s counter-offer of $45,000.00 was not only “plainly inadequate and bore little or no relationship with the losses suffered by the Applicant” but did not even cover the items not in dispute and plainly owing by the Respondent, in total $80,184.69. Clearly the Applicants were entitled, and obligated, to bat on to obtain a judgment of at least that sum and it could not be said by any stretch of the imagination that the rejection by the Applicants of the $45,000.00 offer was unreasonable. Indeed, it is plain, starkly plain, that the Applicants’ offer of $90,000.00 clearly discounted their claim by $151,310.96 and clearly discounted the ultimate result by $49,983.45(!), and that was further discounting to “nil” any costs incurred to that point by the Applicants.

45 In my opinion the Respondent should pay the costs of the Applicant as and from 7 June 2004. This is the relevant date because the Calderbank letter expired on 4 June 2004 and the Respondent’s solicitor’s letter offering $45,000.00 was made 7 June 2004 and from that point on the Applicants incurred costs that should properly be recovered within the terms of section 88.