Spuds Surf Chatswood Pty Ltd v Pt Ltd (No 3) (RLD)

Case •

[2013] NSWADTAP 11

•

01 March 2013

Administrative Decisions Tribunal


New South Wales

Medium Neutral Citation: Spuds Surf Chatswood Pty Ltd v PT Ltd (No 3) (RLD) [2013] NSWADTAP 11
Hearing dates:On the papers
Decision date: 01 March 2013
Jurisdiction:Appeal Panel - Internal
Before: M Chesterman, Deputy President
P Molony, Judicial Member
J Schwager, Non-judicial Member
Decision:

1. In Order 1 of the Appeal Panel's decision dated 3 October 2012, the liability of the Respondent to pay the sum of $97,535.72 to the Appellant is to take effect by way of set-off against the liability of the Appellant to the Respondent stated in Order 2 of the Tribunal's decision of 22 June 2011 and Order (a) of its decision of 3 August 2011, thereby reducing the liability of the Appellant to the Respondent to the net amount of $322,909.29.

2. Order 1 of the Appeal Panel's decision dated 3 October 2012 is to be taken as allowing the appeal by the Appellant against the Tribunal's decision in proceedings 065171 and allowing in part its appeal against the Tribunal's decision in proceedings 085081.

3. (a) The appeal against the Tribunal's orders relating to costs (Orders (b) and (c) of its decision of 3 August 2011) is allowed in part.

(b) The Appellant is to pay the Respondent's costs thrown away by virtue of the vacation of the hearing set down to commence on 12 April 2007.

(c) Subject to paragraph (b) of this Order, the parties are to bear their own costs of the proceedings in the Retail Leases Division.

4. The parties are to bear their own costs of the proceedings before the Appeal Panel.

Catchwords: Retail lease - first instance and appeal proceedings - costs
Legislation Cited: Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994
Cases Cited: Andjoy Pty Ltd v Shand [2005] NSWADT 192
AT v Commissioner of Police [2010] NSWCA 131
Jonamill Pty Ltd v Alramon Pty Ltd (No 2) (RLD) [2010] NSWADTAP 3
Spuds Surf Chatswood Pty Ltd v PT Ltd [2007] NSWADT 130
Spuds Surf Chatswood Pty Ltd v PT Ltd (No 2), PT Ltd v Spuds Surf Chatswood Pty Ltd [2011] NSWADT 152
Spuds Surf Chatswood Pty Ltd v PT Ltd (No 3), PT Ltd v Spuds Surf Chatswood Pty Ltd (No 2) [2011] NSWADT 186
Spuds Surf Chatswood Pty Ltd v PT Ltd (RLD) [2012] NSWADTAP 2
Spuds Surf Chatswood Pty Ltd v PT Ltd (No 2) (RLD) [2012] NSWADTAP 35
Category:Costs
Parties: Spuds Surf Chatswood Pty Ltd (Appellant)
PT Ltd (Respondent)
Registrar of Retail Tenancy Disputes (Intervener - file 119042)
Representation: A Fernon (Appellant)
R Angyal SC (Respondent)
M Walker (Intervener)
Herro Solicitors (Appellant)
Colin Biggers & Paisley (Respondent)
File Number(s):119034, 119042
 Decision under appeal 
Citation:
Spuds Surf Chatswood Pty Ltd v PT Ltd (No 2), PT Ltd v Spuds Surf Chatswood Pty Ltd [2011] NSWADT 152
Spuds Surf Chatswood Pty Ltd v PT Ltd (No 3), PT Ltd v Spuds Surf Chatswood Pty Ltd (No 2) [2011] NSWADT 186
Before:
Retail Leases Division
File Number(s):
065171, 085081

reasons for decision

Introduction

  1. This decision relates principally to two questions of costs that have arisen in protracted proceedings conducted both at first instance (in the Retail Leases Division) and at appellate level within the Tribunal.

  1. The parties to the dispute are Spuds Surf Pty Ltd, which initiated these proceedings by filing an Application for Original Decision on 12 October 2006, and PT Ltd, the Respondent to this Application. Throughout the decisions in the proceedings, the alternative name 'Westfield' has frequently been used for the Respondent.

  1. Between 3 July 2002 and 26 June 2007, the Applicant carried on business in premises ('the Premises') forming part of a retail shopping centre in Chatswood ('the Centre'). It occupied the Premises pursuant to a lease ('the Lease') from the Respondent, which owned the Centre. The Lease was governed by the Retail Leases Act 1994 ('the RL Act').

  1. The most recent decision relating to these proceedings, Spuds Surf Chatswood Pty Ltd v PT Ltd (No 2) (RLD) [2012] NSWADTAP 35, was delivered on 3 October 2012 by the Appeal Panel as presently constituted. In paragraphs [5] to [19] of that decision (hereafter 'the second appeal decision'), we gave an outline of the claims made by each of the two parties. We will not repeat that material here, but will refer to some aspects of it.

  1. In the second appeal decision, we determined the substantive matters at issue between the parties in a manner that diverged significantly from the conclusions reached by the Tribunal.

  1. The Tribunal's principal decision, as we will call it (Spuds Surf Chatswood Pty Ltd v PT Ltd (No 2), PT Ltd v Spuds Surf Chatswood Pty Ltd [2011] NSWADT 152), was in favour of the Respondent. The orders that it made included an award of damages to be paid by the Applicant.

  1. In a later decision (Spuds Surf Chatswood Pty Ltd v PT Ltd (No 3), PT Ltd v Spuds Surf Chatswood Pty Ltd (No 2) [2011] NSWADT 186 - 'the Tribunal's costs decision'), the orders made by the Tribunal included an award of interest to the Respondent and a costs order against the Applicant.

  1. In the second appeal decision, however, we held that an unconscionable conduct claim included in the Applicant's Application to the Tribunal should succeed. The principal order that we made was for the payment of a specified sum by the Respondent to the Appellant.

  1. We also gave directions regarding the determination of the two questions of costs that are the subject of the present decision. These are (a) as to the correctness of the Tribunal's costs order in the Respondent's favour, and (b) as to the costs of the appeal proceedings.

  1. A further matter that we deal with in the present decision is whether certain statements that we made in the second appeal decision about the scope of the substantive appeal should be corrected on account of an objection raised by the Applicant and, if so, whether any amendment should be made to the procedure that we have stipulated for the determination of the costs questions.

  1. Before we embark on our discussion of these three matters, it is necessary to provide a more detailed account of certain aspects of the procedural history of this case.

Procedural history

  1. The first litigation instituted between the parties was an Application for Original Decision filed on 31 August 2006 (file 065141) by the Applicant. It was however withdrawn by the Applicant on 15 September 2006. We do not need to refer to it again.

  1. On 12 October 2006, the Applicant filed the Application for an Original Decision (file no. 065171) by which these proceedings were initiated. This Application incorporated a number of retail tenancy claims and an unconscionable conduct claim.

  1. After several interlocutory hearings, in which the orders and directions made included an order restraining the Respondent from evicting the Applicant from the Premises, the Application for an Original Decision was set down for hearing over four days, commencing on 16 April 2007. At a directions hearing on 12 April 2007, however, the Applicant informed the Tribunal that it was not ready to proceed. The Tribunal vacated the hearing dates and ordered the Applicant to pay the Respondent's costs thrown away by virtue of the adjournment.

  1. On 20 June 2007, following another interlocutory hearing held on 21 May 2007, the Tribunal, in a reserved decision (Spuds Surf Chatswood Pty Ltd v PT Ltd [2007] NSWADT 130), ordered that the costs ordered to be paid in the decision of 12 April 2007 should be assessed and payable forthwith. This order was subject to the Applicant being granted leave, after assessment of those costs, to apply for an order permitting it to furnish adequate security for them in lieu of payment.

  1. On 23 April 2008, the Respondent filed an Application (file no. 085081 - hereafter 'the Cross Application') claiming unpaid rent and outgoings, lost rent and outgoings and make good costs that were payable under the Lease, amounting to $291,908.58 plus interest.

  1. The substantive hearing of the proceedings in the Tribunal commenced on 11 May 2009. At the beginning of this hearing, the Applicant filed a Second Further Amended Application for Original Decision (hereafter 'the Application'), in which relief under the following five heads was claimed:-

(1) Compensation under section 10 of the RL Act for damage suffered as a result of a pre-lease misrepresentation by the Respondent.
(2) A declaration that an alteration made by a director of the Applicant to a clause in the Lease stipulating the amount of rent payable was a term of the Lease.
(3) Compensation under section 34 of the RL Act for damage suffered as a result of conduct by the Respondent causing significant disruption to, or having a significant adverse effect on, trading by the Applicant in the Premises.
(4) Damages for loss suffered by the Applicant on account of breach by the Respondent of the covenant for quiet enjoyment, constituted by the conduct alleged in the claim under section 34.
(5) Damages and/or relief from any liability for rent or other amounts payable under the Lease, on account of unconscionable conduct on the part of the Respondent.

  1. The amount sought under each of the four claims for compensation or damages (nos. 1, 3, 4 and 5) was $400,000, being the maximum amount that the Tribunal is authorised to award under the RL Act (see section 73(1)).

  1. The hearing before the Tribunal took place over nineteen days between 11 May 2009 and 12 February 2010. On 11 February 2010, at the commencement of his oral submissions, counsel for the Applicant, Mr Fernon, indicated that his client did not press the first of these claims: i.e., the claim for compensation under section 10 of the RL Act based on a pre-lease misrepresentation by the Respondent.

  1. The Tribunal's principal decision was delivered on 22 June 2011. The Tribunal dismissed the Application and upheld the Cross Application. It ordered the Applicant to pay $327,533.55 plus interest to the Respondent and reserved the question of costs.

  1. The Tribunal's costs decision was delivered on 3 August 2011. The Tribunal assessed the interest due to the Respondent at $92,811.46. It vacated the costs order in the Respondent's favour that had been made on 12 April 2007 and modified on 20 June 2007 (see [14 - 15] above). Its principal order regarding costs was that the Applicant should pay the Respondent's costs of the Application and the Cross Application on a party and party basis, including the costs that were the subject of the vacated order.

  1. The Applicant appealed against these two decisions of the Tribunal. Its Notice of Appeal relating to the Tribunal's principal decision stated on the cover sheet that its appeal was against the decision 'in proceedings no 065171 and 086081'. It did not state any grounds, however, relating specifically to the decision in file 086081. The grounds stated in the Notice of Appeal relating to the Tribunal's costs decision referred only to its costs order against the Applicant and not to its determination of the amount of interest to be paid.

  1. Before the two days scheduled for the hearing of the two appeals, the parties filed written submissions. In addition, the Registrar of Retail Tenancy Disputes ('the Registrar'), intervening as of right under section 65(2) of the RL Act and thereby becoming a party to the proceedings, filed submissions relating to the appeal against the costs decision.

  1. At the commencement of the appeal hearing, we indicated that we would defer our consideration of the Tribunal's costs decision until we had determined the appeal against its principal decision. With regard to the latter appeal, we held two hearings, during November 2011 and June 2012 respectively, and delivered two decisions. There was also an interlocutory hearing, on 9 May 2012, at which applications by both parties for leave to adduce further evidence at the second appeal hearing were heard and determined. Leave was granted to the Applicant to file supplementary affidavits by two of its witnesses at the Tribunal hearing and to the Respondent to file one supplementary affidavit. An application by the Respondent for leave to file a second affidavit was refused.

  1. In the first appeal decision (Spuds Surf Chatswood Pty Ltd v PT Ltd (RLD) [2012] NSWADTAP 2), delivered on 30 January 2012, we granted leave under section 113(2)(b) of the Administrative Decisions Tribunal Act 1997 ('the ADT Act') for the appeal to extend to the merits. We also directed that a further hearing should take place relating to the following matters: (a) whether, as claimed by the Applicant, the Respondent had engaged in unconscionable conduct; (b) whether any such conduct caused the Applicant to suffer loss for which damages might be recovered; and (c) if so, the amount of such loss.

  1. In the second appeal decision (Spuds Surf Chatswood Pty Ltd v PT Ltd (No 2) (RLD) [2012] NSWADTAP 35), delivered on 3 October 2012, we upheld the Applicant's unconscionable conduct claim. Our principal order was in the following terms: 'The Respondent is to pay to the Appellant the sum of $97,535.72.'

  1. We also gave directions to the effect that (a) the Applicant, the Respondent and (if so minded) the Registrar should file and serve supplementary submissions relating to the appeal against the Tribunal's costs decision and (b) the Applicant and the Respondent should file and serve submissions relating to the costs of the appeal against the Tribunal's principal decision. We indicated that these two matters would be decided 'on the papers', pursuant to section 76 of the ADT Act, unless we determined that a hearing should take place.

  1. In accordance with these directions, the Applicant and the Respondent have filed submissions, prepared respectively by Mr Fernon of counsel and Mr Angyal SC. No supplementary submissions have been received from the Registrar.

Amendment of the second appeal decision

  1. It is convenient to discuss first the last of the three questions identified above (at [9 - 10]): namely, whether statements that we made in the second appeal decision about the scope of the substantive appeal should be corrected on account of an objection raised by the Applicant and, if so, whether any amendment should be made to the procedure that we have stipulated for the determination of the appeal against the Tribunal's costs decision.

  1. In his submissions on behalf of the Applicant, Mr Fernon pointed out that in the second appeal decision at [14] we stated that the Applicant 'did not appeal against the Tribunal's decision upholding the Respondent's application in file 085081'. We repeated this statement at [217] and referred to it at [280], in the course of explaining how our order that the Respondent should pay the sum of $97,535.72 to the Applicant should take effect.

  1. In his submissions, Mr Fernon also made reference to passages in earlier submissions filed by him in the appeal proceedings, and to a passage in the first appeal decision, where it had been stated or clearly implied that the Applicant had appealed against the Tribunal's decision on the Cross Application (file 085081) as well as against its decision on the Application (file 065171).

  1. We agree with Mr Fernon that these statements in the second appeal decision were erroneous. The error was attributable to the fact that, as we mentioned in this decision at [215], the Respondent's submissions filed before the second appeal hearing included an assertion (at paragraph 115) that there was 'no appeal against the Tribunal's judgment for PT in proceedings No. 085081'. This assertion was neither withdrawn by Mr Angyal nor contested by Mr Fernon during the second appeal hearing.

  1. Contrary to a further contention by Mr Fernon, however, we do not think that this error gives rise to any need to defer our consideration of the costs questions that remain undetermined. As Mr Angyal pointed out in submissions responding to this contention, the Applicant's defence to the Respondent's claims in the Cross Application was based solely on the claims that it (the Applicant) had made in its Application. The Applicant did not maintain, for instance, either at first instance or in the relevant Notice of Appeal or in its submissions in the appeal, that the Respondent had overstated the amount of unpaid rent payable under the Lease. Instead, its only grounds of opposition to the Respondent's claims in the Cross Application were as follows: (a) the Respondent should not recover any amount due under the Lease (whether as arrears of rent or on other grounds) because its attempts to do so amounted to unconscionable conduct; and (b) the Applicant was entitled to set off any amount of monetary relief granted to it pursuant to its Application against any liability determined against it pursuant to the Respondent's Cross Application.

  1. In the second appeal decision, we rejected the first of these grounds. In our reasons at [258], following our finding of unconscionable conduct, we said that this finding furnished 'no warrant for an order totally relieving the Applicant from its liability for rent'. But we upheld the second ground. At the end of a paragraph ([280]) explaining how our order requiring the Respondent to pay the sum of $97,535.72 to the Applicant should take effect, we indicated that it could be by way of set-off against the Applicant's liability to the Respondent arising under the Tribunal's determination of the Cross Application.

  1. It is important in this context that our orders in the second appeal decision did not include the setting aside of any of the Tribunal's orders. In our principal order, we simply stated: 'The Respondent is to pay to the Appellant the sum of $97,535.72.' We left untouched the Tribunal's orders in its decisions of 22 June 2011 and 3 August 2011, to the effect that by virtue of the claims brought by the Respondent in file 085081 the Applicant was liable to pay $327,533.55, plus interest totalling $92,811.46, to the Respondent.

  1. The combined effect of these orders at first instance and on appeal is, in our judgment, the correct outcome in these proceedings. As we stated in the second appeal decision at [280], the Applicant is entitled to set off the monetary relief granted to it in this decision (amounting to $97,535.72) against its more substantial liability to the Respondent (amounting to $420,445.01) under the Tribunal's decisions at first instance. The net amount due from the Applicant to the Respondent is therefore $322,909.29.

  1. This net amount, being the amount ultimately awarded to the Respondent under its Cross Application, is below the jurisdictional limit of $400,000 applying by virtue of section 73(1) of the RL Act to the total amount of any order or orders made by the Tribunal in respect of a retail tenancy claim or an unconscionable conduct claim. In determining whether this limit has been exceeded, it was held in Andjoy Pty Ltd v Shand [2005] NSWADT 192 that interest awarded under section 72A must be taken into account. But section 73(1) expressly states that any available set-off should also be taken into account. Surprisingly, the fact that the total amount ordered by the Tribunal in its two decisions relating to the Cross Application exceeded this limit by approximately $20,000 was not drawn to our attention at any stage of the appeal proceedings.

  1. For the foregoing reasons, we conclude as follows. First, our published reasons for the second appeal decision should be amended (under section 87 of the ADT Act) to the extent sufficient to correct our error in stating that the Applicant did not appeal against the Tribunal's decision in file 085081. Secondly, while rectification of this error does not call for any amendment (if this were possible) to our principal order in the second appeal decision, it is appropriate for us to make supplementary orders in the present decision, with a view to clarifying the situation. Thirdly, the existence of this error does not require us to defer our decisions regarding the costs of these proceedings.

The appeal against the Tribunal's costs order

  1. Legislation. With respect to proceedings commenced in the Tribunal by an application under the RL Act, section 77A of this Act authorises the Tribunal to award costs under section 88 of the ADT Act.

  1. So far as relevant, section 88, as amended by legislation taking effect on 1 January 2009, states:-

(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.

  1. The grounds for the Tribunal's costs order. At paragraph [21] of its costs decision (Spuds Surf Chatswood Pty Ltd v PT Ltd (No 3), PT Ltd v Spuds Surf Chatswood Pty Ltd (No 2) [2011] NSWADT 186), the Tribunal summarised as follows the Respondent's submissions regarding the costs of the hearing of the Application and the Cross Application:-

1. Section 88(1A)(b) of the RLA has application in that Spuds Surf unreasonably prolonged the proceedings by -
(i) having the hearing vacated in April 2007 with it not then commencing until May 2009;
(ii) a great deal of time in preparation and hearing was consumed on the pre-lease misrepresentation claim which was abandoned in closing submissions and had no tenable basis in fact or law;
2. Section 88(1A)(c) has application in that Spuds Surf made claims that had no tenable basis in fact or law, namely, in respect of
(i) pre-lease misrepresentation;
(ii) alteration to the lease;
(iii) under s34(1) of the RL Act;
(iv) unconscionable conduct; and
(v) loss and damage.
3. Section 88(1A)(d) has application in that the proceedings brought by Spuds Surf were complex.
4. Section 88(1A)(e) has application in that before Spuds Surf commenced its proceedings PT offered to resolve complaints made by Spuds Surf and on each occasion was more favourable to Spuds Surf than the result of the proceedings and PT made a Calderbank offer to Spuds Surf on 4 June 2007 which was not accepted.

  1. In the ensuing paragraphs of the costs decision, the Tribunal gave separate consideration to each of these grounds for awarding costs. In so doing, it took account of recent case law on section 88 to which it had referred at [20], notably a passage in the judgment of Basten JA (at [33]) in the Court of Appeal's decision in AT v Commissioner of Police [2010] NSWCA 131.

  1. At [22], with reference to the Respondent's reliance on section 88(1A)(b), the Tribunal observed that 'it may not be appropriate to blame Spuds Surf totally' for the delay between the vacation of the hearing in April 2007 and its commencement in May 2009. In the same paragraph, however, it stated that 'a great deal of time' in preparation and at the hearing was 'consumed by the pre-lease misrepresentation claim which was abandoned in closing submissions' and that 'Spuds Surf... did unreasonably prolong the time to conduct the proceedings in respect of the pre-lease misrepresentation claim'.

  1. At [27], with reference to the Respondent's reliance on section 88(1A)(c), the Tribunal stated that, with the exception of the pre-lease misrepresentation claim, it was 'not satisfied' that the Applicant's claims were 'relevantly "lacking a tenable basis in fact or law"'. It went on to say that while the Applicant's claims under section 34 of the RL Act and under the covenant for quiet enjoyment had been unsuccessful, 'a measure of fault on Westfield's part in 2002-2003, was found to have existed'. It concluded as follows: 'The abandonment by Spuds Surf of the pre-lease misrepresentation does suggest that, and accordingly I have formed the opinion, that claim had "no tenable basis in fact or law".'

  1. At [27], with reference to the Respondent's reliance on section 88(1A)(d), the Tribunal observed that 'the nature and complexity of the proceedings were unusually substantial, even in the Retail Leases Division...'

  1. At [28 - 32], with reference to the Respondent's reliance on section 88(1A)(e), the Tribunal held that while 'offers of assistance' made by the Respondent to the Applicant during 2005 and 2006, before these proceedings commenced, were not relevant to the question of costs, an offer of settlement made by the Respondent in a letter of 4 June 2007 was to be treated as a Calderbank offer and required close consideration. The Tribunal decided, however, that for three separate reasons outlined at [31], the Applicant's rejection of this offer could not be 'assessed as unreasonable', even though ultimately the Applicant was unsuccessful in the proceedings. At [32], it stated:-

32 My conclusions in relation to the letter of 4 June 2007 are that there was not involved the unreasonable rejection by Spuds Surf of the offer which it made but that it should have emphasised to Spuds Surf and its advisers that Spuds Surf was involving itself in significant commercial litigation with potentially serious costs consequences for Spuds Surf.

  1. The Tribunal then gave the following summary (at [33]) of the reasons underlying its decision to make a costs order under section 88(1A) in favour of the Respondent:-

33 Ultimately I have thus come to the view that it is fair that Westfield should have its costs of the proceedings but not on an indemnity basis. The principal reasons why it is fair that Westfield should have its costs are that the proceedings were of a commercial nature and complex, that Spuds Surf and its advisers should have been aware of the risk of an adverse costs order, that Spuds Surf ultimately lost on every issue in the proceedings, and that the proceedings included as a significant part the baseless pre-lease misrepresentation issue.

  1. At [34], the Tribunal noted that the Respondent had requested that the costs order made in its favour on 12 April 2007 and modified on 20 June 2007 (see [14 - 15] above) should be vacated and replaced by an order that the Applicant pay its costs of the proceedings.

  1. The Tribunal's orders relating to costs were as follows:-

(b) Vacate the costs order made on 12 April 2007 and modified on 20 June 2007.
(c) Order that Spuds Surf Chatswood Pty Ltd pay to P.T. Ltd its costs of proceedings 065171 and 085081 on a party and party basis as agreed or assessed, such costs to include the costs the subject of the order vacated under the preceding paragraph.

  1. The Applicant's submissions. As indicated earlier, we have received two sets of submissions on this question of costs from the Applicant and from the Respondent, and a single set of submissions from the Registrar. The ensuing summaries encompass the contentions raised in all five sets of submissions.

  1. The principal arguments put by Mr Fernon on behalf of the Applicant were as follows:-

(a) The outcome of the appeal fundamentally altered the factual basis on which the Tribunal made its costs order.
(b) The 'factual matrix' on which the Applicant's unconscionable conduct claim was argued 'impacted upon on a number of the other legal issues before the Tribunal', in particular the claims for compensation under section 34 of the RL Act and under the covenant for quiet enjoyment, and the claim based on variation of the Lease.
(c) The costs associated with the claim on which the Respondent succeeded - i.e. its claim for unpaid rent etc in the Cross Application - were 'minimal' and did not justify a costs order in its favour.
(d) Even though the Applicant failed wholly at first instance, the Tribunal did not find that there was a 'substantial disparity' between the relative strengths of its case and that of the Respondent, let alone that its case was 'not tenable in fact or law'. The only component of its case that the Tribunal characterised as 'not tenable' was its pre-lease misrepresentation claim.
(d) Furthermore, this characterisation of the pre-lease misrepresentation claim was unwarranted. The claim was based on an alleged oral misrepresentation, occurring within a conversation of which two witnesses gave competing accounts. Having conducted an 'assessment of prospects' after these witnesses had been cross-examined, the Applicant made a 'wholly appropriate' decision to abandon the claim. This decision was not sufficient in itself to indicate that the claim was without merit.
(e) The complexity and 'commerciality' of the proceedings were features common to many proceedings brought under the RL Act and did not of themselves furnish grounds for a costs order.
(f) It was 'highly consistent' with the concept of 'fairness' under the RL Act that a 'small business tenant', which had been compelled to fight a long and expensive hearing to obtain justice with respect to unconscionable conduct on the part of its landlord, should obtain a costs order in its favour.

  1. In acknowledgment of the fact that the Applicant had not succeeded on all legal grounds and of the time spent on the pre-lease misrepresentation claim that it had abandoned, Mr Fernon's primary submission was that the Applicant should receive 75% of its costs of the proceedings at first instance. In the alternative, he argued for 'such other proportion of its costs that the Appeal Panel considers just', or for an order that each party should bear its own costs of these proceedings.

  1. The Registrar's submissions. The Registrar, in submissions prepared by Ms Walker of counsel and filed before the hearing of the appeal, argued that if the Tribunal is unduly willing to make costs orders in proceedings under the RL Act, this will be prejudicial to small business enterprises in the retail lease area. The prospect of being ordered to pay costs may not only become a barrier to their entering the Tribunal's regime of dispute resolution, but also 'affect the power dynamic of the negotiation in the mediation engaged under the auspices of the Retail Tenancy Unit'. This would be 'an undesirable and intended outcome in light of... the legislative intent of' the RL Act and of the Tribunal itself.

  1. Ms Walker pointed out that in a speech in the Legislative Assembly on 26 October 1999, the Act was said to be 'aimed at changing the behaviour of both retailers and landlords in relation to retail leasing transactions'. In a speech in the Assembly on 13 November 2001, it was stated that conferring jurisdiction on the Tribunal to hear claims under the Act made it 'faster and cheaper to resolve these disputes' and provided 'affordable access to justice by small businesses that have problems with their landlords in relation to retail leases'. Achievement of these aims, Ms Walker argued, would be compromised if the Tribunal, when determining costs, placed too much emphasis on the fact that proceedings under the RL Act are of a commercial nature and are frequently complex.

  1. The Respondent's submissions. Responding both to the Applicant's submissions and to those of the Registrar, Mr Angyal argued as follows on behalf of the Respondent:-

(a) The appeal by the Applicant failed on liability and on damages 'on all bases propounded by it'. The appeal succeeded as to liability and damages 'in each case only on a basis not propounded by it'. For this reasons, the outcome of the appeal should have no impact on the Tribunal's costs order.
(b) The Tribunal, exercising the discretion conferred on it by section 88(1A) of the ADT Act, found that there were six factors suggesting that it would be 'fair' to award costs. These were (i) the commercial nature of the proceedings; (ii) their complexity; (iii) the fact that the Applicant should be been aware of the risk of an adverse costs order; (iv) the fact that the Applicant lost on every issue; (v) the lack of merit in the pre-lease misrepresentation claim; and (vi) the prolongation of the proceedings caused by the Applicant's maintenance of this claim until the commencement of its closing address. The outcome of the appeal was that only one of these factors (no. (iv)) ceased to be applicable.
(c) With particular reference to the lack of merit in the pre-lease misrepresentation claim, the Tribunal made the following findings in its principal decision (Spuds Surf Chatswood Pty Ltd v PT Ltd (No 2), PT Ltd v Spuds Surf Chatswood Pty Ltd [2011] NSWADT 152): (i) the document relied on as constituting the written part of the alleged misreprentation 'could not rationally be seen as constituting any inducement' by the Respondent to the Applicant (paragraph [206]); (ii) the employee of the Respondent who allegedly made the misrepresentation to a representative of the Applicant (Ms Mimis) never met or spoke to her (paragraph [205(c)]); and (iii) Ms Mimis's evidence on this matter was unreliable (paragraph [236]).
(d) If the Applicant had accepted the Calderbank offer made to it on 4 June 2007, it would have been relieved of its obligation to pay rent totalling $215,966.02. On appeal, the Applicant had not 'come close to bettering this offer'.
(e) The Registrar's submissions did not sufficiently take account of the following considerations: (i) during the mediation of a dispute under the RL Act, a party may feel compelled to settle because of concern that if it decides to prosecute its case in the Tribunal and is ultimately successful, it may not obtain a costs order; and (ii) the 'matters' that the Tribunal may take into account under paragraph (e) of section 88(1A) are limited to matters that are 'in existence' at the time when it is exercising its discretion, and therefore cannot include the possible impact of its decision on future disputes under the Act.

  1. Discussion and conclusions. In our opinion, the Applicant's appeal against the Tribunal's orders relating to costs should be allowed to a substantial degree, for the following reasons.

  1. As we interpret the Tribunal's reasoning, an important consideration on which it based its award of costs to the Respondent was that, as it said at [33], the Applicant 'ultimately lost on every issue in the proceedings'. But this is no longer the case, on account of our ruling in the second appeal decision that the Applicant was entitled to monetary relief on the ground of unconscionable conduct. For this reason, we are bound to give our own separate consideration to the question of 'fairness' under section 88(1A) of the ADT Act, while taking due account of the findings made by the Tribunal.

  1. It is convenient to discuss first the 'relative strengths of the claims made by each of the parties' in these proceedings, including 'whether a party has made a claim that has no tenable basis in fact or law' (section 88(1A), paragraph (c)). In so doing, we will take account of a number of Tribunal decisions on this provision, stemming from Jonamill Pty Ltd v Alramon Pty Ltd (No 2) (RLD) [2010] NSWADTAP 3, to the effect that the provision is applicable to cases in which a 'substantial disparity' existed between 'the relative strengths of the parties' claims'.

  1. Even though the Tribunal held that the Applicant 'lost on every issue in the proceedings', it rejected (in its costs decision at [27]) the Respondent's contention that 'every element' of the Applicant's claims 'lacked a tenable basis in fact or law'. It upheld this contention only in relation to the pre-lease misrepresentation claim.

  1. Mr Fernon's submission challenging the latter ruling (see [51(d)] above) emphasised that the mere fact that the Applicant abandoned this claim was not sufficient to establish that it was a claim without merit. As a general proposition, we would regard this as correct. But the Tribunal's account, in its principal decision at [201 - 207], of the reasons why it found that the claim was not proven give support to Mr Angyal's argument (see [55(c)] above) that the evidence that the Applicant brought forward in support of the claim fell well short of what was required to sustain it. We are not persuaded that the Tribunal's finding on this specific matter was incorrect.

  1. At [203], however, the Tribunal stated that even though the pre-lease misrepresentation claim had been abandoned, it remained 'part of the proceedings, certainly as still pleaded and at least as a matter of pertinent background'. Furthermore, much of the evidence that the Tribunal then outlined (at [204]) as bearing upon this claim was found by us to be of distinct importance for the unconscionable conduct claim that we have upheld. For this reason, our acceptance of the Tribunal's finding that the pre-lease misrepresentation claim was lacking in merit is of less significance for the question of costs than might initially appear at first sight.

  1. As to the other claims of the Applicant that failed both before the Tribunal and on appeal - i.e., those based on the alteration of the Lease, on section 34 of the RL Act and on the covenant for quiet enjoyment - we agree with the Tribunal's statement (in the costs decision at [27]) that none of them was 'untenable'. In the first appeal decision ((Spuds Surf Chatswood Pty Ltd v PT Ltd (RLD) [2012] NSWADTAP 2) at [157 - 268], we discussed them at considerable length because we believed that the Applicant's arguments relating to them required careful consideration.

  1. We make two observations in the present context about the unconscionable conduct claim, on which the Applicant failed at first instance but succeeded on appeal.

  1. First, it cannot be said that the Respondent's defence of this claim was 'untenable' or that there was a 'substantial disparity' between the relative strengths of the parties' cases relating to it. Our conclusion that it should be upheld was reached after a careful and lengthy discussion of numerous arguments. This discussion occupied more than 180 paragraphs (from [25] to [208]) in the second appeal decision.

  1. Secondly, we reject Mr Angyal's contention that the outcome of the appeal should have no impact on the Tribunal's costs order because the appeal succeeded as to liability and damages 'only on a basis not propounded by' the Applicant. In considering this submission, we have reviewed again the arguments, written and oral, that Mr Fernon put before the Tribunal on the question of the Respondent's liability for unconscionable conduct. This review has confirmed our opinion that there was a very substantial overlap between the content of these submissions and the grounds, set out in the second appeal decision at [143 - 208], on which we made our finding of unconscionable conduct. In resolving the matter, we placed more emphasis than Mr Fernon on certain aspects of the Respondent's conduct. But it is simply not the case that in the appeal the Applicant succeeded on liability 'only on a basis not propounded by it'.

  1. On the issue of assessment of damages (though not, it should be said, on the closely linked issue of whether the unconscionable conduct caused any financial loss at all to the Applicant), Mr Angyal is on stronger ground. But that is not enough in itself to support a ruling that the outcome of the appeal should have no impact on the Tribunal's costs order

  1. As to the Cross Application, the salient points are (a) that the Applicant's attempt to rebut it wholly through asserting that the Respondent behaved unconscionably was clearly without merit (see the second appeal decision at [258]), but (b) the costs associated with it were 'minimal' (to use Mr Fernon's description) because all the other matters raised in resisting it formed part of the Application.

  1. Taking all these matters into account, our conclusion as to the relative strengths of the parties' cases before the Tribunal, seen as a whole, is that there was no 'substantial disparity' between them such as would warrant a costs order in favour of either party based on paragraph (c) of section 88(1A). While a significant component of the Application - i.e., the pre-lease misrepresentation claim - was not 'tenable', the other components were at least tenable and one of them - i.e., the unconscionable conduct claim - was ultimately successful. The arguments raised by the Respondent against the unconscionable conduct claim were substantial ones and required careful scrutiny. The lack of merit in the one contention of the Applicant raised by way of complete defence to the Cross Application is not significant because the hearing of the Cross Application occupied very little time.

  1. We turn now to the arguments advanced in relation to paragraph (b) of section 88(1A). In its costs decision at [22], the Tribunal endorsed the Respondent's submission that the Applicant, by maintaining the pre-lease misrepresentation claim, had unreasonably prolonged the proceedings within the meaning of this provision. But it rejected the Respondent's accompanying submission based on the lapse of time between the vacated hearing of 12 April 2007 and the commencement of the substantive hearing on 11 May 2009.

  1. We have left undisturbed the Tribunal's ruling that the pre-lease misrepresentation claim was lacking in merit. As indicated above at [61], however, we treated much of the evidence adduced in support of this claim as important for our consideration and ultimate acceptance of the Applicant's unconscionable conduct claim. Because the Tribunal rejected the latter claim, its assessment of the significance of this evidence differs from our assessment. On these grounds, the prolongation of the hearing caused by the Applicant's adducing evidence in support of the former claim should not, in our opinion, be characterised as 'unreasonable' and therefore should not be treated as a ground for a costs order under section 88(1A)(b).

  1. The parties' submissions to us did not address the Tribunal's ruling with regard to the delay between April 2007 and May 2009. We see no reason to question that ruling.

  1. We agree with the Tribunal that these proceedings were 'of a commercial nature', 'complex' and 'unusually substantial', and that these are relevant considerations under paragraph (d) of section 88(1A). But they would be insufficient in themselves to constitute grounds for a costs order, particularly since the outcome of the appeal is that neither of the parties has wholly succeeded.

  1. We respectfully differ from the Tribunal with regard to the consideration that the Applicant and its advisers 'should have been aware of the risk of an adverse costs order'. We would not treat this as a relevant factor under paragraph (e) of section 88(1A). It is in fact a matter that should be borne in mind by any party to legal proceedings in which costs may be awarded.

  1. As indicated above at [46], the Tribunal dismissed the Respondent's contentions that the Applicant's rejection of a settlement offer made on 4 June 2007 was unreasonable and that accordingly, since the offer was much more favourable to the Applicant than the Tribunal's decision, a costs order should have been made against the Applicant, in line with a number of Tribunal decisions based on section 88(1A)(e). Mr Angyal's submissions included a short passage querying this ruling by the Tribunal. We are not disposed, however, to interfere with its assessment of the circumstances in which the offer was made and subsequently rejected.

  1. There remains a further question only briefly discussed by the Tribunal (at [22]) and not mentioned in the parties' submissions to us. This arises from the Applicant's failure to prepare for the hearing set down for 12 April 2007. The Tribunal, as then constituted, ordered the Applicant to pay the costs thrown away on account of the hearing being vacated. On 20 June 2007, in a reserved decision (Spuds Surf Chatswood Pty Ltd v PT Ltd [2007] NSWADT 130), the Tribunal, differently constituted, ordered that these costs be paid forthwith.

  1. At the request of the Respondent, these earlier orders were vacated in the Tribunal's costs decision of August 2011, because the Tribunal determined that the Applicant should pay all of the Respondent's costs.

  1. We have decided, however, that the Applicant's appeal against this determination should be upheld. Our conclusion is that the Applicant should not be required to pay all of the Respondent's costs of the proceedings at first instance. A question requiring resolution, therefore, is whether the Respondent's claim for the costs thrown away in April 2007, being a claim that the Tribunal upheld at the time when the relevant events occurred, should in effect be reinstated by us.

  1. In our judgment, this is the correct outcome. In its submissions on costs to the Tribunal, the Respondent maintained this claim: it referred expressly (see [41] above) to the conduct of the Applicant in 'having the hearing vacated in April 2007'. In the Tribunal's costs decision, the merits of the claim were not addressed, since this was not necessary. The Applicant did not advance any argument against it, either (as far as we can ascertain) before the Tribunal in 2011 or before us. Nothing in the reasons for the Tribunal's decision of 20 June 2007 (no reasons for the decision of 12 April 2007 are available to us) suggests that there was a reasonable excuse for the Applicant's failure to prepare for the hearing.

  1. The Tribunal's two decisions on this question during 2007 were made under a different version of section 88, in which the criterion to be satisfied was that there should be 'special circumstances warranting an award of costs'. Under the present criterion of fairness, 'causing an adjournment' is specifically identified in paragraph (a)(iv) of section 88(1A) as a matter to be taken into account. Whichever criterion is adopted, the Applicant's liability for these costs is, in our opinion, clear and indisputable.

  1. For these reasons, while the costs order in the Tribunal's costs decision of 3 August 2011 should be set aside, the earlier costs order of the Tribunal made on 12 April 2007 should, in effect, be reinstated.

The costs of the appeal

  1. The Applicant's submissions. The principal matter relied upon in Mr Fernon's submissions was that the Applicant had been 'largely successful in the appeal proceedings'. It had succeeded, he claimed, in obtaining both leave to appeal and leave to adduce further evidence, in opposing the Respondent's application for leave to adduce further evidence, in securing a decision on the merits and in obtaining damages. Overall, therefore, there was a 'substantial disparity' between the relative strengths of the parties' cases, providing justification for a finding that it would be 'fair' to award costs to the Applicant under section 88(1A)(c) of the ADT Act.

  1. Mr Fernon's submissions also included the following propositions:-

(a) The grounds on which the Respondent sought to defend the Applicant's unconscionable conduct claim included one that was clearly without merit: namely, that to entertain this claim at all would constitute a breach of natural justice.
(b) The Respondent, at the interlocutory hearing on 9 May 2012 (as to which, see [24] above), unsuccessfully sought leave to file an affidavit by an employee (Mr Roberts) relating to irrelevant matters. But it declined to call as witnesses other employees who clearly could have assisted the Appeal Panel in determining the merits of the Applicant's unconscionable conduct claim.
(c) It was 'fair' within the meaning of section 88 of the ADT Act that a tenant that had been compelled to fight a long and expensive hearing to obtain justice with respect to unconscionable conduct on the part of its landlord should obtain a costs order in its favour. If a costs order were not made in such circumstances, the institution of such claims would be economically unviable for a tenant.

  1. The Respondent's submissions. Mr Angyal argued that the costs of the three hearings before the Appeal Panel should be considered separately.

  1. With reference to the first hearing (on 17 and 18 November 2011), following which we granted leave for the appeal to extend to the merits and gave directions for a further hearing, he made the following submissions:-

(i) The Applicant succeeded on only one of the grounds that it advanced: i.e., unconscionable conduct. It failed on three other matters: alteration of the Lease, section 34 of the RL Act and the covenant for quiet enjoyment. As the first appeal decision illustrated, determining these three grounds adversely to the Applicant was a time-consuming exercise. To this significant extent, the Applicant unreasonably prolonged the duration of the appeal, within the meaning of section 88(1A)(b) of the ADT Act, and the appeal was unnecessarily complex (being a matter of relevance under section 88(1A)(d)).
(ii) In the first appeal decision at [193], the Appeal Panel found that the Applicant's claim based on the alteration of the Lease failed because of an 'insuperable obstacle'. This indicated that it was a claim without merit, within the meaning of section 88(1A)(c).
(iii) The fact that the Applicant succeeded in the appeal despite (a) the Appeal Panel's rejection of its claim that it entered into the Lease in reliance on what the Panel called 'the 2002 Height Restrictions' and (b) its failure to remedy deficiencies in its case on damages that the Panel identified in the first appeal decision showed that it was 'fortunate to succeed'. This should be treated as a factor of relevance under section 88(1A)(e).

  1. With reference to the costs of the interlocutory hearing (on 9 May 2012) relating to the parties' applications to adduce fresh evidence, Mr Angyal argued that because the Respondent's application to tender an affidavit by Mr Roberts was only rejected because of a concession by the Applicant, the proper order was that each party should bear its own costs.

  1. Mr Angyal's argument regarding the second appeal hearing (on 21 and 22 June 2012) was that because the appeal succeeded, both as to liability and damages, on grounds that the Applicant had not in fact propounded, the provisions of section 88(1A)(c) were 'enlivened', with the consequence that it would be 'fair' for the Respondent to be awarded some or all of its costs.

  1. In the alternative, Mr Angyal submitted that the parties should bear their own costs pursuant to section 88(1).

  1. Discussion and conclusions. In our judgment, this is manifestly an appeal in which the general rule stated in section 88(1) of the ADT Act should apply and each party should bear its own costs.

  1. We are not persuaded by Mr Fernon's arguments, principally for the following two reasons.

  1. First, as we said earlier in this decision (at [64]), the Respondent's grounds of defence to the unconscionable conduct claim had significant merit. We are of this opinion even though we agree with Mr Fernon that its argument based on an alleged denial of natural justice was unmeritorious.

  1. Secondly, the submissions that the Applicant filed before both appeal hearings on questions of liability and, in particular, on the matter of remedies were not such as to render it unreasonable for the Respondent to continue to defend its position at the hearings. The Applicant argued a number of grounds of appeal, only one of which succeeded. It also claimed monetary relief on a very substantial scale, far greater than the scale of the award that we ultimately made.

  1. We acknowledge the force of Mr Fernon's submission, echoing that of the Registrar, that the costs regime applying to the RL Act should not be such as to deter tenants from instituting, or indeed defending, substantial and complicated claims under the Act. But this is not enough to warrant departing from what we see as the proper outcome under section 88 in an appeal that was only partly successful.

  1. While we agree with Mr Angyal that there were a number of grounds of appeal on which the Applicant failed, its success on one ground, radically changing the outcome of the proceedings as a whole, is entirely sufficient to ward off any claim for costs against it on account of these failed grounds.

Our orders

  1. For the foregoing reasons, our orders are as follows:-

1. In Order 1 of the Appeal Panel's decision dated 3 October 2012, the liability of the Respondent to pay the sum of $97,535.72 to the Appellant is to take effect by way of set-off against the liability of the Appellant to the Respondent stated in Order 2 of the Tribunal's decision of 22 June 2011 and Order (a) of its decision of 3 August 2011, thereby reducing the liability of the Appellant to the Respondent to the net amount of $322,909.29.
2. Order 1 of the Appeal Panel's decision dated 3 October 2012 is to be taken as allowing the appeal by the Appellant against the Tribunal's decision in proceedings 065171 and allowing in part its appeal against the Tribunal's decision in proceedings 085081.
3. (a) The appeal against the Tribunal's orders relating to costs (Orders (b) and (c) of its decision of 3 August 2011) is allowed in part.
(b) The Appellant is to pay the Respondent's costs thrown away by virtue of the vacation of the hearing set down to commence on 12 April 2007.
(c) Subject to paragraph (b) of this Order, the parties are to bear their own costs of the proceedings in the Retail Leases Division.
4. The parties are to bear their own costs of the proceedings before the Appeal Panel.

I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.

Registrar

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Decision last updated: 04 March 2013

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Cases Citing This Decision

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PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446