Stenham Nominees Pty Limited v Trust Company of Austrralia

[2002] NSWADT 234

CITATION:	Stenham Nominees Pty Limited v Trust Company of Austrralia [2002] NSWADT 234
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Stenham Nominees Pty Limited RESPONDENT Trust Company of Australia Limited
FILE NUMBER:	025036
HEARING DATES:	Not applicable. Written submissions only
SUBMISSIONS CLOSED:	08/22/2002
DATE OF DECISION:	11/15/2002
BEFORE:	O'Connor K - DCJ (President)
APPLICATION:	Costs
MATTER FOR DECISION:	Costs
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Victorian Civil and Administrative Tribunal Act 1998
CASES CITED:	Citadin Pty Ltd (No. 2) -v- Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd (RLD) [2001] NSWADTAP 31 Graham -v- Director General, Department of Community Services [2001] NSWADTAP 4 Raethel -v- Director-General, Department of Education and Training [2000] NSWADT 56 Townsend -v- Chief Executive, State Rail Authority [1999] NSWADT 104 Prasad & anor -v- Fairfield City Council (RLD) [2002] NSWADTAP 2 Calleja -v- Malli [2001] NSWADT 20 Alessa Pty Limited -v- Total & Universal Pty Limited (RLD) [2002] NSWADTAP 16 Bar Ristretto Pty Limited -v- Ansett Australia Limited [2002] NSWADT 124
REPRESENTATION:	M Bengtsson, solicitor S Black, solicitor
ORDERS:	1. Applicant's application for costs refused.

1 This decision deals with a costs application made by the applicant in a matter that is otherwise resolved between the parties.

2 The applicant for costs was the applicant for relief in proceedings brought under the Retail Leases Act 1994 (RLA). The dispute arises out of refurbishment activities being undertaken by the lessor at a shopping centre in which the applicant holds a lease governed by the RLA. On 5 December 2001 the lessor served a relocation notice on the applicant. As a result the applicant commenced proceedings in the Tribunal by way of an application numbered 015126 filed 7 December 2001. Various attempts were made to mediate the dispute. Ultimately the respondent withdrew the relocation notice, and the applicant discontinued the application. On 22 February 2002 the respondent served another relocation notice, giving rise to the recommencement of proceedings by the applicant by way of an application numbered 025036 filed 22 March 2002.

3 Each of the applications has occasioned attendances at the Tribunal for directions hearings, and separately there have been mediation sessions conducted by the Retail Tenancy Unit, the statutory mediation service established by the RLA.

4 On 30 April 2002 the second application was resolved by consent of the parties on the following agreed terms:

By consent

1. Note that the substantive action is not proceeding.
2. Direct that any application for costs be filed within 40 days of today.
3. Direct that, in the absence of an application in accordance with paragraph 2, the file be marked ‘withdrawn/discontinued’.

5 Within the time permitted by consent order, the applicant on 6 June 2002 applied for an order pursuant to s 88 of the Administrative Decisions Tribunal Act 1997 (the Tribunal Act) that the respondent pay the applicant’s costs of the second application; and extended that in his submissions dated 16 July 2002 to an application for an order for costs in respect of the previous application. He said that both applications had arisen from the one course of conduct by the respondent.

6 By virtue of s 77A of the RLA, the Tribunal’s power to award costs in retail lease matters is governed by s 88 of the Tribunal Act. Accordingly, ‘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 of costs’: s 88(1). Directions for the filing of submissions were made. The applicant filed written submissions on 16 July 2002. The respondent filed its submissions on 30 July 2002. The applicant filed further submissions in reply on 12 August 2002; with the applicant filing submissions in reply to those submissions on 22 August 2002.

7 In Citadin Pty Ltd (No. 2) -v- Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd (RLD) [2001] NSWADTAP 31 the Appeal Panel said:

‘6 The usual rule in the Tribunal is that parties bear their own costs of proceedings. Being successful in proceedings is not in itself a special circumstance. There must be some additional factor or factors present in the case to justify an award of costs. Withdrawal by an applicant of an application after a date for hearing has been set, and in circumstances where the respondent has incurred expense in briefing counsel, may be such a circumstance: see Graham -v- Director General, Department of Community Services [2001] NSWADTAP 4.

7 On the other hand, the Tribunal has so far resisted submissions that adverse costs orders be made as a sanction to reprove allegedly unreasonable conduct by a government agency which has led to a citizen having no option but to apply to the Tribunal for relief, and in so doing incurring professional costs: see, e.g., Raethel -v- Director-General, Department of Education andTraining [2000] NSWADT 56.

8 The Tribunal has rejected the general proposition that because of the commercial character of retail lease relationships, costs should follow the event at Divisional level as occurs in ordinary commercial litigation in the courts: an early case is Townsend -v- Chief Executive, State Rail Authority [1999] NSWADT 104. There appears to be greater sympathy for the proposition that the ordinary costs rule should apply in retail lease cases in Victorian Civil and Administrative Tribunal (VCAT) even though the general rule governing VCAT is, like this Tribunal, that each party bears their own costs.

9 Section 109(1) of the Victorian Civil and Administrative Tribunal Act 1997 provides:

‘ 109. Power to award costs

(1) Subject to this Division, each party is to bear their own costs in the proceeding.
(2) At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in a proceeding.
(3) The Tribunal may make an order under sub-section (2) only if satisfied that it is fair to do so, having regard to-
(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceeding by conduct such as-
(i) failing to comply with an order or direction of the Tribunal without reasonable excuse;
(ii) failing to comply with this Act, the regulations, the rules or an enabling enactment;
(iii) asking for an adjournment as a result of (i) or (ii);
(iv) causing an adjournment;
(v) attempting to deceive another party or the Tribunal;
(vi) vexatiously conducting the proceeding;
(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding;
(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 proceeding;
(e) any other matter the Tribunal considers relevant.
(4) If the Tribunal considers that the representative of a party, rather than the party, is responsible for conduct described in sub-section (3)(a) or (b), the Tribunal may order that the representative in his or her own capacity compensate another party for any costs incurred unnecessarily.
(5) Before making an order under sub-section (4), the Tribunal must give the representative a reasonable opportunity to be heard.
(6) If the Tribunal makes an order for costs before the end of a proceeding, the Tribunal may require that the order be complied with before it continues with the proceeding.'

10 As can be seen, a feature of the VCAT legislation (one not found in this Tribunal's legislation)is the enumeration of factors which might be regarded as a basis for an adverse order for costs. In retail lease disputes it would seem that VCAT has based its tendency to make orders for payment of costs against unsuccessful parties on the factor of complexity, and the likelihood therefore that the parties will feel the need to obtain legal representation.

22 [I]n principle it seems to us that there are some usual situations in litigation that could justify a costs order founded on special circumstance. One, as contemplated expressly by the VCAT legislation, is where the successful party rejected an offer of compromise that was better than the result obtained at hearing. Offers of compromise are usual, and decisions that are less favourable than the rejected offer are not unusual. There is a recent illustration of such an exercise of discretion in the Retail Leases Division: Calleja -v- Malli [2001] NSWADT 20.’

8 In Prasad & anor -v- Fairfield City Council (RLD) [2002] NSWADTAP 2 again in the context of a retail leases appeal, the Appeal Panel said:

‘ Interpretation of Meaning of 'Special Circumstances'

35 Before turning to the remaining grounds, we make the following general observations on the application of s 88 to retail leases claims.

36 As we see it, the principle for which s 88 stands is that each party bear their own costs if their conduct in the litigation has been reasonable. If that standard of reasonable conduct is adhered to, then no costs order should be made against the unsuccessful party. There is another possibility. Both parties may have failed to conduct their cases reasonably, each deserves an order against the other but the degree of dereliction is equal leading to no order being made.

39 The Tribunal has been criticised by the lessees for alluding to the traditional costs rule. While it is not the starting point in this legislative scheme, matters addressed by the traditional costs rule may still have relevance.

40 One matter clearly is not relevant - that costs orders should be made, as a matter of course, in favour of the successful party in relation to the ultimate matter for determination. But there are other occasions in the course of the litigation where it may be appropriate to compensate the successful party. It may not have been consistent with the reasonable conduct of litigation for various preliminary applications to have been made. They may have had the effect of elongating and making more costly the proceedings. There may have been failures to comply with directions giving rise to unnecessary delay and additional professional attendances on the Tribunal.

41 The Tribunal should not forego the costs sanction as a way of dealing with conduct of that kind. As the Tribunal noted in the decision, failure to accept an offer that was equal to or better than the ultimate amount may be a ground for a costs order against the successful party.

42 The matters addressed in s 109 of the Victorian Civil and Administrative Tribunal Act 1998 [sic] provide a good check-list of factors that may be relevant to making a 'special circumstances' costs award.’

9 See also Alessa Pty Limited -v- Total & Universal Pty Limited (RLD) [2002] NSWADTAP 16; Bar Ristretto Pty Limited -v- Ansett Australia Limited [2002] NSWADT 124.

10 The applicant relies upon the following matters as special circumstances:

(a) the issue of the defective first notice of relocation ‘forcing the applicant to file the previous application’
(b) the continued defence of the previous application beyond when the defect in the first notice became clear with the result that additional costs were incurred
(c) the withdrawal of the first notice and the issue of the second notice ‘forcing the applicant to file the current application’
(d) the continued defence of the current application ‘beyond when the defect in the second notice became clear with the result that additional costs were incurred’
(e) the withdrawal of the second notice.

11 The applicant submitted that in the present case the withdrawal by the respondent of both the first and second notices amounts to an admission that it was unreasonable for the respondent to issue either of them or to continue to rely on them in the face of, respectively, the previous application and the current application. Both applications had in their grounds for claim challenged the validity of the relocation notices on the basis that they failed to comply with the requirements imposed by s 34A of the RLA and by cl 20 of the Lease.

12 The respondent in its submissions set out a detailed chronology of the events that occurred between 7 December 2001 (according to it, the date of service of the first relocation notice) and 30 April 2002 (entry of consent directions). Fourteen events are listed. The respondent points to the difficulty of the Tribunal forming any view as to special circumstances in a situation where the substantive claims of the applicant and any related evidence was never tested or assessed.

13 As to the specific circumstances on which the applicant relies, the respondent replied as follows:

(a) There has been no determination that the first notice was defective. The mere withdrawal of a notice can not be grounds for a costs order.
(b) It is not clear what additional costs were incurred, as the applicant did not file any statements despite a direction to do so.
(c) Defensive amendments (to formal notices such as relocation notices) should be encouraged not discouraged. There was no need to file a new application, because, the respondent says, it had indicated its preparedness to allow the original application to be amended to refer to the second notice as the one now under challenge.
(d) ‘It is ambitious to describe the withdrawal of a notice on Tuesday 26 March following the filing of an application late on Friday 22 March, as ‘the continued defence … [causing] additional costs.’
(e) ‘The respondent says that the notice was only withdrawn because the applicant’s own conduct had frustrated any hearing of the matter on the merits within a time that would allow the development timetables to be met.’

14 The applicant in reply submitted that the applicant’s ability to test the two notices was frustrated on each occasion by their withdrawal by the respondent. It is the applicant’s submission that they were fatally flawed for the reasons given in the grounds accompanying each of the applications. The applicant criticises the respondent’s description of its conduct as a defensive amendment. The respondent in its further reply challenges the assertions of the applicant on the basis that there is no evidence for them before the Tribunal.

Assessment

15 In the ordinary course the Tribunal’s assessment of a costs application would occur after it had heard the substantive case, and was in a position to form a view as to the reasonableness of the way in which the parties had conducted themselves in the proceedings. In this case the applicant decided not to pursue the substantive action. The only knowledge the Tribunal has of the background is that which has emerged from the written submissions. It is acknowledged by the respondent that it withdrew the first and then the second relocation notices. It does not make any admissions as to the validity or otherwise of the notices. The applicant has made assertions in that regard. All that is known of the context of the dispute is that it occurred in circumstances where the respondent was pursuing an upgrade and redevelopment of a shopping centre located in a prime area of the main retail district of central Sydney.

16 As to the applicant’s submissions, it does not in my view follow that if a relocation notice is issued, a lessee who considers it to be defective is ‘forced’ thereby to file applications in the Tribunal. I am not satisfied that in the present case the applicant had no option but to come to the Tribunal once it received the notice of relocation. The scheme of the RLA contemplates that ordinarily the first port of call will be the Registrar, Retail Tenancy Disputes and the Retail Tenancies Unit under his administration. That occurred in this case after the proceedings were filed in the Tribunal. I accept that an applicant will sometimes come to the Tribunal first because the Tribunal has powers to make urgent orders which may be needed to stabilise relations between the parties pending attempts at mediation.

17 There is insufficient material before me to form any view on whether the respondent unnecessarily prolonged proceedings thereby causing unnecessary costs to be incurred by the applicant. It is the case that three days had been set aside for hearing of the first application before it was withdrawn. That gives some indication of the scale of the dispute as the parties perceived it. In this instance substantial costs to the community and to the parties were avoided by the fact that the matter did not proceed to a three day hearing.

18 There is utility, I think, in the Tribunal having a relatively disengaged attitude to the circumstances giving rise to withdrawals of applications prior to hearing. The Tribunal must also avoid the danger of being drawn into a scrutiny of the lawfulness of the parties’ conduct by way of a costs application, the task that was obviated by the abandonment of the principal hearing. Had the applicant succeeded on the merits question (validity of notice), it does not follow that it would have got a costs order in its favour. As the passage from Prasad (above) reinforces, mere success in the ultimate litigation does not of itself establish a special circumstance. If it were otherwise, then in effect the rule which Parliament has sought to displace (costs follow the event) would be reinstated (see further Townsend -v- Chief Executive, State Rail Authority [1999] NSWADT 104).

19 I am not satisfied that the circumstances to which the applicant refers are sufficiently significant to warrant any interference with the usual rule that each party bear their own costs of these proceedings.

20 The order which follows relates to matter no. 025036. If I have power to do so (it may be that the Tribunal is functus officio), I would make the same order for the same reasons in respect of matter no. 015126.

Order

1. Applicant’s application for costs refused.