Sydney Supermarkets Pty Limited v Xu and anor (No 2) [2008] NSWADT
[2008] NSWADT 284
•21 October 2008
CITATION: Sydney Supermarkets Pty Limited v Xu and anor (No 2) [2008] NSWADT 284
This decision has been amended. Please see the end of the decision for a list of the amendments.DIVISION: Retail Leases Division PARTIES: APPLICANT
Sydney Supermarkets Pty LimitedFIRST RESPONDENT
SECOND RESPONDENT
Chuan Min Xu
Hua LiangFILE NUMBER: 075058 HEARING DATES: On the papers SUBMISSIONS CLOSED: 10 September 2008
DATE OF DECISION:
21 October 2008BEFORE: Chesterman M - Deputy President; Harrison B - Non-Judicial Member CATCHWORDS: Claim for payment of money - damages - unconscionability MATTER FOR DECISION: Principal matter
CostsLEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994CASES CITED: Beyond Furniture (Aust) Pty Ltd v Virk (No 2) [2008] NSWADT 225
Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31
Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81
Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164
Jones v Dunkel (1959) 101 CLR 298 Kindful (Australia) Pty Ltd v Country Villa Holdings Pty Ltd (No 2) [2006] NSWADT 357
Sarker v World Best Holdings Ltd (No 5) [2008] NSWADT 179
Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43
Sydney Supermarkets Pty Limited v Xu and anor [2008] NSWADT 131
Wood & Anor v Bergman (No 2) [2003] NSWADT 175REPRESENTATION: APPLICANT
RESPONDENTS
J McEncroe, solicitor
J Hassett, solicitorORDERS: 1. The Application instituting these proceedings is dismissed
2. The Applicant is to pay the Respondents’ costs of and incidental to these proceedings, as agreed or as assessed under the Legal Profession Act 2004.
Introduction
1 The main question required to be determined in this case was whether the Applicant, which was the lessee of retail shop premises under a lease (‘the Lease’) governed by the Retail Leases Act 1994 (‘the RL Act’), acted so as to terminate the Lease effectively under section 11(2) of this Act, on the ground that the Respondent lessors had failed to furnish a disclosure statement as required by section 11(1).
2 In its Application to the Tribunal, filed on 10 April 2007, the Applicant alleged that the Respondents had charged ‘excessive rent’, amounting to $34,242.87, under the Lease, and had withdrawn ‘without due cause or excuse’ the amount of $40,287.50 under a bank guarantee that had been issued to them on behalf of the Applicant. The Application claimed reimbursement of the overpayments of rent, a refund of the amount withdrawn under the guarantee, damages for wrongful withdrawal of funds under the guarantee, interest and costs.
3 The Application also alleged unconscionable conduct by the Respondents. Accordingly, the Tribunal has been constituted in these proceedings in accordance with clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’). It has been constituted by a Deputy President who is a member of the Retail Leases Division, assisted by one appropriately qualified member (Non Judicial Member Harrison), acting in an advisory capacity only.
4 On the first day of the hearing, 20 November 2007, a second advisory member (Non Judicial Member Fairweather) was also present. But he was not available to assist on the second scheduled day, 28 November 2007. The Tribunal proceeded in his absence, being authorised to do so by sub-paragraph (4)(a) of cause 4 of Schedule 2, Part 3B. It drew the parties’ attention to this provision.
5 In a decision delivered on 5 May 2008 (Sydney Supermarkets Pty Limited v Xu and anor [2008] NSWADT 131 – hereafter ‘the principal decision’), the Tribunal held that the Lease had not been terminated as claimed by the Applicant. In consequence of this ruling and of other rulings on arguments advanced by the Applicant, the Tribunal rejected a claim by the Applicant that it had no obligation under the Lease to pay outgoings relating to the leased premises.
6 Order 1 made by the Tribunal in the principal decision was in the following terms: -
The Tribunal determines that the Applicant was legally obliged under the Lease between the parties in these proceedings to pay to the Respondents the outgoings identified in Item 14 of Annexure A of the Lease with respect to the period from 23 June 2004 to 31 October 2005.
The matters to be determined in this decision
7 A number of matters were left unresolved in the principal decision, by virtue of the following circumstances.
8 At [104 – 112], the Tribunal set out its findings as to (a) the amounts owing by the Applicant to the Respondents for rent and outgoings under the Lease and (b) the amounts that had been paid to the Respondents under these headings by or on behalf of the Applicant. A number of these payments were in fact made on the Applicant’s behalf by a company called Kings Wharf Supermarket Pty Ltd (‘KWS’).
9 A ‘ledger printout’ maintained by the Respondents’ managing agent, Sydney Advance Realty (‘SAR’), purported to record all payments made under the Lease. It was annexed to the principal affidavit sworn by Dr Fawsy Soliman, who was the only director of the Applicant to have played any part in these proceedings
10 At [113 – 115], the Tribunal set out in the following terms its conclusions as to whether the Respondents had received an excessive amount on account of rent and outgoings, as claimed by the Applicant, and if so, what was the amount of the excess: -
113 On the basis of these calculations, the Respondents’ case is that it is entitled to retain all the moneys that it has received, both in payments made by or on behalf of the Applicant and through calling on the guarantee.
114 But for one important consideration, the Tribunal would agree. This consideration is as follows. Within evidence that the Respondents themselves tendered, there are two documents providing grounds for believing that a significant payment made by KWS on behalf of the Applicant was not recorded on the ledger printout and accordingly was not taken into account in reaching the figure of $240,367.24 for the payments made by or on behalf of the Applicant.
115 The alleged payment that does not appear on the ledger printout is a payment of $12,581.89, made on 29 August 2005. The documents referring to it are the Applicant’s letter of 9 September 2005 to SAR and the letter dated 18 October signed by Bernadette Rayner of the firm Property Business, stating that it had been received and forwarded to SAR (see [35 –37]).
116 Unfortunately, no mention was made of this payment in the evidence or submissions dealing with the question whether the total amount received by the Respondents does or does not exceed the amount to which they were entitled. In the present context, the amount allegedly paid is too large to be ignored. If it was in fact paid, the Applicant would be entitled to approximately $12,000 (to which interest might be added) by way of reimbursement from the Respondents. If it was not paid, the Applicant’s claim would be subject to dismissal.
11 The Tribunal accordingly determined, at [118], that the parties should be invited to file further evidence and/or submissions limited to the questions whether a payment of $12,581.89 alleged to have been made on or about 29 August 2005 on behalf of the Applicant to the Respondents’ agent was in fact made and should be taken into account to the credit of the Applicant.
12 At [119], it determined that at the same time the parties should be invited to file further evidence and/or submissions limited to two further questions: (a) whether interest should be awarded to the Applicant (in the event that it was held entitled to some reimbursement); and (b) the matter of entitlement to costs under section 88 of the Administrative Decisions Tribunal Act 1997.
13 At [121], it gave directions for the filing of this material. For present purposes, the relevant features of these directions were (i) that they required the Respondents, in the first place, to file and serve within 21 days such material (evidence and/or submissions) on these questions as they wished to file; (ii) that the Applicant was subject to a similar direction, to be complied with within a further 21 days; (iii) that the Respondents were allowed a further 14 days for the filing of any material in reply; (iv) that the parties had liberty to apply for any extension of these deadlines; and (v) that the Tribunal would determine the questions raised in the directions ‘on the papers’, under section 76 of the ADT Act, unless it considered, having taken into account any submissions made on this issue by the parties, that a further hearing was required.
The filing of evidence and submissions by the parties
14 On 27 May 2008, the Respondents’ solicitor, Mr Hassett of Hassett Dixon, filed evidence and submissions in accordance with the Tribunal’s directions. It is not clear from the Tribunal’s file whether he served this material on the Applicant’s solicitor, Mr McEncroe, of John McEncroe & Company. Within the ensuing months, the following correspondence ensued between the Registrar (who acted on instructions from the Tribunal as constituted in this case), Mr Hassett, Mr McEncroe and Dr Soliman.
15 On 24 June, the Registrar wrote to Mr McEncroe (with copy to Mr Hassett) pointing out that the Applicant’s evidence and submissions had not been filed within 21 days after 27 May, as required by the directions given in the principal decision. The letter stated that if no response was received from him by 4 July, the Tribunal would determine the remaining issues in the proceedings on the basis of the material then before it.
16 On 2 July, Mr McEncroe advised the Registrar by letter that he had not been able to find the evidence that the Respondents had filed. He requested a copy of this evidence and indicated that the Applicant might need an extension of time beyond 4 July.
17 On 9 July, the Registrar sent a copy of the Respondents’ evidence and submissions to Mr McEncroe. She stated in the covering letter (a copy of which was sent to Mr Hassett) that the Applicant’s evidence and submissions were to be filed and served within 14 days and the Respondents would have a further 7 days in which to file any evidence and submissions in reply.
18 On 23 July, Dr Soliman faxed to the Registrar a letter stating that he had not yet received a copy of the Respondents’ submissions and requesting an extension of time in which to reply.
19 On 1 August, the Registrar sent a fax to Mr McEncroe (with copy to Mr Hassett) stating that the Applicant was now required to file and serve evidence and submissions by 11 August and the Respondents would have a further 7 days in which to file any evidence and submissions in reply. In this letter she also asked why Mr McEncroe had been unable to comply with the direction given in her letter of 9 July and indicated that no further deadline would be considered by the Tribunal.
20 On 8 August, Dr Soliman sent a fax to the Registrar requesting an extension of time on the ground of illness. He enclosed a medical certificate stating that due to illness he would be unfit for work on 8 and 9 August.
21 Also on 8 August, Mr McEnroe sent a fax to the Registrar requesting an extension of time until 13 August on the ground of Dr Soliman’s illness.
22 On 11 August, Dr Soliman sent a fax to the Registrar requesting a further extension of time on the ground of illness. He enclosed a medical certificate stating that due to illness he would be unfit for work from 11 to 15 August.
23 On 13 August, Ms Alana Whyte, the Registry Case Management Officer, telephoned Mr McEncroe and reminded him of the Registrar’s request, made on 1 August, that he should explain why he had not been able to comply with the directions for the filing of evidence and submissions by the Applicant.
24 On 14 August, Mr McEncroe, in a fax to the Registrar, replied to this question as follows:-
… I advise that I only act on the instructions in my retainer with Sydney Supermarkets. This would mean that unless I am instructed, I do not take it upon myself to act otherwise than with those instructions.
25 On 3.14 p.m. on Friday 15 August, the Registrar sent a fax to Mr McEncroe (with copies to Dr Soliman and Mr Hassett) stating as follows: (a) that it was to be assumed from his letter of 14 August, and from the fact that he not filed a notice of ceasing to act, that he was still acting for the Applicant, even though he had not received the instructions that he needed to comply with the directions in the principal decision; (b) that a copy of the Respondents’ evidence and submissions had been sent to him in a letter dated 9 July; (c) that in that letter a final deadline of 23 July had been fixed; (d) that in view of the Applicant’s failure to supply the requisite instructions, the Tribunal would now prepare its decision on the matters outstanding in the proceedings; (e) that it would only take into account material received from the Applicant by 1 p.m. on Tuesday 19 August; (f) that if any such material was received it would give the Respondents an opportunity (if it believed this to be necessary) to file any further material in reply by 26 August; and (g) that in laying down these conditions, it had taken account of his letter of 8 August and Dr Soliman’s letter of 11 August.
26 On Monday 18 August, Mr McEncroe sent a fax to the Registrar acknowledging receipt of her fax of 15 August (which he said had been received after close of business) and stating that Dr Soliman could not comply with the deadline of 1 p.m. on 19 August due to his duties as a lecturer, but would comply by 5 p.m. on that day.
27 On 19 August, the Applicant filed an affidavit sworn by Dr Soliman on that day.
28 In a letter faxed to the Registrar on Thursday 21 August, Mr McEncroe advised that he had received instructions from Dr Soliman and was preparing submissions, but that because of ill health on his own part they might not be filed until the following day. He also stated that ‘a further short affidavit might be necessary’.
29 On 25 August, the Applicant filed an affidavit sworn on that day by Dr Soliman, together with submissions responding to the evidence and submissions that the Respondent had filed on 27 May, nearly three months earlier.
30 Except for indicating, as outlined above, that the preparation of this material had been delayed up to a point by the ill health of Dr Soliman and of Mr McEncroe, neither of them provided any explanation for the delay in filing it.
31 On 27 August, the Registrar advised the solicitors for both parties by fax that the Tribunal, having considered the evidence and submissions filed by the Applicant two days earlier, would permit the Respondents to file evidence and/or submissions in reply on or before 10 September 2008. The Registrar’s letter stated that no further material was to be filed thereafter.
32 On 5 September, the Respondents filed submissions in reply.
33 On 15 September, in spite of the Registrar’s indication that no further material was to be filed after the Respondents had filed evidence and/or submissions in reply, Dr Soliman filed further submissions on behalf of the Applicant. He made no application for leave to do so and did not put forward any reasons why these submissions should be received by the Tribunal after the stipulated closing date for submissions.
34 In the remaining sections of this judgment, the Tribunal’s reasoning and conclusions are set out with regard to (a) the Applicant’s alleged payment of $12,581.89 for outgoings, made on 29 August 2005; and (b) the Respondents’ application for the costs of the proceedings.
The alleged payment on account of outgoings
35 The evidence and submissions filed in the Tribunal. The evidence that the Respondents filed on 27 May 2008 comprised an affidavit sworn on the previous day by Mr Dennis Zhou, the principal of SAR. In the affidavit, Mr Zhou referred to the letter of 18 October 2005 signed by Ms Bernadette Rayner of the firm Property Business.
36 This letter, a copy of which was annexed to his affidavit, was in the following terms: -
18 October 2005
TO WHOM IT MAY CONCERN
RE: Sydney Supermarket – King Street Wharf
We confirm we received two cheques from Kings Wharf Supermarket as being payment for the following:
Outgoings: $12,521.89
Rent: $10,535.75
This was received on the 29th August 2005 and they were handed over to Mr Dennis Zhou of Sydney Advanced Realty Pty Ltd.
Should you require any further information please do not hesitate to contact our office.
37 It is useful to refer here to the fact, not mentioned by Mr Zhou, that Dr Soliman, in a letter to SAR dated 9 September 2005, also claimed that on 29 August 2005 a payment of $12,521.89 for outgoings had been made by KWS on the Applicant’s behalf (see the principal decision at [36]).
38 Mr Zhou testified in his affidavit that he had checked SAR’s business records ‘including the August/September 2006 (sic) period’, which were exhibited to him at the time of his swearing the affidavit. He said that in SAR’s bank deposit book ‘covering this period’ he could find the sum of $10,535.75 referred to as ‘rent’ in Ms Rayner’s letter, but not the ‘outgoings’ sum of $12,521.69. He said further that ‘this sum was not recorded in any ledger or any record related to the above premises’ and that accordingly he denied ever receiving this sum, ‘contrary to what is stated in the letter’.
39 Relying on this affidavit, Mr Hassett stated in the Respondents’ submissions filed on 27 May 2008 that their ‘short answer’ to Ms Rayner’s letter was that they never received the alleged sum of $12,521.69 at all. He added that in a spreadsheet setting out alleged payments by the Applicant that was annexed to an affidavit sworn by Dr Soliman, it was not claimed that this amount was paid. According to Mr Hassett, the Respondents had been unaware of this ‘loose end’ in the evidence and did not know why Ms Rayner’s letter had been created.
40 In his affidavits sworn on 19 and 25 August 2008, the statements made by Dr Soliman relating to the Applicant’s claim that SAR received the alleged payment of $12,521.69 from Ms Rayner were to the following effect: -
- 1. On or about 15 June 2005, in the course of a telephone conversation with Ms Rayner, he told her that the Applicant had sold the grocery section of its business to KWS, but that the Respondents would not consent to a transfer of the Lease until all arrears of rent and outgoings had been paid by or on behalf of the Applicant. Ms Rayner then said that she would arrange for the directors of KWS to pay rent and outgoings directly to the Respondents, since after 28 days they would be deemed, if they had agreed to this arrangement, to have consented to the transfer of the Lease. She added that she might try to organise a meeting to achieve this result.
2. On or about 29 August 2005, Ms Rayner told him in a telephone conversation that the directors of KWS had met Mr Zhou on that day, that she had taken two cheques drawn by KWS and had handed them to Mr Zhou, that Mr Zhou had agreed to the transfer of the Lease and that, on being so requested by Dr Soliman, she would send him a statement confirming that the rent and outgoings had been paid to Mr Zhou.
3. On or about 18 October 2005, he (Dr Soliman) had received from Ms Rayner a copy of her letter bearing that date (i.e., the letter reproduced above at [36]).
4. He believed that the purpose of the meeting on 29 August 2005 (at which he was not present) was as stated by Ms Rayner. He did not believe that she would have stated in her letter of 18 October 2005 that she had received a cheque for $12,521.69 if it were not true.
41 In its submissions filed on 25 August 2008 by Mr McEncroe, the Applicant sought to rebut the Respondents’ arguments regarding the alleged payment of $12,561.69 by making the following three points.
42 First, Mr Zhou in his affidavit was ‘silent’ with regard to the assertion by Ms Rayner that the two cheques identified by her in her letter of 18 October 2005 were handed over to him. Although he did not deny knowing both Ms Rayner and the firm Property Business, he made no reference to a meeting on 29 August 2005 at which, according to her statement to Dr Soliman, she handed the cheques to him.
43 Secondly, Mr Zhou stated that he checked SAR’s business records ‘including the August/September 2006 period’. Such an investigation was unsatisfactory, since the date of the alleged payment was 29 August 2005. Since he also stated that he found ‘the sum of $10,535.75 referred to as “rent” in Ms Rayner’s letter’, it should be assumed that the cheque for $12,521.69 was received by him and deposited into SAR’s bank account.
44 Thirdly, in view of these deficiencies in the evidence filed by the Respondents, the Tribunal should find either that Ms Rayner’s recollection is correct or that ‘at best’ the fate of the cheque for $12,521.69 was ‘unknown’.
45 In their submissions in reply, filed by Mr Hassett on 5 September 2008, the Respondents made the following points:-
(a) Neither in the ledger printout nor in the affidavits sworn by Dr Soliman had it been claimed that the alleged payment of $12,521.69 had been made.
(b) Since Mr Zhou denied having received this payment, the onus lay on the Applicant to show that it had in fact been paid.
(c) The Applicant had made no attempt to subpoena bank records that could have disclosed the alleged payment, or to obtain sworn evidence from Ms Rayner. Neither of these steps would have been difficult to take.
(d) In these circumstances, the Tribunal, applying the rule in Jones v Dunkel (1959) 101 CLR 298, should draw the inference that no evidence other than that provided by Dr Soliman would have assisted the Applicant.
(e) Dr Soliman’s evidence on this matter, even if admitted, was unpersuasive and should not be believed.
46 The Tribunal has reviewed the submissions regarding the alleged payment that were filed on 15 September 2008 by Dr Soliman, even though this filing occurred in breach of a ruling conveyed by the Registrar to the parties’ solicitors in a letter dated 27 August 2008 (see [31 – 33] above). It is sufficient here to say that these submissions add nothing of substance to the arguments already made on the Applicant’s behalf by Mr McEncroe.
47 The Tribunal’s conclusions. The Tribunal agrees with the Applicant’s submission that Mr Zhou’s reference to ‘the August/September 2006 period’ as a period during which he conducted searches of SAR’s business records gives cause for concern. But his accompanying statement that he located a record of receipt of the accompanying cheque for $10,535.75 suggests that his searches did embrace the period when the alleged payment would have been received.
48 The assertions made by Dr Soliman regarding an alleged meeting on 29 August 2005 at which Ms Rayner made the alleged payment to Mr Zhou are purely hearsay. For reasons set out in the principal decision at [70], the Tribunal does not in fact consider Dr Soliman to be a satisfactory witness. As Mr Hassett submitted, these assertions by him could have been, but were not, substantiated by evidence from Ms Rayner or from relevant bank records. No explanation for the Applicant’s failure to obtain such evidence was put forward.
49 Furthermore, no evidence of any such meeting was adduced at the substantive hearing of this case. Indeed, a letter dated 5 September 2005 from the solicitors for KWS to SAR, referred to in the principal decision at [50], mentions a telephone conversation between them and SAR on 29 August 2005, but not any relevant meeting.
50 For these reasons, the Tribunal does not accept Dr Soliman’s claim that Ms Rayner told him of a meeting on 29 August 2005 at which she made the alleged payment to SAR on behalf of KWS.
51 The suggestion in the Applicant’s submissions that the Tribunal should conclude that ‘at best’ the fate of the cheque for $12,521.69 is ‘unknown’ fails, in the Tribunal’s opinion, to take due account of the fact that the Applicant, in these proceedings in which it seeks repayment of moneys allegedly overpaid, bears the onus of proof. If the Tribunal were to reach such a conclusion, it would be an insufficient foundation for a ruling that this amount should be taken into account to the credit of the Applicant.
52 The Tribunal’s decision is that the evidence on this particular question that the Respondents have adduced, although defective, is sufficient to rebut the inferences arising from Ms Rayner’s letter of 18 October 2005 and Dr Soliman’s letter of 9 September 2005. Its conclusion is that the payment of $12,581.89, alleged to have been made on or about 29 August 2005 on behalf of the Applicant to the Respondents’ agent, was not in fact made and should not be taken into account to the credit of the Applicant.
53 The consequence of this finding, for reasons set out in the principal decision at [110 – 113], is that the Respondents are entitled to retain all the moneys that they have received from the Applicant, both in payments made by or behalf of the Applicant and through calling on the bank guarantee that was issued to them on behalf of the Applicant.
54 For completeness, it should be added (as the issue was not directly addressed in the principal decision) that neither in relation to alleged retention of moneys not properly due nor in any other way did the evidence suggest that the Respondents might have engaged in unconscionable conduct as claimed by the Applicant.
55 It further follows that the application instituting these proceedings, by which the Applicant claimed reimbursement of alleged overpayments of rent, a refund of the amount withdrawn under the bank guarantee, damages for wrongful withdrawal under the guarantee, damages for unconscionable conduct and interest, must be dismissed.
Costs
56 Principles regarding costs. If costs are to be awarded in these proceedings, the requirement of ‘special circumstances warranting an award of costs’ set out in section 88(1) of the ADT Act must be satisfied. Section 77A of the RL Act makes this provision applicable in retail tenancy proceedings conducted in the Tribunal.
57 The case-law on section 88(1) in its application to proceedings under the RL Act includes one Court of Appeal decision (Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81) and a considerable number of Tribunal decisions, both at first instance and in appellate proceedings (see for example Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164, Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31, Wood & Anor v Bergman (No 2) [2003] NSWADT 175, Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43 and Sarker v World Best Holdings Ltd (No 5) [2008] NSWADT 179).
58 ‘Special circumstances’ are defined in the case law as ‘circumstances that are out of the ordinary, but without having to be extraordinary or exceptional’. It is not enough that the circumstances are ‘special’: they must also ‘warrant’ an order for costs. On account of the ‘commerciality’ of the Retail Leases Division, the interpretation of ‘special circumstances’ differs significantly from the interpretation that might be adopted in any other Division of the Tribunal. While various categories of ‘special circumstances’ have been identified in the case law, these categories are not closed.
59 As is indicated in the Tribunal’s Practice Note on Costs (Practice Note No. 12, October 2006), ‘special circumstances’ may be discernible through an examination of the way in which the case has been conducted in the Tribunal. The Tribunal may take into account the following matters:-
whether a party has conducted the proceeding in a way that 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;
whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding.
60 In addition, ‘special circumstances’ have been held more than once to exist where proceedings instituted by an applicant are found to have lacked any real prospect of success and therefore to have been unmeritorious. In such circumstances, the purpose of a costs order has been said to be that of preventing the gross abuse of the RL Act by frivolous, vexatious and misconceived proceedings. Two recent decisions stating and applying this proposition are Kindful (Australia) Pty Ltd v Country Villa Holdings Pty Ltd (No 2) [2006] NSWADT 357 and Beyond Furniture (Aust) Pty Ltd v Virk (No 2) [2008] NSWADT 225.
61 In Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81, the Court of Appeal held that the costs of proceedings in the Tribunal under the RL Act, both at first instance and on appeal, should be awarded against the lessors. At [60], Santow JA (with whom Mason P and Brownie AJA agreed) stated that the lessors ‘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’. He pointed out that by virtue of this conduct, the tenant was ‘forced to pursue this litigation’. He also said: ‘While a finding of “serious unfairness” is not prerequisite to determining that there are special circumstances, it is nonetheless a highly relevant consideration.’
62 The Respondents’ submissions. The submissions, prepared by Mr Hassett, supporting the Respondents’ application for the costs of these proceedings were chiefly based on the propositions stated in the preceding two paragraphs.
63 In arguing that the Applicant’s case was unmeritorious, Mr Hassett relied particularly on the following five aspects of it:-
1. Even on the figures put forward by the Applicant, it had no grounds for its claim that rent had been overpaid.
2. The Applicant’s initial assertion regarding outgoings under the Lease was that it was not liable for any outgoings at all. But as indicated in the principal decision at [92], at the commencement of the hearing it conceded through its counsel that the outgoings for which it claimed not to be liable could only be those arising after 10 November 2004, the date of its alleged letter to the Respondents purporting to terminate the Lease. Up to that time, the Respondents had had to meet a claim for a distinctly larger sum than was ultimately sought at the hearing.
3. The Applicant’s liability for outgoings was expressly stated in the Lease and it knew the nature of those outgoings from the outset.
4. The ground on which the Tribunal rejected the Applicant’s claim that it terminated the Lease by a letter dated 10 November 2004 was the finding, in the principal decision at [81], that the letter was never sent. This finding was in part based on the fact that, despite having allegedly sent this letter, the Applicant continued to make payments on account of outgoings.
5. The Applicant’s claim for damages for unconscionable conduct was clearly baseless.
64 In arguing that the Applicant’s behaviour, for which Dr Soliman bore responsibility, had the ‘grossly unreasonable’ character described by Santow JA in Cripps v G & M Dawson Pty Ltd, Mr Hassett referred to the complicated way in which the Appellant made payments for rent and outgoings (including its use of a third party, KWS, to make payments on its behalf) and its introduction of KWS as de facto tenants without the Respondents’ consent. He submitted that this behaviour was clearly ‘out of the ordinary’ and showed a complete disregard for the Respondents’ rights. Its aims, he maintained, were (a) to create such confusion that it would cost the Respondents a great deal of trouble and legal expense to ascertain the true situation, and (b) to extract by these means a settlement from them under which the Applicant would avoid liability for the outgoings which it had clearly agreed to pay. Mr Hassett also described aspects of the way in which the Applicant conducted the litigation – notably in claiming a refund of the outgoings paid before the alleged termination of the Lease on 11 November 2004 and in alleging unconscionable conduct by the Respondents – as ‘pure bluff’.
65 The Applicant’s submissions. In its submissions filed on 25 August 2008 by Mr McEncroe, the Applicant put forward four grounds why it should not be liable for costs. It maintained further that the Respondents should pay its costs.
66 These grounds were as follows: (a) that since the Respondents had refused to attend mediation of the dispute between the parties as provided for in section 68 of the RL Act, the Applicant could not be said to have tried to extract a settlement from them; (b) that the Respondents had deliberately failed to provide a disclosure statement relating to the Lease as required by section 11(1); (c) that because they had not provided outgoings statements as required by section 28, the Applicant was entitled under section 28A to withhold payment of outgoings; and (d) that without providing any explanation they had charged the Applicant for outgoings under a heading ‘Others’, which fell outside the scope of the outgoings chargeable under the Lease.
67 The Tribunal has reviewed the submissions on costs that were filed on 15 September 2008 by Dr Soliman, even though this filing occurred in breach of a ruling conveyed by the Registrar to the parties’ solicitors in a letter dated 27 August 2008 (see [31 – 33] above). It is sufficient here to say that these submissions add nothing of substance to the arguments already made on the Applicant’s behalf by Mr McEncroe.
68 The Tribunal’s conclusions. In the Tribunal’s opinion, the Respondents have established that there are ‘special circumstances warranting an award of costs’ under section 88 of the ADT Act.
69 The Tribunal bases this conclusion in part on the two matters relied on by Mr Hassett. These were that the Applicant’s case was clearly unmeritorious and that the Applicant’s behaviour, rendering it necessary for the Respondents to incur costs in defending these proceedings, had been both ‘out of the ordinary’ and ‘grossly unreasonable’. The Tribunal agrees with these contentions. In view of this behaviour by the Applicant, it attaches no significant weight to the fact that the Respondents refused to participate in mediation under the RL Act.
70 In addition, the Tribunal takes into account the Applicant’s repeated failure, without providing any legitimate reasons, to comply with the Tribunal’s directions regarding the filing of evidence and/or submissions in the period since the principal decision was delivered. The Applicant’s conduct in this respect is outlined above at [14 – 33]. It is the very type of conduct by a party to proceedings that according to Practice Note No. 12 (see [59] above) may be held to constitute ‘special circumstances’. The relevant phrases within clause 2 of the Practice Note are as follows:-
The following are some examples of special circumstances that may justify a costs order…
whether a party has conducted the proceeding in a way that 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;….
whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding.
71 The Tribunal has given consideration to the question whether Dr Soliman could be said to have been guilty of ‘attempting to deceive another party or the Tribunal’ (this being another instance of ‘special circumstances’ set out in clause 2 of the Practice Note). Its strongly critical findings in the principal decision regarding Dr Soliman’s credibility (see paragraph [70]) might well support a ruling to this effect. But the Tribunal does not need to resolve this question, as there are ample grounds for holding that the requirement of ‘special circumstances’ has been satisfied.
72 It remains only for the Tribunal to add that the second, third and fourth matters argued in the Applicant’s submissions on costs (see [66] above) are irrelevant to the issue of costs. The second matter (the Respondents’ failure to provide a disclosure statement) potentially gave rise to remedies that the Applicant could have invoked, but the Applicant failed to take the necessary steps within the time stipulated by the RL Act (see the principal decision at [82]). The third and further matters related to issues in the proceedings that were determined adversely to the Applicant (see the principal decision at [89 – 90] and [108]).
73 For the foregoing reasons, the Tribunal’s conclusion is that pursuant to section 77A of the RL Act the Applicant should be ordered to pay the Respondents’ costs of and incidental to these proceedings.
28/10/2008 - Amendment to coversheet, name of member - Paragraph(s) coversheet
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