Thalassa Pty Limited v Hawkesbury River Marina Pty Limited (No 2)

[2005] NSWADT 90

Set aside by Appeal: Set Aside by Appeal on 14/10/2005

CITATION:	Thalassa Pty Limited v Hawkesbury River Marina Pty Limited (No 2) [2005] NSWADT 90
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Thalassa Pty Ltd RESPONDENT Hawkesbury River Marina Pty Ltd
FILE NUMBER:	045128
HEARING DATES:	11/04/2005
SUBMISSIONS CLOSED:	04/11/2005
DATE OF DECISION:	04/28/2005
BEFORE:	Molloy GB - Judicial Member
APPLICATION:	Costs
MATTER FOR DECISION:	Costs
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Calderbank v. Calderbank [1976] Fam 93Gizah Pty Limited v. AXA Trustees Limited (No. 2) [2001] NSWADT 164Petria Pty Limited v. Makhoul [2005] NSWADTAP 12Sotiropoulos v. Mattana Coiffure (No. 2) Pty Limited [2004] NSWADTAP Trust Company of Australia Limited v. Craig [2005] NSWADT 65
REPRESENTATION:	APPLICANT E Chrysastomu, Barrister RESPONDENT D Spencer, Solicitor
ORDERS:	1. The Applicant pay the costs of the Respondent as agreed or as assessed, such costs to include the costs of this hearing 11 April 2005.

REASONS FOR DECISION

Background

1 On 10 March 2005 I published my Reasons for Decision relating to the preliminary issues which were then before and are set out in paragraph [14] of that Judgment Thalassa Pty Limited v. Hawkesbury River Marina Pty Limited [2005] NSWADT50.

2 For the sake of clarification the preliminary issues were formulated as follows:

A. Were the premises part of a retail shopping centre as at 1 August 1977?

B. If so, did the premises factually cease to be part of a retail shopping centre subsequent to 1 August 1977 and, if so, what effect (if any) does that have on the lease contract between the parties?

C. Is the Applicant prohibited by Retail Leases Act Section 71 from agitating any claim that pre-dates 3 November 2001?

D. Is the relevant date in C above 8 December 2000?

3 In relation to each of those preliminary issues I determined:
A. No

B. Unnecessary to decide, save that if the premises formed part of a retail shopping centre and during the course of the lease the number of leased premises used wholly or predominately for the carrying on of one or more of the businesses specified in Schedule 1 fell below 5, the lease contract between the parties as at 1 August 1997 would not be thereby effected.

C. Yes.

D. No.

4 In the course of my Judgment I was called upon to determined whether a “chandlery” was caught by Schedule 1 of the Retail Leases Act. I determined that it was “so totally different from “hardware” in common use that its non-inclusion in Schedule 1 means that it was not intended to be included in that Schedule” [para 38]. It therefore followed [39] that “a chandlery is not a Schedule 1 business and therefore (in my opinion) cannot be included as one of the minimum 5 premises caught by the first sub-paragraph of the definition of the retail shopping centre”. This was important [40] because “unless there are at least 5 premises used wholly or predominately for the carrying on of one or more of the businesses specified in Schedule 1 then the building does not constitute a retail shopping centre” and therefore “as at 1 August 1997 there were only 4 shops that could have possibly fallen within Schedule 1” in the Marina.

5 In paragraph [41] I referred to the requirement that in order to fall within Schedule 1 the premises must be “used wholly or predominately” and I expressed the opinion that in “my view the evidence of the Applicant fell well short of even prima facie proof of such use. There are methods of proving use but these evidentiary tools were not availed of by the Applicant. Although it is true that the standard of proof is the civil standard where a matter is hotly contested and where the evidence of the Respondent was clearly very detailed relating to the use of Shops 18 and 19 then the Applicant is on notice that this is a very live issue, an issue vital for its case, and if it wished to seriously agitate the point then the evidence would need to be much more powerful and persuasive than that it elected to lead. To merely point to the sale of bait and fishing rods and odd items that may be available in hardware shops does not discharge and goes nowhere near discharging the requirement to demonstrate whole or predominant use”.

6 In paragraph [45] I dealt with that requirement of the definition of “retail shopping centre” in Retail Leases Act Section 3 which requires proof that to be called a “retail shopping centre” it must constitute a “cluster of premises” that has “all” of a number of attributes, the last being that it “is promoted as, or generally as constituting, a shopping centre, a shopping mall, a shopping court or shopping arcade”. I noted that “no submission was made to me that would support a contention that this building was “generally regarded as constituting” a shopping centre” and that I was “unable to see anything in the material that would encourage me” to conclude that the building was so promoted. I stated that in my opinion it was “crystal clear … that the marina was marketed, not as a place to go for shopping but rather as a place to go for enjoyment, particularly marine enjoyment, where one could go for boating services, something to eat and drink, to sit in enjoyable surroundings on the water” and I observed that was “a far cry from being a “shopping centre” as one would generally regard those words”.

7 In relation to preliminary issue B, this was predicated on there being an affirmative answer to the first preliminary issue but because “a considerable amount of time was expended by the parties at the hearing on this issue on the presumption that the premises were in fact part of a retail shopping centre” I determined the issue in the negative ([47]-[50]). I held that the argument to the effect that “if the Schedule 1 businesses fell below the threshold of 5 then the rights of the parties somehow changed such that they were thrown back to their contractual rights under the Lease unaffected by the overriding requirements of Section 30 and Part 7 (of the Retail Leases Act)” had no legal basis. I determined that the contractual rights of the parties were fixed as at the relevant date if at that point of time the building constituted a retail shopping centre and those contractual rights “cannot be varied, absent contractual or legislative entitlement, simply because there is a change of business use of other premises within the building such that there were less than 5 Schedule 1 uses”. In paragraph [50] I stated that: “In my opinion if the premises were a retail shopping centre as at 1 August 1997 and factually ceased to be part of a retail shopping centre subsequent to that date then that fact would not effect the lease contract between the parties”.

8 With regard to issues C and D I dealt with these at paragraphs [51] – [53]. I held that the answer to the question lay within the terms of Section 71 itself and I held that the limitation period in Section 71(2) applies by reference to the date upon which the Applicant files its claim in this Tribunal. So, in the case before me “that date was 3 November 2004 such that the Applicant is prohibited by Section 71 from agitating any claim that pre-dates 3 November 2001” [52].

Respondent’s Arguments

9 The claim that now falls to be determined is a claim by the Respondent for costs. The Respondent submitted that it was wholly successful. From the very beginning it had opposed, clearly and strenuously the arguments and traversed the evidence of the Applicant. The evidence at the hearing supported those submissions.

10 At the costs hearing the Respondent tendered various letters. Relevantly by letter 14 January 2004 its legal advisers wrote to the then lawyers for the Applicant stating, inter alia:

“We are instructed that as at the date your client entered into the Lease there were only four (4) retail shops at the Hawkesbury River Marina. Further, we are instructed that the Hawkesbury River Marina was, and has never been, classified as a Retail Shopping Centre under the Retail Leases Act. Accordingly, we are instructed that there is no basis, whatsoever, for your client’s claim in the above mentioned application” and they foreshadowed “seeking an order for costs against (the Applicant)”. [In the second quoted sentence above I regard as implied the insertion of the word “not” after “was”.]
11 Nextly, by letter 19 January 2004, relevantly, the lawyers for the Respondent again stated that:
“The Lessor denies that the property was a shopping centre for the purposes of the Act and maintains that the outgoings were charged in accordance with the lease”.
They alleged that the lease commenced in 1997 and that therefore: “most of the claim….relates to alleged breaches by the lessor that occurred more than three prior to the filing of the application” and that (effectively) they invited the Applicant “to withdraw so much of the application as refers to outgoings prior to” the date 3 years before the filing of the Application. They referred to the limitation period in Section 71 and again foreshadowed “seeking an order for costs against (the Applicant) and we will rely upon this letter for those purposes.”

12 By letter 23 January 2004 the lawyers for the Respondent wrote yet again, this time to the Registrar of Retail Tenancy Disputes, basically in similar terms, submitting that the building in which the premises were situate was not a retail shopping centre, pleading Section 71, maintaining that the Tribunal was “unable to deal with any claim in respect of outgoings which arose or related to a period prior to (three years before the date of filing of the Application)”, and they forwarded a copy to then the solicitors for the Applicant.

13 It is plain from the above recital of facts that although it is true that the letters could not possibly amount to compromise letters within the general principles of Calderbank v. Calderbank [1976] Fam 93 it was plain that the Respondent maintained its position, as a matter of law and fact, and put the Applicant on notice that if it persisted with its Application and was unsuccessful then an order for costs would be sought.

14 The Respondent submitted that the only possible arguable area of dispute was in relation to what constituted “premises” within the meaning of that word as used in the Retail Leases Act. It was indeed necessary to deal with that issue because one had to find out what was meant by “premises” in order to work out what was meant by a “cluster of premises” and “at least No. 5 of the premises …” within the definition of retail shopping centre in Section 3 of the Retail Leases Act. I dealt with the issue of “premises” in paragraph [20] of my Judgment. Therein I determined that it was “all a matter of contract” such that “one needs to look at the way in which the lessor/landlord had delineated the areas of the building to be occupied by the tenant(s) and those areas are then individually described as “premises” such that and as a consequence “a tenant can occupy one premises or more than one premises such that it is each delineated or specified area that forms a “premises” for the purposes of the (Retail Leases) Act” and I reasoned that “in order to determine the delineated areas one needs to look at the lessor’s plans to see which areas have been delineated by the lessor” or “if there is no plan then one may have to look at the leases to identify with particularity the area(s) tenanted”.

15 This was a relevant exercise because the Applicant submitted that the lease for the liquor/convenience store should be regarded as more than one “premises” because part of it was defined or delineated “for the specific sale of liquor (pursuant to the Liquor Act 1982)” [23] and that therefore “I should regard the separate area used for the sale of liquor as separate premises for the purposes of the (Retail Leases) Act” [24] and I rejected that argument at [25] because once one adopts the view that the “premises” are defined by the lessor and can be found in the lessor’s leasing plans and the definition of “property leased” in the actual lease itself, then the fact that there are separately licensed premises within those premises does not create two separate premises for the purposes of the (Retail Leases) Act.”

16 It was submitted that the argument relating to the “chandlery” as being caught by Schedule 1 could not survive proper analysis (see my Judgment paragraphs [30], [36], [38] and [41]. In any event it was submitted that the evidence of the Applicant was found to have fallen well short of even prima facie proof of wholly or predominate use, even if one accepted that a chandlery could be equated or included in the phrase “hardware shops”. I found [41] that the onus was on the party asserting that the premises are so used within the definition and that the evidence in this case “fell well short of even prima facie proof of such use” and otherwise as I have set out above. It was submitted that the core issue in the case was whether there were five or more shops within the definition and that my decision was strongly against this conclusion. It was submitted that this was not the sort of case where there was evidence one way or the other and it was up to the Tribunal to make a decision on conflicting but believable evidence where the facts could “go one way or the other” but rather the decision of the Tribunal was strongly against the Applicant’s case such that the Applicant lost completely.

17 It was submitted that this was not a balancing act, there were not real issues that were properly arguable as to fact and/or law, but rather the Tribunal held strongly against the Applicant in circumstances where the Respondent’s position and submissions made from the very beginning were vindicated by the decision of the Tribunal.

18 It was further submitted that the Respondent had persistently told the Applicant effectively “you have no case” and one needs to look at the overall circumstances to see whether the circumstances were “out of the ordinary”. Commerciality, it was said, has to be brought into account and one needs to look at the whole situation, particularly where, in the face of strenuous objections maintained by the Respondent from the very beginning, the Applicant persisted with its claim for the whole of what it alleged was due to it by way of refund in the teeth, not only of the Respondent’s objections but also in the teeth of the plain words of Section 71. No concession was made by the Applicant right up to and including the hearing – the full claim was agitated and (it was submitted) the only “concession” was that if the Applicant was not entitled to the full claim then it was entitled to something from whatever the relevant date was, the Applicant contending that Section 71 had effect but the relevant date was 8 December 2000 (being three years prior to when the matter was referred to the Retail Tenancy Unit on 8 December 2003.

19 Finally, the Respondent submitted that in relation to the amount claimed in the Application the Applicant was seeking a refund of a substantial amount of money long after it had vacated the premises and that, in those circumstances, the Applicant had more than ample time to deeply consider the matter such that the application was not of the category of those filed urgently in circumstances where perhaps this deep and meaningful consideration would not necessarily have been applied. In other words, the Applicant had more than enough time to consider the effect of Section 71 and yet brought and maintained its position when a proper consideration of Section 71 would have resulted in the Applicant’s claim being considerably reduced by (as I was informed from the Bar table) about two-thirds.

Applicant’s Submissions

20 The Applicant submitted that this was not a case out of the ordinary. It submitted that something more than success must be shown and the hearing before me was the same as any other case where one party wins and another loses. The highpoint of the case was the argument about the meaning of the word “chandlery” and the use to which the demised premises were put. Although the Applicant failed on the predominate purpose point the manner in which the proceedings were conducted was relevant [55], that the preliminary issue determined the issue, that the “chandlery” was a novel point and it was reasonable to bring that issue before the Tribunal. It could not therefore be said that the case was hopeless and in any event the analysis of the word “premises” was also an argument that was reasonable to put before the Tribunal such that it could not be said that the case was unarguable or hopeless. In other words, the circumstances were not out of the ordinary.

21 With regard to the Section 71 point it was submitted this would not have knocked out the claim but rather would have resulted in a two-thirds reduction in the claim such that one-third of the claim (about $55,000.00) would have been left for determination had the Applicant succeeded on the preliminary points.

The Law

22 In order to obtain the benefit of a costs order in this Division one must satisfy the requirements of Administrative Decision Tribunal Act 1997 Section 88. Relevantly Section 88(1) states:

“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 there are special circumstances warranting an award of costs.”
23 There are two ways of approaching this sub-section. Firstly, one can approach it by identifying “special circumstances” and then determining whether those “special circumstances” warrant an award for costs. Alternatively, one can simply look for “special circumstances” that themselves warrant an award of costs. In my view there is effectively no difference between each approach but personally I favour the former as the more appropriate method of analysis of Section 88 simply because there will be cases where there are “special circumstances” but, as identified, would not warrant an award of costs. So, in order to properly analyse an application for costs one should seek out any “special circumstances”, identify those with reasonable particularity, and then determine whether they “warrant an award of costs”. In other words, there are two hurdles to overcome – see Gizah Pty Limited v. AXA Trustees Limited (No. 2) [2001] NSWADT 164 at [29].

24 It is now clear that this Division deals with commercial matters. All parties to a retail lease are parties engaged in trade and commerce for a reward. As such they must be regarded as commercial persons and is not to the point that one or either of them is unrepresented. Provided that “special circumstances” are found that would warrant the making of a costs order and there are no other disentitling factors, it seems to me that an order must be made – see Gizah at [33] and [34].

25 There are numerous decisions with regard to costs in this Division. There is no need for me to refer to all of them. Recent important decisions are those of the Appeal Panel in Sotiropoulos v. Mattana Coiffure (No. 2) Pty Limited [2004] NSWADTAP and Petria Pty Limited v. Makhoul [2005] NSWADTAP 12 at [18] – [20]. It is plain that “special circumstances” are “circumstances that are out of the ordinary, but without having to be extraordinary or exceptional” and one needs to look for those circumstances that are “out of the ordinary” and then see whether they warrant an award of costs, whether in relation to the whole of the proceedings, part thereof or a proportion thereof. After all, time can be spent on an “out of ordinary circumstance” but the time spent may be, considered in the light of the whole proceedings, either minimal (in which case there would be no costs order) or quantifiable (in which case there would be a costs order but of a limited kind).

26 The key initial question is: in this case are there any “special circumstances” being “circumstances that are out of the ordinary, but without having been extraordinary or exceptional”?

Special Circumstances

27 In my opinion the following aspects of the case constitute “special circumstances” within the meaning of that phrase in the context of this Division:

1. The failure of the Applicant to adduce evidence that constituted or amounted to prima facie proof that the premises occupied by the chandlery were used wholly or predominately for the carrying on of one or more of the businesses specified in Schedule 1 – Judgment [41].

2. The failure of the Applicant to adduce persuasive evidence that the Marina was promoted as a shopping centre – Judgment [45].

3. The failure of the Applicant, in the face of the clear words of Section 71(2) to modify or reduce its claim to meet the clear words of that Section.

28 Even if one accepted that the chandlery was caught by Schedule 1 then the evidence of the Applicant “fell well short of even prima facie proof of” whole or predominate use of the premises. In my opinion it is not an argument to assert that because there was an arguable point relating to the word “chandlery” or an arguable point relating to the meaning of the word “premises” within the ambit of the Retail Leases Act then these were important issues for the development or clarification of the law such that no costs order should be made. All of those arguments were predicated on the evidentiary base or foundation that the premises, howsoever described or defined, were used wholly or predominately for a Schedule 1 use. Without that at least prima facie evidence the other, and no doubt interesting arguments, had in fact no basis in evidence – after all, this is not a Tribunal that deals with aspects of philosophy or academic questions removed from the real world of evidence. There is, in my view, an absolute obligation upon an Applicant, before commencing proceedings, to at least be reasonably sure that the evidence that it proposes to adduce will at least reach a prima facie standard such that the basis or foundation for the advancement of legal argument (in this case on the meaning of “chandlery” and “premises”) is properly founded such that the whole court case is not merely an academic exercise. In my view the evidence in this matter fell far short of providing that proper basis or foundation.

29 There is an absolute obligation on a moving party to ensure that the evidence supports the submissions. That basic principle applies in all jurisdictions. In my view this was not a case where a party could say that on the facts adduced one view or the other was available to the Tribunal such that the Tribunal would have to decide between competing evidence, but rather the evidence demonstrated that the Applicant did not reach even prima facie proof of whole or predominate use.

30 In this regard it is important to understand that the Respondent, in the circumstances as I have outlined above, made it plain from the very beginning that not only was the matter, if agitated, to be strenuously defended but also the issue of whole or predominate use was a key core issue – in these circumstances the Applicant was on clear notice that it needed to look very carefully at its evidence to be sure that its evidence would, at the very least, constitute prima facie proof of such use. These are serious matters which are costly to conduct and which required (in my opinion) considerable attention in order to meet and overcome the evidentiary hurdles required to be met and overcome in order to form the foundation of the Applicant’s case.

31 Nextly, in my view the material (evidence) adduced by the Applicant in support of its contention that the Marina was promoted as a shopping centre fell far short of proof of that submission. Not a great deal of time was spent on this aspect at the hearing and I can understand an argument to the effect that the material in evidence was sufficient, on a prima facie basis to support the submission. However, and notwithstanding that understanding, in my opinion the material fell far short of supporting that contention and in the context of this Division that failure constituted “special circumstances”.

32 Finally, there is the Section 71 issue. The claim by the Applicant sought a refund from the Respondent of some $165,000.00, asserted to be over-payments and based upon the evidentiary foundation of the premises forming part of a retail shopping centre. In other words, the whole of the Applicant’s case was based on that submission (which only goes to underline the views that I have expressed above). It could not be said that the quantum in issue was not inconsiderable. Consequently, it was a serious issue to be tried. However, the claim for that amount in my view flew in the face of the clear words of Section 71(2). And it was not as if the Applicant was not on notice – the Respondent (through its lawyers) had given clear notice (as I have outlined above) that Section 71 applied and therefore the amount sought to be recovered could not possibly be sustained. This notwithstanding, the Applicant persisted in its submission that the full amount was payable, alternatively that Section 71(2) operated from the date of referral to the Retail Tenancy Unit. In my view both contentions could not possibly survive a proper understanding of Section 71(2) in its very plain words, such that their agitation constituted “special circumstances”.

33 The next question is: do those special circumstances warrant an award of costs?

34 In my opinion, they do. Although the phrase “special circumstances” is in the plural in my opinion it is sufficient to find a special circumstance (in the singular) which would warrant an award for costs. In this matter however I have found that there were three special circumstances and in my view those warrant an award of costs. Even if I am wrong about the second special circumstance in my opinion the first and the third on their own would warrant an award for costs. The whole basis of the Applicant’s case was built on a very shaky (to put it at its highest) foundation and in my view there is no call for me to reduce (by percentage or proportion) the Respondent’s entitlement to an award for costs in the whole of the circumstances of this case.

35 There was some small amount of time spent on preliminary issue B – this was a fall-back position adopted by the Respondent in case the Tribunal found in favour of the Applicant – very little time was spent on this argument and I am of the opinion that the Respondent’s failure on this point does not reduce its entitlement to an award for costs.

36 As I pointed out in Trust Company of Australia Limited v. Craig [2005] NSWADT 65 at [44] “the commencement of proceedings against a party should only be carried out after the greatest of consideration to ensure that proceedings are not commenced in circumstances where they should not have been commenced”. Similarly, in my opinion, proceedings should not be commenced unless the evidence properly and at least on a prima facie basis, supports the ultimate contentions.

37 The Respondent is entitled to an award of costs in its favour.

Orders

1. The Applicant pay the costs of the Respondent as agreed or as assessed, such costs to include the costs of this hearing 11 April 2005.