Tsimbakis v BlackRock Investment Management (Australia) Limited (No. 2)

[2010] NSWADT 260

CITATION:	Tsimbakis v BlackRock Investment Management (Australia) Limited (No. 2) [2010] NSWADT 260
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Aristotelis Stanley Tsimbakis RESPONDENT BlackRock Investment Management (Australia) Limited
FILE NUMBER:	095031
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	2 September 2010
DATE OF DECISION:	2 November 2010
BEFORE:	Olsson E, SC - Deputy President; Harrison B - Non-Judicial Member
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Evidence Act 1995
CASES CITED:	Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (No. 2) [2007] NSWADT 58 Barsoum v Glebe Administration Board (No. 2) [2002] NSWADT 174 Calderbank v Calderbank [1975] 3 All ER 333 Gizah Pty Limited v AXA Trustees Limited (No. 2) [2001] NSWADT 164 Rucom Pty Ltd and Anor v Multiplex and Ors [2010] NSWADT 1 Salon Today Pty Ltd v M.M.I.R. Pty Limited [2009] NSWADT 71
REPRESENTATION:	APPLICANT C Lindo, Macarthur Law Group RESPONDENT L Arblaster, Holding Redlich Lawyers
ORDERS:	Applicant to pay the respondent’s costs of the proceedings

1 The Tribunal delivered its decision in this matter on 27 July 2010 and made orders that:

(i) Application is dismissed;

(ii) Declaration that Applicant’s continued possession of premises is pursuant to a holding over of lease;

(iii) Costs reserved and parties to file and serve submissions as to costs within 14 days.

2 The Tribunal gave the parties leave to file submissions as to costs, and both parties have done so.

3 Section 88 of the Administrative Decisions Tribunal Act 1997 (“the Act”) was amended on 1 January 2009. Read with Schedule 5, Part 11, Section 43(3), it is clear that the amendment to s 88 applies to “applications and proceedings that were made on or commenced, but not finally determined, before the commencement of the substantive amendment concerned”. Accordingly, it is the new form of s 88 of the Act that pertains to this matter.

4 The Tribunal is required to have regard to the terms of s 88 itself, which provides as follows:

88 Costs

(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.

(2) The Tribunal may:

(a) determine by whom and to what extent costs are to be paid, and

(b) order costs to be assessed on a basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis.

(3) However, the Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs.

(4) In this section, "costs" includes:

(a) costs of or incidental to proceedings in the Tribunal, and

(b) the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application.

5 The proceedings are commercial in nature, arising from the relationship between two parties who are acting in trade and commerce. One significant effect of the amendment to s 88 is that the notion of ‘fairness’ is to broaden the basis upon which costs might be awarded, particularly in a jurisdiction that is commercial in nature. In Salon Today Pty Ltd v M.M.I.R. Pty Limited [2009] NSWADT 71, the Tribunal said:

“What the Parliament has done…is to recognise that there is a need for this Tribunal to be more flexible and widen the scope of a litigant’s entitlements to costs. This is a concept generally that is now accepted in this Division [Retail Leases Division]….” (paragraph [72])

6 The Tribunal considered the nature of the Retail Leases Division in the context of costs in Rucom Pty Ltd and Anor v Multiplex and Ors [2010] NSWADT 1. Having reviewed the authorities, Judicial Member Molloy said at paragraph 37:

“So, it is plain to me, that not only is this Division a commercial division dealing with commercial issues between lessors and lessees in a retail lease environment, but, and in addition, proceedings should only be commenced in this Tribunal after very careful consideration of the merits of the case: see Trust Company of Australia Ltd v Craig [2005] NSWADT 65 at [44]. After all, commencing proceedings without such consideration inevitably results in considerable expense being incurred by the other party and one might not unreasonably ask: “why should the other party have to bear those expenses when the proceedings should not have been commenced in the first place?””

7 In the present case, the applicant was unsuccessful in his application.

8 The respondent made an application for costs on 25 August 2010. In doing so, it points to four written offers it made to settle the proceedings (from 13 August 2009 to 27 August 2009). Each of those offers contained an offer to lease the current premises at the current rental rate. All of the offers were rejected. All of the offers represent a better result for the applicant than that decided by the Tribunal.

9 The first offer was made on the same date upon which the amended application was filed in the Tribunal.

10 The respondent also submitted that the applicant’s case was weak and pointed to the fact that the applicant’s affidavit omitted crucial evidence which was forthcoming only in cross examination and that his evidence generally was not supported by the contemporaneous correspondence.

11 The respondent contended that the applicant unreasonably prolonged the case by filing evidence and a notice to produce documents which were largely irrelevant to the proceedings.

12 It was submitted on his behalf however (no doubt correctly) that costs do not follow the event unless the Tribunal considers, in the terms of s 88 of the Act, that it is fair to do so.

13 The applicant, on the other hand, submitted that he had no choice but to commence proceedings in circumstances where he was threatened with the cessation of a lease that had continued in one form or another for the previous decade. It was said on his behalf that the respondent had declined to mediate the dispute prior to commencement of proceedings.

14 The applicant also submitted that the business was his only source of income and the financial support for him and his young family.

15 It was also said that the applicant’s claim, whilst ultimately unsuccessful, was not devoid of merit or otherwise untenable.

16 Accordingly, it was said, there should be no departure from the primary position found in s 88, namely the order ought to be that each party pay its own costs.

Decision

17 Clearly, on their terms, three offers were made to resolve the dispute which were more favourable to the respondent than the terms of the Orders made by the Tribunal. The offers were not expressed to be ‘Offers of Compromise’ nor were they expressly made in the terms of what is generally known as a Calderbank offer.

18 The first offer, made on 13 August, was for a 5-year lease at the same rent the applicant was then paying. It was rejected, the applicant noting that at least with respect to the rent, no compromise was contained within it. The counter offer, made on 20 August, sought a lease in the same terms as that on offer but for a period of 6 months with an option to renew for 2.5 years.

19 The next offer by the respondent (20 August) was for a 3-year lease on the same terms as previously offered. The applicant accepted 3 years with an option to renew for 3 years but sought a substantial reduction in rent and clauses protecting the applicant from competition from other tenants.

20 By letter dated 24 August, the respondent made a further offer, confirming a 3-year lease with 3-year option to renew but with the same terms as previously offered.

21 The applicant rejected it (26 August) and sought a reduction in the size of premises on offer, to 80 square metres, and a concomitant reduction in rent.

22 The respondent made a final offer in the same terms as the offer of 24 August.

23 The offer was rejected by letter dated 28 August and a counter offer made, reducing the size of the premises and rent.

24 In Barsoumv Glebe Administration Board (No. 2) [2002] NSWADT 174, Judicial Member Molloy said, at [32]:

“offers made ought to be properly considered and when rejected the rejecting party must understand that a costs order may flow if the rejecting party does not obtain a more favourable verdict”.

25 The respondent’s offers were quite capable of acceptance and if accepted, would have disposed of all issues between the parties. Three questions arise, however: firstly, the offers were exchanged over a short period of time, at which some but not all of the evidence had been served. Were the parties sufficiently apprised of the issues such that they could make an informed evaluation of the offers?

26 Secondly, since none of the offers were expressed to be Calderbank offers or offers the rejection of which might carry costs consequences, should it be assumed that the respondent intended them to have that effect and should it be assumed that the applicant read them in that context?

27 Thirdly, none of the offers purported to examine the merits of the case or identify precisely the compromise proposed by the offering party. Should Calderbank principles apply in such a situation?

28 It has been stated before – see Gizah Pty Limited v AXA Trustees Limited (No. 2) [2001] NSWADT 164 and Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (No. 2) [2007] NSWADT 58 and elsewhere – that this Division of this Tribunal is a commercial division in that it deals with the commercial relations between lessors and lessees in particular commercial circumstances. It is for that reason that the Retail Leases Act requires, as does the Tribunal, that parties engage in mediation in a genuine attempt to resolve their differences. Indeed, it is now common (if it ever was uncommon) for attempts to be made, prior to litigation and in the course of litigation, by parties and their lawyers to resolve cases without the issues going to a full hearing.

29 It is important to remember that this Tribunal, like all Courts and Tribunals, deals with disputes between parties. Over hundreds of years courts have endeavoured to protect the interests of the party who is successful in the litigation on the basis that the successful party would not have had to travel down the litigious path and incur legal costs had it not been for the actions of the unsuccessful party. In other words, there are two sides (at least) to every argument and courts have been at pains to protect the interests of the successful party: see Salon Today Pty Limited v M.M.I.R. Pty Limited at paragraph [5] above.

30 A review of the authorities leads to the conclusion that there is no prima facie presumption arising out of an offer that is not accepted where the party not accepting the offer of compromise achieved no better result at trial, rather it is a factor to be taken into account in determining whether the offeree acted unreasonably. In the light of the Evidence Act 1995 and the general appreciation of commercial litigation, it does not make any difference whether an offer was made in open court, by some form of letter or by a formal Offer of Compromise pursuant to particular rules of a particular court. The real issue is whether in all the circumstances the offer was properly made (having regard to the whole course of the litigation) and whether it was unreasonably rejected.

31 The Tribunal accepts that the background to the dispute was such that the applicant felt he had no choice but to commence proceedings (which he did, by application for an urgent interim order on 3 March 2009). The Tribunal member who conducted the hearing for interim relief amended the first application after comments. The second amendment to the application necessitated the vacation of a hearing date.

32 The applicant filed and served seven affidavits, two of which were not read at the hearing. There is some substance to the argument of the respondent that the applicant’s conduct prolonged the proceedings but the Tribunal is not persuaded that it was unreasonable in the circumstances.

33 The respondent’s first offer to settle the proceedings was made on 13 August 2009; the date on which the applicant filed his further amended application. The parties, by virtue of the detail contained in the evidence filed by that date and by the terms in which the offers and counter offers were expressed, were well appraised of the issues between them.

34 Should the Tribunal assume that the parties anticipated that the offers would be relied upon in a costs application? Legal practitioners represented both parties and both plainly understood the significance of making offers and counter offers. The Tribunal is prepared to accept that the parties did or ought to have anticipated that the letters would be relied upon in a costs application.

35 None of the offers, though, were expressed as Calderbank offers and none made an effort to persuade the other party as to the reasonableness of the offer contained therein. There was no analysis of the evidence or the cause of action except in the first letter from the respondent which referred to the inconsistencies in the applicant’s statements and to his on-going breaches of lease (late payment of rent and failure to provide turnover figures).

36 Taking all of the abovementioned circumstances into account, the Tribunal is not persuaded that the conduct of either party was such that the usual order for costs be disturbed but it is satisfied that each of the respondent’s offers was capable of acceptance, was reasonable given the evidence available to it and that it was unreasonable for the applicant to insist on a reduction in the size of premises and in rent. Therefore the Tribunal is of the view that it is fair that a costs order in the respondent’s favour ought to be made in the light of the offers made to settle the proceedings.

37 No application was made for indemnity costs and given the deficiencies in the offers referred to in paragraph [35] above, the Tribunal would not be minded to order indemnity costs. Accordingly, the order will be that the applicant pays the respondent’s costs of the proceedings.