Zeaiter Corporate Holdings Pty Ltd v Satchitanantham (No2)

[2009] NSWADT 70

CITATION:	Zeaiter Corporate Holdings Pty Ltd v Satchithanantham (No 2) [2009] NSWADT 70
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Zeaiter Corporate Holdings Pty Ltd REPSONDENT Hemalathasothy Ranjini Satchithanantham
FILE NUMBER:	055131
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	19 August 2008
DATE OF DECISION:	2 April 2009
BEFORE:	Chesterman M - Deputy President; Fagg N - Non-Judicial Member ; Griffiths G - Non-Judicial Member
CATCHWORDS:	Costs - Retail Leases Act
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Administrative Decisions Tribunal Amendment Act 2008 Retail Leases Act 1994
CASES CITED:	Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 Calderbank v Calderbank [1975] 3 All ER 333 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 De Luca & Anor v Scuccimarra (No 2) [2007] NSWADT 245 Dykes & Wildie v Heatherway Pty Ltd (No 2) (RLD) [2007] NSWADTAP 46 Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 Jones v Bradley (No 2) [2003] NSWCA 258 Ng v Chong [2005] NSWSC 385 Restuccia & Ors v Entasil Pty Ltd (No 2) [2008] NSWADT 313 Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43 Wood & Anor v Bergman (No 2) [2003] NSWADT 175 Zeaiter Corporate Holdings Pty Ltd v Satchithanantham [2008] NSWADT 165
REPRESENTATION:	APPLICANT D Edwards, solicitor RESPONDENT T Satchithanantham, agent
ORDERS:	1.The order made on 9 August 2006 for payment of costs of the Applicant/Cross Respondent by the Respondent/Cross Applicant is to take effect as an order for immediate payment 2. The Respondent/Cross Applicant is to pay 80% of the balance of the Applicant/Cross Respondent’s costs of these proceedings on a party-party basis, as agreed or assessed.

Introduction

1 This decision relates to application for costs filed by the Applicant/Cross Respondent in these proceedings, Zeaiter Corporate Holdings Pty Ltd (‘Zeaiter’). The Tribunal has jurisdiction in the proceedings because they concern a ‘retail tenancy dispute’: that is, a dispute between the parties to a lease that is governed by the Retail Leases Act 1994 (‘the RL Act’).

2 The proceedings were determined in Zeaiter’s favour in a Tribunal decision delivered on 10 June 2008 (Zeaiter Corporate Holdings Pty Ltd v Satchithanantham [2008] NSWADT 165). In that decision (‘the principal decision’), the Tribunal made the following orders:-

1. The Respondent/Cross Applicant is to pay to the Applicant/Cross Respondent the sum of $70,187.78, comprising (a) a principal sum of $52,330.01 and (b) interest amounting to $17,857.77.

2. The cross claim filed by the Respondent/Cross Applicant is dismissed.

3. Any application for costs in these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.

3 The cross claim made by the Respondent/Cross Applicant, Ms Hemalathasothy Ranjini Satchinantham (‘Mrs Satchi’), included allegations of unconscionable conduct on Zeaiter’s part. Accordingly, the Tribunal was and remains constituted in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’). It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only.

4 In an application filed together with supporting submissions on 8 July 2008, Zeaiter sought an order that Mrs Satchi should pay its costs of the proceedings as agreed or assessed on a party/party basis up to a specified date (2 August 2006) and thereafter on an indemnity basis. In the alternative, Zeaiter claimed its costs of the proceedings as agreed or assessed on a party/party basis. The application and submissions were signed by Zeaiter’s solicitor in these proceedings, Mr Darren Edwards.

5 On 19 August 2008, Mrs Satchi filed opposing submissions. They were signed by her husband, Mr Thambiappah Satchithantham (‘Mr Satchi’), who has acted as her agent in these proceedings.

6 It should be added here that Mr and Mrs Satchi agreed during the proceedings to this abbreviation of their surname.

7 Mrs Satchi has lodged an appeal against the principal decision to an Appeal Panel of the Tribunal. In preliminary hearings relating to the appeal, the position initially taken with regard to the costs of the proceedings at first instance was that they should not be determined until the appeal had been disposed of. But at a directions hearing on 5 March 2009 the Appeal Panel directed that Zeaiter’s application for costs should be determined before the appeal was heard. It requested that this determination be made no later than 7 May 2009.

8 The Appeal Panel also directed that the Tribunal, in resolving the matter of costs, should first decide whether to accede to an application made by Mrs Satchi for an oral hearing. No reasons have, however, been advanced in support of this application, either at the directions hearing on 5 March 2009 or in any other communication with the Tribunal.

9 The Tribunal’s power to determine matters ‘on the papers’ – that is to say, without a hearing – stems from section 76 of the ADT Act. This is in the following terms:-

76 Circumstances in which hearing may be dispensed with

The Tribunal may determine proceedings by considering the documents or other material lodged with or provided to the Tribunal and without holding a hearing if it appears to the Tribunal that the issues for determination can be adequately determined in the absence of the parties.

10 Having considered the written submissions filed by both parties, the Tribunal has concluded that the questions raised in them can indeed be ‘adequately determined in the absence of the parties’. It notes that in this Division (the Retail Leases Division), if not also in other Divisions of the Tribunal, it is standard practice for applications for costs to be determined ‘on the papers’. It attaches significant weight to the fact that, as just indicated, no reason for departing from this practice in the present case has been put before it.

Relevant aspects of the proceedings

11 These proceedings were originally instituted by Zeaiter in the Local Court at Bankstown, as long ago as 8 February 2005. They related to a registered lease of retail shop premises at Wentworthville (‘the Registered Lease’) that Zeaiter, as owner of the premises, had granted to Mrs Satchi.

12 The term of the Registered Lease was stated in it to be three years, commencing on 15 January 2004, with an option to renew for a further three years. The rent stated to be payable was $4,766.67 per month (plus GST), which equates to $1,100.00 per week (plus GST).

13 On 12 July 2004, Zeaiter terminated the Registered Lease and repossessed the premises, pursuant to a clause entitling it to do so if rent and/or outgoings were due but unpaid over a period of more than 14 days.

14 Zeaiter claimed that Mrs Satchi owed it the sum of $52,330.01 plus interest, comprising unpaid rent and outgoings, damages for lost rent and outgoings, and expenses incurred in reletting the premises.

15 During June 2005, Mrs Satchi filed a cross claim in the Local Court. It was chiefly based on a contention that, by virtue of events preceding the execution of the Registered Lease, the parties had already entered into a lease, binding upon both of them, under which the monthly rent was not $4,766.67 plus GST, but only $1,100.00 plus GST.

16 The principal allegations made by her in support of the defence and the cross claim were as follows: (a) that Mr Satchi, who handled all relevant dealings in this case on her behalf, and Mr Tony Khoury, an estate agent whom Zeaiter had employed to find a tenant for the premises, agreed in November 2003 that the rent should be $1,100.00 per month plus GST; (b) that a one-page document (‘the Agreement’) prepared by Mr Khoury to record the essential terms of the proposed lease showed this amount as the monthly rent (though it in fact said ‘Rental: $1,100 + GST’ without indicating whether this was the monthly or the weekly rent); (c) that during January 2004 Zeaiter’s solicitor, Mr Tim Olliffe, sent to Mrs Satchi a disclosure statement and an unexecuted memorandum of lease (‘the Draft Lease’), each of which also stipulated this amount as the monthly rent; (d) that in reliance on this agreement on a monthly rent of $1,100.00 plus GST, Mr Satchi spent a substantial sum on renovating the premises during January 2004; (e) that after Mr Olliffe had been advised by Zeaiter in the later part of this month that the amount of $1,100.00 was in fact the weekly rent only and had passed on this advice to Mrs Satchi’s solicitor (Ms Christine Karthikeyan), Mr Khoury conveyed a threat to Mr Satchi that Mrs Satchi would be evicted if she did not agree to sign the Registered Lease, which stated the monthly rent to be $4,766.67 plus GST; and (f) that Mr Khoury also told Mr Satchi that this increased amount of rent would be accepted by Zeaiter as rent both for the premises and for other premises on the ground floor of the same building.

17 Mrs Satchi maintained that for these reasons Zeaiter’s repossession of the premises on 12 July 2004 was unlawful. She claimed that the Tribunal should make a declaration to this effect and should order Zeaiter to restore possession of the premises to her. She also claimed that Zeaiter was liable to her for damages totalling $520,321.43, together with interest and costs. The principal component of this damages claim was alleged loss of profits of the business conducted at the premises.

18 In a letter to Zeaiter’s solicitors dated 25 July 2005, Mrs Satchi advised that in addition to applying for the Local Court proceedings to be transferred to the Tribunal, she would file an unconscionable conduct claim in the Tribunal.

19 The proceedings, having been transferred to the Local Court at Sydney during August 2005, were further transferred by consent on 15 September 2005 to the Tribunal, pursuant to section 75 of the RL Act.

20 A Tribunal hearing set down for 9 and 10 August 2006 was vacated at Mrs Satchi’s request. She was directed to file particulars of her unconscionable conduct claim within a specified period. They were in fact filed on 31 August 2006. They were accompanied by a claim that Zeaiter, through its principal director (Mr Mark Zeaiter) and its agent Mr Khoury, had engaged in conduct that was misleading or deceptive, within the meaning of sections 62C – 62E of the RL Act.

21 Ms Satchi maintained throughout the proceedings her claim that Zeaiter was liable to her for damages totalling $520,321.43, together with interest and costs. But in the Tribunal she abandoned the amount by which this figure exceeded $400,000.00, since this is the upper limit of the Tribunal’s jurisdiction under the RL Act.

22 Following a number of interlocutory procedures, including an unsuccessful application by Mrs Satchi for an order dismissing Zeaiter’s claim on the ground that it had not complied with Tribunal directions, a hearing during which the parties put forward their evidence took place over four days during September and October 2007. The filing of written submissions by the parties then took a further five months.

23 Having considered the evidence and submissions, the Tribunal delivered the principal decision on 10 June 2008. In that decision, the Tribunal upheld Zeaiter’s claim and dismissed Mrs Satchi’s cross claim.

24 The principal findings of fact on which the principal decision was based were stated in these terms at [109]:-

(a) the rent for the Premises agreed upon between Mr Satchi and Mr Khoury in their negotiations during November 2003 was $110 per week plus GST; (b) it is not established that any significant amount was spent by Mr or Mrs Satchi on renovating the Premises before Mr Satchi was told, on 23 or 24 January 2004, of the increased rent; (c) Mr Khoury did not, on or about 24 January 2004, convey to Mr Satchi a threat of eviction if the extra amounts due for rent and security deposit were not paid within a short period of time; and (d) Mr Khoury did not ever indicate to Mr Satchi that an increased rent of $1,100 per week (plus GST) would be accepted by Zeaiter as sufficient for both the Premises and the ground floor premises.

25 The matters to which the Tribunal attached importance in making these findings included the following (see the decision at [103 – 108]): (a) that after Mr and Mrs Satchi were advised of the increased rent late in January 2004, neither of them told their solicitor, Ms Karthikeyan, that in November 2003 the lower rent of $1,100.00 per month plus GST had been agreed on between Mr Satchi and Mr Khoury and might therefore be binding on Zeaiter, even though they did instruct her to raise other matters relating to the lease in her correspondence with Mr Olliffe; (b) that equally, neither of them told Ms Karthikeyan that Mr Khoury had threatened eviction if Ms Satchi refused to execute the Registered Lease; and (c) that the Tribunal, while characterising Mr Khoury as a ‘not particularly reliable’ witness, held that his evidence should be accepted in preference to that of Mr Satchi because it had significant doubts regarding Mr Satchi’s veracity and his capacity to remember relevant conversations accurately.

26 In the principal decision, the Tribunal (at [111 – 116]) considered and rejected two line of argument which had not been advanced on Mrs Satchi’s behalf but which might have provided grounds for upholding Mrs Satchi’s cross claim.

27 The first of these was that since Mrs Satchi both executed the Draft Lease and acquired possession of the premises before being told that the Draft Lease misstated the rent, a binding lease arose through the operation of section 8 of the RL Act. The Tribunal rejected this on the grounds that there was at this time no ‘consensus’ between lessor and lessee as to what the rent should be and that Mr Olliffe had stipulated more than once in correspondence that no binding lease arose until a formal lease had been executed by both parties.

28 The second was that Zeaiter was estopped from denying that an agreement to lease, incorporating the terms of the Draft Lease, had been created. The Tribunal’s reasons for rejecting this were that the figure of $110.00 plus GST had been agreed upon as weekly rent in the negotiations during November 2003 and that there was no credible evidence of significant expenditure on renovation of the premises during January 2004.

29 At [118 – 119], the Tribunal considered and rejected Mrs Satchi’s contention that Zeaiter had been guilty of unconscionable conduct. At [120], it dismissed her claim of misleading or deceptive conduct on the ground that the relevant provisions of the RL Act (sections 62C – 62E) did not apply to conduct before 1 January 2006.

30 At [121 – 130], the Tribunal held that Zeaiter’s termination of the Registered Lease was lawful and that it was entitled to recover from Mrs Satchi the amounts claimed for unpaid rent and outgoings, damages for lost rent and outgoings, expenses incurred in reletting the premises and interest.

Relevant principles regarding costs

31 Under section 77A of the RL Act, costs in Tribunal proceedings instituted under the Act may be awarded under section 88 of the ADT Act. As illustrated in Dykes & Wildie v Heatherway Pty Ltd (No 2) (RLD) [2007] NSWADTAP 46, this section permits orders for payment of a proportion of a party’s costs, as well as for payment of all the costs incurred.

32 At the time when the principal decision was delivered, and indeed when the parties filed their submissions on costs, the Tribunal could not make a costs order under section 88 unless a requirement of ‘special circumstances warranting an award of costs’, set out in section 88(1), was satisfied.

33 Upon the commencement, on 1 January 2009, of the Administrative Decisions Tribunal Amendment Act 2008, this requirement of ‘special circumstances’ in section 88(1) was replaced by a provision (being a new section 88(1A)) to the effect that the Tribunal could only award costs in proceedings before it if it was ‘fair’ to do so. This provision requires the Tribunal to have regard to a number of matters that had already been listed in the Tribunal’s Practice Note on Costs (No. 12, October 2006 – hereafter ‘the Practice Note’). These matters are listed below (at [42]).

34 Clause 43(2)(i) of Part 11 of Schedule 5 to the ADT Act (which is headed ‘Savings and transitional provisions’) states that the amendment to section 88 effected by the amending Act of 2008 extends to ‘applications and proceedings that were made or commenced, but not finally determined’ before the commencement of the amendment.

35 In the Tribunal’s opinion, however, the costs application to which this decision relates is governed by section 88 in the form that it took before the amendment. The reason is that the principal decision and the filing of the application and the submissions on costs all preceded the commencement of the amendment. Accordingly, the requirement of ‘special circumstances’, not the new criterion of ‘fairness’, must be satisfied.

36 The case law on the requirement of ‘special circumstances’, 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 Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150, 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 and Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43).

37 ‘Special circumstances’ are defined in this 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.

38 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.’

39 Three types of situation that have been held to constitute ‘special circumstances’ in retail tenancy proceedings are relevant to the determination of costs in this case.

40 The first of these is where the proceedings instigated, or the grounds of defence raised, by the party against whom a costs order is sought 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. In the Practice Note, it is stated that the Tribunal should have regard to ‘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 of in law’.

41 The second is where (a) the successful party in the proceedings has made an offer of compromise of the dispute before the conclusion of the proceedings; (b) the unsuccessful party has unreasonably rejected the offer; and (c) the terms of the offer were more favourable to the unsuccessful party than the orders made by the Tribunal. In a number of cases (for example, De Luca & Anor v Scuccimarra (No 2) [2007] NSWADT 245) the Tribunal has held this situation to constitute ‘special circumstances warranting an award of costs’ by way of analogy with costs rules in the Supreme and District Courts and the principles laid down in Calderbank v Calderbank [1975] 3 All ER 333.

42 Thirdly, as indicated in the Practice Note, ‘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.

43 In its submissions on costs, Zeaiter referred to several of the categories of ‘special circumstances’ that are described in the preceding five paragraphs. It is convenient to discuss each of these categories separately.

44 As was generally the case with the submissions made by Mr Satchi on behalf of his wife at the hearing of the case (see the principal decision at [117]), the submissions that he filed on the matter of costs, although lengthy, contained only a small quantity of material directly addressing the questions to be resolved. As it endeavoured to do in preparing the principal decision (see the decision at [7]), the Tribunal has sought in this judgment to make allowances for his lack of legal training.

Claim of ‘grossly unreasonable’ conduct that was ‘out of the ordinary’

45 Citing the judgment of Santow JA in Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 (see [38] above), Zeaiter argued that because Mrs Satchi had engaged in conduct that was ‘out of the ordinary’ and was ‘grossly unreasonable’, there were ‘special circumstances warranting an award of costs’ in its favour.

46 Zeaiter identified the conduct in question as follows. First, Mrs Satchi ignored a letter dated 20 July 2005 from its solicitor, Mr Edwards, to Mr Satchi, which asserted that her defence and cross claim were without merit and put her on notice that if she did not withdraw them and pay Zeaiter’s claim in full, it would seek a costs order against her. Secondly, she ignored or failed to accept an offer of settlement conveyed to her in a letter from Mr Edwards dated 2 August 2006, even though her claim of unconscionable conduct was ultimately found to be baseless. Thirdly, she filed and served ‘an enormous amount of affidavits’ containing ‘no substantial evidence’ and she applied for the proceedings to be adjourned, with the consequence that Zeaiter incurred ‘an enormous amount of costs for what should have been a relatively simple matter’.

47 In the Tribunal’s opinion, none of these three instances of conduct on Mrs Satchi’s part amounts to ‘grossly unreasonable’ conduct that was ‘out of the ordinary’, in the sense that this concept was invoked in Cripps v G & M Dawson Pty Ltd. The Court of Appeal was dealing in that case with lessors who compelled the lessee to resort to litigation and incur substantial legal costs by ‘relying upon their status as the registered proprietors of the freehold and the doctrine of indefeasibility of title to wrongly deny registration and consequently assignment of the lease’ (see Santow JA at [60]). The Court characterised the lessors’ conduct as akin to equitable fraud.

48 As will appear below, however, the second and third instances of conduct by Mrs Satchi that Zeaiter relied upon in this context are relevant to other aspects of its claim that ‘special circumstances’ exist.

The ‘relative strengths’ of the parties’ claims

49 Zeaiter argued that it should have all its costs of the proceedings on the ground that Mrs Satchi’s defence and cross claim were ‘without merit’ and ‘had no prospects of success’.

50 In making this argument, Zeaiter relied on the Tribunal’s findings that the rent for the premises agreed upon between Mr Satchi and Mr Khoury in their negotiations during November 2003 was the higher amount ($110 per week plus GST) and that if Mr Khoury had conveyed the threat of eviction alleged by Mr Satchi, Mr or Mrs Satchi would undoubtedly have mentioned it to Ms Karthikeyan. Zeaiter also relied on (a) the Tribunal’s doubts regarding Mr Satchi’s veracity and his capacity to remember relevant conversations accurately, and (b) the Tribunal’s conclusion that there were no grounds to support Mrs Satchi’s claim that Zeaiter and/or its agents engaged in unconscionable conduct.

51 The Tribunal agrees that the description ‘unmeritorious’ can properly be applied to Mrs Satchi’s unconscionable conduct claim. This claim was bound to fail because the only matter asserted by her against Zeaiter or its agents that might conceivably have constituted unconscionable conduct within the meaning of section 62B of the RL Act was the alleged threat of eviction conveyed by Mr Khoury. Even if, contrary to the Tribunal’s finding, Mr Khoury did suggest that a refusal by her to pay the increased rent might lead to eviction, this would not have amounted to ‘undue influence or pressure’ or ‘unfair tactics’ by a lessor’s agent, within the meaning of section 62B(3)(d), because it could not have been characterised as ‘highly unethical’ conduct, involving ‘a high level of moral obloquy’. As the Tribunal said in the principal decision at [118], conduct falling short of this level of impropriety is not ‘unconscionable’ within section 62B: see Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583.

52 A further major defect in Mrs Satchi’s unconscionable conduct claim was that she adduced no material evidence in support of her assertion that Zeaiter’s behaviour caused her to sustain significant economic loss, let alone that this loss exceeded $500,000.00.

53 Mrs Satchi’s claim of misleading or deceptive conduct was also wholly lacking in merit. This is for the simple reason that, as already pointed out, she sought to rely on provisions of the RL Act that were not in force when the alleged conduct occurred.

54 The Tribunal takes a different view, however, of Mrs Satchi’s claim that Zeaiter’s termination of her lease was wrongful. This claim was sustainable if it could be held that as soon as she had executed the Draft Lease and taken possession of the premises, a lease providing for monthly rent of $1,100.00 plus GST was created. The principal reason why it was rejected in the principal decision was the Tribunal’s finding that Mr Satchi and Mr Khoury, in the course of their negotiations during November 2003, agreed that this amount was to be the weekly rent, not the monthly rent. To a significant extent, the Tribunal based this finding on its conclusion that Mr Satchi was a distinctly unsatisfactory witness. When however it is borne in mind that Mr Khoury was also an unreliable witness and that the Agreement prepared by Mr Khoury following the negotiations was utterly unhelpful on this question, Mr Satchi’s assertion that this was the rent agreed on, at least according to his understanding of the negotiations, is not wholly without credibility.

55 Having taken into account Mr Satchi’s later conduct – notably in not instructing Ms Karthikeyan to object to the increase in rent contained in the Registered Lease – the Tribunal came to the conclusion that Mr Khoury’s testimony on this issue was to be preferred. But for reasons analogous to those set out in Restuccia & Ors v Entasil Pty Ltd (No 2) [2008] NSWADT 313 at [14 – 17], this is not enough to warrant categorising as wholly unmeritorious Mrs Satchi’s assertion that the termination of the lease was wrongful. This view of the matter is not affected by the fact that, as just stated with reference to her unconscionable conduct claim, her evidence on the issue of economic loss was seriously defective.

56 It is open to an applicant for costs seeking to establish ‘special circumstances’ under section 88 to argue that, even if the opposing party’s case was not ‘wholly unmeritorious’, it was nonetheless very weak in comparison with the applicant’s case. In the Tribunal’s opinion, this argument is available to Zeaiter. Its damages claim, founded on the provisions governing rent and termination for non-payment of rent in the Registered Lease and the undisputed evidence that rent was in arrears, was substantially stronger than Mrs Satchi’s claim that the rent payable was that stated in the Draft Lease.

57 After a good deal of hesitation, the Tribunal has concluded, however, that this marked disparity in the strength of the opposing parties’ claims should not be held to constitute ‘special circumstances’ warranting an award of all of the costs of the proceedings to Zeaiter.

58 The Tribunal’s reason for so concluding is that agents engaged by Zeaiter – notably Mr Khoury, but also Mr Olliffe and those employed by him in dealing with the lease – bear significant responsibility for the confusion that arose regarding the rent payable under the lease. They created documents – the Agreement and the Draft Lease – that either failed to indicate what the agreed rent really was or stated the rent incorrectly. In so far as Mrs Satchi’s claim that the lease was wrongfully terminated had merit, it was chiefly because these documents, purporting to record the agreement that had been reached, had been sent to her.

59 To the extent, therefore, that Zeaiter’s claim for all its costs of these proceedings was based on its submissions relating to the comparative strengths of the parties’ cases, it is not upheld. As will appear below, however, the relative weakness of aspects of Mrs Satchi’s case is relevant to other aspects of Zeaiter’s application for costs.

Zeaiter’s offer of compromise

60 As already mentioned, Mr Edwards, in a letter dated 2 August 2006 sent to Mrs Satchi, conveyed an offer by Zeaiter to ‘resolve the proceedings, on a commercial basis’ on the following terms: (a) that she pay $40,000.00 to Zeaiter within 28 days, ‘in full and final settlement’ of the proceedings; (b) that both parties discontinue all claims and cross claims in the Tribunal by consent; and (c) that each party pay their own costs.

61 The letter was headed ‘Without Prejudice Except As To Costs’. It stated that the offer was made in accordance with the principles expressed in Calderbank v Calderbank [1975] 3 All ER 333 and that Zeaiter reserved the right to tender the letter on the matter of costs if it was successful at the hearing.

62 The letter also pointed out that the proceedings were listed for hearing on 9 and 10 August 2006. It indicated that due to ‘time constraints and the need to prepare for hearing’ the offer would remain open for acceptance until 4 p.m. on 7 August 2006, but would be withdrawn.

63 Zeaiter indicated its submissions on costs that no response to this letter was received. Mrs Satchi’s submissions made no reference to the letter or to the offer conveyed in it.

64 As Zeaiter pointed out in its submissions on costs, it was held entitled in the principal decision to an amount by way of damages ($52,330.01 plus interest of $17,857.77) substantially exceeding the amount ($40,000.00) stipulated in the offer. It may be observed that at the time of the offer the amount claimed was $51,530.66 and that interest, if calculated on the same basis as in the principal decision, would have increased the amount awarded to about $60,000.00. On any view of the matter, therefore, the offer did, in the Tribunal’s opinion, embody a genuine element of compromise.

65 As emphasised by the Appeal Panel, however, in Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43, a finding of ‘special circumstances’ will not be made on the ground of rejection of an offer to settle the proceedings unless the rejection was ‘unreasonable’.

66 In Court of Appeal and Supreme Court cases applying the principles stated in Calderbank v Calderbank, it is recognised that a relevant consideration in determining reasonableness in this context is the length of time for which the offer is left open. If negotiations for settlement have already commenced, with the consequence that the amount of a possible verdict is ‘under active consideration’, a period of ‘less than half of a working day’ may not be unreasonably short: see Jones v Bradley (No 2) [2003] NSWCA 258. But in other circumstances, a period as long as seven days has been considered to be insufficient: see, for example, Ng v Chong [2005] NSWSC 385. In the present case, there is no evidence to suggest that negotiations for settlement were in train at the time when Mr Edwards’ letter of offer was sent.

67 The date of this letter was 2 August 2006, a Wednesday. Acceptance of the offer was required by 4 p.m. on the following Monday, 7 August. There is nothing on the copy of the letter attached to Zeaiter’s submissions, or elsewhere in evidence tendered by Zeaiter, to indicate that it was sent by fax. The Tribunal must assume that it was posted. If it was received in the ordinary course of post some time on Thursday, 3 August, Mrs Satchi and her husband would have had about four days, including two working days, in which to consider it. The possibility must be borne in mind, however, that it took longer than one day to reach her.

68 In these circumstances, the Tribunal has reached the conclusion, again after some hesitation, that Zeaiter has failed to establish that Ms Satchi’s failure to accept the offer of settlement was unreasonable. This is a matter on which Zeaiter bears the onus of proving the relevant facts. Uncertainty as to when the offer was received, coupled with the fact that even if it was delivered in the ordinary course of post a relatively brief period was permitted for consideration of it, produces this outcome.

The manner in which the Tribunal proceedings were conducted on Mrs Satchi’s behalf

69 The key points made on this topic in Zeaiter’s submissions were as follows.

70 First, an ‘enormous’ number of affidavits, containing ‘no substantial evidence’, were filed and served on Mrs Satchi’s behalf.

71 Secondly, after the case had been set down for hearing on 9 and 10 August 2006, she applied successfully for this hearing to be vacated, in order that she could file her unconscionable conduct claim. She was in fact ordered on 9 August 2006 to pay Zeaiter’s costs thrown away by virtue of the adjournment. On 31 August 2006, the Tribunal assessed these costs at $5,912.00 including GST and ordered that they be paid by monthly instalments of $100.00. According to Zeaiter’s submissions, only one such instalment had been paid.

72 Thirdly, when the matter was ultimately heard during September and October 2007, Mr Satchi’s conduct as her legal representative – notably, his engaging in repetitive and time-consuming cross-examination of the witnesses called by Zeaiter – made it necessary for a case that had been set down for two days to occupy a full four days, with a further period being required for the filing of submissions.

73 Fourthly, the chief focus of the ‘entire proceedings and the hearing’ was not Zeaiter’s claim, ultimately upheld, for losses caused by her breaches of the Registered Lease, but her defence and cross claim, which were both rejected.

74 As Zeaiter said in its submissions, the consequence was that this ‘unreasonable conduct’ of Mr and Mrs Satchi caused it to incur ‘an enormous amount of costs for what should have been a relatively simple matter’.

75 The Tribunal endorses this description of the way in which the proceedings were handled on Mrs Satchi’s behalf. In the principal decision, it made its own critical comments (at [7] and [117]) on this matter. It now makes four further observations to similar effect.

76 First, the affidavits filed on Mrs Satchi’s behalf and the cross-examination of witnesses conducted by Mr Satchi dealt with some matters that were totally irrelevant to the proceedings. These included particularly a dispute between a company controlled by him (Satchi & Satchi Pty Ltd) and Zeaiter, relating to the leasing of different premises.

77 Secondly, Mr Satchi’s persistence with irrelevant and repetitive cross-examination occurred despite (a) directions from the Tribunal to refrain from such behaviour, (b) warnings that it might well provide a ground for awarding costs against Mrs Satchi and (b) orders made on two occasions, pursuant to section 73(5)(d) of the ADT Act, limiting the duration of any further cross-examination of the relevant witness.

78 Thirdly, much of the unnecessary protraction of these proceedings – both before they came on to be heard and during the hearing – was a consequence of Mrs Satchi’s instituting and maintaining what the Tribunal has held to have been an unmeritorious claim of unconscionable conduct.

79 Fourthly, further delay and expense to Zeaiter was occasioned by a separate application filed by Mrs Satchi on 24 February 2007. In it, she sought damages from Zeaiter as set out in her cross claim in the present proceedings, solely on the ground that it had not filed its defence to this cross claim within the time stipulated in directions. A Tribunal decision on 24 May 2007 striking out this separate application was upheld by an Appeal Panel and in the Supreme Court, in circumstances outlined in the principal decision at [5]. The costs of this application are of course not a matter covered by the present decision. But the fact that it was made and pursued through three separate hearings contributed to the pressure exerted on Zeaiter by the present proceedings.

80 In the Tribunal’s opinion, all these aspects of the handling of Mrs Satchi’s case in these proceedings amount to ‘special circumstances warranting an award of costs’ in Zeaiter’s favour. They fall within the scope of the following extracts from the Practice Note on Costs (set out above at [42]):-

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;…

(iv) causing an adjournment;…

whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding.

81 It is at least arguable that they fall within a further phrase in the Practice Note, namely, ‘vexatiously conducting the proceeding’.

82 Taking account, however, of its earlier rulings in this decision (see [59] and [68] above) to the effect that Zeaiter’s claim for all its costs should not be upheld, the Tribunal considers that an award of only a proportion of its costs – albeit a substantial proportion – is justified on the grounds just outlined.

83 The Tribunal sees no reason to discharge an order made on 9 August 2006 that Mrs Satchi should pay Zeaiter’s costs thrown away by virtue of the adjournment of the hearing set down to commence on that day (see [20] above). Indeed, it considers that a subsequent order, made on 31 August 2006, for payment by instalments should be replaced by an order for immediate payment.

84 As to the balance of Zeaiter’s costs of these proceedings, the Tribunal orders that Mrs Satchi should pay 80% of them on a party-party basis, as agreed or assessed.