Ashenhurst v Optima Property Developments Pty Ltd [2006] NSWADT 143

CITATION: Ashenhurst v Optima Property Developments Pty Ltd [2006] NSWADT 143

DIVISION: Retail Leases Division

APPLICANT PARTIES: Margaret Ashenhurst RESPONDENT Optima Property Developments Pty Ltd

FILE NUMBER: 055001

HEARING DATES: On the papers

SUBMISSIONS CLOSED: 12/21/2005

DATE OF DECISION: 05/17/2006

BEFORE: Higgins S - Judicial Member

CATCHWORDS: Costs

MATTER FOR DECISION: Costs

LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994

Brooks Maher v Cheug [2001] NSWADT 18 Calderbank v Calderbank [1975] 3 ALL ER 333 Gizah Pty Ltd v AXA Trustees Limited (No. 2) [2001] NSWADT 164 CASES CITED: Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72 Lituma Pty Ltd v Jafari (No 2) (RLD) [2005] NSWADTAP 60 Petria Pty Ltd v Makhoul [2005] NSWADTAP 12 Prasad v Fairfield City Council (RLD) [2002] NSWADTAP 2 Singh v Solomon & Ors (No 2) (RLD) [2005] NSWADTAP 58

APPLICANT A Foel, barrister REPRESENTATION: RESPONDENT K Viglianti, barrister

ORDERS: 1. The applicant's application for costs is dismissed; 2.The respondent's application for costs is dismissed.

REASONS FOR DECISION Background 1 On 6 January 2005, Margaret Patricia Ashenhurst ("the applicant") made a claim pursuant to the Retail Leases Act 1994 ("the RL Act") against Optima Property Developments Pty Ltd ("the respondent"). In that claim the applicant identified the following matters as being in dispute between the parties: (a) the amount of rent that the applicant should be paying under the lease; (b) the amount of outgoings that the applicant should be paying under the lease; and (c) the payment by the landlord to the tenant of compensation for losses that the applicant's business has sustained from a building development on neighbouring land. 2 The applicant is the lessee of premises, which are owned by the respondent. The applicant uses the premises to run an art gallery business. It would appear that the dispute arose during 2004 when the respondent proposed increasing the rent pursuant to the lease. The applicant objected to the proposed increase and corresponded with the respondent setting out her objection. At the same time the applicant disputed the amount of outgoings and sought compensation for the loss of quiet enjoyment of the premises as a result of work being carried on at a building development on the adjacent land. The applicant was unable to resolve the dispute through correspondence and ultimately decided that she would not pay any increase in rent. As a result, on 23 December 2004, the respondent served on the applicant a notice of breach of covenant for failure to pay rent and advised that if the rent was not paid it would re-enter the premises. On receipt of the notice the applicant made an application for mediation and lodged her application with the Tribunal. At the same time she lodged an application for an interim order to prevent the respondent from re-entering the premises until after the mediation had taken place. That order was made by consent of the parties and the mediation occurred on 20 January 2005. The rental and outgoings dispute was settled between the parties at the mediation. However, the applicant's claim for compensation for loss of enjoyment remained a live issue. 3 The matter then came before the Tribunal at a directions hearing on 27 January 2005. Between that date and 17 November 2005, when by consent the application was withdrawn and dismissed, the matter was before the Tribunal on seven separate occasions for directions. The respondent, who appeared at the directions hearings through its legal representative, had at all times indicated that it did so without formally submitting to the jurisdiction of the Tribunal as it wished to challenge the Tribunal's jurisdiction to hear the applicant's application. That challenge was never made and the applicant agreed to withdraw her application following receipt from the respondent, on 22 September 2005, of a conditional cross claim in which the respondent raised serious allegations against the applicant of misleading and deceptive conduct as well as making a claim of equitable estoppel. 4 In seeking an order that the application be withdrawn and dismissed the parties preserved their respective rights to make an application for costs. It was agreed that following receipt of written submissions (if any) the Tribunal was to determine any application that was made on the papers. Both parties subsequently made an application for costs and their applications were supported by detailed written submissions. This decision sets out the Tribunal's determination of these applications. Principles governing costs 5 The Tribunal has no inherent power to award costs however, it has been given such a power under s.88(1) of the Administrative Decisions Tribunal Act 1997 ("ADT Act"). In respect to proceedings for an original decision (see s.7 of the ADT Act), which includes proceedings under the RL Act, s.88(3) of the ADT Act provides that the Tribunal only has such a power where the enactment pursuant to which the Tribunal is given jurisdiction to make such a decision also gives the Tribunal jurisdiction to make an award of costs. In this matter, s.77A of the RL Act expressly gives the Tribunal power to make an award of costs under s.88(1) of the ADT Act. 6 The power to award costs under s.88(1) is a discretionary power, which can only be exercised where the Tribunal is satisfied that there are "special circumstances" that warrant an award of costs. This means that in order to obtain a cost order an applicant has two hurdles to overcome. The first being able to identify "special circumstances" and the second being able to show that the "special circumstances" warranted an award of costs: see Gizah Pty Ltd v AXA Trustees Limited (No. 2) [2001] NSWADT 164 at [29]. 7 "Special circumstances" have been defined as "circumstances that are out of the ordinary, but without having to be extraordinary or exceptional". It is well established that the fact of a party having succeed in its application or in defending an application does not constitute "special circumstances": see Lituma Pty Ltd v Jafari (No 2) (RLD) [2005] NSWADTAP 60 at [9] & [10]. At the same time on the account of the "commerciality" of the Retail Leases Division, it has been held that the interpretation of "special circumstances" differs significantly from the interpretation that might be adopted in any other Division of the Tribunal: see Singh v Solomon & Ors (No 2) (RLD) [2005] NSWADTAP 58 at [12] and Petria Pty Ltd v Makhoul [2005] NSWADTAP 12. In retail leases applications it has been held that where (a) a successful party in 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, that these may constitute "special circumstances" warranting a cost order: see Singh (supra) at [13]. This it has been held to be analogous with costs rules in the Supreme and District Courts and the principles laid down in Calderbank v Calderbank [1975] 3 ALL ER 333: see Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72. 8 It has also been held that where an appeal is dismissed as disclosing no sufficiently arguable question of law that this may constitute "special circumstances": see Petria (supra at [20]). 9 In Practice Note 12, reissued on 11 May 2005, the following examples of "special circumstances" which may warrant an order for costs under s.88(1) of the ADT Act are set out as follows: "Whether a party has conducted the proceedings in the way that disadvantaged another party to the proceedings by conduct such as: (i) failure 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 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 proceedings; (vii) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings; and (viii) 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. 10 In Prasad v Fairfield City Council (RLD) [2002] NSWADTAP 2 at [38] the Appeal Panel held that where a party to a retail leases matter has acted inconsistently with the reasonable conduct of litigation this may constitute "special circumstances warranting an order for costs". Example of what was inconsistent with the reasonable conduct of litigation was cited to include the making of unnecessary preliminary applications or any unnecessary delay in the progress of the matter, which have the effect of elongating the litigation and therefore making it more costly. Applicant's application for costs 11 The applicant contended that she had at all times particularised her claim for compensation with sufficient detail for the respondent to press any jurisdictional claim it wished to make. She went on to say that her claim has at all times been "narrow, concise and detailed." She said that detailed points of claim were provided to the respondent at the time of mediation, namely 20 January 2005. Prior to this there had been correspondence, which set out her concern. Additional points of claim were provided to the respondent on 10 May 2005. Then on 15 July 2005 she filed and served the evidence on which she relied to support her claim. She contended that her claim had been appropriately brought in the Tribunal and that the only complicating feature was the assertion by the respondent of a jurisdictional impediment to her claim. Initially that impediment was said to be based on the respondent's desire to join other parties to the proceedings, however, the respondent at no stage made an application asserting that the Tribunal had no jurisdiction to deal with the applicant's application. Nor has it, the applicant asserts, taken any steps to join such third parties. What it did do, the applicant asserts was to suddenly change its position on 22 September 2005, some 8 months after the mediation, by making new allegations against the applicant. It was these new allegations, which the applicant asserts took her application outside the jurisdiction of the Tribunal. These new allegations, the applicant asserts could have been made at any time after the mediation, and more particularly after she had filed and served her evidence. 12 On these asserted facts, the applicant contended that the conduct of the respondent had been "frivolous, and at time vexatious." That is, the respondent's conduct had been such that it constituted "special circumstances" which warranted an order for costs in her favour and in this regard she sought an order for her costs in the application, or alternatively from 1 August 2005. 13 In reply to the applicant's contentions the respondent said that the applicant's points of claim of 10 May 2005 had failed to clearly identify her claim and needed to be supplemented by further particulars, which were not given until 4 months later. The respondent also claimed that it had "fairly and squarely" made its objection to jurisdiction on 8 June 2005. That is, its objection to jurisdiction had not been made late in the day. It was also submitted that its conditional cross claim against the applicant was provided 2 days after the applicant had "eventually" provided the requested particulars to her claim. It went on to assert that its conduct of the proceedings had at all time been reasonable and efficient, particularly having regard to the delays on the part of the applicant. It said that on the basis of there being no evidence to support the applicant's contentions, the applicant's application for cost should be refused. Respondent's application for costs 14 The respondent has made an application for its costs from 10 May 2005, or in the alternative from 8 June 2005. 15 The respondent's application was based on several grounds. These are that the applicant has delayed the proceedings by failing to provide particulars as directed, that the applicant's application before the Tribunal was misconceived in that there was no legal basis for her to bring her claim in the tribunal and that her failure to accept an offer of compromise as set out in its letter of 8 June 2005 was unreasonable. 16 In respect to the assertion of delay by the applicant, the respondent contended that it was the applicant's delay in providing particulars, which prevented it from formulating its response to her claim. This is supported by the terms of its letter of 8 June 2005 in which the respondent stated that the applicant's claim did not appear to be directed at any conduct by the respondent but was directed at conduct of those who were working on the neighbouring development. The respondent then requested further particulars as to what conduct it was alleged that the respondent had engaged in that gave rise to the applicant's claim. 17 The respondent also contended that its letter of 8 June 2005, which it invited the applicant to discontinue her claim without a cost penalty was in the form of a Calderbank letter and that the applicant's refusal of this offer was in the circumstances unreasonable and therefore constituted "special circumstances that warranted an order for costs". It argued that it was unreasonable because the applicant's claim, which was based on cl.14 of the lease or s.34 of the RL Act had no reasonable prospect of success as she had failed to identify any conduct by the respondent, which gave rise to such a claim. In essence it was argued that the applicant's claim was based entirely on the conduct of other third parties and not that of the respondent. 18 The applicant responded to the respondent's application for costs by saying that the tribunal had not made, nor was there an application for it to make a determination as to the merits of the applicant's claim or whether that claim had been properly brought or particularised. She again emphasised that at all times her application had been properly brought before the Tribunal. She also rejected the respondent's assertions that she had failed to comply with the orders of the Tribunal and said that the letter of 8 June 2005 was not an "offer" coming within the terms of the principles set out in Calderbank. She pointed to the letter having made reference to costs being sought if the respondent were to be successful in persuading the Tribunal that it did not have jurisdiction "to join third parties" or "to hear the relief that was to be sought against these parties". As no such claim was brought by the respondent nor was this the grounds on which the applicant ultimately agreed to discontinue her claim before the Tribunal, the applicant contended that the letter was irrelevant to the circumstances in which she agreed to withdraw her application. Consideration and decision 19 I have carefully examined and considered the material that has been relied on by the parties for the purpose of their respective costs applications. I have also had regard to the tribunal's record and notes of the various directions hearing in this matter. These can be conveniently summarised as follows: Date of Directions and Orders Made and Notes 27 Jan 2005 Adjourned for further directions on 24 February 2005. Note: mediation has occurred – 2 issues resolved – issue re damages for loss of quiet enjoyment not resolved. Parties still seeking to resolve this last issue and have sought adjournment for 1 month 24 Feb 2005 Adjourned for further directions on 24 March 2005 Note: 1. Mr Redmond (for the applicant) said instructions were still being obtained re. settlement. 2. Mr Kelso (for respondent) did not object but was concerned that nothing had happened in the preceding month. 24 March 2005 Adjourned for further directions on 21 April 2005 In a letter dated 24 March 2005 from the applicant's solicitor a request was made for this adjourned date and the letter stated that the request was made with the consent of the respondent. 21 April 2005 1. Applicant to file points of claim by 6 May 2005. 2. Respondent to file and serve points of defence by 20 May 2005. 3. Applicant to file affidavits by 20 May 2005. 4. Respondent to file affidavits in reply by 3 June 2005. 5. Applicant to file affidavits in reply by 17 June 2005. 6. Stood over to 30 June 2005. Note: Only outstanding issue is breach of covenant of quiet enjoyment 30 June 2005 1. Applicant to provide the respondent with a response to the request for particulars on or before 15 July 2005. 2. Applicant to file and serve her affidavits by 15 July 2005. 3. Respondent to file and serve its affidavits by 19 August 2005. 4. Adjourned for further directions on 25 August 2005. 25 Aug 2005 1.Applicant to respond to respondent's request for further particulars by 1 September 2005. 2. Respondent to file and serve any application by way of cross claim on or before 15 September 2005 (note that cross claim to identify challenge to jurisdiction). 3. Respondent to file and serve written submissions on jurisdictional challenge (if any) by 15 September 2005. 4. Adjourned for further directions on 22 September 2005. Applicant's application for costs 20 As mentioned above, the applicant's application for an order for costs is primarily based on the assertion that the respondent had unnecessarily delayed the proceedings and for which the applicant suffered unnecessary costs. The applicable legal principles do not appear to be in dispute, what is in dispute is whether the respondent has in fact delayed the proceedings by its conduct and if it has whether this constitutes "special circumstances" and which also warrant an order for costs under s.88 of the ADT Act. 21 Having regard to the manner in which this application was progressed, in my opinion it cannot be said that the respondent delayed let alone unnecessarily delayed the progress of the applicant's application. Two of the matters in dispute were resolved at mediation and it cannot be said that the dispute in respect to the applicant's claim for compensation was entirely free from any difficulty. In saying this I am not suggesting that it was inappropriately brought nor is the Tribunal required to conclusively determine this issue for the purposes of these costs applications. 22 Having resolved two of the matters in dispute, it cannot be said that the respondent's conduct in respect of the remaining issue was unnecessary in that it could have filed and served its conditional cross claim against the applicant early in the proceedings. As indicated by the abovementioned summary of the directions hearings in this application, from 27 January to 21 April 2005 the parties were continuing to endeavour to resolve the compensation claim. When they were not able to resolve it, the respondent sought clarification of the applicant's claim by way of "points of claim". The applicant did not object to providing these and orders were made accordingly on 21 April 2005. These orders were complied with, but on the next occasion, 30 June 2005, the respondent sought orders for further particulars. Again this order was consented to, however, it was not complied with and a similar order was made on 25 August 2005. Again no objection was made to such an order and once this order was complied with there was no delay. 23 Even though the points of claim and the further particulars primarily related to the issue of what conduct it was alleged the respondent had engaged in that gave rise to the applicant's claim it cannot be said that the respondent abandoned its claim that the Tribunal had no jurisdiction to hear and determine the applicant's claim for compensation. The conditional defence and conditional cross claim filed and served by the respondent in September 2005 demonstrated the contrary. However, I agree that the conditional cross claim in so far as it related to the applicant was new in that this was an issue that had not previously been raised before the Tribunal. The fact that the applicant saw this as the basis for withdrawing her application and bringing her claim elsewhere does not alter the fact that the respondent had at no time abandoned its claim that the Tribunal had no jurisdiction to hear and determine the applicant's claim. Had the matter not been withdrawn, and the respondent continued to press this point this was clearly an issue that may have required determination as a preliminary point. 24 Accordingly, the applicant has failed to satisfy the tribunal that there are "special circumstances" that warrant an order for costs in her favour. Respondent's application for costs 25 I make a similar finding in respect to the respondent's application for costs. 26 In respect to the applicant's failure to comply with the Tribunal's orders, in particular the orders for further particulars, in my opinion these cannot be said to give rise to "special circumstances". The delay was not out of the ordinary and was not 4 months late as asserted by the respondent. Furthermore, it is difficult to see how the delay has given rise to the respondent incurring unnecessary additional costs, particularly as the applicant did file and serve her evidence well before the next directions day, being 25 August 2005. 27 In my opinion, the respondent's contention that the applicant's application seeking orders for compensation under cl 14 of the lease and s.34 of the RL Act was misconceived and could at no time be made out is not supported by the material before the Tribunal. It is noted that s.34(1)(d) of the RL Act entitles a lessee to make a claim for compensation where a lessor "fails to take any reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control." It is also noted from the material before the Tribunal that the applicant had corresponded with the respondent and its predecessor in respect of the work being carried out in the adjoining land. While it is not for the Tribunal to determine the merits of the applicant's claim, in my opinion, it cannot be said that it was entirely misconceived. 28 Even if I am wrong in my conclusion as to whether the applicant's application for compensation was not entirely misconceived, in my opinion, the respondent's letter of 8 June 2005 does not satisfy the principles of a Calderbank offer, the rejection of which may give rise to "special circumstances" for the purpose of s.88 of the ADT Act. Firstly the offer is not stated to be a Calderbank offer and while this is not critical what is important is that the offer is not a compromise of that which was in dispute between the parties, namely a claim for compensation. If anything it was a compromise entirely as to costs, which in the jurisdiction of the Tribunal does not follow the event. Without the respondent demonstrating that, after 10 May 2005 or alternatively after 8 June 2005, the applicant's conduct of the progress of her application was unreasonable, in my opinion, no special circumstances can arise. As I have mentioned there is no evidence of conduct by the applicant that could be classed as unreasonable in progressing her application. The fact that the parties held differing views as to the Tribunal's jurisdiction and that the applicant ultimately withdrew her application does not, in my opinion, mean that her conduct in progressing her claim has been unreasonable. Orders 29 For the reasons set out above the Tribunal orders that: (a) the applicant's application for costs is dismissed; and (b) the respondent's application for costs is dismissed.