Set aside by Appeal : CITATION: Skiwing Pty Ltd v Trust Co of Australia Ltd (No 4) [2004] NSWADT 162 DIVISION: Retail Leases Division APPLICANT PARTIES: Skiwing Pty Ltd RESPONDENT Trust Co of Australia Ltd FILE NUMBER: 035036, 035053, 035066 HEARING DATES: On the papers SUBMISSIONS CLOSED: 07/02/2004 DATE OF DECISION: 08/06/2004 BEFORE: Donald BG - Judicial Member APPLICATION: Costs MATTER FOR DECISION: Costs LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Alessa Pty Limited -v- Total & Universal Pty Limited (RLD) [2002] NSWADTAP 16 Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164 Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72 CASES CITED: Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27 Skiwing Pty Limited v Trust Company of Australia Ltd (No 2) [2003] NSWADT 243 Skiwing Pty Ltd v Trust Co of Australia Ltd (No 3) [2004] NSWADT 94 Skiwing Pty Ltd v Trust Company of Australia Ltd [2003] NSWADT 190 Wood & Anor v Bergman (No. 2) [2003] NSWADT 175 APPLICANT REPRESENTATION: AI Tonking, barrister RESPONDENT M Allars, barrister ORDERS: Order that Stockland pay:-; a.the actual costs of Skiwing's expert witnesses reports and their attendance at the hearing, and; b.half Skiwing's barrister's fees; within 30 days of presentation by Skiwing of copies of those accounts to Stockland's lawyers. REASONS FOR DECISION 1 This decision relates to costs in the principal matter Skiwing Pty Ltd v Trust Co of Australia Ltd (No 3) [2004] NSWADT 94. 2 Skiwing was successful on the two main commercial issues at stake, the relocation claim and partly on the balcony claim. It was unsuccessful on some of the legal bases for those claims and in the extent of the balcony claim. 3 Costs were reserved and both parties have filed written submissions on costs. 4 Costs do not follow the event in this jurisdiction. The Tribunal's power to award costs in relation to proceedings before it is governed by sections 77A and 88 of the Administrative Decisions Tribunal Act 1997 and arises only if it is satisfied that there are 'special circumstances warranting an award of costs'. 5 There are various statements of the principles governing this "special circumstances" discretion of the Tribunal to award costs in retail leases matters, the most recent being the Appeal Panel's decision in Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72, in particular pars 7-12. The key statement is pars 9-10:- 9 In Wood & Anor v Bergman (No. 2) [2003] NSWADT 175 at [9 – 13], the Tribunal discussed the application of s 88 to cases decided under the RL Act as follows:- 9 The normal common law principle governing costs in civil cases is that they 'follow the event'. But s 88 lays down a different principle, namely, that the Tribunal must be 'satisfied' that there are 'special circumstances warranting an award of costs'. 10 In Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164, at [29], the Tribunal defined 'special circumstances' as 'circumstances that are out of the ordinary, but without having to be extraordinary or exceptional'. 11 It is recognised that the Retail Leases Division is unique within the Tribunal, in that it alone deals with commercial disputes between parties who are engaged in trade and commerce for reward. In Gizah, at [22] and [33 – 34], the significance of this for costs orders was explained as follows. Whereas in the context of appeals from administrative decisions the requirement of 'special circumstances' might be interpreted so as not to discourage proceedings by a private individual on account of the risk of an adverse costs order, no such consideration should apply in the context of retail lease disputes. The 'commerciality' of the Retail Leases Division calls for an interpretation quite different from that which might be adopted in any other Division of the Tribunal. 12 These observations in Gizah were quoted with approval by an Appeal Panel of the Tribunal in the recent decision in Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27 at [12-13, 28]. 13 The proposition, however, that 'special circumstances' should be interpreted differently within this Division, because it deals with relationships of a commercial character, does not imply that costs should simply follow the event. This was made clear in Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 at [4]. 10 These observations of the Tribunal were quoted in Irresistible's written submission to us. Nothing in Roche's submissions appeared to raise any question about them. 6 The principle from Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150, which the Panel includes among relevant statements, was:- '… the circumstances must be seriously beyond the usual or ordinary pursuit of a claim so that it would be seriously unfair to a party to proceedings before the Tribunal not to be awarded some or all of its costs where it has been successful.' That principle had been in turn accepted for the purposes of reviewing and upholding the first instance decision by the Appeal Panel in Alessa Pty Limited -v- Total & Universal Pty Limited (RLD) [2002] NSWADTAP 16 (see par 31). 7 So in summary, the commercial nature of the Retail Leases Act jurisdiction requires a different approach from other ADT Divisions ie the Tribunal would be expected to find costs orders more appropriate although without a 'costs follow the event' approach. The circumstances must be out of the ordinary, but without having to be extraordinary or exceptional. The circumstances must be seriously beyond the usual or ordinary pursuit of a party's legal position so that it would be seriously unfair for a party not to receive some or all its costs. 8 The decision is a discretionary decision having regard to the particular facts of the case. 9 Skiwing seeks a substantial proportion of its costs and says the Tribunal should have regard to:- - the refusal of Stockland, as the party with substantially greater resources, to negotiate a commercial resolution of the relocation notices at the various times when Skiwing offered to do so and then when close to hearing an offer in the range of the ultimate judgment was put. - the delay of Stockland in procedural matters including filing its evidence and its failure to admit certain facts concerning rent reductions. 10 Stockland submits that:- - while Skiwing succeeded on two claims it failed on five major issues, in particular its Trade Practices Act claims having been invited by the Tribunal before the hearing to reconsider them. - the conduct of the case unnecessarily increased costs with Skiwing initially being represented by its director without legal assistance and making imprecise and overlapping claims which required interlocutory proceedings before the claims were sufficiently clear to be pursued. - at none of the points when settlement was proposed was it unreasonable for Stockland to reject the offers then made; the withdrawal of the relocation notices at various times removed a basis for negotiation and the offer immediately pre-hearing reflected claims on which Stockland was ultimately successful. 11 There is no question that these proceedings and related matters have been convoluted and complex and that the conduct of both parties has contributed to that. The task of the Tribunal is to identify whether there is any aspect beyond the robust cut and thrust of commercial litigation which falls within the tests for special circumstances stated. 12 In my view the conduct of the case and the respective successes and failures in interlocutory proceedings or pressing issues do not give rise to special circumstances. 13 Stockland failed in its strike out application; Skiwing Pty Ltd v Trust Company of Australia Ltd [2003] NSWADT 190. Skiwing failed in pressing claims under the Trade Practices Act; Skiwing Pty Ltd v Trust Co of Australia Ltd (No 3) [2004] NSWADT 94. Both parties claimed to have been prejudiced by late or inadequate delivery of material pursuant to directions or in response to summonses; see eg., Skiwing Pty Limited v Trust Company of Australia Ltd (No 2) [2003] NSWADT 243. In my view there is no basis for concluding that either party was more burdened by such matters than the other to the extent that serious unfairness for either arises in making no costs order. 14 However in my view there are clear factors in this case which constitute 'special circumstances'. In my decision I found that:- 93 In summary, Stockland set about a commercial course to reposition its Arcade, intending to sustain a high vacancy rate for a substantial period while it found the right icon tenant for its new market position and to use the icon tenant to attract the new tenant mix. 94 Central to this plan to attract such a major tenant, Stockland sought to use relocation rights under the Lease and the Act in what I find to be a demonstrably invalid manner. It considered that the rights of its established and generally complying tenant, Skiwing, among others, were not such as to prevent this course of action or to require any compensation. It maintained this right to relocate in legal disputation over a five month period. 95 These relocation notices seriously disrupted Skiwing in the operation of its business, diverted management effort from running the business, constituted a breach of the agreement under which it was applying for consent to develop the balcony proposal, and caused it to engage in what for it was major legal disputation. 96 The high vacancy rate associated with the process and its unwinding lasted for most of a two year period. 97 Though since withdrawn, the notices and the dispute over them have left the parties bitterly at odds such that the likelihood of them now being able to operate co-operatively as landlord and tenant is remote if not impossible. 98 Stockland has chosen not to accord to Skiwing concessions granted to other tenants who have complained of the impact of the high vacancy rates, among other matters. … 15 From the very outset of that process Skiwing offered to negotiate a settlement and remained willing to do so. While that may have involved substantial payments to it by Stockland, it is in my opinion certain that any such negotiated settlement could well have even been less than the total legal costs in this matter and if pursued early would also have been substantially less than the damages amount awarded. A commercial negotiation would have cleared the way for Stockland to implement in a constructive way its plans for the management of the Imperial Arcade without trampling on a tenant. Stockland elected not to engage in any settlement negotiations. 16 In addition, with the balcony claim, Stockland peremptorily terminated its agreement for Skiwing to pursue its application for reasons unrelated to the subject matter of that agreement. It was in my view a manifestly unreasonable breach of an agreement, compliance with which would not have exposed Stockland to any cost and which may have very significantly benefited its tenant. 17 In my opinion, those aspects of this matter takes Stockland's pursuit of its alleged rights out of the ordinary and constitutes circumstances seriously beyond the usual or ordinary pursuit of a claim so that it would be seriously unfair for Skiwing not to recover some of those essential costs which had to be incurred to establish and quantify the claims on which it was successful. 18 Accordingly I consider Skiwing is entitled to the actual costs of its expert witnesses reports and their attendance at the hearing as those reports were essential for the Tribunal to resolve the matters on which Skiwing was successful. I refer to Mr Edmonds and Mr Coggiola. I also consider Skiwing is entitled to part of its barrister's fees as these too were essential to clarifying its claims and assisting the Tribunal shorten and manage the case. In all the circumstances, that proportion should be half the fees actually billed by its barrister to Skiwing; that reduction makes due allowance for the issues on which Skiwing did not succeed as well as reflecting the requirement to confine any costs award to reflect only the special circumstances. 19 I consider it would be seriously unfair for Skiwing to bear all its costs without reimbursement of those items. 20 Accordingly I order that Stockland pay:- a) the actual costs of Skiwing's expert witnesses reports and their attendance at the hearing, and b) half Skiwing's barrister's fees within 30 days of presentation by Skiwing of copies of those accounts. 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