Appeal Panel - Internal CITATION: North Eastern Travel Stops Pty Ltd v Bradley & Ors (No 2) (RLD) [2005] NSWADTAP 17 APPELLANT PARTIES: North Eastern Travelstops Pty Ltd RESPONDENTS Seamus Bradley, Margie Howarth and Peta Hunter FILE NUMBER: 049030 HEARING DATES: On the papers SUBMISSIONS CLOSED: 03/22/2005 DATE OF DECISION: 04/22/2005 North Eastern Travelstops Pty Ltd v Bradley & Ors [2004] NSWADT 145 DECISION UNDER APPEAL: BEFORE: Chesterman M - ADCJ (Deputy President); Rickards K - Judicial Member; Fairweather R - Non Judicial Member CATCHWORDS: costs MATTER FOR DECISION: Costs FILE NUMBER UNDER APPEAL: 035012 DATE OF DECISION UNDER APPEAL: 07/21/2004 LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31 Colleja v Malli [2001] NSWADT 20 G & M Dawson Pty Ltd v Cripps (RLD) [2005] NSWADTAP 3 Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 CASES CITED: Ktenas v Scott (RLD) [2002] NSWADTAP 15 North Eastern Travelstops Pty Ltd v Bradley & Ors [2004] NSWADT 145 North Eastern Travelstops Pty Ltd v Bradley & Ors (RLD) [2005] NSWADTAP 6 Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27 Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43 Stanoevski v Council of the Law Society of New South Wales [2003] NSWADTAP 33 APPELLANT REPRESENTATION: M Campbell, barrister RESPONDENTS S Woodward, solicitor ORDERS: 1. The Appellant is to pay the Respondents' costs of (a) the application for an interim order heard on 19 August 2004 and (b) the appeal; 2. Unless costs are applied for within 28 days of the date of these reasons, there will be no order for costs on this application. REASONS FOR DECISION Introduction 1 This is an application for costs by the successful respondents to an appeal. In the appeal, the Appellant, North Eastern Travelstops Pty Ltd, unsuccessfully challenged a decision of the Tribunal awarding compensation to the Respondents, Seamus Bradley, Margie Howarth and Peta Hunter, for loss of profits of their restaurant business known as Café Portofino. 2 The Respondents had occupied the restaurant premises under a document headed 'Permit to Occupy', which set out the terms of what was agreed to be a 'retail shop lease', governed by the Retail Leases Act 1994, between them and the Appellant. The Appellant itself was a sub-lessee. In circumstances which need not be set out here, the Respondents had been compelled to vacate the premises before the expiry of the term specified in the Permit to Occupy. 3 In the decision under appeal (North Eastern Travelstops Pty Ltd v Bradley & Ors [2004] NSWADT 145) Mr P Boyce, Judicial Member, ordered that the Appellant pay $17,982.00 by way of compensation to the Respondents for lost profits caused by their having been compelled to leave the premises, together with interest at 9% from 1 November 2003 to the date of payment. 4 On 19 August 2004, we dismissed an application by the Appellant for an interim order staying execution of the Tribunal's judgment pending disposition of the appeal. We reserved the costs of that application. 5 Our decision dismissing the appeal itself (North Eastern Travelstops Pty Ltd v Bradley & Ors (RLD) [2005] NSWADTAP 6) was delivered on 25 February 2005. 6 In the appeal, the principal ground urged by the Appellant was that the Tribunal erred in law in failing to construe correctly certain clauses of the Permit to Occupy', side by side with a clause of a Licence Agreement which the Appellant had entered into, as sub-lessee, from Caltex Australia Petroleum Ltd ('Caltex'), a lessee of the relevant property. 7 In our judgment dismissing the appeal, we held that the Tribunal had in fact omitted in its judgment to deal with this question of interpretation, even though it had been directly raised in the submissions made by the parties. We held, at [27], that this omission constituted an error of law. We referred here to a statement by the Appeal Panel in Stanoevski v Council of the Law Society of New South Wales [2003] NSWADTAP 33 at [17], to the effect that an error of law arose in that case because the Tribunal had 'made it appear that it has not heard and determined the actual case that the appellant was putting forward'. 8 Having then proceeded to consider for ourselves this question of interpretation, we concluded, at [29 – 33], that the Appellant's argument was not correct. In so doing, we said of the interpretation urged upon us by the Appellant that 'it goes beyond what the words of the relevant clauses provide...' (see [29]) and that the agreement between the parties, properly construed, 'fell well short of' producing the outcome for which the Appellant argued (see [32]). 9 At [34 – 36], we rejected a subsidiary argument raised by the Appellant, to the effect that the Respondents were in some sense on notice of provisions in the head-lease of the property from its owner to Caltex that rendered their tenure vulnerable to early termination without compensation. 10 In dismissing the appeal, we gave liberty to the parties to apply for costs within 28 days and stated that, unless an application was made for a hearing, the matter of costs would be decided on the papers. 11 The Respondents' application to us now is for the costs of both the appeal and the application for an interim order. It was filed, with supporting submissions, on 11 March 2005. The Appellant filed opposing submissions on 14 March. By a letter dated 22 March, the Respondents indicated that they did not wish to file submissions in reply. There has been no request for a hearing. Principles governing the award of costs 12 In their submission on costs, prepared by Mr Woodward, solicitor, the Respondents argued that the requirement of 'special circumstances' set out in s 88(1) of the Administrative Decisions Tribunal Act 1997 ('the ADT Act') was satisfied in this case. Section 77A of the Retail Leases Act 1994 makes this provision applicable in retail tenancy proceedings conducted in the Tribunal. 13 Section 88(1) of the ADT Act states as follows:- 88 Costs (1) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs. 14 In Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31, an Appeal Panel of the Tribunal rejected an argument that this provision requiring 'special circumstances' to be shown applied only to decisions made by the Tribunal at first instance, and not to Appeal Panel decisions. The Panel stated, at [16], that 'the s 88(1) rule applies to Appeal Panel proceedings arising out of proceedings for an original decision unless otherwise provided in the primary enactment conferring the jurisdiction to make an original decision'. The Retail Leases Act, which is the relevant 'primary enactment' in these proceedings, makes no such provision. 15 Citadin (No 2) is also authority for the proposition that 'special circumstances' may include factors connected with the nature of Appeal Panel proceedings (see the judgment at [16] and [24]). 16 In Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 at [29], it was said (a) that the phrase 'special circumstances' means 'circumstances that are out of the ordinary, without having to be extraordinary or exceptional' and (b) that those circumstances must, as the section states, 'warrant an award of costs'. The Respondents' submissions 17 In essence, the Respondents' assertion that 'special circumstances warranting an award of costs' existed was based on two grounds. 18 The first of these was as follows. Even though in the appeal the Appellant identified an 'arguable question of law' which it had initially raised by way of defence to the Respondents' claim for compensation, that question was decided against it. Furthermore, the fact that it had no grounds of defence against the Respondents' claim was apparent throughout. Yet the Appellant persisted with both the interim application and the appeal. Since the appeal involved complex legal argument, the Respondents had no choice but to instruct a solicitor, whose arguments on all material matters were accepted as correct in our decision on the appeal. 19 Mr Woodward relied on a passage in the judgment of the Appeal Panel in Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27 at [13]. The Panel stated there that the Retail Leases Division is a 'unique' division within the Tribunal, because it 'deals with commercial disputes between parties who are engaged in trade and commerce for reward'. 20 The Panel went on to say:- 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. 21 Mr Woodward relied also on the following passage in Citadin (No 2) at [13]:- It may be that more use of costs orders should be made where there is an appeal and it is dismissed. At the appeal level, there would seem to be a stronger case for recognising the complexity of retail leases disputes and their commercial character as relevant factors amounting to 'special circumstances'. 22 He argued that the Appellant, when filing its appeal, should have realised that if the appeal failed costs might well be awarded against it. This, he claimed, was because the Tribunal's standard notification to parties regarding rights of appeal contains the following statement: 'Costs are usually awarded against unsuccessful Appellants in retail lease cases even where the appeal has raised reasonably arguable questions of law'. 23 The second ground advanced in the Respondents' submissions was that on 3 February 2004, which is about six weeks before the case was heard in the Tribunal, the Respondents offered to settle their claim, including any entitlement to costs, for $16,000.00. This offer was not accepted. The amount that the Tribunal ultimately ordered to be paid by the Appellant was the larger sum of $17,982.00, together with interest at 9% from 1 November 2003 to the date of payment. 24 In this connection, Mr Woodward relied on Colleja v Malli [2001] NSWADT 20 and Gizah (No 2) at [46] as authority for the propositions that the rejection of an offer of settlement is a matter that should be taken into account in relation to costs and should indeed be held to constitute a 'special circumstance' when the offer is more favourable to the rejecting party than the outcome of the proceedings. The Appellant's submissions 25 Mr Campbell, counsel for the Appellant, responded to the first line of argument of the Respondents by referring initially to a passage in the Tribunal Practice Note No 12 (4 March 2003) which lists some examples of 'special circumstances'. One of these is as follows: 'where an appeal is lodged and the Appeal Panel considers the appeal was without any real prospect of success'. 26 He argued that the present appeal clearly did not fall within this description, since we had agreed with him that the Tribunal at first instance had erred in law through failing to consider what he described as the Appellant's 'principal point on appeal'. Instead, the appeal, he submitted, 'involved a bona fide argument on behalf of the Appellant as to the manner in which a commercial document should be (and was not) construed by the Tribunal'. 27 Mr Campbell's submissions did not refer at all to the second line of argument advanced by the Respondents. Our conclusions 28 In our judgment, the principal question on which the success of this application for costs depends is whether or not (to quote again from the Practice Note) this was an appeal 'without any real prospect of success'. 29 An alternative formulation in an Appeal Panel judgment, delivered ex tempore in a retail lease case, uses the term 'unmeritorious'. In Ktenas v Scott (RLD) [2002] NSWADTAP 15 at [1], the Appeal Panel, in awarding costs to a successful respondent, stated as follows with reference to its decision in Citadin (No 2): We have indicated in that decision that the appeal panel is of the view that where unmeritorious appeals are lodged in retail leases cases they should be met with a costs order of the usual kind. 30 In Citadin (No 2), the specific ground on which costs were awarded to the successful respondent was summarised as follows at [23]:- In the present case the appeal was dismissed as disclosing no sufficiently arguable questions of law. It was reasonable for the respondents to engage counsel given the financial significance of the dispute and the factual and legal complexity inherent in retail leases disputes. 31 The phrase 'sufficiently arguable' was explained further at [2]:- … there were no questions of law identified by the notice of appeal that were sufficiently arguable to warrant further consideration of the appeal. 32 In G & M Dawson Pty Ltd v Cripps (RLD) [2005] NSWADTAP 3, a retail leases case, the Appeal Panel, at [20], commented as follows on these statements by the Panel in Citadin (No 2):- In giving prominence to this question whether any questions of law had been identified, the Panel was taking into account the provisions of s 113(2) of the ADT Act. These are to the effect that an appeal may be made on any question of law and that is only with the leave of the Appeal Panel that the appeal can extend to a review of the merits. 33 In the present case, there was, as we have said, an error of law by the Tribunal at first instance. It took the form of omitting to deal with a question of interpretation of contractual provisions that the Appellant had raised at the hearing. In order to determine properly the rights and liabilities of the parties, we needed to consider for ourselves what was the true interpretation of these provisions. 34 Our own assessment, however, of the Appellant's arguments on this issue was that they clearly lacked merit. As we have said above, at [8], the relevant provisions, properly interpreted, 'fell well short of' producing the result for which the Appellant argued. It was not, in our judgment, a difficult question of interpretation. 35 We are bound to take due account of the Appeal Panel's suggestion in Citadin (No 2) at [13] that in retail leases cases maybe 'more use of costs orders should be made where there is an appeal and it is dismissed', and also of the underlying justification, stemming from the 'commerciality' of such cases. 36 In our judgment, taking all these factors into account, the lack of real merit in the arguments advanced by the Appellant on the key issue of interpretation constitutes 'special circumstances warranting an award of costs' under s 88(1) of the ADT Act. This is the case even though we held the Tribunal to have committed an error of law by not dealing with this issue, thereby necessitating that it be resolved on the appeal. Our view, in essence, is that it could have been predicted with sufficient certainty that resolution of the issue, following due consideration, would not alter the outcome of the proceedings. 37 In reaching this decision, we do not go as far as to endorse the statement in the Tribunal's standard notification to parties, quoted above at [21]. The authorities do not in our view support the proposition that 'costs are usually awarded' (our emphasis) in the circumstances indicated there. 38 We do not need to rule on the second ground put forward by the Respondents in their application (see [23 – 24] above). This was based on the fact that the Appellant rejected an offer of settlement by the Respondents which proved more favourable to it than the outcome of the proceedings. We would observe, however, this is not enough of itself to constitute 'special circumstances'. That rejection must also be held not to have been 'reasonable': see eg Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43 at [9]. No evidence or submission on this issue was put to us. Our orders 1. The Appellant is to pay the Respondents' costs of (a) the application for an interim order heard on 19 August 2004 and (b) the appeal. 2. Unless costs are applied for within 28 days of the date of these reasons, there will be no order for costs on this application. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.