CITATION: Kyluk Pty Ltd v The Bike Mason Pty Ltd & Anor [2007] NSWADT 96 DIVISION: Retail Leases Division APPLICANT Kyluk Pty Ltd PARTIES: FIRST RESPONDENT The Bike Mason Pty Ltd SECOND RESPONDENT Scott John Mason FILE NUMBER: 065182 HEARING DATES: On the papers SUBMISSIONS CLOSED: 15 March 2007 DATE OF DECISION: 20 April 2007 BEFORE: Rickards K - Judicial Member CATCHWORDS: Costs MATTER FOR DECISION: Costs LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Cripps & Anor v G & M Dawson Pty Ltd & Anor (2006) NSW CA 81 CASES CITED: Gizah Pty Ltd v AXA Trustees Ltd (2 no. 2) (2001) NSW ADT 164 Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd & Roche Group Pty Ltd (2003) NSW ADT 241 APPLICANT B Foster, solicitor REPRESENTATION: FIRST RESPONDENT No appearance SECOND RESPONDENT No appearance ORDERS: The Second Respondent is to pay the Applicant's costs of these proceedings as assessed or agreed. REASONS FOR DECISION Background 1 On 22 February 2007, after an ex-parte hearing where the Second Respondent did not appear, I made orders in favour of the Applicant against the Second Respondent. The Applicant's claim against the First Respondent was discontinued at the request of the Applicant. 2 On the same date, I also ordered that there would be no order as to costs unless written submissions were filed within 21 days. 3 The Applicant subsequently forwarded written submissions to the Tribunal which were received on 15 March 2007. Reasons for Decision 4 In order to ground an order for costs in proceedings before the Administrative Decisions Tribunal, s88 of the Administrative Decisions Tribunal Act 1997 requires that special circumstances must first be found to exist. As such, an order for costs is intended to be the exception, rather than the rule. 5 There is no exhaustive list of what constitutes "special circumstances" justifying an order for costs. The term was considered in Gizah Pty Ltd v AXA Trustees Ltd (no. 2) [2001] NSW ADT 164 and described as "circumstances that are out of the ordinary, but without having to be extraordinary or exceptional". 6 Further examples of what may constitute "special circumstances" are set out within Practice Note no. 12, as well as other decisions of this Tribunal. 7 In summary, the Applicant in these proceedings contends that "special circumstances" exist because the Second Respondent attended at mediation and entered into an agreement to pay outstanding rent by way of instalments, but then failed to make any payments at all, thus necessitating the commencement of these proceedings. 8 Pursuant to s68 of the Retail Leases Act 1994 ("RL Act"), mediation of a retail tenancy dispute is an essential precursor to any proceedings being taken pursuant to the RL Act. 9 Pursuant to s69 of the RL Act, any statement or admission made in the course of the mediation of a retail tenancy dispute is not admissible at a hearing of a claim or in any other legal proceedings. In my view, a settlement agreement reached following mediation does not fall within the ambit of s69 and accordingly can be considered in relation to this application for a costs order. I accept the Applicant's submissions to be factually correct, and in reaching a decision in this matter, I therefore take into account that an agreement was reached by the Second Respondent following mediation which he completely failed to honour, and that he failed to provide any explanation for such failure. 10 In Cripps & Anor v G & M Dawson Pty Ltd & Anor (2006) NSWCA 81 at paragraph 60, the Court of Appeal expressively disapproved of the notion that costs orders cannot be a sanction to reprove unreasonable conduct that has led to an application for relief: "… In my view it suffices that the conduct of Cripps and Jones, in relying upon their status as the registered proprietors of the freehold and the doctrine indefeasibility of title to wrongly deny registration and consequently assignment of the lease, 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. On the one hand, the Tribunal correctly concluded that the respondent, through no fault of its own, has been placed in the situation where it has been forced to pursue this litigation. Yet it still failed to find special circumstances. With respect, I consider that the Tribunal was in error in failing to conclude that special circumstances here applied. For this purpose, it suffices that the circumstances are out of the ordinary. They do not have to be extraordinary or exceptional. While the finding of "serious unfairness" is not prerequisite to determining that there are special circumstances, it is nonetheless a highly relevant consideration". 11 If the Second Respondent had simply ignored the claim against him and had not taken part in mediation nor in the proceedings, then I would not be prepared to find that "special circumstances" exist, for the reasons set out in similar circumstances by the Appeal Panel in Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Pty Ltd (2003) NSW ADT 241: "[44] Irresistible sought a costs order against Sparbac. It claimed that Sparbac's failure to appear was cogent evidence of its having no arguable defence to Irresistible's claim. But we do not think that this necessarily follows. There are a number of other reasons why a respondent to proceedings who has been served with initiating process may not file an appearance. Furthermore, it cannot be said that the phenomenon of a party failing to appear is so "out of the ordinary" that it might constitute "special circumstances"… [45] Yet another consideration of significance is that, if we were to accept Irresistible's argument, we would be conveying the message that any party that chose not to appear in Tribunal proceedings within this division, and thereby suffer a default judgement to be entered against it, would in the ordinary course be liable to pay the costs of the applicant. In this jurisdiction in which the prima facie presumption is that costs orders should not be made, it would be unfortunate if respondents who are otherwise inclined not to appear were induced to file an appearance and offer some sort of defence to the claim solely to avoid a costs order". 12 What distinguishes this matter from the factual situation in Irresistible Frocks is that here the Second Respondent has participated in mediation and subsequently entered into an agreement which he has failed to honour and for which he has given no explanation for such failure. I find that this is a special circumstance justifying an order for costs. To adopt the language of the Court of Appeal in Cripps, such behaviour by the Second Respondent is clearly out of the ordinary and grossly unreasonable so far as the Applicant is concerned, and has caused serious unfairness to the Applicant in creating additional delay and expense in its claim for unpaid rent. 13 I accordingly find that an order for costs is justified in favour of the Applicant against the Second Respondent. ORDERS The Second Respondent is to pay the Applicant's costs of these proceedings as assessed or agreed. 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.