Nakhle v Karmanchuk (No 2) [2007] NSWADT 141

CITATION: Nakhle v Karmanchuk (No 2) [2007] NSWADT 141

DIVISION: Retail Leases Division

APPLICANT PARTIES: Melissa Nakhle RESPONDENT Zoya Karmanchuk

FILE NUMBER: 065092

HEARING DATES: On the papers

SUBMISSIONS CLOSED: 5 February 2007

DATE OF DECISION: 26 June 2007

BEFORE: Fox R - Judicial Member

CATCHWORDS: Costs

MATTER FOR DECISION: Costs

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

Alessa Pty Limited v Total and Universal Pty Limited [2001] NSWADT 150 Cripps & Another v G & M Dawson Pty Limited [2006] NSWCA 81 Cripps and Anor v G. & M. Dawson Pty Limited and Anor (2006) NSW CA 81 CASES CITED: Hoctor v Scheib [2001] NSWADT 100) North Eastern Travelstops Pty Limited v Bradley and Ors (No. 2) [2005] NSWADTAP 17 Prasad and Walker v Fairfield City Council [2002] NSWADTAP 2 Sotripoulos v Mattana Coiffure Pty Limited (No. 2) NSWADTAP 43

APPLICANT W Carney, Barrister REPRESENTATION: RESPONDENT G Penhall, Solicitor

ORDERS: Respondent to pay Applicant's costs, on a party/party basis, of preparing for and appearing at the Application for Urgent Interim Relief on 27 June 2006.

REASONS FOR DECISION 1 In response to my invitation, both parties have made submissions claiming costs pursuant to special circumstances in their favour. 2 It seems appropriate to again state that, although this Division considers special circumstances differently to other Divisions, because of the commercial nature of the matters usually in issue, it does not mean that costs follow the event:- Alessa Pty Limited v Total and Universal Pty Limited [2001] NSWADT 150. 3 It also seems appropriate to restate Section 88(1) of the Administrative Decisions Tribunal Act 1997:- "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." 4 In many of the decided cases this has resulted in an analysis of the conduct of the parties at the hearing, costs often being awarded against a party whose conduct has had a seriously unfair impact on the other. It is clear that serious unfairness is not a test which applies in all circumstances, but it is still a very useful guide:- see Sotripoulos v Mattana Coiffure Pty Limited (No. 2) NSWADTAP 43 and Cripps and Anor v G. & M. Dawson Pty Limited and Anor (2006) NSW CA 81. 5 Mr Carney submitted on behalf of the Applicant that the evidence of both the Supreme Court proceedings (which technically was evidence before me) and the further evidence brought in this Tribunal made it clear (at least immediately before the commencement of the hearing), that there had been no unauthorised transfer of the possession of the premises and proposed that that fact raised special circumstances. I disagree. Whilst it is clear that persisting in an almost unsupportable case will amount to special circumstances (see North Eastern Travelstops Pty Limited v Bradley and Ors (No. 2) [2005] NSWADTAP 17, and Hoctor v Scheib [2001] NSWADT 100) that does not apply in a matter where the Tribunal is faced with material which might well result in a decision either way, depending on the fall of the evidence. This was such a case, even though, in the end, it turned out in my view not to be finely balanced. The evidence which favoured the Applicant was not so blatantly clear in her favour that it was possible to say that a prudent opponent would not have put the other party to the trouble of a hearing. It is on that basis that I say that I can identify no special circumstances which would justify an award of costs in favour of the Applicant in respect of the Application itself and the hearing which followed. 6 However, Mr Carney also argued the matter on the basis that "The Lessor has acted prematurely in trying to take back possession of the premises", a comment which I take to apply to both the hearing of the Application and of the hearing of the Application for Interim Relief. As I indicated in the last paragraphs of my reasons herein, I am not at all satisfied that the Respondent's action in initiating a lockout were the appropriate way of dealing with the situation which faced the Respondent at that time. 7 There are many circumstances in which a lessor's action to lockout a lessee are appropriate, no matter how severe that impact may be upon the lessee. This was not one of those. I note that Mr Penhall sought to justify the action taken on the basis that not doing so might result in new lease for 5 years implied by section 16 of the Retail Leases Act 1994. That proposition seems to me to be so difficult to support that, to raise it, falls within the ambit of the special circumstances identified in Hoctor and Schieb and North Eastern Travelstops. I am satisfied that a prudent lessor, in these circumstances, would simply have made an application in this Tribunal for a declaration to the effect that there had been an unauthorised assignment which was terminal to the right of occupancy. I reject Mr Penhall's suggestion that, in the absence of a response to the notice to vacate, a lockout was appropriate. To put it in the vernacular, the attempted lockout was an over kill. The appropriate response was the much less aggressive step of immediate commencement of proceedings. 8 Viewed in this light, the Respondent's actions also fall within the sense of the special circumstances identified in Prasad and Walker v Fairfield City Council [2002] NSWADTAP 2 and which are highlighted in the Tribunal's Practice Note 12 – broadly expressed as the method of conducting the Proceedings. Cripps & Another v G & M Dawson Pty Limited [2006] NSWCA 81 is clear authority for the proposition that the conduct which led to the Proceedings is as relevant as the actual conduct of the Proceedings. It is in this regard that it seems to me to be proper to observe that a lessor must, when contemplating a lockout, be conscious of the severe effect that such action will have on the lessee. Such actions, taken without proper legal basis, leaving the lessee no choice but to incur the cost of an Application for Urgent Interim Relief in the Tribunal, are a clear example of the kind of circumstance in which it can only be said that it would be seriously unfair to leave the lessee with the burden of those costs. It follows that such actions amount to special circumstances in the relevant sense to justify a Costs Order. There may even be instances (although this is not one) where the legal basis of the lockout is so minimal that an Indemnity Costs Order is appropriate. 9 The Respondent is to pay the Applicant's costs of the Application for Urgent Interim Relief, being the costs of preparing for, and appearing on 27 June 2006, on a party/party basis.