CITATION: Wilbe Pty Ltd v Malmundu Pty Ltd [2007] NSWADT 172 DIVISION: Retail Leases Division APPLICANT PARTIES: Wilbe Pty Ltd RESPONDENT Malmundu Pty Ltd FILE NUMBER: 065218 HEARING DATES: On the papers SUBMISSIONS CLOSED: 10 May 2007 DATE OF DECISION: 3 August 2007 BEFORE: Higgins S - Judicial Member CATCHWORDS: Claim for declaration of rights, obligations and liabilities under a lease 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 Gizah Pty Ltd v AXA Trustees Limited (No. 2) CASES CITED: Petria Pty Ltd v Makhoul [2005] Prasad v Fairfield City Council (RLD) [2002] Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1977) Sarip Investment Pty Ltd v Uno Uno Pty Ltd [2004] Singh v Solomon & Ors (No 2) APPLICANT A Masi, solicitor REPRESENTATION: RESPONDENT JC Treback, barrister ORDERS: The respondent to pay the applicant's cost of this application as agreed or assessed REASONS FOR DECISION Background 1 The applicant is the lessee of premises known as shop 1 at 100-104 Kinghorne Street, Nowra and the respondent is the lessor of those premises. The parties had entered into a five year lease in respect to these premises on 26 July 2001. That lease made provision for two options to renew the lease and each option was for a further five year term. 2 On 29 December 2006, the applicant lodged an application with the tribunal seeking a declaration that it was entitled to the grant of a new lease following its valid exercise of the option to renew, an order that the respondent specifically perform the terms of the lease and grant the applicant a renewal of the lease and an order for the appointment of a specialist retail valuer pursuant to s.19 of the Retail Leases Act 1994 ('the RL Act'). 3 The matter first came before the tribunal on 1 February 2007 and the tribunal made orders by consent as to the filing and serving of evidence by the parties. The matter next came before the tribunal on 12 April 2007. The only evidence filed following the initial directions hearing was an affidavit of Max Moody, a director of the applicant, which was filed and served prior to the agreed date of 22 February 2007. No evidenced was filed by the respondent. When the matter came before the tribunal at the April 2007 directions hearing it was unnecessary for the tribunal to set a new time table as the respondent consented to the tribunal making the declaration and orders sought by the applicant in its application. As a result the applicant made an application for costs and orders were made for the filing and serving of written submissions and the parties consented to the tribunal dealing with this application on the papers. The respondent also indicated its intention to make an application for costs in respect to the costs application in the event the tribunal does not make an order in favour of the applicant in this costs application. As the tribunal has made such an order this issue has not been considered any further. Principles governing costs 4 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 Retail Leases Act 1994 ("RL Act"), s.88(3) of the ADT Act provides that the tribunal has such a power where the enactment pursuant to which the tribunal is given jurisdiction to make an original decision also gives the tribunal jurisdiction to make an award of costs. S.77A of the RL Act is such a provision. 5 The power to award costs under s.88(1) of the ADT Act is discretionary and 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 for costs has two hurdles to overcome. The first hurdle is to establish that the circumstances of the application constitute 'special circumstances'. The second hurdle is to establish that the identified 'special circumstances' warranted an award of costs: see Gizah Pty Ltd v AXA Trustees Limited (No. 2) [2001] NSWADT 164 at [29]. 6 "Special circumstances" have been defined as "circumstances that are out of the ordinary, but without having to be extraordinary or exceptional". On account of the "commerciality" of the Retail Leases Division of the Tribunal, 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. This does not mean that costs will follow the event in such matters: see Alessa Pty Limited v Total and Universal Pty Limited [2001] NSWADT 150. 7 Practice Note 12 (reissued on 11 May 2005) sets out the following as examples of "special circumstances" which may warrant an order for costs under s.88(1) of the ADT Act: "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. 8 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". In that case, the Appeal Panel cited the making of unnecessary preliminary applications or any unnecessary delay in the progress of an application, which had the effect of elongating the litigation and making it more costly as an example of what was generally regarded as being inconsistent with the reasonable conduct of litigation. 9 It is also accepted that the categories of special circumstances are not closed and that each case must depend on its own particular facts: see Sarip Investment Pty Ltd v Uno Uno Pty Ltd [2004] NSWADT 27 at [30]. Applicant's case 10 Its is the applicant's contention that it was forced to initiate proceedings in the tribunal because the respondent failed to respond to the applicant's numerous written requests to provide it with a renewed lease as required under the terms of the lease. In support of this contention the applicant provided the tribunal with copies of the following letters between from solicitors, Hansons Lawyers, and those of the respondent, Holman Webb Lawyers: (a) 14 August 2006 – the applicant's solicitors requested confirmation by 3.00pm on 18 August 2006 that the respondent would submit a renewed lease pursuant to the exercise of the option and that the respondent would participate in an independent rent assessment process. In this letter the applicant's solicitor also indicated that the applicant would commence proceedings if there was no response. (b) 29 September 2006 – the applicant's solicitor requested a response to the abovementioned letter by 6 October 2006. (c) 10 November 2006 – the applicant's solicitor advised that the applicant would not be vacating the premises and that the applicant would commence proceedings in the Supreme Court. (d) 27 November 2006 – the applicant's solicitor, inter alia, requested the respondent to provide it with a renewed lease by 13 December 2006 and failing this the applicant would commence proceedings. 11 In submissions in reply the applicant submitted that any defence that was available to the respondent lacked any real prospect of success and was therefore unmeritorious and resulted in the applicant being required to unnecessarily incur the expense of putting on evidence. In regard to there being no defence the applicant pointed to annexure 'B' of the affidavit of Max Moody, which was a letter, dated 27 October 2005, from the applicant's former solicitor to the respondent and in which the applicant formally exercised its option to renew. The applicant also stated that the respondent did not give notice under s.133E of the Conveyancing Act 1919 in response to the applicant's letter. 12 The applicant seeks $7,633.45 (inclusive of GST) in costs. These are made up as follows: (a) cost of solicitor: $6,093.45 (b) tribunal filing fee: $55.00 (c) cost of barristers Gordon McGrath: $1,320.00 Kalina Rose: $165.00 Respondent's case 13 The respondent submitted that as the matter was settled between the parties before there was a hearing on the merits of the applicant's application, on the basis of the principles set out by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1977) 186 CLR 622 at 624-5 there should be no order as to costs, unless the tribunal finds that the conduct of the respondent in defending the proceedings was unreasonable. In this regard the respondent pointed to the terms in which the applicant's letter of 27 October 2005 was framed in that it stated that the applicant 'wished' to exercise the option. The respondent went on to say that there were arguable points of defence and it was not for the tribunal in this application to make any conclusive findings in that regard. 14 The respondent also stated that following the directions hearing on 1 February 2007 and the filing and serving of the affidavit of Max Moody, the respondent sought advice. It was as a result of that advice that the respondent consented to the declaration and orders sought by the applicant when the matter was next before the tribunal. 15 The respondent also contended that the solicitor's fees were excessive. In regard to the respondent's failure to comply with the agreed timetable, the respondent contended that the applicant suffered no disadvantage as a result of that failure as consent orders were entered into when the matter next came before the tribunal. Consideration 16 In my opinion, in regard to the applicant's costs application, the main issue is whether the respondent has conducted itself in these proceedings in a manner which was unreasonable and which disadvantaged the applicant and therefore warrants a cost order to be made in the applicant's favour. 17 As pointed out by the respondent, in determining this issue it is not the function of the tribunal to make a prediction as to the outcome of the application had it proceeded to a hearing: see Ex parte Lai Qin at 625. In that decision McHugh J. said the following: "In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; ex parte Raysun Pty Ltd the full court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the cost of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The full court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans." 18 While applications to the tribunal pursuant to the RL Act are matters of a commercial nature and not administrative law matters, in my opinion, the abovementioned comments equally apply in respect to the conduct of parties to a commercial dispute. Furthermore, regard can be had to conduct that preceded the initiation of proceedings: see Cripps & Another v G & M Dawson Pty Limited [2006] NSWCA 81. 19 In this application, on the basis of the material filed by the applicant (which is not disputed by the respondent), I find that after the respondent had refused to respond to the applicant's numerous requests to issue it with a renewed lease the applicant had no reasonable alternative but to commence proceedings in the tribunal. The basis on which the applicant sought the renewed lease was at all times made expressly clear and there is no material before the tribunal that suggests that the respondent at any time, other than through the submissions of its counsel in this application raised a basis on which the applicant was not so entitled. Furthermore, the application filed with the tribunal the applicant expressly and very clearly the basis on which its claim was based. This included proving particulars of when the option was exercised; namely the letter of 27 October 2005 from the applicant's former solicitors. 20 I am not persuaded by the respondent's submission that it was not until after being served with the affidavit of Max Moody that the respondent was in a position to make a decision as to whether it would defend the proceedings or consent to the orders that had been sought. The affidavit of Max Moody is a very short affidavit which attaches to it a copy of the lease, a copy of the letter dated 27 October 2005 and a copy of a letter from the respondent's solicitor to the applicant's then solicitor dated 5 March 2006. This affidavit and its attachments contained no matter of any controversy or documents which the respondent was unaware of and it had been aware of these well and truly before August 2006 when the applicant made its first request to be issued with a renewed lease. 21 In my opinion, the conduct of the respondent when viewed overall was unreasonable and caused the applicant to incur unnecessary costs in regard to its application to the tribunal. Furthermore, this conduct in my opinion constitutes special circumstances which also warrant an award of costs. However, in light of the respondent's contention that the costs are excessive it is appropriate that the costs order be couched in terms of costs being assessed or as agreed. 22 The tribunal orders that the respondent pay the applicants costs of this application 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.