CITATION: G & M Dawson Pty Limited v Cripps, Jones & Anor (No 2) [2005] NSWADT 14 DIVISION: Retail Leases Division APPLICANT G & M Dawson Pty Limited FIRST RESPONDENT PARTIES: Michael Lance Cripps, Executor of the Will of the late Kerrie Frances Cripps SECOND RESPONDENT Madonna Kaye Jones THIRD RESPONDENT H G & R Securities Pty Limited FILE NUMBER: 025079 HEARING DATES: On the papers SUBMISSIONS CLOSED: 12/08/2004 DATE OF DECISION: 02/03/2005 BEFORE: Montgomery S - Judicial Member APPLICATION: Costs MATTER FOR DECISION: Costs and interest LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Charteris v General Manager Leichhardt Municipal Council [2001] NSW ADTAP 39 Citadin Pty Ltd (No. 2) -v- Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd (RLD) [2001] NSWADTAP 31 Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 CASES CITED: Falkner v Bourke (1990) 19 NSWLR 574 Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164 Sotiropoulos v Mattana Coiffure Pty Limited (No 2) (RLD) [2004] NSWADTAP 43 Wood & Anor v Bergman (No 2) [2003] NSWADT 175 APPLICANT S Reuben, barrister REPRESENTATION: FIRST & SECOND RESPONDENTS D Robertson, barrister THIRD RESPONDENT C Champion, barrister ORDERS: 1. Each party is to bear its own costs of these proceedings; 2. The First and Second Respondents are jointly and severally liable to pay to the Applicant interest on the whole of the amount ordered in these proceedings. Interest is payable at the applicable District Court rate from 28 June 2002; 3. If the parties are unable to agree on the amount of interest to be paid, the Applicant is invited to provide details to the Tribunal within 28 days of these orders so that the amount may be quantified. REASONS FOR DECISION 1 In the substantive matter, G & M Dawson Pty Limited ("the Applicant"), as lessee of for premises located at Shop 1 Eton Arcade, 754-760 Princes Highway, Sutherland, ("the Premises") sought certain orders against Kerrie Frances Cripps and Madonna Kaye Jones ("the First & Second Respondents") as the lessors of the Premises and H G & R Securities Pty Limited ("the Third Respondent"). The Premises were used as a photographic retail outlet. 2 In determining the substantive matter I made the following orders: "Kerrie Frances Cripps and Madonna Kaye Jones are jointly and severally liable to pay to G & M Dawson Pty Limited the amount of $3,115.00. This amount is to be paid within 21 days of the date of these reasons. Each party is invited to file written submissions in relation to the issues of interest or costs within 28 days of the date of these reasons. Any submissions in reply are to be filed and served within a further 14 days." 3 The Applicant successfully appealed the decision and the Appeal Panel ordered: "1. Leave is granted to the Appellant to substitute Michael Lance Cripps, as executor of the will of the late Kerrie Frances Cripps, in her place as the First Respondent to this appeal; 2. The appeal is allowed; 3. Order 1 made by the Tribunal on 23 December 2003 is set aside, and in its place it is ordered that the First and Second Respondents are jointly and severally liable to pay to the Appellant the amount of $105,115.00, less any amount that has already been paid in satisfaction of the Tribunal's Order; 4. Unless within 28 days one of the parties files a written submission seeking costs, there will be no order for the costs of the appeal. If a submission is filed, the opposing party or parties must file any submission in reply within a further 14 days. The matter will be determined on the papers unless a party seeks to be heard; 5. The case is remitted to the Tribunal as constituted at first instance for determination of the following issues: (a) the costs of the hearing at first instance and (b) interest on the damages awarded". 4 Each of the parties filed written submissions in relation to the issues of interest and costs. 5 The Applicant asserted that the hearing of this matter could have been avoided if the first and second Respondents were prepared to recognise that the Applicant was entitled to a lease on the terms negotiated; and/or had they consented to an Assignment of the Lease to Kilbane in a timely manner. The failure on the part of the first and second Respondents involved an equitable fraud on the part of the Lessors and was in contravention of the express terms of the provisions of Section 39 and 41 of the Retail Leases Act 1994 and was therefore unlawful conduct on the part of the Lessor. The Applicant further asserted that such conduct on the part of the Lessor could constitute special circumstances to attract the exercise of discretion under section 88 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act") to justify an award of costs against the unsuccessful party. 6 The Applicant further asserted that the conduct of the first and second Respondents has been totally unreasonable, frustrating the rights of the tenant going to the heart of its tenancy, failing to recognise the lease terms and obligations or recognising the capacity of the tenant to assign its lease as might be contemplated by a sale of the retail shop business the subject of the tenancy. It is contended that the Respondents have so acted notwithstanding that they had the opportunity to do otherwise at numerous points in the litigation. It submitted that if no cost penalty is applied by the Tribunal against the first and second Respondents then they enjoy in immunity from the consequences of their equitable fraud and unlawful conduct, which would be offensive to the notion of fairness that governs the exercise of discretion in relation to costs. 7 In the Applicant's submission there are no special circumstances that would justify an award of costs against the Applicant in favour of the Third Respondent. However, if the Tribunal was of a contrary view, then the Applicant submits that it is appropriate that an order for costs be made such that the First and Second Respondents are required to pay the costs which the Applicant would otherwise be required to pay in favour of the Third Respondent. That is, a Bullock order. 8 The Applicant also submits that an award of interest should be made with respect to the amount that the First and Second Respondents have been ordered to pay to it, and that the interest should run from June 2002. It contends that the purpose of the discretion to award interest is to permit a successful party to be properly compensated for the loss it has suffered: Falkner v Bourke (1990) 19 NSWLR 574. It is submitted that the Applicant's loss relates to having been held out of possession of $102,000 since the date of the failed sale in June 2002 and interest should be awarded to compensate it for the loss of the use of that money in accordance with the power conferred upon the Tribunal to award interest. 9 The First and Second Respondents assert that they have not acted unreasonably in the conduct of this litigation. Although ultimately unsuccessful on the question of liability they raised properly arguable issues in defence of the claim against them. They contend that it cannot be said that their arguments were not put forward in good faith or that they had no reasonable basis. There was no offer of compromise that was clearly more favourable to them than the ultimate determination of the Tribunal. 10 While they concede that criticisms could be made of the actions of the solicitors involved in the transaction, the First and Second Respondents assert that that is all merely background. They submit that the issue now is, "were there special circumstances surrounding the conduct of the case?" It is only the conduct of the proceedings that could be relevant to the question of costs. They refer to views expressed by the Appeal Panel in Charteris v General Manager Leichhardt Municipal Council [2001] NSW ADTAP 39 at paragraph 18 that the Tribunal should show caution as to allowing a costs application to become a vehicle for undertaking a general review of the conduct of a respondent towards an applicant. They refer to Citadin Pty Ltd (No. 2) v Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd (RLD) [2001] NSWADTAP 31 at paragraph 7 as grounding the submission that adverse costs orders are not a sanction to reprove allegedly unreasonable conduct which has led to an application for relief. 11 The First and Second Respondents also assert that there is no warrant for a costs order against the Third Respondent in favour of the Applicant. However, if such a costs order were to be made it could only be on the basis that the conduct of these proceedings by the Third Respondent was such as to constitute special circumstances warranting the making of such an order. If there was such conduct the Third Respondent should bear the consequences of that conduct. There is no basis for subjecting the First and Second Respondents to any liability imposed on the Third Respondent by reason of its conduct of the proceedings. 12 The First and Second Respondents did not oppose the award of interest at District Court rates on the sum of $3,115 from 1 August 2002 until 11 February 2004. However, it appears that they otherwise opposed an order for interest. They submitted that interest should not be awarded in respect of the period prior to 8 April 2003. In respect of the period subsequent to that date interest should not be awarded in respect of the amount of $32,023.87 from July 2002 to April 2003 on the basis that during that period the Applicant was better off as a result of conducting the business. 13 The Third Respondent seeks an order that the Applicant pay its costs of the hearing and of all work reasonably necessary to prepare therefore. The Third Respondent contends that special circumstances support the making of a costs order in its favour because firstly, the Applicant knew, in detail, all of the steps taken by the Third Respondent to ensure the registration of the Lease prior to the registration of the Transfer and the Mortgage; and secondly, by letter dated 17 April 2003 the Third Respondent made an open offer of settlement to the Applicant that reflected all acts the Third Respondent was legally and practically able to do in the matter however the offer was not accepted. 14 The Third Respondent also seeks an order for costs against the First and Second Respondent on an indemnity basis. It is submitted that the conduct of the First and Second Respondents was unmeritorious, deliberate and high-minded in the sense discussed in Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, at 233-234 such as to satisfy the test of being circumstances that are out of the ordinary and justifying an order for indemnity costs. 15 The Third Respondent submits that an alternative basis for, firstly, a costs order being made against the First and Second Respondent and, secondly, such an order being made on an indemnity basis can be found in the terms of the indemnity provided to the Third Respondent by the First and Second Respondent in clause 50.7(a)(ii)(B) of the Contract of Sale. 16 In the alternative the Third Respondent submits that if a costs order is made against it in favour of the Applicant, a Bullock order should be made with the consequence that the First and Second Respondent reimburse the Third Respondent the amount of the costs that it is required to pay the Applicant. Findings as to costs 17 If the traditional common law approach of 'costs follow the event' applied in the Tribunal, the Applicant, being successful, would have a prima facie entitlement to its costs. But as has been said in numerous cases within the Retail Leases Division, the criterion of 'special circumstances' dictates a very different approach. 18 The principles governing the awards of costs were specifically considered by the Appeal Panel in Sotiropoulos v Mattana Coiffure Pty Limited (No 2) (RLD) [2004] NSWADTAP 43 and in Wood & Anor v Bergman (No 2) [2003] NSWADT 175. Clearly, section 88 of the ADT Act lays down a principle that the Tribunal must be satisfied that there are special circumstances warranting an award of costs. Illustrations of what may qualify as 'special circumstances' appear in paragraph 2 of the Tribunal's Practice Note 12, dated 4 March 2003 however, the list given is not exhaustive. 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'. A finding of 'serious unfairness' is not a prerequisite to determining that there are 'special circumstances'. 19 Unreasonable conduct that is out of the ordinary and conduct which is grossly unreasonable can attract the exercise of the Tribunal's power under section 88. The Applicant points to the conduct by the First and Second Respondents in failing to consent to the assignment and the consequence that it was unable to be fully compensated for its actual losses as a result of their actions; and asserts that it would be seriously unfair to the Applicant not to be awarded costs where it has been successful in this litigation and in effect forced to pursue this litigation in order to have its legal rights recognised. 20 I have no doubt that the Applicant, through no fault of its own, has been placed in the situation where it has been forced to pursue this litigation. In my view this is extremely regrettable. Nevertheless, the legislature has established a scheme for the resolution of retail tenancy disputes that anticipates that an order for costs will be the exception rather than the rule. I agree with the First and Second Respondents' assertion that, in order for the Applicant to succeed in this application, I must find that the circumstances surrounding the conduct of the case amount to 'special circumstances'. I also agree that costs orders are not a sanction to reprove unreasonable conduct that has led to an application for relief. 21 In the circumstances of this matter it is my view that requirements for an order pursuant to section 88 have not been met. The circumstances were not out of the ordinary such as to amount 'special circumstances' that could be relevant to the question of costs. Accordingly, the appropriate order is that each party should bear its own costs. Findings as to interest 22 I agree with the Applicant's submissions that an order for the payment of interest is appropriate. In my view, the First and Second Respondents should pay interest on the whole of the outstanding amount of the Appeal Panel's order. Section 72A of the Retail Leases Act 1994 provides that the Tribunal may order that interest be paid on the whole or any part of an amount ordered for the whole or any part of the period between when the cause of action arose and when the order takes effect. The Applicant seeks interest to compensate it from the date of the failed sale in June 2002. I agree that this is appropriate. The interest should be paid at the relevant District Court rate from 28 June 2002. As I am unaware of whether or not any or all of the amount ordered has been paid I am unable to calculate the amount of interest to be paid. If the parties are unable to agree on the amount of interest to be paid, the Applicant is invited to provide details to the Tribunal within 28 days of these orders so that the amount may be quantified. Orders 1. Each party is to bear its own costs of these proceedings. 2. The First and Second Respondents are jointly and severally liable to pay to the Applicant interest on the whole of the amount ordered in these proceedings. Interest is payable at the applicable District Court rate from 28 June 2002. 3. If the parties are unable to agree on the amount of interest to be paid, the Applicant is invited to provide details to the Tribunal within 28 days of these orders so that the amount may be quantified. 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.