CITATION: Bradley & Ors v North Eastern Travelstops Pty Limited (No 2) [2005] NSWADT 160 DIVISION: Retail Leases Division APPLICANT PARTIES: Seamus Bradley, Margie Howarth and Peta Hunter RESPONDENT North Eastern Travelstops Pty Limited FILE NUMBER: 035012 HEARING DATES: 17/03/2004, 18/03/2004 SUBMISSIONS CLOSED: 03/23/2005 DATE OF DECISION: 07/13/2005 BEFORE: Boyce P - Judicial Member APPLICATION: Costs MATTER FOR DECISION: Costs LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 Townsend v SRA [1999] NSWADT 104 Citadin Pty Ltd v Eddie Azzi Australia Pty Ltd & Anor (No2) [2001] NSWATAP31 Holpitt Pty Ltd v Varimu Pty Ltd (1991) 103 ALR 684 CASES CITED: Hoblos v Marchese [1999] NSW ADT 127 Forma v BHP Co. Ltd. [1999] NSW ADT 59 Langley v UNSW (1984) EOC 92-018 Wood and Anor v Bergman (No. 2) [ 2003] NSWADT 175 Randi Wiks Pty Ltd v Pokona Pty Ltd [2003] NSWADT AP 27 Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72 Sotiropoulos v Mattana Coiffure Pty Ltd (No.2) [2004] NSWADTAP 43 Trustees of the Pious Society of St Charles v Vodap P/L & Ors (No.2) [2004] NSWADT 113 Colleja v Malli [2001] NSWADT 20 REPRESENTATION: S Woodward, solicitor S Campbell, barrister ORDERS: 1. The Tribunal orders that the Respondent pay the costs reasonably and properly incurred by the Applicant; 2. Such costs to be assessed on a party and party basis ; 3. The amount of such costs: (i) may be agreed between the parties within 28 days of the date of this decision, or (ii) failing agreement being reached within that time, such costs to be assessed; 4. The costs will be payable within 21 days of agreement as to the amount or the amount assessed whichever is the earlier. REASONS FOR DECISION 1 In this matter the Applicant Lessees, Mr Seamus Bradley, Ms Margie Howarth and Ms Peta Hunter applied for orders against the Respondent Lessor, North Eastern Travelstops Pty Limited for loss of profits of their restaurant business known as Café Portofino after their right to occupy the restaurant premises was terminated. 2 Ladehai Pty Limited was the registered proprietor of land upon which a service station and restaurant known as 1 Coast Road, Hastings Point was built. 3 On 2 November 1997 Ladehai Pty Limited leased the whole of 1 Coast Road, Hastings Point to Caltex Australia Pty Limited ("Caltex") for the term of 5 years ending on 1 November 2002 ("Headlease"). 4 On 1 November 1998 Caltex entered into a sublease with Quality Travelstops Pty Limited for the service station and restaurant operated from 1 Coast Road, Hastings Point for a term of 5 years ending on 30 October 2003. 5 On 23 March 2000 Quality Travelstops Pty Limited assigned its sublease of the whole of 1 Coast Road, Hastings Point to North Eastern Travelstops Pty Limited, the Respondent in these proceedings. 6 On 12 December 2000 the Lessees entered into a "permit to occupy" with the Respondent permitting the Applicants to occupy a licensed area, being the restaurant area constructed at 1 Coast Road, Hastings Point, for a term ending at midnight on 30 October 2003, an option for a further term of 5 years, conditional upon Caltex exercising its option under the Headlease. 7 The parties agreed that the "permit to occupy" was a retail shop lease to which the Retail Leases Act, 1994 applies. 8 The Headlease from Ladehai Pty Limited expired on 1 November 2002 without Caltex exercising its option. 9 As Caltex did not exercise its option under the Headlease, the Respondent could not exercise its option under the sublease and the Applicants could not exercise their option under the permit to occupy. 10 It was represented to the Applicants by the Respondent that they had tenure to the premises until midnight 30 October 2003. 11 Caltex gave notice to the Applicants to vacate the premises on or before 28 February 2003. 12 As a result, these proceedings were commenced and Caltex took no further steps in relation to the notice to terminate pending resolution of the dispute about the Applicants' tenure. The Applicants agreed to vacate the premises on 27 July 2003 and ceased trading on that date. 13 This Tribunal found that by Caltex determining the Headlease an essential term of the permit to occupy was breached constituting repudiation of the permit to occupy. 14 The Tribunal's decision of 21 July 2004 found that the Applicants were entitled to damages for the loss suffered by them as a result of being unable to trade from the premises from 27 July 2003 to 30 October 2003 and the Tribunal ordered North Eastern Travelstops Pty Limited pay to the Applicant Lessees the sum of $17,982.00 damages together with interest from 1 October 2003. 15 The Tribunal also ordered that in the absence of an agreement for costs the parties may make submissions in relation to costs. 16 North Eastern Travelstops Pty Limited, the Respondent appealed the Tribunal's decision of 21 July 2004 to an internal Appeal Panel of this Tribunal unsuccessfully. 17 The Appeal Panel delivered its decision to dismiss the Appeal on 25 February 2005. 18 On the papers the Applicants now make a submission as to costs in respect of the initial proceedings. The Respondent has filed its submissions opposing an order for costs in favour of the Applicants. Principles Governing the Awards of Costs 19 Section 77A of the Retail Leases Act expressly provides that the Tribunal may award costs under Section 88 of the Administrative Decisions Tribunal Act in respect of proceedings commenced by an application under the Retail Leases Act. 20 Section 88 (1) of the Administrative Decision Tribunal Act provides that the Tribunal may award costs in relation to proceedings in the Tribunal but only if it is satisfied that there are special circumstances warranting an award of costs. 21 There have been a number of decisions in the Retail Leases Division of the Tribunal in relation to costs awarded by the Tribunal. These decisions give guidance on the interpretation and application of Section 88(i) of the Administrative Decision Tribunal Act. 22 In Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 the Tribunal defined "Special Circumstances" as: 29. Consequently, I am of the opinion that in order to satisfy the test of "special circumstances" one must find circumstances that are out of the ordinary, but without having to be extraordinary or exceptional, and those special circumstances would warrant an award of costs. In other words, I agree with Brooks Maher that there are two hurdles for a cost applicant to overcome. 23 In Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 at [4 - 6] the Tribunal found: 4.This Tribunal has rejected the general proposition that because of the commercial character of retail lease relationships, costs should follow the event. Townsend v SRA [1999] NSWADT 104. It has done so notwithstanding the tendency to a contrary view in Victoria in retail lease cases. See the review of the Victorian position by the Appeal Panel of this Tribunal in Citadin Pty Ltd v Eddie Azzi Australia Pty Ltd & Anor (No2) [2001] NSWATAP31. 5.The meaning of "special circumstances" has been considered in cases in a number of decisions of this tribunal. Descriptions of such circumstances range from "circumstances which take the matter out of the ordinary courses (see Holpitt Pty Ltd v Varimu Pty Ltd (1991) 103 ALR 684 referred to by this Tribunal in Hoblos v Marchese [1999] NSW ADT 127), to circumstances where the claims "lacked any conceivable merit in fact or law", the purpose of a costs order in those circumstances being described as a measure to prevent "the gross abuse of the legislation by frivolous and vexatious and misconceived proceedings". Forma v BHP Co. Ltd [1999] NSW ADT 59 quoting Hutley JA in Langley v UNSW (1984) EOC 92-018 at 75 468. 6.These analyses of the test to be applied make it clear that the circumstances must be seriously beyond the usual or ordinary pursuit of a claim so that it would be seriously unfair to a party to proceedings before the Tribunal not to be awarded some or all of its costs where it has been successful. 24 Gizah (No 2) at [22] and [33-34] explained the significance of the Retail Leases Division being unique within the Tribunal, in that it is the sole Division of the Tribunal to deal with commercial disputes between parties engaged in trade and commerce for reward. Wood and Anor v Bergman (No.2) [2003] NSWADT 175 at [11]: 11.It is recognised that the Retail Leases Division is unique within the Tribunal, in that it alone deals with commercial disputes between parties who are engaged in trade and commerce disputes between parties who are engaged in trade and commerce for reward. In Gizah, at [22] and [33 – 34], the significance of this for costs orders was explained as follows. 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." 25 Further in Gizah (No.2) the Tribunal held that 'special circumstances' existed in that case where (a) the successful party in the proceedings has made an offer or compromise of the dispute before the conclusion of the proceedings (b) the unsuccessful party had rejected the offer without good reason; and, (c) the terms of the offer were more favourable to the unsuccessful party then the orders made by the Tribunal. 26 The Gizah (No 2) approach was approved by Randi Wiks Pty Ltd v Pokona Pty Ltd [2003] NSWADT AP 27 at [14-16, 28] and applied in Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72, Sotiropoulos v Mattana Coiffure Pty Ltd (No.2) [2004] NSWADTAP 43; Trustees of the Pious Society of St Charles v Vodap P/L & Ors (No.2) [2004] NSWADT 113. The Applicants Submissions as to Costs 27 The Applicants submit that special circumstances exist entitling them to an award of costs as follows: "1. The rights to occupy the premises granted by Caltex to the Respondent expired 1 November 2002 or could be determined by Caltex as from that date. 2. That notwithstanding such knowledge the Respondent represented to the Applicants that tenure was until 30 October 2003. 3. The Applicants were not given the opportunity to independently confirm the tenure of the Respondent but were advised by the Respondent's Solicitor that they could rely upon that Solicitors unequivocal assurance that the right to occupy expired on 30 October 2003. 4. The Applicants sought application of the Tribunal to save their business or to mitigate their loss but without success due to the decisions of third parties including Caltex. 5. That an offer was put by the Applicants to the Respondent on 3 February 2004 to settle the matter in the sum of $16,000.00 all up, i.e. including costs, whereas the decision determined an award in excess of that sum. 6. That there was clear and continuous conduct by the Respondent before the trial of the Respondent's failure to comply with the obligations to the Applicant, if not a total disregard of the Applicant's rights under contract. These included: - a) the refusal to disclose the financial dealings between the Respondent and Caltex which could have alerted the Applicants of the limitation of the Respondent's tenure rights to November 2002; b) the failure by the Respondent to notify the Applicants of the sale of the business and franchise; c) the failure, to make such sale of business and franchise conditional upon the purchaser entering into a new lease arrangement with the Respondent in breach of the specific conditions of the permit to occupy; d) the presumptive giving notice of termination and to vacate, and the denial of the obligations of the Respondent to the Applicant relating to the tenure to October 2003." 28 In support of this submission the Applicant relies on the guidance given by Randi Wiks, Colleja v Malli [2001] NSWADT 20 Gizah (No.2) to satisfy the need to establish that 'special circumstances' exist in the Applicant's case. 29 The Applicants also submitted that as the matter raised substantive legal issues it was not only appropriate but essential that the parties be legally represented. At the hearing the Respondent saw the need to be represented by Counsel instructed by its Solicitor. 30 In summary the Applicants further submitted the circumstances entitling the Applicants to an award of costs as follows: "1. The appropriateness of legal representation. 2. Endeavours to settle the matter by negotiation. 3. The making of an offer of settlement of $16,000.00 inclusive on 3 February 2004 which was rejected by the Respondent. 4. The need for the Tribunal to encourage settlements. 5. The long established principle that one significant way of encouraging settlement of a matter is to award costs at least from the date of offer. 6. The conduct of the Respondent in its disregard of its obligations to the Applicants as evidenced in making blanket assertions as to entitlements which the Respondent did not have and then denying the ability of the Applicants to independently verify such rights." Respondent's Submissions 31 The Respondent quotes from the Tribunals Practice Note No 12: "whether a party has conducted the proceeding in a way that disadvantaged another party to the proceeding by conduct such as (i) failing 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 an 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 proceeding; whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding; 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; in matters under the Retail Leases Act 1994 where a party lodges an unconscionable conduct claim instead of a retail tenancy claim and it is found that there was no basis for the unconscionable conduct claim; where an appeal is lodged and the Appeal Panel considers the appeal was without any real prospect of success." 32 The Respondent submits that there are no special circumstances justifying a costs order and that there is no evidence of any of the matters referred to in Practice Note No. 12 in support of the Applicants submission of the existence of special circumstances. 33 The Tribunals decision of 21 July 2004 referred the parties to Trustees of the Pious Society of St Charles v Vodap Pty Ltd & Ors (No.2) [2004] NSWADT 113. The Applicant and Respondent made submissions outlining the principles referred to in that decision. 34 The Respondent submits that its conduct of and defences to the proceedings were bona fide and in no way categorised as frivolous or vexatious. It put that the case was not a situation where the Applicants had an unarguable case and this position is not altered by the fact that the Respondent's defence was unsuccessful; Trustees at [33]. 35 In relation to the Applicants' offer to settle the matter the Respondent says that the Tribunal does not function in relation to the issue of costs as the Supreme, District and Local Courts of New South Wales and that in Wood, Deputy President Chesterman noted that it was not enough simply to submit that an offer has been made and rejected by the opposing party, as the prevailing consideration is the presence of special circumstances. Conclusions 36 The thrust of the Applicants' submission in relation to the special circumstances entitling them to an award of costs can be crystallised into three grounds. A. The Respondent being prepared to grant to the Applicants a permit to occupy until 30 October 2003 when the Respondent's rights to occupy the premises expired on 1 November 2002. B. An offer of settlement made by the Applicants to the Respondent on 3 February 2004. C. The Respondents conduct prior to the trial in that it refused to disclose financial dealings with Caltex, the sale of its business and franchise, having regard to the Applicants' tenure in dealing with the purchaser of its business and franchise and denial of the Applicants' tenure until 1 October 2003. 37 The first ground on which the applicant relies is the basis of the claim upon which the Applicants succeeded. 38 The Respondents say that its conduct of and defence to the proceedings was bona fide and could not in any way be categorised as frivolous or vexatious. Its arguments were put forward in good faith and had a reasonable basis for those arguments. It was not a situation where the Applicant had an unarguable case and this position is not altered by the fact that the Respondents defence was unsuccessful. 39 This first ground of the Applicants claim is no more than what is in the ordinary course of decisions by courts in relation to disputes. The Applicants ground does not establish circumstances which take the matter out of that ordinary course. 40 I find that the evidence does not support the Applicants submissions in relation to its first ground that the circumstances of the Applicants claim were beyond the usual or ordinary pursuit of a claim and is therefore unable to establish special circumstances for this ground. 41 The Applicants second ground is in relation to its offer of settlement on 3 February 2004 to the Respondent. 42 To succeed on this ground it is well established in Gizah (No.2) that for special circumstances to exist in that case: a) the successful party in the proceedings has made an offer or compromise of the dispute before the conclusion of the proceedings; b) the unsuccessful party had rejected the offer without good reason; and c) the terms of the offer were more favourable to the unsuccessful party than the orders made by the Tribunal. 43 The Applicant and Respondent acknowledge that on the face of it, the Applicants offer of 3 February 2004 rejected by the Respondent was more favourable to the Respondent than the orders of the Tribunal. 44 However, the Respondent refers the Tribunal to Woods at [52] The final argument by Mr. Baker was founded on the Lessees' rejection of two offers of compromise. There are authorities on s 88 to the effect that such rejection may constitute 'special circumstances' – see for example the Gizah case, and also Barsoum v Glebe Administration Board (No. 2) [2002] NSWADT 174. But it is not enough simply to submit, as Mr. Baker did, that an offer of compromise was made by the party seeking the costs order and rejected by the opposing party. 45 The Respondent says that it is implicit in the words of Deputy President Chesterman in Woods at [52] that the Tribunal does not function in relation to the issue of costs in the same way as the Supreme, District and Local Courts of New South Wales. The Respondent contends that notwithstanding the offer being rejected, the prevailing consideration is the presence of special circumstances. 46 Indeed s. 88 (3) of the Administrative Decisions Tribunal Act does not permit the award of costs in proceedings for an original decision unless permitted under the enactment conferring jurisdiction award of cost as s 77A of the Retail Leases Act does. 47 S.88 of the Administrative Decisions Tribunal Act says that the Tribunal must be "satisfied" that there are 'special circumstances warranting an award of costs'. 48 I do not feel that the Respondents submissions referred to in paragraph 45 above assists it to refute the Applicants argument that its second ground establish special circumstances. 49 The circumstances of the Applicants offer, rejected by the Respondent before the commencement of the hearing, with the Applicant obtaining a more favourable result by the order of the Tribunal falls within the test and guidance of Gizah No. 2 approved by Randi Wiks and applied in many other decisions as being special circumstances under s.88. 50 Accordingly on the Applicants second ground I find they have established special circumstances entitling them to an award of costs against the Respondent. 51 The final ground establishing special circumstances is submitted by the Applicant as being the Respondents conduct prior to trial in its refusal to disclose its commercial arrangements with Caltex, other third parties. 52 The Respondent does not directly make submissions in reply to the Applicants contention. Apart from a general denial that there is no evidence of matters referred to in paragraph 1(b) of the Tribunals Practice Note No. 12. 53 Most of the issues complained of by the Applicant in this submission were matters of a commercial nature perhaps confidential to the Respondent and a third party or which the Respondent negotiated with the Applicants before entering into the Permit to Occupy. In my decision of 21 July 2004 I found that there was no evidence of the Respondent knowingly giving false or misleading representations in breach of s. 10(1) of the Retail Leases Act. 54 I do not find that the Applicant has established special circumstances in respect of its third ground. 55 Having found that on its second ground the Applicant has established special circumstances warranting an award of costs under s. 88(1) of the Administrative Decisions Tribunal Act. S. 88(2)(a) permits the Tribunal to determine by whom and to what extent costs are to be paid. 56 I consider that the Applicant is entitled to its costs on a party party basis. Orders 1.The Tribunal orders that the Respondent pay the costs reasonably and properly incurred by the Applicant. 2.Such costs to be assessed on a party and party basis. 3.The amount of such costs (i)may be agreed between the parties within 28 days of the date of this decision; or (ii) failing agreement being reached within that time, such costs to be assessed. 4.The costs will be payable within 21 days of agreement as to the amount or the amount assessed whichever is the earlier. 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.