CITATION: Risorto & Ors v Hanjoena Pty Ltd [2004] NSWADT 171 DIVISION: Retail Leases Division APPLICANT PARTIES: Fernando Risorto, Domenica Risorto & Sara Risorto RESPONDENT Hanjoena Pty Ltd FILE NUMBER: 035112 HEARING DATES: 23/07/2004 SUBMISSIONS CLOSED: 07/23/2004 DATE OF DECISION: 08/17/2004 BEFORE: Rickards K - Judicial Member APPLICATION: Costs MATTER FOR DECISION: Costs LEGISLATION CITED : Retail Leases Act 1994 Victorian Civil and Administrative Tribunal Act 1998 Brooks Maher -v- Cheung [2001] NSWADT18 Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 CASES CITED: Irresistible Frocks Salon Pty Ltd -v- Sparbac Pty Ltd & Roche Group Pty Ltd (No 2) [2004] NSWADT AP72 Randi Wiks Pty Ltd -v- Pokana Pty Ltd [2003] NSWADT AP27 Wood & Anor -v- Bergman (No 2) (2003) NSWADT 175 APPLICANT REPRESENTATION: A Autore, solicitor RESPONDENT D Lagopodis, solicitor ORDERS: 1. Applicants to pay the Respondent's costs with the exception of any costs incurred in connection with the Submissions of the Respondent dated 11 June 2004.; 2. The amount of such costs to be as agreed or assessed. REASONS FOR DECISION INTRODUCTION 1 This matter originally involved an Application for Urgent Interim Orders which was dismissed by the Tribunal on 2 October 2003, and an Application for various orders including declaration of a valid and subsisting lease, which was discontinued by the applicants on 28 January 2004. 2 The Respondent has sought an order that the Applicants pay its costs of the proceedings. 3 Written submissions were made by both parties, as well as oral submissions during the course of hearing of the Respondent's application for costs on 23 July 2004. 4 The Respondent argues that it is entitled to an order for costs because there are special circumstances warranting such an order. Such special circumstances are claimed to be as follows:- a) the Applicants' discontinuance of the proceedings; b) the proceedings were initiated and continued without any foundation or legal basis and lacked any merit whatsoever, and were flawed; c) the conduct of the Applicants in all the circumstances before the commencement of the proceedings made the commencement and/or continuation of the proceedings (even though discontinued), frivolous and vexatious in nature; d) the conduct of the Applicants was unreasonable in all circumstances. 5 In response, the Applicants argue that:- a) the Respondent's application for costs does not meet the particular criteria required for "special circumstances"; b) the Applicants discontinued the proceedings in January 2004 which was the earliest point at which discontinuance was warranted having regard to "the interlocutory steps taken to protect their interests"; c) conversations between the Applicants and the Respondent between April 2002 and March 2003 were such that they formed genuine and reasonable view that a three year lease would be entered into; d) there was neither evidence nor conclusion by the Tribunal to warrant any finding that the proceedings were initiated or continued without any foundation or legal basis, or lacking any merit, or that the Applicants had acted in a frivolous or vexatious manner, or that their conduct was unreasonable. 6 Having heard submissions and considered the evidence, I am satisfied as to a number of factual matters which are set out below. FACTUAL BACKGROUND 7 The Applicants in this matter are a business partnership which operated a café business as lessee of retail shop premises known as Shop 1, 16 Cliff Road, North Wollongong ("the premises") from 1 January 1993 until 1 October 2004. 8 The Respondent was the lessor of the premises 9 The initial lease was for a twelve month period from 1 January 1993 to 31 December 1993 with a further two options of two years each at the end of the initial period. 10 The option under the original lease was not exercised by the Applicants but they nevertheless continued in occupation on a month to month basis. 11 In March 2003 the Applicants requested a solicitor by the name of Murray Dribbus to write to the Respondent upon behalf of the Applicants requesting a new lease of the premises. Relevantly, the letter from Mr Dribbus to the Respondent dated 6 March 2003 enquired "If the company is willing to offer our clients a lease, would you please advise on what terms so we may obtain further instructions." 12 In her affidavit sworn 2 October 2003 the Applicant, Sarah Risorto asserts that she had retained Mr Dribbus to act on behalf of the Applicants because he also acted on behalf of A M Rutty Real Estate Agents who represented the interests of the Respondent in relation to the premises. I here note that the agent Mr Rutty was also a director of the respondent company. 13 Sarah Risorto also asserts in paragraph 12 of her affidavit sworn 2 October 2003 that prior to instructing Mr Dribbus in March 2003, the Applicants understood that they had secured an agreement with the Respondent for a three year lease. This assertion is at odds with the terms of Mr Dribbus' letter of 6 March 2003, and Sarah Risorto's letters of 23 June 2003 and 3 July 2003 which are respectively referred to elsewhere in this judgment at paragraphs 11, 17 and 19. I do not accept such assertion as being factually correct. 14 The Applicants had received notification on or about 27 April 2002 from Wollongong City Council that they were required to apply to amend the outdoor sitting area at the premises to comply with Council's requirement for public access to the footpath. On 20 March 2003, Mr Rutty signed an original Development Application form on behalf of the Respondent, and gave it to the Applicants, but except for the details and signature of Sarah Risorto the form is otherwise blank, and was never lodged with the Council. 15 A letter was subsequently received by Mr Dribbus from Mr Rutty dated 27 March 2003 stating "In reply to your letter dated 6 March 2003 I wish to advise that I personally spoke to Mr Risorto last week and explained the lessor's current position with regards to a lease….I will advise you should that position change." 16 Mr Rutty subsequently forwarded a letter to the Applicants dated 18 June 2003 on behalf of the Respondent, which requested the Applicants to vacate possession of the premises within one month from 1 July 2003. 17 The Applicants then wrote to A M Rutty by letter dated 23 June 2003 stating that more time was needed to vacate the premises in order to relocate the business elsewhere, and asking for a period of three months. The letter offered vacant possession of the premises on 1 October 2003. 18 Mr Rutty then wrote to the Applicants on 30 June 2003 indicating that in view of the long association between the parties, the suggested date of 1 October 2003 for vacant possession was accepted. 19 By letter dated 3 July 2003, the Applicants confirmed their agreement to provide vacant possession on 1 October 2003. 20 Mr Dribbus then wrote to the Applicants on behalf of the Respondent on 6 August 2003 in the following terms: "As you are aware, we act for the landlord. We have been handed a copy of the following document signed by you: 1. Letter dated 23 June 2003 from you to our client acknowledging receipt of Notice from our client to Vacate the premises by 1 August 2003, and your request to extend the time to vacate to 1 October 2003; 2. Letter dated 3 July 2003 from you to our client acknowledging your agreement and acceptance to vacate the premises on 1 October 2003. Our client requires strict adherence to your written agreement to vacate on or before 1 October 2003. We have been instructed by our client to give you notice that if you remain in possession of the premises after 1 October 2003, our client will enforce their rights for possession under the terms of the expired lease and seek liquidated damages against you. Yours faithfully Murray Dribbus Lawyers" 21 Some time in September 2003 a sign was placed in the window of the premises which was set out as follows:- "NOTICE To our valued customers Due to our landlord's not renewing our lease this shop will close Sunday 28 September. We would like to thank you for your valued support and patronage over the last ten years. Thank you from Sara and the girls" 22 Proceed i ngs were commenced in this Tribunal on 29 September 2003 when the Applicants filed: a) an Application for an urgent interim order that the Respondent be restrained from interfering with the Applicants' entitlement to possession of the premises pending determination of an application for the granting of a lease as set out below; b) an Application seeking a declaration that a valid lease or agreement for lease existed between the parties in respect of the premises for a term of thee years commencing 1 April 2003 and terminating on 31 March 2006 upon terms providing for payment of rental by the Applicants of $1910.00 per month plus GST, that the Respondent do all things necessary to specifically perform such lease and bring same into execution and registration, and that the Respondent pay unspecified damages. 23 The Application for urgent interim order came before Judicial Member Donald on 2 October 2003. The Application was refused. 24 There was no communication from or by the Applicants to the Respondent between the date of their last letter to the Respondent on 3 July 2003 and the date of commencement of proceedings on 29 September 2003 to indicate any new or different assertion on their part that they had, were claiming, or were entitled to, a valid and subsisting three year lease in respect of the premises. 25 The Applicants surrendered possession of the premises to the Respondent on 3 October 2003. 26 The parties thereafter attended unsuccessful mediation on 21 November 2003. 27 On 27 November 2003 Judicial Member Donald made the following orders:- a) Applicants to file and serve affidavits and submissions by 16 January 2004, or alternatively to advise the Respondent that the Application is withdrawn. b) Applicants to advise Respondent of any recipients of Summons. c) Respondent to have leave to seek costs in the event of withdrawal. d) If not withdrawn, the Application adjourned for hearing on an interim basis on Friday 23 January 2004 at 10.00 am as to whether on the Applicants' evidence, a lease exists, unless the Respondent informs the Tribunal by 21 January 2004 that it does not seek an interim determination, in which case the matter is listed for Direction at 10.30 am on 29 January 2004. 28 On the same date a notation was made by Judicial Member Donald that he had acceded to the Respondent's request for an interim hearing as to whether the matter should be struck out after the Applicants' evidence was put on, and before the need for any case in reply, because he had dismissed the urgent application on grounds that there was no case for an oral lease, and to minimise costs to the Respondent it was fair to permit it to argue no prima facie case and only to go into evidence if a prima facie case was established. 29 The Applicants did not file any further affidavits or submissions on or before 16 January 2004. 30 The proceedings were listed before Judicial Member Boyce on 23 January 2004 for hearing, but due to misunderstanding on the part of both parties there were no appearances. Mr Boyce simply had the matter noted as adjourned for directions on 29 January 2004, but after having spoken to the representatives for both parties noted that the Applicants' solicitor would advise on or before 28 January 2004 if the matter was to proceed. 31 On 28 January 2004 the Applicants' solicitor advised that the Application was being withdrawn. 32 Further Directions Hearings took place, as the Respondent elected to press its application for costs. 33 Ultimately the matter was listed for Directions on 20 May 2004 when a hearing date of 23 July 2004 was allocated with an order that the Respondent had leave to file affidavits by 10 June 2004. PRINCIPLES CONCERNING ORDERS FOR COSTS 34 Various submissions were made on behalf of the parties as to the approach which I should take in relation to the application for costs. Relevant principles in relation to this issue can be found from a review of the decisions of this Tribunal in Brooks Maher -v- Cheung [2001] NSWADT18, Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164, Randi Wiks Pty Ltd -v- Pokana Pty Ltd [2003] NSWADT AP27, Wood & Anor -v- Bergman (No 2) (2003) NSWADT 175, Irresistible Frocks Salon Pty Ltd -v- Sparbac Pty Ltd & Roche Group Pty Ltd (No 2) [2004] NSWADT AP72 as well as review of the provisions of the Victorian & Civil Administrative Tribunal Act 1998, the Retail Leases Act 1994, the Administrative Decisions Tribunal Act 1997 and Practice Note No 12 of this Tribunal. Those relevant principles can be summarised as follows:- a) The Tribunal may award costs but only if satisfied that there are special circumstances warranting an award of costs (Section 88(1) ADT Act). b) The Tribunal must be satisfied both that special circumstances exist, and that those special circumstances warrant an award of costs (Gizah, Brooks Maher, Irresistible Frocks). c) The Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs (Section 88 (3) ADT Act). d) Section 77A of the Retail Leases Act 1994 provides that the Tribunal does have power to award costs in relation to Retail Lease matters. e) "Special circumstances" are circumstances that are out of the ordinary, but without having to be extraordinary or exceptional (Gizah, Wood -v- Bergman) f) There is no exhaustive list of special circumstances which might warrant an award of costs but such circumstances include: i) whether a party has conducted the proceeding in a way that disadvantaged another party to the proceeding by conduct such as failing to comply with an order or direction of the Tribunal without reasonable excuse, failing to comply with an Act or regulations or rules, or causing or asking for an adjournment as a result of such failures, attempting to deceive another party or the Tribunal, or vexatiously conducting the proceedings ii) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings iii) 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 iv) 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 v) where an appeal is lodged and the appeal panel considers the appeal was without any real prospect of success g) The interpretation of "special circumstances" can be made more broadly in the Retail Leases Division than in other divisions of this Tribunal, because the parties concerned are engaged in trade and commerce for reward ( Gizah, Randi Wiks, Irresistible Frocks ). h) The broader interpretation of "special circumstances" does not mean that costs should simply follow the event (Irresistible Frocks). i) In the Retail Leases Division, factors such as an unsuccessful party not being represented, or bringing the proceedings in good faith, or not having legal advice as to the prospects of success, do not constitute sufficient reason to deny the successful party its costs, if it is otherwise entitled (Gizah). j) Costs may be awarded in respect of all or only part of the successful party's case. FINDINGS 35 On the evidence before me, I am satisfied that the Applicants had no tenable basis for their claims that they were entitled to an urgent interim order that they be allowed to remain in possession of the premises beyond 1 October 2003, or that they were entitled to a three year lease as and from 1 April 2003. There is no convincing evidence before the Tribunal that the Respondent offered or agreed to grant such a lease, or that the Applicants acted in a manner consistent with a belief on their part that such a lease had been offered or agreed to. 36 The Applicants commenced these proceedings without warning to the Respondent and in direct contradiction of their agreement made some months previously to vacate the premises on a date which had been nominated by them. 37 Regardless of what advice the Applicants received prior to commencing proceedings in this Tribunal, the refusal of the Tribunal to grant the urgent interim order, and the orders then made by the Tribunal to permit the Respondent to argue that the Applicants had no prima facie claim, should have amplified to the Applicants that unless they were able to provide further or other evidence in addition to the affidavit evidence of Sara Risorto sworn 2 October 2003, their application for a grant of a new lease was doomed to eventual failure. 38 Whilst I am not satisfied that these proceedings were instituted vexatiously by the Applicants, I do find that the Applicants' claim was untenable in fact and law, that it should not have been commenced or continued, and that special circumstances do thereby exist which warrant the making of an order for costs. 39 The Respondent filed original submissions on 11 March 2004, further submissions on 24 March 2004 and additional submissions on 12 June 2004. This last set of submissions was not responsive to any direction of the Tribunal. The final direction of the Tribunal was on 20 May 2004, when leave was given to the Respondent to file further affidavits by 10 June 2004. ORDERS 40 I accordingly make the following orders: a) The Applicants are to pay the Respondent's costs with the exception of any costs incurred with the submissions of the Respondent dated 11 June 2004. b) The amount of such costs is to be as agreed or assessed. 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.