Appeal Panel - Internal CITATION: Sotiropoulos -v- Mattana Coiffure Pty Limited (No 2) (RLD) [2004] NSWADTAP 43 APPELLANT PARTIES: Vlasios Vasilios Sotiropoulos RESPONDENT Mattana Coiffure Pty Limited FILE NUMBER: 049018 HEARING DATES: 30/08/2004 SUBMISSIONS CLOSED: 08/30/2004 DATE OF DECISION: 10/06/2004 Mattana Coiffure Pty Limited -v- Sotiropoulos [2004] NSWADT 80 DECISION UNDER APPEAL: BEFORE: Chesterman M - ADCJ (Deputy President); Molloy GB - Judicial Member; O'Neill A - Non Judicial Member CATCHWORDS: costs MATTER FOR DECISION: Principal matter FILE NUMBER UNDER APPEAL: 035024 DATE OF DECISION UNDER APPEAL: 04/23/2004 LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 Calderbank v Calderbank [1975] 3 All ER 333 Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164 CASES CITED: Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72 Mattana Coiffure Pty Limited v Sotiropoulos [2003] NSWADT 210 Mattana Coiffure Pty Limited v Sotiropoulos (No 2) [2004] NSWADT 80 Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27 Wood & Anor v Bergman (No 2) [2003] NSWADT 175 APPELLANT REPRESENTATION: M Elliott, Barrister RESPONDENT M Darke, Barrister ORDERS: 1. Appeal allowed; 2. Order No. 11 in the Tribunal's decision of 23 April 2004 set aside. Introduction 1 In these appeal proceedings, filed on 12 May 2004, the Appellant Lessor, Mr Vlasios Soritopoulos ('Sotiropoulos'), alleged a number of errors of law in two decisions of the Tribunal, constituted by Mr R Fox, Judicial Member. These decisions, given in proceedings in the Retail Leases Division, were dated 9 September 2003 (Mattana Coiffure Pty Limited v Sotiropoulos [2003] NSWADT 210) and 23 April 2004 (Mattana Coiffure Pty Limited v Sotiropoulos (No 2) [2004] NSWADT 80). 2 In a decision delivered on 8 June 2004, the Appeal Panel of the Tribunal held that the appeal, in so far as it alleged errors of law in the earlier of these two decisions, must be struck out because it was filed outside the time limit of 28 days prescribed by s 113(3)(a) of the Administrative Decisions Tribunal Act 1997 ('the ADT Act') and there were insufficient grounds for granting leave under s 113(3)(b) to appeal out of time. 3 In the Notice of Appeal, the only errors alleged by Sotiropoulos in relation to the latter of the two Tribunal decisions concerned the Judicial Member's conclusion that the Lessee, Mattana Coiffure Pty Ltd ('Mattana'), was entitled to an award of costs. Mattana was the Applicant in the proceedings at first instance and is the Respondent to the appeal. 4 In the proceedings at first instance, brought under the Retail Leases Act 1994 ('the RL Act'), Mattana sought orders for (a) the refurbishment of premises that had been leased to it by Sotiropoulos for the purposes of a hairdressing salon and had been damaged as a result of building activities on the site; (b) compensation for past and future trading profits that it had lost due to interference caused by these activities; and (c) costs. It succeeded under all three heads. 5 Orders implementing the Tribunal's conclusions were set out in the second of its two decisions (Mattana Coiffure Pty Limited v Sotiropoulos (No 2) [2004] NSWADT 80). For present purposes, we need only reproduce here the terms of the costs order, which was Order No. 11. With the names 'Mattana' and 'Sotiropoulos' substituted for 'the Applicant' and 'the Respondent' respectively, these were as follows: 11. [Sotiropoulos] pay one half of [Mattana's] costs of preparation for trial up to the commencement of but not including the actual conduct of the hearing of 22 July and is to pay all of [Mattana's] costs (including preparation) for the conduct of the matter on 23 and 24 July and all subsequent appearances in the matter including appearance of 6 April 2004, all on a party/party basis. Principles governing the awards of costs 6 It is expressly provided in s 77A of the RL Act that costs in matters decided in the Tribunal under that Act should be determined in accordance with s 88 of the ADT Act. This provides in subsection (1) that the Tribunal may award costs 'only if it is satisfied that there are special circumstances warranting an award of costs'. 7 A number of cases within the Retail Leases Division provide guidance on the interpretation and application of this provision. A useful summary, referring specifically to matters relevant in this case, appears in Wood & Anor v Bergman (No 2) [2003] NSWADT 175 at [9 – 14]: 9 The normal common law principle governing costs in civil cases is that they 'follow the event'. But s 88 lays down a different principle, namely, that the Tribunal must be 'satisfied' that there are 'special circumstances warranting an award of costs'. 10 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'. 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 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. 12 These observations in Gizah were quoted with approval by an Appeal Panel of the Tribunal in the recent decision in Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27 at [12-13, 28]. 13 The proposition, however, that 'special circumstances' should be interpreted differently within this Division, because it deals with relationships of a commercial character, does not imply that costs should simply follow the event. This was made clear in Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 at [4]. 14 In Alessa, it was said also, at [5-6], that where an application to the Tribunal lacked any conceivable merit in fact or law, this could constitute 'special circumstances' justifying a costs order under s 88 in favour of the successful respondent. It would be a situation where refusal to grant such an order would be 'seriously unfair'. In such a case, the purpose of the costs order would be to prevent the 'gross abuse' of the Retail Leases Act by frivolous, vexatious and misconceived proceedings. 8 In the passage from Alessa just referred to, the Tribunal stated, at [6], 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' if costs were not awarded. In our opinion, this formulation, which treats a finding of 'serious unfairness' as a prerequisite to determining that there are 'special circumstances', is not borne out by the language of s 88 or the authorities interpreting the section. Such a finding may well provide sufficient grounds for so determining. But it should not be treated as a necessary condition for an award of costs under s 88. 9 In Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164, the Tribunal held that 'special circumstances' existed in that case where (a) the successful party in the proceedings had made an offer of 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. It treated the situation as analogous with costs rules in the Supreme and District Courts and the principles laid down in Calderbank v Calderbank [1975] 3 All ER 333. This approach was approved by an Appeal Panel of the Tribunal in Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27 at [14 – 16, 28]. It has been applied in subsequent decisions: see eg Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72. 10 Further illustrations of what may qualify as 'special circumstances' appear in paragraph 2 of the Tribunal's Practice Note 12, dated 4 March 2003. The list given is not exhaustive. The award of costs in this case 11 With these principles in mind, we now turn to the particular passages in the judgment under appeal (Mattana Coiffure Pty Limited v Sotiropoulos (No 2) [2004] NSWADT 80) where the issue of costs was discussed. 12 At [8 – 9], the Tribunal referred to correspondence between the parties during the period from October 2002 to March 2003, in which various offers of settlement were made. It found, however, that none of the offers made by Mattana to Sotiropoulos was so advantageous, having regard to the Tribunal's decision in the proceedings, that his failure to accept any of them amounted to 'special circumstances'. 13 In the next three paragraphs, the Tribunal set out the further matters which, in its view, constituted 'special circumstances' warranting an award of costs. It did so in the following terms (again the names 'Mattana' and 'Sotiropoulos' are substituted for 'the Applicant' and 'the Respondent' respectively): 10 However, the position was changed by a letter of 2 June 2003 from [Mattana] to [Sotiropoulos] in which there was yet another formula for the description and supervision of the Works still to be done, the provision of appropriate temporary facilities, the temporary closure of the Salon and compensation for that closure and finishing with the proposal: "your client also agrees to our client seeking additional compensation (including by way of rent reductions and the recovery of legal costs, in the Tribunal)". It should be borne in mind that at this time, pleadings were in hand, and the matter had been set for trial. That offer was not accepted, but I am satisfied, if it had been, that the hearing would have been reduced to one day's duration and the preparation for it, on any view of the matter, would have been halved. In this regard I note that a substantial part of the hearing time was involved in establishing the condition of the premises, and the need for urgent remedial work to establish proper temporary facilities. This required, as well as much oral evidence, plans etc., two separate attendances for formal views of the premises, to establish the condition of the temporary facilities before and after the remediation. 11 I have in my findings of fact I made comment on the unfortunate state of the initial temporary facilities, and I am satisfied that [Sotiropoulos] should have taken urgent remedial steps once the condition of the premises was raised by [Mattana]. I am also, in view of the apparent quality of the work which the builder had done, satisfied that [Mattana] was justified in seeking some clear indication of the quality of the further remedial work before actually allowing the builder back into the premises. It is appropriate to observe in this regard that the initial rebuilding agreement reached between [Mattana] and [Sotiropoulos] (see paragraphs 18 and 19 of my 9 September 2003 reasons) was a variation within the broad of parameters of the Lease, and only varied [Mattana's] right of quiet enjoyment, it did not abrogate it. [Sotiropoulos's] tardiness in taking steps to remedy the facilities is a separate basis for finding special circumstances, and is a separate trigger for the costs order which I propose to make. I think I have already made it clear that in my view [Sotiropoulos's] subsequent failure [to] accept the offer of 30 May 2003 also and separately amounts to special circumstances. 12 I note that Mr Darke [counsel for Mattana] very properly indicated that he limited the claim to party/party costs. 14 It was agreed between the parties that 'the offer of 30 May 2003', referred to in the last sentence of [11], was in fact the 'formula' set out in the letter of 2 June 2003 from Mattana to Sotiropoulos, referred to in the opening sentence of [10]. The issues raised in this appeal 15 In essence, the submission put forward by Mr Elliott, counsel for Sotiropoulos, was that the Tribunal, in concluding that two independent grounds existed for a finding of 'special circumstances', failed in each case to articulate and apply correctly the relevant legal principles. It followed, he said, that the decision was vitiated by errors of law requiring that it be set aside. He did not apply for leave under s 113(2)(b) of the ADT Act for the appeal to extend to the merits. 16 In relation to the first ground, based on the failure of Sotiropoulos to accept the 'offer' or 'formula' outlined by Mattana in the letter of 2 June 2003, Mr Elliott argued first that the Tribunal did not give proper consideration to the principles to be applied. This was evident from the fact that it made no express findings on three essential matters. These were (a) that the letter amounted to a genuine offer to settle the dispute by way of compromise; (b) that apart from the saving to both parties in reducing the length of the litigation, its terms were advantageous to Sotiropoulos in comparison with the orders ultimately made; and (c) that it was unreasonable of Sotiropoulos not to accept it. 17 In the absence of findings along these lines, the Tribunal had, in Mr Elliott's submission, no basis on which to find 'special circumstances' on the ground of rejection of an offer of compromise. 18 Mr Elliott argued also that on examination the letter of 2 June 2003 – which was tendered in evidence – could not be said to have proposed any sort of compromise. It was an open letter, which did not purport to convey any such proposal. With one exception, it simply called on Sotiropoulos to agree to the same arrangements for refurbishment of the leased premises as Mattana had claimed in its Application to the Tribunal. The exception was that Mattana offered to close the hairdressing salon, on due notice, to permit excavation to take place, rather than seeking an order that there should be no excavation at all. But it only agreed to do this if it had the right to seek additional compensation for this disturbance (as indeed is mentioned in the Tribunal's judgment at [10]). 19 He submitted also that there was no evidence to justify the Tribunal's statement in [10] that acceptance of the terms of the letter of 2 June 2003 would in fact have shortened the length of the proceedings. There was indeed no proper consideration of this factual question. 20 In response, Mr Drake, counsel for Mattana, argued that, whether or not the letter of 2 June 2003 was expressed to be an offer of compromise, the Tribunal implicitly treated it as one. This was evident when the paragraphs quoted above were read in conjunction with the immediately preceding paragraphs, which contained express references to such offers. 21 Mr Darke submitted also that, when the orders sought by Mattana in its Application were compared with the arrangements proposed in this letter, there was a tangible yielding of ground on the issue of excavation. Furthermore, the letter did not require, as a term of the proposed settlement, the payment of extra compensation for any resulting disturbance of Mattana's business. It merely preserved Mattana's right to claim such compensation. 22 On the issue of whether acceptance of the terms of the letter would have reduced the time needed to hear the proceedings, he submitted that this was a finding of fact by the Tribunal which could not be challenged in an appeal confined to alleged errors of law. 23 Mr Darke relied also on the Tribunal's reference in [11] to the 'unfortunate state of the initial temporary facilities' provided by Sotiropoulos to Mattana. This, he said, should be read together with very strong criticisms of these facilities made by the Tribunal in its first judgment in the proceedings (Mattana Coiffure Pty Limited v Sotiropoulos [2003] NSWADT 210). In this judgment at [25], the Tribunal stated that, judging from a view that it had conducted, these facilities did not comply with occupational health and safety standards, let alone with any standard appropriate for clients. At [26], it described them as 'dreadfully unacceptable'. 24 On the basis of these observations, Mr Darke submitted, Sotiropoulos was implicitly and appropriately held by the Tribunal to have acted unreasonably in rejecting the offer in the letter of 2 June 2003. 25 In our judgment, these submissions by Mr Darke insufficiently address the most compelling argument put by Mr Elliott in relation to this first ground for awarding costs. This was, as summarised above at [16 – 17], that the Tribunal erred in law through failing to give proper consideration to the principles that apply in determining whether the rejection of a purported offer of compromise constitutes 'special circumstances'. As the authorities cited above show, this calls for positive findings on three essential matters. The question whether these findings could and should be made was addressed to only a very limited extent. 26 As to the first of these three matters, it would seem that the Tribunal did, by implication, treat the letter of 2 June 2003 from Mattana to Sotiropoulos as an offer of compromise. 27 In relation, however, to the second matter – whether the offer's terms were more advantageous to Sotiropoulos than the orders ultimately made in the proceedings – the Tribunal seemed to treat the saving to both parties through reduction in the length of the proceedings as constituting a sufficient 'advantage' to Sotiropoulos. In our judgment, this finding, if it is indeed an ingredient in the Tribunal's reasoning, betrays a misunderstanding of the relevant principles. It is self-evident that acceptance of a pre-trial offer to settle proceedings will be more 'advantageous' to the accepting party, other things being equal, than fighting the case to the bitter end. But such an 'advantage', standing alone, cannot be treated as sufficient to satisfy the second pre-requisite for a finding of 'special circumstances' in the circumstances that we are discussing. If it was treated as sufficient, any applicant in this Division could offer to 'settle' the proceedings in precisely the same terms as the relief that it sought, then assert, once its offer had been rejected and the proceedings had been determined its favour, that the respondent had rejected an offer that was 'more favourable'. 28 The third matter – whether rejection by Sotiropoulos was unreasonable – was not as far as we can tell given consideration by the Tribunal. We do not accept Mr Darke's argument that it implicitly held to this effect simply because it found the temporary facilities provided to Mattana to have been, amongst other things, 'dreadfully unacceptable'. 29 In our opinion, these considerations are sufficient to justify overturning the Tribunal's decision to award costs on this first ground. We will not rule on the remaining arguments raised in this connection, because in our opinion they bore on the merits of the decision and, as already indicated, leave was not sought for the appeal to extend to the merits. 30 The arguments relating to the Tribunal's second ground for awarding costs addressed three issues: (a) whether implicitly it was based on a finding that Sotiropoulos's defence of the proceedings was untenable, this being recognised as an instance of 'special circumstances; (b) whether it amounted to a costs order made for 'punitive purposes'; and (c) whether it should be set aside for the reason that the Tribunal, by referring in [11] to the 'tardiness' of Sotiropoulos in 'taking steps to remedy the facilities' was incorrectly treating as 'special circumstances' an aspect of a party's behaviour that had no connection with the conduct of the proceedings. 31 On the first of these matters, Mr Darke relied on the Tribunal's strong criticism of the facilities offered by Sotiropoulos (see [23] above]) to support an argument that by implication it found his defence of the proceedings to be untenable, lacking any merit in fact or in law. We do not consider, however, that this inference can be drawn. Furthermore, if this was the true explanation of the second ground for finding special circumstances, it was, in our opinion, an error of law on the Tribunal's part not to state the relevant principle and make the necessary finding explicitly. 32 On the second matter, we would agree with a submission of Mr Elliott that a costs order made under s 88 for 'punitive purposes' alone would be liable to be set aside. But we do not regard this as an adequate characterisation of the Tribunal's second ground for awarding costs. 33 Finally, we consider that, to the extent that the Tribunal's reference to 'tardiness' on the part of Sotiropoulos indicates that it was prepared to treat behaviour unconnected with the conduct of the proceedings as relevant to determining 'special circumstances', it was in error. 34 On the foregoing grounds, we allow the appeal and set aside the costs order (Order No. 11) made by the Tribunal in its decision of 23 April 2004. 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.