CITATION: Behl v Hurstville Retail Pty Ltd (No 2) [2010] NSWADT 234 DIVISION: Retail Leases Division APPLICANT Saurabh Behl PARTIES: RESPONDENT Hurstville Retail Pty Ltd FILE NUMBER: 095079, 095097 HEARING DATES: On the papers SUBMISSIONS CLOSED: 22 September 2010 DATE OF DECISION: 30 September 2010 BEFORE: Olsson E, SC - Deputy President; Harrison B - Non-Judicial Member; Griffiths G - Non-Judicial Member CATCHWORDS: Costs LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 APPLICANT/CROSS RESPONDENT REPRESENTATION: RESPONDENT/CROSS APPLICANT ORDERS: The Applicant/Cross Respondent pay the costs of the Respondent/Cross Applicant on the usual basis up until 23 June 2009 and thereafter on an indemnity basis. REASONS FOR DECISION 1 On 10 August 2010 the Tribunal delivered its decision on the substantive part of this matter. The Tribunal made an order that each party pay its own costs but gave liberty to the parties to make submissions for a variation of the costs order within 14 days. The Respondent/Cross Applicant made submissions. No submissions were received from the Applicant/Cross Respondent. 2 In the substantive matter, the Tribunal found in favour of the Respondent/Cross Applicant and made orders dismissing the Applicant's claim and upholding the Cross Application. 3 The Respondent seeks an order that the Applicant pay its costs on an indemnity basis. In support of that application, it relies upon an affidavit sworn by Simone Corbett, solicitor, on 8 September 2010. 4 The affidavit deposes to the fact that various offers were made by the Respondent to settle the proceedings. The first offer (made on 23 June 2009) was proposed broadly in terms which would not have permitted the Applicant to continue to sell coffee but which would have continued the sub lease and expanded its permitted use to sell cold bottled drinks, sandwiches and wraps. It was a condition of the offer that the Applicant pays the sum of $7,500.00 in costs. A further offer in similar terms was made on 13 July 2009 although the part of the offer that dealt with costs required the Applicant to pay $13,500.00 in costs. The Lease Police which was representing the Applicant rejected both offers. 5 In a counter offer dated 15 July 2009, the Lease Police made an offer that its client continue to sell the beverages it was "entitled to sell" (that is, including coffee), pay no costs and have a rent free period of two months. 6 On 25 August 2009 the Respondent made a further offer in which it required removal of the coffee machine and payment of $15,000.00 towards its costs in return for which it would reinstate the lease and waive the balance of its costs. 7 On 27 August 2009 the Respondent made an open offer in the Tribunal proceedings to accept the sum of $20,000.00 in costs and to reinstate the lease. 8 On 28 August 2009 The Lease Police put a counter offer which (relevantly) included the sale of coffee. 9 It follows from these exchanges that the principle point of contention between the parties was the continued sale of coffee from the premises. On this point, the Applicant was wholly unsuccessful. 10 The Tribunal is required to have regard to the terms of s.88 of the Administrate Decisions Tribunal Act 1997. It provides as follows: Section 88 Costs Each party to proceedings before the Tribunal is to bear the party's own costs in the proceedings, except as provided by this section. (1A) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that it is fair to do so having regard to the following: (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings by conduct such as: (i) failing to comply with an order or direction of the Tribunal without reasonable excuse, or (ii) failing to comply with this Act, the regulations, the rules of the Tribunal or any relevant provision of the enactment under which the Tribunal has jurisdiction in relation to the proceedings, or (iii) asking for an adjournment as a result of a failure referred to in subparagraph (i) or (ii), or (iv) causing an adjournment, or (v) attempting to deceive another party or the Tribunal , or (vi) vexatiously conducting the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) 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, (d) the nature and complexity of the proceedings, (e) any other matter that the Tribunal considers relevant. (2) The Tribunal may: (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on a basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. (3) However, 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 . (4) In this section, "costs" includes: (a) costs of or incidental to proceedings in the Tribunal , and (b) the costs of or incidental to the proceedings giving rise to the application , as well as the costs of or incidental to the application . 11 The proceedings are commercial in nature, arising from two parties who are acting in trade and commerce. One significant effect of the amendment to s.88 is that the notion of 'fairness' is to broaden the basis upon which costs might be awarded, particularly in a jurisdiction which is commercial in nature. In Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71, the Tribunal said: "What the Parliament has done…is to recognise that there is a need for this Tribunal to be more flexible and widen the scope of a litigant's entitlements to costs. This is a concept generally that is now accepted in this Division [Retail Leases Division]…." (paragraph [72]). That is not to say, by any means, that the usual principle in the Supreme and District Courts that "costs follow the event" is now to be adopted by this Tribunal. It is not. Costs can only be awarded under Section 88, but plainly the aspects of the litigation that need to be examined by the Tribunal to determine whether it is fair to award costs have been more than considerably expanded by the Parliament and ought, in fairness to the successful party, be embraced by this Tribunal. The test is, always, "relevance"." 12 The Tribunal considered the nature of the Retail Leases Division in the context of costs in Rucom Pty Ltd and Anor v Multiplex and Ors [2010] NSWADT 1. Having reviewed the authorities, Judicial Member Molloy said at paragraph 37: "So, it is plain to me, that not only is this Division a commercial division dealing with commercial issues between lessors and lessees in a retail lease environment, but, and in addition, proceedings should only be commenced in this Tribunal after very careful consideration of the merits of the case: see Trust Company of Australia Ltd v Craig [2005] NSWADT 65 at [44]. After all, commencing proceedings without such consideration inevitably results in considerable expense being incurred by the other party and one might not unreasonably ask: "why should the other party have to bear those expenses when the proceedings should not have been commenced in the first place?" 13 s.88(1A)(a) has two limbs: the Tribunal has to be satisfied that it is fair to award costs having regard to whether a party has conducted the proceedings in a way that unnecessarily disadvantages another party to the proceedings. 14 In this regard, the Respondent says that the Applicant unreasonably prolonged the proceedings by refusing to accept a series of offers to settle. The exchange of offers took place (as recorded above) over a period of about two months and in those circumstances, the Tribunal does not accept that the Applicant's attitude unreasonably prolonged the proceedings. 15 The Respondent also says that the Applicant's case for relief was relatively weak compared to the Respondent's case. That was demonstrated to be so, but for this to become a point upon which costs were decided is tantamount to following the usual rule that costs follow the event. The fact that the Respondent was successful does not, without more, entitle it to a costs order. The fact that it might be considered to have won 'comprehensively' does not necessarily entitle it to a costs order. There must be an additional element of fairness in the context of the proceedings. 16 The Respondent also says that the contention that coffee was a 'juice' raised a matter of considerable complexity and caused the Respondent to incur additional costs. It is true that expert evidence was adduced with respect to this point and the Tribunal accepts that it caused additional cost to the party who commissioned the evidence. 17 Overall, the Tribunal accepts the proposition put by the Respondent with respect to the repeated offers of compromise which were made: the Tribunal has frequently recognized that the rejection of an offer of compromise, or a failure to engage in settlement negotiations, may provide grounds for an award of costs: Salon Today Pty Ltd [supra] at [48]. 18 In the present case, the offers that were made were considerably more favourable to the Applicant than the orders of the Tribunal which decided the case. Critically, they included a continuation of the lease, which would have put the Applicant in substantially a better position than that in which he now finds himself. Moreover by offering him an extension on the permitted usage of the lease, the offers were commercially considerably more advantageous to him than the lease under which he had been operating. 19 Each of the offers made by the Respondent was more favourable to the Applicant than the actual outcome of the case. The Applicant was wholly unsuccessful on his claim including that part of it which alleged unconscionable conduct by the Respondent. 20 The offers were commercially realistic and stand in stark contrast to the weakness of the argument by the Applicant that coffee was, technically speaking, a juice and as such, should be included within the terms of the existing usage. The Tribunal accepts the submission made for the Respondent that this weakness was revealed in the fact that the Applicant did not call any expert evidence to corroborate his personal opinion that coffee was a 'juice' and further, that the Applicant had commenced to sell coffee despite having unsuccessfully petitioning the Respondent for permission to sell it. 21 The Tribunal is of the view that it is appropriate for an order to be made that the Applicant pay the costs of the Respondent. The next question is the basis upon which those costs ought to be ordered. 22 The Tribunal has power to award indemnity costs (s.88(2)(a)) and may grant them where there has been a "sufficient or unusual feature" or a "relevant delinquency" in relation to the conduct of the proceedings: Rucom Pty Ltd (supra) at [59]. 23 The Respondent identifies the Applicant's failure to consider or accept the various offers of settlement as evidence of a sufficient or unusual feature of the matter such that an order for indemnity costs is appropriate. It pointed out that the offers were of very clear commercial benefit to the Applicant and that not only had he rejected them, but had done so in a peremptory fashion, without any indication that he was genuinely interested or engaged in trying to reach a mutually acceptable solution to the dispute. 24 The Tribunal agrees. The Applicant's rejection of the offers and his failure to make any meaningful or helpful counter offer demonstrated an unreasonable failure to conduct himself in a commercial manner, contrary to the interests and expectations of the Tribunal and of the other party to the dispute: Rucom (supra) at [37]. 25 The Tribunal considers that the costs should only run on an indemnity basis as and from the date of the first offer of settlement (23 June 2009). It is not prepared in the circumstances to order costs in a gross sum. 26 The Tribunal orders that the Applicant/Cross Respondent pay the costs of the Respondent/Cross Applicant on the usual basis until 23 June 2009 and thereafter on an indemnity basis. 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.