Duarte & anor v Mitchell & anor (RLD) [2008] NSWADTAP 40

Appeal Panel - Internal

CITATION: Duarte & anor v Mitchell & anor (RLD) [2008] NSWADTAP 40

APPELLANTS Carlos Duarte Rita Duarte PARTIES: RESPONDENTS Steve Mitchell Sandra Mitchell

FILE NUMBER: 089001

HEARING DATES: 3 April 2008

SUBMISSIONS CLOSED: 15 April 2008

DATE OF DECISION: 18 July 2008

BEFORE: O'Connor K - DCJ (President)

DECISION UNDER APPEAL: Duarte and ors v Mitchell and ors [2007] NSWADT 276

FILE NUMBER UNDER APPEAL: 075102, 075168

DATE OF DECISION UNDER APPEAL: 11/28/2007

LEGISLATION CITED : Retail Leases Act 1994 Administrative Decisions Tribunal Act 1997

Duarte and ors v Mitchell and ors [2007] NSWADT 276 CASES CITED: Dykes and Wildie v Heatherway Pty Ltd (No 2) (RLD) [2007] NSWADTAP 46 Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31 North Eastern Travel Stops Pty Ltd v Bradley & Ors (No 2) (RLD) [2005] NSWADTAP 17

In Person REPRESENTATION: P Mitchell, solicitor

ORDERS: Appellants to pay the respondent's costs of the summary dismissal application, as agreed or assessing, taking note of para [21] of these reasons.

REASONS FOR DECISION 1 On 28 November 2007 the Retail Leases Division of the Tribunal dealt with two applications brought under the Retail Leases Act 1994 (the RL Act). The lessees, Mr Carlos and Mrs Maria Rita Duarte, made one application; the lessors, Mr Steve and Mrs Sandra Mitchell the other. The lessees' application was dismissed. The lessors' application was successful in part. See Duarte and ors v Mitchell and ors [2007] NSWADT 276. 2 The Tribunal made the following orders: '1. It is declared that the lease between the parties, relating to retail shop premises at Shop B, 113 Queen Street, Campbelltown, was validly terminated by the Respondents/Cross Applicants [i.e. the lessors] on 11 May 2007; 2. The Applicants/Cross Respondents [i.e. the lessees] are jointly and severally liable to pay the sum of $6,864.00 to the Respondents/Cross Applicants; 3. The Applicants/Cross Respondents are to pay the Respondents/Cross Applicants' costs of the directions hearing held on 9 August 2007, as agreed or assessed on a party/party basis; 4. The Application lodged on 15 June 2007 by the Applicants/Cross Respondents is dismissed.' 3 The lessees lodged an appeal against the decision on 4 January 2008. 4 At a directions hearing held on 5 March 2008 before me, the lessors, as respondents to the appeal, applied for the appeal to be summarily dismissed. I listed the hearing for 3 April 2008. The lessors also foreshadowed an application, if successful, for the lessors' costs of the appeal including the costs of the directions hearing. I directed the lessees to file and serve submissions relating to certain aspects of the appeal, which they did. 5 At hearing on 3 April 2008 I summarily dismissed the appeal. (The power of summary dismissal is conferred by s 73(5)(h) of the Administrative Decisions Tribunal Act 1997 (the ADT Act). The Appeal Panel may be constituted by a single presidential member for the purpose of making a decision in respect of a summary dismissal application. See s 24A.) 6 In response to one of the issues raised by the appeal, I entered an order to vary Order 3, by consent, to fix the costs at $1,000. The date of operation was deferred until 17 April 2008 to allow for any submission from the solicitor who was acting for the lessees at that time. This was because the order was seen as directly affecting the solicitor. 7 At the close of the hearing on 3 April, the lessors applied for their costs of responding to the appeal and the summary dismissal application. They were represented at hearing by Mr Peter Mitchell, solicitor. 8 I will first summarise my reasons for dismissing summarily the appeal. 9 The notice of appeal raised three objections to the Tribunal's decision. 10 The first was that there was no evidence for the findings of the Tribunal that the lessees were in default in paying GST to the lessors. Their second objection was that one of the respondents' affidavits was only forwarded to them one hour before the hearing, not allowing them an adequate opportunity to present their case. 11 The third objection related to a costs order made against them for the lessors' wasted costs of attendance at a directions hearing at which there was no appearance by them or their solicitor. As to this matter, I noted that the filed material showed that the solicitor had given an undertaking to meet those costs. In any case the Tribunal's exercise of discretion was reasonable and appropriate, and there was no basis for an appeal. The consent variation of Order 3 went to this matter. 12 As to the second objection I noted that the lessees had had legal representation in their disputes with the lessors and at hearing. (The disputes included such matters as the effect of rain incursion on their ability to trade, the state of the premises and the extent of rent relief given when the premises were unusable.) They had chosen to proceed at hearing and their legal representative had not objected to late service of the affidavit. In these circumstances, I did not think that there was any tenable basis for a ground of appeal alleging procedural unfairness by the Tribunal. 13 The final ground of appeal relates to Order 2. The lessors did not press the original claims alleging default in payment of rent by the lessees. They did press a claim in respect of GST due on certain rent paid. The Tribunal ruled as follows: '104 The third order in the Lessors' list was a declaration that the Lessees were obliged to pay GST payments on rent as and from 1 July 2005 to date and continuing. Having considered the evidence on this matter (see [60 – 62] above), the Tribunal sees no reason why clause 25 of the Lease, requiring the Lessees to reimburse the Lessors for any GST paid with respect to the rent, should not be given full effect. 105 The evidence shows that the Lessors became liable for GST in connection with the Lease as from 1 July 2005. They have acknowledged that rent was fully paid up to 31 December 2006 at the stipulated annual rate of $45,760.00, and they have granted an abatement of rent from that date until the date of termination of the Lease. The amount assessable against the Lessors for GST and due to be reimbursed by the Lessees is accordingly 10% of 18 months' worth of rent, i.e., $6,864. 106 The Tribunal orders that the Lessees are jointly and severally liable to pay the sum of $6,864 to the Lessors.' 14 The passages in the Tribunal's reasons going to this matter are: ' Evidence regarding the Lessees' alleged liability to pay GST and expenses associated with a grease trap 59 Clause 25 of the Lease provided as follows: The amounts payable by the tenant to the landlord under this Lease do not include any goods and services tax ("GST"). If any GST is or becomes payable with respect to the payment by the tenant to the landlord or any other amounts under this Lease, the tenant must pay the GST or reimburse the landlord for any GST paid or payable by the landlord with respect to any amounts payable by the tenant under this Lease. 60 Annexed to Mr Mitchell's affidavit was a copy of the a memorandum from the Lessor's accountants to the Lessors, stating that as from 1 July 2005 they were required to collect GST from the tenants in their commercial properties and that their liability for 2005-06 was $10,555. Also annexed were copies of a payment slip sent by the Australian Taxation Office to the Lessors, requiring payment of this amount, and a post office receipt acknowledging payment on 19 June 2007. 61 The letters of 26 April and 8 May 2007 from Johnsons to the Lessees (see [39] and [46] above) included a claim that they were liable under clause 25 to reimburse the Lessors for the GST paid with reference to the Lease. It was stated in both letters that the amount then due from them was $8007.30 and, in the latter letter, that as from May 2007 a sum of $381.50 would be 'factored into' their monthly rent. 62 The affidavit sworn by Ms Duarte included a number of allegations (supported by annexed copies of documents) to the effect that the Lessees should not have been required to pay outgoings associated with a grease trap because the drains from the Premises were not in fact attached to a grease trap. This matter did not, however, receive any attention during the hearing.' 15 It is apparent that the lessees have a deep sense of grievance over the way the lessors have dealt with them. I reviewed the material. I indicated that I was satisfied that there was no tenable ground of appeal against the Tribunal's order. The liability had been clearly affixed to the lessees by the Lease. The Lessors' Costs Application 16 Having been successful in his application for summary dismissal, Mr Mitchell applied for an order for costs. He made oral submissions at the close of the hearing. The lessees were given the opportunity to make submissions in reply in writing, with a view to the Tribunal deciding the matter without further hearing (as permitted by the ADT Act, s 76). 17 The Tribunal may award costs in its original jurisdiction if the Act conferring the original jurisdiction allows for that, as the RL Act s 77B does. The RL Act provides that the rule to be applied is the usual ADT rule that costs are only to be awarded where 'there are special circumstances warranting an award of costs' (ADT Act, s 88(1)). 18 The Tribunal's Practice Note No 12 gives some guidance as to how the discretion may be exercised. In relation to appeals, it says, for example: ' Special circumstances that may justify a costs order 2. The following are some examples of special circumstances that may justify a costs order. … - 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; … - where an appeal is lodged and the Appeal Panel considers the appeal was without any real prospect of success.' 19 Mr Mitchell also drew attention to recent observations of the Appeal Panel dealing with a retail leases appeal in Dykes and Wildie v Heatherway Pty Ltd (No 2) (RLD) [2007] NSWADTAP 46 (where I presided). The following statements are relevant to the present matter: '22 The Appeal Panel observed in Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31 at [13]: 'It may be that more use of costs orders should be made where there is an appeal and it is dismissed. At the appeal level, there would seem to be a stronger case for recognising the complexity of retail leases disputes and their commercial character as relevant factors amounting to 'special circumstances'.' 23 It is now accepted, we consider, that the making of an appeal without any reasonable prospect of success can provide a 'special circumstance' sufficient to attract an adverse costs order. The Appeal Panel said in North Eastern Travel Stops Pty Ltd v Bradley & Ors (No 2) (RLD) [2005] NSWADTAP 17: '35 We are bound to take due account of the Appeal Panel's suggestion in Citadin (No 2) at [13] that in retail leases cases maybe 'more use of costs orders should be made where there is an appeal and it is dismissed', and also of the underlying justification, stemming from the 'commerciality' of such cases. 36 In our judgment, taking all these factors into account, the lack of real merit in the arguments advanced by the Appellant on the key issue of interpretation constitutes 'special circumstances warranting an award of costs' under s 88(1) of the ADT Act. This is the case even though we held the Tribunal to have committed an error of law by not dealing with this issue, thereby necessitating that it be resolved on the appeal. Our view, in essence, is that it could have been predicted with sufficient certainty that resolution of the issue, following due consideration, would not alter the outcome of the proceedings.' … 28 In this case the special circumstance is, essentially, that the appellant pursued, in relation to the liability claim, a weak appeal, an appeal that was doomed to fail. Its success was on a second and relatively narrow point. 29 Weak appeals should, we think, be discouraged. In the retail leases jurisdiction, particularly, the underlying circumstances (the 'factual matrix') are often complex. Often many points of law are raised. Trial level decisions are often long and detailed. An appeal will often involve the need to revisit all, or many, of the factual or legal elements of the underlying decision. The potential impact on the resources of the respondent is obvious. 30 We accept that there will be cases where an appeal raises reasonably contestable points but fails. No costs order may be appropriate. In our view, though we respect the vigour with which the arguments were put by Mr Zipser, this appeal so far as it related to the liability issue was weak.' 20 The lessees' written submissions in reply dated 15 April 2008 mainly focussed on issues to do with the grounds of appeal, and their relationship with their former solicitor. The only reference to the question of costs was to seek relief from any order on the ground of financial hardship. 21 I am satisfied that there should, in the circumstances, be an award of costs in favour of the lessors. The appeal was a weak one. It was summarily dismissed. In my view the costs should be confined to the attendance (by telephone) undertaken by Mr Mitchell on 5 March 2008 and his preparation for and attendance at the hearing on 3 April 2008. I would encourage Mr Mitchell to keep the costs to a reasonable amount. Order Appellants to pay the respondents' costs of the summary dismissal application, as agreed or assessing, taking note of para [21] of these reasons.