CITATION: Peat v Burcul and anor [2008] NSWADT 47 DIVISION: Retail Leases Division APPLICANT Daryl Martin Peat PARTIES: RESPONDENTs Goislav Burcul and Wendy Dawn Burcul FILE NUMBER: 065119 (Related matters 065089, 065117) HEARING DATES: 3 December 2007 SUBMISSIONS CLOSED: 3 December 2007 DATE OF DECISION: 6 February 2008 BEFORE: Olsson E SC - Deputy President; Harrison B - Non Judicial Member; Griffiths G - Non Judicial Member CATCHWORDS: Claim for payment of money - Costs MATTER FOR DECISION: Principal matter LEGISLATION CITED : Retail Leases Act 1994 Charteris v General Manager, Leichhardt Municipal Council [2001] NSWADTAP 12 CASES CITED: Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 Stefopoulos v Manikas (No 3) [2004] NSWADT 172 Wood and Anor v Bergman (No2) [2003] NSWADT 175 APPLICANT J Gooley, barrister REPRESENTATION: RESPONDENT No appearance 1. In matter No. 065089, the Tribunal notes that the application against Goislav Burcul and Wendy Dawn Burcul had previously been dismissed with no order as to costs. 2. In matter No. 065089, the Tribunal gives leave to Rasko Holdings Pty Ltd to discontinue the application as against Daryl Martin Peat, with no order as to costs. ORDERS: 3. In matter No. 065089, the Tribunal orders Susan Joy Costello and William Costello to pay to Rasko Holdings Pty Ltd the sum of $48,663.15, (being $38,891.30 plus $9,771.85) plus costs as agreed or assessed. 4. In matter No. 065117, the application is dismissed. Rasko Holdings Pty Ltd made an application for costs in respect of this matter. The costs which were claimed (and which have been allowed) in matter No. 065089 were particularised, inter alia, in the affidavit of Michael Doropoulos sworn on 28 November 2007 and plainly include costs arising from the counter claim filed by the Costello's. In those circumstances, the Tribunal declines to make any further order as to costs. 5. In accordance with the application made by Daryl Martin Peat, matter No. 065119 is adjourned for directions on a date to be fixed by the Registry. REASONS FOR DECISION Background There are three sets of related proceedings before the Tribunal: 1 Proceeding number 065089 is an application by Rasko Holdings Pty Limited ("Rasko") against Daryl Martin Peat ("Peat"), Goislav Burcul and Wendy Burcul ("Burcul") and William and Susan Costello ("Costello"). This claim is for unpaid rent and outgoings, interest and legal costs and expenses in respect of a retail lease over property at 60 The Esplanade, Terrigal ("the premises"). The proceedings between Rasko and Burcul were withdrawn or dismissed before the matter came to the Tribunal for determination. At the hearing of the matter the Tribunal was told by counsel for Rasko that it had settled proceedings between it and Peat and sought an order that the proceedings formally be discontinued with no order as to costs. 2 Proceeding number 065117 is a counter claim brought by William and Susan Costello against Rasko. The claim was for damages in the amount of $139,128.50 plus interest and costs. The claim for damages was put on two basis – (i) Costello alleged that Rasko retained certain equipment and goods left at the premises by Costello and (ii) Costello lost the opportunity to sell their business for the sum of $110,000.00. Mr and Mrs Costello did not appear at the hearing of the matter and their solicitor, Whitelaw McDonald, forwarded a letter to the Tribunal dated 30 November 2007 in which they notified the Tribunal of their ceasing to act. The Tribunal received correspondence in the form of a facsimile purportedly from Susan Costello dated 30 November 2007 in which she said she and her husband could not afford to appear and intended not to pursue their claim. 3 Proceeding Number 065119 is an application by Peat against Burcul. In that application Peat seeks a contribution or indemnity from Burcul for any amount he is ordered to pay to Rasko. Peat was represented at the hearing but took no part in it and asked the Tribunal to adjourn those proceedings pending the determination in the matter between Rasko and Costello. Factual Background 4 On about 14 November 2000 Rasko and Peat entered into a lease in respect of the premises at 20 The Esplanade, Terrigal. The lease was a lease within the meaning of the Retail Leases Act 1994 and was duly registered. 5 The relevant terms of the lease were: (a) the lessee would pay rent as specified by the lease (Clauses 6,7 and 8 of the lease) (b) the lessee would pay outgoings as specified by the lease (Clause 10 of the lease) (c) the lessee would pay the reasonable costs, charges and expenses of the lessor (Clause 12(c) of the lease) (d) if the lessee did not pay any amount payable by the lessee under the lease on time the lessee would pay interest on that amount on demand from when the amount became due for payment until it was paid at the rate of 2 percent per annum above the rate quoted on the date of demand by the lessor's nominated banker on unsecured overdraft accommodation over $100,000.00 (Clause 15.6 of the lease) (e) if the lease ended under clause 24 of the lease, the lessee would indemnify the lessor against any liability or loss arising and any cost incurred in connection with the lessee's breach and the end of the lease (Clause 24.3(a) of the lease) 6 The lease commenced on 1 November 2000 and was expressed to terminate on 30 October 2005 (annexure 1 to exhibit MD1 to the affidavit of Michael Doropoulos sworn 17 May 2007). 7 On 18 April 2001 the lease was assigned from Peat to Burcul. It was a term of the assignment that nothing operated to relieve Peat from his liabilities as lessee under the lease (Clause 5.1 of the first assignment, annexure 2 to exhibit MD1 of the affidavit of Michael Doropoulos sworn 17 May 2007). 8 On or about 24 December 2003 Burcul assigned the lease to Mr and Mrs Costello (annexure 3 to exhibit MD1). It was a term of the assignment that nothing operated to relieve Burcul from their liabilities as lessee under the lease (Clause 2.1.4 of the second assignment, annexure 3 to exhibit MD1 to the affidavit of Michael Doropoulos sworn 17 May 2007). 9 Costello conducted a business from the premises known as "Louvres Café". 10 By virtue of the deed of assignment of the lease, William and Susan Costello agreed that from the date of the assignment until the date of the end of the lease including any extension or renewal of the lease or any period of over holding under it, they would comply with all the obligations of the tenant under the lease as if they were originally named as tenants in the lease: Clause 3.1.1 of the deed of consent to assignment of the lease (annexure 3 to exhibit MD 1). 11 The original lease provided for rent in the sum of $37,277.52 per annum with CPI adjustment rates on (relevantly) 1 November 2004 together with liability for outgoings. 12 On 8 November 2004 Mrs Costello sought an extension of the lease after October 2005 (annexure 2 to the affidavit of Andrew John Cannone sworn 14 August 2007). The extension was apparently granted as Costello continued in occupation. 13 However by February 2005 the tenants were in arrears by approximately $7,762.00 (annexure 5 to exhibit AJC 1 to the affidavit of Andrew Cannone). 14 It is clear from the affidavit of Andrew Cannone that the tenants continued to struggle financially in March and April. Matters came to a head in May. By 10 May the plaintiff alleged that Costello owed $25,571.74 (annexure 16 to exhibit AJC 1). The evidence discloses that the tenants attempted to obtain loan moneys to continue funding the business but apparently this was unsuccessful and on 13 or 14 June 2005 they vacated the premises leaving some goods behind. 15 The landlord who took possession of the site on 15 June 2005. The evidence of Mr Cannone and Mr Doropoulos was that the landlord acted to readvertise the shop for lease and in fact it was leased on 14 November 2005. 16 The landlord served a demand for payment of the outstanding rent on 7 November 2005 and a demand for payment of interest on 2 December 2005. At that date, the relevant bank interest rate was 9.5 percent (paragraph 5 and annexure 1 to MD2 to the affidavit of Michael Doropoulos sworn on 28 November 2007), making the applicable interest rate 11.5 percent. 17 Costello originally brought a counter claim asserting that Rasko had retained the Costello's goods and chattels and appropriated them for its own use and/or benefit. They valued that claim at something in excess of $21,000.00. In addition Costello asserted that Rasko wrongly refused to consent to an assignment of the lease to a prospective purchaser. It was said that this was contrary to clause 21 of the lease. 18 As I noted earlier Mrs Costello wrote to the Tribunal and indicated that she and her husband did not want to proceed with her claim against Rasko. Accordingly, I dismissed those proceedings and reserved the question of costs. Findings 19 The Tribunal is satisfied that William and Susan Costello voluntarily executed an assignment of a lease in respect of the premises at 20 The Esplanade, Terrigal on or about 24 December 2003. 20 The Tribunal is further satisfied that pursuant to that lease Costello were obliged to pay rent and outgoings in accordance with the lease. 21 The Tribunal is satisfied that by May 2005 Costello were significantly in default of their obligations to pay the rent and outgoings pursuant to the assigned lease and also finds that they abandoned the premises on or about 14 June 2005. 22 The Tribunal accepts the evidence of Mr Cannone that all reasonable steps were taken to clean the premises and re-let them but that a tenant was not found until mid November 2005. 23 As a consequence the Costello's were indebted to Rasko for rent, which was unpaid as of the date they abandoned the lease, and also for the balance of rent due under the lease together with outgoings. The lease expressly gives Rasko a right to claim interest on any amount payable under the lease (clause 15.6) and interest is calculated at a default rate defined in clause 29 of the lease. The default rate is 11.25 percent per annum. 24 Clause 24.3 of the lease gives the landlord an express right to claim for any liability or loss arising and any costs incurred whether before or after termination of the lease in connection with the breach. 25 The Tribunal is satisfied that the Costello's are required to pay the outstanding rent and outgoings, which are quantified in the affidavit of Michael Doropoulos of 28 November 2007. The claim for rent and outgoings (less bank guarantee) is found in affidavit of Doropoulos (annexure 15) and is for the sum of $38,891.30. The Tribunal is satisfied as to the calculation of that amount. 26 With respect to interest the Tribunal accepts the calculation of Phillips Fox, solicitors, in their letter of 2 December 2005, which is behind Tab 15 to the exhibit, marked MD 1. Interest appears to have been accruing at $11.99 per day. 27 Interest from 7 November 2005 to 30 January 2008 is $11.99 x 814 days = $9,771.85. 28 Rasko claims legal costs and expenses as a head of loss under clause 24.3 of the lease. It was submitted that the Tribunal has jurisdiction to make such award and the Tribunal has been referred to section 70, 72 and 77A of the Retail Leases Act 1994. Section 88 of the Administrative Decisions Tribunal Act 1997 provides that the Tribunal may award costs where it is satisfied that "special circumstances" exist. No submissions were made on the question of special circumstances. The principles which are applicable to an award of costs in the Tribunal have been considered in a number of cases, most helpfully in Stefopoulos v Manikas (No. 3) [2004] NSWADT 172 commencing at paragraph 28. 29 In Charteris v General Manager, Leichhardt Municipal Council [2001] NSWADTAP 12 at [90] the Appeal Panel said: "The power to award costs is circumscribed. In keeping with the position found in many modern statutory tribunals, the usual rule is that costs are not to be awarded. This is a measure that has at least two objectives - one, to remove an impediment to the exercise of important rights that the Tribunal has been established to see protected where appropriate; two, to discourage the use of lawyers. In these ways the goals of affordable, accessible justice are seen as being supported. But circumstances can arise in proceedings where a party should be given some compensation by way of a costs order. The `special circumstances' power allows the Tribunal to take that action. In Gizah Pty Ltd v AXA Trustees Ltd No 2 [2001] NSWADT 164, Judicial Member Molloy said (at paragraph 29): "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." 30 The Appeal Panel's view has been cited with approval in subsequent decisions of the Tribunal. With particular respect to the Retail Leases Division, it has been said that the Division is unique within the Tribunal in that it alone deals with commercial disputes between parties who are engaged in trade and commerce: Wood and Anor v Bergman (No.2) [2003] NSWADT 175. At paragraph [11] - [13] the Deputy President said: "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." ... "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 [2001] NSWADT 150 at [4]. 31 The question for determination is whether there are circumstances, which are seriously beyond the usual or ordinary pursuit of a claim so that it would be seriously unfair to a party not to be awarded some or all of its costs where it has been successful. Ultimately, the question is one of fact. 32 The landlord claims legal costs and expenses pursuant to Clauses 17.1 and 24.3 of the lease and the Tribunal is satisfied that costs were incurred in bringing and defending these proceedings. The sum claimed and allowed is $53,174.75 (paragraphs 6-8 of the affidavit of Michael Doropoulos sworn on 28 November 2007). I am satisfied that special circumstances exist to warrant an award of costs. Special circumstances arise as a result of the commercial nature of the lease, the fact that the tenants abandoned the premises leaving rent unpaid and the premises in disrepair, the fact that the tenants defended the present proceedings and instituted a counter claim which necessitated the landlord preparing evidence in reply and the fact that the counter claim was not pursued at trial by Costello. In the circumstances the landlord has been put to considerable expense in bringing and defending proceedings and it is appropriate that it should recover its costs. 33 However, I decline to order the amount sought by the landlord. Instead, the Tribunal orders that Costello pay the costs of Rasko on a party - party basis as agreed or assessed. Therefore the orders of the Tribunal will be: 1. In matter No. 065089, the Tribunal notes that the application against Goislav and Wendy Dawn Burcul had previously been dismissed with no order as to costs. 2. In matter No. 065089, the Tribunal gives leave to Rasko to discontinue the application as against Daryl Peat, the first Respondent, with no order as to costs. 3. In matter No. 065089, the Tribunal orders Susan and William Costello to pay to Rasko the sum of $48,663.15, (being $38,891.30 plus $9,771.85) plus costs as agreed or assessed. 4. In matter No. 065117, the application is dismissed. Rasko made an application for costs in respect of this matter. The costs which were claimed (and which have been allowed) in matter No. 065089 were particularized, inter alia, in the affidavit of Michael Doropoulos sworn on 28 November 2007 and plainly include costs arising from the counter claim filed by the Costello's. In those circumstances, the Tribunal declines to make any further order as to costs. 5. In accordance with the application made by Peat, matter No. 065119 is adjourned for directions on a date to be fixed by the Registry. 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.