CITATION: O'Neill v Henry (No 2) [2009] NSWADT 294 DIVISION: Retail Leases Division APPLICANT Jeffrey Raymond O'Neill FIRST RESPONDENT Jamie Michael Raymond PARTIES: SECOND RESPONDENT Henry Stephen Paul Dykes THIRD RESPONDENT Jennine Gay Dykes FILE NUMBER: 085214 HEARING DATES: On the papers SUBMISSIONS CLOSED: 13 November 2009 DATE OF DECISION: 27 November 2009 BEFORE: Chesterman M - Deputy President; Ward R - Non-Judicial Member ; Griffiths G - Non-Judicial Member CATCHWORDS: Retail lease – costs LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 CASES CITED: Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 O'Neill v Henry [2009] NSWADT 254 Salon Today Pty Ltd v M. M. I. R. Pty Ltd [2009] NSWADT 71 APPLICANT R Murphy, solicitor REPRESENTATION: SECOND AND THIRD RESPONDENT K Halyburton, solicitor ORDERS: The Applicant is to pay on a party-party basis the legal costs and the disbursements incurred by the Second and Third Respondents in the proceedings between these parties. REASONS FOR DECISION Introduction 1 This decision relates to the costs and disbursements incurred by the Second and Third Respondents in defending these Tribunal proceedings, which were instituted under the Retail Leases Act 1994 ('the RL Act'). 2 The Applicant is Mr Jeffrey O'Neill. He was represented in these proceedings by Mr Richard Murphy, of Pavey & Murphy, Solicitors. The First Respondent, Mr Jamie Henry, represented himself at the hearing but subsequently retained a solicitor to prepare and file written submissions on his behalf. At the hearing, the Second Respondent, Mr Stephen Dykes, represented both himself and the Third Respondent, Mrs Jennine Dykes, who is his wife. Mr and Mrs Dykes subsequently retained Ms Kathryn Halyburton, of Harris Wheeler, Lawyers, to prepare and file written submissions on their behalf. 3 Mr O'Neill claimed to be entitled to recover damages from Mr Henry and/or from Mr and Mrs Dykes, on the ground that he was unlawfully denied entry to premises at Warners Bay which he occupied under a sublease from Mr Henry. Mr and Mrs Dykes, who were the owners of the premises, had leased the premises to Mr Henry for five years commencing on 1 April 2003. The lease was governed by the RL Act. Early in 2007, Mr Henry had permitted Mr O'Neill to take over occupation of the premises for the purposes of a pizza takeaway business. But on 30 January 2008, Mr Henry locked him out of the premises. 4 Because the proceedings instituted by Mr O'Neill included an unconscionable conduct claim, the Tribunal is constituted in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only. The Tribunal's substantive decision 5 On 30 September 2009, following a hearing at Belmont Local Court on 16 March 2009 and the filing of written submissions, the Tribunal delivered its decision on Mr O'Neill's claims for damages (O'Neill v Henry [2009] NSWADT 254). 6 So far as relevant for these purposes, the Tribunal's conclusions were as follows. Mr O'Neill occupied the premises pursuant to a sublease from Mr Henry, but Mr and Mrs Dykes did not know of or consent to the granting of this sublease. They believed instead that Mr O'Neill was employed by Mr Henry as a manager. Mr Henry's conduct in locking Mr O'Neill out of the premises and terminating the sublease on 30 January 2008 was not justified, either under the terms set out in the Lease or on the ground that Mr O'Neill had repudiated the sublease. It did not, however, amount to unconscionable conduct. Mr O'Neill could not recover any damages from Mr Henry because he had failed to establish that he suffered any loss in consequence of the lockout and the termination of the sublease. Furthermore, the evidence did not establish any involvement whatsoever by Mr and Mrs Dykes in the lockout, and there was no reason to hold them liable to Mr O'Neill, either under section 34 of the RL Act (the alleged ground here being that they failed to take all reasonable steps to prevent the lockout occurring) or for unconscionable conduct. 7 For these reasons, the Tribunal dismissed Mr O'Neill's claims both against Mr Henry and against Mr and Mrs Dykes. The orders regarding costs in the substantive decision 8 The Tribunal dealt with this topic in its decision at [84 – 88]. It first noted that the written submissions of all the parties included a claim for costs. It then pointed out that while section 77A of the RL Act and section 88 of the ADT Act laid down a general rule in the Retail Leases Division that each party paid his or her own costs, the Tribunal could award costs if, taking into account matters listed in section 88(1A), it was satisfied that it was 'fair' to do so. The costs so awarded could include (a) the costs paid by parties to their legal representatives and (b) out-of-pocket expenses that they incurred, irrespective of whether they had engaged legal representation or represented themselves. But they did not extend to the financial harm suffered by a self-represented party on account of having to devote labour and time to preparing for and appearing at a hearing. 9 The Tribunal then set out its provisional conclusions regarding costs. These were (a) that Mr Henry should not recover any costs from Mr O'Neill even though Mr O'Neill's claim against him had failed, but (b) that Mr O'Neill should pay on a party-party basis the legal costs and the disbursements incurred by Mr and Mrs Dykes in the proceedings between these parties. 10 In reaching the latter conclusion, the Tribunal took particular account of the fact that there was no evidence whatsoever to link Mr and Mrs Dykes with the lockout of Mr O'Neill from the premises. It based the conclusion principally on subparagraph (c) of section 88(1A) of the ADT Act. This states that a factor to be taken into account in determining whether it is 'fair' to award costs is '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'. The Tribunal expressed the opinion (at [88]) that 'the claim against Mr and Mrs Dykes had "no tenable basis"'. 11 Orders 3, 4 and 5 of the Tribunal were as follows:- 3. Unless within 21 days a party files and serves submissions showing why costs should be awarded, there will be no order as to costs in the proceedings between the Applicant and the First Respondent. 4. Unless within 21 days the Applicant files and serves submissions raising arguments to the contrary, the Applicant is to pay on a party-party basis the legal costs and the disbursements incurred by the Second and Third Respondents in the proceedings between these parties. 5. If submissions are filed by a party pursuant to Order 3 or Order 4, the opposing party or parties must file and serve submissions in response within a further 21 days. The Tribunal will determine the matter raised in the submissions without a hearing, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997. Submissions regarding the provisional costs order in favour of Mr and Mrs Dykes 12 On 19 October 2009, Mr Murphy, acting for Mr O'Neill, filed written submissions in response to Order 4. He indicated first that Mr O'Neill would be appealing against the dismissal of his claim against Mr Henry, but not against the dismissal of his claim against Mr and Mrs Dykes. He then contended that the Tribunal should not be satisfied that it was 'fair', within the meaning of section 88(1A) of the ADT Act, to order Mr O'Neill to pay Mr and Mrs Dykes' costs, 'having regard to the terms of the legislation and… to all the evidence, the Applicant's original Submissions and the matters set out below'. 13 The 'matters set out below' were as follows:- 1. Mr O'Neill had been 'substantially successful' against Mr Henry, in so far as he had proved that Mr Henry had granted him a sublease and had terminated it improperly. 2. It was accordingly 'not unreasonable' for Mr O'Neill to join Mr and Mrs Dykes, the head lessors, as respondents, particularly as they had not filed 'comprehensive statements' that would have enabled him to make an informed decision as to whether or not continue with the proceedings against them. 3. Mr and Mrs Dykes had failed to comply with Tribunal orders requiring evidence to be filed (this being a form of conduct specifically mentioned in section 88(1A)(a)(i) of the ADT Act). 4. By refusing to engage in mediation, Mr and Mrs Dykes denied to Mr O'Neill a further opportunity to make an informed decision as to whether he continue with the proceedings against them. 5. Because they did not engage legal representation, they denied him and his legal representative any opportunity to discuss their position or the possibility of discontinuing the proceedings against them. 14 In submissions filed on 13 November 2009 on behalf of Mr and Mrs Dykes, Ms Halyburton made the following points:- (a) Mr and Mrs Dykes consistently maintained the position that the dispute in this matter was solely between Mr O'Neill and Mr Henry. They made this position known to both these parties. (b) For this reason, they did not engage legal representation for the hearing. Mr O'Neill or his solicitor could however have discussed possible discontinuance with them. (c) Although they did not file formal evidence before the hearing, they corresponded with the Tribunal 'to the best of their understanding of the legal procedures'. (d) They did not receive any request to attend mediation. In accordance with a request from Mr O'Neill, they were however involved in two telephone conferences with the other parties. (e) Through attending the hearing, they incurred considerable costs in terms of lost earnings, which were not recoverable under a costs order. (f) Because the Tribunal stated in its substantive decision that Mr O'Neill's claim against Mr and Mrs Dykes had 'no tenable basis', a reversal of its provisional decision on their claim for costs would be 'an unfair outcome'. The Tribunal's conclusion 15 So far as is relevant to the present decision, section 88 of the ADT Act provides:- (1) 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… (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. 16 The current version of section 88, in which a criterion of 'fairness' has replaced a requirement that there be 'special circumstances warranting an award of costs', became operative on 1 January 2009. In cases applying the earlier test (see for example Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164), it had regularly been held that because of the 'commerciality' of the Retail Leases Division the interpretation of the phrase 'special circumstances' should differ significantly from the interpretation that might be adopted in any other Division of the Tribunal. In Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81, the Court of Appeal held that the costs of proceedings in the Tribunal under the RL Act, both at first instance and on appeal, should be awarded against the lessors. At [60], Santow JA said: 'While a finding of "serious unfairness" is not a prerequisite to determining that there are special circumstances, it is nonetheless a highly relevant consideration.' 17 Because the criterion is now one of 'fairness', as contrasted with the notion of 'serious unfairness' mentioned by Santow J, there are good grounds for believing that costs should now be more readily obtainable. In Salon Today Pty Ltd v M. M. I. R. Pty Ltd [2009] NSWADT 71 (a case within the Retail Leases Division), the Tribunal advanced this proposition. At [72], it stated:- What the Parliament has done, in its 1 January 2009 amendments, is recognise that there is a need for this Tribunal to be more flexible and widen the scope of a litigant's entitlement to costs. This is a concept generally that is now accepted in this Division, and certainly touched upon by the Court of Appeal in Cripps , and the result of this re-assessment by the Parliament is a different test, a test of fairness, having regard to a number of parameters/factors. 18 In the present case, the factor of prime importance is, in the Tribunal's opinion, that no evidence was adduced at the hearing to suggest that Mr and Mrs Dykes had played any role in the lockout. In the application to the Tribunal with which Mr O'Neill instigated these proceedings, he claimed that 'the Respondents' changed the locks on the premises without differentiating between them. In his opening address at the hearing, Mr Murphy stated that Mr O'Neill did not know who had effected the lockout. But Mr O'Neill said shortly afterwards in cross-examination that he knew it to have been Mr Henry. Neither he nor any other witness called by him suggested that Mr and Mrs Dykes knew in advance of Mr Henry's intention to effect the lockout, or that they had any involvement in it, or indeed that they could have prevented it. There was accordingly no factual basis for any claim for relief against them. Yet the onus lay on Mr O'Neill, as Applicant, to establish such a basis. Merely to have proved, as he did indeed try to do, that they knew of the sublease granted to him by Mr Henry was clearly not sufficient. 19 It was for these reasons that the Tribunal held that Mr O'Neill's case against Mr and Mrs Dykes had 'no tenable basis' and arrived at the provisional conclusion expressed in Order 4. 20 The submissions now put by Mr Murphy do not provide any grounds for disturbing this conclusion. Since Mr and Mrs Dykes believed on reasonable grounds that the dispute was wholly between Mr O'Neill and Mr Henry, it was entirely reasonable of them to decide, as many litigants do in this Tribunal, that they would not commit themselves to the expense of legal representation. The fact that they did not file evidence as stipulated in directions made by the Tribunal is far from sufficient in these circumstances to deprive them of costs to which they are otherwise entitled. 21 The Tribunal's order, confirming the provisional order made in its substantive decision, is that the Applicant is to pay on a party-party basis the legal costs and the disbursements incurred by the Second and Third Respondents in the proceedings between these parties. 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.