Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Fagerlund v PPS Nominees Pty Ltd (No 2) [2011] NSWADT 52 Hearing dates: On the papers Decision date: 14 March 2011 Before: Deputy President L Olsson SC G Griffiths, Non Judicial Member R Ward, Non Judicial Member Decision: The parties bear their own costs up and until 7 April 2009 and that thereafter, the Applicants pay the Respondents costs on an indemnity basis. Catchwords: Misleading and deceptive conduct; unconscionable conduct; Calderbank offer Legislation Cited: Retail Leases Act 1994 Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Salon Today Pty Ltd v M.M.I.R Pty Limited [2009] NSWADT 71. Rucom Pty Ltd and Anor v Multiplex and Ors [2010] NSWADT 1. Meriton Properties Pty Ltd v DCM Leases-Five Pty Ltd (No. 2) [2010] NSWADT 11 Category: Costs Parties: Debbie Marie Fagerlund (First Applicant) Wade Anthony Atkinson (2nd Applicant) PPS Nominees Pty Ltd (Respondent) Representation: A Fernon (Applicant) M Ellicott (Respondent) S & T Lawyers (Applicant) Minter Ellison (Respondent) File Number(s): 085230 and 095010 reasons for decision Costs 1The Tribunal delivered its decision in this matter on 3 February 2011. 2The following orders were made: Application dismissed. Cross Application allowed in part. The Cross Respondents will pay the Cross Applicant the sum of $88,830.90 calculated as follows: $23,046.85 $13,784.10 $22,000.00 The Cross Applicant is entitled to interest. The Tribunal notes that the parties have requested the opportunity to make submissions as to costs. The Tribunal orders that each party pay its own costs, which order will be stayed for the period of 14 days from the date hereof during which time the parties are invited to make submissions as to costs in writing to the Tribunal. 3The parties were invited to make written submissions as to costs. Submissions have been received from the Respondent. The Applicants have not made any submissions. 4The Respondent, in its submissions, refers to two offers that it made pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333 and Salon Today Pty Ltd v M.M.I.R Pty Limited [2009] NSWADT 71. 5The first offer was made on 7 April 2009. In that offer, the Respondent gave an outline of the deficiencies it perceived in the Applicants' case, made observations about the mounting costs of the proceedings and offered to accept $50,000.00 inclusive of costs in full and final settlement of the matter. 6The offer was rejected. The Respondents have obtained a substantially better result that the terms of that offer. 7The second offer was made on 9 April 2009 after discovery and service of evidence had been completed. 8In the second offer, the Respondent gave an outline of the deficiencies in the Applicants' case as it saw it, made observations about the costs of the proceedings and made an offer that each party walk away and pay their own costs. 9This offer was rejected. 10The second offer was made on terms that were substantially more favourable to the Applicants than the terms of the Orders made by the Tribunal. 11Section 88 of the Administrative Decisions Tribunal Act (1997) ("the Act") was amended on 1 January 2009. Read with Schedule 5, Part 11, Section 43(3), it is clear that the amendment to s.88 applies to "applications and proceedings that were made on or commenced, but not finally determined, before the commencement of the substantive amendment concerned". Accordingly, it is the new form of s.88 of the Act that pertains to this matter. 12The Tribunal is required to have regard to the terms of s.88 itself, which provides as follows: - Section 88 Costs (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 (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 Act2004or 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) Thecosts of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application. 13The proceedings are commercial in nature, arising from the relationship between 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 that 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]) 14The 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?" 15As Deputy President Chesterman said in Meriton Properties Pty Ltd v DCM Leases-Five Pty Ltd (No. 2) [2010] NSWADT 11 at [29] "Undoubtedly, the general principles that govern the interpretation of the criterion of 'fairness' in proceedings under the Retail Leases Act indicate that despite the presumption stated in subsection (1) of section 88 of the ADT Act,- ie that each party should bear its own costs - the Tribunal should not be unduly reluctant in a case such as this to make the requisite finding under subsection (1A)". 16But for the offers of compromise which were made by the Respondent, there would not seem to be present in this case any factors which would warrant a departure from the usual order as to costs, that is, that each party bear their own costs. However, on two occasions, the Respondent outlined to the Applicants many of the deficiencies in the Applicants' case and did so with some precision. The replies to those offers did no more than reject them; the Applicants did not traverse the assertions made therein, nor did they proffer any reason -either then or now- as to why it would have been reasonable to reject the offers. 17The Tribunal is mindful of the fact that the decisions cited herein relating to the interpretation of s.88 of the Act were handed down at the same time or later than the date of the offers made in this case. However the common usage and consequences of offers of compromise or 'Calderbank' offers is such that parties ignore or reject them at their peril. In the circumstances of the present case, both offers were in terms that were substantially more favourable to the Applicants than the Tribunal's orders. 18The deficiencies of the Applicants case were plainly communicated and at a time when the discovery process had occurred and after the evidence had been served. In other words, both parties were, at that time, seized of sufficient information about the other's case that they were able to make a realistic assessment of the prospects of success of their own case. 19The Tribunal considers it to be appropriate therefore to order that the parties bear their own costs up and until 7 April 2009 and that thereafter, the Applicants pay the Respondents costs on an indemnity basis. I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal. Registrar ********** 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. Decision last updated: 14 March 2011