Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Starwick Pty Ltd v Harrison [2011] NSWADT 58 Hearing dates: 3 March 2011 Decision date: 23 March 2011 Before: K Rickards, Judicial Member Decision: 1.Peter Harrison is to pay Starwick Pty Ltd the sum of $60,684.85 in respect of money owing to Starwick Pty Ltd 2.Peter Harrison is to pay the sum of $6,101.78 to Starwick Pty Ltd in respect of its costs of these proceedings. Catchwords: Jurisdiction; costs Legislation Cited: Retail Leases Act 1994 Administrative Decisions Tribunal Act 1997 Cases Cited: Prasad & Anor v Fairfield City Council (2000) NSWADT 164 Holden Tourism and Hospitality Pty Limited v Baldock (2001) NSWADT 123 Parallel Lines International Pty Limited v Video-Drama Pty Limited (2007) NSWADT 84 GPT Management Ltd and Anor v Spa Heaven Pty Ltd & Ors (2005) NSWSC 1043 Cripps and Another v G & M Dawson Pty Ltd and Another (2006) NSWCA 81 Category: Principal judgment Parties: Starwick Pty Ltd Representation: P Brown (Applicant) No appearance (Respondent) File Number(s): 105206 reasons for decision Background 1On 17 September 2007 the Applicant ("Starwick") as lessor and the Respondent as lessee entered into a retail lease agreement in respect of premises known as unit 2, 4 Machinery Drive, South Tweed Heads. The term of the lease was for 3 years with a 3 year option. 2The premises were predominantly used by the Respondent for the sale of health food items. 3Pursuant to the terms of the lease, the Respondent was required to pay rent of $43,200 per annum, payable by monthly instalments of $3,600 plus GST for the first year of the term, together with CPI increases for the following years. The Respondent was also required by the terms of the lease to meet payment of other service outgoings including excess water and garbage charges. 4At the time of entering into the lease, the parties also entered into a loan agreement whereby Starwick lent the sum of $20,000 to the Respondent to assist the Respondent to purchase fittings and equipment for the conduct of the business at the premises. 5The loan was repayable by monthly payments of $1,666.66 in arrears and bore interest at 6% per annum, but the loan agreement provided that no interest would be payable if repayments were made on time. The Respondent has conceded that no repayments of this loan were ever made. 6The Respondent first failed to pay rent which was due on 17 April 2009 in the sum of $4,144.44 inclusive of GST. The Respondent thereafter paid no further rent for the ensuing 12 months to March 2010. The Respondent also failed to pay service outgoings in respect of the premises for the period February 2008 to December 2010. 7The term of the lease expired on 16 September 2010, but the Respondent stayed on in occupation of the premises until 2 December 2010 when he advised Starwick's Director Mr Phippard that he was immediately vacating the premises. 8It soon emerged that the Respondent had, some days earlier, purported to sell the business which was being conducted at the premises together with all stock, equipment, plant and fittings to a Mr Ben Schindler. It was the apparent understanding of Mr Schindler that he had entered into a binding agreement for the purchase of the business and, after the Respondent had left the premises, he appeared to operate the business and also change the locks at the premises. 9After being made aware that the locks had been changed, Starwick then arranged for the locks to be changed again and asserted its rights to possession of the premises and its contents. 10Mr Schindler engaged a firm of solicitors who threatened Starwick with injunctive proceedings. In turn, Starwick instructed its solicitor to commence the present proceedings in this Tribunal and to also seek urgent interim orders for declarations that it was entitled to possession of the premises and to the stock, plant, fittings and equipment. 11The hearing of the application for urgent interim orders took place by telephone before Judicial Member Montgomery on 13 January 2011. The Respondent was represented during this hearing by an agent Mr John Burkhardt who also appeared in the interests of Mr Schindler. 12The Respondent by this time had filed an affidavit which was sworn on 23 December 2010 in which he did not seriously contest Starwick's claim for unpaid rent and outgoings. Within this affidavit, the Respondent also admitted that the loan from Starwick remained unpaid. 13Orders were subsequently made by Judicial Member Montgomery on 13 January 2011 declaring that the Respondent had repudiated the lease, that Starwick was entitled to immediate possession of the premises and also was entitled to all stock, plant and equipment remaining on the premises. 14By an agreement dated 1 February 2011 Starwick sold the plant, equipment and fixtures at the premises for the sum of $25,000 and entered into a new lease of the premises with the same party who had purchased those items. 15The original Application was then listed for hearing at Tweed Heads on 3 March 2011. On 8 February 2011, notices were sent to Starwick and also to the Respondent, at both his post office box and his street address, advising of the hearing date as well as the directions made for provision of evidence. The notice sent to the post office box of the Respondent was later returned as "unclaimed". The Registry subsequently left a message for the Respondent's nominated representative Mr Burkhardt in relation to the hearing, but no response was received from Mr Burkhardt. 16Starwick appeared at the hearing, but the Respondent did not. I was satisfied that the Respondent had had ample notice of the hearing and had been given a reasonable opportunity to respond to the Application and to appear at the hearing. The hearing accordingly proceeded upon an ex-parte basis. Application for Payment of Rent and Outgoings 17Starwick seeks orders for payment by the Respondent of unpaid rent for the period of 12 months from April 2009 to March 2010 in the sum of $49,373.28 inclusive of GST and for unpaid outgoings in the sum of $7,144.28. 18Having considered the evidence, I am satisfied that the above sums do remain outstanding and payable by the Respondent to Starwick. Application for Repayment of Loan Advance 19Starwick also seeks an order that the Respondent pay the sum of $23,817.32 representing the loan amount plus accrued interest. 20It is clear that the amount of $20,000 lent by Starwick to the Respondent has not been repaid and that the amount of $23,817.32 is the correct sum repayable after addition of interest. 21The real issue to be addressed in relation to this aspect of the proceedings is whether the Tribunal is empowered to make any order for repayment of this loan. 22The Tribunal has power to make an order for payment of money by way of debt, restitution or refund in respect of "proceedings for a retail tenancy claim"; see s.72 (i)(a) of the Retail Leases Act 1994 ("RLA"). 23The term "retail tenancy claim" is defined by s.70 of RLA to mean: 24 "(a) a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned, being: (i) a claim for payment of money (whether or not stated to be by way of debt, damages, restitution or refund)" 24In turn, the term "retail tenancy dispute" is defined by s.63 of RLA to mean: "any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates ..." 25The mere fact that the parties to a loan agreement also happen to be the lessor and the lessee under a retail lease agreement is insufficient of itself to bring any proceedings seeking repayment of the loan within the ambit of a "retail tenancy dispute". 26It is submitted on behalf of Starwick that the failed obligation of the Respondent to repay the loan does fall within the definition of "retail tenancy dispute" because it is an obligation "which arose in connection with the use or occupation of the retail shop" to which the subject lease relates. 27The term "in connection with the use or occupation" of leased premises as used in s.63 of RLA is to be interpreted widely; see the decisions of the Tribunal in Prasad & Anor v Fairfield City Council (2000) NSWADT 164 and Holden Tourism and Hospitality Pty Limited v Baldock (2001) NSWADT 123. This wide approach to interpretation was also approved and followed by the Tribunal in Parallel Lines International Pty Limited v Video-Drama Pty Limited (2007) NSWADT 84: "(152)In the Tribunal's opinion the broad phraseology of this definition in s.63 ... is sufficient to cover the liability in conversion that Parallel Lines asserts against Video-Drama by virtue of the removal of its goods from the premises. This liability clearly arose 'in connection with the use or occupation' of premises which were subject to a retail lease ... (153)It has indeed been emphasised more than once that the definition of "retail tenancy dispute" should not be construed narrowly. In GPT Management Ltd and Anor v Spa Heaven Pty Ltd & Ors (2005) NSWSC 1043, for instance, Palmer J said at (14) that it was 'exceedingly broad and, clearly enough ... intentionally so'. He held at (16) that it was not confined to disputes about legal issues only, but could extend, for instance, to disputes concerning 'broader questions of fairness as to how an admitted legal liability may, or should, be enforced' " 28In these proceedings, the loan agreement was entered into by the parties at the same time as, and as adjunct to, the retail lease agreement. The loan advance was intended to be, and was in fact, used for the purpose of fitting out the shop and obtaining equipment so as to facilitate the intended use of the premises in accordance with the terms of the subject retail lease agreement. 29The liability of the Respondent to repay money advanced by Starwick to allow the Respondent to fit out and equip the premises so as to enable use of the premises in accordance with the retail lease agreement is a liability which arises out of the use and occupation of the premises. Accordingly, the claim for repayment of the loan made by Starwick to the Respondent should be considered to be a "retail tenancy claim" in respect of which this Tribunal is empowered to make orders. The Respondent's Liability to pay money to Starwick 30For the reasons set out above, the Respondent is liable to pay to Starwick the sum of $49,373.25 for unpaid rent, the sum of $7,144.28 for unpaid outgoings and the sum of $23,817.32 for the loan made by Starwick. The total of these amounts is $80,334.85. 31From the above total, the proceeds of sale of the stock, plant, fittings and equipment should be deducted less allowances for the amounts paid by Starwick for agents' commission and legal fees. Taking into account the evidence provided as to the proceeds of sale and the payments made for commission and legal fees, I am satisfied that the final amount to be applied as a credit against the amounts owing by the Respondent is $19,650. The amount therefore payable by the Respondent to Starwick is $60,684.85. Costs 32Starwick seeks an order that the Respondent pay its costs in such specific sum as may be determined by the Tribunal. The power of the Tribunal to make such an order is set out within s.88(2)(b) of the Administrative Decisions Tribunal Act 1997 (" ADT Act "). 33In support of its costs application, Starwick has tendered as evidence the train of correspondence between its solicitor and the solicitors representing Mr Schindler, as well as a tax invoice dated 14 February 2011 setting out the costs and disbursements which Starwick is to pay its solicitor for the period prior to the hearing date, but not including preparation for and attendance at the hearing on 3 March 2011. 34In broad terms, Starwick contends that it is entitled to a costs order because of the Respondent's conduct in purporting to transfer possession of the premises and ownership of the plant, fittings and equipment to a third party, in circumstances where such conduct was patently unreasonable and lacking merit. Further, it is argued that this conduct was the direct cause of the misapprehension on the part of Mr Schindler and his solicitors that Mr Schindler was entitled to exclusive possession of the premises and its contents. It is clear from the letters which have been admitted into evidence that a real dispute arose between Starwick and Mr Schindler which necessitated Starwick applying to this Tribunal for urgent interim orders. 35The Respondent's affidavit of 23 December 2010 infers an intention to contest Starwick's claims for payment, but the grounds for such contest are nebulous. In summary, the Respondent in his affidavit complains about inaccuracies within Starwick's contentions without really specifying what they are or how they may be relevant to the claims made, complains about being unable to enter the premises in order to verify the amounts claimed by Starwick as owing but without explaining how entry to the premises would assist such an exercise, and does not deny being indebted to the Respondent. 36I am satisfied that Starwick had little option but to file the original Application as well as the Application for Urgent Interim Orders in order to properly protect its position, given the actions of both the Respondent and Mr Schindler, and that the actions of Mr Schindler in taking possession of the business and the premises were at least in part caused by the unreasonable conduct of the Respondent in purporting to transfer the business and the purported right to occupy the premises to Mr Schindler. 37The Tribunal may only award costs in these proceedings in accordance with the provisions of s.88 of the ADT Act . The general rule is that each party bears its own costs of proceedings. Despite this general rule, the Tribunal may order one party to pay another party's costs, but only if it is satisfied that it is fair to do so. In reaching a decision as to whether or not it is fair to make a costs order, the Tribunal is to have regard to a number of factors which are set out within s.88, and which include the manner in which a party has conducted proceedings, whether a party has been responsible for prolonging proceedings, the relative strengths of claims made by each of the parties, the nature and complexity of the proceedings and "(e) any other matter that the Tribunal considers relevant". 38In considering whether there are any other matters that should be considered as relevant in deciding whether it is fair to order a party to pay another party's costs, regard should be had to many previous decisions of the Tribunal establishing the principle that the "commerciality" of the Retail Leases Division calls for an approach which may be quite different from that which might be adopted in other divisions of the Tribunal. Although the majority of these decisions dealt with the now repealed requirement within s.88 that there had to be "special circumstances" warranting an award of costs, the commerciality of the relationship between the parties nevertheless remains as a factor which should be taken into account in deciding whether a costs order should be made under the now amended s.88 which requires consideration of what is "fair". 39Consideration as to whether a party's conduct prior to proceedings has been unreasonable and has caused the proceedings to be commenced such that it would be seriously unfair not to award costs against that party, is another factor that can properly be taken into account. This approach has been adopted by the Tribunal in a number of decisions which have expressly relied upon the decision of the Court of Appeal in Cripps and Another v G & M Dawson Pty Ltd and Another (2006) NSWCA 81 at paragraphs 55 to 60, where the Court confirmed that unreasonable conduct necessitating commencement of proceedings can of itself be sufficient grounds to base a costs order. 40The Respondent has acted unreasonably in purporting to transfer his business and possession of the premises to a third party without notice to Starwick and in circumstances where such purported transfer was clearly invalid. This unreasonable conduct has directly led to Starwick having to engage lawyers and commence these proceedings in order to properly protect its interests. It is considered fair that the Respondent should pay Starwick's costs in these circumstances. 41Notwithstanding its application, Starwick has not, however, established any entitlement to indemnity costs. 42The tax invoice dated 14 February 2011 for legal services rendered to Starwick in relation to the subject dispute is in the sum of $6,101.78; this tax invoice clearly sets out the work performed by Starwick's solicitors and how the legal costs have been calculated, but does not include the additional work which was subsequently required to prepare for and appear at the hearing of this matter on 3 March 2011. 43Allowance of Starwick's costs up to, but not including final preparation and appearance at the hearing as set out within this tax invoice is considered to be an imprecise but fair method of determining the appropriate amount of party/party costs which should be paid by the Respondent to Starwick in the circumstances. Orders (1)Peter Harrison is to pay Starwick Pty Ltd the sum of $60,684.85 in respect of money owing to Starwick Pty Ltd. (2)Peter Harrison is to pay the sum of $6,101.78 to Starwick Pty Ltd in respect of its costs of these proceedings. 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: 23 March 2011