Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Chastel-Roux Pty Ltd v Le [2012] NSWADT 223 Hearing dates: On the papers Decision date: 31 October 2012 Jurisdiction: Retail Leases Division Before: S Montgomery, Judicial Member Decision: Each party is to pay its own costs of these proceedings. Catchwords: Costs Legislation Cited: Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Cases Cited: Coogee Bay Village v Profilio (RLD) [2011] NSWADTAP 67 Du Aus Pty Ltd v Riviera Cove Pty Ltd (No. 2) [2010] NSWADT 302 Profilio v Coogee Bay Village Pty Ltd (No. 4) [2011] NSWADT 64 Category: Costs Parties: Chastel-Roux Pty Ltd (Applicant) Chinh Le and Diane Phung (Respondents) Representation: Bicknell & Monteith Lawyers (Applicant) Than & Co. Solicitors (Respondents) File Number(s): 125066 REasons for decision 1GENERAL DIVISION (S MONTGOMERY, (JUDICIAL MEMBER)): The Applicant is the lessee of premises at 53 Walker Street North Sydney. The Respondent is the lessor of those premises. 2The Applicant applied to the Tribunal pursuant to section 71 of the Retail Leases Act 1994 ("the Act") seeking the following orders: "1. The Respondent submit the lease document to the Applicant with 14 days 2. The parties execute the lease document within 24 days after submission of the lease document The Respondent pay the Applicant's costs of the application." 3The Applicant identified the following grounds for its application * the Applicant exercised its option for a further term of the lease but agreement could not be reached on the rent for the new term to commence on 1 June 2011. * on 2 August 2011, the Applicant filed an application for the appointment of a specialist retail valuer to assess the rent for the new term. * on 18 August 2011, the Tribunal, by consent, ordered that Mr Phil Barlow of Landmark White be appointed as the specialist retail valuer. * the valuation was provided on 29 November 2011 assessing rent at $36,300.00 per annum plus outgoings and GST as from 1 June 2011. * no objection to the assessment was taken by either party. * following the provision of the valuation, the Applicant sought from the Respondents the new lease. * on 29 April 2012, the Respondents advised the Applicant that their solicitor had drafted the new lease and that it would be sent to the Applicant's solicitor 'soon' but wanted payment of outgoings cleared before the new lease would be sent. * on 1 May 2012, the Applicant instructed its solicitors to seek the submission of the new lease from the Respondents. On the same day, the Applicant's solicitors wrote to the Respondents requesting the submission of the new lease within 7 days. * the new lease was not submitted within such time and the Applicant's solicitor spoke to the Respondent's solicitor but was advised that the Respondent's solicitor had no instructions to submit the new lease. * the Applicant wishes to obtain the new lease to confirm its right to occupy the shop as soon as possible. * the Applicant is entitled to a new lease having exercised its option in accordance with the terms of the lease, which has not been disputed by the Respondent. As the rent for the first year of the new term has been determined by the valuation and the lease is otherwise on the same conditions as the existing lease, there is no reason for the delay by the Respondents in submitting the new lease to the Applicant. * there are no issues in dispute between the Applicant and Respondent which would warrant the parties going to mediation to resolve. * in all the circumstances, the Applicant seeks orders of the Tribunal to enforce its rights for the submission of the new lease. 4The matter came before me for Directions on 31 May 2012. At that time I was informed that the lease had been provided and therefore the orders were no longer required. However, the Applicant indicated that it was seeking an order for costs. I set a timetable for the parties to file whatever material they sought to rely on in regard to that application and it was agreed that the application should be determined on the basis of the material files and without the need for a hearing. Applicable legislation 5The Tribunal is empowered to award costs under section 88 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act") and section 77A of the Act. 6Section 88 of the ADT Act provides: 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 Act 2004 or 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) the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application. 7Section 77A of the Act provides: 77A Tribunal may award costs The Tribunal may award costs under section 88 of the Administrative Decisions Tribunal Act 1997 in respect of proceedings commenced by an application made under this Part. Background 8The Applicant has provided written submissions in which it sets out the background to this matter: * The Applicant is the lessee of the premises. The Respondents are the owner and landlord of the premises. * The lease of the premises was for a term of 6 years commencing 1 June 2005 and terminating on 31 May 2011 with an option to renew for 6 years. * The Applicant became the tenant pursuant to an assignment of lease dated 28 May 2008. * On 10 February 2011, the Applicant exercised its option for a new lease. * The Applicant did not receive any acknowledgement or response from the Respondents or their solicitors following the notice of exercise of option. * The Applicant wrote to the Respondents several times over the following months regarding the notice of exercise of option but received no reply. * On 21 June 2011, the Applicant wrote to the Respondents proposing the appointment of a specialist retail valuer to determine the rent for the first year of the new lease term. A further copy of that letter was forwarded to the Respondents' solicitors on 30 June 2011. * On 30 June 2011, the Respondents' solicitors replied agreeing to the appointment of a specialist retail valuer. * Over the following weeks the Applicant twice wrote to the Respondents regarding that appointment but received no reply. * On 25 July 2011, the Respondents' solicitors advised the Applicant that they did not accept the Applicant's notice of exercise of option. * On 28 July 2011, the Applicant wrote to the Respondents' solicitors seeking a response to its letter of 13 July 2011 regarding the appointment of a specialist retail valuer. The Applicant advised the Respondents that if no response were received by 29 July 2011, the Applicant would apply to the Tribunal for the appointment of a specialist retail valuer to determine the rent. * No response was received from the Respondents by 29 July 2011 and the Applicant filed an application with the Tribunal on 2 August 2011. * Correspondence was exchanged between the parties in regard to the appointment and on 18 August 2011 the Tribunal made an order appointing Mr Barlow as specialist retail valuer. * Further correspondence was exchanged between the parties and with Mr Barlow in regard to the appointment. * Mr Barlow provided his valuation dated 28 November 2011 at which time he fixed the rent at $36,300.00 per annum. * On 1 May 2012, the Applicant wrote to the Respondents' solicitors requesting submission of the new lease and disclosure statement by 8 May 2012. No response was received to the letter nor was the lease or disclosure statement provided. * On 16 May 2012, the Applicant filed this application with the Tribunal. * The matter was listed for directions on 31 May 2012. * On 29 May 2012, the Respondents' solicitors provided the new lease but a disclosure statement did not accompany it. On that same day, the Applicant requested the Respondents' solicitors provide the disclosure statement immediately. * The Applicant received the disclosure statement by email on Wednesday 30 May 2012. 9I do not understand the Respondents to have taken issue with this chronology of events however there is dispute as to the implication to be drawn from those events. The Respondents provided copies of correspondence between the parties which shows that during the time that the Applicant was seeking the new lease there were negotiations between the parties regarding amounts that the Respondents asserted were payable by the Applicant. The Applicant's submissions 10The Applicant contends that it is fair to make an order for cost in the Applicant's favour in this matter. The Applicant alleged that the Respondents have been guilty of delay and seeks its costs in the sum of $1,443.75. 11In its submissions, the Applicant referred to Du Aus Pty Ltd v Riviera Cove Pty Ltd (No. 2) [2010] NSWADT 302 and to the observation at paragraph [13] to the effect that costs will more readily be awarded in the Retail Leases Division of the Tribunal than in other divisions based on the commercial nature of disputes in that division. 12In considering whether it is fair to award costs, the Applicant ask the Tribunal to take into consideration the long history going back to February 2011. The Applicant submits that, at all times, it has conducted itself and taken action in accordance with its obligations. The Applicant contends that, in contrast, the Respondents have either failed or delayed to meet their obligations and duties to the Applicant. They have failed to answer correspondence, they have failed to take appropriate action and steps when they were clearly under a duty to do so, and they have only acted either when the Applicant has been left with no option but to take action before the Tribunal or just prior to the matter being dealt with by the Tribunal. 13The Applicant further submits that, by their actions, the Respondents have unreasonably prolonged the time taken to finalise this matter. Their conduct in not meeting their obligations and duties in a timely manner resulted in the Applicant being unfairly penalised by having to instruct lawyers to act on its behalf to obtain results and outcomes that would have been and should have been the natural consequence of the Respondents meeting their obligations. 14The Applicant concedes that an issue existed between the parties in regard to outstanding payments due by the Applicant to the Respondents for outgoings for the property and that the Respondents wanted those issues resolved before issuing the lease. However, in the Applicant's submission, the resolution of the payment of outgoings should not be and cannot be a condition for the issue of the lease. 15The Applicant rejected the Respondents' assertion that the Applicant is in breach of the lease. 16The Applicant contends that the Respondents knew of the rent determination for the first year of the new term of the lease by 28 November 2011, and that there was no reason for the Respondent not having issued the lease within a reasonable time after that date. The Applicant submits that the failure to provide the lease until some six months after the determination of the rent is unreasonable and unconscionable. 17The Applicant further submits that the actions of the Respondents are ones of recalcitrance and deliberate prolongation such that the matters which the Tribunal must take into consideration in considering whether costs should be awarded under section 88 are met, thereby entitling the Applicant to an award of costs which the Applicant submit should be on the indemnity basis. The Respondents' submissions 18In response to the Applicant's application for cost, the Respondents provided copies of correspondence between the parties. 19The Respondents deny that they have been guilty of delay. They contend that the delay was due to extensive negotiations between the parties. In the Respondents' submission, one of the issues causing the delay is the Applicant's refusal to pay the GST component of the rental supply. In the Respondents' submission the Applicant is in breach of clause 15 of the lease. 20The Respondents provided copies of July 2011 correspondence between the Respondents' solicitors and the Applicant's solicitors in regard to that issue. 21The Respondents contend that the renewal lease was delivered to the Applicant's solicitor on 28 May 2012, but they had not received a signed lease from the Applicant. Instead, by letter dated 19 June 2012, solicitors acting on behalf of the Applicant had sought an additional option for renewal. 22The Respondents contend that there is substantial evidence for the Tribunal to draw an inference that as at the date of the Application, the Applicant had no intention to sign the renewal lease as sought. 23The Respondents submit that nothing in the Respondent's conduct in these proceedings would fall under the circumstances set out in subsection 88(1A) of the ADT Act. 24It is further submitted that the evidence is sufficient to draw a conclusion that it was unnecessary and unreasonable for the Applicant to make the Application to the Tribunal as it did and that the Applicant's application for costs of the proceedings should be dismissed and the Respondents are entitled to be awarded the costs for these proceedings. Discussion 25As noted above, the jurisdiction to award costs is derived from section 88 of the ADT Act and Section 77A of the Act. 26These provisions have been considered in numerous decisions. It is settled law that the starting point is that there will be no order for costs unless the Tribunal is satisfied that there should be a costs order having regard to the various matters referred to in section 88(1A). The party seeking a costs order in their favour must displace the usual rule that each party bears its own costs. The criterion is one of fairness. 27In its decision in Profilio v Coogee Bay Village Pty Ltd (No. 4) [2011] NSWADT 64, the Tribunal extensively reviewed the principles relevant to the awarding of costs under the ADT Act. The Tribunal stated at paragraphs [33] to [38] of the decision: 33 The current version of section 88, in which the criterion of 'fairness' stated in subsection (1A) has replaced a rule that in the absence of 'special circumstances' no costs might be awarded, became operative on 1 January 2009. 34 Subparagraph (d) of subsection (1A) of section 88 requires the Tribunal to take account of the 'nature' of the relevant proceedings. In cases applying the earlier criterion of 'special circumstances' (see for example Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164), it was consistently held that because of the 'commerciality' of proceedings in 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. 35 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.' 36 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 orders should be more readily obtainable. In Salon Today Pty Ltd v M M I R Pty Ltd [2009] NSWADT 71 (a case brought under the RL Act), 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. 37 In Rucom Pty Ltd and Anor v Multiplex & Ors [2010] NSWADT 1 (another case brought under the RL Act), the Tribunal, after referring to the Gizah and Salon Today decisions, said (at [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, in addition, proceedings should only be commenced in this Tribunal after very careful consideration of the merits of the case: ... 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?" 38 Furthermore, in a Court of Appeal case emanating from the General Division of the Tribunal, AT v Commissioner of Police [2010] NSWCA 131, Basten JA, delivering the judgment of the Court, referred at [33] to 'the force of the general principle' in section 88(1) that 'each party should bear its own costs in the Tribunal, a principle applicable at both first instance and before the Appeal Panel'. He then said:- Although an order varying the general rule may be made "only if" the relevant criterion is satisfied in a particular way, there is a relatively low hurdle for an applicant seeking an order. The criterion of "fairness" will take into account the compensatory purpose of an award of costs, which will generally favour the successful party. The circumstances in which fairness may be identified are indicated by the specific attributes listed in sub-s (1A), but subject to the generality of paragraph (e), read in its context. Other considerations will no doubt include the nature of the jurisdiction of the Tribunal which is invoked and the objects identified in s 3(b)-(g) of the [ADT Act]. (emphasis added) 28In considering fairness, the Tribunal is entitled to take into account that the matter concerns a commercial dispute; that the test of "fairness" is a lower barrier than the test of "special circumstances" previously applicable; that the notion of fairness will take account of the compensatory nature of awards of costs, which will normally favour a successful party, and that offers of compromise can properly be taken into account: Coogee Bay Village v Profilio (RLD) [2011] NSWADTAP 67. 29As is apparent from the cases referred to above, in assessing an application for costs the criterion is one of fairness. In considering fairness, the Tribunal is entitled to take a number of factors into account. 30The Applicant point to a chronology of events leading to the application to the Tribunal and assert that this demonstrates delay on the part of the Respondents, which forced the Applicant into a position where the application to the Tribunal was necessary. 31The Applicant further submits that the Respondents have been recalcitrant and deliberately prolonged the matters. 32In answer, the Respondents point to the Applicant's failure to pay GST as required by the lease and asserts that the delay was due to extensive negotiations between the parties. 33The history of the negotiations between the parties suggests that the relationship between the parties, or at least their solicitors, is not a comfortable one. However, I note that the history of the matter in the Tribunal is not one of delay. The application was filed on 16 May 2012 and the issue in dispute was resolved on 30 May 2012. 34The delay to which the Applicant points occurred prior to the commencement of these proceedings and at a time when negotiations were underway between the parties. 35In the circumstances I do not accept that the Respondents have been responsible for prolonging unreasonably the time taken to complete the proceedings. 36Any application for costs must be limited to costs associated with the conduct of these proceedings. The substantive matter was settled between the parties and, therefore, the Tribunal did not deal it with. Consequently, no decision has been taken in regard to the merits of the Applicant's assertions of delay caused by the Respondents or the Respondents' response to those assertions. 37In my view, it follows that it would be unfair to make an award of costs in favour of either party to these proceedings. 38That being the case, the correct and preferable decision is that each party should pay its own costs. Order Each party is to pay its own 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: 31 October 2012