Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Nguyen & Anor v Perpetual Trustee Company Ltd; Perpetual Trustee Company Ltd v Nguyen & Anor (no 2) [2016] NSWCATAP 168 Hearing dates: On the papers Date of orders: 26 July 2016 Decision date: 26 July 2016 Jurisdiction: Appeal Panel Before: A Britton, Principal Member K Rosser, Senior Member Decision: The application for costs is dismissed. Catchwords: COSTS — whether special circumstances warrant an award of costs Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Civil and Administrative Tribunal Rules 2014 (NSW) Retail Leases Act 1994 (NSW) Civil and Administrative Tribunal (Amendment No 3) Rule 2015 Cases Cited: Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164 Nguyen v Perpetual Trustee Company Ltd; Perpetual Trustee Company Ltd v Nguyen [2015] NSWCATAP 264 Prieston v Panyiotou [2015] NSWCATAP 71 36 Wagg v Farthing (No 2) [2015] NSWCATAP 263 Tofighi v Adami [2015] NSWCATAP 260 Wood and Anor v Bergman (No. 2) [2003] NSWADT 175 Wright v Commissioner of Police (Costs) [2015] NSWCATAP 69 Category: Costs Parties: Anthony and Thi Nguyen (Appellants AP 15/32040); Respondents (AP 15/39175) Perpetual Trustee Company Ltd Appellant (AP 15/39175); Respondent (AP 15/32040) Representation: Counsel: B Zipser Appellants (AP 15/32040); Respondents (AP 15/39175) Solicitors: Bui Lawyers (AP 15/32040) Respondents (AP 15/39175) HWL Ebsworth Appellant (AP 15/39175); Respondent (AP 15/32040) File Number(s): AP 15/32040; AP 15/39175 Decision under appeal Court or tribunal: NCAT Jurisdiction: Consumer and Commercial Date of Decision: 16 June 2015 Before: K Richards, Senior Member File Number(s): COM 14/19397 REASONS FOR DECISION Introduction 1. For a number of years Anthony and Thi Nguyen (the Nguyens) ran an optometry business from a shop in Liverpool Plaza leased from Perpetual Trustee Company Ltd (Perpetual). In 2013, a dispute arose between the parties about the amount payable by the Nyugens for outgoings. They asserted that under their lease agreement with Perpetual (the lease agreement) they were required to pay 0.0152% of Perpetual's total outgoings for the Plaza; Perpetual, on the other hand, asserted that the Nuygens were required to pay 1.52%. The difference between the two figures was dramatic. 2. The parties were unable to reach agreement and in April 2014 Perpetual commenced proceedings in the Consumer and Commercial Division of the New South Wales Civil and Administrative Tribunal (NCAT). The Tribunal decided in favour of Perpetual and ordered the Nguyens to pay outgoings of $164,496 (the Decision). In addition, the Tribunal ordered each party to pay their own costs. Following an application made by Perpetual, the Tribunal amended its decision under s 63(3) of the Civil and Administrative Tribunal Act 2013 (NSW) (the Act), increasing the amount payable by the Nguyens to $177,452 (the Amended Decision). 3. Both parties appealed the Decision. The appeal brought by the Nyugens principally concerned the proper construction of the provisions of the lease agreement governing the calculation of outgoings (the first appeal). Perpetual's appeal concerned the decision made by the Tribunal not to award costs (the second appeal). 4. On appeal, we rejected the Nyugens' contention that the Tribunal had misconstrued the lease agreement but accepted their contention that the Tribunal had erred in calculating the amount payable by them for outgoings (Nguyen v Perpetual Trustee Company Ltd; Perpetual Trustee Company Ltd v Nguyen [2015] NSWCATAP 264 (at [58]-[59]). With respect to the second appeal, the parties agreed that the Tribunal failed to afford procedural fairness by not giving them an opportunity to make submissions about costs. We set aside that decision and, in substitution, ordered the Nyugens to pay Perpetual's costs of the proceedings at first instance. 5. These reasons address an application made by Perpetual for an order that the Nyugens pay its costs in both appeals. Unsurprisingly, the Nyugens oppose that application. 6. Being satisfied that the issues raised by the costs application could be adequately determined in the absence of the parties and on the basis of their written submissions, with their consent we decided to exercise the power under s 50(2) of the Act to determine the application without holding a hearing. Power to award costs 1. As both appeals were lodged before 1 January 2016, the Appeal Panel's power is conferred by s 60 of the Act, which relevantly provides: Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following: (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to 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) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36 (3), (g) any other matter that the Tribunal considers relevant. … Submissions in support of application for costs 1. Perpetual submits that the following factors constitute "special circumstances" and warrant the exercise of the power to award costs under s 60 of the Act. 2. With respect to the first appeal, Perpetual submits that it involved a level of complexity which rendered it "unusual". Perpetual contends that the central issue raised in that appeal, namely the proper construction of a provision in a lease agreement, was both factually and legally complex as evidenced by the lengthy written and oral submissions made by the Nguyens. 3. Perpetual contends that the complexity of the issues raised in the appeal together with the consequent need for legal representation was "sufficiently out of the ordinary" to warrant an order for costs, citing in support Wagg v Farthing (No 2) [2015] NSWCATAP 263 at [9] and Tofighi v Adami [2015] NSWCATAP 260 at [12]. 4. Second, Perpetual submits it is relevant to the determination of special circumstances that the losing party, the Nguyens, had initiated the first appeal, citing in support the following passage from Tofighi v Adami at [10]: The Appeal Panel has tended to accord more weight to outcome as a significant factor in cases where the losing party has, as in this case, brought an appeal and has again been unsuccessful: see Wright v Commissioner of Police (Costs) [2015] NSWCATAP 69. 1. Third, Perpetual contends that the nature of the proceedings, namely a commercial dispute between "commercially sophisticated" parties, supports a determination that there are special circumstances warranting an award of costs, citing in support the following passage from the decision in Prieston v Panyiotou [2015] NSWCATAP 71 at [26]: 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. 1. Fourth, Perpetual contends that recent amendments to the costs provisions applying to internal appeals in NCAT are relevant. 2. Fifth, Perpetual points to cl 21.5 of the lease agreement, which required the Nguyens to pay as damages any reasonable costs, charges and expenses incurred in connection with a termination of the lease by Perpetual for breach of an essential term of the lease agreement. Are special circumstances established? 1. The general rule created by s 60 of the Act is that each party to proceedings is to pay their own costs (s 60(1)). An Appeal Panel may order costs "only if satisfied that there are special circumstances warranting an award of costs (emphasis added)" (s 60(2)). Section 60(3) sets out a non-exhaustive list of factors that may be taken into account in deciding whether there are special circumstances warranting an award of costs. 2. The term "special circumstances" is not defined in the Act. It has been interpreted to mean circumstances that are out of the ordinary but not necessarily extraordinary or exceptional. The discretion to award costs must be exercised judicially having regard to the underlying principle that parties to proceedings in the Tribunal are ordinarily to bear their own costs. (See eMove Pty Ltd v Naomi Dickinson [2015] NSWCATAP 94 at [48]; CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21 at [23]-[31].) 3. The issue we must decide is whether the factors relied upon by Perpetual, separately or in combination, establish special circumstances warranting an award for costs in one or both of the appeals. 4. While the principal issue raised in the first appeal, namely the proper construction of those provisions of the lease agreement dealing with the calculation of outgoings, involved a level of complexity, in our opinion it was not "out of the ordinary". In contrast to Wagg v Farthing (No 2), cited by Perpetual, the first appeal primarily involved a discrete question of law. There was no dispute as to the facts. Further, we note that in the first appeal Perpetual asserted that the issues to be determined were "factually and legally simple". (See Perpetual's submissions, par. 3, filed 17 August 2015.) 5. It is not suggested that the second appeal raised any complex issues of fact or law. In that appeal, the Nyugens properly conceded that the Tribunal had failed to afford procedural fairness and that this constituted an error of law. 6. The Nguyens were unsuccessful in relation to their principal ground of appeal, namely the proper construction of the lease agreement, and only partially successful in the other grounds on which they relied. As Perpetual points out, Appeal Panels of both NCAT and one of its predecessor tribunals, the NSW Administrative Decisions Tribunal (ADT), have tended to give greater weight in the assessment of special circumstances to the outcome of an appeal in circumstances where the losing party brought the appeal (see for example, Tofighi v Adami [2015] NSWCATAP 260 at [10]). While relevant this is not determinative of whether special circumstances are established, especially where, as is this case, the losing party was not entirely unsuccessful. 7. It is unclear how, as suggested by Perpetual, cl 21.5 of the lease agreement is relevant to the assessment of special circumstances. Clause 21.5 applies where the landlord terminates the lease agreement as a result of a breach of an essential term by the tenant. Perpetual has not identified the evidence which supports the assumption underlying its submission — that it terminated the lease as a result of a breach of an essential term. 8. Nor is it apparent how the recent amendments to the costs provisions governing internal appeals, support a finding that special circumstances are established. To put Perpetual's argument in context it is necessary to explain the amendment to the costs provisions, introduced by the Civil and Administrative Tribunal (Amendment No 3) Rule 2015. 9. In proceedings in the Consumer and Commercial division of NCAT where the amount in dispute is more than $30,000, the Tribunal may award costs in the absence of special circumstances (r 38(2) of the Civil and Administrative Tribunal Rules 2014 (the Tribunal Rules)). However, where, as in this case, an internal appeal was lodged before 1 January 2016 in relation to a decision caught by r 38(2), costs in the appeal can only be awarded if special circumstances are established (s 60 of the Act, r 38A(1) of the Rules). 10. Introduced by the Civil and Administrative Tribunal (Amendment No 3) Rule 2015, r 38A of the Tribunal Rules states that where an internal appeal was lodged on or after 1 January 2016 and the "first instance costs provisions" differ from those set out in s 60 of the Act, the Appeal Panel must apply the former when deciding whether to award costs in relation to the internal appeal. 11. It is unclear how as Perpetual suggests, these amendments to the costs provisions strengthen its contention that special circumstances are established in this case. The amendments were evidently introduced to rectify the anomaly applying to that class of matters caught by r 38(2) of the Tribunal Rules, whereby the power to award costs in first instance proceedings could be exercised in the absence of special circumstances, but on appeal could only be exercised if special circumstances are established. Nonetheless, the amendments are not retrospective in their operation. 12. Of the arguments advanced by Perpetual, that relating to the commercial nature of the proceedings, in our view is the most compelling. As Perpetual points out, successive Appeal Panels of both NCAT and the ADT have consistently accepted the proposition that "special circumstances" should be interpreted differently in respect of appeals involving retail leases because of the commercial character of those proceedings (see for example, Randi Wiks Pty Ltd v Pokana Pty Ltd [2003] NSWADTAP 27, Prieston v Panyiotou [2015] NSWCATAP 71 at [26]). While it has been accepted that different considerations may apply to the interpretation of "special circumstances", this has not been taken to imply that costs should simply follow the event (see for example, Wood and Anor v Bergman (No. 2) [2003] NSWADT 175 at [13]; Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150 at [4]). 13. The appeal brought by the Nyugens was neither unmeritorious nor hopeless. Neither they nor Perpetual conducted the appeals in a way that unnecessarily disadvantaged the other or caused the proceedings to be unreasonably prolonged. Each party made appropriate concessions, which assisted in the narrowing of the issues and reduced the time required to determine the appeal. While, as acknowledged by the Nyugens, the first appeal involved a level of legal complexity, in our view it was not such as to establish special circumstances. Nor in our view is the commercial nature of the proceedings sufficient to establish special circumstances, even though the Nyugens had initiated and were largely unsuccessful in the first appeal. 14. We are not satisfied that the factors relied upon by Perpetual, separately or in combination, constitute special circumstances warranting an award of costs. It follows we are unable to exercise the power to award costs in the first and second appeal. Orders 1. The application for costs is dismissed. ****** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. 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: 26 July 2016