Alexander James Pty Ltd v Pozetu Pty Ltd

NCAT Appeal Panel|2016-02-26

Introduction

On 21 October 2015, we published Reasons for Decision in Alexander James Pty Ltd v Pozetu Pty Ltd [2015] NSWCATAP 228 in which we allowed an appeal from a Decision of a Senior Member. We reserved the question of costs which has now been agitated before us. The appellants have sought costs orders against the respondent both in the proceedings at first instance and on appeal.
Our Decision on appeal involved complex factual matters and principles of law concerning the circumstances surrounding the grant of a retail lease, the exercise of an option for renewal, the rental payable under any renewed lease, whether there was a failure by the lessor respondent to grant the renewed lease upon exercise of the option, whether an equitable lease came into existence, the circumstances surrounding the termination of the lessor-lessee relationship, and whether a duty of fidelity applied in favour of the respondent.

Deferral of these costs proceedings?

In written submissions the respondent said that on 18 November 2015 it had sought leave in the Supreme Court of NSW to appeal from our decision, and had invoked the original jurisdiction of that Court seeking relief by way of certiorari and mandamus. It was submitted that we should defer dealing with costs until these matters had been determined. We were advised that no stay had been sought from the operation of our decision and orders. In the circumstances, and so that the totality of all matters may be dealt with in the Supreme Court we declined to delay dealing with these applications for costs.

The proceedings at first instance

The parties on appeal were in agreement concerning the following matters: 1. The first instance matter was originally set down for two hearing days, namely, 19 and 20 November 2012. 2. During the course of the hearing on 20 November 2012, the Senior Member asked the respondent to tell him "exactly what the landlord's claim is, what Pozetu's claim is." Counsel for the appellants informed the Tribunal that he did not understand what case his clients had to meet. In these circumstances, counsel for the appellants was unable to pursue his cross-examination of the respondent's witnesses. Accordingly, the matter had to be adjourned that day at about 12 noon. 3. The matter was set down for further hearing on 6 June 2013. 4. In the interim, on 4 December 2012, the respondent filed a statement of facts, issues and contentions in which, for the first time, it sought relief by way of rectification of the lease and an increase in the amount of the claim from $162,530.03 to an amount which exceeded the jurisdictional limit of $400,000. 5. In May 2013, the respondent served a series of additional affidavits 6. When the matter came on for further hearing on 6 June 2013, counsel for the respondent indicated that she was not ready to proceed and that she wished to recall the director of the respondent and to call expert evidence from a valuer. The appellants complained that expert evidence was not necessary. At that stage, counsel for the respondent raised for the first time the fact that her client wished to rely on a good-faith principle. The respondent asked for directions to enable it to file further evidence. 7. Subsequently, the respondent served affidavits sworn by a director and a valuer. 8. The further hearing was conducted on 27 and 28 August 2013. 9. There was a further short hearing on 22 April 2014, after the Senior Member had published his decision, which enabled the parties to subsequently reach agreement as to the quantum payable pursuant to his decision.

The proceedings on appeal

The hearing of the appeal proceedings before us traversed a number of complex factual matters, and principles of law, which we have previously summarised. The completion of the appeal proceedings was delayed because counsel for the respondent sought to rely on the application of a duty of fidelity in circumstances where, initially, she was unable to provide relevant references to all of the authorities on which she wished to rely. Ultimately, these were provided by way of written submissions and necessitated a response on behalf of the appellants. The submissions of the respondent on this point were untenable, and unnecessary time and costs were expended as a result.
We refer also to one additional matter contained within written submissions prepared by counsel for the respondent dealing with the question of costs. The submissions state that the appellants succeeded on the basis of "repudiation by reason of the incorrect rent and bad faith," which we understand to be a shorthand description of the primary conclusions contained within our reasons for decision. Counsel complained that these points were never raised by the appellants in correspondence with the respondent, were never raised by them in the proceedings before the Senior Member and, significantly for our purpose, they were not contained within any ground of appeal. At [10] and following of our decision, we specifically referred to the grant of leave to the second appellant to amend the grounds of appeal. The first additional ground of appeal asserted that no new lease had been entered into after the exercise of the option to renew. The relevant principles of law and authorities were clearly set out in written submissions prepared for the purpose of the appeal hearing by counsel for the second appellant dated 7 August 2015. Furthermore, the "bad faith" submission was initiated by the respondent as part of an array of its submissions. In the circumstances, it was incorrect and disingenuous of the respondent's counsel to put forward such a submission, and it should not have been made.

The statutory framework

A distinguishing feature, among others, between the court system and this Tribunal relates to the power to award costs. As is well known, in the court system the general rule is that costs follow the event, which of course may be displaced or varied in appropriate cases. The general rule in this Tribunal is governed by section 60 of the Civil and Administrative Tribunal Act 2013 ("The Act"). which is in the following terms: 60 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. (4) If costs are to be awarded by the Tribunal, the Tribunal may: (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014 ) or on any other basis. (5) In this section: "costs" includes: (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
It will be observed that if a costs order is to be made under section 60, the Tribunal may only do so if it is satisfied that special circumstances exist. However this presumption is replaced by operation of Rule 38 of the Tribunal Rules in cases where a claim is brought in the Consumer and Commercial Division for an amount over $30,000.
Rule 38 is as follows; 38 Costs in Consumer and Commercial Division of the Tribunal (1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal. (2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if: (a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10 (2) of Schedule 4 to the Act in relation to the proceedings, or (b) the amount claimed or in dispute in the proceedings is more than $30,000.

Costs at first instance

The proceedings before the Senior Member were heard in the Consumer and Commercial Division, so that Rule 38 applies. In these circumstances, it is not necessary that the special circumstances contemplated by section 60 apply.
Nevertheless, whether or not costs should follow the event as a general principle, it is necessary that the tribunal exercise the power and jurisdiction to award costs in an appropriate manner, having regard to all relevant circumstances. The narration which we have set out above demonstrates that the proceedings before the Senior Member were complex in that a number of distinct and technical points of law arose for consideration, many of them at the instance of the respondent. All parties were necessarily represented by counsel and solicitors. The amount of the claim as initially brought by the respondent was large, $162,530.03, and eventually exceeded $400,000. Accordingly, the stakes were high and it may reasonably be assumed that the parties contemplated the possibility, indeed the probability, of an adverse costs order being made against the unsuccessful party. There is no suggestion that the conduct of the appellants in the first instance proceedings would in any way justify any consideration that would disentitle them to a costs order in their favour. In these circumstances we are of the opinion that the appellants, having ultimately succeeded against the respondent in the complex and lengthy proceedings at first instance, are entitled to a costs order in their favour and we shall so order.

Costs on appeal

The provisions of Rule 38 do not apply to these appeal proceedings. They are not proceedings in the Consumer and Commercial Division of the Tribunal. However, it has been held that the fact that proceedings at first instance are not subject to sec 60 is a factor that may be taken into account in determining costs on appeal. In Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 the Appeal Panel said: 14. The grounds of appeal related to the meaning of the contract. While the appellant was unsuccessful, there was a real issue as to how the contract should be interpreted. It would have been difficult for a person who was not a lawyer to have given meaningful submissions on the proper construction of the contract. The decision of both parties to instruct lawyers was understandable given the nature of the legal dispute and the amount of money involved. 15. Because the amount in dispute was more than $30,000, the Tribunal may award costs at first instance "in such circumstances as it thinks fit": Consumer Trader and Tenancy Act 2001 (NSW), repealed, s 53; Consumer Trader and Tenancy Regulation 2009 (NSW) repealed, cl 20. While that rule does not apply on appeal, it is a factor which the Appeal Panel may take into account in deciding whether special circumstances exist on appeal: NCAT Act, s 60(3)(g). One reason for its relevance is that parties have the expectation of an unfettered discretion being applied in relation to an application for costs at first instance and will make decisions about the merits of their case and the desirability of legal representation partly on that basis. 16. In summary, we have decided that the appellant should pay the respondent's costs because the appeal relates to a commercial transaction involving a significant amount of money, a question of law was raised on appeal which justified representation by lawyers and the wider discretion to award costs at first instance, tends to favour an award of costs on appeal.
It is now necessary to determine whether we are satisfied that special circumstances exist to warrant the making of a costs order against the respondent. In so doing we are entitled to have regard to any of the matters set out in section 60(3). It is generally accepted that "special circumstances" mean something out of the ordinary, which invites an examination of the particular circumstances of the proceedings under consideration and a comparison with what may be characterised as "ordinary circumstances." The difficulty with expressing the matter in any generality may be illustrated by reference to one of the sub paragraphs of sub section (3), namely (d); the nature and complexity of the proceedings. Even an outwardly "ordinary" claim which comes before the Tribunal for, for example, defective building works or defective motor vehicle repairs, may become unusually complex by reason of the matters involved. The former may raise complex geotechnical questions as to the suitability of the underlying ground structure in which to site a swimming pool, and the latter may raise complex questions such as the installed computer program measuring emissions from the fuel system. Resolution of the controversy between the parties may involve consideration of complex expert technical opinion at the very highest level. It may also involve determination of any legal liability to be borne by third parties who may not be parties to the proceedings.
An assessment whether circumstances are "special" involves the exercise of a value judgement carried out by way of comparison between what is not "special", and what is special. There are no scientific means by which the former can be ascertained. The evaluative process is necessarily one of impression informed by the particular provisions of section 60, which by sec 60(3)(f) incorporates also a consideration of section 36(3) of the Act.
Having regard to the nature of the proceedings on appeal as we have described them, we are of the opinion that they intrinsically, and by reason of their complexity, both as to fact and law, justify them being characterised as special, warranting an award of costs in favour of the successful appellants. Counsel for the second appellant likened the proceedings to those commonly encountered in the Supreme Court of NSW. Their complexity was increased because of the position taken by the respondent, and it was necessary in the course of the appeal proceedings and for the purpose of determining them, to deal with circumstances in which an equitable lease would come into effect, the duty of fidelity and its application and the nature and effect of an option to renew a lease. These appeal proceedings could have only been prosecuted and defended appropriately by legal practitioners, and this attests to their complexity.
Relying on the provisions of section 60(3)(d), we conclude that there are special circumstances in the appeal proceedings warranting an award of costs in favour of the successful appellants against the respondent and we shall so order.

Order

We make the following order: 1. The respondent is to pay the costs of the appellants in the proceedings before the Senior Member and the costs of the appellants in the appeal proceedings before us in an amount to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act, 2014) in default of agreement.

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: 08 April 2016

Consumer Trader and Tenancy Act 2001(NSW)

Consumer Trader and Tenancy Regulation 2009(NSW)

At a glance

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Judgment (9 paragraphs)

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Cited By (47)