Citadin Pty Ltd (No. 2) -v- Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd (RLD) [2001] NSWADTAP 31

CITATION: Citadin Pty Ltd (No. 2) -v- Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd (RLD) [2001] NSWADTAP 31 FIRST RESPONDENT Eddie Azzi Australia Pty Ltd PARTIES: SECOND RESPONDENT General Pants Co Pty Ltd FILE NUMBER: 019024; 019025 HEARING DATES: 03/08/2001 SUBMISSIONS CLOSED: 08/14/2001 DATE OF DECISION: 09/06/2001

Eddie Azzi Australia Pty Ltd; Citadin Pty Ltd -v- General Pants Co Pty Ltd [2001] NSWADT 79 DECISION UNDER APPEAL: BEFORE: O'Connor K - DCJ (President); Hole M - Judicial Member; O'Neill A - Member CATCHWORDS: costs MATTER FOR DECISION: Ruling as to costs FILE NUMBER UNDER APPEAL: 015010, 015016 DATE OF DECISION UNDER APPEAL: 05/18/2001 LEGISLATION CITED : Retail Leases Act 1994 Citadin Pty Ltd -v- Eddie Azzi Australia Pty Ltd and General Pants Co Pty Ltd [2001] NSWADTAP 30 Graham -v- Director General, Department of Community Services [2001] NSWADTAP 4 aethel -v- Director-General, Department of Education and Training [2000] NSWADT 56 Townsend -v- Chief Executive, State Rail Authority [1999] NSWADT 104 CASES CITED: Khodr -v- Foo Qan Eng Holdings Pty Ltd [2001] VCAT 5 he Cutting Edge Victoria -v- Industry Superannuation Property Trust Pty Ltd (2000) 16 VAR 282 Cleary Bros (Bombo) Pty Ltd -v- Cvetkoski [2001] NSWADTAP 10 Gallagher -v- Police Service [1998] EOT Calleja -v- Malli [2001] NSWADT 20 APPELLANT C Birch SC with J-J Loofs, barristers FIRST RESPONDENT REPRESENTATION: P Callaghan SC with D Robertson, barristers

SECOND RESPONDENT D Raphael with A Diethelm, barristers ORDERS: That the appellant pay the respondents' costs of the appeal.

1 On 3 August 2001 the Appeal Panel dismissed ex tempore an appeal by a lessor against an order made in relation to two applications heard together by the Retail Leases Division of the Tribunal (the Tribunal) under the Retail Leases Act 1994 . The Tribunal had declared that the lessor was not entitled to terminate two lessees in a retail shopping centre following issuance of a 'notice of demolition'. 2 The Appeal Panel dismissed the appeal on the basis that there were no questions of law identified by the notice of appeal that were sufficiently arguable to warrant further consideration of the appeal: see Citadin Pty Ltd -v- Eddie Azzi Australia Pty Ltd and General Pants Co Pty Ltd [2001] NSWADTAP 30. 3 Following the making of the order dismissing the appeal, counsel for each of the lessees applied for an order for costs. The position as to costs in proceedings for an original decision in the Tribunal is governed by the statute conferring jurisdiction. In this instance s 77A of the Retail Leases Act 1994 confers power on the Tribunal to award costs under s 88 of the Administrative Decisions Tribunal Act 1997 (the Tribunal Act). Section 88 provides: ' 88. Costs (1) 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 there are special circumstances warranting an award of costs. (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 the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 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.' 4 After the Appeal Panel had delivered its reasons for decision, Mr Callaghan SC for the first respondent referred to the Tribunal's power and submitted that there were special circumstances here, constituted by the failure of the notice of appeal to identify errors of law of sufficient significance to warrant interfering with the decision below. He referred to directions that had been given to more clearly identify alleged errors of law, and submitted that the appellant had failed to fulfil the direction, with the inevitable result that it had failed. Mr Raphael for the other lessor, General Pants, adopted these submissions. Dr Birch SC noted that the direction had been complied with in so far as written submissions had been filed and served which sought to identify the questions of law, and he referred in particular to paragraphs 12 to 18 of his written submissions. 5 The oral submissions concluded at that point. The parties were given liberty to make any further submissions in writing within 7 days. Written submissions were filed on behalf of the second respondent, General Pants and on behalf of the appellant. 6 The usual rule in the Tribunal is that parties bear their own costs of proceedings. Being successful in proceedings is not in itself a special circumstance. There must be some additional factor or factors present in the case to justify an award of costs. Withdrawal by an applicant of an application after a date for hearing has been set, and in circumstances where the respondent has incurred expense in briefing counsel, may be such a circumstance: see Graham -v- Director General, Department of Community Services [2001] NSWADTAP 4. 7 On the other hand, the Tribunal has so far resisted submissions that adverse costs orders be made as a sanction to reprove allegedly unreasonable conduct by a government agency which has led to a citizen having no option but to apply to the Tribunal for relief, and in so doing incurring professional costs: see, e.g., Raethel -v- Director-General, Department of Education and Training [2000] NSWADT 56. 8 The Tribunal has rejected the general proposition that because of the commercial character of retail lease relationships, costs should follow the event at Divisional level as occurs in ordinary commercial litigation in the courts: an early case is Townsend -v- Chief Executive, State Rail Authority [1999] NSWADT 104. There appears to be greater sympathy for the proposition that the ordinary costs rule should apply in retail lease cases in Victorian Civil and Administrative Tribunal (VCAT) even though the general rule governing VCAT is, like this Tribunal, that each party bears their own costs. 9 Section 109(1) of the Victorian Civil and Administrative Tribunal Act 1997 provides: ' 109. Power to award costs (1) Subject to this Division, each party is to bear their own costs in the proceeding. (2) At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in a proceeding. (3) The Tribunal may make an order under sub-section (2) only if satisfied that it is fair to do so, having regard to- (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceeding by conduct such as- (i) failing to comply with an order or direction of the Tribunal without reasonable excuse; (ii) failing to comply with this Act, the regulations, the rules or an enabling enactment; (iii) asking for an adjournment as a result of (i) or (ii); (iv) causing an adjournment; (v) attempting to deceive another party or the Tribunal; (vi) vexatiously conducting the proceeding; (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding; (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 proceeding; (e) any other matter the Tribunal considers relevant. (4) If the Tribunal considers that the representative of a party, rather than the party, is responsible for conduct described in sub-section (3)(a) or (b), the Tribunal may order that the representative in his or her own capacity compensate another party for any costs incurred unnecessarily. (5) Before making an order under sub-section (4), the Tribunal must give the representative a reasonable opportunity to be heard. (6) If the Tribunal makes an order for costs before the end of a proceeding, the Tribunal may require that the order be complied with before it continues with the proceeding.' 10 As can be seen, a feature of the VCAT legislation (one not found in this Tribunal's legislation)is the enumeration of factors which might be regarded as a basis for an adverse order for costs. In retail lease disputes it would seem that VCAT has based its tendency to make orders for payment of costs against unsuccessful parties on the factor of complexity, and the likelihood therefore that the parties will feel the need to obtain legal representation. 11 Judge Davey, Vice President, VCAT, has recognised complexity as a special circumstance for the purposes of the exercise of the costs discretion. He said in Khodr -v- Foo Qan Eng Holdings Pty Ltd [2001] VCAT 5 that: '10. It is plain that the Tenant succeeded on the major issue of the exercise of the option to renew the lease and also on the equitable estoppel in respect to the rent forgiven by the Landlord. 11. On the other hand the Tenant failed to succeed on the issues of loss of profit by reason of works carried out by the Landlord and also on the commencing rent for the new lease. In addition the Tenant failed to properly specify before the commencement of the hearing the precise remedies that she was seeking contributed to some further loss of time. 12. I am satisfied that this is an appropriate case in which to award costs. Section 109(3) of the VCAT Act provides that costs may be awarded where it is fair to do so having regard to particular specified circumstances. One of those circumstances is the nature and complexity of the proceeding. Although this proceeding may not have involved a large monetary claim the proceedings did involve complex factual and legal issues.' 12 Mr Macnamara, Deputy President, VCAT has taken the wider view that routinely in retail lease disputes there should be an award of costs in favour of the successful party. He said in The Cutting Edge Victoria -v- Industry Superannuation Property Trust Pty Ltd (2000) 16 VAR 282: ' Costs 29. The respondent landlord through its solicitor Mr Karvela has sought an order that the order that the tenant, unsuccessful applicant of injunctive relief today, should pay the landlord's costs. 30. In the circumstances Mr Meese submits that the issues raised today were difficult and novel ones and the presumption to be found in Section 109(1) of the Victorian Civil and Administrative Tribunal Act 1998 should prevail such that the parties should meet their own costs. 31. I have previously expressed the view in the matter of Malthall and Illiopolous v Bevendale Pty Ltd (No. 2) (1998) V Conv R ¶ 58-528 that proceedings in this List having regard to their nature and in the way of commercial litigation and that the matters which arise here arising out of the common law rules of landlord and tenant and the Retail Tenancies Act 1986 and the Retail Tenancies Reform Act 1998 are by their nature complex. Accordingly, costs should usually follow the event. Judge Davey in the matter of Stelridge Pty Ltd v Handbags International Pty Ltd (1999) V Conv R ¶ 58-532 did not concur with that approach, though I note that reasoning along the same lines as that which I adopted in the Malthall case was referred to with apparent approval by Phillips JA as a Member of the Court of Appeal in the Court's recent decision in Antonino Guiseppina Isabella and Sons Pty Ltd v Players Downunder [2000] VSCA 73 at paragraph 43 of His Honour's judgment. 32. The usual order which would be made in court where an applicant for interlocutory injunctive relief fails to obtain that relief on the basis that there was no serious question to be tried demonstrated to exist is that the applicant should pay the respondent's costs. Where the injunction is refused on the basis of the balance of convenience, as I would conceive it, the usual order is that the costs are expressed to be costs of the cause. In the present instance I agree that the issue raised was a difficult and novel one. The application for costs on the part of the landlord was not made with especial vigour. Whilst I accept that having regard to the nature of this proceeding which is a piece of commercial litigation and its complexity that it is proper that there be an order for costs. The appropriate order today is that the costs of this application should be costs of the proceeding.' 13 As previously noted, this approach has not been seen as appropriate in this Tribunal at the trial level in respect of retail lease disputes. It may be that more use of costs orders should be made where there is an appeal and it is dismissed. At the appeal level, there would seem to be a stronger case for recognising the complexity of retail leases disputes and their commercial character as relevant factors amounting to 'special circumstances'. 14 As previously noted, Mr Callaghan contended that there had been a failure to comply with the direction to identify arguable errors of law. In his written submissions, Mr Raphael focused on the complexity of the proceedings. He noted that very lengthy submissions had been filed and served by the appellant warranting lengthy and detailed submissions in reply. Mr Raphael referred to the nature of the finding of the Appeal Panel. It was unable to identify a question of law, and had dismissed the appeal as incompetent. He submitted: 'The respondents have each been put, wholly unnecessarily, to engaging, in one case, senior and junior counsel, and in the other two junior counsel of standing and reputation. That expense has been, on the facts of the case, wholly unnecessarily incurred.' 15 Mr Raphael also submitted that the proceedings on appeal are on a somewhat different footing to those at first instance (his emphasis). As we understood his submission, his contention is that s 88(3) only displaces the ordinary costs rule (costs follow the event)in respect of 'proceedings for an original decision'. The argument is that s 77A of the Retail Leases Act only adopts the s 88(1) rule for proceedings at original level in the Retail Leases Division;it is silent as to the position in relation to Appeal Panel proceedings. We do not agree. Our view is that the s 88(1) rule applies to both the Divisional and Appeal Panel levels. Section 77A of the Retail Leases Act and s 88(1) of the Tribunal Act confer the relevant power on 'the Tribunal'. In the scheme of the Tribunal Act references to the 'Tribunal' are not simply references to the Tribunal sitting at Divisional level. The Tribunal includes the Appeal Panel. This is clear from, for example, the definition section (s 4(1)) where the Appeal Panel is referred to as an Appeal Panel of the Tribunal, and, for example, from s 113(1) which provides that an appeal lies 'to the Tribunal constituted by an Appeal Panel.' 16 The s 88(1) rule applies to Appeal Panel proceedings arising out of proceedings for an original decision unless otherwise provided in the primary enactment conferring the jurisdiction to make an original decision. The question remains whether 'special circumstances' for the purpose of an order for costs may include factors connected with the nature of Appeal Panel proceedings. 17 Mr Raphael submitted that had this appeal been one where the parties had been called on to argue fully the detailed written submissions that had been filed, it may be that in such an appeal the ordinary rule under s 88(1) should continue to apply with each party bearing their own costs. Where, as here, the appeal 'did not get off the ground' then, he submitted, either costs of the appeal on a party and party basis should be awarded, or, in the alternative, that costs of the two days set aside for the hearing should, in these circumstances, be borne and paid by the appellants. 18 Mr J-J Loofs, of counsel, prepared the written submissions for the appellant. He submitted that in rejecting the notice of appeal the Appeal Panel was doing no more than adjudicating on a common threshold question. He submitted that if such a finding was to be treated as a special circumstance, then in all cases where this threshold was not met, special circumstances would exist requiring the payment of costs. This would, he said, create a rule for the granting of costs contrary to the legislative intent that in each matter it was incumbent upon a claimant for costs to demonstrate special circumstances. He referred to Cleary Bros (Bombo) Pty Ltd -v- Cvetkoski [2001] NSWADTAP 10 at [66] citing Gallagher -v- Police Service [1998] EOT. 19 He submitted that the respondents must demonstrate a special circumstance other than the threshold rejection of an appeal, for example that the appeal was based on irrational grounds or was otherwise vexatious. These submissions were elaborated upon. We do not regard the appeal as belonging to either of those extreme categories. He submitted further that all therefore that was involved was that his client was 'advancing a case rationally open to it to be argued'. It was 'doing no more than what any party might have done in its position, namely attempting to avail itself of a review entitlement.' 20 In reply to these submissions, Mr Raphael reiterated its submission that where an appeal is dismissed as incompetent by reason of not disclosing a question of law, that situation constitutes special circumstances sufficient to enliven the right of the respondent to costs. 21 The appellant's submission refers to Cleary -v- Cvetkoski, cited above. In that case the Appeal Panel set aside a costs order on the ground that the special circumstance said to exist could not on the evidence before the Tribunal be reasonably regarded as special. In an equal opportunity inquiry (governed by a rule as to costs found in s 114 of the Anti-Discrimination Act 1977 essentially the same as the rule under s 88 of the Tribunal Act) the Tribunal had made an order for costs against the unsuccessful party solely, in the Appeal Panel's view, on the ground that there was a 'distinguishing feature' that there had been a 'history of attempts at settlement.' The Appeal Panel considered that this was a usual situation in equal opportunity litigation and could not rationally be relied on as a special circumstance. 22 We have no concern with the Appeal Panel's ruling in Cleary, as it relates to its facts. But in principle it seems to us that there are some usual situations in litigation that could justify a costs order founded on special circumstance. One, as contemplated expressly by the VCAT legislation, is where the successful party rejected an offer of compromise that was better than the result obtained at hearing. Offers of compromise are usual, and decisions that are less favourable than the rejected offer are not unusual. There is a recent illustration of such an exercise of discretion in the Retail Leases Division: Calleja -v- Malli [2001] NSWADT 20. 23 In the present case the appeal was dismissed as disclosing no sufficiently arguable questions of law. It was reasonable for the respondents to engage counsel given the financial significance of the dispute and the factual and legal complexity inherent in retail leases disputes. 24 These in our view are factors sufficient in the context of an appeal to amount to 'special circumstances' for the purposes of s 88 and ones that warrant the respondents being given some relief as to costs.

Order 25 That the appellant pay the respondents' costs of the appeal.

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