1 Application by the 2nd respondent for costs against the applicant is dismissed.

2 The first respondent must pay 60% of the applicant's costs of this proceeding (including today's hearing) to be taxed in default of agreement in accordance with County Court Scale D.

1 This proceeding was filed in the Tribunal on 10 June 2004 with respect to premises which it is common ground fell within the definition of retail premises in the Retail Leases Act 2003 being situated at 200 to 206 Lygon Street, East Brunswick. The owner of those premises, De Simone Nominees Pty Ltd sought relief against three members of the Szabo family, Mr Andrew Szabo who is the younger member of the family; Mr Steven Szabo, his father and Ms Ulfet Szabo, Mr Andrew Szabo's mother and the wife of Mr Steven Szabo. As it happened Mrs Szabo has died prior to the commencement of the proceeding and so the claim made by De Simone against her was stayed. The claim against Mr Andrew Szabo was that he was tenant of the premises at 200 to 206 Lygon Street and repudiated the lease. He was therefore responsible for arrears of rent and damages.

2 It was further alleged that the elder Szabos were the ones actually operating the business on the premises and that they had made certain assurances to De Simone as to steps which they would take to raise money to pay off the arrears of rental and outgoings for the premises.

3 I published reasons following a hearing on 20 July 2005 on 8 August. I sustained the claim against Mr Andrew Szabo, the contractual tenant, but rejected claims against Mr Steven Szabo, his father, Mr Steven Szabo that either had been guilty of misleading and deceptive conduct causing damage to De Simone or that he was a tenant by estoppel in the circumstances described.

4 Now I have to consider a costs application made on behalf of Mr Steven Szabo.

5 Mr Harrison who appears for the Szabos today, contends, first, that in the circumstances, the claim against Mr Steven Szabo could not accurately be characterised as a matter governed by Part 10 of the Retail Leases Act 2003. The significance of this contention is that Section 92 of the Retail Leases Act 2003, the costs provision which on its face would appear to govern a proceeding such as this, drastically constrains the Tribunal's costs discretion and as I understood Mr Harrison, he conceded that if the matter were to be adjudicated under Section 92 he could not make successful claim for costs. He said however that the proceeding in so far as it affected his client, Mr Steven Szabo, was not within the scope of a 'retail tenancy dispute' as defined in Section 81 of the Retail Leases Act and so was not subject to Section 92. He then took me to an offer of compromise which his instructors had made dated 27 August 2005. That offer of compromise stated as follows:

The second respondent hereby offers to compromise the proceeding on the following terms:

1. By paying to the applicant the sum of $1,000 in full and final settlement of the applicant's claim against the second respondent including interest and costs. Such payment being payable within 30 days of acceptance of the offer.

2. This offer is made without prejudice and shall remain open for acceptance for a period of 14 days.

6 That offer was not accepted. Therefore, said Mr Harrison, Section 92 of the Retail Leases Act 2003 does not apply. The provisions of the Victorian Civil and Administrative Tribunal Act 1998 with respect to costs applied without limitation and Section 112 of that Act provided that where an offer such as the one described was made and was not accepted, the Tribunal unless it saw fit to determine otherwise, ought award all of the costs incurred by the offering party after it made its offer. Therefore, he submitted, since the claim against Mr Steven Szabo had been dismissed in its entirety it was clear that the offer of compromise was no less favourable than the result obtained at trial and an order should be made on a full indemnity basis for De Simone to pay Mr Steven Szabo's costs from 27 June 2005 onwards. He submitted that with respect to the costs for the period until that date, they should be awarded to his client on a party party basis, namely County Court Scale D.

7 These orders were resisted on a variety of bases by Mr Lustig who appears for De Simone.

8 It is necessary first I think to determine what costs regime governs in these circumstances and then to apply that regime to the dispute before me.

9 Mr Harrison's contention is that since Mr Steven Szabo was not a tenant the claim against him was not governed by the Retail Leases Act and Part 10 simply does not apply to it.

10 Section 81 of the Retail Leases Act defines a retail tenancies dispute and other provisions in Part 10 of the statute to give this Tribunal jurisdiction to hear and determine such disputes. The definition of retail tenancy dispute is somewhat elaborate and there are a number of different headings within the definition. What all of them have in common however is that they postulate a dispute between a landlord and a tenant, therefore said Mr Harrison, since Mr Steven Szabo was neither a landlord nor a tenant, the dispute with him cannot be a retail tenancy dispute.

11 In my view that contention though initially attractive does not give proper attention to the terms of Section 90 of the Retail Leases Act. That section states who are the parties to a hearing in the Tribunal. Those parties are the applicant and the respondent who will be either a landlord and a tenant or a tenant and a landlord and also persons who are joined to the proceeding by the Tribunal. This provision to my mind is an acknowledgement on the part of Parliament that there are appurtenances to the core feature of a retail tenancy dispute being a dispute between a landlord and a tenant. The most common appurtenance is for a landlord either in a claim or in a counterclaim to seek relief not only against the tenant but against guarantors of the tenant. If Mr Harrison's contention on this point is correct, the claim against the tenant would be a retail tenancy dispute, the claim against the guarantor which is in the circumstances very obviously bound up with it would not be and the jurisdictional basis for the claim against the guarantor would be dubious. However in my view Section 90 indicates that this is not the case.

12 The next question is whether there is any point to be made of the fact that the contention against Mr Steven Szabo was not that he was an actual tenant but that he was a tenant by estoppel. That contention was of course unsuccessful and was rejected by me. There is nothing to my mind in the Retail Leases Act that would treat tenants by estoppel in any way differently from an actual tenant and so it seems to me that the fact that the claim against Mr Szabo is that he was a tenant by estoppel puts it in no different case from a situation where the contention is that Mr Steven Szabo was an actual tenant.

13 That then brings us to another interesting point and it may be illustrated by reference to the facts of a matter which was argued before me yesterday and which stands listed to continue tomorrow. The applicant company alleged that it had agreed to lease certain retail premises. Its principal said that she had signed a lease document which had been prepared for her signature by the putative lessor's letting agent. The applicant company said it was provided with a disclosure statement and the information booklet required by the Retail Leases Act. The agent, it was said, had given the applicant company access for purposes of measuring and survey of the demised premises. Then the putative lessor said that she did not agree with the tenancy. The applicant's case is in colloquial language, that this was a 'done deal'. The putative lessor said that no tenancy was finally agreed upon. If Mr Harrison's contention is correct, the finding if made, that there was no concluded tenancy would mean that there was no jurisdiction under the Retail Leases Act 2003 and that the matter was not properly to be characterised as a retail lease dispute. In my view it is sufficient to attract the definition of retail tenancy dispute that there is an allegation on the grounds which are either plausible or at least not colourable that the other party to the dispute is in the relationship of landlord and tenant with regard to retail premises or has been.

14 The Tribunal has jurisdiction to determine whether the jurisdictional facts necessary for the exercise of its jurisdiction in fact exists and therefore the Retail Leases Act 2003 applies.

15 It follows in my opinion therefore that the allegation that Mr Steven Szabo was a tenant by estoppel means that this matter as regards him was properly characterised as a retail tenancy dispute and that Section 92 of the Retail Leases Act 2003 applies.

16 The only bases upon which a costs award could be made in his favour would be:

(a) if De Simone had refused to take part in mediation and the fact as demonstrated by a certificate from the Small Business Commissioner was that De Simone was willing to mediate and Mr Steven Szabo was not; or

(b) if De Simone had conducted the proceeding against Mr Steven Szabo in a vexatious manner.

17 There may be circumstances where refusing to accept an offer of compromise or a Calderbank letter could amount to vexatious conduct.

18 Mr Lustig on behalf of De Simone however points out that the $1,000 offered was a pittance having regard to the size of the claim which was successful against Mr Andrew Szabo to the extent of $58,494.06 and with respect to the costs which had been incurred. It was not in my view vexatious on the part of De Simone not to accept the offer of compromise.

19 There were other interesting questions raised with regard to the offer of compromise, whether on its true meaning it was an offer to compromise the entire proceeding for $1,000 or only the proceeding in so far as it entailed a claim against Mr Steven Szabo. In my view the terms of paragraph (1) make it clear that it was the latter and not the former. A more interesting submission was that acceptance of that offer solely with regard to the claim against Mr Steven Szabo would as a matter of law have destroyed the claim against Mr Andrew Szabo. The cases establish that the release of one joint and several debtor automatically releases the other; however a covenant not to sue would not have that effect. Mr Harrison rightly observed that it is dubious to say the least, in the circumstances which I have described that the Messrs Szabo could be regarded as joint and several debtors. In any event acceptance of the offer would be likely to lead not to a release but to an accord and satisfaction. The rule of automatic release of another joint and several debtor does not as I understand the law on this subject, operate where an accord and satisfaction is reached rather than a release being given.

20 In the end however it is unnecessary to express a final view on these matters for the reasons given the costs application on behalf of Mr Steven Szabo against De Simone must be dismissed.

21 I have given my reasons earlier today for the rejection of an application by the successful second respondent, Mr Steven Szabo, for his costs against the applicant in this proceeding, De Simone Nominees Pty Ltd. I gave a generalised description of the nature of the dispute between De Simone and the Szabos in that earlier ruling and so I incorporate that explanation by reference into this ruling.

22 The earlier application by Mr Steven Szabo failed by reason of the operation of Section 92 of the Retail Leases Act 2003.

23 In the present instance De Simone seeks its costs against Mr Andrew Szabo, the first respondent against whom it was successful at the hearing. There is no dispute as there was with regard to the earlier application that Section 92 of the Retail Leases Act 2003 governs the award of costs with regard to the present application. Given that the section is central to the present dispute I will read it in full:

92(1) Despite anything to the contrary in Division 8 of Part 4 of the Victorian Civil and Administrative Tribunal Act 1998, each party to a proceeding before the Tribunal under this Part is to bear its own costs in the proceeding.

(2) However, at any time the Tribunal may make an order that a party pay all or a specified part of the costs of another party in the proceeding but only if the Tribunal is satisfied that it is fair to do so because -

(a) the party conducted the proceeding in a vexatious way that unnecessarily disadvantaged the other party to the proceeding; or

(b) the party refused to take part in or withdrew from mediation or other form of alternative resolution under this Part.

(3) In this section "costs" includes fees, charges and disbursements .

24 In accordance with the provisions of Part 10 of the Retail Leases Act 2003, De Simone brought its claim against the Szabos first to the Office of the Small Business Commissioner as Part 10 requires them to do. It was only once the processes of the Small Business Commissioner were complete that the matter could be brought to this Tribunal.

25 The Commissioner in a certificate dated 1 June 2004 stated:

Appropriate form of alternative dispute resolution is unlikely to resolve this dispute. Reasonable attempts have been made to arrange mediation or another form of alternative dispute resolution but have been unsuccessful due to the failure of the respondents to agree to mediation.

26 The purport of that certificate is the Commissioner invited the Szabos to attend mediation but they declined. Therefore, it would appear that whilst Section 92 drastically constrains the circumstances in which costs may be awarded, the second circumstance in which there is a discretion to award costs against a party namely the one appearing in paragraph (b) of sub-section (2) has been made out.

27 Mr Lustig on behalf of De Simone also contended that Mr Andrew Szabo had conducted the proceeding in a vexatious way that unnecessarily disadvantaged De Simone, thereby if the submission be accepted, making out the other paragraph of the sub-section and providing an alternative basis upon which costs could be awarded.

28 Mr Lustig took me to a Calderbank letter in which the Szabos, father and son were invited to settle this dispute upon their accepting, inter alia, the joint and several liability for the sum of $40,000. The order against Mr Andrew Szabo made at trial exceeded $58,000. The failure to accept this offer, according to Mr Lustig, was vexatious. Mr Lustig also noted that Mr Andrew Szabo put De Simone to proof on all points including the quantum of its loss, the reinstatement costs and the like. He noted that Mr Szabo did not give evidence at the hearing and advanced no positive defence. This, said Mr Lustig, was also vexatious.

29 I am unable to accept that in the circumstances described, Mr Andrew Szabo has conducted the proceeding in a vexatious manner. Merely to put an opponent to proof is not in my view vexatious. A party who propounded a palpably incredible factual case or a legally misconceived legal defence might be regarded as having conducted a proceeding in a vexatious way; but merely to put the other side to proof is not vexatious. So far as the Calderbank letter is concerned, acceptance of it would have required Mr Andrew Szabo to prevail upon his father to undertake a joint and several liability with him. Therefore this offer was inherently incapable of acceptance by Mr Andrew Szabo. Since the claim against Mr Steven Szabo failed at trial, Mr Steven Szabo was acting in no unreasonable fashion in not undertaking a joint and several liability for $40,000 or any other sum. If Andrew Szabo either did not prevail upon his father or failed to even try, again he was acting not only not vexatiously but reasonably and properly in not asking his father to accept a legal liability that did not properly belong on his shoulders.

30 Therefore this application must succeed or fail based upon Section 92(2)(b) and the threshold consideration relative to that paragraph had been made out.

31 Mr Harrison stressed that it was a matter of discretion as to whether or not an order should be made.

32 Mr Lustig contended that once either of the paragraphs of Section 92(2)(b) was enlivened the Tribunal could consider all provisions of Division 8 of Part 4 of the Victorian Civil and Administrative Tribunal Act 1998 including all of the matters referred to in sub-section (3) of Section 109 which would justify a departure from the prima facie rule in the Tribunal that costs lie where they fall.

33 He submitted, for instance, that Mr Andrew Szabo had failed to comply with orders of the Tribunal by not paying the $58,000 that he was ordered to pay and also by not attending the Small Business Commissioner mediation. I am unable to accept either of those as proper bases for the making of a costs award. The orders referred to in Section 109 are orders of the Tribunal and therefore a request to attend a mediation issued by the Small Business Commissioner is not an order for the purpose. Secondly, I believe that the orders referred to in Section 109(3) are orders leading up to the trial of the matter or as trial not the ultimate orders made by the Tribunal.

34 To put it another way I do not believe that Section 109(3) is intended to give a party as it were a discount for speedy payment. Pay up quickly and there are no costs, don't pay and you have to pay costs. There might be some attraction in this matter as a philosophy but I see no evidence that that philosophy is adopted in Section 109.

35 I think that Mr Harrison is probably correct in saying that the operation of Section 92(2)(b) is to enliven the discretion on the part of the Tribunal to award costs but not expressly or by implication to incorporate by reference all considerations in Section 109(3) of the Victorian Civil and Administrative Tribunal Act. Where Section 92(2)(b) is established and the discretion is open for exercise, the introductory words of the sub-section give us the basis upon which the discretion must be exercised. A consideration of whether it is fair to order the costs or not. Section 109 of the Victorian Civil and Administrative Tribunal Act is so wide a discretion and mentions a whole series of specific matters and then adds an ability to refer to any other matters that the Tribunal considers that its discretion is effectively open.

36 We reach the same destination I think in Section 92 of the Retail Leases Act by a freewheeling commission to award costs where it is 'fair to do so' where the circumstances set out in paragraph (a) or (b) of sub-section (2) are made out. In the present case it is in my view 'fair' to award costs for a number of reasons.

37 First, whilst I do not accept that there has been any vexatious conduct by Mr Andrew Szabo he has denied to the end in the legal sense, demands for which there was on their face no defence. He was legally entitled to do that; but having taken the matter to the wire, I believe it is fair that he make a contribution to the cost of bringing the matter so far.

38 Secondly, this is a dispute between commercial parties. Mr Szabo entered into a lease with De Simone for the purpose of running a commercial enterprise. De Simone let the premises to Mr Szabo to enable it to earn income on its capital investment in the reversion. This is therefore commercial litigation and commercial litigation between two commercial parties not between a trader and a consumer for instance. This consideration sets it apart from the great bulk of proceedings in the Tribunal.

39 In my view therefore, these two considerations render it fair that Mr Andrew Szabo should pay costs; however I accept the contention put by Mr Harrison that a large part of the proceeding at the trial related to the mounting of an unsuccessful claim against Mr Steven Szabo and that it would not be fair to require Mr Andrew Szabo to shoulder the entire burden of the costs of the proceeding even as between party and party.

40 Mr Harrison submitted that no more than 50% should be awarded as against Mr Andrew Szabo.

41 Mr Lustig conceded that there was something in the point but submitted that based upon the view the 50% of the applicant's costs would relate to pre-trial preparation and 50% would relate to the trial itself, an appropriate award against Mr Andrew Szabo would be some 75% of those costs. Clearly there can be little science in making a division upon the consideration which I have described which I think is a fair consideration in the circumstances. I accept Mr Lustig's contention that allowing Mr Andrew Szabo a 50% discount on the costs of the proceeding would go too far however I think 75% goes too far in the other direction and a more appropriate percentage to choose would be 60%.

42 In light of the size of the award made against Mr Andrew Szabo, in the absence of any contention to the contrary by either party, I will order that the costs in question be taxed in accordance with County Court Scale D.

43 I have given my reasons for rejecting an application by Mr Steven Szabo, the successful respondent in this proceeding for his costs as against the applicant, De Simone Nominees Pty Ltd and for awarding 60% of the applicant's costs of the proceeding against the unsuccessful respondent, Mr Andrew Szabo. As a consequence of those rulings, Mr Lustig, Solicitor for the applicant, De Simone, seeks orders for the Szabos as against Mr Steven Szabo with respect to the unsuccessful costs application which he made today against De Simone and against Mr Andrew Szabo with respect to the successful application which De Simone made against him.

44 Mr Harrison who represented both the Szabos said that he did not oppose the inclusion in the costs order against Mr Andrew Szabo that it extends to today's hearing and I believe that that is an appropriate way of dealing with the issue of costs of today with respect to Mr Andrew Szabo, and so I will include a parenthetical phrase after the words 'costs of this proceeding' to the effect 'including today's hearing'.

45 The more difficult issue is whether a costs order should be made with respect to today's hearing against Mr Steven Szabo. This is opposed by Mr Harrison. The reason that Mr Steven Szabo's costs application failed was because of the operation of Section 92 of the Retail Leases Act 2003. It was conceded that if that section applied, neither of the circumstances which would justify an award of costs between party and party had so far as Mr Steven Szabo was concerned, been made out. On the other hand proceeding on the footing that Section 92 applies to the costs as between De Simone and Mr Steven Szabo in the case of a claim by De Simone against Mr Steven Szabo it has been demonstrated that he refused to take part in a mediation which the small Business Commissioner attempted to convene and so the requirements of Section 92(2)(b) have been made out. The effect of that, as I sought to explain in my ruling with regard to the costs claim against Mr Andrew Szabo, is that the Tribunal has power to make an award of costs if it is fair to do so. The question then is whether it is fair to make a costs award against Mr Steven Szabo with regard to the application today.

46 I have already noted with regard to Mr Andrew Szabo that this was a commercial claim, a piece of commercial litigation. I believe however that Mr Steven Szabo is in a materially different situation from his son, Mr Andrew Szabo. He was the victor in the dispute as to the substantive matters. De Simone contended and he denied that he was a tenant by estoppel. De Simone contended and he denied that De Simone had suffered loss and damage by reason of misleading and deceptive conduct by him, his son and his late wife. That claim also failed. In the circumstances even although his costs application was not successful it was based upon some issues as to the operation of Part 10 of the Retail Leases Act 2003 which are difficult and obscure. I cannot say that the points relied upon by Mr Steven Szabo were untenable or other than plausible. When I add this factor to the consideration of Mr Steven Szabo who was the substantive victor in his context with De Simone, I am not persuaded that it is fair that he should suffer a costs award against him for today's application and so no such order will be made.