What happened
Bar Ristretto Pty Limited operated a retail coffee shop at the Ansett terminal at Sydney Airport under a sub-lease from Ansett Australia Limited. Ansett went into administration in September 2001, the terminal closed, and Bar Ristretto stopped paying rent from 1 October 2001 while remaining liable under the lease. The administrator continued to issue rent invoices and made a formal demand for arrears. Bar Ristretto was aware throughout that Ansett intended to surrender the head lease to Sydney Airport Corporation Limited (SACL).
On 12 June 2002, with the airport sale to the Southern Cross Consortium well advanced (announced 25 June 2002 for $5.6 billion), Bar Ristretto filed an application in the Retail Leases Division of the Administrative Decisions Tribunal. It sought urgent interim relief declaring a notice of termination ineffective or, alternatively, relief against forfeiture. The application alleged unconscionable conduct and breach of lease covenants, requiring the Tribunal to be specially constituted under Sch 2 Part 3B cl 4 of the Administrative Decisions Tribunal Act 1997. No supporting affidavit or statement was filed, and no prior mediation through the Retail Tenancy Unit had occurred.
The urgent application was heard on 19 June 2002. The Tribunal directed the parties to attempt expedited mediation, file any amended application and affidavits by 21 June 2002, and seek leave of the Victorian Supreme Court under Corporations Act 2001 s 444E if required. That section prevents a person bound by a deed of company arrangement from commencing or proceeding with litigation against the company or its property without court leave. On 26 June 2002 Bar Ristretto's solicitors advised by fax that, in light of the imminent surrender of the head lease on 30 June 2002, the proceedings had no utility and would be discontinued immediately. Ansett then sought its costs of the entire proceedings, including the two hearings.
The costs application was heard on 27 June 2002 by a panel chaired by President O'Connor K with Members Griffiths and Ward participating by telephone. The Tribunal treated undisputed assertions from the bar table as evidence. It ultimately granted Ansett's costs application but imposed two limitations: senior counsel's fees were allowed for one hour only, and solicitors' travel and related disbursements from Melbourne were disallowed.
Why the court decided this way
The Tribunal began from the statutory starting point that each party bears its own costs unless special circumstances justify departure (Administrative Decisions Tribunal Act 1997 s 88 and Retail Leases Act 1994 s 77A). It found that special circumstances existed and that the factors advanced by Ansett's counsel clearly outweighed those pressed by Bar Ristretto.
Central to the reasoning was the applicant's eight-month delay after the terminal closure before seeking relief against forfeiture or termination. The Tribunal noted that relief against forfeiture normally requires the tenant to show it can bring rent arrears up to date; here there was little likelihood of that, given the closed terminal and cessation of rent payments. The applicant had been aware since the collapse that Ansett intended to surrender the head lease, yet waited until the airport sale was at an advanced stage before filing.
A further strong factor was the complete bypass of the Retail Tenancy Unit mediation process. The Tribunal emphasised that the Retail Leases Act 1994 and the 1998 amending Act both make clear, through their second reading speeches, that Tribunal proceedings are to be a last resort after formal mediation. The applicant was a commercially sophisticated party with legal representation and could not be likened to an uninformed self-represented tenant. The urgent application therefore appeared to the Tribunal to be an attempt to obtain tactical advantage and disrupt the sale process rather than a genuine response to sudden urgency.
The Tribunal also placed weight on the applicant's knowledge that Ansett was under administration and that s 444E of the Corporations Act 2001 required leave of the Victorian Supreme Court before proceedings could be commenced. The administrator had put the applicant on notice of this before the application was filed. Commencing without leave was at least imprudent and exposed the administrator to unnecessary expense at a time when the law required protection of remaining assets for creditors generally. The discontinuance itself, coupled with non-compliance with the 21 June filing directions, reinforced the conclusion that the proceedings had caused avoidable cost.
The Tribunal acknowledged the "perversity" of Bar Ristretto's commercial position: it was treated as a debtor for back rent while locked out of premises with no custom. It also accepted that the discontinuance was a measured commercial decision once the head lease surrender became certain. These matters were not sufficient, however, to displace the special circumstances found. The Tribunal was conscious not to deter genuine discontinuance of weak claims, but considered that the retail leases jurisdiction could appropriately use costs orders as a sanction in accordance with the principle in One.Tel v Deputy Commissioner of Taxation that a discontinuing party may be ordered to pay costs if the claim had no reasonable prospects or the respondent was a clear winner.
On quantum the Tribunal exercised restraint. It doubted that the short one-hour urgent hearing justified senior counsel or the attendance of Melbourne-based solicitors, leading to the two express limitations in the costs order.
Before and after state of the law
Before this decision the Tribunal had been "guarded" in awarding costs in first-instance retail lease disputes. It had, however, been readier to order costs against unsuccessful appellants, especially where appeals lacked merit, as illustrated by its reference to Citadin Pty Ltd (No. 2) -v- Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd (RLD) [2001] NSWADTAP 31. The statutory costs rule in s 88 of the Administrative Decisions Tribunal Act 1997 was (and remains) silent on the factors that might constitute special circumstances. Tribunals had therefore looked to the more detailed provision in s 109 of the Victorian Civil and Administrative Tribunal Act 1998, which lists conduct causing disadvantage, unreasonable prolongation, relative strength of claims, complexity, and any other relevant matter.
In the federal sphere, Burchett J in One.Tel v Deputy Commissioner of Taxation [2000] FCA 270 had articulated a practical test for costs on discontinuance: without an exhaustive inquiry the court asks whether the claim lacked reasonable prospects or the respondent was certain to win. This decision expressly imported that approach into the Tribunal's retail leases jurisdiction, confirming that the no-costs starting point does not preclude costs orders as a sanction for discontinuance in appropriate private inter partes cases.
After the decision the law remained unchanged in its statutory text, but the Tribunal signalled a greater willingness to examine the timing, purpose and procedural compliance of urgent applications brought without mediation or supporting material, especially where an administrator is involved. The emphasis on protecting creditor interests during deeds of company arrangement under Corporations Act 2001 s 444E was reinforced. The moderated costs order also illustrated that even when special circumstances exist the Tribunal will scrutinise the reasonableness of the respondent's legal team and disbursements.
Key passages with plain-English translation
Paragraph 12 states the basic rule: "The basic rule as to costs in the Tribunal is that each party bears their own costs. This rule may be departed from if the Tribunal is satisfied that there are 'special circumstances' justifying departure from the rule." In plain English, you start from no costs orders, but the Tribunal can make an exception if something out of the ordinary justifies it.
Paragraph 21 is the pivotal adoption of external authority: "The Courts do not award costs against a party discontinuing in the early stages of proceedings, unless the Court is satisfied (without undertaking any exhaustive inquiry) that the claim had no reasonable prospects of success or the other party would have been, without doubt, a 'clear winner' … In these jurisdictions, more particularly retail leases, it may be appropriate on occasions to utilise costs orders as a sanction for discontinuance in accordance with the principle referred to in the One.Tel decision." Translation: even if you drop your case early, you can still be ordered to pay the other side's costs if it looks like you were never going to win anyway. The Tribunal says this idea can be used in retail lease cases.
Paragraph 26 underscores the mediation requirement: "There was, in our view, no obvious reason why Bar Ristretto chose to bypass the Retail Tenancy Unit before coming to the Tribunal. The Act is clear in the importance that it gives to retail lease disputes first being the subject of formal mediation." Plain English: the law wants parties to try mediation first; jumping straight to an urgent Tribunal application without it counts against you.
Paragraph 28 contains the rebuke of tactical use: "The original application smacks of an attempt, as submitted by Mr Ogborne, to procure a tactical advantage at a sensitive time for Ansett. It is not appropriate to use the retail leases jurisdiction in that way." Translation: you cannot weaponise an urgent retail lease application to interfere with an airport sale or administration; the Tribunal will penalise that conduct with costs.
Paragraph 32 explains the moderation: "The Tribunal's view is that Ansett's costs of the proceedings … should be granted subject to the following qualifications: (a) senior counsel's fees be allowed as to only one hour; and (b) solicitor's disbursements in respect of travel and related costs to and from Melbourne not be allowed." In plain English: you win your costs application but we are not giving you a blank cheque; two lawyers from Melbourne and a senior barrister for a one-hour urgent hearing was excessive.
What fact patterns trigger this precedent
This decision is triggered when an applicant in the Retail Leases Division discontinues after filing an urgent interim application but before final hearing, and the respondent can point to a combination of: significant delay in seeking relief; complete bypass of the statutory mediation scheme; knowledge that the respondent is in administration and that Corporations Act 2001 s 444E leave was required; failure to comply with directions for filing evidence; and indications that the proceedings were brought for tactical disruption of a time-sensitive commercial transaction such as an asset sale. The presence of an administrator seeking to preserve assets for creditors generally strengthens the case for costs. Conversely, the mere fact of discontinuance or the applicant's difficult insolvency position will not, without more, prevent a costs order. The decision is less likely to apply to self-represented tenants who have attempted mediation or to government respondents in merits review matters.
How later courts have treated it
The Tribunal itself treated the earlier Appeal Panel decision in Citadin (No 2) as confirming a more ready approach to costs on unsuccessful appeals, contrasting that with the guarded first-instance position it had previously taken. It treated One.Tel v Deputy Commissioner of Taxation as supplying the operative principle for discontinuance costs in private civil matters, expressly extending that Federal Court approach into the retail leases jurisdiction. The decision has therefore operated as a bridge, importing a clear-winner test into Tribunal practice while anchoring it in the statutory special-circumstances test and the VCAT factors. Its emphasis on the second reading speeches of the Retail Leases Act 1994 and the 1998 Amendment Act as evidencing Parliament's intention that mediation precede litigation has reinforced the primacy of the Retail Tenancy Unit process in subsequent Tribunal reasoning. The moderated costs order has served as an illustration that even successful costs applications remain subject to Tribunal scrutiny of the reasonableness of the quantum claimed.
Still-open questions
The judgment expressly left unexplored the precise interaction between the wide conduct orders available under Retail Leases Act 1994 s 72 for retail tenancy claims and the more limited money-only relief under s 72AA for unconscionable conduct claims when considering the form of interim relief. It remains unclear how that difference affects the necessity for, or scope of, interim orders in mixed claims. The Tribunal also noted that s 88 provides no statutory list of factors, leaving open the precise weight to be given to each of the VCAT s 109(3) considerations in future retail lease cases. Whether an administrator's costs will automatically be treated as "unnecessary expense" to creditors in every case where leave under Corporations Act 2001 s 444E has not been obtained, or only where the claim is also weak on the merits, was not exhaustively determined. Finally, the boundary between a legitimate commercial decision to discontinue once new facts emerge and a belated recognition that the original claim lacked merit remains a matter of factual evaluation in each case.
Gotchas
Most practitioners assume the "each party bears its own costs" rule in the Administrative Decisions Tribunal is almost absolute in retail lease matters; this decision shows that once an applicant bypasses mediation, ignores the administration leave requirement, and appears to time its urgent application to coincide with a major asset sale, the Tribunal will treat those steps as special circumstances even if the tenant is itself in an "insolvency squeeze". Another trap is the belief that discontinuance at an early stage automatically shields the applicant from costs; the One.Tel principle adopted here means the Tribunal can award costs without a full merits hearing if it concludes the respondent was a "clear winner". Lawyers acting for tenants must realise that filing an urgent application without evidence or mediation, then discontinuing once the commercial futility becomes obvious, can result in a costs order that is moderated but not eliminated. Administrators and their advisers should note that the Tribunal will protect them from unnecessary legal expense but will still prune excessive representation, so claims for two counsel and interstate travel will not be rubber-stamped. Finally, the decision quietly reminds counsel that assertions made from the bar table, if undisputed, can be treated as evidence; this can accelerate costs arguments but also exposes parties to adverse findings on knowledge and motive without formal affidavits.