One.Tel v Deputy Commissioner of Taxation

CITATION: Bar Ristretto Pty Limited -v- Ansett Australia Limited [2002] NSWADT 124 DIVISION: Retail Leases Division APPLICANT PARTIES: Bar Ristretto Pty Limited RESPONDENT Ansett Australia Limited FILE NUMBER: 025072 HEARING DATES: 27/06/2002 SUBMISSIONS CLOSED: 06/27/2002 DATE OF DECISION: 07/19/2002

BEFORE: O'Connor K - DCJ (President); Griffiths G - Member; Ward R - Member APPLICATION: Costs MATTER FOR DECISION: Costs Administrative Decisions Tribunal Act 1997 Corporations Act 2001 (Cth) LEGISLATION CITED : Retail Leases Act 1994 Retail Leases Amendment Act 1998 Victorian Civil and Administrative Tribunal Act 1998 CASES CITED: Citadin Pty Ltd (No. 2) -v- Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd (RLD) [2001] NSWADTAP 31 One.Tel v Deputy Commissioner of Taxation [2000] FCA 270 (Burchett J) APPLICANT REPRESENTATION: L Aitken, counsel RESPONDENT A Ogborne, counsel ORDERS: 1. Respondent's application for costs of the proceedings (including the hearings of 19 and 27 June 2002) is granted subject to the following conditions: ; (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.

1 The respondent to an application made under the Retail Leases Act 1974 (the Act) has applied for their costs following their discontinuance of the proceedings by the applicant. This decision deals with that application. 2 Bar Ristretto Pty Ltd (Bar Ristretto), the lessee of a retail shop at the Ansett terminal, Sydney Airport on 12 June 2002 lodged an application seeking relief under the Act from the lessor of the premises, Ansett Australia Ltd (Administrator Appointed) (Ansett) who occupies the premises in turn under a head lease from the Sydney Airport Corporation Limited (SACL). 3 This application was accompanied by a separate application for an urgent interim order. The order sought was that 'the notice of termination of the sub-lease is of no effect and the sub-lease is on foot, or in the alternative an order granting the applicant relief against forfeiture'. There was no material filed in support of the application, such as an affidavit or statement as to relevant circumstances. 4 The principal application alleged that Ansett had acted unconscionably and also alleged breach of the convenants of the lease. Accordingly, the Tribunal dealt with the matter as involving both a Retail Tenancy Claim and an Unconscionable Conduct Claim (see s 70 of the Act). One consequence of making an Unconscionable Conduct Claim is that the Tribunal is required to be specially constituted, and appeal rights different to those that normally appeal in proceedings under the Act apply to such claims: see Administrative Decisions Tribunal Act 1997 (the Tribunal Act), Sched 2, Part 3B cl 4 (as to constitution of Tribunal); Act, s 77 (appeals). 5 The power to grant interim relief in respect of retail tenancy claims and unconscionable conduct claims is expressed in the same terms: 'The Tribunal may make an interim order under this section pending final determination of a claim, if it appears to the Tribunal to do so': see s 72(4) and s 72AA(4), respectively. 6 The forms of final order permitted by these sections differ significantly. In the case of retail tenancy claims, the Tribunal has wide powers to make both conduct and money orders: s 72(1); whereas in the case of unconscionable conduct claims the available relief is confined to money orders: s 72AA(1). Conduct orders, being relief similar to equitable relief, are not permitted to be made by the Tribunal in respect of the unconscionable conduct claim. Accordingly to obtain a conduct order, it would appear to be necessary to establish that a liability or obligation of the lessor (in this instance) which arose under the lease or which arose in connection with the use or occupation of the shop has been contravened (see s 72, read in conjunction with the definition of 'retail tenancy claim', s 70, and 'retail tenancy dispute', s 63(1)). These differences in the forms of final order may be relevant to the question of what form of interim relief is necessary to be granted. It is not necessary to explore this issue further on this occasion. 7 The urgent interim orders application was listed for hearing before an appropriately constituted panel of the Tribunal, chaired by Deputy President Rossiter, Divisional Head, on 19 June 2002. There had been no attempts at mediation of the dispute using the services of the Registrar, Retail Tenancy Unit, as contemplated by the scheme of the legislation. The Tribunal made the following directions: '1. Direct parties to attempt mediation before 27 June; request expedited mediation. 2. If application to be amended, new application to be filed and served by 5 pm 21 June 2002 3. Affidavits to be filed by 21 June 2002 and served. 4. If leave of Victorian Supreme Court be required under s 444E Corporations Act, leave be sought forthwith.' 8 The final direction is a reference to the Corporations Act 2001 (Commonwealth) which provides: ' 444E Protection of company's property from persons bound by deed (1) Until a deed of company arrangement terminates, this section applies to a person bound by the deed. (2) The person cannot: (a) make an application for an order to wind up the company; or (b) proceed with such an application made before the deed became binding on the person. (3) The person cannot: (a) begin or proceed with a proceeding against the company or in relation to any of its property; or (b) begin or proceed with enforcement process in relation to property of the company; except: (c) with the leave of the Court; and (d) in accordance with such terms (if any) as the Court imposes. (4) In subsection (3): property , in relation to the company, includes property used or occupied by, or in the possession of, the company.' 9 As is well known, Ansett has ceased trading and is under administration. The administrator had submitted that it was not open to Bar Ristretto, being a person bound by the deed of arrangement, to commence proceedings in this Tribunal without the leave of the Victorian Supreme Court, which is the Court overseeing the administration. That submission prevailed to a degree, and is reflected in order 4. Had such leave been sought, it would have been for the Victorian Supreme Court to determine whether in fact Bar Ristretto could be said to be claimants in the winding up, and therefore bound by the terms of the deed of arrangement. 10 By fax dated 26 June 2002 the solicitors for Bar Ristretto advised in writing in confirmation of earlier telephone advice (on or near 25 June 2002, the Registry file note is unclear) that: 'We … confirm that in light of information that Ansett proposes to surrender its Head Lease on 30 June 2002, in any event there is no utility in continuing these proceedings. Accordingly our client wishes to discontinue these proceedings immediately.' 11 Following the earlier telephone advice, the Registry had advised the members of the original panel that they were not required for the hearing previously listed for 27 June 2002. Ansett's solicitors advised on 26 June 2002 that their client sought a costs order in respect of the proceedings. The panel was reconvened. Deputy President Rossiter was now unavailable to preside. The President presided, with the other members of the original panel participating by telephone link. 12 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: see Retail Leases Act 1994, s 77A; Administrative Decisions Tribunal Act 1997, s 88. 13 Mr Ogborne for Ansett put forward several considerations as justifying departure from the usual rule. The following list sets out those that the Tribunal considered had weight: 1. The fact of discontinuance itself. 2. Further material was not filed, as directed, by 21 June 2002. 3. Bar Ristretto's knowledge that Ansett was under administration, and that it had been placed on notice prior to the commencement of the proceedings that it was the administrator's view that the leave of the Supreme Court was required to commence them in the Tribunal. 4. The desirability of protecting the position of creditors generally in the context of an administration against the administrator being put to unnecessary expense. These proceedings had caused unnecessary expense. 5. Bar Ristretto did not commence proceedings for relief against termination within a reasonable time of the closure of the terminal. Bar Ristretto came to the Tribunal 8 months later. 6. At all relevant times following the collapse of Ansett in September 2001, Bar Ristretto was aware that Ansett was intending to surrender its lease of the terminal under which Bar Ristretto occupied its shop as a sub-lessee. 7. In proceedings for relief against forfeiture, it is necessary for the tenant to show that it is in a position to bring rent arrears up to date. There was little likelihood of that in this case as the terminal was closed. Bar Ristretto ceased paying rent on 1 October 2001. 8. Bar Ristretto had been putting forward claims for various forms of relief for many months, since the collapse of Ansett in September 2001. Bar Ristretto knew that Ansett was involved in an open exercise of seeking to surrender its lease to SACL. 9. It is not clear what pending urgency required the initiation of urgent interim order proceedings in the Tribunal. Bar Ristretto could have gone to mediation first. It would seem that they moved in the Tribunal because they were aware of the likelihood of a sale of the Airport as a whole. It would appear to have been a move by Bar Ristretto to disrupt the sale process, well advanced at 19 June 2002, and of which they were aware, for their own commercial advantage. 14 The order sought was for the costs in connection with the proceedings before the Tribunal. Costs in respect of the mediation session (which had taken place in compliance with the directions, earlier in the week) were not sought. 15 In reply for Bar Ristretto, Mr Aitken put forward several considerations in support of following the usual practice of making no order as to costs. The following list sets out those that the Tribunal considered had weight: 1. The administrator made a formal demand for unpaid rent. The liability remains a real one for Bar Ristretto. 2. Bar Ristretto is in the 'insolvency squeeze' of being a debtor in the eyes of the administrator. Consequently the administrator makes back rent demands, purportedly on the basis that it remains liable under its unexpired lease. Yet it is prevented from continuing to trade at the premises, which are closed and in any case have no custom of any significance. 3. It is unfair that costs orders be made against tenants who find themselves in these circumstances, when they move to assert their rights under the Retail Leases Act. 4. The discontinuance reflected a measured commercial decision, once it was learnt that the head lease was to be surrendered. [By virtue of the sale of the Sydney Airport announced on 25 June from SACL to the Southern Cross Consortium; the sale price was $5.6b, with the terminal one component of the assets sold.] 16 In the event that the Tribunal is minded to make a costs order against his client, Mr Aitken drew attention to the level of Ansett's representation in these proceedings. He noted that at the proceedings on 19 June Ansett had been represented by senior and junior counsel, together with two solicitors from Ansett's Melbourne based firm of solicitors, and a representative of the administrator. He submitted that they should not be compensated to that extent. He submitted that the proportionate impact of a costs order would be far greater on his client than the impact that bearing its own costs would have on Ansett. 17 Mr Ogborne advised that there was only one instructing solicitor, and that the only possibly reasonable issue raised regarding the level of representation concerned the engagement of senior counsel to lead him. He said that the engagement of senior counsel could not be assessed simply by reference to the nature of the application placed before the Tribunal; it had to be seen in the context of the risk that current legal proceedings presented for the completion of an orderly transfer of the terminal asset as part of the wider sale of the Airport. The application also raised issues as to the application of the Corporations Law. He noted that the hearing only took one hour. 18 At the conclusion of submissions, the Tribunal noted that many assertions as to the conduct and knowledge of the parties had been made from the Bar table. The Tribunal indicated to counsel that it proposed to proceed on the basis that all undisputed assertions of fact were in evidence. There was no objection. 19 The Tribunal has been guarded in making decisions to impose costs in retail lease disputes when before the Retail Leases Division. It has been less guarded in instances where an appeal is made against a Divisional decision and is unsuccessful. It is more inclined to make a costs award against the unsuccessful appellant, especially if the appeal had little or no merit: see generally, Citadin Pty Ltd (No. 2) -v- Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd (RLD) [2001] NSWADTAP 31. 20 Discontinuance of proceedings is not an unusual event in the Tribunal. In the merits review jurisdictions of the Tribunal, where an aggrieved citizen is challenging an adverse government decision, government agencies have not pressed costs applications where the citizen choses to discontinue (and thereby accept the adverse decision). This is, the Tribunal considers, an appropriate stance for government respondents to take in this class of proceedings. 21 However the position is more complicated where the discontinuance occurs in private civil proceedings (proceedings inter partes). Clearly the respondent may have been put to considerable expense in having to defend the claims. 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': see, for example, One.Tel v Deputy Commissioner of Taxation [2000] FCA 270 (Burchett J). The Tribunal has two private claims jurisdictions, equal opportunity and retail leases. 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. 22 Equally the Tribunal would not wish to give rise to a situation where weak claims continue to be pressed because of fear of a costs order being made, when it would have been better all round for the proceedings to have been discontinued, even if the respondent is left with their costs bill. 23 A shortcoming, the Tribunal considers, of the Tribunal costs provision, s 88, is that it provides no guidance as to the factors that might persuade the Tribunal to depart from the usual rule. In a number of decisions the Tribunal has drawn attention to the equivalent provision in the legislation governing the Victorian Civil and Administrative Tribunal, another multi-jurisdiction tribunal like this Tribunal which includes a retail lease disputes jurisdiction. That provision is s 109 of the Victorian Civil and Administrative Tribunal Act 1998. Section 109(3) gives the following list of factors that might give rise to a costs order by way of exception to the usual rule: '(3) The Tribunal may make [a costs order]… only if satisfied that it is fair to do so, having regard to- (a) whether a party has conducted the proceeding 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.' 24 In our view, this is a case where a costs order should be made. The factors given by Mr Ogborne clearly outweigh those pressed by Mr Aitken. 25 In particular we note the following matters. Bar Ristretto had been in dispute with the Ansett administrator for months over the situation it found itself in. We acknowledge the perversity of that situation. Bar Ristretto was subject to demands for rent when it had been shut out of the premises for which it was liable to pay rent. On the other hand it had declined to pay rent, and no orders had been sought by Ansett, even though payment invoices were continuing to issue. 26 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. Parliament's clear intention is that proceedings in the Tribunal be the last resort. The Second Reading Speech introducing the original Act is clear in that regard, and the theme is continued in the Second Reading Speech four years later substantially expanding the scope of the Act: see Hansard, Retail Leases Act 1994, Second Reading Speech, LA, 20 April 1994; and Second Reading Speech, Retail Leases Amendment Act 1998, LA, 28 October 1998. 27 Bar Ristretto was an informed party with legal representation. It can not be likened to the relatively uninformed, self-representing tenant that finds their way on occasions to the Tribunal without having first gone to the Unit for mediation. 28 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. 29 It ought, we consider, be well understood by commercial people that when a company is under administration strict controls apply under the law to ensure that the assets are administered in a way that best preserves what remains; and that it is not in the interests of creditors for the assets that remain to be eroded by legal claims that had not been initiated prior to the company going into administration. In this case the Tribunal was advised (a matter not contested) that Bar Ristretto had been informed of the provision relating to the grant of leave by the Court. In these circumstances it was, at least, imprudent of Bar Ristretto first to approach this Tribunal. 30 The application for costs is granted. 31 The next question is what the terms of the costs order should be. The Tribunal is of the view that it should seek to impose some restraint in that regard. 32 The Tribunal's view is that Ansett's costs of the proceedings (including the hearings on 19 and 27 June 2002) 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. 33 These limitations reflect the Tribunal's doubt that the points involved, in spite of their significance for Ansett, necessitated any significant involvement of senior counsel; and the Tribunal's doubt that attendance by a solicitor brought from Melbourne was necessary. These limitations offer some amelioration of the position that Bar Ristretto finds itself in. ORDER 1. Respondent's application for costs of the proceedings (including the hearings of 19 and 27 June 2002) is granted subject to the following conditions: (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.

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