Commercial tenancy - Applicant seeking leave to withdraw - Respondent applying for costs - Principles

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 19

Commercial Tribunal Act 1984 (WA)

State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA)

State Administrative Tribunal Act 2004 (WA), s 9, s 87

Bilek and Vata Investments Pty Ltd [2005] WASAT 153

1 The respondent has applied for an order that the applicant pay the respondent's costs of the application.

2 The applicants have for many years leased premises from the respondent at the Garden City Shopping Centre, Booragoon, in the State of Western Australia. It is common cause that the tenancy was subject to the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), ("CTRSAA"). The term of the lease was about to expire, or had expired, as at 25 May 2004 when the respondent wrote to the applicants inviting them to make an offer to lease the premises for a further term. Subsequently, that invitation was replaced by an invitation which referred to a re-configured and larger premises. The area was increased from 107.2 square metres to one, as re-configured, which combined shops 99 and 100, with a total area of 165 square metres. While the base rent sought was increased over that applying during the last year of the term of the lease, the effect of the increased rate coupled with the greater area was that a significantly higher rental was proposed.

3 The applicant lodged an application before the Commercial Tribunal on 11 October 2004 raising for determination questions designed to establish that a binding lease had been formed based on the initial invitation letter dated 25 May 2004.

4 The application was referred to a mediation on 9 November 2004. There is nothing on the file to reflect the outcome of the mediation but it obviously did not result in a resolution of the matter, which was consequently transferred to the State Administrative Tribunal ("SAT") pursuant to the State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA) ("Conferral Act").

5 The application was set down for a directions hearing on 10 February 2005. At the directions hearing the respondent's counsel raised as a preliminary issue whether SAT had jurisdiction to determine the questions raised. In essence, jurisdiction was challenged on the basis that the letter relied upon was expressly no more than an invitation to make an offer and concluded that if the offer was accepted the applicant would be notified in writing within 14 days. In those circumstances, there having been no such notification, it was contended that no lease could have been concluded and therefore no question arising under a lease which could be referred to the Tribunal.

6 It is to be noted that the parties had already filed written submissions addressing this issue. Although the applicant was not represented by a solicitor, the applicant's submissions had attached to them legal texts on which the applicant relied.

7 The matter was set down for a hearing of the jurisdictional issue on 16 March 2005. On that date, the applicants objected to the respondent being represented by counsel. The objection was based on an assumption that pursuant to s 19 of the CTRSAA such representation would be precluded. That section, prior to its repeal by the Conferral Act, provided that in a reference before the Registrar of the Commercial Tribunal, each party shall have the carriage of his own case and is not entitled to be represented by an agent unless, relevantly, the Registrar, approved of the party being so represented.

8 When that objection was over-ruled on the basis that s 19 of the CTRSAA had been repealed and the respondent was now entitled to legal representation pursuant to s 39 of the SAT Act, the applicants applied for an adjournment. It was contended that they would be disadvantaged in attempting to argue a legal issue without legal representation, if the respondent was so represented.

9 The respondent opposed the adjournment and informed the Tribunal that the applicants had been holding over since the middle of 2004 and were paying a rental much below that which could be achieved in the market. Consequently, any delay was costing the respondent a significant amount. The rent proposed under the 25 May 2004 letter was an amount of $165 000 per annum whereas that proposed in subsequent correspondence for the re-configured premises described as shops 99 and 100 reflected a total rental of some $292 956 per annum.

10 The Tribunal granted the application for an adjournment because it was accepted that the applicants would be at a disadvantage in presenting their case. It emerged during the hearing that the applicants had made no arrangement to call any witnesses which presented an obvious difficulty in view of the nature of the questions raised by the application. However, in these circumstances, directions were made that the matter be set down on an expedited basis on a date to be advised.

11 On 21 March 2005 a notice of hearing setting the matter down on 19 April 2005 was issued by the Tribunal.

12 On 11 April 2005 the applicants wrote to the respondent's solicitors advising that they did not intend to proceed with the application and that they would be making arrangements to cease trading and return the leased premises to the respondent by no later than 31 May 2005.

13 At the hearing on 19 April 2005 the applicants applied for leave to withdraw the application, which application was granted. The respondent applied for costs and the decision on that application was reserved.

14 The relevant considerations in dealing with costs in relation to Commercial Tenancy proceedings are set out in the recent decision of Bilek and Vata Investments Pty Ltd [2005] WASAT 153 in which I stated as follows:

"The Tribunal's power to award costs is expressed in s 87 of the State Administrative Tribunal Act 2004 (WA) ("the SAT Act"), relevantly, as follows:

"87. Costs of parties and others

(1) Unless otherwise specified in this Act, the enabling Act, or an order of the Tribunal under this section, parties bear their own costs in a proceeding of the Tribunal.

(2) Unless otherwise specified in the enabling Act, the Tribunal may make an order for the payment by a party of all or any of the costs of another party or of a person required to produce a document or other material on the application of the party under section 35."

The effect of s 87(1) is that the starting point in a consideration of whether or not to award costs is that in the absence of any legislative direction each party bears its own costs.

The SAT Act contains no costs prescription relevant to the proceedings in question. Those proceedings were commenced under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) ("CTRSAA") which is the enabling Act for the purposes of s 87(1) above.

At no time has the CTRSAA made any provision in respect of costs. Prior to the coming into effect of the SAT Act and the State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA) on 1 January 2005 the jurisdiction conferred by the CTRSAA was exercised by the Commercial Tribunal under the Commercial Tribunal Act 1984 (WA). That Act was repealed by State Administrative Tribunal (Conferral of Jurisdiction) Amendment and Repeal Act 2004 (WA) ("Conferral Act"). The Commercial Tribunal Act 1984 (WA) empowered the Commercial Tribunal (under s 17) to make such order for costs as it thought fit.

The intent reflected in s 87(1) appears to be that if the enabling Act provides for costs to be awarded then the presumption that each party should bear their own costs does not apply. That general intent which can be evinced from the section does not sit comfortably with the scheme under which the Commercial Tribunal exercised jurisdiction under the CTRSAA. Further, s 87(1) would not appear to remove the presumption if the enabling Act was amended so as to no longer specify otherwise in relation to costs. The effect of the repeal of the Commercial Tribunal Act 1984 (WA) is that there is no longer any specification in relation to costs as applying to proceedings under the CTRSAA.

It may well be that this is an unintended consequence. When one has regard to the Conferral Act and a sample of the various enabling Acts, it is apparent that the legislative has adopted a scheme under which any original or review jurisdiction has been transferred from whatever body previously exercised those functions to the State Administrative Tribunal, with as little consequential amendments as were necessary.

In any event, the discretion under s 87(2) is sufficiently broad to enable the Tribunal to take into account the practice which was followed in the exercise of the applicable jurisdiction prior to 1 January 2005. The practice of the Commercial Tribunal in relation to matters under the CTRSAA was that costs generally followed the event subject to the exercise of discretional factors.

As there is no specific cost provision applicable under either the SAT Act or the CTRSAA the starting point, when considering an application for costs, must be that each party should bear their own costs.

In considering whether there are reasons why that presumption should not apply each case must be examined on its merits.

In relation to this matter I consider that the following factors favour the award of costs.

1. It was generally the practice in the Commercial Tribunal for costs to follow the event, subject to relevant discretionary considerations.

2. The dispute concerns a commercial venture. There is something to be said for the approach that decisions on costs in commercial disputes should be made to promote certainty and responsibility in parties to their contractual obligations: Vasiliou v Australia's Country Homes Pty Ltd [1999] VSC 462. Consequently a successful party might reasonably expect that a costs award would be made in its favour.

The following factors militate against an award of costs.

1. Under a largely similar costs regime it was held in Re Cooper and Boroondara CC [2001] VCAT 2429 that great care should be taken in exercising a power to award costs in order to ensure that the Tribunal remained readily accessible to the public at relatively low cost, particularly having regard to the Tribunals obligations to act fairly and according to the substantial merits of the dispute and to conduct proceedings with as little formality and technicality, and to determine such proceedings with as much speed as the applicable legislation permitted. These are obligations also enshrined in s 9 of the SAT Act.

2. Although the dispute relates to a commercial lease it is one very much at the lower end of the commercial spectrum commanding a rental of only some $1000 per month plus outgoings of approximately $100, according to the applicant's papers.

3. The respondent does not present as a sophisticated operator, but rather as someone who might be described colloquially as "a battler". The applicant asserts in his application that the loss of profit per day as a result of being locked out of the shop is an amount of $200. The award of costs in proceedings involving less affluent sectors of the public might effectively deny access to the justice system."

15 The factors referred to in the Bilek decision in support of an award of costs continue to apply as does paragraph one of the factors listed therein militating against an award of costs. However, the further factors set out indicating against an award of costs have no application in this matter. To the contrary the applicants were conducting a significant business in one of Perth's prime shopping centres. I consider this is the type of commercial venture contemplated by the Vasiliou decision in which it was recognised that recoverability of costs was a feature in promoting certainty and responsibility in the parties towards their contractual obligations.

16 While the applicant may have wrongly believed that the matter could be resolved in mediation, at little cost, they must have appreciated that if the matter was not settled they would have a hard fought dispute on their hands. The monetary value of the lease in itself would suggest that likelihood. If they did not appreciate this risk, they certainly should have done so, properly advised.

17 In any event, the applicants were fully aware of their situation as at the date of the directions hearing on 10 February 2005, yet they persisted in holding over the lease to their financial advantage and only indicated their intention not to proceed, shortly prior to the hearing on 19 April 2005.

18 In these circumstances I consider that the applicants should be ordered to pay the respondent's costs of the application, including the cost of the hearing on 16 March 2005, in an amount to be assessed, if not agreed.

19 The respondent should prepare a bill of costs showing the scale on which costs are claimed. Unless the amount of costs is agreed between the parties, the bill of costs should be filed with the Tribunal on or before 15 August 2005 and the matter will then be set down for an assessment of costs before a member of the Tribunal.

20 I accordingly order as follows:

1. The applicants are to pay the respondents costs of the application, including the costs of the hearing on 16 March 2005.

(a) on or before 15 August 2005 the respondent is to file and serve a bill of costs.

(b) the matter thereafter be set down before a member of the Tribunal for assessment of the amount of costs so payable by the applicants to the respondent.

I certify that this and the preceding [20] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

MR C RAYMOND, SENIOR MEMBER