REASONS FOR DECISION
Introduction
1 This decision by the Tribunal relates to two matters remaining for determination following a decision delivered on 12 March 2008 (Sarker and anor v World Best Holdings Limited and anor (No 4) [2008] NSWADT 75 - hereafter 'the principal judgment'), which disposed of the major substantive issues in these proceedings. The two matters determined here are interest on damages and costs.
2 The proceedings commenced in 2003. They comprised (a) a summons first taken out in the Supreme Court but transferred soon afterwards to the Tribunal (initially, as file 035087) and (b) a cross application lodged in the Tribunal (initially, as file 035100).
3 The Applicant/Cross Respondent is Mr Abul Sarker. The Respondent/Cross Applicant is World Best Holdings Ltd ('World Best'). The proceedings were concerned with a lease ('the Lease') granted by World Best to Mr Sarker, relating to premises ('the Premises') owned by World Best at Shop 48B, Minto Mall Shopping Centre ('the Mall').
4 The Lease, which was stipulated to commence on 1 July 2003, was governed by the Retail Leases Act 1994 ('the RL Act').
5 Before the matter came on for its first substantive hearing, an interlocutory hearing in the Supreme Court and four interlocutory hearings in the Tribunal took place.
6 The first substantive hearing of the case took place in the Tribunal on 5, 6 and 7 April 2004. On 25 June 2004, the Tribunal delivered its decision (Sarker v World Best Holdings Ltd; World Best Holdings Ltd v Sarker (No 3) [2004] NSWADT 119 - hereafter 'the earlier judgment'). It decided that World Best had repudiated the Lease and had engaged in unconscionable conduct, with the consequence that Mr Sarker suffered financial loss. It made an award of damages to Mr Sarker.
7 In a judgment delivered by Sully J on 12 October 2004, leave to appeal to the Supreme Court by World Best under section 77(4) of the RL Act was refused (World Best Holdings Ltd v Abul Sarker & Anor [2004] NSWSC 935). Section 77(4), which has subsequently been repealed, permitted any party to proceedings for an unconscionable conduct claim to appeal, by leave of the Supreme Court, for a review of the merits from any decision of the Tribunal in those proceedings.
8 In a judgment, delivered by Patten AJ on 3 December 2004, an appeal to the Supreme Court by World Best under section 77(2) of the RL Act was allowed (World Best Holdings Ltd v Sarker & Ors [2004] NSWSC 1164). Section 77(2), which has subsequently been repealed, permitted appeals as of right on questions of law from any decision of the Tribunal in proceedings for an unconscionable conduct claim.
9 Patten AJ upheld two grounds of appeal: (a) that the Tribunal had not been constituted as required by Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 ('the ADT Act') (in the form that these clauses then took) for the hearing of unconscionable conduct claims; and (b) that contrary to Clause 4(3) of this Part of the Schedule, the two advisory members who had been appointed to the Panel that heard the proceedings had participated in the Tribunal's adjudication. The Court set aside the Tribunal's decision and ordered that the matter be remitted to the Tribunal to be heard and determined again. It also ordered that 'the costs of the first hearing before the Tribunal be at the discretion of the member constituting the Tribunal at the second hearing'.
10 On 11 August 2005, the Court of Appeal dismissed an appeal against this decision of the Supreme Court (Attorney General of New South Wales v World Best Holdings Ltd & Ors (2005) 63 NSWLR 557; [2005] NSWCA 26).
11 Subsequently, an application to the Tribunal by World Best for removal of the remitted proceedings in the Tribunal to the Supreme Court under section 76A of the RL Act was dismissed. World Best unsuccessfully challenged this decision in the Supreme Court and in the Court of Appeal.
12 The second substantive hearing took place on 2, 3, 4 and 5 October 2007. On 12 March 2008, the Tribunal delivered the principal judgment.
13 In that judgment, the Tribunal ordered that on grounds of (i) conduct amounting to repudiation of the Lease and (ii) unconscionable conduct, World Best should pay to Mr Sarker damages amounting to $72,223.79. The Tribunal dismissed World Best's cross claim alleging that Mr Sarker had repudiated the Lease and had engaged in unconscionable conduct.
14 The two issues now to be resolved are (a) whether, and if so in what amount, interest should be awarded on this award of damages to Mr Sarker; and (b) whether costs should be awarded in respect of any of the Tribunal proceedings.
15 In the principal judgment, the Tribunal gave directions for these questions to be resolved, pursuant to section 76 of the ADT Act, on the basis of written submissions, unless reasons were advanced for a further hearing to be conducted.
16 Mr Sarker seeks interest on the damages awarded to him. He has also applied for the costs of the two sets of proceedings in the Tribunal: namely, the proceedings leading to the earlier judgment and those leading to the principal judgment. The parties, through their legal representatives, have filed submissions on these matters.
17 In the principal judgment, the Tribunal directed also that the question whether interest on costs should be awarded should be determined on the basis of written submissions. In his initial submissions, Mr Ashhurst SC, counsel for Mr Sarker, applied for an order to this effect. But in submissions in reply, he conceded that the Tribunal appeared to have no power to award interest on costs.
18 Because the claims made by both parties in this case included allegations of unconscionable conduct, the Tribunal has been constituted for the purposes of the second substantive hearing in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the ADT Act, in the form that it has taken since the commencement on 15 June 2005 of the Courts Legislation Amendment Act 2005 (see clause 3 of Schedule 1 to that Act). It has been constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only.
19 It is convenient to deal with the questions of interest and costs separately. To the extent necessary, reference will be made to the Tribunal's findings and legal rulings in the principal judgment and in earlier decisions.
INTEREST
20 Mr Sarker's application for an award of interest is based on section 72A of the RL Act. The relevant parts of this section state:
(1) When the Tribunal orders on a retail tenancy claim or an unconscionable conduct claim that a person pay money to another person, the Tribunal may order that there is to be included, in the amount ordered to be paid, interest at a specified rate on the whole or any part of that amount for the whole or any part of the period between when the cause of action arose and when the order takes effect.
(3) The rate of interest specified by the Tribunal under this section must not exceed the rate at which interest is payable on a judgment debt of the District Court.
21 In his submissions, Mr Ashhurst contended that interest should be paid at 9 percent on the principal sum awarded ($72,223.79) from 8 December 2003 to 31 December 2006 and at 10 percent from 1 January 2007 to 9 April 2008. He indicated that these were the rates applicable to judgment debts in the District Court within these two periods. He claimed the amount that would be payable on this basis, namely, $29,146.75.
22 In the submissions filed by Mr Biber, the solicitor for World Best, it was argued that there no was provision in the RL Act or the ADT Act authorising the Tribunal to make an award of interest on damages or compensation. Mr Biber argued that interest could only run from the date on which an order of the Tribunal was registered for enforcement purposes.
23 It is clear, however, that the terminology of subsection (1) is sufficiently broad to include orders that interest be paid on awards of damages. An award of this description was made, for example, in Gu v Gold Valley Investments Pty Limited & Ors [2005] NSWADT 169.
24 If subsection (1) were not sufficiently broad in scope to extend to awards of unliquidated damages that did not purport to reflect identified financial losses, it would still encompass the damages awarded in this case. As explained in the principal judgment at [261 - 271], these were awarded as compensation to Mr Sarker for specified expenditures (listed at [271]) that he incurred on account of having entered into the Lease.
25 Mr Sarker incurred the latest of these expenditures, being an instalment of rent or 'occupation fee', on 8 December 2003 (see the principal judgment at [134]). This is the commencement date for the interest claimed in Mr Ashhurst's submissions.
26 In those submissions, the date on which interest ceases to accrue is 9 April 2008. The date, however, on which the Tribunal's order awarding damages to Mr Sarker took effect was the date of the principal judgment, 12 March 2008. There is no provision in the RL Act, the ADT Act or any other legislation deferring the operation of the Tribunal's orders. The date on which the interest to be awarded must be taken to have ceased to accrue is 12 March 2008.
27 Having made an appropriate adjustment to the figures supplied by Mr Ashhurst, the Tribunal orders that World Best is to pay to Mr Sarker interest on damages in the amount of $28,592.70.
COSTS
The general principles to be applied
28 If costs are to be awarded, the requirement of 'special circumstances warranting an award of costs' set out in section 88(1) of the ADT Act must be satisfied. Section 77A of the RL Act makes this provision applicable in retail tenancy proceedings conducted in the Tribunal.
29 For present purposes, the relevant parts of section 88 are subsections (1) and (2), which state:
(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 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis.
30 The case-law on section 88(1) in its application to proceedings under the RL Act includes one Court of Appeal decision ( Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81) and a considerable number of Tribunal decisions, both at first instance and in appellate proceedings (see for example Alessa Pty Ltd v Total & Universal Pty Ltd [2001] NSWADT 150, Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164, Citadin Pty Ltd (No 2) v Eddie Azzi Australia Pty Ltd & General Pants Pty Ltd (RLD) [2001] NSWADTAP 31, Wood & Anor v Bergman (No 2) [2003] NSWADT 175 and Sotiropoulos v Mattana Coiffure Pty Ltd (No 2) (RLD) [2004] NSWADTAP 43).
31 'Special circumstances' are defined in the case law as 'circumstances that are out of the ordinary, but without having to be extraordinary or exceptional'. It is not enough that the circumstances are 'special': they must also 'warrant' an order for costs. On account of the 'commerciality' of the Retail Leases Division, the interpretation of 'special circumstances' differs significantly from the interpretation that might be adopted in any other Division of the Tribunal. While various categories of 'special circumstances' have been identified in the case law, these categories are not closed.
32 In Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81, the Court of Appeal held that the costs of proceedings in the Tribunal under the RL Act, both at first instance and on appeal, should be awarded against the lessors. At [60], Santow JA (with whom Mason P and Brownie AJA agreed) stated that the lessors 'so acted as by their conduct to give rise to special circumstances; that is, circumstances that were clearly out of the ordinary and grossly unreasonable so far as the respondent tenant was concerned'. He pointed out that by virtue of this conduct, the tenant was 'forced to pursue this litigation'. He also said: 'While a finding of "serious unfairness" is not prerequisite to determining that there are special circumstances, it is nonetheless a highly relevant consideration.'
33 Amongst the various types of situation that have been held to constitute 'special circumstances' in retail leases cases, one is where the proceedings instigated, or the grounds of defence raised, by the party against whom a costs order is sought are found to have lacked any real prospect of success and therefore to have been unmeritorious. In such circumstances, the purpose of a costs order has been said to be that of preventing the 'gross abuse' of the RL Act by frivolous, vexatious or misconceived proceedings.
34 In addition, as stated in the Tribunal's Practice Note No. 12 (October 2006), 'special circumstances' may be discernible through an examination of the way in which the case has proceeded in the Tribunal. The Tribunal may take into account the following matters:
whether a party has conducted the proceeding in a way that 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;
whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding.
35 The parties' submissions in this case raised no significant dispute as to the general principles that should be applied.
Relevant aspects of the evidence and the principal judgment
36 For the purposes of determining what order, if any, in relation to costs should be made, it is necessary to summarise parts of the evidence in the proceedings and a number of the conclusions reached in the principal judgment.
37 On or about 3 June 2003, Mr Sarker took possession of the Premises pursuant to the Lease. On 27 June he executed the Lease. It had a commencement date of 1 July 2003 and a three-year term, together with an option to renew for a further three years. Although World Best never executed the Lease, it conceded that by virtue of section 8 of the RL Act (see the principal judgment at [166]) a binding lease between the parties was created.
38 The permitted use stated in the Lease was initially 'Asian grocery store', though this was later altered in handwriting (by Mr Sarker or his solicitor) to 'Asian supermarket'. Clause 33.5 provided that during Mr Sarker's occupancy of the Premises no other tenant within the Mall was permitted to operate an Asian grocery shop without his consent.
39 In June 2002, before negotiations for the Lease had begun, World Best had granted to Dhaka Corporation Pty Ltd ('Dhaka') a five-year lease of a shop in the Mall, situated near the Premises. The permitted use in this lease included the retail sale of Indian groceries and Halal meat. The lease contained a clause guaranteeing to Dhaka the exclusive right to conduct retail sales of these products in the Mall.
40 Ms Tracy Helen James, who during 2002 and 2003 was employed by World Best as the centre manager of the Mall, testified that (a) when negotiating the Lease with Mr Sarker during April and May 2003, she told him of this exclusivity clause in the lease to Dhaka, and (b) he verbally undertook that he would not sell Indian groceries or Halal meats in the business that he proposed to conduct. Mr Sarker denied these allegations.
41 For reasons set out in the principal judgment at [147 - 155], the Tribunal concluded that, while Mr Sarker did not give satisfactory evidence, the testimony of Ms James was defective to an even greater degree. It said at [152] that a number of assertions by her, including the second of the two allegations that have just been mentioned, were 'so manifestly improbable that the Tribunal is bound to disbelieve them'. It said also (at [153]) that it 'cannot attach any credibility to' a number of claims that she made in cross-examination without having previously included them in her five affidavits. Four of these claims are outlined at [154]. The Tribunal concluded at [155] that on the relatively few matters on which the evidence of Ms James was in conflict with that of Mr Sarker, 'the evidence of Mr Sarker should be preferred'.
42 Taking into account both this conclusion regarding Ms James' credibility and other aspects of the evidence, the Tribunal found, at [158], that during negotiations for the Lease Mr Sarker did not, despite allegations by Ms James to the contrary, give a verbal undertaking to her to refrain from selling Indian groceries or Halal meats.
43 The Lease contained several provisions, set out at [55] and [58] of the principal judgment, to the effect that Mr Sarker's fit-out of the Premises should (a) cost at least $40,000, (b) be 'of the highest standard', (c) comply with a Tenancy Fitout Guide supplied to him by World Best, (d) follow plans previously approved by World Best and (e) not involve the laying of vinyl flooring. Clause 24 (see the judgment at [56]) stated that these provisions were 'essential terms' of the Lease and that any breach of them entitled World Best to end the Lease by giving notice to Mr Sarker or by re-entry.
44 During June and July 2003, Mr Sarker installed fit-out in the Premises. The Tribunal found that he did not comply with these obligations regarding fit-out.
45 During this same period, representatives of Dhaka and a firm of lawyers instructed by it complained to Ms James that Mr Sarker was planning to open an Asian grocery store next to its shop and that World Best was in breach of its obligations in permitting this to occur. In responding, Ms James suggested that Dhaka and Mr Sarker should 'endeavour to minimise business conflicts if any' and also that there would be no prejudice to Dhaka's rights because the definition of an Asian grocery shop was different from that of an Indian grocery shop. She did not mention any verbal agreement by Mr Sraker not to sell Indian groceries.
46 The Tribunal found (see the principal judgment at [162 - 163]) that during this period, despite claims by Ms James to the contrary, no-one on World Best's behalf indicated to Mr Sarker that the fit-out being installed by him did not comply with the terms of the Lease or that Dhaka had complained about his intention to sell Indian groceries.
47 On 25 July 2003, two days after Mr Sarker had commenced trading, World Best delivered to him a letter, written by Mr Biber on its behalf, purporting to terminate the Lease and requiring him to remove all his stock from the Premises by 27 July. The letter ('the first termination notice') alleged breaches of the provisions of the Lease relating to fit-out, and also of a term requiring provision of a bank guarantee before 1 July 2003, the date of commencement of the Lease. In relation to the latter alleged breach, the Tribunal found, however, that on grounds of estoppel World Best was not entitled to rely on the fact that Mr Sarker had indeed failed to supply the required guarantee before this date (see [204 - 213]).
48 Mr Biber's letter of 25 July 2003 began with the following statement: 'My client has a number of serious concerns, many of which have been previously expressed to you, regarding your tenancy which are also detailed below.'
49 On 27 July 2003, representatives of World Best removed from the Premises some stock owned by Mr Sarker and changed the locks, thereby repossessing the Premises.
50 In two separate letters to the solicitor then acting for Mr Sarker, both dated 29 July 2003 and headed 'without prejudice', Mr Biber enclosed a disclosure statement for a proposed new lease to Mr Sarker for a three-year term commencing on 11 August 2003. He indicated that the new lease would not be granted unless World Best received from Mr Sarker both a bank cheque for $12,127.50, constituting a security deposit in lieu of a bank guarantee, and a detailed fit-out plan involving expenditure of at least $40,000. The new disclosure statement defined the permitted use as 'Asian Grocery Store', subject to a condition expressly excluding the sale of Indian groceries and Halal meats during the term of the lease and any renewal of it.
51 On 31 July 2003, Mr Sarker filed in the Supreme Court a summons claiming (a) declarations that the first termination notice was invalid, that World Best had re-entered the Premises in breach of section 129 of the Conveyancing Act 1919 and that it had repudiated the Lease; (b) an order that it restore possession of the Premises to him; (c) an award of damages sustained on account of its repudiation of the Lease; and (d) in the alternative, relief against forfeiture.
52 On the same day, Mr Sarker obtained from the Court an interim order restoring him to possession of the Premises, coupled with an order transferring the proceedings to the Tribunal.
53 In a letter dated 4 August 2003 to Mr Sarker's solicitors, Kemp Strang Lawyers ('Kemp Strang'), Mr Biber contended that the Supreme Court had made no order for the return of Mr Sarker's stock. He added: 'If your client had required an order along these lines in the Court, he should have sought one.'
54 On 8 August 2003, Mr Sarker, in response to an earlier letter from Campbelltown City Council, submitted a development application seeking approval for the sale of food in the Premises.
55 In a letter to Kemp Strang dated 12 August 2003, Mr Biber stated that World Best refused to consent to this application. The reasons that he gave included alleged defects in the application and alleged misrepresentations made by Mr Sarker to the Supreme Court regarding the fit-out that had already been installed. Mr Biber also stated that 'the lessor's hands are tied in that the lease is at an end having been validly terminated by notice dated 25 July 2003'.
56 On 21 August 2003, Mr Sarker obtained from the Tribunal an urgent interim order requiring World Best to give its consent to the application.
57 On 25 August 2003, following the filing of an appeal by World Best against this decision, the Appeal Panel held that no stay of the Tribunal's order should be granted. On the same day, World Best withdrew its appeal and signed the form, which Mr Sarker subsequently lodged with the Council.
58 On 5 September 2003, World Best filed in the Tribunal a cross application claiming (a) a declaration that the Lease had been validly terminated by the letter of 25 July 2003; (b) in the alternative, an order rectifying the Lease so as to exclude from the permitted use the sale of Indian groceries and Halal meats; and (c) a declaration of unconscionable conduct on Mr Sarker's part, constituted by his having sold Indian groceries and Halal meat from the Premises in breach of an agreement not to do so.
59 On 19 September 2003, the Council approved Mr Sarker's development application subject to a number of conditions. One of these was that a freestanding hand-basin serviced with hot and cold water be installed in the Premises. World Best refused, however, to grant permit a plumber engaged by Mr Sarker to have access to the common property of the Mall in order to carry out this task.
60 On 24 October 2003, Mr Sarker obtained from the Tribunal an urgent interim order, made by consent, that access be granted. Access was subsequently granted.
61 On or about 7 November 2003, having obtained development approval, Mr Sarker recommenced trading. But in view of the delay that had elapsed since his previous short period of trading (23 to 27 July 2003), a significant amount of his stock had become unsaleable and he was in serious financial difficulties.
62 On 14 November 2003, Mr Biber delivered to Mr Sarker a second notice purporting to terminate the Lease ('the second termination notice'). The grounds of termination were default in rent (there was no evidence to support this claim), failure to comply with fit-out obligations and 'trading in Indian Groceries, contrary to the permitted use'.
63 On 28 November 2003, the Tribunal heard an application by World Best for an interim order restraining Mr Sarker from selling Indian groceries and Halal meats. In an ex tempore decision, it rejected the application. Its grounds included a finding that World Best:
has not sufficiently shown a significant likelihood that the version that it puts forward based on affidavit evidence of a conversation by its manager would be accepted in the forthcoming trial of the matter …
64 The hearing of Mr Sarker's claim (that is, the proceedings transferred from the Supreme Court) and of World Best's cross claim (which had been filed on 5 September 2003) was set down for 19 and 20 January 2004. The Tribunal agreed, however, that because the evidence was not yet in a sufficient state of preparation the hearing should be confined to argument on a legal issue relating to the validity of the two termination notices that World Best had served on Mr Sarker.
65 On 28 January 2004, the Tribunal delivered its decision on this matter (Sarker v World Best Holdings Ltd (No 2) [2004] NSWADT 15). It ruled that although World Best had failed, before giving each of these notices to Mr Sarker, to serve on him the notice required by section 129(1) of the Conveyancing Act 1919, it could not be said that for this reason the notices were invalid as a matter of law. The grounds of this decision were that if Mr Sarker had acted so as to repudiate the Lease according to common law principles, service of the statutory notice would not have been a necessary precondition of terminating the Lease.
66 Mr Sarker ceased trading at the Premises towards the end of January 2004. In a letter dated 24 February 2004 to Mr Biber, Kemp Strang stated that World Best's conduct, commencing with the service of the first termination notice, amounted to repudiation of the Lease, and that Mr Sarker accepted the repudiation and terminated the Lease. Early in March 2004, Mr Sarker restored possession of the Premises to World Best.
67 In the principal judgment, the Tribunal concluded that the first and second termination notices were invalid on the following grounds: (a) World Best had failed in each instance to serve on Mr Sarker the notice required by section 129(1) of the Conveyancing Act 1919; and (b) it could not claim exemption from the operation of this provision on the ground of prior repudiation of the Lease by Mr Sarker because, although Mr Sarker had indeed breached various terms of the Lease (notably, those relating to fit-out), his conduct in so doing did not amount to repudiation.
68 At [188 - 192], the Tribunal rejected a submission by Mr Angyal SC, counsel for World Best, that because the Lease identified Mr Sarker's obligations in relation to fit-out as 'essential terms', any breach of them constituted repudiation of the Lease, with the consequence that World Best could terminate it without first complying with section 129. It described the matters raised by this and related submissions as 'not straightforward' (see [188]).
69 The Tribunal further concluded that World Best had by its conduct repudiated the Lease, that Mr Sarker was entitled to accept the repudiation and that he was entitled also to claim damages for the various breaches by World Best.
70 The Tribunal also decided (at [249 - 260]) that World Best had engaged in unconscionable conduct, for which Mr Sarker was entitled to recover damages.
71 The relevant conduct, all occurring during 2003, was particularised as follows by Mr Ashhurst (in the ensuing reproduction of this passage from paragraph [249] of the principal judgment, two matters on which the Tribunal did not accept Mr Ashhurst's arguments have been deleted):
1. … .
2. Serving the first termination notice on 25 July and evicting Mr Sarker from the Premises two days later, in circumstances where (a) he was given no opportunity to rectify alleged breaches; (b) he had been encouraged to believe that he was not in breach; (c) …; (d) World Best did not comply with section 129 of the Conveyancing Act 1919; (e) the fit-out was not yet complete; (f) the agreement between the parties' solicitors regarding the bank guarantee was broken [this should read 'not broken']; (g) the termination notice falsely alleged that the alleged grounds of termination had previously been raised with Mr Sarker; (h) World Best was pursuing the improper purpose of attempting to insert into the Disclosure Statement a term precluding Mr Sarker from selling Indian groceries.
3. Claiming on 4 August that the Supreme Court's orders of 31 July did not require World Best to return Mr Sarker's stock.
4. Refusing on 12 August to consent to Mr Sarker's development application, thereby compelling him to apply to the Tribunal for an order that consent be granted.
5. Appealing on 22 August against this order despite having no new evidence and in circumstances where World Best must have known that the appeal had no prospect of success.
6. Refusing [in a letter written by Ms James] on 23 September to permit a plumber engaged by Mr Sarker to have access to the common property of the Mall, thereby compelling Mr Sarker to apply to the Tribunal for an order that access be granted.
7. Serving the second termination notice on 14 November, in circumstances where (a) the notice was based on incorrect calculations of rent paid; (b) due to World Best's actions, Mr Sarker had been unable to trade for three months; (c) World Best did not comply with section 129 of the Conveyancing Act 1919; (d) the termination notice falsely alleged that Mr Sarker had orally agreed not to sell Indian groceries.
8. Applying on 28 November for an urgent interim order restraining Mr Sarker from selling Indian groceries, relying on a false allegation that Mr Sarker had orally agreed not to do this.
72 In reaching the conclusion that these actions by World Best amounted to unconscionable conduct, the Tribunal made the following observations (at 257 - 259]:
257 … World Best employed a wide range of tactics to put pressure on Mr Sarker either to abandon the Premises or to accept a restriction on his activities - that is, a prohibition on selling Indian groceries - to which, according to a key finding of the Tribunal, he had not agreed in the course of negotiations with World Best and which could not fairly be imposed on him after he had entered into possession and commenced trading.
258 In view of this finding, Mr Angyal's submission [on behalf of World Best] that World Best was simply taking steps that it believed on legal advice to be warranted cannot apply to the matters alleged in sub-paragraphs 2(h), 7(d) and paragraph 8. A number of other steps taken by World Best - specifically, those described in sub-paragraphs 2(a), (b), (f) and (g), paragraph (6) and sub-paragraph 7(a) - were not, on the face of it, prompted by legal advice furnished to World Best.
259 In the Tribunal's judgment, the conduct of World Best outlined in the particulars filed by Mr Sarker, leaving aside the matters alleged in paragraph 1 and sub-paragraph 2(c), amounts to unconscionable conduct under section 62B(1) of the RL Act. As Mr Ashhurst argued, it involved both unreasonable failure to disclose to Mr Sarker (notably in the days preceding the first termination notice) its intended conduct that might affect his interests and a failure to act in good faith (notably in putting the form of pressure on Mr Sarker that the penultimate paragraph describes). These are types of conduct to which sub-paragraphs (i) and (k) of section 62B(3) respectively require the Tribunal to have regard.
73 In the principal judgment at [271 - 274], the Tribunal dismissed World Best's unconscionable conduct claim and its claim that Mr Sarker, by abandoning the Premises early in March 2004, had repudiated the Lease.
Submissions on Mr Sarker's behalf
74 Mr Ashhurst's contention that the Tribunal should be satisfied of the existence of 'special circumstances warranting an award of costs' was founded mainly on four aspects of the Tribunal's conclusions in the principal judgment. These are as follows.
75 First, World Best's case was conducted on the basis of two factual claims that, according to the Tribunal's findings, were not only without substance, but were known by Ms James (at least) to have been without substance at the time when they were made, and were therefore 'groundless allegations'. These claims were (a) that Mr Sarker gave a verbal promise to Ms James not to sell Indian groceries; and (b) that prior to terminating the Lease, World Best notified him that his fit-out did not comply with the requirements imposed by the Lease.
76 Secondly, World Best had been held by the Tribunal to have failed to act in good faith. This was an essential ingredient of the Tribunal's finding of unconscionable conduct, on account of the actions by World Best that are summarised above at [71].
77 Thirdly, World Best repossessed the Premises, employing unfair tactics 'deliberately and systematically', with the ulterior motive of forcing Mr Sarker to agree not to sell Indian groceries, this being a restraint on the scope of his trading that World Best could not otherwise impose.
78 Fourthly, after legal proceedings had been commenced, World Best engaged in conduct causing 'loss of time' to the Tribunal and to Mr Sarker. This conduct was as follows: initially refusing to return Mr Sarker's stock following the Supreme Court's order restoring him to possession; refusing to consent to his development application; bringing a groundless appeal against the Tribunal's order that it give consent; refusing to permit his plumber to have access to the common area; and bringing a groundless application for an interim order restraining him from selling Indian groceries.
79 In addition to citing some of the authorities on costs under section 88 that are mentioned above, Mr Ashhurst relied on a number of cases dealing with the circumstances in which a court or tribunal implementing the familiar principle that 'costs follow the event' should order that indemnity costs or solicitor-client costs, not party-party costs, should be paid. He pointed out in those cases it is frequently said that such costs orders should only be made when there are 'special' or 'exceptional' circumstances'. Among the cases mentioned in this connection by Mr Ashhurst, it is sufficient here to refer to three.
80 The first is a Federal Court case, Colgate-Palmolive Company v Cussons Pty Ltd (1993) 118 ALR 248. While discussing the judicial discretion to award indemnity costs to a successful party, Sheppard J said (cases cited are omitted):
Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud …; evidence of particular misconduct that causes loss of time to the court and to other parties …; the fact that the proceedings were commenced or continued for some ulterior motive … or in wilful disregard of known facts or clearly established law …; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions …; an imprudent refusal of an offer to compromise … and an award of costs on an indemnity basis against a contemnor ... Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
81 Secondly, in Hoblos v Marchese [1999] NSWADT 127, this Tribunal, in determining in a retail lease case whether 'special circumstances' existed under section 88 of the ADT Act, referred to case-law on the exercise of this and other similar discretions regarding costs. At [13], it cited Colgate-Palmolive as a case dealing with 'the more general principles of "special circumstances"'.
82 Thirdly, in Packer v Meagher [1984] 3 NSWLR 486, Hunt J ruled that the dominant purpose for which defamation proceedings had been instituted was not to vindicate the plaintiff's reputation by an award of compensatory damages but an 'ulterior and collateral' purpose. Having held that for this reason the proceedings should be struck out as an abuse of process, he ordered (at 500) that the plaintiff should pay the defendant's costs on a solicitor and client basis.
83 Mr Ashhurst also addressed the issue of the costs of the Tribunal proceedings culminating in the earlier judgment. He pointed out that Patten AJ, when setting aside this judgment, had ordered that the costs of these proceedings be at the discretion of the Tribunal as presently constituted (see World Best Holdings Ltd v Sarker & Ors [2004] NSWSC 1164). He submitted, relying on a passage in G E Dal Pont, Law of Costs (LexisNexis, 2006) at [20.23] - [20.31], that where a second trial of a matter must be held, prima facie the costs of the abortive first trial should be paid by the party who is unsuccessful at the second trial. In this case, he maintained, Mr Sarker had done nothing to make the second trial necessary, so there was no reason why the Tribunal, in exercising its discretion, should depart from the prima facie rule.
84 In responding to Mr Biber's submissions on costs, Mr Ashhurst argued that a contested issue given some prominence in those submissions - namely whether 'Indian groceries' and 'Asian groceries' were wholly distinct categories of product - was irrelevant to the question whether 'special circumstances' existed.
Submissions on World Best's behalf
85 Mr Biber contended that for at least one reason World Best's conduct in both defending Mr Sarker's claim and bringing its own cross claim could not be characterised as 'vexatious' or 'frivolous'. This was that, as the Tribunal recognised in the principal judgment at [188], one of the critical issues in the proceedings was 'not straightforward'. This issue was whether World Best could validly terminate the Lease on the ground of Mr Sarker's breaches of terms that the Lease labelled 'essential terms' without first serving a notice under section 129 of the Conveyancing Act 1919. For this reason, it could not be said that the case advanced by World Best was unmeritorious.
86 Mr Biber also argued that World Best's claim that 'Indian groceries' and 'Asian groceries' were wholly distinct categories of product was not unmeritorious. He referred in this connection to evidence from Mr Sarker to the effect that he purchased Indian goods from Dhaka Corporation's shop for resale in his own 'Asian grocery' even though he maintained that under the Lease he had the exclusive right to sell 'Indian groceries', along with other species of 'Asian grocery', within the Mall.
87 In responding to Mr Ashhurst's contention that prior to terminating the Lease World Best failed (as Ms James well knew) to notify Mr Sarker that his fit-out did not comply with the requirements imposed by the Lease, Mr Biber pointed out that failure to comply with these requirements was not the sole basis for the first termination notice. He added that, for reasons just outlined, determining the validity of this notice called for consideration of a complex area of law.
88 In contesting Mr Ashhurst's contention that World Best acted with the 'ulterior motive' of forcing Mr Sarker to accept a restraint on his trade, Mr Biber relied the following observation of the Tribunal in the principal judgment at [255]:
The contemporaneous documentary evidence suggests that in reality Ms James may have forgotten about the clause in Dhaka's lease when conducting negotiations with Mr Sarker and may have believed, as she later asserted in correspondence with those representing Dhaka, that 'Asian groceries' and 'Indian groceries' were mutually exclusive categories of product.
89 Mr Biber pointed out that the Tribunal, in concluding that World Best had engaged in unconscionable conduct, did not expressly say that it acted with an 'ulterior motive'. He maintained that its conduct amounted to no more than exercising robustly, but not capriciously or in a 'highly unethical' manner, what it believed to be its legal rights. In using the phrase 'highly unethical' (and also referring to the need to establish 'a high degree of moral obloquy'), Mr Biber relied on dicta of Spigelman CJ, explaining the concept of unconscionable conduct under the RL Act, in Attorney General of New South Wales v World Best Holdings Ltd & Ors (2005) 63 NSWLR 557 at 583.
90 As to Mr Ashhurst's claim that World Best's appeal against the Tribunal's order of 22 August 2003 directing it to consent to Mr Sarker's development application was 'groundless', Mr Biber drew attention to the fact that the appeal was never heard on the merits. Because the Appeal Panel rejected an application by World Best for a stay of the Tribunal's order pending the hearing the appeal, World Best had no choice but to withdraw the appeal.
91 Mr Biber maintained that because the grounds on which the Supreme Court set aside the earlier judgment did not include a number of matters raised by World Best in its notice of appeal (they related instead to the constitution of the Tribunal), there was no grounds for ordering World Best to pay the costs of the earlier proceedings.
92 Finally, Mr Biber relied on breaches by Mr Sarker of 'numerous directions' made by the Tribunal in the earlier proceedings. These had the result, he submitted, that two sets of dates scheduled for a substantive hearing (3 and 4 November 2003; 19 and 20 January 2004) had to be vacated, and World Best incurred costs in participating in the hearing (on the latter two days) regarding the validity, as a matter of law, of the two termination notices. On this separate legal issue, Mr Sarker was unsuccessful, for the reasons set out in the Tribunal's decision (Sarker v World Best Holdings Ltd (No 2) [2004] NSWADT 15).
Discussion and conclusions
93 Whether costs should be awarded. In the Tribunal's judgment, the foregoing account of relevant features of these proceedings discloses that there are indeed 'special circumstances warranting an award of costs' within the meaning of section 88(1) of the ADT Act.
94 This is not a case falling clearly within one well-recognised category of 'special circumstances'. Rather, it is one where different aspects of the proceedings prompt the overall conclusion that the statutory criterion has been satisfied.
95 The Tribunal agrees with the first proposition advanced by Mr Ashhurst. This is that in the present context significant weight must be placed on the adverse findings regarding Ms James' testimony on matters of central importance that the Tribunal made in the principal judgment. It considers that since she was both World Best's principal witness and the centre manager of the Mall, these findings justify the further conclusion that, in the terms of the Tribunal's Practice Note No. 12 (see [34] above), World Best 'attempted to deceive the Tribunal' in relation to these matters. Her persistence with key allegations to which the Tribunal could attach no credibility - notably that Mr Sarker agreed orally not to sell Indian groceries and that before the first termination notice he was notified of World Best's concerns regarding his fit-out - also had the effect of 'prolonging unreasonably the time taken to complete the proceeding', within the meaning of this phrase as used in the Practice Note. In addition, as pointed out below at [107], the falsity of the former allegation is a matter of importance in assessing the implications of World Best's action in applying for an urgent interim order restraining Mr Sarker from selling Indian groceries.
96 The Tribunal also agrees that the second, third and fourth matters emphasised by Mr Ashhurst (see [76 - 78] above) are also significant, though not in the same way as he suggested.
97 In the Tribunal's opinion, if the claims made by Mr Sarker in the Supreme Court summons taken out by him on 31 July 2003 (see [51] above) had been determined in the Tribunal before World Best had adopted any of the measures, adverse to his interests, that it in fact adopted during the four months following the eviction on 27 July, there would have been no evident reason why a Tribunal decision in his favour should have been accompanied by an order for costs under section 88.
98 In that hypothetical situation, the Tribunal might have held the view - as it does now - that the period of notice given by World Best to Mr Sarker before evicting him was unfairly short (it was only two days), given that the only ground on which (as it well knew) it might have done so validly under the Lease was his failure to comply with fit-out obligations before the stipulated time of commencement of the Lease. But as Mr Biber submitted, the question whether a statutory notice was required under section 129 of the Conveyancing Act 1919 was 'not straightforward'. World Best's claim that in evicting Mr Sarker without giving this notice it was acting strictly in accordance with its legal rights was, at the least, arguable.
99 It is not immediately obvious, therefore, why Mr Sarker, even if successful in maintaining that the first termination notice was invalid and obtaining the declarations and orders (other than relief against forfeiture) that he sought in the Supreme Court summons, could also have established that a costs award under section 88 was justified. The events that had occurred so far might not have been worthy of characterisation as 'out of the ordinary', let alone such as to 'warrant an award of costs'.
100 Between 27 July and 28 November 2003, however, the actions of World Best were such as to put the whole matter in a very different light, for the following reasons.
101 In World Best's 'without prejudice' offer of a new lease, communicated on 29 July 2003, it demonstrated that its concerns about Mr Sarker's fit-out (which had been strongly emphasised in the first termination notice, served only four days earlier) were not so serious that it would not be willing to allow him the time needed to fit out the Premises in accordance with the Lease. This offer also demonstrated that World Best's real motive in evicting him was to put pressure on him to accept a lease in which he would be prohibited from selling Indian groceries.
102 As the Tribunal found in the principal judgment at [257], that same motivation underlay the six further measures adopted by World Best that were listed in paragraphs 3 to 8 of the particulars of unconscionable conduct put forward by Mr Ashhurst (see [71] above). By taking these measures, World Best exerted substantial financial pressure on Mr Sarker, through delaying the time when he could recommence trading and compelling him to instruct legal representatives to represent him at the hearings of four interlocutory applications.
103 These four applications are significant in the present context for other reasons, which will now be outlined.
104 In two of them, World Best resisted an application by Mr Sarker that its earlier conduct had compelled him to file. These were his separate applications for orders requiring World Best to consent to his development application to the Council and to allow a plumber to have access to the common property. The orders sought were granted on 21 August 2003 and (ultimately by consent) on 24 October 2003.
105 For reasons already given, World Best's purpose in defending these applications, at least initially, can properly be described as an 'ulterior and collateral' purpose, in the sense given to this phrase in Packer v Meagher [1984] 3 NSWLR 486 at 500. Furthermore, the grounds of defence that it raised were in each instance unmeritorious, in the Tribunal's view.
106 The same observations may be made about another of these four applications: namely, World Best's appeal against the order of 21 August 2003 requiring it to consent to Mr Sarker's development application. Although, for the reasons indicated by Mr Biber, the Appeal Panel did not in fact consider the merits of this appeal, it is appropriate for the Tribunal now to form its own judgment on this matter.
107 The last of the four applications now being discussed was World Best's application, heard and dismissed on 28 November 2003, for an urgent interim order restraining Mr Sarker from selling Indian groceries and Halal meats. It cannot be said that this application was made for an 'ulterior and collateral' purpose. But on account of the Tribunal's finding that, contrary to Ms James' evidence, Mr Sarker did not make any verbal promise to refrain from selling these products, it was an application founded on factual allegations that the Tribunal has found to be false.
108 A further effect of World Best's actions in relation to these four applications was to postpone the time at which the substantive dispute between the parties could be heard by the Tribunal.
109 By way of further illustrating the significance of these steps taken by World Best between 27 July and 28 November 2003, it is noteworthy that it was not until 23 December 2003 that Mr Sarker first claimed, through amendment of the summons initially filed in the Supreme Court, that World Best's behaviour was so unfair and unethical that it amounted to unconscionable conduct.
110 It should be added also that the Tribunal agrees with Mr Ashhurst's submission that the question whether 'Indian groceries' and 'Asian groceries' are wholly distinct categories of product is not a matter of direct relevance to the issue of costs.
111 In the light of this analysis of World Best's behaviour, the Tribunal is satisfied that there exist 'special circumstances', in the sense of 'circumstances that are out of the ordinary, but without having to be extraordinary or exceptional'.
112 World Best's behaviour during the period of four months following the first termination notice departed substantially from what one might regard as the normal behaviour of a lessor which, having evicted a lessee on the grounds of alleged breaches of the lease, is required by an interim order to permit the lessee to remain in the premises pending resolution of the dispute between them. Its behaviour at other times, notably the conduct of its centre manager at the second substantive hearing in making factual allegations which were both false and distinctly improbable, was likewise 'out of the ordinary'.
113 The Tribunal is also satisfied that these 'special circumstances' are such as to 'warrant' an order for costs. This conclusion is based principally on a finding that, in line with the principles stated by Santow JA in Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 at [60], World Best 'so acted as by [its] conduct to give rise to special circumstances; that is, circumstances that were clearly out of the ordinary and grossly unreasonable so far as the … tenant was concerned'. Those circumstances produced a situation where it would be 'seriously unfair' not to award costs.
114 In addition, as already noted, different aspects of the conduct of World Best and of Ms James provide the foundation for findings that World Best (a) attempted to deceive the Tribunal on matters of central importance in the proceedings, (b) acted at different times and in different ways so as to prolong unreasonably the time taken to complete the proceedings, (c) filed or defended interlocutory applications for an 'ulterior and collateral' purpose and (d) filed or defended interlocutory applications in circumstances where the stance that it adopted was unmeritorious. Having regard to the cases dealing specifically with the interpretation of section 88, to the further authorities discussed above at [80] and [82] and to the matters listed in the Tribunal's Practice Note No. 12, these are features of this case that further support the conclusion that costs should be awarded under section 88.
115 The proper scope and nature of the costs order to be made. In line with the submissions from both parties, the Tribunal has initially considered the question of the costs associated with the second substantive hearing, even though the reasons for which it has found that 'special circumstances' exist have involved paying significant attention to the interlocutory applications and other events occurring in the lead-up to the first substantive hearing.
116 As to the costs associated with the first hearing, the Tribunal accepts, subject to one significant qualification, the submission advanced by Mr Ashhurst. This was that in the absence of any evidence indicating that the necessity of a second trial was attributable to the conduct of the successful party, the costs of the abortive first trial should be paid by the party against whom a costs order in respect of the second trial was warranted. It is not sufficient that, as Mr Biber argued, certain grounds raised by World Best in appealing against the orders made in the earlier judgment did not receive consideration by the Supreme Court.
117 The qualification to this acceptance by the Tribunal of Mr Ashhurst's submission relates to the Tribunal hearing on 19 and 20 January 2004, following which it delivered its decision on 28 January (Sarker v World Best Holdings Ltd (No 2) [2004] NSWADT 15). As Mr Biber pointed out, the substantive hearing of the parties' claims had been set down for those two days, but because Mr Sarker had not filed evidence in compliance with Tribunal directions, the Tribunal agreed to receive argument on the validity, as a matter of law, of the two termination notices. On this separate legal issue, Mr Sarker was unsuccessful.
118 Although, as pointed out in that decision at [64], the arguments put by counsel were relevant and useful in the Tribunal's later determinations, the Tribunal believes that it would not be appropriate for the costs order that it now proposes to make against World Best to include the costs of and incidental to that particular hearing. The parties must pay their own costs relating to that hearing.
119 Mr Biber argued also that World Best should have the costs associated with the vacating of another hearing, set down for 3 and 4 November 2003, because the reason for vacating the hearing was the late filing of evidence by Mr Sarker. But having examined the files held by the Registry, the Tribunal does not accept that this was the only reason. It notes that in the directions on 16 October 2003 vacating the hearing, the Tribunal also made provision for an inspection of the Premises by Mr Philpott, the expert witness engaged by World Best, on or before 30 October 2003. This contention by Mr Biber is accordingly rejected.
120 In his initial submissions, which included a claim for interest on costs, Mr Ashhurst included a schedule setting out the costs that Mr Sarker had incurred in the earlier proceedings. Mr Biber's submissions included the contention that since section 88(2) provides for costs to be assessed under the Legal Profession Act 2004, any costs order made by the Tribunal should not take any account of this schedule, but should stipulate that assessment under this Act should occur in the absence of agreement by the parties. In his submissions in reply, Mr Ashhurst made no response regarding the mode of assessment, while conceding (as already mentioned) that the Tribunal could not award interest on costs.
121 On this issue of the mode of assessment, the Tribunal accepts Mr Biber's argument.
122 Mr Ashhurst did not maintain that any award in Mr Sarker's favour should be for indemnity costs or solicitor and client costs. The usual basis of assessment - party/party costs - is appropriate.
The Tribunal's orders on costs
123 Except for the costs of and incidental to the hearing conducted on 19 and 20 January 2004, the Respondent/Cross Applicant is to pay on a party/party basis the Applicant/Cross Respondent's costs of and incidental to both the initial proceedings (files 035087 and 035100) and the remitted proceedings (files 045136 and 045137) in the Tribunal.
124 The amount of these costs, unless agreed by the parties, is to be assessed under the Legal Profession Act 2004.