Superburrito Pty Ltd v TNAU Finery Pty Ltd (No 2)

1. The appellants appealed against the second Tribunal decision. They sought the orders which are referred to at [59] of the decision, namely:

'(1) The landlord is to pay the tenant the sum of $399,922.61.

(2) The landlord is to pay the costs of the tenant as agreed or assessed on a party/party (now called ordinary) basis.

(3) The NAB Bank Guarantee (number omitted) dated 31 July 2019 be returned to the NAB at any NAB branch located in Australia so that the sum guaranteed is forthwith with returned to the account of the tenant: and

(4) The landlord's application be dismissed'

1. The appellants' Grounds of Appeal were referred to at [60] - [68] of the decision. Of relevance are the additional Grounds of Appeal, Grounds 5 and 6 which were referred to at [67] and [68] of the decision as follows"

The [Tribunal] erred in awarding damages in the amount of $284,034.41 which amount included the figure of $71,074.58 respondent's goods". The [Tribunal] should not have found storage costs as damages at all as it was not a loss or damage suffered by TNAU

In the alternative to Ground 5, if damages are to be awarded for "Storage Costs of the Respondent's Goods" it should only be for the period between 20 January 2021 to 13 April 2021.'

1. The appellants had limited success. They were successful on grounds 5 and 6 referred to above. The award for damages that was made in favour of the respondent in COM 23/07365 in the second Tribunal decision was set aside so far as it related to the award of damages for storage costs. The question of the respondent's entitlement to an award of damages for storage costs and in what amount was remitted to the Tribunal as constituted in the second Tribunal decision. Apart from that, the appellants were unsuccessful in the appeal.
2. On 28 October 2024 order 9 of the decision (costs orders) was varied as regards the times for filing costs submissions.

1. On 1 November 2024 the appellants submitted that the parties had mixed success on the appeal. The appellants were said to have enjoyed the partial success of approximately a quarter reduction of the damages awarded against them under the second Tribunal decision where the respondent was found to be entitled to $216,080.84. Storage costs were said to amount to $53,648.40 of that amount. These facts led to the further submission that the appropriate cost order should be that the appellants pay three quarters of the costs of the respondent, as agreed or as assessed.

1. On 1 November the respondent sought the following orders as regards costs:

'1. An ORDER that the Appellants pay the Respondent's costs of these appeal proceedings no. 2024/00102956, including the application for leave to appeal.

2. An ORDER that the Appellants pay the Respondent's costs of this costs application.

3. An ORDER that the costs so ordered be assessable on the indemnity basis.

4. Such further or other ORDER as to the Panel seem (sic) fit.'

1. The respondent filed counsel's submissions and an affidavit affirmed by the respondent's solicitor in support of the orders sought. The respondent's submissions were that pursuant to Rule 38A of the Civil and Administrative Tribunal Rules 2014, the Appeal Panel was obliged to apply the first instance cost provisions which were those contained in Rule 38 of the Civil and Administrative Tribunal Rules. Since the subject matter of the proceedings exceeded $30,000 the Tribunal had the jurisdiction to order costs without the restrictions otherwise imposed by section 60 of the Civil and Administrative Tribunal Act 2013. I agree that Rule 38 of the Civil and Administrative Tribunal Rules applies to this costs decision.
2. Counsel for the respondent submitted that the respondent was substantially successful and that costs should follow the event. As to the orders made in connection with Grounds 5 and 6 as referred to above, the respondent submitted that:

(a) The substance of these grounds was not pursued in the second Tribunal decision;

(b) In the second Tribunal decision the appellants' counsel stated that the respondent's damages were 'mathematically agreed', 'it will be a matter of calculation' and the appellants were 'not challenging any of the evidence in relation to it'.

(c) Grounds 5 and 6 were a late addition to the Appeal and took up a small part of the arguments and materials;

(d) The quantum involved in Grounds 5 and 6 can be seen from the affidavit of Ms Ngyen; and

(e) The respondent having been substantially successful should not be deprived of costs because of a minor point that the appellants failed to pursue appropriately in the second Tribunal decision.

1. The respondent's solicitor's affidavit annexed three 'Without prejudice save as to costs' letters sent by the respondent's solicitor to the appellants' solicitors on 20 January 2021, 19 August 2021 and 12 May 2023. I find that the 20 January 2021 and 19 August 2021 letters related to the 2020 proceedings and pre-dated the 2022 Decision. The 12 May 2023 letter was relevant to the second Tribunal decision which was heard on 26 and 27 June 2023.
2. The respondent's counsel referred to clause 33.1(a) of the lease between the parties which was an indemnity whereby the first appellant indemnified the respondent

'from and against all actions, claims, demands, losses, damages, costs and expenses for which the lessor shall or may be or become liable or which the lessor ....shall or may incur in respect of or arising from:

'(a) Any failure by the lessee or by any lessee or assignee of the lessee to perform and observe the covenants, conditions and provisions herein contained or implied and on the part of the lessee to be performed and observed;'

1. The respondent submits that the 'Without prejudice save as to costs' letters considered together with clause 33.1(a) of the lease justify an indemnity costs order against the appellants in the appeal.

1. On 20 November 2024 the appellants replied stating:

(a) despite the reference to clause 33.1 of the lease, the Tribunal's cost discretion is unfettered;

(b) the Without prejudice save as to costs letters referred to by the respondent were not made in connection with this Appeal;

(c) clause 33.1 does not refer to indemnity costs, it requires the lessee to keep the lessor indemnified which is different from am indemnity costs order;

(d) no claim for indemnity costs based on clause 33.1 was ever made; and

(e) This case is on all fours with Kyabram Property Investments Pty Limited & Anor v Murray & Anor [2005] NSWCA 87 at [16] and [17]

1. In reply the respondent submitted that if the Tribunal were to take all matters into account, the storage costs amount to one twelfth of the principal amount in issue, and interest and costs diminishes that proportion. More significantly in my opinion is the submission that the appellants have not succeeded on storage costs, they obtained a remitter on that issue.
2. It is also submitted that clause 33.1 of the lease is relevant citing Kyabram Property Investments Pty Limited & Anor v Murray & Anor at [12] - [14] where Beazely JA, Hodgson and Ipp JAA concurring, stated:

12 It is well established that a mortgagee may rely upon its contractual entitlement to costs so as to claim an order other than on a party/party basis. In Re Adelphi Hotel (Brighton) Limited [1953] 2 All ER 498, Vaisey J at 502 observed that the prima facie rule was that costs were awarded on a party/party basis unless some alternative basis was shown "either on some well-recognised principle, or under some contract plainly and unambiguously expressed". The New Zealand Court of Appeal applied the rule to the payment of a mortgagee's legal costs in a recovery action: ANZ Banking Group (NZ) Limited v. Gibson (Court of Appeal) [1986] 1 NZLR 556 at 566, 569.

13 The application of the principle is well recognised in Australia: see Inglis and Anor. v. Commonwealth Trading Bank of Australia (1973) 47 ALJR 234 at 235. In AGC (Advances) Limited v. West (1984) 5 NSWLR 301, Hodgson J stated (at 304-305) that at general law a mortgagee was entitled to party/party costs only but that the general law was subject to the precise terms of any provision of the mortgage. Cole J accepted this to be correct in Sandtara Pty. Limited & Others v. Australian European Finance Corporation Ltd. & Others (1990) 20 NSWLR 82, at 97.

14 AGC v. West and Sandtara were concerned with whether the terms of the mortgage agreement itself provided for costs on a specific basis. The question which arises here is more specific. It is whether the existence of a contractual provision entitling a mortgagee to the costs of litigation in relation to the enforcement of the mortgage governs the parties' entitlements, or whether such a provision is subject to a general discretion in the Court. This question was considered by the Court of Appeal in England in Gomba Holdings UK Limited & Others v. Minories Finance Limited & Others (No. 2) [1993] Ch 171. Scott LJ, delivering the Judgment of the Court, after reviewing the cases stated at 194:

"In our opinion, the following principles emerge from the cases and dicta ...

(i) An order for the payment of costs of proceedings by one party to another party is always a discretionary order: s.51 of the Act of 1981.

(ii) Where there is a contractual right to the costs, the discretion should ordinarily be exercised so as to reflect that contractual right.

(iii) The power of the Court to disallow a mortgagee's costs sought to be added to the mortgage security is a power that does not derive from s.51 but from the power of courts of equity to fix the terms on which redemption will be allowed.

(iv) A decision by a court to refuse costs, in whole or in part, to a mortgage litigant may be a decision in the exercise of the s.51 discretion or a decision in the exercise of the power to fix the terms on which redemption will be allowed or a decision as to the extent of a mortgagee's contractual right to add his costs to the security or a combination of two or more of these things. The pleadings in the case and the submissions made to the judge may indicate which of the decisions to which we have referred has been made.

(v) a mortgagee is not, in our judgment, to be deprived of a contractual or equitable right to costs to the security merely by reason of an order for payment of costs made without reference to the mortgagee's contractual or equitable rights and without any adjudication as to whether or not the mortgagee should be deprived of those costs."

1. In Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWSCA 304 (Bostik), the Court of Appeal said at [38]:

'38 The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this Court in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows:

• Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).

• In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal.

• If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27].

• Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).

• A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].

• Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272.'

1. In considering the parties' submissions I consider it relevant to refer to the decision's findings regarding Grounds 5 and 6:

(1) At [247]:

'As to the claim for storage costs we have not been referred to any amended claim of the tenant where this item of claim was identified.'

(2) At [248], at the first Tribunal hearing the lack of an entitlement to damages for storage costs was raised in oral submissions by Mr Chan for the appellants.

(3) At [256], it was stated it would appear that the topic of damages was not a matter expressly raised with the Tribunal when the proceedings were heard on remittal, nor did it appear that the submissions of the parties dealt with the entitlement to an award of damages for storage costs in any specific manner, save for the closing written submissions of the respondent.

(4) At [265], it was regrettable that the need to make an assessment as to an award of damages for storage costs was not identified by the parties at the original hearing, no doubt due to their focus on the primary issues which had been remitted namely whether the appellant was an impacted lessee and whether the respondent had engaged in unconscionable conduct.

(5) At [266], the point taken by the appellants in relation to the head of damage relating to storage costs did not contravene the limitation in Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1.

(6) This reasoning process led us to conclude that no prejudice had been identified that would make it inappropriate to allow the Notice of Appeal to be amended to add grounds 5 and 6.

1. The above references to the decision is an abbreviated account of the basis on which we concluded that the appellants may have suffered a substantial miscarriage of justice because the decision in the second Tribunal decision was not fair and equitable and or against the weight of evidence and that they had been deprived of a significant chance of a different outcome leading to granting leave to appeal and allowing the appeal on the damage for storage cost issue.
2. I find that the respondent as it submitted was substantially the successful party in the appeal. I also find as submitted by the respondent that the appellants success was based on issues raised late (on 13 May 2024) in Amended Grounds of Appeal. More importantly I accept the respondent's submissions that the appellants' success on Grounds 5 and 6 was limited to obtaining a remittal of the issue to the Tribunal as constituted in the second Tribunal decision. In addition, as disclosed by the reasoning process in the decision as outlined above, the substance of the issue raised in Grounds 5 and 6 was not expressly raised in the original hearing and in the second Tribunal decision was not a matter which was focused on.
3. Having regard to the considerations referred to in the preceding paragraph, I have reached the conclusion that the matter of storage costs was a relatively minor issue in the appeal hearing such that it is appropriate to award the costs of the proceedings to the respondent without attempting to differentiate between those issues on which it was successful and the storage costs issues.

1. I find that the Without prejudice as to costs letters referred to by the respondent should not be taken into account in exercising my discretion on indemnity costs. Those letters did not specifically relate to these proceedings. The respondent has accepted this at [16] of its 1 November submissions by reference to Ashton v Stevenson; Stevenson v Ashton (No 2) [2019] NSWCATAP at [28] - [30].
2. As regards clause 33.1(a) of the lease the appellants rely on Kyabram Property Investments Pty Limited & Anor v Murray & Anor at [16] and [17] where Beazely JA, Hodgson and Ipp JAA concurring stated at [15] that if a party such as the respondent intended to claim costs under a contractual entitlement, it should have specified that in their pleadings. In the 2020 proceedings the respondent did not claim costs on the indemnity basis expressly relying on clause 33.1(a) of the lease.
3. I agree with the appellants' submission that if the respondent intended to claim costs on the indemnity basis relying on clause 33.1(a) of the lease it should have stated that position in its Counter Claim in the 2020 proceedings, such that the appellants would know the case on costs that they were facing. I find that this is of significance as the respondent is unable to point to any conduct on the part of the appellants in this appeal which would justify the making of an order for indemnity costs.
4. I reject the respondent's application for indemnity costs.
5. The order that I will make is that the appellants must pay the respondent's costs of the appeal such costs if not agreed to be assessed on the ordinary basis as set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014.
6. I am satisfied that the issue of costs can be determined on the basis of the parties' written submissions without the need for an in person hearing. Accordingly, I will make an order under s 50(2) of the Civil and Administrative Tribunal Act dispensing with a hearing.

(1) Pursuant to s50(2) of the Civil and Administrative Tribunal Act 2013 (NSW) a hearing on the question of the costs of the appeal is dispensed with.

(2) Superburrito Pty Ltd and Zong Yuan Qin must pay TNAU Finery Pty Ltd its costs of the Appeal such costs if not agreed to be assessed on the ordinary basis as set out in the legal costs legislation as defined in section 3A of the Legal Profession Uniform Law Application Act 2014

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.