Trowbridge v Morris [2010] NSWCA 24 | Case summary

REASONS FOR DECISION 1 This is an appeal against the decision of the Retail Leases Division of the Tribunal in respect of retail tenancy claims lodged by a tenant and lessor under the Retail Leases Act 1994. The decision is Trowbridge v Morris [2010] NSWADT 18. 2 The tenant is Mr Trowbridge, a chiropractor. He was the lessee of a shop in the Swansea Arcade, shop 8A, from where he conducted his practice in the period 1 July 2004 to 30 October 2008. At the beginning he held the lease by way of assignment of the pre-existing lease. In April 2005 the lessor, Ms V Morris, granted him a new lease for one year with a two year option, commencing 1 June 2005. 3 Though Mr Trowbridge did stay on at the shop, he never effectively exercised the option. The parties could not agree on a rent increase proposed by the lessor under the rent review clause of the lease for the year commencing 1 July 2006. For the years commencing 1 July 2007 and 1 July 2008, the lessor again proposed a rent increase. Mr Trowbridge continued to dispute the appropriateness of the rent increases. Through the years mentioned he continued paying rent at the rate set in the lease agreed in April 2005, i.e. $808.50 per month. On 19 August 2008 the lessor gave him notice to quit on the ground that he was in arrears. On 21 August 2008 Mr Trowbridge filed the application in the Tribunal that underlies this appeal. 4 In the application he referred to a long-running dispute between him and the lessor over incursions of rain into his premises, for which he did not believe he had been properly compensated. Two events were highlighted - one on 21 February 2005 and the other on 12 October 2007. The 21 February 2005 event caused damage to the ceiling and to the carpet in his consulting room. The lessor gave him a rent free period pending repairs, the period being 22 February 2005 to 22 April 2005 later extended to 28 April 2005. The ceiling was repaired on 23 March 2005. The carpet was replaced on 20 June 2005. He closed for business for the day, 23 March 2005. The event of 12 October 2007 was, in the view of the lessor, minor. 5 Mr Trowbridge's application originally took the form of a retail tenancy claim and an unconscionable conduct claim. The unconscionable conduct claim was summarily dismissed. The retail tenancy claim proceeded. It was met originally by a cross application from the lessor for a specialist retail valuer to be appointed. That response sought to address the dispute over the rent increases. Mr Trowbridge had consistently claimed that the rent increase was above market. Mr Trowbridge vacated the premises on 30 October 2008, and that application was not pursued. Instead the lessor amended its claim to one for rent arrears, in the sum of $1244.35. 6 Mr Trowbridge's material includes various emails and letters that passed between him and the lessor's agent, Mr Laybutt, over compensation for the rain incursion of 2005. It also included various exchanges over the fairness of the rent increase, with both parties canvassing the possibility of having a specialist retail valuer make an assessment. 7 In the decision appealed by Mr Trowbridge, the Tribunal ruled that Mr Trowbridge was obliged to pay the rent increases. In its opinion, they were in line with the lease terms. It also examined his complaints about the rain incursions, and allowed his claim to the following extent: lost fees for the day he was closed, 23 March 2005 ($271); an allowance of $144 for cleaning and moving furniture to allow repair work that day; and that he be allowed $57 for cleaning the carpet after the 12 October 2007 incursion. It also ruled that the rent free period should have been extended by 8 further days to 6 May 2005. 8 The Tribunal made no order in respect of the above amounts, total $472. It did not quantify the amount that might be represented by the eight days of rent that Mr Trowbridge was held not to be obliged to pay. 9 The Tribunal saw the amount of $472 as being off-set by, what it thought to be, Mr Trowbridge's failure to pay rent in the period 28 April 2005 to 20 June 2005. 10 At the appeal hearing, Mr Laybutt acknowledged Mr Trowbridge's claim in the notice of appeal that Mr Trowbridge had in fact paid rent for the period 28 April 2005 to 20 June 2005. It follows that there should have been an order by the Tribunal for that amount. 11 We expect that the Tribunal's misunderstanding as to whether Mr Trowbridge had paid rent in the period 28 April to 20 June led it not to quantify the value of the eight day extension it made to the rent free period. Mr Laybutt had calculated that amount at $202.35 and deducted it from the amount sought when he enforced the Tribunal's debt order. Mr Trowbridge has complied with the order as reduced, under protest. 12 Mr Laybutt also agreed that there was an error, as claimed by Mr Trowbridge, in the account the Tribunal gave of the various claims made by Mr Trowbridge. At para [17] of its reasons, the Tribunal had said incorrectly that Mr Trowbridge had sought rent reductions of '80%' for the periods 1 November 2007 to 30 September 2008, and 1 October 2008 to 30 October 2008. The correct position was that he had sought '20%'. 13 The ordinary rule in the Tribunal is that each party bears its own costs: Administrative Decisions Tribunal Act 1997, s 88. The Tribunal may make an order by way of exception if it is 'fair' to do so in all the circumstances. The Tribunal granted the lessor's application for cost, as follows: 2. The applicant is to pay the Respondent's costs, as agreed or assessed, of the hearing on 1 June 2009 and the written submissions filed on her behalf in accordance with the directions made on 1 June 2009. The Appeal 14 This dispute, on its face, was a small one. It is apparent from the exchanges with the lessor's agent, and the submissions to the Tribunal, that Mr Trowbridge is pursuing a wider cause in support of what he sees as the rights of tenants generally, especially in relation to rain incursions causing damage to business premises and the setting of rent increases. 15 The right to appeal a decision of the Tribunal is confined to 'questions of law', with the Appeal Panel having the power to permit extension of the appeal to the merits. Mr Trowbridge seeks in his notice of appeal to have all his claims re-heard. He also criticises the Tribunal for failing to accord him procedural fairness at the hearing. 16 His notice of appeal has three annexures (as to questions of law, annexure 'A', with ten points; reasons for extending to merits, annexure 'B', five points; and, Annexure 'C', email exchanges debating calculations in relation to the 8 further days allowed by the Tribunal in its decision). Mr Laybutt, the lessor's real estate agent, as he had at first instance appeared on behalf of the lessor at the appeal. Liability Orders 17 In his submissions at first instance and before the Appeal Panel, Mr Trowbridge's main grievance concerned the mistreatment he felt he suffered in respect of the rain incursion event of 21 February 2005. Yet it was not until he was served with a notice to quit in August 2008 that he decided to take action against the lessor over the way she dealt with him. And then in the application filed 15 August 2008 he made claims for thousands of dollars. He claimed $7000 for the business impact of the rain incursion, $5000 for the loss of clients on the day of the ceiling repair, and mentioned the sum of $40,000 apparently for what he saw as the unconscionable and unfair way he had been dealt with on these issues and the rent adjustment issue. His submissions are replete with criticisms of the commercial morality of Mr Laybutt. 18 We will deal briefly with the points raised in the notice of appeal. 19 Mr Laybutt has conceded the Tribunal's error re the $472 and we agree. 20 Mr Laybutt has also sought to address the eight-day issue, reasonably in our view, by reducing the claim under the execution warrant; and there is nothing to be gained in continuing to examine this issue. 21 Many of Mr Trowbridge's objections in the notice of appeal and the accompanying submissions go to procedural fairness. In our view, the Tribunal adopted an approach that was procedurally fair in all the circumstances. 22 Despite Mr Trowbridge's view, we consider that the dispute was one of small compass. The Tribunal allowed the parties two days for the hearing. That was more than adequate. It did not need, as we see it, to resume for a third day. It took the practical course of finalising the matter on the papers. 23 In our view, the unconscionable conduct application was untenable for the reasons given by Fox JM, and there was no unfairness in the Tribunal not allowing that to be reagitated at the main hearing. 24 Moreover, in our view, it can be inferred, we think reasonably, from the Tribunal's reasons read in conjunction with the filed material, that Mr Trowbridge's case for a further rent free period up to 21 June 2005 was considered and rejected. It is plain that the Tribunal regarded the business loss claim for 12 October 2007 as untenable, and simply reimbursed him for a cleaning expense. 25 The Tribunal considered and accepted that the rent increases were imposed in a lawful manner. It is apparent that the Tribunal considered that the rent review clause was properly applied, and that the opportunity to have the matter examined by a specialist retail valuer was not taken up. 26 While the Tribunal's reasons are not explicit on this point, it is to be inferred that it was of the view that the lessor was in breach, to a small degree, of the covenant as to repair in relation to the rain events. It rejected the business impact claims with the limited exception of the lost income reimbursed for the day of closure for the ceiling repair. In our view, it properly rejected the business loss claims. Mr Trowbridge sought in his originating application the amounts of '$7000' and '$5000' as business impact losses together with '$40000' for unconscionable conduct towards him. It is plain that Mr Trowbridge could not prove his business impact losses, and his unconscionable conduct claim, as mentioned, was struck out at an early stage. 27 In our final orders in this appeal we have reduced the amount of the debt order by two sums (a) the $472; and (b) to take account of the $202.35 already allowed in the execution process by Mr Laybutt. The nett effect is therefore that there should be a refund by the lessor of a further $472. 28 In our view, that sum can be held against the costs order at first instance which we are not disposed to disturb for the reasons that follow. In addition we have made an order in respect of the costs of the appeal. Costs Order 29 Mr Trowbridge challenged the adverse costs order. The Tribunal is, in making a costs order, engaged in the exercise of a broad discretion. The ordinary rule is that each party bears their own costs in proceedings in the Retail Leases Division. The making of an order for costs is by way of exception. 30 In this case, Mr Trowbridge brought, as we see it, an inflated claim relying mainly on relatively distant events (the rain incursion of February 2005, and the rain incursion of October 2007). The small claims that the Tribunal saw as having validity ought to have been disposed of in a mediation process. Mr Laybutt, as we see it, sought on behalf of his client to make concessions to Mr Trowbridge, especially by way of the rent free period, to alleviate losses that Mr Trowbridge may have incurred. He was, we think, entitled to think that by August 2008 those steps had been satisfactory. 31 We see no reason to interfere with the Tribunal's exercise of its costs discretion. It is a wide and open-ended one, to adopt the words of Handley JA in World Best Holdings Limited v Sarker [2010] NSWCA 24 at [101]. There is no error of law. 32 However, we think it would be desirable in order to bring some finality to this dispute that the sum of the order be fixed rather than left floating by the formula 'as agreed or assessed'. This is essentially a small dispute. 33 We would encourage Tribunal members to make fixed sum costs orders in cases where neither party is legally represented as is the case here. We think that orders using the 'as agreed or assessed' formula are best confined to cases with lawyers on both sides. 34 Against this background, we note that the amount claimed by Mr Laybutt in respect of the first instance proceedings for his professional time (which he has billed back to his client) is a modest one, set at the rate of $35 per hour, plus some small disbursements, total $1876.75. 35 In our view the Tribunal's costs order should not be disturbed, but it would be better that the amount be fixed in the sum mentioned. Application for Costs of the Appeal 36 The appeal identified some errors in the Tribunal's understanding of the evidence. Mr Laybutt conceded these in his written submissions prior to hearing. Those mistakes could have been resolved at that point. Mr Trowbridge continued at the appeal hearing to press his broader case. The appeal as it relates to that case has failed. 37 As already noted, the making of a costs order in retail leases proceedings is by way of exception having regard to whether it is 'fair' to do so, and account may be taken of the various factors listed in s 88(1A). Three of the factors are of particular relevance to this case: (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (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 proceedings, 38 In our view, Mr Trowbridge at the appeal has, as he did below, filed voluminous material which was verbose and unclear. His claims were weak. The issues in relation to water incursion were, we consider, dealt with in an appropriate way by the lessor at the time. Mr Trowbridge pressed a case for business impact losses without providing any probative evidence but his own self-interested assertions. The rent increases dispute involves a very small sum. In our view, the correspondence filed in the proceedings and the way Mr Laybutt conducted himself at hearing shows a consistent attempt on his part to make reasonable concessions while maintaining his client's position in the matter of the adjustment of rent. 39 In our view it is fair, keeping in mind the primary rule that ordinarily there is to be no costs order, to allow the lessor to recover her costs of the appeal, which we set at $350, based on 10 hours of time at the modest rate charged by Mr Laybutt. Orders

Appeal dismissed except as follows.
Orders made below varied as follows: (i) In respect of the respective retail tenancy claims, the Appellant to pay the Respondent the amount of $570. (ii) In respect of the proceedings before the Retail Leases Division, the Appellant to pay the Respondent's costs fixed at $1876.75.
In respect of the appeal: (iii) Appellant to pay the Respondent's costs of the appeal, fixed at $350.

Trowbridge v Morris

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