On 14 August 2018, the Tribunal made Orders and Directions in the proceedings constituted by File Nos. COM 18/34598 and COM 18/34601. The Tribunal also gave Written Reasons to accompany the Orders and Directions in both proceedings.
In the proceeding for File No. COM 18/34598 Chung Hoa Ung ("lessee") as applicant had sought urgent interlocutory relief; specifically, relief against forfeiture in respect of leased commercial premises (a retail fashion store) in Cabramatta NSW owned by Golden Century Property Investments Pty Ltd ("lessor"), the respondent to the application. The lessee had obtained interim orders affecting the lessor. Such orders were made ex parte in chambers by Principal Member K Rosser on 8 August 2018. The proceeding was then listed before the Tribunal in its Retail Lease List on 14 August 2018 to hear the applicant's application for the continuation of the interim relief. After considering evidence and submissions from both parties the Tribunal dismissed the application for interim orders. The costs of the application for interim orders were reserved for consideration in the application (File No. COM 18/34601) for substantive relief under the Retail Leases Act 1994 (NSW).
Also on 14 August 2018, the proceeding in File No. COM 18/34601 was listed before the Tribunal for directions in its Retail Lease List. After hearing evidence and submissions the Tribunal made directions in the proceeding including that the parties participate in a mediation at the Office of the NSW Small Business Commissioner and if the mediation failed to resolve the disputes the subject of the proceeding for the proceeding to return to the Tribunal for further case management.
On 29 August 2018, the Tribunal dismissed the proceeding in File No. COM 18/34601 in accordance with s 55(1)(a) of the Civil and Administrative Tribunal Act 2013 (NSW) (the "NCAT Act") because the lessee as applicant had withdrawn the application for substantive relief. As it was apparent that the issue of costs in both proceedings was unresolved, the Tribunal made these further directions:
1. Subject to the directions below, no order as to costs with the intent that each party is to bear their own costs of both applications.
2. If any party contends for a different costs order, such application (including submissions and evidence) must be filed and served within 7 days of the date of these orders. The respondent to the costs application is to file and serve submissions and evidence in reply within 14 days from the date of these orders. The applicant for costs may file and serve submissions in response 7 days thereafter. Submissions must include submissions about whether an order should be made dispensing with a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW).
3. In the event that an application is made under the previous order 3 above, order (2) shall cease to have effect.
By written submissions dated 4 September 2018, the solicitors acting for the lessor exercised the liberty under the orders and directions of 29 August 2018 to apply for their client's costs in both proceedings (i.e. the lessee's applications for interim orders and substantive relief). The particular form of order sought by the lessor's solicitors was:
An order that the applicant pay the respondent's cost of the proceedings, including reserved costs and the costs of both applications, as agreed or assessed.
The Tribunal also received submissions on costs from the applicant's (i.e. the lessee's) solicitors dated 13 September 2018 and a Written Statement dated 14 September 2018 from Ms Kelly Ung, the daughter of the applicant. The Tribunal then received the respondent's (i.e. the lessor's) submissions in reply on costs dated 24 September 2018.
The lessor's submissions on costs dated 4 September 2018 did not address whether an order should be made dispensing with a hearing under s 50(2) of the NCAT Act. This was in spite of order 3 made on 29 August 2018 which required the parties' submissions to deal with whether the Tribunal should dispense with a formal hearing on the question of costs. On the other hand, the lessee's submissions dated 13 September 2018 (at [36] - [37]) expressly support a procedure whereby the Tribunal's decision on the lessor's costs' application is made on the basis of the parties' written submissions and without a further formal hearing in a Tribunal hearing room.
The Tribunal did not receive any written request from the respondent lessor, or its solicitors, for the respondent's costs' applications to be listed for formal hearing. In particular, no such request was made to the Tribunal in the lessor's written submissions in reply, received on 24 September 2018. The Tribunal was satisfied that the lessor's application for costs could be adequately determined in the absence of the parties by considering the written submissions referred to. Accordingly, the Tribunal found that it was an appropriate exercise of its discretion under s 50(2) of the NCAT Act to dispense with a formal hearing requiring the parties to be present and to proceed to determine the lessor's application for costs on the papers.
[2]
General Principles on Costs
The starting point in any application for costs is that parties to proceedings in the Tribunal are to pay their own costs: see s 60(1) of the NCAT Act. Subsection 60(2) provides costs are awarded only if the Tribunal is satisfied that there are: "special circumstances warranting an award of costs".
Subsection 60(3) of the NCAT Act provides:
In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following:
(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings,
(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,
(e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance,
(f) whether a party has refused or failed to comply with the duty imposed by section 36 (3),
(g) any other matter that the Tribunal considers relevant.
Rule 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) (the "NCAT Rules") relates to costs in this Division of the Tribunal, the Consumer and Commercial Division. Rule 38(2) says that despite s 60 of the NCAT Act the Tribunal may award costs in the absence of special circumstances warranting such an award if the amount claimed is more than $10,000.00 but not more than $30,000.00 and the Tribunal has made an order under cl 10(2) of Sch4 of the NCAT Act in relation to the proceedings, or the amount claimed or in dispute in the proceedings is more than $30,000.00
The lessee as applicant sought relief against forfeiture; the applicant did not seek payment of a monetary amount in either proceeding. Furthermore, the Tribunal made no orders in the proceedings under cl 10(2) of Sch4 of the NCAT Act. In this respect, the Tribunal did not find that the lessee conducted the proceedings in such a way that unreasonably disadvantaged the other party. While the lessor was ultimately successful in the proceedings, its success did not arise from any failure on the part of the lessee to comply with an order or direction of the Tribunal.
Accordingly, no case for an order for costs arose against the lessee under Rule 38 of the NCAT Rules. The Tribunal may only award costs in the proceedings if satisfied that there are: "special circumstances warranting an award of costs" within the meaning of s 60(2) of the NCAT Act.
The onus was upon the costs' applicant (in this instance, the lessor and respondent in both proceedings) to establish that there are "special circumstances" in the proceedings which warrant the making of a costs order.
"Special circumstances" are circumstances that are out of the ordinary. They do not have to be extraordinary or exceptional: Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 at [11], citing Santow JA in Cripps v G & M Mawson [2006] NSWCA 84 at [60]; see also CPD Holdings Pty Ltd t/as The Bathroom Exchange v Baguley [2015] NSWCATAP 21.
Being successful in proceedings is not, of itself, a special circumstance. There must be some additional factors present in the case to justify an award of costs: Citadin Pty Ltd (No. 2) v Eddie Azzi Australia Pty Ltd & General Pants Co Pty Ltd [2001] NSWADTAP 31 at [6].
Even if there are special circumstances, it may still not be appropriate for the Tribunal to award costs for discretionary reasons: Obeita v Australian College of Professionals Pty Ltd [2014] NSWCATAP 38 at [81]; Brodyn Pty Ltd v Owners Corporation - Strata Plan 73019 (No. 2) [2016] NSWCATAP 224 at [24].
The discretion to award costs is broad and unfettered, save that it must be exercised judicially: see, for example, Ruddock v Vardalis (No 2) (2001) 115 FCR 229, and also "according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy": Williams v Lewer [1974] 2 NSWLR 91 at [95].
An award of costs to a party is to compensate it where that party has been put to expense in bringing or defending a claim: see Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. An award of costs is made, not for the benefit of a losing party, but for the successful party. In Oshlack [1998] HCA 11, [67], McHugh J (in dissent but with the tacit agreement on this issue with other members of the Court) said:
The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended by, the unsuccessful party the successful party would not have incurred the expenses which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
[3]
Costs in the application for interim orders
The lessor based its application for costs in both applications on subsections 60(2), (3)(c), 3(e) and (3)(g) of the NCAT Act.
The hearing before the Tribunal on 14 August 2018 was to determine whether interim orders made ex parte in chambers by Principal Member K Rosser on 8 August 2018 should be continued. Therefore, it was the case at the hearing on 14 August 2018 that the lessee had already satisfied the Tribunal there was sufficient written material in support of the application for interim orders to warrant an order granting relief against forfeiture. The order of 8 August 2018 was made pending a further hearing with the applicant and the respondent each present to argue their respective cases.
On 14 August 2018, the Tribunal considered further written material from the parties and heard their oral submissions. The lessee by his legal representative made a decision to limit the argument in support of the continuation of the interim order to an alleged estoppel arising from the lessor's acceptance of rent at $4,550.00 per month from 17 April 2018 which the lessor submitted was consistent with the exercise of a one year option under clause 2 of the retail lease dated 10 March 2017. On that basis the applicant argued that there was an extension of the term of the lease until 15 April 2019 and the lessor's Notice of Termination dated 11 July 2018 was invalid and of no effect.
The Tribunal had to determine whether there was at least a serious issue to be tried and also whether the balance of convenience favoured the continuation of the interim order made on 8 August 2018.
Careful analysis of the parties' evidence and submissions was required before the Tribunal reached its findings that the lessee's estoppel argument did not raise a serious issue to be tried (i.e. on the evidence provided, that such argument was "doomed to fail"); but as importantly, the Tribunal could not be satisfied that the balance of convenience favoured the continuation of the order of 8 August 2018: see paragraphs [12] and [13] of the Tribunal's Reasons dated 14 August 2018. This was not a determination of the Tribunal that the lessee's application had no tenable basis in fact or law, and as would found a basis for a special circumstance warranting a costs order. Relevantly, the Tribunal made orders and directions for the continuation of the other proceeding (i.e. the substantive application).
In response to the lessor's present application for its costs, the Tribunal does not think it was out of the ordinary that the lessee contended, on 14 August 2018, for the continuation of the order granting relief against forfeiture. The Tribunal does not stigmatise such course of action as frivolous or vexatious, or otherwise misconceived or lacking in substance.
The Tribunal is satisfied that there are no special circumstances warranting a departure from the usual order that each party is to bear their own costs of the proceeding.
[4]
Costs in the Substantive Application
Section 55(1)(a) of the NCAT Act allows a party to unilaterally withdraw from proceedings in the Tribunal without the consent of the other party.
Relying upon cases decided in other jurisdictions, the lessor submitted (written submissions dated 4 September 2018 at [29]) that the lessee's act of withdrawing the substantive application amounted to: "a complete capitulation by the Lessee, which ought to sound in costs". The Tribunal does not accept that submission. Consistent with s 60(1) of the NCAT Act, and as already stated, the starting point in any costs application is that each party bears its own costs; whereas; in other jurisdictions such as the Supreme Court of New South Wales where the Uniform Civil Procedure Rules apply the prima facie position is that costs follow the event. In the Tribunal, an outcome whereby costs follow the event is exceptional. The exception arises where there are special circumstances, and special circumstances can arise by reason of any matter that the Tribunal considers relevant pursuant to subsection 60(3)(g).
The Tribunal is not persuaded that there are special circumstances warranting a costs order against the lessee in the substantive application. It accepts the submission made on behalf of the lessee (written submissions dated 13 September 2018 at [26]) that the lessee's withdrawal: "was purely a commercial decision, benefiting all parties, to discontinue with a set of proceedings which do not serve any real or useful purpose". While it was open for the lessee to seek orders other than relief against forfeiture in the substantive application, the lessee made a decision at an early stage of the proceeding (i.e. before any mediation had taken place or any timetable of directions for evidence and submissions had been set by the Tribunal) that he did not intend to seek any damages or compensation from the lessor.
Nevertheless, even if the Tribunal had been satisfied that there were special circumstances warranting a costs order in the substantive application, there are discretionary considerations which, in the Tribunal's opinion, militated against any adverse costs order in the proceeding. In this respect, the Tribunal was satisfied that the lessee's early withdrawal of the substantive proceeding was consistent with each party's statutory obligation (s 36(3), NCAT Act) to cooperate with the Tribunal in giving effect to the Tribunal's guiding principle of the just, quick and cheap resolution of the real issues in proceedings. The lessee's decision to withdraw in the substantive application undoubtedly enabled a saving of time and resources for the parties; but it also assisted the Tribunal in the proper management of its finite resources in terms of the allocation of hearing time to all matters in its Retail Lease and other Lists.
[5]
Conclusion
For the foregoing reasons, the Tribunal's determination of the application for costs by the lessor is that consistent with s 60(1) of the NCAT Act and in the exercise of the Tribunal's general discretion as to costs, each party is to bear their own costs of both proceedings.
I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.
Registrar
[6]
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.
Registrar
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Decision last updated: 21 December 2018