Ushta Pty Ltd atf The AVVM Trust v Babayan (No 2)

Bonita v Shen [2016] NSWCATAP 159

CB Australia Ltd v Shepherd [2018] NSWSC 353

Hanave PL v Wine Nomad PL [2022] NSWCATAP 361, [2023] NSWSC 265

Human Appeal International Australia v Beyond Bank Australia Ltd [No 3] [2023] NSWSC 1622

Johnson t/as One Tree Constructions v Lukeman [2017] NSWCATAP 45

Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534

Oppidan Homes PL v Yang [2017] NSWCATAP 67

Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72

Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256

Thompson v Chapman [2016] NSWCATAP 6

Vella v Mir [No 3] [2020] NSWCATAP 17

1. This was an internal appeal filed under s 80 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) from a decision of the Consumer and Commercial Division of the Tribunal dated 5 March 2025 (and amended by way of costs directions on 5 May 2025) in proceedings 2023/444425 (Tribunal proceedings) filed 7 December 2023. The proceedings involved a dispute under the Retail Leases Act 1994 (NSW) (Retail Leases Act) (Decision) in respect of a retail shop lease for a restaurant in Crows Nest, on Sydney's lower North Shore.
2. The appellant, Ushta Pty Limited (as trustee of the AVVM Trust), was the applicant in the Tribunal proceedings and current lessor. There were two respondents to the Tribunal proceedings - Mediterranean Pty Limited and Babak Babayan. The claim was for $400,000 primarily in respect of alleged unpaid rent. There were other proceedings mentioned in our substantive reasons that were not before us on the appeal.
3. The appellant had become the lessor by transfer of lease dated 20 September 2023 when the appellant purchased the premises containing the leased area on about 20 September 2023 from the original lessor, subject to the Lease. The original lessor at the time of completion of sale executed a Deed of Assignment of Rights under the Lease (the Assignment Deed) to the second lessor.
4. On 20 September 2023 the appellant issued a notice of termination for rent arrears giving the third lessee 30 days' notice. The appellant took possession of the leased premises on 23 October 2023.
5. Mediterranean Pty Limited was the lessee of the premises at the relevant time, being the third lessee, and as we understand it has been in liquidation since 8 October 2024. No leave to proceed against the third lessee in the primary proceedings from which this appeal is brought was sought or granted.
6. Mr Babayan was the guarantor of the original lessee's obligations under the original lease (guarantor). He was also the sole director of the original lessee.
7. Mr Babayan was the sole respondent to the appeal and was and will be referred to as the respondent. Effectively the primary proceedings and the appeal were between the appellant and Mr Babayan.
8. The Decision was a dismissal of the application for $400,000. On appeal the appellant sought to have the Decision set aside, a finding that the respondent was liable to the appellant as guarantor under the retail lease and costs of the appeal.
9. In our substantive decision on 20 January 2026, for the reasons there given we extended time (to the extent required) for filing of the appeal, refused leave to appeal and dismissed the appeal. We made directions for costs submissions in respect of the costs of the appeal; we were told that the costs of the Tribunal proceedings had been deferred pending the appeal so will be determined in due course by the Tribunal.
10. The Tribunal proceedings had a vexed and complex procedural history over which the parties were in disagreement as to responsibility. The appellant made serious allegations against the respondent of providing a non-existent authority, changing affidavits, delay, belated introduction of new case theories, orchestration of the commercial labyrinth of lessees and lease dealings and obfuscation which had the effect in part of reducing the appellant's ability to enforce against the third lessee before it went into liquidation. The respondent said that the appellant knew that there was a mediated settlement prior to its acquiring the property which resolved the respondent's prior obligations and that the appellant was simply seeking to go behind the settlement.
11. As part of the allegations just described, the appellant sought that we conduct an inquiry into the procedural history including the Tribunal's part in allegedly acceding to the respondent's delay tactics and strategy. As we said in our substantive reasons, that is not our role - the nature of an appeal, as described below, was outlined to the parties during the hearing and is well-published information.
12. In our substantive reasons we summarised some procedural difficulties that arose in relation to the appeal.
13. The appellant failed on all grounds of appeal that were dispositive of the appeal. It was unnecessary in those circumstances to consider the remaining grounds of appeal. As we said at [97] of our substantive reasons, "the narrow scope and operation of the guarantee is sufficient to exclude the respondent's liability for the matters claimed."
14. We shall make an order dispensing with a hearing on costs - neither party sought such a hearing and we are satisfied that we can determine the issue of costs on the written materials provided by the parties and dispense with a hearing under s 50(2) of the NCAT Act.

1. Section 60 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act) provides as follows:

(1) Each party to proceedings in the Tribunal is to pay the party's own costs.

(2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs.

(3) 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,

(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.

(4) If costs are to be awarded by the Tribunal, 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 the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis.

(a) the costs of, or incidental to, proceedings in the Tribunal, and

(b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.

1. Rules 38 and 38A of the Civil and Administrative Tribunal Rules 2014 (NSW) (the Rules), provide a costs regime for proceedings in the Consumer and Commercial Division and appeals from orders in such proceedings that does not require a finding of special circumstances to exercise the discretion to award costs:

38 Costs in Consumer and Commercial Division of the Tribunal

(1) This rule applies to proceedings for the exercise of functions of the Tribunal that are allocated to the Consumer and Commercial Division of the Tribunal.

(2) Despite section 60 of the Act, the Tribunal may award costs in proceedings to which this rule applies even in the absence of special circumstances warranting such an award if -

(a) the amount claimed or in dispute in the proceedings is more than $10,000 but not more than $30,000 and the Tribunal has made an order under clause 10(2) of Schedule 4 to the Act in relation to the proceedings, or

(b) the amount claimed or in dispute in the proceedings is more than $30,000.

(1) This rule applies to an internal appeal lodged on or after 1 January 2016 if the provisions that applied to the determination of costs in the proceedings of the Tribunal at first instance (the first instance costs provisions) differed from those set out in section 60 of the Act because of the operation of -

(b) the Division Schedule for the Division of the Tribunal concerned, or

(2) Despite section 60 of the Act, the Appeal Panel for an internal appeal to which this rule applies must apply the first instance costs provisions when deciding whether to award costs in relation to the internal appeal.

1. In Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at [37]- [38], the Appeal Panel found that "'[P]roceedings'" refers to the process set in motion, or commenced, by lodging an application or notice of appeal. That process includes the steps taken by the Tribunal to hear and determine whether to grant the relief sought in the application or notice of appeal, as well as any interlocutory or ancillary steps. Proceedings are defined by the subject matter raised in the application or notice of appeal. The participants in proceedings are limited to the parties determined in accordance with [s 44 of the NCAT Act and the Rules]".
2. In Owners SP 63341 v Malachite Holdings PL [2018] NSWCATAP 256 at [3]- [5] the Appeal Panel summarised the operation of r 38 as follows, from the detailed discussion at [86]-[111]:

"[3] Rule 38(2)(b) applies to the following proceedings:

(1) Where the relief claimed in the proceedings is for an order to pay a specific amount of money, or an order to be relieved from an obligation to pay a specific amount of money, and that amount is more than $30,000;

(2) Where an order is sought in the proceedings for the performance of an obligation (such as to do work), and the Tribunal has power make an order to pay a specific amount of money, even if not asked for by the claimant, provided that

(a) there is credible evidence relating to the amount the Tribunal could award; and

(b) that evidence, if accepted, would establish an entitlement to an order for an amount more than $30,000.

[4] Rule 38(2)(b) may also apply to proceedings where the orders sought in the proceedings depend upon the claimant proving there is a debt owed in order to establish an entitlement to the relief sought, and that amount is in dispute and is more than $30,000.

(1) Where a claim for relief in the proceedings (not being a claim for an order to be paid or be relieved from paying a specific sum) may, as a consequence of that relief being granted, result in the loss of any property or other civil right to a value of more than $30,000; or

(2) Where there is a matter at issue amounting to or of a value of more than $30,000 but:

(a) no direct relief is sought and no order could be made in the proceedings requiring payment or relief from payment of an amount more than $30,000; or

(b) the relief sought does not depend on there being a finding that a specific amount of money is owed."

1. In Hanave PL v Wine Nomad PL [2022] NSWCATAP 361 at [40]- [42] the Appeal Panel expounded aspects of the above summary which were not the subject of findings in the partly-successful appeal to the Supreme Court on aspects of the substantive decision [2023] NSWSC 265:

"[40] As made clear in Malachite at [75] and following, r 38 is not concerned with the value of rights that might be in issue or any change in wealth. Unlike s 101(2)(r) of the Supreme Court Act 1970 (NSW), r 38 does not require consideration of whether the proceedings:

(1) involve a matter at issue amounting to or of a value of $30,000 or more, or

(2) involve (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to or of the value of $30,000 or more.

[41] Rather, r 38(2)(b) applies where "the amount claimed or in dispute in the proceedings is more than $30,000".

[42] The questions to be determined are what is the amount "claimed", what is the amount "in dispute" and what are "the proceedings" in circumstances where there are two applications, the second in the nature of a cross-application ("cross application").".

1. The amount claimed in the original proceedings under appeal exceeded $30,000 and the costs regime in rr 38 and 38A of the NCAT Rules applies.
2. The principles and rules governing costs in the absence of a requirement to find special circumstances are authoritatively explored in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 and Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 and have been followed and applied in this Tribunal in many decisions, of which three are Thompson v Chapman [2016] NSWCATAP 6, Bonita v Shen [2016] NSWCATAP 159, citing earlier consistent authority, and more recently Vella v Mir [No 3] [2020] NSWCATAP 17 at [28]- [31]. In summary:

(1) The exercise of the discretion is principled but involves impression and evaluation.

(2) The starting point for the exercise of costs discretion on the usual principles is that costs follow the event.

(3) "The event" is usually the overall outcome of the proceedings (and arguably of each proceeding if the proceedings are true cross-claims or counter-claims rather than one being by way of equitable defence) - did the successful party have to go to the Tribunal (in this case) to get what it achieved, rather than being offered at least that relief prior to commencement of the proceedings: cp CB Australia Ltd v Shepherd [2018] NSWSC 353 at [10]- [12].

(4) If there are distinct, separable or dominant issues on which the party seeking relief did not succeed, that may be taken into account in the exercise of costs discretion, either as an award of costs of those issues to the party who had success on them or as a discount of the costs of the overall successful party, or some other appropriate exercise of principled discretion: see, further, Access Training Group Ltd v Jane [2024] NSWCA 204 at [191].

(5) There may be no order as to costs made (to the intent that each party pays its or their own costs) where there has been a measure of success on both sides_: Johnson t/as One Tree Constructions v Lukeman_ [2017] NSWCATAP 45 at [25]- [29]; applied in Oppidan Homes PL v Yang [2017] NSWCATAP 67.

(6) Costs are usually ordered on the ordinary basis as agreed or assessed, unless the parties tender material and/or make submissions that justify an award of costs on the indemnity basis as agreed or assessed, in whole or part.

(7) For an award of costs on other than the ordinary basis, a party's conduct of the proceedings themselves, or the nature of the proceedings themselves (for instance, misconceived), or unreasonable refusal of an offer (often when an outcome less favourable than an offer is achieved in the litigation), are considered.

1. The respondent sought his costs of the appeal on the ordinary basis as agreed or assessed. Absent a special provision, the costs covered by such an order include all interlocutory costs not the subject of an existing costs order and all reserved costs.
2. The respondent's costs submissions focused on establishing grounds for special circumstances within s 60(3) of the NCAT Act. While this was not necessary given that the ordinary costs rules apply, the substance of the respondent's submissions also addressed the overall lack of success of the appellant.
3. In our view, costs should follow the event which in this case was the outcome of the appeal.
4. If the appellant had succeeded on the appeal by reason of success on the limited range of central issues (on which the respondent succeeded), there may have been a basis for denying the appellant some of its costs in respect of the serious allegations it raised (described earlier). That would depend on the extent to which there were findings in respect of those allegations or their utility.
5. We do not need further to address the respondent's submissions on costs because of the foregoing conclusion, except to say that we should not be taken as necessarily agreeing with the matters that we do not need further to address. In particular, the scope of what was referred to in [91] of our substantive reasons is construed too broadly at [9] of the respondent's costs submissions, in its reference to "any of the grounds advanced" - the cross-reference in [91] was only to the matters in [89]-[90].
6. Likewise, the appellant's responsive submissions do not need to be addressed in detail. They were largely directed to defending that the appeal was arguable. That is the case but it does not address the central issue, on which we have determined costs above, that the event was the respondent's success on the appeal.
7. The appellant raised also that the respondent essentially, and after legal representation, changed the basis of his resistance. This was not spelled out in detailed analysis in the appellant's "cross-application on costs" in a manner that would ground a reduction of the respondent's costs or an award of costs of distinct issues to the appellant. Even if it had been, the matters that appear to be those sought (in general terms) to be identified by the appellant were not of the character that warranted a departure from the general rule that costs follow the event: see, eg, Human Appeal International Australia v Beyond Bank Australia Ltd [No 3] [2023] NSWSC 1622 esp at [25]-[33] and authority there discussed.

(1) Order that the appellant pay the respondent's costs of the appeal on the ordinary basis as agreed or assessed.

(2) Dispense with a further hearing on costs.

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.