Sarip Investment Pty Ltd v Uno Uno Pty Ltd [2004] NSWADT 27 (11 February 2004)

Last Updated: 16 April 2004

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL RETAIL LEASES DIVISION

CITATION: Sarip Investment Pty Ltd v Uno Uno Pty Ltd [2004] NSWADT 27


PARTIES: APPLICANT
Sarip Investment Pty Limited
RESPONDENT
Uno Uno Pty Limited



FILE NUMBERS: 035086

HEARING DATES: 17/11/2003

SUBMISSIONS CLOSED: 22/12/2003



DECISION DATE: 11/02/2004

BEFORE: Molloy GB - Judicial Member





LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994

CASES CITED: Kao v. Lin (No 2) [2003] NSWADT 2
Randy Wiks v. Pokana Pty Limited [2003] NSWADT (11 March 2003 unreported)
Law Society of NSW v. Symonds (1995) 2LPDR10
Attorney General of NSW v. R Gouder (Legal Services Tribunal No. 23 of 1995, 16 April 1997)
Kolavo v. Pitsikas & Anor [2003] NSWCA 59
Green v. Schneller [2001] NSWSC 1215
Gizah Pty Limited v. Axa Trustees (No. 2) [2001] NSWADT 64
Vifill Pty Limited v. Hagood Holdings Pty Limited [2001] NSWADT 160 at 49
Wood & Anor v. Bergman (No. 2) [2003] NSWADT 175
Randi Wiks Pty Limited v. Pokana Pty Limited [2003] NSWADT 27
Khao Thai Pty Limited v. Coles Meyer Properties Limited ( No. 2) [2001 NSWADT 186] at 59-52
Prakash v. Bobb Borg Enterprises Pty Limited [1999] NSWADT 73 at 47
Barsoum v. Glebe Administration Board (No. 2) [2002] NSWADT 174
Alessa Pty Limited v. Total and Universal Pty Limited [2001] NSWADT 150

APPLICATION: Costs

MATTER FOR DECISION: Costs


APPLICANT REPRESENTATIVE: APPLICANT
S Monzo, counsel

RESPONDENT REPRESENTATIVE: RESPONDENT
J Crisp, counsel

ORDERS: 1. The Respondent is to pay the Applicant’s costs of and incidental to these proceedings, costs to be assessed on an indemnity basis.
2. Liberty granted to the Respondent to apply, if so advised, for any variation of that order consistent with the submissions of its counsel dated 17 December 2003, paragraphs 30, 31 and 32.


Reasons for Decision:

Background

1 By Application filed 12 August 2003 the Applicant, who is the lessor of property at 153 Liverpool Street Darlinghurst, sought relief in this Tribunal against the Respondent, who was the lessee of those premises, seeking orders that the Respondent pay to the Applicant certain alleged arrears of rent inclusive of interest. The Applicant also sought an order that the Respondent "is to comply with the terms and conditions of (the lease) and to continue to pay the full rental instalments as stipulated under (the lease), not (sic) rent abatement is allowed". I very much doubt whether this Tribunal would have power to make such a mandatory order, but I was not addressed on this aspect and it is not an issue that is before me. The Applicant sought an order for costs "on an indemnity basis".

2 When the application came before me for hearing on 17 November 2003 the parties had by that stage filed and served numerous and voluminous documents in support of their particular cases. However, at the doorstep of the Court (so to speak) the Respondent accepted (to all intents) that its defence to the proceedings was unfounded and it conceded that Judgment should be entered against it in the sum of $58,677.83. This Judgment was stated to be "inclusive of interest and represents payment of rent outstanding up to and including 24 November 2003 and is payable on or before 21 November 2003".

3 It appeared that the Respondent was effectively agitating some sort of argument by way of cross-claim such that, and for more abundant caution, I noted that although no formal cross-claim could be found on the file, "any cross-claim filed by or agitated by the Respondent is dismissed".

4 The Applicant applied for an order for costs. Counsel for the Applicant commenced to address me on this issue. However, and in particular having regard to the volume of material in the Tribunal’s file and the fact that it was obvious that oral argument would extend for a number of hours, it seemed to me that written submissions by both parties would assist in clarification of the issues such that oral argument could be avoided. One of the difficulties in matters like this is where there has been no actual hearing in that there has been no ventilation of the issues, tendering of evidence, cross-examination and the like, and a cost application is subsequently made, it is not necessarily easy to get a grip on the issues relating to costs.

5 Both parties have filed detailed written submissions.

The Substantive Issues:

6 The Lease between the parties is dated 9 March 2000 and is registered L9547991. It is for term of five years commencing 25 January 2000 expiring 24 January 2005 with an option for renewal for a period of two years conditional upon compliance with Clause 21. Forming part of the lease is the Law Society standard Landlord and Tenant lease and clause 5.1.5 of that document requires the lessee to pay interest on moneys in default. In addition, the Applicant provided to the Respondent a Disclosure Statement and as I understand it there has been no dispute at all as to the content or enforceability of those documents.

7 Nextly, it is educative to review the Tribunal file. The reason for this is simply that the material in this file was the material that would have been (one assumes) put before me as the evidence in the case at the hearing 17 November 2003. That is not to say that the material would not be the subject of objection, nor is it to say that it may have been supplemented by oral evidence. But the purpose of the review is to indicate the arguments that were advanced by both parties. At the outset I have already referred to the terms of the Application filed by the Applicant on 12 August 2003 – effectively, this was a very simple application seeking an order that the Respondent pay alleged arrears in rent (together with interest thereon) said to be in accordance with the terms of the lease.

8 The file shows that the next primary document filed by either party was an Outline of the Respondent’s case, filed by the Respondent on 25 September 2003. This document demonstrates a number of significant matters:

(a) The Respondent was in occupation of the demised premises from January 1995 under a prior lease.

(b) In late 2002 demolition, development and building commenced on adjoining property.

(c) Since the commencement of those works the Respondent alleged that it had suffered numerous physical problems relating to the premises including entry of water, flooding, cracking of internal and external walls, dropping of floor levels, cracking of tiles and skirting boards, dirt, dust and noise "emanating from the adjoining construction site" and so on. The Respondent also complained that it suffered a "loss of use of right of way/access to external toilet".

(d) That the Applicant was notified of the alleged damage and that rectification was sought, that the Applicant entered into correspondence with the developers of the adjoining site to rectify the damage, that notwithstanding repair works "having been carried out" the premises remained in a damaged condition and as a result that since January 2003 ‘the Respondent has withheld half of the monthly rent due to the diminished useability of and disturbance to the premises" which (it was alleged) had continued.

9 The Respondent also alleged that the Applicant was in breach in clause 7.1 of the lease in that it as Lessor "has not maintained the external walls, ceiling and floor of the premises in a state of good condition, and has not fixed structural defects"; that as a consequence and by virtue of clause 8.2 of the lease the Respondent "is not liable to pay rent in respect of any period during which the property cannot be used or is inaccessible" and the Respondent claimed diminished use and consequent reduction in rent; that by virtue of clause 11.1 the Applicant did not "allow the (Respondent) to possess and use the property in any way permitted under the lease without interference from the Applicant, or any person claiming under it and the Applicant also claimed reasonable compensation pursuant to Retail Leases Act clause 34(1) and a reduction in rent due to the "diminished useability" of the premises under Section 36(1).

10 The Respondent sought damages and an order that the rent claimed by the Applicant is not due and owing from the Respondent and an order that the Applicant do work necessary to repair damage and allow free access to the leased property.

11 It would seem that the order of pleadings proceeded in this fashion (ie that the Respondent presented its Outline, then its Submissions, then its affidavits and then the Applicant filed and served its material in reply) on the basis that the claim by the Applicant was not contested other than by way of cross-claim. So, it would not be unreasonable to say that the real case that was before the Tribunal was in fact the claim by the Respondent (as I have set out above) and that was the case that the Applicant had to meet – so that it really was a claim by the Respondent for "damages or restitution", a declaration "that the rent claimed by the Applicant is not due or owing from the Respondent" and an order that the Applicant" do work necessary to repair damage and allow free access to the leased property". Looked at in this fashion, the onus of proof and effectively the conduct of the case moved from the Applicant to the Respondent.

12 This view is supported by the fact that the next chronologically filed document is the Outline of Submissions, filed by the Respondent on 17 October 2003. This document in itself was supported by a report from a Valuer and two affidavits (in considerable detail).

13 The next set of documents came from the Applicant. That included the Applicant’s Outline of Submissions, an expert report and an affidavit (also in considerable detail). There is no need to refer to each paragraph of the Applicant’s submissions. Suffice it to say that they traversed each and every allegation/submission made on behalf of the Respondent, submitted that whatever the action the Applicant took was "prompt and reasonable" in addressing the grievances and complaints of the Respondent, denied that any material produced by the Respondent would have been sufficient for the Tribunal "to conclude any damage or loss alleged by the Respondent was caused by or is referrable to anything not done by the Applicant" and that the Respondent "has and had no basis for withholding rent properly due and payable", that the Respondent’s "contentions and allegations as to fact and frivolous and vexations (and that they) lack any conceivable merit since in its own case the Respondent acknowledges that any disturbance to its business or useability of the premises....was and is due to factors patently external to the control of the Applicant". In short the Applicant submitted that whatever action it took was done in a reasonable and timely fashion and that such matters that may have impacted upon or continued to impact upon the Respondent’s use of the premises did not warrant the making of the orders as sought by the Respondent as against the Applicant.

Analysis:

14 I do not propose to trawl through the evidentiary material was filed with the Tribunal but not put into evidence in these proceedings and is in any event untested. What I have said above outlines the course adopted by the parties in the presentation of their material to the Tribunal prior to the hearing such that it is patently obvious that it was effectively the Respondent’s case rather than the Applicant’s case in that it was effectively conceded by the Respondent that, absent disentitling or reductive factors, the amount claimed by the Applicant was in fact due and owing. On this primary matter there appears to me to have been no dispute. So, when the matter came before me for hearing on 17 November 2003 the amount entered for Judgment was, and this is a clear assumption from the notes made, the amount claimed by the Applicant and brought up-to-date – after all, the Tribunal was asked to note that "the Judgment sum is inclusive of interest and presents payment of rent outstanding to and including 24 November 2003 and is payable on or before 21 November 2003" - and that notation is a clear indication to me that the amount claimed by the Applicant in its original application filed 12 August 2003 was accepted as correct by the Respondent and simply brought-up-date for the purposes of entry of Judgment.

15 In these circumstances counsel for the Applicant orally submitted that there was a "total capitulation by the Respondent". It was an eleventh hour admission that the claim for abatement and the withholding of rent was unjustified and that the proceedings by way of Response were unfounded and without merit. He submitted that the entry of Judgment in its terms was an admission also "that the amount claimed was always due and payable and should have been paid" and that the filing of submissions by way of cross-claim was irresponsible.

16 It is plain from the recital of facts above that the case for the Respondent was based upon alleged disruption to its business and alleged damage to the premises caused by development activities on a neighbouring property. Obviously, this was nothing to do with the Applicant. No submission has been made to me that would have justified the withholding of any rent on the basis of development work being carried out on a neighbouring property. Particularly so, where the Respondent accepted that whatever actions the Applicant took were actions reasonably taken, promptly and in a timely manner and in accordance with the obligations of the Applicant pursuant to the Lease. I conclude that if it was seriously to be argued that the Applicant’s actions or inaction had resulted in damage to the Respondent the one might not unreasonably ask: why did the Respondent agree to entry of Judgment in the amount and in the terms to which I have made reference above? Particularly so, after the Respondent (and the Applicant) had clearly spent a considerable amount of time and effort, and no doubt considerable legal costs, in addressing the issues raised by the Respondent in its initial Outline of its case.

17 Both parties have made careful and detailed submissions on the application by the Applicant that the Respondent pay its costs. The Respondent has submitted that "it is not clear that the Tribunal has a power to make an order for costs when the proceedings have settled prior to the commencement of a hearing, and where no determination has been made". Firstly, in my view that statement is simply incorrect: Although it is true that "the proceedings have settled" this is only correct as to part – there was no settlement on the question of costs. Secondly, there has in fact been a determination – a determination made by consent that Judgment be entered in favour of the Applicant. Unless it could be said that the settlement was all inclusive (certainly not a circumstance in this case) then I am totally unable to see that the Tribunal does not have power to make costs order in appropriate circumstances.

18 It was submitted "that the Tribunal should not make an award of costs in these circumstances because had the matter proceeded to a hearing the Applicant would have been at liberty to make the same application as it is making now". Quite frankly, I do not understand that submission. If the Applicant could make a costs application at the conclusion of a hearing then there seems to be nothing, at law or as a matter of principle, that would stop a successful party from seeking an award of costs at a time after the entry of consent judgment. It is particularly so where it was plain that the costs question was a live question and had not been the subject of settlement and was one that would be hotly pursued by the successful Applicant.

19 It was also submitted that the Tribunal "can be in no doubt in the light of the admissions by the Applicant and the overall circumstances of the case that the Respondent was acting reasonably in pressing his right for a reduced rent and defending the claim generally". I am unable to find in the Respondent’s submission on the question of costs what "admissions by the Applicant" would have resulted in the judicial conclusion that the Respondent was "acting reasonably in pressing its right by reducing the rent and defending the claim generally". Similarly, I am unable to find any supporting material for the general statement "the overall circumstances of this case". Reference was made to Chesterman ACDJ in Wood & Anor v. Bergman (No. 2) [2003] NSWADT 175 were his Honour said: ".... lessees do not act in bad faith only because they seek to benefit from a protection conferred by the (Retail Leases) Act which is not in accordance with the terms of the lease to which they are agreed", but the relevance of that reference to this matter is a mystery to me. His Honour’s referral is to pleading the terms of the Act which in some circumstances gives protection to a lessee in overriding or supplementing the term of a written lease. That is a totally different argument.

20 The Respondent then contended that the "submission on behalf of the Applicant is that a costs order should be made in its favour because the conduct of the Respondent in maintaining its claim was frivolous and vexations". In answer to that the Respondent admitted that it withheld half of the rent due under the lease from late 2002 but that it "did this in response to the circumstances it found itself in through no fault of its own (in that) there were major problems caused by the development on the adjoining property". The Respondent relied on Retail Leases Act Sections 34 and 36 "in the belief that.... his liability for rent was reduced and/or the Applicant was liable to pay the Respondent compensation due to the damage and disturbance caused to the premises (and that as a consequence there was a genuine dispute between the parties caused by the construction work at the adjoining premises)" and in these circumstances it was submitted that "it is obvious that the conduct of the Respondent was in no way frivolous or vexatious".

21 The problem with this submission is simply that firstly Section 34 is nothing to do with adjoining premises. Section 34 is directed to actions taken by "the lessor" and it is plain from the case mounted by the Respondent that the damage (if proven) to the demised premises and to the Respondent’s business was caused not by the Applicant (lessor) but by development work on an adjoining property. Clearly, that work (in itself) falls outside Section 34. There may be some liability on a lessor under this section (eg if a lessor fails to adequately clean and maintain or repair) but it is crystal clear from the material that the Respondent has accepted that whatever actions that were taken by the Applicant as lessor were consistent with its obligations under the Lease and under the Act. Secondly, Section 36 refers to damage to the demised premises or to the building of which the premises forms part. The Respondent pleaded (as I understand it) that the shop was "still useable under the lease but is useability is diminished due to the (alleged) damage and therefore the Respondent’s liability for rent and in amount in respect of outgoings attributable to any period during the useability is diminished caused by the damage". There is no doubt that there was damage and disturbance caused to the Respondent’s business by the development of the adjoining property – there is a wealth of letters from the solicitors for the Applicant to the adjoining owners and others. But that of itself does not necessarily amount to a claim under section 36. Although it is true that section 36(1)(b) permits a reduction in rent where useability of demised premises is diminished, there is nothing in that section that would permit a lessee to somehow or other simply withhold rent (absent agreement with the lessor) and expect that by some magical process the amount withheld would equal the lessee’s reduced liability. It would seem uncontested that the Respondent commenced withholding rent from or on or about 25 December 2002 and if it had not been for the Applicant filing its Application on 12 August 2003 then there was not put in place by the Respondent any magical process that would have determined, or even touched upon, the amount of its reduced liability. It seems to me that the actions of the Respondent were quite unwarranted and effectively caused the Applicant to seek relief in this Tribunal in circumstances where it should have been the Respondent applying to this Tribunal for a reduction in rent due to the alleged diminished useability. In any event, the situation seems to be that the Respondent simply dropped any claim under Section 36 because it consented to Judgment being entered in full in the amount claimed by the Applicant extrapolated forward to 24 November 2003.

22 On 13 November 2003 the solicitors for the Respondent wrote to the Applicant’s solicitors: "We confirm our client’s instructions that he is now prepared to pay all the outstanding rental and interest and withdraw claims in respect to damage". It is significant that this letter was not predicated "without prejudice" and attached to it proposed Terms of Settlement in the following terms:

1. The Respondent pay to the Applicant within 28 days from the date hereof all arrears of rent due together with interest accrued thereon pursuant to the terms of registered Lease No. 9547991 ("the Lease") in respect of the premises known as 155 Liverpool Street Sydney ("the premises").

2. The Respondent withdraws all claims made against the Applicant in respect of damage to the premises the subject of the lease."

23 This was an unconditional surrender by the Respondent and an unconditional withdrawal of all its claims. By this time the case was effectively ready for hearing, all relevant material had been filed and served and it indicates to me that, at least on a prima facie basis, there was absolutely nothing in the respondent's counter claim and that the Applicant was entitled and was always entitled to the amount that was the subject of its claim, and without any reduction under section 36.

24 The Respondent submitted that there was no "abuse of process" in defending proceedings "where there is a dispute as to the value of rent" in circumstances where the Respondent "continued to pay a reduced rent and also at the mediation in May made a proposal for an appointment of an independent valuer in order to determine the issue and that showed that the Respondent acted in good faith". But the plain fact of the matter is that there was in reality (as far as I can see it) no real dispute, no real issue for determination as to the value of the rent because in the end result the Respondent paid the rent in full and without deduction. The Respondent submitted "that the fact that the parties agreed to consent orders before the matter proceeded to formal hearing should not be regarded as an admission of anything other than at that date the parties agreed to settle, and that there were reason on both sides for deciding not to proceed with a hearing which would have involved both parties in further expense". There is some strength in that generality and it would have been stronger had the parties entered into some form of compromise evidenced by the Applicant conceding that there were parts of its case that were weak and which in the spirit of compromise and settlement and to avoid further costs may have resulted in a lesser sum being paid to the Applicant than it claimed. However, that is not the case here. Rather the contrary. Certainly by 13 November the Applicant (if not the Respondent) would have done most of its preparation of hearing, would have worked the matter up for trial and would have been generally "ready to go". Proper preparation of the Applicant’s case would have taken place in accordance with proper legal practice, conferences would have taken place, cross-examination prepared, and so on. It is not the law that one can avoid the costs by simply agreeing to the case of the other party effectively at the doorstep of the Court. There is little doubt in my view that in ordinary civil proceedings this Applicant would have been entitled to its costs. The question is: is it entitled to its costs in this Tribunal?

Determination

25 I have been referred to numerous cases on the question of costs. These I have set out at the end of this Judgment. The most recent case relevant to this issue is the decision of the Appeals Panel in Randi Wiks Pty Limited v. Pokana Pty Limited [2003] NSW ADTAP 27. If further authority is required this decision makes it absolutely plain that:

(a) The question whether the fact that have been proved constituted "special circumstances" was not a question of law but one of fact.

(b) There is a significant difference between Section 109 of the Victorian Civil and Administrative Tribunal Act 1998 and Section 88 Administrative Decisions Tribunal Act 1997, the difference being that while Section 88 requires a finding of "special circumstances", Section 109 lays down a criteria of "fairness". This distinction is crucial and the Victorian Act does not give direct guidance to the interpretation of Section 88.

(c) Arguments by an unsuccessful party that are put forward in good faith and have a reasonable basis do not of themselves entitle a successful party to an order for costs. It may well be different if the unsuccessful party had persisted with an unarguable case.

(d) The fact that one of the objects of the Administrative Decisions Tribunal, as set out in Section 3(b), to the effect that this Tribunal should be "accessible", does not imply that costs should regularly follow the event in disputes between lessors and lessees. If this were the case this Tribunal "would be less, not more, accessible to tenants because if they were unsuccessful they would have to pay the costs of opposing landlords".

(e) In order to award costs the Tribunal must be "satisfied" that there are "special circumstances warranting an award of costs" (Section 88) and "special circumstances" means circumstances that are "out of the ordinary, but without having to be extraordinary or exceptional".

26 The issue of costs was further considered by Judicial Member McDonald in Kao v. Lim (No. 2) [2003] NSW ADT 32. It is plain that "in order to satisfy the test of "special circumstances" one must find circumstances that are out of the ordinary, but without having to be extraordinary or exceptional, and those special circumstances would warrant an award of costs" (Gizah at 29). That is the law. It has been the law now for some considerable time. Costs do not simply "follow the event" as in the civil law but need to satisfy the above test. As Judicial Member McDonald pointed out, the "question to be determined is whether in the circumstances ... there are special circumstances that warrant the making of an order for costs." [Kao at 38]. As I pointed out in Randi Wiks Pty Limited v. Pokana Pty Limited [2003] NSWADT (11 March 2003 – unreported) "The plain fact that a party wins or loses or is successful or unsuccessful on a point does not mean they are entitled to or should be the subject of a cost order. I think that principle is plain. What the Parliament has done in section 88 is leave it to the relevant Tribunal to determine what are special circumstances in the particular circumstances of a matter before it and as there are many permutations and combinations of what may amount to special circumstances then that simply requires the Tribunal to search and find, if there are any special circumstances, in the particular matter". Further, as Judicial Member McDonald pointed out in Kao at 42 the Tribunal has to be "satisfied that the circumstances warrant (an) interference with the position that each party should bear their own costs".

27 I do not propose to make any further reference to the law or the now numerous decisions in this Tribunal, both at first instance and on appeal, on the interpretation of Section 88 in the context of the Retail Leases Division. Those principles are now clear and do not have to be repeated.

28 It is significant in this case counsel for the Respondent did not seek to justify the legal basis of the Respondent’s Outlines nor the relevance of its filed evidence to the legal arguments that the Respondent may have mounted. It seems plain that the complaint of the Respondent was a complaint, not against the Applicant but rather against the neighbouring developer. The Respondent’s counsel submitted that the "purpose of costs order is compensatory rather than punitive. The tenant has been in possession for many years, the landlord has received his full amount of rent in circumstances where much disturbance was caused to the tenant". All of that may be quite correct but the plain fact of the matter is that the landlord only received the full amount of its rent because it commenced proceedings in this Tribunal in circumstances where it should not have been so required had the Respondent focused its attention on the terms of the lease, the terms of the Act, the cause of the problem and what was required of it. It seems plain that the disturbance caused to the Respondent was that caused by a next door developer, that the Applicant had done everything reasonable and proper and had behaved in an appropriate manner and that the withholding of rent was unjustified, the claim for damages was misconceived and the Respondent’s Defence was simply not maintainable. Had the Respondent focused its attention on the true issues then the Applicant would not have been forced to seek relief in this Tribunal (in which it was totally successful) and would not have been obliged to incur otherwise unnecessary costs and disbursements through no fault of its own as a direct result of and through the fault of the Respondent.

29 It is difficult to conclude, on the facts as put before me, that "the arguments of the Respondent had been put forward in good faith and had a reasonable basis". If that were the case then there would not be "special circumstances" but this seems to me to be a case where the case mounted by the Respondent was simply misconceived, unsupportable and not maintainable and in the absence of cogent argument to the contrary the entry of Judgment in the amount and in the terms as specified must lead one inevitably to that conclusion.

30 The categories of "special circumstances" are not closed by any means – see Law Society of NSW v. Symonds (1995) 2LPDR10 and the unreported decision of Attorney General of NSW v. R Gouder (Legal Services Tribunal No. 23 of 1995, 16 April 1997) in which latter case the Tribunal stated that "each case must depend upon its own particular facts". In my opinion there are "special circumstances" in this particular case and in my view unsuccessful parties should be actively discouraged from mounting a case or defence that is hopeless (see Kolavo v. Pitsikas & Anor [2003] NSWCA 59), and no submission was made to me that would have supported in any fashion at all the case as pleaded by the Respondent.

31 When parties come to this Tribunal (or, indeed, to any Court) they have an obligation, not only to the Tribunal but also to the other party to the litigation, to put forward arguments in good faith that have a reasonable basis. In my view the advancement of a hopeless or an unarguable case mounts to "special circumstances" within the meaning of Section 88 such that absent disentitling factors the successful party is entitled to a costs order in its favour.

32 There are two further matters that go to the question of costs. Firstly, it appears from the material that prior to the parties entering into the lease commencing 25 January 2000 a firm of Valuers was commissioned to determine the appropriate market rent applicable to the demised premises. By letter dated 18 February 2000 the Valuers stated: "that there was a "development proposal/consent to redevelop certain property adjoining the subject premises ..." (and) "that this factor was taken into account in respect to the rental determination for the subject premises." In the next following paragraph the Valuers said that if "at some time in the future the parties to the Lease agree to have a rental valuation carried out in respect to the premises (ie due to the disturbance caused by the construction of the project adjoining) the following information would be required:-

(a) evidence of disturbance (if any) caused to the subject premises;

(b) timeframe of the said disturbance; and

(c) agreement from the parties to the lease on the valuation method (ie before and after approach).

It is plain from this that the Respondent "knew or ought to have known of the existence" of the next door development proposal and that any such development (if approved) would cause disturbance; and that "this factor was taken into account in respect of the rental determination". Consequently, it is difficult to accept a submission that somehow or other the problems faced by the Respondent, although no doubt genuine, can be sheeted home to the Applicant or any conduct of the Applicant.

33 The second factor is this: by letter dated 24 April 2003 the solicitors for the Applicant wrote to the solicitors for the Respondent a letter styled "Without Prejudice save as to costs" putting forward an offer that the Respondent "pay the full amount of arrears and rental plus 50% of the interest due and payable within 14 days of the date of this letter ... (and thereafter) pay the full amount of rental punctually on the due date." This letter was said to be a Calderbank letter. For the purposes of costs it probably does not matter whether it was a Calderbank letter or not because the law now requires (correctly in my view) that all attempts to resolve litigation be taken into account on the question of costs.

34 The material shows that there were numerous opportunities for the Respondent to withdraw its Defence/Counter-Claim but on all these occasions the Respondent failed to accept that it was liable for the full amount of the rent. It seems to me that the letter 24 April 2003 (a letter properly written before action and in a genuine attempt to resolve the dispute) was a letter of the type which, absent disentitling or reductive factors, would have properly entitled the successful Applicant to, not only an order for costs in its favour in this Tribunal but also an order that those costs be paid on an indemnity basis. Taking into account the letter, taking into account the history of the matter as I have set out above and bearing in mind the general principles that apply to indemnity costs (eg an indemnity order and certification for senior counsel was made by the Court of Appeal in Kolavo; see also Green v. Schneller [2001] NSWSC 1215) in my view the Applicant is entitled to its costs on an indemnity basis.

35 Counsel for the Respondent submitted that the Tribunal may determine the extent of costs to be paid and as a consequence the Tribunal should take into account that the solicitor for the Applicant is "also the principal of the Applicant" and as a consequence the Applicant’s claim for costs should be treated in the same manner as that of a litigant and should be restricted to actual disbursements, it being contended that the solicitor "is not entitled to an amount to represent time and effort spent in the preparation and conduct of the proceedings" and that any "costs order" should be restricted to counsel’s fees. It was further submitted that the Tribunal "should also take into account that the solicitor for the Applicant would have been obliged to attend to many of the matters involved here due to his responsibility as a landlord in dealing with the action of the developers". At this stage I am not prepared to make any such restrictive order. It seems to me that if that argument is to be properly advanced it will need to be properly addressed by the Applicant and the time to deal with that aspect is at the point of assessment. However, if the Respondent wishes to agitate an argument that the costs order be restricted in some manner as submitted then I will grant liberty to the Respondent, if so advised, to re-list the matter before me for oral argument limited to this issue only. If it is to be seriously argued then cogent supportable evidence in support would need to be led to support the contentions.

Orders:

1. The Respondent is to pay the Applicant’s costs of and incidental to these proceedings, costs to be assessed on an indemnity basis.

2. Liberty granted to the Respondent to apply, if so advised, for any variation of that order consistent with the submissions of its counsel dated 17 December 2003, paragraphs 30, 31 and 32.