Gu v Gold Valley Investments Pty Ltd (No 2) [2006] NSWADT 1 (9 January 2006)

Last Updated: 23 January 2006

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL RETAIL LEASES DIVISION

CITATION: Gu v Gold Valley Investments Pty Ltd (No 2) [2006] NSWADT 1


PARTIES: APPLICANT
Zhi Yun Gu
RESPONDENT
Gold Valley Investments Pty Ltd



FILE NUMBERS: 045073

HEARING DATES: 30/03/05-31/03/05

SUBMISSIONS CLOSED: 25/08/2005



DECISION DATE: 09/01/2006

BEFORE: Boyce P - Judicial Member





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

CASES CITED: Alessa Pty Ltd v Total & Universal Pty Ltd [2001]
Citadin Pty Ltd v Eddie Azzi Australia Pty Ltd & Anor (No2) [2001] NSWATAP31
Colleja v Malli [2001] NSWADT 20
Forma v BHP Co. Ltd. [1999] NSW ADT 59
Gizah Pty Ltd v AXA Trustee Ltd (No 2) [2001] NSWADT 164
Gould v Vaggelas (1998) 157CLR215
Hoblos v Marchese [1999] NSW ADT 127
Holpitt Pty Ltd v Varimu Pty Ltd [1991] FCA 269; (1991) 103 ALR 684
Langley v UNSW (1984) EOC 92-018NSWADT 150
Sotiropoulos v Mattana Coiffure Pty Ltd (No.2) [2004] NSWADTAP 43
Townsend v SRA [1999] NSWADT 104
Trustees of the Pious Society of St Charles v Vodap P/L & Ors (No.2) [2004] NSWADT 113
Wood and Anor v Bergman (No. 2) [2003] NSWADT 175 Randi Wiks Pty Ltd v Pokona Pty Ltd [2003] NSWADT AP 27 Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72

APPLICATION: Costs

MATTER FOR DECISION: Costs


APPLICANT REPRESENTATIVE: R Johnston, barrister

RESPONDENT REPRESENTATIVE: M Ellicott, barrister

ORDERS: 1. Tribunal orders that the Applicant, Mr Gu, pay to the Respondent, Gold Valley Investments Pty. Ltd., its costs reasonably and properly incurred in file number 045073
2. Such costs be assessed on a party/party basis
3. The amount of such costs: -i. may be agreed between the parties within 21 days of the date of this decision; or
ii. failing agreement being reached within that time such costs to be assessed
iii. Costs will be payable within 21 days of agreement as to the amount of costs or the amount assessed, whichever is the earlier.


Reasons for Decision:

REASONS FOR DECISION

INTRODUCTION

1 This is an application by the Respondent, Gold Valley Investments Pty Limited (called in this decision "GVI") for an order for costs against the applicant Zhi Yun Gu (called in this decision "Mr Gu").

2 Mr Gu made an application for a declaration of rights, obligations and liabilities under a lease and for payment of money against GVI. The Tribunal gave its decision on 22 July 2005 and dismissed that application.

3 Application File Number 045118 by GVI was heard at the same time as Mr Gu’s application. The application by GVI was successful and an order for damages was made against Mr Gu as part of the decision given on 22 July 2005. In the course of the hearing of the principal matters GVI submitted it did not seek an order for costs in relation to proceedings file number 045118, but made brief submissions in relation to special circumstances entitling GVI to an award of costs in respect of proceedings file number 045073.

4 In the orders made on 22 July 2005 the parties were invited to file written submissions in relation to the issues of costs in application 045073 within 28 days of the date of the reasons for the decision in the principal matters. GVI has made submissions in respect to its entitlement to costs.

5 Mr Gu has not made any further submissions in relation to GVI’s application for costs.

Conduct of Proceedings

6 Mr Gu’s application filed on 17 June 2004 and given file number 045073 was originally a combined retail tenancy and unconscionable conduct claim under Section 71 and 71A of the Retail Leases Act 1994 ("RLA").

7 The Respondents to the application were GVI, Lamonthe Pty Limited (called in this decision "Lamonthe") and Derisi Pty Limited (called in this decision "Derisi").

8 Lamonthe and Derisi were the Lessors to Mr Gu when he entered into the Lease for the premises. GVI purchased the premises from Lamonthe and Derisi during the term of Mr Gu’s lease of the premises.

9 Mr Gu did not pursue his claim for unconscionable conduct.

10 On the first day of hearing of the principal matters, 30 March 2005, proceedings in file number 045120 and 045073 were settled as between Mr Gu and Lamonthe and Derisi.

11 On that day Mr Gu sought leave to amend his claim against GVI. After hearing argument by both parties the Tribunal ordered that Mr Gu be granted leave to amend his claim but reserved any decision as to GVI being entitled to costs.

12 Mr Gu’s amended application in file number 45073 then became: -

i. a declaration pursuant to Section 72(i)(F)(iii) of the RLA that the Applicant validly terminated the lease dated 20 June 2001 registered number 8153908 of premises know as Shop 16 and 16A Miller Community Shopping Centre, Cartwright Avenue, Miller between the applicant’s predecessors entitled Lamonthe Pty Limited and Dirisi Pty Limited as Lessor and the Respondent Gold Valley Investments Pty Limited;
ii. a declaration that the Applicant is not liable to pay damages or compensation to the Respondent and specified as $45,611.57, Gold Valley Investments Pty Limited.
iii. an order that GVI pay Mr.Gu’s costs

13 During the first day of the hearing an accountant’s report prepared by Mr Kent Yu was relied upon by Mr Gu in relation to alleged losses, said to have flowed from GVI’s actions as the Landlord. Mr Yu’s report indicated that the business was conducted by Kool Discounts Pty Limited (called in this decision "KDPL") which was at all relevant times the effective owner of the business conducted at the premises leased by Mr Gu from GVI.

14 KDPL were not a party to the proceedings against GVI.

15 It is submitted by GVI that there was no evidence before the Tribunal as to the shareholdings of KDPL or their value. I agree with this submission as no such evidence was given in the principal matters.

16 It is further submitted by GVI that Mr Gu was not in a position to sue to recover losses suffered by KDPL. The High Court has held that a shareholder may only sue to recover losses which it itself has suffered, not losses which are reflective of losses suffered by the company; Gould v Vaggelas (1983) 157CLR215

Legislative Authority for Costs in the Administrative Decisions Tribunal

17 Section 77A of the RLA expressly provides that the Tribunal may Tribunal may award costs under Section 88 of the Administrative Decisions Tribunal Act in respect of proceedings commenced by an application under the RLA.

18 Section 88(1) of the Administrative Decisions Tribunal Act provides that the Tribunal may award costs in relation to proceedings in the Tribunal but only if it is satisfied that there are special circumstances warranting an award of costs.

Principles as to Award of Costs

19 There have been a number of decisions in the Retail Leases Division of the Tribunal in relation to costs. These decisions give guidance on the interpretation and application of Section 88(1) of the Administrative Decisions Tribunal Act.

20 Tribunal Practice Note 12 sets out guidelines for the granting of costs. They are, inter alia, as follows: -

"whether a party has conducted the proceedings in a way that disadvantaged another party to the proceeding by conducts such as:

i. failing to comply with an order or a direction of the Tribunal without reasonable excuse;
ii. failing to comply with this act, the regulations, the rules or enabling an enactment;
iii. asking for an adjournment as a result of (i) or (ii);
iv. causing an adjournment;
v. attempting to deceive another party or the Tribunal;
vi. vexatiously conducting the proceeding;
vii. whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings;

the relative strengths of the claims made by each of parties, including whether a party has made a claim that has no tenable basis in fact or law;
in matters under the Retail Leases Act 1994 were a party lodges an unconscionable conduct claim instead of a retail tenancy claim and is found that there is no basis for the unconscionable conduct claim;
where an appeal is lodged and the appeal panel considers the appeal was without any real prospect of success.

21 In Gizah Pty Limited v Axa Trustees Limited (No 2) [2001] NSW ADT 164 at [29] the Tribunal defined "special circumstances" as:

"consequently, I am of the opinion that in order to satisfy the test "special circumstances" one must find circumstances that are out of the ordinary, but without having to be extraordinary or exceptional but those special circumstances would warrant an award of costs".

22 In Alessa v Total and Universal Pty Limited [2001] NSW ADT 150 at [4-6] the Tribunal found:

"4. This Tribunal has rejected the general proposition that because of the commercial character of retail lease relationships, costs should follow the event: Townsend v SRA [1999] NSW ADT 150 at [104]. It has done so notwithstanding the tendency to a contrary view in Victoria in retail leases cases. See the review of the Victorian position by the Appeal Panel of this Tribunal in Citadin Pty Limited v Eddie Azzi Australia Pty Ltd & Anor (No2) [2001] NSW ATAP 31.
5. The meaning of "special circumstances" has been considered in cases in a number of decisions of this tribunal. Descriptions of such circumstances range from "circumstances which take the matter out of the ordinary courses (see Holpitt Pty Ltd v Varimu Pty Ltd [1991] FCA 269; (1991) 103 ALR 684 referred to by this Tribunal in Hoblos v Marchese [1999] NSW ADT 127), to circumstances where the claims "lacked any conceivable merit in fact or law", the purpose of a costs order in those circumstances being described as a measure to prevent "the gross abuse of the legislation by frivolous and vexatious and misconceived proceedings". Forma v BHP Co. Ltd [1999] NSW ADT 59 quoting Hutley JA in Langley v UNSW (1984) EOC 92-018 at 75 468.
6. These analyses of the test to be applied make it clear that the circumstances must be seriously beyond the usual or ordinary pursuit of a claim so that it would be seriously unfair to a party to proceedings before the Tribunal not to be awarded some or all of its costs where it has been successful."

23 Gizah No 2 at [22] and [33-34] explained the significance of the Retail Leases Division being unique within the Tribunal, in that it is the sole Division of the Tribunal to deal with commercial disputes between parties engaged in trade and commerce for reward. Wood and Anor v Bergman (No.2) [2003] NSWADT 175 at [11]:

11. It is recognised that the Retail Leases Division is unique within the Tribunal, in that it alone deals with commercial disputes between parties who are engaged in trade and commerce disputes between parties who are engaged in trade and commerce for reward. In Gizah, at [22] and [33 – 34], the significance of this for costs orders was explained as follows. Whereas in the context of appeals from administrative decisions the requirement of ‘special circumstances’ might be interpreted so as not to discourage proceedings by a private individual on account of the risk of an adverse costs order, no such consideration should apply in the context of retail lease disputes. The ‘commerciality’ of the retail Leases Division calls for an interpretation quite different from that which might be adopted in any other Division of the Tribunal."

24 In Trust Company of Australia Limited v Craig and Ors [2005] NSWADT 65 at [44] Tribunal held:

"the commencement of proceedings should only be carried our after the greatest of consideration to ensure that proceedings are not commenced in circumstances where they should not have been commenced

and at paragraph [45]:

"the withdrawal of the proceedings in the circumstances of this case amounts to "special circumstances" within the meaning of the Act and the Respondent is entitled to a costs order in their favour, subject to appropriate assessment.

GVI’s Submissions

25 GVI submitted that Mr Gu’s claim for damages was based on a form of action unknown to law and therefore never had any legal basis and that the relevant law was fully considered by the High Court in Gould v Vaggelas [1983] 157 CLR215 where it held that a shareholder may only sue to recover losses which it itself has suffered, not losses that are reflective of losses suffered by the Company. It is submitted, that Mr Gu was suing for losses which were not his losses but those of KDPL and that there was a lack of any legal foundation for the claim and therefore must have a significant implication in respect of costs.

26 GVI further submitted that the following constitutes special circumstances within the meaning of Section 88(1) of the Administrative Decisions Tribunal Act: -

a. Mr Gu withdrew his damages claim on the second day of the hearing;
b. Mr Gu’s claim for damages never had any legal basis. Any loss or damage that may have flowed from GVI’s alleged acts or omissions was suffered by KDPL, Mr Gu’s company and not Mr Gu himself;
c. KDPL made no claim for damages against GVI;
d. without any damages claim remaining, Mr Gu was obliged to seek leave to further amend his application (during the hearing) and the orders sought were in the nature of a cross application to GVI’s claim in file number 045118. No separate proceedings were necessary for Mr Gu to make his "proper" claim;
e. GVI suffered substantial prejudice in wasted time and costs in addressing Mr Gu’s application in file number 045073 and the evidence relied upon in file number 045073 from 17 June 2004 up to and including the hearing;
f. proceedings in file number 045073 were frivolous/or vexatious. The application lacked any conceivable merit in fact or in law.

Conclusions

27 The applicant, Mr Gu maintained his application against the GVI through to the second day of the Hearing. Having reached settlement with Lamonthe and Derisi on the first day of the hearing it appeared that Mr Gu reconsidered his application and came to the Tribunal.

28 His original application was an application and subsequent points of claim made on or about 24 September,2004 with allegations of misrepresentations, seeking damages for loss of income and repayment of rent, seeking remedies in the nature of damages for loss of income and repayment of rent, for unsafe and unsuitable premises including allegations of inadequate air conditioning system to the premises.

29 The amendment to the application during the Hearing was for a declaration that Mr Gu had validly terminated his lease, and that he was not liable to pay any damages or compensation to GVI together with payment by GVI of Mr Gu’s costs.

30 This amendment caused a vastly different application to be answered by the Respondent from that which was sought at the commencement of the Hearing.

31 GVI has submitted that Mr Gu’s conduct of the proceedings amounted to special circumstances within the meaning of Section 88(1) of the Administrative Decisions Tribunal Act.

32 If the Tribunal finds that the circumstances in the conduct of the application are out of the ordinary without having to be extraordinary or exceptional, those circumstance warrant an award of costs; Ghiza Supra. The circumstances of the conduct of an application must be seriously beyond the usual or ordinary pursuit of a claim so that it would be seriously unfair to a party to proceedings before the Tribunal not to be awarded some or all of its costs if it is successful; Alessa Supra.

33 I accept that Mr Gu’s conduct of the proceedings were such that they satisfied the guidance given in Alessa and Ghiza. That the circumstances were out of the ordinary and seriously beyond the usual or ordinary pursuit of a claim so as to entitle GVI to an award of costs.

34 The conduct of the proceedings in file number 045073 by Mr Gu amount to special circumstances upon which this Tribunal can make an award of costs. The submissions made by GVI include such circumstances as amount to special circumstances.

35 The claim for damages by Mr Gu against GVI was fundamentally flawed as he had no legal basis for making such a claim as it was KDPL which conducted the business and it was not a party to the proceedings. GVI had come to the Tribunal ready to answer the claim made against it in respect of the points of claim made by Mr Gu on 24 September 2004. On the first day of the hearing Mr Gu threw away that application in favour of an amended application, none of the orders being sought, having been foreshadowed in any previous application or points of claim raised by Mr Gu. The Respondent, GVI was at a disadvantage in that in then had to answer the claim by Mr Gu for the declarations that he then sought as a result of his amended application.

36 As I granted leave to permit Mr Gu to amend his application on the first day of the hearing so that the matters of dispute between the parties could be ventilated in the hearing, I am not prepared to make a finding that the proceedings in file number 045073 were frivolous/or vexatious.

37 It is sufficient that where an applicant seeks to amend his application after the start of the hearing to such an extent that the orders sought bear little resemblance to the orders sought in the original application that the respondent in these proceedings ought to be entitled to an award of costs as such conduct amounts to special circumstances and it would be seriously unfair to the respondent not to be awarded its costs upon being successful in response to the application.

38 Accordingly, the Respondent is entitled to an award of costs in its favour on a party/party basis.

Orders

1. Tribunal orders that the Applicant, Mr Gu, pay to the respondent, Gold Valley Investments Pty. Ltd., its costs reasonably and properly incurred in file number 045073.
2. Such costs be assessed on a party/party basis.
3. The amount of such costs: -

i. may be agreed between the parties within 21 days of the date of this decision; or
ii. failing agreement being reached within that time such costs to be assessed.
iii. Costs will be payable within 21 days of agreement as to the amount of costs or the amount assessed, whichever is the earlier.