Profilio v Coogee Bay Village Pty Ltd (No 2) [2009] NSWADT 319 (21 December 2009)

Last Updated: 24 December 2009

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL

CITATION:
Profilio v Coogee Bay Village Pty Ltd (No 2) [2009] NSWADT 319


DIVISION:
RETAIL LEASES DIVISION

PARTIES:
First Applicant:
Joe Profilio

Second Applicant:
Rozi Sajko

Respondent:
Coogee Bay Village Pty Ltd




FILE NUMBERS:
085127

HEARING DATES:
on the papers

SUBMISSIONS CLOSED:
6 October 2009



DATE OF DECISION:
21 December 2009

BEFORE:
Chesterman M - Deputy PresidentWard R - Non-Judicial Member





LEGISLATION CITED:
Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994
Vexatious Proceedings Act 2008

CASES CITED:
Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81
Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164
Profilio v Coogee Bay Village Pty Ltd [2009] NSWADT 211
Salon Today Pty Ltd v M M I R Pty Ltd [2009] NSWADT 71

TEXTS CITED:


APPLICATION:
Retail lease – costs – interim award of costs

MATTER FOR DECISION:
Costs


REPRESENTATION:
Applicant Representative:

First Applicant:
In person

Second Applicant:
J Profilio, agent
Respondent Representative:
T Rogers, barrister


ORDERS:
The Applicants’ application for costs filed on 31 August 2009 is dismissed.


Reasons for Decision:

REASONS FOR DECISION

Introduction

1 This decision deals with an application for costs that has been made by the applicants in Tribunal proceedings before the determination of all questions raised in the proceedings has occurred.

2 In the proceedings, the Applicant lessees, to whom the Respondent lessor had granted an exclusive right to use the leased premises for the purposes of an ‘internet café’, claimed damages from the Respondent on the ground that the lessee of adjacent premises, carrying on business as a travel agent, provided internet access to customers pursuant to a clause in the lease that it had obtained from the Respondent.

3 The Tribunal directed that the question of liability should be argued and determined first. The issue of remedies was left for a later hearing, if this proved necessary.

4 The premises leased to the Applicants, Mr Joe Profilio and Ms Rozi Sajko, by the Respondent, Coogee Bay Village Pty Ltd, formed part of a retail shopping centre owned by the Respondent. The lease was therefore governed by the Retail Leases Act 2004 (‘the RL Act’).

5 One of the grounds on which the Applicants claimed damages is that the Respondent engaged in unconscionable conduct. Accordingly, the Tribunal has been constituted in these proceedings in accordance with clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’). It has been constituted by a Deputy President who is a member of the Retail Leases Division, assisted by an appropriately qualified member (Non Judicial Member Ward), acting in an advisory capacity only. Because no second advisory member was available to assist at the hearing, the Tribunal has proceeded with only one such member. At the commencement of the hearing, it drew the parties’ attention to the fact that it was authorised to do so by sub-paragraph (4)(a) of clause 4 of Schedule 2, Part 3B.

6 In a decision delivered on 10 August 2009 (Profilio v Coogee Bay Village Pty Ltd [2009] NSWADT 211 – hereafter ‘the liability decision’), the Tribunal determined the issue of liability in favour of the Applicants. The principal orders that it made were as follows:-

1. The Tribunal declares as follows:-

(a) that the Respondent, through granting or having granted to Backpacker World Travel Pty Ltd a lease of premises at 194 Coogee Bay Road, Coogee, on terms that permitted the lessee to use these premises for the provision of internet and email services, was in breach of an obligation under its current lease of premises at 192 Coogee Bay Road, Coogee to the Applicants, such obligation being to ensure that the Applicants had exclusive use of these premises as an internet café; and

(b) that the Respondent is liable to compensate the Applicants for the economic harm resulting from this breach.

2 (a) Any application for costs of the proceedings so far must be filed and served, with supporting submissions, within 28 days of the date of this decision. The submissions must put forward grounds for making such an order before the proceedings have come to an end.

(b) The opposing party must file and serve submissions in reply within a further 28 days.

(c) Unless reasons are advanced for a hearing to be conducted, this matter of costs will be resolved ‘on the papers’, pursuant to s 76 of the Administrative Decisions Tribunal Act 1997.

7 The Tribunal also specified a date for further directions, in order that arrangements for a hearing on damages might be made.

8 In its decision at [188], the Tribunal gave the following reasons for making Order 2:-

In a document filed during the hearing, the Applicants signalled that if successful on liability, they might wish to apply forthwith for an award of costs in relation to the proceedings so far. This is not normally the approach taken by the Tribunal. Good grounds must be shown for the making of any costs order before proceedings have come to an end. But the Applicants are entitled to put forward such grounds if they so wish.

9 On 31 August 2009, the Applicants filed an application for a costs order, with supporting submissions. Accompanying the submissions, which were prepared by Mr Profilio, was a large quantity of documentation, chiefly comprising copies of correspondence between the parties and their representatives. The submissions themselves are confused and repetitive and are not always easy to follow.

10 On 6 October 2009, the Respondent filed submissions in reply, prepared by Mr Rogers of counsel.

Relevant legal principles

11 By virtue of section 77 of the RL Act, awards of costs in Tribunal proceedings under this Act are governed by section 88 of the ADT Act. So far as is relevant to the present decision, section 88 provides:-

(1) Each party to proceedings before the Tribunal is to bear the party’s own costs in the proceedings, except as provided by this section.

(1A) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that it is fair to do so having regard to the following:

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings by conduct such as:

(i) failing to comply with an order or direction of the Tribunal without reasonable excuse, or...

(vi) vexatiously conducting 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) any other matter that the Tribunal considers relevant.

12 The current version of section 88, in which the criterion of ‘fairness’ stated in subsection (1A) has replaced a rule that in the absence of ‘special circumstances’ no costs might be awarded, became operative on 1 January 2009. In cases applying the earlier test (see for example Gizah Pty Ltd v AXA Trustees Ltd (No 2) [2001] NSWADT 164), it had regularly been held that because of the ‘commerciality’ of the Retail Leases Division the interpretation of the phrase ‘special circumstances’ should differ significantly from the interpretation that might be adopted in any other Division of the Tribunal. In Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81, the Court of Appeal held that the costs of proceedings in the Tribunal under the RL Act, both at first instance and on appeal, should be awarded against the lessors. At [60], Santow JA said: ‘While a finding of "serious unfairness" is not a prerequisite to determining that there are special circumstances, it is nonetheless a highly relevant consideration.’

13 Because the criterion is now one of ‘fairness’, as contrasted with the notion of ‘serious unfairness’ mentioned by Santow J, there are good grounds for believing that costs orders should be more readily obtainable. In Salon Today Pty Ltd v M M I R Pty Ltd [2009] NSWADT 71 (a case within the Retail Leases Division), the Tribunal advanced this proposition. At [72], it stated:-

What the Parliament has done, in its 1 January 2009 amendments, is recognise that there is a need for this Tribunal to be more flexible and widen the scope of a litigant’s entitlement to costs. This is a concept generally that is now accepted in this Division, and certainly touched upon by the Court of Appeal in Cripps, and the result of this re-assessment by the Parliament is a different test, a test of fairness, having regard to a number of parameters/factors.

14 As stated by the Tribunal in Gizah at [25], an order under section 88 can apply to the costs of part only of the relevant proceedings. Accordingly, the fact that the order for which the Applicants have applied is limited in this way is not enough of itself to defeat their application.

15 The Tribunal said, however, in the liability decision at [188] that the Tribunal does not normally make orders before proceedings have come to an end. It indicated that ‘good grounds’ must be shown for the making of any such order. Neither of the parties questioned this general proposition in their submissions.

16 In contending that it would be ‘fair’ to make a costs order in favour of the Applicants, Mr Profilio relied specifically on four of the factors listed in subsection (1A) of section 88. In outlining his arguments and the opposing arguments put by Mr Rogers, it is convenient to consider each of these factors in turn.

Failing to comply with an order or direction of the Tribunal without reasonable cause (s 88(1A)(a)(i))

17 Mr Profilio maintained that on three separate occasions the Respondent failed without reasonable cause to file and serve its expert evidence in accordance with Tribunal directions. In directions of this nature given on 27 November 2008, 5 March 2009 and 29 April 2009, the dates stipulated for filing and serving this evidence were respectively 25 February, 9 April and 29 May 2009. According to Mr Profilio, the documents that the Respondent required before preparing this evidence were available to it as early as 5 March 2009. But it still did not comply with any of these directions.

18 Mr Rogers acknowledged that if a failure of this nature was established by appropriate evidence, this might be an occasion where costs could fairly be ordered before the proceedings had come to an end. He maintained however that Mr Profilio had failed to adduce any evidence in support of his claim. He also maintained that the Applicants themselves had not complied with directions given during 2008 for the filing and service of expert evidence.

19 In determining this aspect of Mr Profilio’s argument, it is relevant first to point out that on his own showing the Respondent did not have access to the requisite documents until about a week after the first stipulated date (25 February 2009) had passed. Furthermore, the notes of directions hearings contained in the Registry’s file do not confirm Mr Profilio’s assertion that the Respondent was required to file and serve its expert evidence by either of the two later dates (9 April and 29 May 2009). A record of the directions hearing on 29 April 2009 shows instead that on that day the Applicants were ordered to comply by 5 May 2009 with summonses requiring production of certain financial records relating to their business.

20 For these reasons, the Tribunal agrees with Mr Rogers’ contention that the Applicants’ claim based on section 88(1A)(a)(i) lacks evidentiary support.

Conducting the proceedings vexatiously (s 88(1A)(a)(vi))

21 At different stages in his written submissions, Mr Profilio relied on various instances of alleged behaviour by the Respondent which he claimed to amount to ‘vexatious’ conduct of the proceedings. He also made a broad and unspecific claim that the Respondent had harassed and intimidated the Applicants.

22 As far as can be ascertained from his submissions, these instances were as follows: (a) the Respondent maintained, in a letter written by its solicitor during February 2008, that it would only withdraw its opposition to what it claimed to be the unauthorised presence of an ATM in the leased premises if the Applicants agreed to enter into a new lease which had no exclusivity clause and provided for a higher rent; (b) it offered during August 2008 to withdraw its opposition to the ATM if the Applicants discontinued the Tribunal proceedings; (c) it threatened during September 2008 that it would appeal if it was unsuccessful at first instance; and (d) it refused during April 2009 to extend the time during which the Applicants could exercise an option to renew their lease, with the consequence that the case had to be heard in two stages (liability first, then damages).

23 The copies of correspondence annexed to Mr Profilio’s submissions substantiated the first three of these allegations, but did not contain any evidence bearing upon the fourth. Equally, the Tribunal’s file did not disclose the extent, if any, to which the decision to split the hearing was attributable to the Respondent’s stance regarding exercise of the option.

24 In support of this part of his argument, Mr Profilio referred to the definition of ‘vexatious proceedings’ in section 6 of the Vexatious Proceedings Act 2008. He relied particularly on the statement in section 6(d) that ‘vexatious proceedings’ includes ‘proceedings conducted in a way so as to harass or annoy, cause delay or detriment, or achieve another wrongful purpose’.

25 In his submissions, Mr Rogers interpreted the alleged vexatious conduct as being confined to the Respondent’s threat of an appeal and its unspecified harassment and intimidation of the Applicants. He maintained that these were ‘not elements indicative of vexatiousness’ and that ‘vexatiousness by a Respondent can only occur by prosecution of applications which on their face were themselves vexatious’.

26 While not necessarily concurring with this last proposition put forward by Mr Rogers, the Tribunal considers that the specific matters alleged by Mr Profilio do not amount to ‘vexatious conduct’ of these proceedings. It would point out also (a) that the first of these matters preceded the instigation of the proceedings, which occurred in June 2008 and (b) that it is not prepared to attach any weight to a broad and unsubstantiated allegation of ‘harassment’ and ‘intimidation’.

27 For these reasons, the Applicants’ claim that their application for costs derives support from section 88(1A)(a)(vi) is rejected.

Unreasonably prolonging the time required to complete the proceedings (s 88(1A)(b))

28 Mr Profilio submitted that the following conduct of the Respondent caused the proceedings to be unnecessarily prolonged: (a) failing without good reason to comply with directions for the filing of expert evidence; (b) refusing to extend the time during which the Applicants could exercise their option of renewal, with the consequence that the case had to be heard in two stages; (c) seeking an interlocutory order on 29 April 2009 requiring the Applicants to produce a large quantity of unnecessary documents in response to a summons; and (d) engaging in unnecessarily lengthy cross-examination of the Applicant’s witnesses at the hearing on liability, which lasted for six days.

29 It will be observed that Mr Profilio raised the first two of these matters in the context of submissions by him that have already been dealt with in this judgment. For the same reasons as are set out above (see [19 – 20] and [23]), they do not provide any assistance to his claim that the Respondent has unreasonably prolonged the time required to complete these proceedings.

30 As to the third matter, the Tribunal’s record of the directions hearing on 29 April 2009 discloses, as mentioned above at [19], that the order made related to compliance by the Applicants with summonses addressed to them. They were required by the order to produce certain specified documents by a specified date. Far from indicating that the Respondent unreasonably prolonged the proceedings, this order suggests that the Applicants’ prior failure to comply with the summonses may have been conduct answering this description. But there is insufficient evidence to indicate whether this characterisation of it is justified, and the Tribunal does not now make any ruling to this effect.

31 The Tribunal’s view of the fourth matter, in line with a submission by Mr Rogers, is that a major reason why the liability hearing lasted for six days was that counsel for the Applicants made a number of unsuccessful objections on evidentiary issues. The Tribunal considers that this hearing may well have lasted longer than it should have. But any blame for this does not rest solely or predominantly with the forensic tactics employed by counsel for the Respondent.

32 For these reasons, the Applicants’ claim that their application for costs derives support from section 88(1A)(b) is rejected.

The relative weakness of the Respondent’s case (s 88(1A)(c))

33 Mr Profilio argued that the Respondent’s case should be regarded as relatively weak, on the grounds (so far as can be discerned from his submissions) that (a) the liability decision was in the Applicants’ favour, (b) the Respondent should have realised well before the proceedings commenced that this would be the outcome, and (c) the Tribunal was not impressed by certain aspects of the testimony of lay and expert witnesses called by the Respondent (Mr Profilio referred here to the liability decision at [137] and [139 –140]).

34 The Tribunal is however entirely of the view that, as Mr Rogers argued, an application for costs based on this ‘limb’ of section 88(1A) is premature. The Applicants cannot establish that it would be ‘fair’ to award costs to them solely by pointing to the fact that their case on the issue of liability was held by the Tribunal to be stronger than the Respondent’s case. If on the important question of damages – which is still to be determined – the Tribunal were to conclude that the relevant conduct of the Respondent caused no loss, or merely an inconsequential loss, to the Applicants, the ‘fair’ decision on costs might well be that the Applicants should pay at least a proportion of the Respondent’s costs. Alternatively, the Tribunal might revert to what may be called the statutory starting-point on costs set out in section 88(1) – namely that the parties should bear their own costs.

35 For this reason, the Applicants’ claim that their application for costs derives support from section 88(1A)(c) is rejected.

Conclusion

36 Having rejected the arguments put forward by the Applicants, the Tribunal (taking section 88(1A)(e) into account) sees no other reason why a costs order in their favour at this time would be ‘fair’.

37 This does not mean that the same situation would prevail at the conclusion of these proceedings. The Applicants might then be able to establish ‘fairness’ under section 88(1A). But equally, as just mentioned, the Respondent instead might be in a position to do this.

38 The Applicants’ application for costs filed on 31 August 2009 is dismissed.