Snowpave Pty Ltd v Gibo Pty Ltd and Edite Pty Ltd (No 2) [2011] NSWADT 25 (8 February 2011)

Last Updated: 17 April 2011

Administrative Decisions Tribunal New South Wales

Case Title:	Snowpave Pty Ltd v Gibo Pty Ltd and Edite Pty Ltd (No 2)
Medium Neutral Citation:	[2011] NSWADT 25
Hearing Date(s):	On the papers
Decision Date:	08 February 2011
Jurisdiction:
Before:	Deputy President Olsson SC
Decision:	i) Respondent to pay the Applicant the sum of $21,306.50. ii) Respondent to pay the Applicant an amount of interest calculated at the interest rate applicable under section 72A of the Retail Leases Act 1994 (NSW), calculated from 12 June 2008. iii) Once the sums in (i) and (ii) are paid, the moneys in the jointly controlled account are to be released forthwith to the Respondent. iv) Each party is to bear its own costs.
Catchwords:	Damages and Costs
Legislation Cited:	Administrative Decisions Tribunal Act 1997
Cases Cited:	Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71; Rucom Pty Ltd and Anor v Multiplex and Ors [2010] NSWADT 1; Barsoum v Glebe Administration Board (No. 2) [2002] NSWADT 174; Gizahand Armstrong Jones v Axa Trustees Ltd (No. 2) [2001] NSWADT 164
Texts Cited:
Category:	Consequential orders
Parties:	Snowpave Pty Ltd (applicant/cross respondent) Gibo Pty Ltd (respondent/1st cross applicant) Edite Pty Ltd (2nd cross applicant)
Representation
- Counsel:	Mr T Maltz (applicant)
- Solicitors:	Mr Bruno Cara (respondent)
File number(s):	085112, 085145
Publication Restriction:

REASONS FOR DECISION

1. The Tribunal delivered its decision in this matter on 27 August 2010 and made orders that :

a) Clause 20.1 of Lease no AC 680330D between the Applicant and Respondent and commencing on 1 July 2006 includes within the definition of "Lessee's Work" inter alia: the motors and ventilation ducting servicing Lot 128 in SP 71747 and the grease trap.

b) The Applicant is entitled to refuse to give any other tenant permission to use the "Lessee's Works" under Clause 20.1 unless such tenant contributes to the Applicant a sum in accordance with Clause 20.4 towards the installation, maintenance, repair and costs of electrical power in respect of the Lessee's works.

c) The Respondent pays the Applicant or procures from the lessee of shop 3, such sum as is equivalent to the sum of money otherwise payable by the lessee of shop 3 pursuant to clause 20.4 of the lease.

d) With respect to the Cross Application, for the avoidance of doubt, the meaning of "Lessee's work" in clause 20 of the subject lease does include i tems which were installed prior to the commencement of the lease and does include the grease trap and ventilation ducting servicing the Lot identified in clause 20.1 of the lease.

e) Further, the meaning of the expression "incurred" in clause 20.4 does include any expenses incurred prior to the commencement date of the lease, does not refer to expenses which were incurred only by the Applicant and may include costs referred to in the letter of 21 April 2008 (referred to in paragraph 2 of the Cross Application).

f) The Tribunal makes a declaration that the lease contains an implied term requiring the Cross Respondent to perform its obligations in good faith and to reasonably co-operate in the performance of its obligations.

g) The Cross Application is otherwise dismissed except with respect to paragraph 7 which deals with the monies held in the controlled monies account.

2. The parties have now made submissions as to the calculation of the monies payable for the lessee's works (and monies in the controlled monies account) and as to costs.

Monies payable and controlled funds

3. Pursuant to clause 20.1 of the lease, the Lessee is entitled to install on the common property for the strata scheme (subject to prior approval by the Owners Corporation) the following:

(a) Signage which will accommodate space for other tenants of the Lot

(b) Motors to complete the functioning of the ventilation ducting servicing the Lot; and

(c) Grease trap (all of which are called "Lessee's Works")

4. Clause 20.4 provides that if any tenant of other premises forming part of the Lot is given permission pursuant to clause 20.3 to use any part of the Lessee's Works then such tenant must contribute towards the installation, maintenance, repair and the cost of electrical power incurred by the Lessee in respect of the Lessee's Works on a pro-rata basis having regard to the lettable area of the premises leased by such other tenant. [emphasis added]
5. The Tribunal found that certain works had been carried out, being the motors and ventilation ducting servicing Lot 128 in SP 71747 and the grease trap.
6. At paragraph [60] of the reasons for decision, the Tribunal held that the Applicant is entitled, prima facie, to recover costs incurred in carrying out the Lessee's works as defined above. The next question is whether Snowpave is the entity which can recover the costs.
7. T he Tribunal found, not without some hesitation, (at paragraphs [62-68]) that the Applicant company, Snowpave Pty Ltd, had, by virtue of a complex series of loan transactions, been the entity which had ultimately paid for the works. There is no doubt that at the time the work was carried out various corporate entities within the group controlled by Mr Oppedisano were used to contract and pay for the works. Statement of John Oppedisano 10 June 2008 paragraph 19) He said that he paid little attention to the details of which company was responsible for the works - invoices were paid by whichever company had money in its account at the time. He also said that he had instructed his accountant to bring the cost of the works to the account of Snowpave by loan transactions. The evidence of the expert accountant Mr Baker, called by the Respondent, was not particularly illuminating. Mr Baker, having examined the books and records of Barecall Pty Ltd, and Snowpave Pty Ltd, was not able to determine that the expenses had in fact been transferred from eh former to the latter company but that the records were consistent with the possibility of that having occurred.
8. T here was no suggestion that there was anything improper or inappropriate about a transfer of those expenses from one company in a group to another.
9. Mr Oppedisano was not cross examined as to the genuineness of the invoices which related to the work done; he was not cross examined as to whether or not the work had actually been done. The Tribunal accepted that the work was carried out and the invoices were genuine.
10. F or these reasons, I am satisfied that the expenses of the installation of the grease-trap and ventilation were ultimately incurred by Snowpave and it follows that it is entitled to recover part of the costs of the works.
11. A s I noted in the principal judgment, without making any admissions as to liability, both parties agreed that the costs related to the installation and maintenance of the works was $115,055.60. A schedule to this effect (cross referenced to the evidence) was provided to the Tribunal.
12. T he parties were asked to make further submissions, particularly as to whether it was in fact an agreed figure and if not, what figure ought to be substituted. Both parties provided submissions. The Respondent said that it did not agree that $115,055.60 was expended on the works. It said that the percentage figure - if any were to be applied - would be 18.5%.
13. T he Applicant's submissions confirmed that it contended for the figure of $115,055.60 (not surprisingly) and that the relevant percentage figure to be applied was 41.5%.
14. T he Tribunal accepts that the sum of $115,055.60 was expended on the works. Respondent should have collected from its tenants a proportion of that cost. At least in the case of SMJR the Respondent failed to do so.
15. I pause here to observe that neither party addressed the fact that the cost of the works necessarily involves two elements: the installation cost (which is fixed) and the ongoing maintenance and repair (which is not fixed). Clause 20.4 does not address this issue.
16. I t may not matter as long as the parties have a percentage figure with which to work: that is, a figure which may be applied to the cost actually incurred, and a figure which may be applied in respect of ongoing expenses.
17. T he Applicant contended that the sum owed by SMJR is 41.5% of $115,055.60, being $47,729.00. It is that sum which the Applicant claims, together with interest from 12 June 2008 pursuant to s.72A of the Retail Leases Act 1994 .
18. T he Applicant says that the appropriate manner of determining the proportion payable by the other lessee (ie SMJR) is to calculate the lettable area of SMJR's tenancy relative to the lettable area of both it and Snowpave.
19. T he Applicant says that this is a reasonable and available construction of Clause 20.4 because, inter alia, if the balance of the area in Lot 128 were never occupied or not occupied by tenants who wished to utilize the grease trap and ventilation systems (for example, clothing shops), then the Applicant could never recover the full cost of its expenditure. It says that, properly construed, the reference in Clause 20.4 to "pro rata basis having regard to the lettable area [of the other tenant]" calls up only the combined area actually occupied by the lessees.
20. I n terms of areas occupied by tenancies, there is a slight discrepancy in the evidence. Attached to the statement of Mr Oppedisano of 12 June 2008 (annexure G) is a survey that shows Tenancy 1 having a gross lettable area of 141.2 sq m. Dr Abeshouse refers to it as 131 sq m. It seems more likely to me that the survey is correct and that Dr Abeshouse is in error. However, since I am setting out in detail the various calculations that I have made in order to reach a decision, if the parties consider that the actual area is 131 sq m, it should be a simple matter for them to re-calculate the sums by simply substituting 141.2 for 131.
21. T here is agreement that the tenancy of SMJR (tenancy 4) occupies an area of 100 sq m.
22. T he Applicant contends that contribution is to be determined by reference to the use of the Lessee's equipment. It was said that it is the use of the equipment which determines power consumption, wear and tear (and therefore maintenance). Since this is uninfluenced by the size of the whole Lot, the relevant area that ought to be considered is the total of both tenancies.
23. T hat is, 241.2 sq m being 141.2 sq m occupied by the Applicant ( Statement of John Oppedisano of 20 June 2008, annexure H being the Lease between Applicant and Respondent) and 100 sq m being occupied by SMJR ( Statement of Dr Abeshouse of 28 January 2009 paragraphs 9 and 10) . On this basis, the Applicant would be entitled to recover 100/241.2 x $115,055.60 or 41.8% x $115,055.60, which is $48,093.24.
24. T here is force in this submission particularly in respect of the ongoing costs of running, repairing and maintaining the works. If there were only two tenants sharing the works, it would seem to be sensible that they share the cost in proportion to the area of their occupancy.
25. O n the other hand, the Respondent says that the appropriate calculation and the one which accords best with the spirit and letter of Clause 20.4 is derived from calculating the lettable area of the premises occupied by SMJR as a proportion of the whole of the area of the Lot.
26. A dopting the Respondent's approach, the multiplier in the calculation would be the percentage of the area of Tenancy 1 (100 sq m) to the whole area of Lot 128 (540 sq m) ( Statement of Dr Abeshouse of 28 January 2009 paragraph 10) or $115,055.00 x (100/540) = $115,055.00 x 18.5% or $21,306.50.
27. T he Respondent says that this is a just result and one which makes commercial sense as well as sense within the context of Clause 20 of the lease. It points out that if the Applicant's position were adopted, then if other shops were tenanted by lessees who connected to the Applicant's works and they were also required to contribute in shares which were referable only to their tenancy and that of the Applicant, then the Applicant would achieve a windfall gain of an amount in excess of that which it spent. These submissions are articulated in paragraphs 28 to 32 of the Respondent's submissions.
28. T he calculations which support this contention are found at paragraphs 32 and following of the Respondent's submissions.
29. B oth arguments have merit but on balance, the Tribunal accepts that the argument by the Respondent is compelling. Clause 20.4 refers to the "Lot" which is defined as the whole of the area of Lot 128. The reference to "pro rata" must, in my view, pertain to the proportion of the individual tenancy vis--vis the whole of the Lot.
30. M oreover, if the other two tenancies are occupied - which it seems reasonable to assume will occur if it has not occurred already - it is likely that they will be food shops. I note that Dr Abeshouse referred to the brochure advertising the sale of the Lot that contained a depiction of the "elaborate fit out of the areas marked as 'Fast Food Outlet' and 'Pizza Bar'." If that is the case, they will require connection to the works carried out by the Applicant and pursuant to Clause 20.4 should be required to contribute to the cost.
31. T he difficulty in interpreting the clause derives in part from its failure to distinguish between installation costs and ongoing costs and also from its failure to make provision for an adjustment of contributions by tenants as the vacancies are filled.
32. I n summary, and not without a good deal of hesitation, I accept the submissions of the Respondent as to the calculation of the proportion of costs payable by the Respondent to the Applicant.

Costs

33. Section 88 of the Administrative Decisions Tribunal Act (1997) ("the Act") was amended on 1 January 2009. Read with Schedule 5, Part 11, Section 43(3), it is clear that the amendment to s.88 applies to "applications and proceedings that were made on or commenced, but not finally determined, before the commencement of the substantive amendment concerned". Accordingly, it is the new form of s.88 of the Act that pertains to this matter.
34. The Tribunal is required to have regard to the terms of s.88 itself, which provides as follows: -

Section 88 Costs

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

(ii) failing to comply with this Act, the regulations, the rules of the Tribunal or any relevant provision of the enactment under which the Tribunal has jurisdiction in relation to the proceedings, or

(iii) asking for an adjournment as a result of a failure referred to in subparagraph (i) or (ii), or

(iv) causing an adjournment, or

(v) attempting to deceive another party or the Tribunal , 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.

(2) The Tribunal may:

(a) determine by whom and to what extent costs are to be paid, and

(b) Order costs to be assessed on a basis set out in Division 11 of Part 3.2 of the Legal Profession Act HYPERLINK "http://www.austlii.edu.au/au/legis/nsw/consol_act/lpa2004179/" 2004 or on any other basis.

(3) However, the Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs .

(4) In this section, "costs" includes:

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

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

35. The proceedings are commercial in nature, arising from the relationship between two parties who are acting in trade and commerce. One significant effect of the amendment to s.88 is that the notion of 'fairness' is to broaden the basis upon which costs might be awarded, particularly in a jurisdiction that is commercial in nature. In Salon Today Pty Ltd v MMIR Pty Ltd [2009] NSWADT 71, the Tribunal said:

"What the Parliament has done...is to recognise that there is a need for this Tribunal to be more flexible and widen the scope of a litigant's entitlements to costs. This is a concept generally that is now accepted in this Division [Retail Leases Division]...." (paragraph [72])

36. The Tribunal considered the nature of the Retail Leases Division in the context of costs in Rucom Pty Ltd and Anor v Multiplex and Ors [2010] NSWADT 1. Having reviewed the authorities, Judicial Member Molloy said at paragraph 37:

"So, it is plain to me, that not only is this Division a commercial division dealing with commercial issues between lessors and lessees in a retail lease environment, but, and in addition, proceedings should only be commenced in this Tribunal after very careful consideration of the merits of the case: see Trust Company of Australia Ltd v Craig [2005] NSWADT 65 at [44]. After all, commencing proceedings without such consideration inevitably results in considerable expense being incurred by the other party and one might not unreasonably ask: "why should the other party have to bear those expenses when the proceedings should not have been commenced in the first place?"

37. In the present case Mr Cara, solicitor for the Applicant, made written submissions that sought a costs order against the Respondents. The grounds of the application were that the conduct of the Respondent (in permitting a tenant to connect to the grease trap installed by the Applicant and to interfere with the Applicant's ventilation system) necessitated the commencement of proceedings and that its continued denial of liability ensured that the proceedings continued to final hearing.
38. The Respondents' submissions, made by Mr Maltz of counsel, were that:

i) The Applicant had engaged in "uncompromising conduct", having persisted in its claim for 50% of the costs of the Lessee's works up until the hearing

ii) There was no suggestion that the Respondent acted in a manner which extended the conduct of the proceedings nor that it disobeyed directions

iii) The Applicant did not press its unconscionable conduct claim

iv) The Applicant did not act reasonably in that it did not reveal the transfer of costs from one entity to another until the hearing

v) The Respondent has had a measure of success in having terms implied into the Lease

vi) The case involved difficult issues of construction of the Lease

vii) The proceedings were at first instance

39. As Deputy President Chesterman said in Meriton Properties Pty Ltd v DCM Leases-Five Pty Ltd (No. 2) [2010] NSWADT 11 at [29]"Undoubtedly, the general principles that govern the interpretation of the criterion of 'fairness' in proceedings under the Retail Leases Act indicate that despite the presumption stated in subsection (1) of section 88 of the ADT Act,-ie that each party should bear its own costs - the Tribunal should not be unduly reluctant in a case such as this to make the requisite finding under subsection (1A)".
40. The Applicant's submissions do not raise any issues which attract the operation of subsection (1A) of section 88 of the ADT Act. No submission was made to the effect that the Respondent's conduct unnecessarily disadvantaged the Applicant, or that the proceedings were unreasonably prolonged. In fact, to the Tribunal's observation, both parties conducted the proceedings most efficiently.
41. The thrust of the Applicant's submissions does not go much further than the fact that the Applicant was the successful party.
42. Equally, however, I do not accept the Respondent's submission that the conduct of the Applicant (in persisting in its claim for 50% of the Lessee's costs, in not proceeding with the unconscionable conduct claim and in only revealing the transfer of costs from one entity to another at the hearing- subparagraphs (i) to (iv) above) unduly prolonged the proceedings or caused the Respondent unnecessary disadvantage. As I have said, the proceedings were conducted efficiently and were not of great duration. The matters to which the Respondent refers in submissions seem to me to fall within the usual exigencies of litigation.
43. The fact that the Respondent was partially successful in that a term in the lease was implied is not, in my view, sufficient to displace the primary position that each party should pay its own costs.
44. Similarly, although there was a difficult question of construction of the lease, its mere existence is not enough to displace the presumption stated in s.88(1). The key question is whether or not the complexity was of sufficient import to have that effect. In my view, and after a great deal of consideration, it was not.
45. It is true that these proceedings were at first instance, and as Deputy President Chesterman observed in Meriton (supra) at [34], the Tribunal has shown itself to be more willing to award costs in appeal proceedings. It is a factor to be taken into consideration and I have done so, but ultimately it seems to me that absent any other factors, this alone does not displace the presumption that each party pay its own costs.
46. It follows that I have not been persuaded by either party to depart from the principle that each party pay its own costs.
47. The orders of the Tribunal will be:

i) Respondent to pay the Applicant the sum of $21,306.50
ii) Respondent to pay the Applicant an amount of interest calculated at the interest rate applicable under section 72A of the Retail Leases Act 1994 (NSW), calculated from 12 June 2008
iii) Once the sums in (i) and (ii) are paid, the moneys in the jointly controlled account are to be released forthwith to the Respondent
iv) Each party is to bear its own costs

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