City Convenience Leasing Pty Limited v Boo

1. [1]

   City Convenience Leasing Pty Limited (“CCL”) seeks leave to appeal a costs order made by the NSW Civil and Administrative Tribunal on 30 September 2014, requiring it to pay the defendants’ costs of proceedings concerning a lease of premises at Hunter Street Sydney, owned by the defendants, where CCL operated a convenience store.

2. [2]

   There was a disagreement over the rent. In November 2013 an application brought under the Retail Leases Act 1994 (NSW) came before the Retail Leases Division of the Administrative Decisions Tribunal, then constituted by Deputy President Callaghan, in accordance with the Administrative Decisions Tribunal Act 1997 (NSW).

3. [3]

   The application was dismissed (see City Convenience Leasing Pty Ltd v Boo [2013] NSWADT 268). CCL’s appeal from that decision was dismissed by the NCAT Appeal Panel, in a decision given on 7 April 2014 (see City Convenience Leasing Pty Ltd v Boo [2014] NSWCATAP 12).

4. [4]

   The ADT was abolished on 1 January 2014 and its functions were taken over by NCAT and so the appeal proceedings were “unheard proceedings” as defined in cl 6(1) of Sch 1 of the Civil and Administrative Tribunal Act 2013 (NSW). Clauses 7(1) and 7(3)(b) of that Schedule required the proceedings to be heard by NCAT, as if that Act had not been enacted.

5. [5]

   The question of costs, at first instance and on appeal, were dealt with by NCAT on the papers, in accordance with s 76 of the Administrative Decisions Tribunal Act on 30 September 2014 (see City Convenience Leasing Pty Ltd v Boo (No 2) [2014] NSWCATAP 55). CCL was ordered to pay the defendant’s costs as from 17 September 2013, when it received a Calderbank offer.

6. [6]

   In August 2006, CCL had leased ground floor premises in Hunter Street, Sydney owned by the defendants. It operated a convenience store there for an annual rent of some $285,000. The lease provided for a 5% annual rent increase and a market review in 2012, in accordance with a mechanism provided in clause 5. There was also an option to renew the lease, at the reviewed rent, increased by a further 5%, the new lease to commence in August 2013.

7. [7]

   The rent review procedure was not implemented in 2012. In September and October 2012 rent was in arrears. The parties then entered into a payment plan agreement, which envisaged rent would be brought up to date by February 2013.

8. [8]

   On the day before the lease was due to expire in August 2013, but after CCL had exercised the option to extend the lease, CCL filed an application under s 19(1) of the Retail Leases Act for appointment of a specialist retail valuer to determine “current market rent”, the term used in clause 5 of the lease. It fell to the ADT to determine whether the defendants could object to the appointment of the valuer.

9. [9]

   CCL was represented by an agent, Mr Soltan, who was not legally qualified. The defendants filed a motion seeking to have CCL‘s application struck out. On 13 September 2013, Mr Soltan wrote by email to the defendants’ lawyers, inviting them to withdraw their objection to the appointment of the valuer, which it was claimed was vexatious and lacked merit, providing a basis for CCL to claim its costs under s 88 of the Administrative Decisions Tribunal Act. The defendants made a counter offer on 17 September, which was not accepted. When the matter came before the ADT on 19 September, directions were given for the filing of evidence and submissions.

10. [10]

    The application was heard on 4 November. It was dismissed on 26 November. The appeal was dismissed on 7 April 2014, in part on different grounds. Costs were later ordered against CCL under s 88(1A) of the Administrative Decisions Tribunal Act, which provides:

Jurisdiction

1. [11]

   Under s 83 of the Civil and Administrative Tribunal Act 2013, an appeal lies to this Court, on questions of law, with leave. Under s 119(1A) of the Administrative Decisions Tribunal Act, as at 31 December 2013, an appeal on a question of costs lay to this Court, with leave.

2. [12]

   Initially, the parties contended that the Court’s jurisdiction to deal with these proceedings arose under Sch 1 of the Civil and Administrative Tribunal Act and thus had to be decided under s 119 of the Administrative Decisions Tribunal Act. It came to be common ground that jurisdiction was, in fact, conferred by s 83 of the Civil and Administrative Tribunal Act. That reflected that it is a decision of NCAT which is the subject of this appeal, a decision to which the transitional provisions of Sch 1 of the Civil and Administrative Tribunal Act do not apply.

3. [13]

   That common ground reflects that at [6[ - [7] of the NCAT judgment, it was noted that the appeal had been heard as if the Civil and Administrative Tribunal Act had not been enacted.

4. [14]

   That accorded with subclause (3)(b) of clause 7 “Pending proceedings before existing tribunals transfer to NCAT” of Subdivision 2 “Determination of pending proceedings” of Schedule 1 “Savings, transitional and other provisions” of the Civil and Administrative Tribunal Act. That provides that “unheard” proceedings’ were to be heard by NCAT, as if “the provisions of any Act, statutory rule or other law that would have applied to or in respect of the proceedings had this Act and the relevant amending Acts not been enacted”.

5. [15]

   “Unheard proceedings” are defined in clause 6 of Schedule 1 to mean “pending proceedings that had not been heard before the establishment day by the court or existing tribunal in which the proceedings were instituted or commenced”.

6. [16]

   “Pending proceedings” are there defined to be:

7. [17]

   It follows that this appeal does not fall within these definitions, it having not been either instituted or commenced before the establishment day, which is 1 January 2014.

8. [18]

   Clause 10 of the Schedule deals with “unexercised rights”, defined in clause 6 to be:

9. [19]

   This appeal is not such a right, because it was not available to be exercised immediately before the establishment day, because the costs decision the subject of this appeal, had not then been given.

10. [20]

    Accordingly, as the parties finally accepted, CCL may only appeal from NCAT’s decision on a question of law, with the leave of the Court, as s 83 of the Civil and Administrative Tribunal Act provides.

The appeal does not raise a question of law

1. [21]

   In its decision NCAT noted that the defendants sought costs in respect of their motion before the ADT, the interlocutory orders made in their favour by the ADT in January 2014 and the appeal determined by NCAT’s appeal of 7 April 2014.

2. [22]

   After referring to s 88 of the Administrative Decisions Tribunal Act and accepting that the proceedings had been complex as CCL argued, reference was made to a Calderbank offer made by the defendants by email sent to Mr Soltan on 17 September 2013. That email provided:

3. [23]

   There was no response to that counter offer.

4. [24]

   NCAT accepted that the case which CCL had advanced called for careful examination and could not easily be put to one side (at [58]). In the result, it could not be concluded that s 88(1A)(c) and (d) had been triggered, there not being at first instance, or appeal a substantial disparity between the relative strengths of the parties’ claims (at [61])). It was concluded, however, that CCL’s application for interlocutory relief had not been soundly based (see at [62] - [65]).

5. [25]

   It was, however, accepted to be well recognised that the unreasonable rejection by an unsuccessful party of an offer of settlement on terms more favourable than the order ultimately made in the proceedings, may be treated as a relevant consideration under paragraph (e) of section 88(1A) and may provide the basis for a costs order (Charalambous v Yeung (No 2) (RLD) [2014] NSWCATAP 1 at [21]).

6. [26]

   It was noted that the offer was made by the defendants’ solicitors in the email message sent to Mr Soltan at 3.27 p.m. on Tuesday 17 September 2013, rejecting CCL’s offer made in the email Mr Soltan sent on Friday 13 September. The defendants’ offer lapsed at 4.00 pm on 18 September 2013. There was a directions hearing the next day 19 September 2013.

7. [27]

   At [70], NCAT noted that the defendants had argued that the “amount to be achieved by the Application” was at that stage “under active consideration” by CCL. It followed, they maintained, that CCL’s rejection of their offer was unreasonable and that “an appropriate costs order” should therefore be made in their favour.

8. [28]

   It was also noted that CCL maintained that the 17 September offer was “not a Calderbank v Calderbank offer” and could not be invoked as a basis for a costs order in their favour, because firstly, the time it was given to consider the offer was only 24 hours, which was insufficient to allow Mr Soltan to advise it as to the legal consequences of the offer, or to obtain relevant legal advice. Secondly, the offer did not “deal with the Application that was before the Tribunal”, with “the rent [that] may have been overpaid or underpaid for the year ending 17 August 2013”, or with “the costs of the application”, but only the option lease (see at [71] - [73]).

9. [29]

   CCL also relied on an offer of settlement made on 13 February 2014, between the delivery of the Tribunal's decision and the commencement of the appeal hearing. The terms of the offer were that if the defendants consented to the appointment of a specialist retail valuer, it would not require the payment of any rent overpaid to them between 18 August 2012 and 23 January 2014 (on which date they had sold the premises to a third party).

10. [30]

    After referring to authorities cited by the parties, Jones v Bradley (No 2) [2003] NSWCA 258; Charalambous v Yeung (No 2); Brymount Pty Ltd t/a Watson Toyota v Cummins; Young Shire Council v Cummins (No 2) [2005] NSWCA 69 at [14]; SMEC Testing Services Pty Ltd [2000] NSWCA 323, it was concluded at [80] - [90]:

11. [31]

    CCL contended that these reasons revealed that thereby the costs discretion had miscarried. The defendants’ offer had been made in proceedings without pleadings, at a time when evidence had not been served and there was no hearing pending. NCAT had erred in concluding that there had been an offer of settlement made by CCL on 13 September. There was then no active consideration being given to the issues and risks associated with the litigation and it had been given no reasonable opportunity to obtain legal advice, or consider the merits of accepting the offer.

12. [32]

    The result was, CCL argued, that the question of costs had been determined on an erroneous factual basis and without proper application of the applicable principles, amounting to error of the kind discussed in House v The King [1936] HCA 40; (1936) 55 CLR 499. Both the evidence had been misunderstood and the principles misapplied. Had those errors not been made, the primary position under s 88, that each party bears its own costs, would not have been departed from.

13. [33]

    The defendants contended that these alleged errors had not been made and in any event, did not amount to an error of law. Further, that the arguments advanced impermissibly departed from the grounds advanced in the summons. What was pursued was dissatisfaction with the exercise of the costs discretion, which did not amount to an error of the kind discussed in House v R, that is, a result that is so unreasonable or so unjust that an error of principle in approaching the matter of costs must be inferred.

14. [34]

    Further, even if such an error had been made, the costs order would not be disturbed because there were other reasons for making that order, consistently with the requirements of s 88.

15. [35]

    It is apparent from the reasons given, that NCAT took the view that it was CCL who had raised the question of settlement by the email sent on 13 September and that it had been unreasonable for CCL not to have accepted the counter offer which the defendants made on 17 September, two days before the directions hearing on 19 September. That involved no factual error.

16. [36]

    Those conclusions reflected the terms of Mr Soltan’s 13 September email which said:

17. [37]

    There is no rule precluding efforts at early settlement being pursued, as the parties did, prior to the directions hearing at which they were directed to file and serve their evidence. Even an offer which amounts to capitulation, such as that made by CCL on 13 September can later, in an appropriate case, be relied on by a party seeking a departure from the usual costs order (see Prospect Resources Ltd v Molyneux [2015] NSWCA 171 at [93] - [96]).

18. [38]

    The defendants’ counter offer was not such an offer. To the contrary, CCL having advised the defendants on 13 September of its readiness to settle on the basis that their objection to its claim be withdrawn, after Mr Soltan advised that he had given consideration to the case they were advancing, the defendants made a very substantial counter offer, as NCAT explained at [81]-[82] of its decision. There was no other suggestion in these proceedings that this conclusion was wrong.

19. [39]

    There was also no error of law in NCAT’s articulation of what had to be considered, in determining whether there should be a departure from the usual costs order under s 88, as the result of the rejection of the defendants’ counter offer.

20. [40]

    It was open to NCAT to find that the counter offer was both a genuine compromise of the dispute and one which proved to be more favourable to CCL than the outcome of the proceedings, either initially, or on appeal, CCL having failed to establish its case both at first instance and on appeal, albeit on different grounds.

21. [41]

    As discussed in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No. 2) [2008] NSWCA 85 at [22]:

22. [42]

    CCL led no evidence as to such matters.

23. [43]

    The approach adopted by NCAT accorded with that discussed in Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [7] - [9]. As there discussed at [11] – [15], what must be considered in determining whether an offeree was unreasonable in refusing an offer, the response of the offeree must be assessed at the time the offer was made, and not with the benefit of hindsight, resulting from a known outcome. The matters identified in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 must also be considered in determining whether the rejection of the offer was unreasonable. They are:

24. [44]

    In concluding that CCL had been unreasonable in rejecting the counter offer the defendants made prior to the directions hearing, NCAT took the view that this turned on whether sufficient time was afforded to CCL to give due consideration to the offer.

25. [45]

    There was also no error in this approach, even though at the time of the settlement discussions the parties had not served their evidence. The proceedings had been commenced in August. The parties had made their offers in the context of their ongoing communications about their respective cases. That was the factual context in which the question of unreasonableness arose to be determined.

26. [46]

    The extent of the compromise which the defendants offered, to which there was no response, or any suggestion that more time was needed to consider it, was consistent with CCL then having an understanding of the nature of the counter offer which the defendants had made.

27. [47]

    NCAT took the view that in the particular circumstances, the time that the offer was open was not unduly short, given that CCL was then giving active consideration to the question of settlement.

28. [48]

    That conclusion rested on Mr Soltan’s 13 September email, which revealed that CCL took the view that it had significant prospects of success and that the defendants did not. Given what lay in issue between the parties as to the application of the market rent review clause and the claim for the appointment of a specialist valuer, the claimed agreement as to rent and the defendants’ estoppel claims, when it received the counter offer on 17 September, CCL could not have reasonably approached it on the basis that the case which the defendants were advancing had no merits, but still there was no response to the offer or any suggestions that further time was needed to consider it.

29. [49]

    That conclusion followed the approach taken in Jones v Bradley (No 2) at [16], where a counter offer made on the Friday before the commencement of a trial, which was kept open for only half a working day, was found to have been unreasonably refused.

30. [50]

    A similar approach was taken in Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd and Roche Group Pty Ltd (No 2) [2004] NSWADT 72 at [29] – [31], where two business days had been given to consider an offer made even before proceedings were instigated. There correspondence between the parties also established that settlement was being actively considered. It had even there been suggested by the offeree that the time frame given was unrealistic, but still a counter offer was made within the time provided.

31. [51]

    Here there was no such suggestion. The counter offer made to CCL on 17 September was open until 4 pm on the 18 September, before the directions hearing on 19 September, after which the parties would begin incurring considerable expenses in preparing the matter for hearing.

32. [52]

    As discussed in Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; (2007) 71 NSWLR 230, there is a difference between failing to take into account a relevant consideration and the weight which such a consideration is given in the exercise of a discretion (see at [54]).

33. [53]

    Even if, as a matter of discretion, a different view could have been taken on the facts, CCL has not established that NCAT’s conclusion that it had been unreasonable in rejecting the defendants’ offer involved any error of law. The conclusions reached do not evince legal unreasonableness of the kind discussed in Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332. There it was observed at [75] – [76]:

34. [54]

    Unreasonableness of this nature has not here been established. In the result, CCL has not established that its case raises a question of law. Accordingly, the leave sought must be refused.

Costs

1. [55]

   The usual order as to costs is that they follow the event. Unless the parties approach within 14 days, that will be the Courts order.

Orders

1. [56]

   For the reasons given, I order that:

   1. (1)

      Leave to appeal is refused.

   2. (2)

      The usual order as to costs is that they follow the event. Unless the parties approach within 14 days, that will be the Courts order.

   3. (3)

      All exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.