Crema Espresso Leasing Pty Ltd v Grocorp Development Pty Ltd [2021] QCAT 420

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Crema Espresso Leasing Pty Ltd v Grocorp Development Pty Ltd [2021] QCAT 420 PARTIES: CREMA ESPRESSO LEASING PTY LTD A.C.N. 165 916 334 (applicant) V GROCORP DEVELOPMENT PTY LTD A.C.N. 151 679 364 (respondent) APPLICATION NO/S: RSL133-19 MATTER TYPE: Retail shop leases matter DELIVERED ON: 9 November 2021 HEARD AT: Brisbane DECISION OF: Member Lember ORDERS: The application for miscellaneous matters (security for costs) filed 10 September 2021 is dismissed. CATCHWORDS: PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – POWER TO ORDER – exercise of discretion – where financial circumstances, prospects of success, genuineness of proceedings, delay and other matters considered Corporations Act 2001 (Cth), s 58AA, s 1335 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 3, s 4, s 32, s 38, s 62, s 95, s 100, s 102, s 109 Retail Shop Leases Act 1994 (Qld), s 43AA, s 83 Uniform Civil Procedure Rules 1999 (Qld), s 681 Bryan E Fencott and Assoc Pty Ltd v Eretta Pty Ltd (1987) 2 Qd R 523 Buckley v Bennell (1974) 1 ACLR 301 Covecorp Constructions and Indigo Projects Pty Ltd Greg Black Constructions Pty Ltd v Brodie and Anor [2011] QCAT 671 2 Hapisun Pty Ltd v Rikys & Moylan Pty Ltd [2013] VSC 730 Hyperion Technology Pty Ltd v Queensland Motorways Limited [2013] QSC 20 Tamawood v Paans [2005] QCA 111 Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential CTS 33550 [2017] QCAT 424 -- 1 of 8 -- 2 Whelan Air Conditioning Pty Ltd v Arcape Pty Ltd [2012] QCS 187 APPEARANCES & REPRESENTATION: This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). REASONS FOR DECISION What is the application about? The applicant leased space in the respondent’s four-tenancy complex in order to operate a coffee shop with drive-through facilities under the terms of a retail shop lease (“the lease”) that included a provision purporting to limit the respondent’s ability to place competing businesses in the remaining tenancies. The applicant says that, in breach of representations and contractual promises made by the respondent to the applicant, the service station tenancy within the complex has been permitted to operate its own coffee shop within the service station itself, to the significant detriment of the applicant. On 31 May 2019 the applicants filed a Notice of Dispute under the Retail Shop Leases Act 1994 (Qld) (“RSLA”), alleging breach of contract, misrepresentation and unconscionable conduct on the respondent’s part and seeking: (a) compensation under sections 43AA and/or 83(3) of the RSLA (estimating losses in the sum of $730,405 as at the date the application was filed and described then as “ongoing and increasing”1); and (b) a declaratory order that it is lawfully entitled to terminate the lease. A mediator referred the matter to the tribunal on 18 September 2019. On 11 January 2021 the relief sought was amended to reflect the intervening events whereby: (a) on 18 June 2019 the respondent issued to the applicant a Notice to Remedy Breach, which the applicant says was invalid; (b) on 18 July 2019 the respondent gave the applicant Notice of Termination for the lease and re-entered the premises and changed the locks; and (c) on 23 July 2019 the applicant purported to accept the repudiation and itself gave notice terminating the lease. The respondent denies the allegations made by the applicant, seeking that the application be dismissed and counter-applying for orders that the applicant pay the respondent $187,132.19 outstanding for rent and outgoings (ongoing and increasing until the premises is relet), plus relet costs and legal costs on an indemnity basis.2 1 Notice of Dispute, Annexure A, page 6. 2 Response and counter-application filed 25 November 2019, amended 17 February 2021. -- 2 of 8 -- 3 The substantive issues in dispute will be determined at a hearing and are not the subject of this decision. Suffice it to say, the quantum of the respective claims is significant. On 10 September 2021 the respondent filed an application for miscellaneous matters relying upon sections 102 and 109 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (“QCAT Act”) and section 1335 of the Corporations Act 2001 (Cth) for orders that: (a) the applicant provide security for the respondent’s costs in the sum of $41,750; and (b) such sum be paid to the respondent’s solicitors trust account or to the tribunal; and (c) failing such payment, the application be dismissed or, alternatively, heard on the papers. The tribunal issued directions that called for submissions on the issue of security for costs, noting that a decision on point would be made on the papers after submissions closed (which was on 8 October 2021). That decision, with its reasons, follows. The tribunal’s role and jurisdiction It is not contested that the lease is a retail shop lease to which the RSLA applies, and the tribunal appears to have jurisdiction over the dispute. The objects of the QCAT Act3 include to have the tribunal deal with matters in a way that is accessible, fair, just, economical, informal and quick, and, to that end, section 4 of the Act requires the tribunal, among other things, to: (a) encourage the early and economical resolution of disputes before the tribunal;4 and (b) ensure proceedings are conducted in an informal way that minimises costs to the parties and is as quick as is consistent with achieving justice.5 Justice is often achieved after a full hearing and tested evidence in a matter. However, section 62(1) of the QCAT Act permits the tribunal to give a direction at any time in a proceeding and do whatever is necessary for the speedy and fair conduct of the proceeding. To that end, proceedings may be finally determined, or interlocutory applications decided upon the written submissions of the parties without those parties or their representatives appearing at a hearing.6 These proceedings are known as decisions made “on the papers”. The tribunal must allow a party to a proceeding a reasonable opportunity to call or give evidence and to make submissions to the tribunal.7 I am satisfied that such an opportunity was given to the parties in this instance. 3 Section 3(b), ibid. 4 Section 4(b), ibid. 5 Section 4(c), ibid. 6 Section 32(2), ibid. 7 Section 95(1), ibid. -- 3 of 8 -- 4 As to costs, the starting point in the tribunal is that each party to a proceeding must bear its own costs.8 Where the tribunal has the power to award costs, it may require one party to give the other security for costs and may stay a proceeding or part of a proceeding until the security is given.9 In deciding whether to make an order for security for costs the tribunal may have regard to any of the following matters: (a) the financial circumstances of the parties to the proceeding; (b) the prospects of success or merits of the proceeding or the part of the proceeding against the applicant party; (c) the genuineness of the proceeding or the part of the proceeding against the applicant party; (d) anything else the tribunal considers relevant.10 As observed by the Tribunal in Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential CTS 33550,11 the test to be applied under section 109 is not the same as what courts must consider under the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) because the starting point in the tribunal is that each party must bear their own costs whereas under rule 681(1) of the UCPR costs follow the event unless the court orders otherwise. In Hapisun Pty Ltd v Rikys & Moylan Pty Ltd12 the Supreme Court of Victoria considered and application for security for costs in the Victorian Civil and Administrative Tribunal (“VCAT”) and said: … the fact that VCAT is, by presumption imposed by s 109 of the VCAT Act, a “no-costs” jurisdiction, means that part of any analysis of the question of whether security for costs ought to be ordered needs to include some assessment of the likelihood of whether, even if a defendant was successful in defending a claim, that an order for costs would be made in its favour. Do the section 109 factors favour an order for security for costs? The financial circumstances of the parties to the proceeding Each party has been granted leave to be legally represented in these proceedings.13 It is reasonable to assume therefore that each will incur legal costs that are - given the complexity of the matter, how long it has endured, and the material filed - likely to be substantial. 8 Section 100, QCAT Act. 9 Section 109(1), ibid. 10 Section 109(2), ibid. 11 [2017] QCAT 424 at [10]. 12 [2013] VSC 730, cited in Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential CTS 33550 [2017] QCAT 424 at [10]. 13 Decision made 24 June 2021. -- 4 of 8 -- 5 The respondent’s circumstances The respondent estimates its costs to the final hearing will be up to $46,00014 but otherwise tendered no evidence as to the respondent’s financial circumstances or capacity to absorb the costs of the application. The respondent owns the four-tenancy complex, although the net income derived from it, whether the tenancy the subject of this dispute has been relet, the value of the complex and the cost of any encumbrances over it are not known. The respondents rely on section 1335(1) of the Corporations Act 2001 (Cth) which provides: Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. The applicant’s circumstances The respondent says the applicant has a modest share capital, but the applicant says this is “not an accurate valuation of the business of Crema”.15 The applicant did not tender any evidence of the applicant’s own financial position or capacity to pay costs should costs be ordered. The applicant relies on the tribunal’s decision in Greg Black Constructions v Brodie and Anor16 wherein it noted that in the absence of evidence as to the applying party’s ability to absorb the cost of the proceeding, it cannot be determined that any success in the proceedings would be nullified by the costs spent in obtaining that result. Further, the Court of Appeal held in Tamawood v Paans17 that: In the absence of counterveiling considerations, where a party has reasonably incurred the cost of legal representation, and has been successful before the Tribunal, it could not rationally be said to be in the interests of justice to allow that success to be eroded by requiring that party to bear the costs of the representation that was reasonably necessary to achieve that outcome. When tendering the company search and credit report pertaining to the applicant,18 the respondent did not highlight any particular points of concern with respect to credit or solvency, the applicant company having traded since 2013. Notably, departing from what would ordinarily be a standard request if the financial veracity of a tenant were a concern, the respondent did not, when entering into the lease, insist on a director’s guarantee “whilst Crema Espresso Leasing Pty Ltd A.C.N. 165 916 334 or a Crema Espresso Entity is the Tenant”.19 They relied on a bank guarantee that was not, I understand, ultimately provided, but nonetheless it is common to rely on both forms of security in commercial and retail leases. 14 Affidavit of Daniel Craig Nash sworn 10 September 2021 at paragraph 12. 15 Submissions filed 6 October 2021 at paragraph 15. 16 [2011] QCAT 671 at [7]. 17 [2005] QCA 111 at [33]. 18 Exhibit DCN-03 to the Affidavit of Daniel Craig Nash sworn 10 September 2021. 19 Lease dated 15 December 2017 at Item 11 of the Appendix. -- 5 of 8 -- 6 I am not satisfied there is sufficient evidence of the financial circumstances of both parties to favour an order for security for costs. The prospects of success or merits of the proceeding or the part of the proceeding against the applicant party In circumstances where part of the evidence upon which the applicant’s case will turn is oral evidence to be given by parties to a conversation, it is impossible to assess the merits or success of that part of the proceeding because the credibility of those witnesses cannot be assessed until their evidence is tested. Whilst the respondent seeks to dismiss the pre-lease discussions in reliance upon (among other things) the express terms of the use clause,20 the exclusive use clause21 and the entire agreement clause,22 and also questions reliance and causation, these are matters that can only be tested in weighing all of the circumstances at the hearing. This does not favour an order for security for costs. The genuineness of the proceeding or the part of the proceeding against the applicant party The respondent takes the view that the applicant’s case is vexatious as the applicant has: (a) caused significant delays in the proceedings; (b) instituted the proceedings without reasonable ground; and (c) conducted the proceedings in a way so as to harass or annoy the respondent.23 The applicant was not successful in having the dispute summarily dismissed earlier on in these proceedings when it made an application on those grounds. Whilst acknowledging that it is untested, the applicant’s case is on its face well documented (in terms of supporting documents and correspondence), well particularised (as the respondent appeared not to have any particular difficulty responding to it) and the dispute involves a genuine disagreement between two parties as to the nature of pre-lease negotiations had, the meaning and intent of written lease terms and the nature of conduct attributed to the respondent, as well as issues of causation and loss. In short, there appears to be a genuine dispute between the parties and there are no grounds to support a finding that the application has been made frivolously or vexatiously or for reasons other than attempting to resolve the dispute such as to support an order for security for costs. Anything else the tribunal considers relevant – delay The application for security for costs was made on 13 September 2021, almost two years after the respondent filed its response and counter-application. In the meantime, the dispute itself has progressed through many stages including; 20 Clause 4 of the lease. 21 Clause 25 of the lease. 22 Clause 16 of the lease. 23 Submissions in support of an application to summarily dismiss filed 18 March 2021. -- 6 of 8 -- 7 (a) On the papers directions on 28 October 2019, 8 January 2020, 19 February 2020, 8 December 2020, 29 April 2021 and 24 June 2021; and (b) Directions Hearings on 19 June 2020 and 20 August 2021. The applicant relies upon the decision of Justice Daubney in Hyperion Technology Pty Ltd v Queensland Motorways Limited24 in which His Honour observes “the numerous authorities which speak to the need for an application for security for costs to be made in a timely fashion”25 and quotes the following observations by French J (as he then was) in Bryan E Fencott and Assoc Pty Ltd v Eretta Pty Ltd:26 The further a plaintiff has proceeded in an action and the greater the costs it has been allowed to incur without steps being taken to apply for an order for costs, the more difficult it will be to persuade the Court that such an order is not, in the circumstances, unfair or oppressive. In Buckley v Bennell (1974) 1 ACLR 301 at 309 Moffitt P put the matter as follows: The right to seek security for costs and to stay proceedings, with the possible result that a claim for damages is frustrated, is a powerful weapon. Therefore, the litigant who seeks to use it against his opponent is at risk of not having it available, unless the application is made and persevered with in circumstances involving the least oppression of his opponent. The primary reason why the application should be brought promptly and pressed to determination promptly is that the company, which by assumption has financial problems, is entitled to know its position in relation to security at the outset, and before it embarks to any real extent on its litigation, and certainly before it is allowed to or permits substantial sums of money towards litigating its claim. The applicant says that: (a) the respondent has not explained their delay in bringing the application for security for costs; (b) they will suffer significant prejudice if they are required to lodge security at this late stage of proceedings. All of these factors weigh against an order for security for costs. Anything else the tribunal considers relevant – counter-application The applicant says the making of an order for security for costs would have the effect of preventing the application from pursuing its claim (until security is provided) whilst keeping the counter-application alive and, in that case, an order for security for costs would be oppressive in circumstances where the respondent has not given an undertaking to stay the counter-application. This submission mirrors a view expressed by Justice Boddice in Whelan Air Conditioning Pty Ltd v Arcape Pty Ltd27 and I agree with the applicant’s submission that this factor does not weigh in favour of an order for security for costs. 24 [2013] QSC 20. 25 At [14], ibid. 26 (1987) 2 Qd R 523 at 530. 27 [2012] QCS 187 at 22. -- 7 of 8 -- 8 Anything else the tribunal considers relevant – likelihood of a costs order against the applicant in these proceedings As mentioned, the starting point in the tribunal is that each party bears its own costs, rather than following the event as they would in a court. In the absence of sufficient evidence to make findings as to merit (discussed above), it should go without saying that I cannot find that there is “likely” to be costs order against the applicant in these proceedings even if the application fails and the counter- application is successful. As an exercise of discretion, the tribunal can order costs if it considers it is in the interests of justice to do so.28 In deciding whether to award costs in a matter the tribunal may have regard to factors29 such as: (a) whether a party to a proceeding acted in a way that unnecessarily disadvantages another party to the proceeding; (b) the nature and complexity of the dispute the subject of the proceeding; (c) the relative strengths of the claims made by each of the parties to the proceeding; (d) the financial circumstances of the parties; and (e) anything else the tribunal considers relevant. These are not issues that can be assessed at this interlocutory stage. Decision Applying the factors set out in section 109 of the QCAT Act does not support an order for security for costs in these proceedings. For those reasons, I dismiss the application for security for costs. Whilst the applicant has mentioned in its submission that costs should be granted there is no formal application for costs before the tribunal and, as mentioned, costs of the proceedings will be a discretionary consideration undertaken by the tribunal in the course of making its final determination of the issues in dispute. I therefore make no order as to costs. 28 Section 102(1), of the QCAT Act. 29 Section 102(3), ibid. -- 8 of 8 --