The Rule
The Victorian Civil and Administrative Tribunal (VCAT) is empowered to hear and make orders relating to owners Corporation disputes. As we are well aware, bringing or defending proceedings in VCAT can become costly. The question is, then, who should bear these costs?
The general proposition in proceedings before VCAT is that each party is to bear their own costs. The rationale for this general proposition was set out by Senior Member Vassie in McCarthy v Dandenong Region Body Corporate Services (Aust) Pty Ltd t/as D R Strata Management (Civil Claims) [2009] VCAT 1898 as follows:
Parliament has decided to confer upon VCAT the jurisdiction to hear and determine owners corporation disputes. The provision of the VCAT Act encourage self representation. Most individual lot owners wanting to vent a grievance at VCAT will be self-represented. It is important that would-be applicants in the jurisdiction are not deterred from airing genuine grievances and making genuine claims, by the fear that VCAT will award costs against them if they lose. [para 67]
However, Senior Member Vassie went on to say:
Conversely, the right to air a grievance and make a claim must be exercised responsibly. It would be unfair to respondents for the Tribunal to permit applicants to think that they can, with impunity, make and pursue to the bitter end any claim that they might have a mind to make, no matter how hopeless, manifestly weak, irrational or quixotic such a claim might be. [para 68]
Considering Senior Member Vassie’s comments above, it is evident that in some instances, VCAT should award costs against a party.
Key Takeaways:
- VCAT usually requires each party to pay their own costs, allowing lot owners to raise genuine claims without fear of big financial risks. This keeps access to justice fair.
- The rule has exceptions when a party acts unreasonably, withdraws a case, rejects a fair settlement, or in fee recovery matters. These prevent abuse of the system.
- Since VCAT has wide discretion, parties need to watch their conduct and the strength of their claims. Costs can shift and affect both strategy and outcome.
The Exceptions to the Rule – Departing from the General Proposition
There are several exceptions to the general proposition, five of which will be discussed below.
Exception 1
Section 109 of the Victorian Civil and Administrative Tribunal Act 1998 [VCAT Act] provides that VCAT may order that a party pay all or a specified part of the costs of another party in a proceeding when it is satisfied that it is fair to do so having regard to the factors set out in subsection (3).
The factors set out in section 109(3) are:
a. Whether a party has conducted the proceeding in a way that unnecessarily disadvantages another party to the proceeding by conduct such as:
i. Failing to comply with an order or direction of the Tribunal without reasonable excuse;
ii. Failing to comply with the Act, the regulations, the rules, or an enabling 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
b. Where a party has been responsible for prolonging unreasonably the time taken to complete the proceeding;
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 proceeding.
Exception 2
Section 74(2)(b) of the VCAT Act provides that if an applicant withdraws an application or referral before it is determined by the Tribunal, the Tribunal may make an order that the applicant pay all, or any part of, the cost of the other parties to the proceeding.
Exception 3
In accordance with section 112 of the VCAT Act, there is a presumption of an order for costs if a settlement offer is rejected. This will apply where:
(a) A party to a proceeding gives another party an offer in writing to settle the proceeding; and
(b) The other party does not accept the offer within the time the offer is open; and
(c) The offer complies with sections 113 and 114; and
(d) In the opinion of the Tribunal, the orders made by the Tribunal in the proceeding are not more favourable to the other party than the offer
Exception 4
Section 115C of the VCAT Act provides that there is a presumption of an order for reimbursement of fees to the successful party in certain proceedings which include proceedings under the Owners Corporations Act 2006 (the OCA), other than a proceeding on application for review under section 191 of the OCA.
Exception 5
An extension of the fourth exception is that which was discussed most recently by Member Leshinsky in the matter of Owners Corporation Plan No. PS336460Q v Hallmark Group (Aust) Pty Ltd (Owners Corporations) [2018] VCAT 1483
Member Leshinsky set out the exception which applies to fee recovery hearings as follows:
although s109(1) of the Victorian Civil and Administrative Act 1998 (Vic) sets out a general rule that parties are to bear their own costs, s109(2) provides that the Tribunal may make an award for costs if it is satisfied that it is fair to do so. It is common that when an owners corporation has been successful in a fee recovery proceeding in this Tribunal, it is usually fair to make an award of costs in a nominal amount (including the filing fee) so that a lot owner who was in default in paying fees bears a greater burden of the overall costs incurred by the owners corporation than is borne by other lot owners who had not been in default. Whether to make an award of costs, and if so for how much, is within the discretion of the Tribunal Member who presides at the hearing, subject to proper observation of s109. [para 25]
Having regard to the exceptions discussed, the VCAT does have a wide-ranging discretion to depart from the general proposition in certain instances. Accordingly, careful consideration must be given during a proceeding as to whether any of the exceptions are likely to apply and an application for costs should be made where appropriate to do so.
For assistance on any Owners Corporation or Building Law matters, please contact Emilia Panayiotou at CLP Lawyers on 9042 2070 or at emilia@clplawyers.com.au
