1IQ Pty Ltd (ACN 134 743 614) and Anor v Delaney Associates Pty Ltd (ACN 063 887 836) (Civil Claims) [2011] VCAT 2056

1. Each of the respective applications for costs by the first respondent and by the applicants is refused.
2. Written reasons for the decision shall be provided.

1. On 12 April 2011, granting an application by the first respondent Delaney Associates Pty Ltd, I ordered that as against the first respondent this proceeding was struck out for want of jurisdiction. I gave written reasons for that decision: 1IQ Pty Ltd & Anor v Delaney Associates Pty Ltd & Anor (Civil Claims) [2011] VCAT 671.
2. The first respondent applied for an order that the applicants pay its costs of the proceeding. The applicants retaliated by asking for an order that the first respondent pay their costs of the proceeding.
3. The first respondent is an auditor which had been involved in audits by the Victorian Registration and Qualifications Authority ("VRQA") of the two applicants, each a registered training organisation. By this proceeding, in the form which it eventually took, the applicants claimed that they had suffered loss and damage because of the first respondent's contravention of section 9 of the Fair Trading Act 1999 which was in force at all material times. My decision was that the first respondent's impugned conduct was not "in trade or commerce" and so the jurisdictional basis for an application under section 159 of the Act to this Tribunal did not exist. In short, the applicants had made a legal mistake in choosing the Civil Claims list of VCAT as the forum for whatever remedy they sought.
4. Throughout the proceeding the applicants have been self-represented. Their common director, Simon Smith, who is not a lawyer, has represented them. The first respondent has been represented by solicitors and Counsel throughout.
5. I heard the costs applications on 14 October 2011. At the conclusion of the hearing I told the parties that I had reached a clear view that they should bear their own costs and that I would give written reasons for my decision. I proceeded to make an order refusing each application for costs.
6. Each party argued that in the course of e-mail correspondence on 10 or 11 November 2010 it had made to the other an offer of settlement that ought to have been accepted because it was just as favourable to the other party as my decision was, and that the rejection of the offer was a reason for an award of costs in favour of the offering party. I reject each argument.
7. The e-mail correspondence started with an e-mail by Mr Smith to the solicitors for the first respondent dated 10 November 2010. It made what the e-mail described as a "hypothetical suggestion". It stated that the applicants would "look at" withdrawing the proceeding if the first respondent consented to an order whereby the proceeding was withdrawn "with full right of reinstatement at any time in any forum", with no order as for costs, but with the order stating that the first respondent "supports the application". It was not clear whether the e-mail contained an offer or was merely an invitation to the first respondent to make an offer. Moreover what was meant by the first respondent supporting the application (presumably the application for leave to withdraw) was unclear.
8. The solicitors responded to Mr Smith by e-mail dated 11 November 2010. It treated the earlier e-mail as an offer, stated that the offer was rejected, and put what was said to be a counter-offer. The terms were that the first respondent would agree to an order that the proceeding be dismissed, with no order as to costs, if the applicants were to execute a release "from any and all further claims of any type and any liability whatsoever" arising from the audits. The difference between dismissal (in terms of the counter-offer) and striking-out (as I ordered) is that a striking-out would have been no impediment to the applicants commencing proceedings in a court based upon the same subject matter of dispute. Nor would a withdrawal have been an impediment. Arguably a dismissal would have created an impediment. At all events the demand that the applicants execute a release, if acceded to, would have prevented the applicants from litigating elsewhere. Thus the so-called counter-offer sought an outcome that was more favourable to the first respondent than the striking-out order that I eventually made.
9. By a third e-mail also dated 11 November 2010, to the solicitors, Mr Smith rejected the first respondent's offer. The e-mail went on to state that the "original suggestion" remained open until 5.00pm on the following day, but would then be withdrawn. Again, it was unclear whether that was said to be remaining open for that limited time was an offer or an invitation to make an offer. Either way, it involved the first respondent consenting to an order in terms that were unclear.
10. There was no other arguable basis for the applicants' application for costs. They had been unsuccessful in the proceeding, albeit for a technical legal reason.
11. The first respondent's successful strike-out application had been brought under section 75 of the Victorian Civil and Administrative Tribunal Act 1998. Section 75 (2) provides that if the Tribunal makes a strike-out order under the section it may order the applicant to pay an amount to compensate the other party "for any costs, expenses, loss, inconvenience and embarrassment resulting from the proceeding".
12. Section 109 (1) of the VCAT Act imposes a general rule that parties bear their own costs in a proceeding. Nevertheless by virtue of section 109 (2) and (3), the Tribunal may make an order that one party pay another party's costs if it is satisfied that it is fair to do so, having regard to various matters including any matter the Tribunal considers relevant. The various matters include "vexatiously conducting the proceeding" (section 109 (3)(a)(vi)), "whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding" (section 109 (3)(b)) and "whether a party has made a claim that has no tenable basis in fact or law" (section 109 (3)(c)).
13. The last word has not yet been spoken on the relationship between section 75 (2) and section 109. This case is not the occasion to add many more words. All I say is that I agree with the following propositions contained in the written submission as to costs to which Mr Slattery, Counsel for the first respondent, spoke at the hearing. (They are my paraphrasing, not his words.)

1. It is open to a respondent who has succeeded on a summary dismissal or strike-out application made under section 75 to seek costs either under that section or under section 109. 2. Section 75 (2) is unaffected by the general rule in section 109 (1) that parties bear their own costs. When an application for costs is made under section 75 (2) the Tribunal has a complete discretion to award, or not award, costs.

1. The power to award costs under section 109 (2) is also discretionary.

1. Vexatious conduct of a proceeding, unreasonable prolongation of a proceeding and the making of an untenable claim are all grounds for the exercise of a discretion under s 75 (2) to award costs, just as they are for the exercise of a discretion under section 109 (2) to award costs. 2. So by and large it makes little difference whether an application for costs, following a summary striking-out of a proceeding, is made under section 75 (2) or under section 109 (2).
2. In making its application for costs the first respondent relied not only upon the argument about the offer it had made on 11 November 2010 (an argument which I have rejected) but also upon what it claims were the following features of the proceeding.
3. Untenable claims. In my earlier reasons for decision I had stated that the proposition that the first respondent's impugned conduct had occurred "in trade or commerce" was untenable. So the whole proceeding involved an untenable claim. The consequence was that VCAT's jurisdiction under section 159 of the Fair Trading Act was lost. Whether the allegations impugning the conduct and the allegations of loss were tenable or untenable was never put to the test. The proceeding was not heard and determined on its merits. It was struck out for a technical legal reason. The untenability involved was not of a kind that cried out for the exercise of the discretion adversely to the applicants.
4. Unnecessarily prolonged proceeding. In a chronology appended to his written submission Mr Slattery accurately outlined the history of the proceeding and emphasised that there had been five hearings between 5 July 2010 and 7 March 2011 until, following the fifth hearing, the proceeding was struck out as against the first respondent. That, he submitted, showed that the applicants had unnecessarily prolonged the proceeding.
5. The first three of those hearings, however, largely concerned applications that the applicants were making for third party discovery against VRQA and for an interlocutory injunction against VRQA. In those three hearings Mr Smith's line of fire was towards VRQA rather than towards the first respondent. Of course the first respondent was entitled to be represented at those hearings to protect its interests but, with one exception, its interests were not directly put at risk during those hearings and the applicants were not directly pursuing their claims against the first respondent during those hearings. The exception was that the applicants had served a summons to witness upon the first respondent to produce documents. At the third hearing I made an order setting aside the summons to witness.
6. It was only after the applications directed to VRQA had run their (unsuccessful) course that the applicants focused upon the claims against the respondents. The fourth hearing was a directions hearing during which the applicants' Further Amended Points of Claim were regularized and a timetable was set for the summary dismissal applications which the respondents had foreshadowed. The fifth hearing was of the first respondent's summary dismissal application.
7. Viewed in that light, the proceeding was not unnecessarily prolonged by the applicants, in my opinion. My order brought it to an early end in a way which I suspect was merciful to both parties: merciful to the first respondent because it did not have to incur the expense and inconvenience of what might have been a marathon hearing on the merits, and merciful to the applicants because they avoided the risk of ultimate failure on the merits and the consequential risk of a heavy order of costs against them.
8. Complexity and obscurity. Mr Slattery correctly submitted that the applicants had filed and served three versions of the Points of Claim, and each was lengthy, the last being 33 pages long. His remark that they were "difficult to decipher" is justified.
9. While the proceeding was on foot, the applicants bombarded the Tribunal's registry with documentary material, usually by facsimile transmission, to an inordinate degree. I have had no evidence of the extent to which the experience of the first respondent's solicitors replicated the experience of the Tribunal's registry staff and of Tribunal members, but I have no doubt that the volume of material served upon them in the course of the proceeding was unusual and inordinate.
10. This, to my mind, was the point that weighed most heavily towards the exercise of a discretion in favour of awarding costs against the applicants. In the end, however, I decided that it did not tip the scales in that direction.
11. Vexatious and oppressive conduct. The first respondent put forward various instances of what it said had been vexatious and oppressive conduct of the proceeding by the applicants.
12. First, it was said that the making of verbose, obscure and ultimately untenable claims was itself engaging in vexatious and oppressive conduct. I do not accept that. Making a bad or weak claim, or even a vexatious claim, in a proceeding is a different thing from conducting a proceeding vexatiously. Section 109(3) itself separates the concepts of untenability and of vexatious conduct into different sub-paragraphs, illustrating that the concepts are different. The concept of vexatious and oppressive conduct involves the manner in which a party pursues, or fails to pursue, a claim or defence in a proceeding, not to the strength or the contents of the claim or of the defence.
13. Secondly, it was said that the applicants deliberately decided to pursue inappropriately a proceeding under the Fair Trading Act instead of going down the more appropriate avenue of seeking administrative review of VRQA's decision. So they did. But in my opinion making a wrong choice between two types of proceeding does not amount to vexatious conduct of the proceeding wrongly chosen.
14. Thirdly, it was said that the applicants had unnecessarily made serious, "extravagant and baseless" allegations of intentional misconduct and deceit. Some such allegations were made in the Points of Claim themselves. I cannot say whether they were or were not "extravagant and baseless". I never got to the stage of investigating their merits. Most of the instances of such allegations, however, that Mr Slattery gave occurred in correspondence from the applicants after I had made the order which determined the proceeding, as against the first respondent, by striking it out. One cannot conduct a proceeding vexatiously or oppressively after it is over.
15. Fourthly, it was said that after this proceeding was struck out there was a fresh proceeding commenced against Ms Delaney, the director of the first respondent company, based upon the same subject matter. There was no evidence of that. I was told about it from the Bar table. I have no reason to doubt it. Whatever one might want to say about that conduct, it was not part of the conduct of this proceeding.
16. So I do not accept that the applicants' conduct of this proceeding has been vexatious or oppressive.
17. Desire for financial gain. It was said that "the fact that this proceeding was driven by a desire for financial reward" was a reason for exercising the discretion in favour of awarding costs. There are many criticisms that could fairly be made of the applicants but this is not one of them. I do not think that Mr Smith was interested in money at all. The applicants claimed money only because the allegation that they had suffered loss and damage was one they had to make when they were trying to force their case into the mould that the Fair Trading Act makes available. It never fitted the mould. I have never understood why the applicants tried to ventilate their grievance in that inappropriate way. But I am sure that the desire for financial gain was not the reason.
18. There are numerous provisions in the VCAT Act that encourage would-be applicants to think that they may represent themselves in a VCAT proceeding and that if they lose their case because of a legal mistake they will not be penalized in costs. A party who seeks to be represented by a professional advocate must (with a few exceptions) seek leave to be so represented. There is the general rule in section 109(1) that parties bear their own costs. There is the requirement in section 98(1)(d) that the Tribunal must conduct a proceeding with as little formality and technicality as a proper consideration of the matters before it permits. Generally speaking, I say that it is important that would-be applicants are not deterred from airing genuine grievances, and making genuine claims, by the fear that the Tribunal will award costs against them if they lose, particularly if they lose because they have made a legal mistake.
19. On the other hand, the right to air a grievance and make a claim needs to be exercised responsibly. It would be unfair to respondents for the Tribunal to permit applicants to think that they can, with impunity, pursue any claim that they have a mind to make. It is trite to say that the purpose of an award of costs is to indemnify the party incurring those costs, not to punish the party causing those costs to be incurred. There are cases in which justice requires that a party be indemnified, even though the effect of the indemnity is to penalize financially a self-represented litigant.
20. I have mentioned above one feature of this case that would point towards a conclusion that the applicants have not responsibly exercised their right to commence and pursue a proceeding and that as a result the first respondent has incurred costs unnecessarily. However, I was not persuaded that I should exercise my discretion in favour of making a costs order. In the end the primary consideration remained that the applicants had made a legal mistake, bringing a case that the Tribunal had no jurisdiction to hear and determine, and should not be made to suffer financially because of that mistake.