Section 92 of the Retail Leases Act

1. Mr Nugent of Counsel, who appeared on behalf of the Landlord, submitted that his client was entitled to the costs of and associated with the withdrawn counterclaim because the conduct of Ms Le Mercier enlivened the Tribunal's discretion under s92(2) of Retail Leases Act 2003 ('the RLA'). That provision states:

However, at any time the Tribunal may make an order that a party pay all or a specified part of the costs of another party in the proceeding but only if the Tribunal is satisfied that it is fair to do so because -

(a) the party conducted the proceeding in a vexatious way that unnecessarily disadvantaged the other party to the proceeding; or

(b) the party refused to take part in or withdrew from mediation or other form of alternative dispute resolution under this Part.

1. In other words, Mr Nugent submitted that the conduct of Ms Le Mercier was such that she conducted the counterclaim proceeding in a vexatious way that had unnecessarily disadvantaged the Landlord.
2. In the State of Victoria v Bradto Pty Ltd [2006] VCAT 1813, Bowman J considered the operation of s92(2) of RLA. His Honour stated:

[32] Section 92(2) of the RLA, which is similar in wording in parts of s78 of the VCAT Act, involves consideration of three factors. These elements are whether the party conducted the proceeding in a vexatious way; whether this unnecessarily disadvantaged the other party; and, thirdly, the question of justice or fairness.

[33] In relation to what is meant by "vexatious", reference is made to Oceanic Sunline Special Shipping Company Inc v Fay [1988] HCA 32; (1988) 165 CLR 197. A proceeding is conducted in a vexatious way if it is conducted in a way productive of serious and unjustified trouble or harassment, or conduct which is seriously and unfairly burdensome, prejudicial or damaging. Where there is vexatious conduct which causes loss of time to the decision-making body or to other parties, indemnity costs should be ordered, and they are sought in this case.

1. In Cabot v City of Keilor [1994] 1VR 220, Gobbo J discussed the meaning of vexatious or frivolous as used in s150 of the Planning and Environment Act 1997. At page 223 of that judgement, His Honour stated:

The tribunal adopted the test for vexatiousness expressed by Roden J in Attorney-General (Vic) v Wentworth (1988) 14 NSWLR 481 at 491:

"It seems then that litigation may properly be regarded as vexatious for the present purposes on either objective or subjective grounds. I believe that the test be expressed in the following terms:

"1. proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against who they are brought;

"2. they are vexatious if they are brought for collateral purposes, and not for the purpose of having a Court adjudicate on the issues to which they give rise;

"3. they are also properly to be regarded as vexatious if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless".

1. In the present case, Mr Nugent suggests that the proceedings fall within the third test. In particular, Mr Nugent submits that the counterclaim is so obviously untenable or manifestly groundless as to be utterly hopeless so as to enliven the operation of s 92 of the RLA.
2. In State of Victoria and Bradto Pty Ltd Bowman J said the tests adopted by Gobbo J, previously expressed by Roden J, would be "contrasted with the wording of s92 which specifically refers to a proceeding being "conducted ... in a vexatious way". Guided by His Honour's reasoning, it seems to me that it is not sufficient to simply say that the proceeding is vexatious per se but rather, in order for s 92 to be enlivened one must demonstrate that the proceeding is being conducted in a vexatious way.
3. The question arises whether a proceeding that is so obviously untenable or manifestly groundless as to be utterly hopeless then falls within the ambit of s 92 of the RLA. In my view, such a proceeding might fall within the definition if the litigant knew that the claim was so obviously untenable or manifestly groundless as to be utterly hopeless but continued to prosecute it in the face of that knowledge. That scenario is contrasted with the test described by Roden J in Wentworth and adopted by Gobbo J in Cabot, which contemplates that the intention or motive of the litigant is irrelevant. In other words, the test adopted by Gobbo J in Cabot includes taking into account the merits of the proceeding - looked at objectively, rather than simply confining itself to examine how the litigant is conducting the proceeding, once issued.
4. In the present case, it has not been suggested that the proceeding was instituted with the intention of causing annoyance, embarrassment or the like or that it was brought for some collateral purpose. Further, it has not been suggested that the proceeding was conducted in a vexatious way, other than to say that the counterclaim was so manifestly groundless as to be utterly hopeless and should never been initiated and that in so doing, constituted vexatious conduct. The question then arises whether that conduct, if proven, is sufficient to enliven the operation of s 92 of the RLA?

1. In my view, the application for costs, framed in that way, does not enliven s 92. As I have already indicated, I am of the view that s 92 focuses on the manner in which a litigant conducts a proceeding, rather than relating to the bringing of or nature of the proceeding in question. Simply initiating a proceeding that is so obviously untenable or manifestly groundless as to be utterly hopeless is insufficient to enliven s 92 of the RLA. However, continuing to prosecute a proceeding in circumstances where the litigant is aware or ought reasonably be aware that the claim is so obviously untenable or manifestly groundless as to be utterly hopeless may constitute vexatious conduct falling within the definition of s 92 of the RTA. That being the case, can it be said that Ms Le Mercier continued to prosecute her counterclaim in the knowledge that it was so obviously untenable or manifestly groundless as to be utterly hopeless?
2. There is no evidence before me to suggest that the Ms Le Mercier knew that her counterclaim was so obviously untenable or manifestly groundless as to be utterly hopeless but continued to prosecute it in the face of that knowledge. Indeed, the explanation given by counsel for Ms Le Mercier for withdrawing her counterclaim was that there were difficulties in proving that she had paid $210,000 cash to the Landlord, given that the director of the Landlord swore an affidavit on 17 October 2010 denying having received that payment.
3. When faced with that denial, Ms Le Mercier sought leave to withdraw her counterclaim on the following day. In my view, that action is at odds with any suggestion that she conducted the proceeding vexatiously by continuing to prosecute her counterclaim after it had become obvious to her that there were difficulties in proving her claim. On that basis I do not find that s 92 is enlivened.
4. Further, I do not consider that the conduct of Ms Le Mercier enlivens s 92, even if 'vexatious conduct' is given a wider interpretation to include the bringing of or nature of the proceeding in question where, irrespective of the motive of the litigant, the proceeding is so obviously untenable or manifestly groundless as to be utterly hopeless.
5. Mr Nugent impressed upon me that Ms Le Mercier's counterclaim was clearly so untenable or manifestly groundless as to be utterly hopeless because the allegation that she paid $210,000 cash to the director of the Landlord was entirely inconsistent with correspondence passing between the parties after the date the alleged payment was made. Mr Nugent referred to that correspondence in order to demonstrate this point.
6. Having considered that correspondence, I agree that there appears to be serious inconsistencies between the text of that correspondence and the affidavits sworn by Ms Le Mercier, Mr Cooper and Mr Mohammed all of which refer to the alleged payment of $210,000. However, neither Ms Le Mercier, Mr Cooper or Mr Mohammed were called to give evidence nor was there any request that they be cross-examined as to those inconsistencies. In those circumstances, I consider it inappropriate to make a finding, based solely on the historical correspondence passing between the parties, that the counterclaim was so obviously untenable or manifestly groundless as to be utterly hopeless. There may have been some explanation as to why there were inconsistencies between the sworn evidence set out in the above affidavits and the correspondence passing between the parties but without the benefit of a trial, I cannot be sure one way or the other.
7. Given the above, I am not persuaded that Ms Le Mercier has conducted the proceeding (as it relates to her counterclaim) in a vexatious way that unnecessarily disadvantaged the Landlord.
8. Therefore, I dismiss the Landlord's application that Ms Le Mercier pay its costs of and associated with the counterclaim.