[2004] VCAT 247

1. Pursuant to s109(4) of the Victorian Civil and Administrative Tribunal Act 1998 order that Peter Davey, the Applicant's legal representative, shall pay the First Respondent's costs of the proceeding for the period 8 March 2003 to 4 June 2003 inclusive, including the costs of and incidental to the First Respondent's application for costs and the Directions Hearing on 4 June 2003. Payment of such costs by Peter Davey will discharge the Applicant's liability to that extent in relation to Order 2 of the Directions dated 4 June 2003.

2. The Applicants and Mr Davey having been served with a First Respondent's Bill of Costs in Taxable Form shall file and serve any objections to such Bill of Costs by 9 March 2004. Costs are to be agreed or assessed/settled in accordance with the directions made on 4 June 2003.

3. Costs of this application are reserved. Liberty to apply until 9 March 2004. Any costs hearing to be before Member Aird

1. On 2 May 2003 the Applicant's claim was dismissed in accordance with self-executing orders made on 7 March 2003. The First Respondent then made application for an order for costs which was referred to a Directions Hearing on 4 June 2003. By order 1 of the Directions made on that day, the dismissal of the proceeding was confirmed. By order 2 the Applicants were ordered to pay the First Respondent's costs of the proceeding. By order 4 the Applicants were granted leave to bring an application that the costs be paid by their former solicitor (Mr Peter Davey) pursuant to s109(4) of the Victorian Civil and Administrative Tribunal Act 1998 which application was made in accordance with those orders on 11 July 2003. Further orders were made on 7 October 2003 setting the application down for hearing on 2 December 2003 and requiring the Applicant and Mr Davey to file and serve Affidavits in support of their respective positions. The hearing proceeded initially on 2 December and was adjourned to 22 December 2003 to enable the filing and service of legal submissions on behalf of the Applicant and Mr Davey. The Applicants were represented by Ms Hannon of Counsel and Mr Davey by Mr Aghion of Counsel.

2. This proceeding was filed on behalf of the Applicants in May 2002 seeking to review a decision of the First Respondent, the insurer. Mr Davey was not the solicitor on the record at the time, and subsequently took over conduct of the proceeding in or about September 2002. The initial contact with Mr Davey was apparently through the Applicants' building consultant, David Cheong, and it appears that much of the communication during the conduct of this proceeding continued between Mr Davey and Mr Cheong. The Applicants have poor command of the English language and their son, Billy Chan, gave evidence that when any correspondence was received from Mr Davey he would translate it for them. From time to time, there were also telephone conversations between Mr Davey and Billy Chan, but it seems that Mr Davey relied, in the main, on Mr Cheong for his instructions.

3. It is clear that there were some communication difficulties, and that Mr Davey was frustrated by the apparent delays in obtaining instructions to enable compliance with the Tribunal's directions. On 7 March 2003 after repeated failure by the Applicants to comply with directions the Tribunal ordered that Points of Claim and any joinder application be filed and served by 2 May 2003 and further:

"2. Should the Applicants fail to comply with Order 1, this proceeding shall stand dismissed save as to any applications for costs"

4. A copy of these Directions was not sent to the Applicants by Mr Davey until 21 March 2003 at which time they were advised "we now have until 2 May 2003 to file and serve Points of Claim or file an affidavit supporting joinder of additional parties." However, their attention was not drawn to order 2 nor were they advised of the implications if they failed to provide the information to Mr Davey which he said, and which I accept, he had been requesting for some months, to enable the preparation of the Points of Claim and any application for joinder. In particular, they were not advised that failure to comply with Order 2 of the Directions would result in their application being dismissed. On 27 May 2003 Mr Davey faxed copies of correspondence he had received from the Applicants to Mr Cheong and although he indicated in his facsimile cover sheet that "I would very much appreciate your assistance with putting this matter back on the rails" there is no reference to the fact that the date for compliance had now passed and that the application stood dismissed (by virtue of the directions made on 7 March 2003). There is no evidence that Mr Davey ever advised the Applicants that the proceeding had been dismissed. Further, it seems he did not advise them that the First Respondent had made application for an order for costs until he faxed them a Notice of Solicitor Ceasing to Act at 5.40 p.m. on 3 June 2003, the evening before the Directions Hearing of 4 June 2003, although he had been advised of the by VCAT Notice of Hearing dated 22 May 2003.

The Tribunal's power to make an order for costs under s109(4)

"If the Tribunal considers that the representative of a party, rather than the party, is responsible for conduct described in sub-section (3)(a) or (b), the Tribunal may order that the representative in his or her own capacity compensate another party for any costs incurred unnecessarily"

6. It is submitted by Mr Aghion on behalf of Mr Davey that the Tribunal does not have power to make an order for costs against a representative of a party once the question of costs has been determined. In other words, the question of responsibility for the payment of costs must be considered and determined at the time of the making of an order for costs - not at some later date. In this case, the Tribunal ordered on 4 June 2003 that:

"The Applicant must pay the First Respondent's costs of the proceeding (including reserved costs on County Court Scale C, to be agreed by the parties, failing agreement to be assessed or settled by the Principal Registrar pursuant to s111 of the Act."

and, it is submitted on behalf of Mr Davey, is therefore functus officio in respect of the question of costs.

7. Ms Hannon, on behalf of the Applicants, referred me to a decision of Deputy President Cremean in RV Walpole Pty Ltd v Rangeville Manor Pty Ltd [2000] VCAT 31 where a self executing order was set aside and submitted this was authority for the proposition that the Tribunal has power to vary or amend any order or direction. The Tribunal's power to vary or revoke relates to procedural orders or directions and is found in s131 of the Act which provides:

"An order or direction as to the procedure to be followed in a proceeding may be varied or revoked at any time by any member empowered by or under this Act or the rules to make such an order or give such a direction."

8. It is clear to me that Member Lothian's order is a final order, not a procedural order and therefore cannot be varied or revoked pursuant to the provisions of s131. Mr Aghion submitted that were the power in the VCAT Act similar to that as set out in Rule 63.23 of the Supreme Court Rules I would have power to make the orders sought, but that the wording of s109(4) not being in those terms does not allow the making of such orders. However, in UTSA Pty Ltd (in liq) & Ors v Ultra Tune Australia P/L & Ors [1998] VSC 13 Chernov J held that the making of an order than a non- party pay costs that would otherwise be payable by a party should properly be regarded as a supplemental order. In that case at the time he determined that costs be paid by the First Respondent (Ultra Tune) he "reserved liberty to UTA to bring such proceeding as it may be advised in respect of the recovery of any costs from persons other than parties to the proceeding.". At paragraph 7 he observed that "I have not considered the question of whether costs should be ordered against non-parties and, therefore ....there will be no 're-agitation of uses that the parties to the judgment, had long since believed to be at an end.'"

"In my opinion , the consideration by the Court of an application for costs against a non-party, even after it has given judgment on the issue of costs inter-parties in the proceeding, would amount to the exercise of a new discretion and not a re-agitation of issues previously considered..."

The situation in this case is entirely analogous - at the time of making the order that the Applicants pay the costs of the First Respondent, Member Lothian clearly reserved the right to the Applicants to make application that an order be made under s109(4). Whilst s109(4) is not in the same terms as s24(1) of the Supreme Court Act it is apparent that a proper interpretation of s109(4) enables an order to be made on the application of a party or on the Tribunal's own initiative. Before an order can made under s109(4) requiring a party's representative to pay the costs of another party, the Tribunal must first determine if the party would otherwise be liable for payment of those costs. I am satisfied that the order made by Member Lothian on 4 June 2003 should be properly construed as satisfying that necessary first step.

9. Further, I am assisted by the views of the Full Court of the Federal Court in Caboolture Park Shopping Centre Pty Ltd (In Liquidation) v White Industries (Qld) Pty Ltd (1993) 117 A.L.R. 253. In that case the Court had ordered that Caboolture' pay the costs of White Industries. At the time that order was made the Court would have regarded the matter as being concluded. Subsequently, White Industries, who had not taken steps to enforce the order because Caboolture was in liquidation, applied for an order that such costs be paid by Caboolture's solicitors. The Court was satisfied it has jurisdiction to make a supplemental order and at paragraph 53 said:

"That the present case involves the making of a supplemental order is made more apparent when the form of the appropriate order is considered. In our view that order would be that the solicitors pay the costs of White Industries (Qld) Pty Ltd on an indemnity basis and that payment by the solicitors operate to discharge the liability of Caboolture. So framed it is clear that the Court has no need in any way to vary or alter any order previously made by it."

I am similarly satisfied that the Tribunal has power to make the orders sought, particularly as further orders were clearly contemplated by Member Lothian on 4 June 2003..

10. It was submitted by Mr Aghion that a further impediment to the making of an order under s109(4) exists because Member Lothian failed to make any findings in relation to the conduct of the Applicant under ss109(3)(a) and (b) which provide:

The Tribunal may make an order under sub-section (2) only if satisfied that it is fair to do so, having regard to -

(a) whether a party has conducted the proceeding in a way that unnecessarily disadvantaged 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 this Act, the regulations, the rules or an enabling enactment

(iii) asking for an adjournment as a result of (i) or (ii);

(v) attempting to deceive another party or the Tribunal;

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding.

However, where an order for costs has been made as a result of the failure of the Applicants to comply with a self-executing order, it follows by clear implication that it is because the Applicant's conduct of the proceeding has disadvantaged the Respondents by "failing to comply with an order or direction of the Tribunal without reasonable excuse" and "has been responsible for prolonging unreasonably the time taken to complete the proceeding." I am of the view that formal findings at the time of making the order were therefore unnecessary.

Can Mr Davey be said to be responsible for the conduct set out in s109(3)(a) and (b)

11. Mr Aghion submitted that in any event an order for costs should not be made against Mr Davey as he was not responsible for the conduct as set out in s109(3)(a) and (b) which has disadvantaged the First Respondent. Although I accept that the Applicants have failed to provide Mr Davey with oft requested information in a timely fashion to enable compliance with Directions made on more than one occasion, and Mr Davey can therefore not be considered totally responsible, I am of the view that he must be held responsible for their failure to comply with the self-executing orders. A careful consideration of the chronology submitted on behalf of Mr Davey, his oral evidence and that of Mr Chan, supports the conclusion that he did not fully appreciate the impact of the Directions made on 7 March 2003. He failed to send a copy of them to the Applicants until some two weeks after they were made; he failed to draw the Applicants' attention to the self-executing orders nor did he advise them of the implications of failing to comply with the Directions. On 27 May 2003, more than three weeks after the date for compliance had passed and the proceeding stood dismissed, he faxed copies of correspondence he had received from the Applicants to Mr Cheong with the request "I would very much appreciate your assistance with putting this matter back on the rails" but there was no mention that the proceeding stood dismissed by reason of the self-executing order.

12. It is submitted on behalf of Mr Davey, that the Applicants would have been unlikely to escape an order for costs upon determination of the proceeding, as their proceeding was without merit. Notwithstanding that this may be an inference that could reasonably be drawn from their failure to obtain and provide the requested information to Mr Davey or to apply to have the proceeding reinstated, I accept Ms Hannon's submission that even if their case was without merit I cannot be satisfied that a negotiated outcome might not have been possible with, for instance, each party bearing their own costs.

13. This is an unfortunate situation which appears to have been contributed to by some communication difficulties exacerbated by Mr Davey's apparent failure to fully appreciate that the Applicants and not Mr Cheong were his clients, and his responsibilities as the solicitor on the record in relation to the self-executing orders.

14. In considering the evidence before me it is clear that the Applicants must bear the major responsibility for the costs of the First Respondent. I am satisfied they failed to respond in a timely manner to repeated requests from Mr Davey for the necessary information to enable compliance with Directions. It is apparent that there were significant communication difficulties, not assisted by Mr Davey's apparent failure to fully appreciate that the Applicants, and not Mr Cheong were his clients. However, that of itself does not warrant on order under s109(4).

15. Mr Davey cannot be held entirely responsible for the Applicant's conduct under s109(3)(a) for the period leading up to 7 March 2003. Notwithstanding the First Respondent was clearly disadvantaged by the Applicants' continual failure to comply with directions, it is apparent that the cause of this failure was a combination of Mr Davey's apparent reliance on Mr Cheong for instructions, his failure to communicate directly with his clients on occasion, and the Applicants' failure to provide the oft requested information. However, in failing to advise the Applicants of the importance of providing the requested information and the implications of the self-executing orders which led directly to the Applicant's failure to comply with the Tribunal's directions (s109(3)(a)(i)) which further unnecessarily disadvantaged the First Respondent, I am satisfied that he is responsible for the conduct contemplated by s109(3)(a) for the period from 7 March 2003 to 4 June 2003 notwithstanding his withdrawal as solicitor on the record on 3 June 2003. The First Respondent's costs of the application for costs and the Directions Hearing on 4 June 2003 directly arise out of the dismissal of the proceedings pursuant to the self executing orders. It may very well be that had the Applicants been properly advised in relation to the self-executing orders they would have provided the necessary information to Mr Davey, the Directions complied with and these costs not incurred by the First Respondent.

16. I accept that the Tribunal does not have power to apportion costs between a party and their representative in relation to the same event nor to costs incurred during a particular period of time and in this regard refer to the decision of Judge Bowman in LBC Constructions Pty Ltd v Capital Bridge Pty Ltd [2003' VCAT 776. However, this does not prevent an order for costs being made pursuant to s109(4) for a specific period where I am satisfied the representative was responsible for the conduct of the Applicants as anticipated by s109(3)(a) and which has disadvantaged another party. I shall therefore order that Mr Davey pay the First Respondent's for the period 8 March 2003 to 4 June 2003 inclusive, including the costs of and incidental to the First Respondent's application for costs and the Directions Hearing on 4 June 2003. Payment of such costs by Peter Davey will discharge the Applicant's liability to that extent only in relation to Order 2 of the Directions dated 4 June 2003.

17. I will reserve the costs of this application. However, given the conduct of the Applicants and Mr Davey in this proceeding, and my apportionment of responsibility for the First Respondents costs, there would need to be very persuasive argument that first there is any power for the Tribunal to make any order for costs as between a party and its (former) representative, and secondly that if so satisfied as to why the Applicants and Mr Davey should not bear their own costs.