Sackville Grange Management Services Pty Ltd (ACN: 115 721 652)

Dallimore v Cotham Road Pty Ltd (Owners Corporations) [2014] VCAT 1136

The respondents' application for an order for costs is refused.

1. Following an order which I made on 3 October 2013 dismissing this proceeding, the respondents have applied for an order that the applicants pay their costs of the proceeding.
2. The applicants are residents of a retirement village. The second applicant Mrs Dallimore owns a lot shown on the plan of subdivision of the land on which the retirement village is situated. The applicants reside in a penthouse on the lot.
3. The first two respondents are the developers of the retirement village. They sold the relevant lot to Mrs Dallimore. The third respondent is a management company. Both applicants had entered into a contract with it and bound themselves to pay management fees. Their principal complaint in the proceeding was that they had been required to pay management fees which were wrongly calculated. Owners corporation fees were a component of the management fees.
4. I heard the proceeding over three days between 7 and 9 August 2013. On 3 October 2013 I made an order dismissing the proceeding but made a finding that before 1 July 2010 owners corporation fees payable by Mrs Dallimore were not based upon lot liability as by law they were required to be. The finding was a vindication of one of the allegations that the applicants had made. I published written reasons for my decision: Dallimore v Cotham Road Pty Ltd (Owners Corporations) [2013] VCAT 1740. They explained why I had made the finding but why I declined to make any order as a consequence of the finding.
5. The applicants were self-represented at the hearing in August 2013 and throughout the proceeding. Mr Dallimore, a retired accountant, represented them both. The respondents were represented at the hearing, and throughout the proceeding, by common Counsel and common solicitors.
6. The hearing of the respondents' application for costs occurred on 25 August 2014. Mr Jones of Counsel appeared on their behalf. The applicants did not appear. All the indications in the Tribunal's file for the proceeding were that the applicants had been sent a notice of the hearing. I reserved my decision. My order of 25 August 2014 said so.
7. By a letter to the principal registrar dated 28 August 2014 Mr Dallimore stated that he had received a copy of the order dated 25 August 2014 but that neither he nor Mrs Dallimore had received any notice of the hearing that had occurred on that day. He went on to say: 'As we were prepared to defend the application for a Hearing for Costs, we request that VCAT give us that opportunity, prior to any decision, if one is to be made against us'.
8. I have decided to refuse the application for costs. With one possible exception, there is nothing that I shall be saying in these reasons for decision that I ought not to say without having first given the applicants the opportunity to be heard about it. I shall explain that possible exception below. So I have not thought it necessary to wait until the applicants have made a formal application under s 120 of the Victorian Civil and Administrative Tribunal Act 1998 for a review of the order of 25 August 2014, and until that application is heard, before making my decision and giving the reasons for it.
9. So far as it is relevant to the respondents' application for costs, s 109 of the Act provides:

(1) Subject to this Division, each party is to bear their own costs in the proceeding.

(2) At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in a proceeding.

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

(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;

(e) any other matter the Tribunal considers relevant.

1. It has been repeatedly and correctly said that s 109 lays down a general rule that parties in VCAT proceedings should bear their own costs, that the general rule should be departed from only if the Tribunal is satisfied that it is fair to do so, and that the onus is on the party making an application for costs to satisfy the Tribunal that it is fair to order that another party pay costs. In submitting that it was fair so to order, Mr Jones called in aid sub-paragraphs (c), (d) and (e) of s 109(3). He did not submit that any other party of s 109(3) was applicable.
2. In paragraphs 3, 4 and 5 of my earlier reasons for decision published on 3 October 2013 I described the nature of the proceeding in this way:
   1. This proceeding reflects disputes that the Dallimores have with the village's developers and the village's manager.
   2. The major dispute is about the fees that the Dallimores have been paying for management services. They claim that the fees have been arrived at on an incorrect basis. In particular, they allege that for two years the manager was ignoring the requirement in the Owners Corporations Act 2006 ('the OC Act') that an owners corporation must set fees in accordance with lot liability. They also allege that a provision about fees in the relevant contract - a Management Agreement - is void because it conflicts with the OC Act. They are asking the Tribunal to vary that provision so that it accords with the OC Act and more accurately specifies the fees that they are required to pay.
   3. There are secondary disputes. One concerns the manager's alleged failure to require the developers to pay sums which the Dallimores maintain that the developers are liable to pay. The other secondary disputes all involve, in one way or another, entries in the village's financial statements and balance sheets. The Dallimores claim that a proper accounting would show that there are sums which ought to be credited to them. They are asking the Tribunal to make orders that would require a proper accounting.
3. Mr Jones submitted that 'the nature and complexity of the proceeding' was such that it was fair to make an order for costs against the unsuccessful applicants. In the preceding paragraph I have repeated my earlier description of the proceeding's nature. The proceeding certainly had a degree of complexity, arising from a tension between the requirements of the Owners Corporations Act 2006 and the requirements of other legislation (such as it is) that relates to retirement villages, as well as from the issues that the applicants raised. The hearing took three days. The respondents had to consider lengthy and detailed accounting documents that Mr Dallimore had prepared. Difficult questions of construction of the Management Agreement arose. The case was anything but straightforward. I have borne in mind those considerations.
4. Mr Jones also submitted, correctly in my opinion, that many of the claims made and orders sought against the respondent had 'no tenable basis in fact or law'. I had concluded, in my earlier reasons for decision, that the applicants had no legal standing to seek some of the relief that they did seek. I had also concluded that there were fundamental reasons why as a matter of law some of the claims they made had to fail. I reached those conclusions, however, at the end of a difficult process of isolating, analysing and evaluating each of those claims. The case was far from one in which it was readily apparent that the claims had no tenable basis. The case was even further from one in which even self-represented applicants ought to have been aware that it had little if any tenable basis. There were some claims that did have a tenable basis. In particular, the claim that the manager had failed to base owners corporation fees upon lot liability was, in part, made out.
5. The application form that the applicants filed to commence the proceeding had a paragraph numbered 11 which asked the question 'What do you want VCAT to do?'. The form offered various possible answers which the applicants could make by ticking or completing a box. In the next box to the possible answer 'Payment of money: Amount' the applicants wrote '$100,000 +'. Attached to the application were numerous documents including accounting analyses which Mr Dallimore had prepared. Mr Jones drew my attention to the fact that the respondents faced a claim against them which appeared to be for payment of a sum exceeding $100,000.00 yet the outcome of the proceeding was that the respondents were not liable to pay anything.
6. The size of an unsuccessful monetary claim is a relevant consideration under s 109(3)(d), in my opinion. In McCarthy v Dandenong Region Body Corporate Services (Aust) Pty Ltd t/as DR Strata Management (Civil Claims) [2009] VCAT 1898 the applicants made an application against an owners corporation manager which included a monetary claim for $103,000.00. I dismissed it, and said that the monetary claim was flimsy and went beyond anything that might have had a rational basis. In paragraphs [67], [68 and [69], referring to the respondent as 'DRSM' and to the general rule that s 109(1) lays down, I said:
   1. The general rule should be adhered to in most cases, particularly when, as in the present case, self-represented applicants have lost an owners corporation dispute. Parliament has decided to confer upon VCAT the jurisdiction to hear and determine owners corporation disputes. The provisions of the VCAT Act encourage self-representation. Most individual lot owners who want to ventilate 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.
   2. 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, make and pursue to the bitter end any claim that they have a mind to make, no matter how hopeless, manifestly weak, irrational or quixotic such a claim might be. I am not suggesting that any of those adjectives applied to Mr and Mrs McCarthy's claims in this case. I have said, however, that in my opinion their making and pursuit of a claim for damages of a magnitude of $103,000.00, on such a flimsy basis as became evident, was irresponsible.
   3. DRSM was faced with defending a claim against it for $103,000.00. Understandably, it engaged lawyers to defend the proceeding. The hearing took one full day and half of a second day. Its costs of the hearing alone would have exceeded $4,000.00. Had Mr and Mrs McCarthy simply pursued their argument about the meaning of legislation concerning fees, and not pursued unrealistic and (to my mind) irresponsible money claims, the proceeding would have been shorter and simpler and the defence of it would have been less costly. In all the circumstances I think it fair to depart to some extent from the general rule that parties should bear their own costs and to require Mr and Mrs McCarthy to bear some of DRSM's costs. I shall order them to pay $1,500.00 in costs.
7. Even though this proceeding involved a mixture of owners corporation disputes and other disputes in which the other disputes were more numerous, the views which I expressed in the McCarthy case, to which I adhere, apply to the present proceeding. I have considered whether there was any irresponsibility in the applicants having sought 'payment' of '$100,000+'. This issue is the possible exception to which I referred in paragraph 8 above. In fairness to the applicants they ought to have been given the opportunity to address me as to whether there was any such issue at all. If in truth they did not receive notice of the costs hearing on 25 August 2014 they were not given that opportunity. Nevertheless I have concluded that their monetary claim was not an irresponsible one.
8. Most of the orders that the applicants sought in the proceeding were not orders that the respondents make any monetary payment to them. There was enough in the documents attached to the application to alert the respondents to that. Some of the applicants' claims were for corrections to what appeared in the village's books of account. For example, one of the claims was that an entry in the financial operating statement for one year, 'Service Fees Undistributed - $50,000', had inexplicably disappeared from similar statements in subsequent years. The owners corporation had distributed the $50,000.00 by spending it on improvements to the village. Mr Dallimore did not dispute the propriety of that. His complaint was that the accounting records did not deal with it properly. I concluded that he 'may well have a valid point' about that but I declined to make any order about it (paragraph [97] of my earlier reasons). Insofar as the $50,000.00 in question formed part of the '$100,000+' scope of the proceeding, the answer to a question on the application form did not truly reflect the claim made about it. Other claims made, when analysed, turned out not to have had any tenable basis, but none of them was made irresponsibly, in my opinion.
9. Despite the complexity of the proceeding, and having considered all the other matters which Mr Jones put in his submission, I have not been persuaded that it is fair to order the applicants to pay any costs of the proceeding. The general rule, that parties should bear their own costs, obtains.
10. For those reasons the respondents' application for a costs order is refused.