MREEF Project Company No. 11 Pty Ltd (ACN: 111 344 426)

Delfin Marketing Australia Pty Ltd (ACN: 079 974 440)

Planinsek Property Group Pty Ltd (ACN: 095 897 751)

Filippou Management Pty Ltd v MREEF Project Company No. 11 Pty Ltd & Ors (No 2) (Civil Claims) [2010] VCAT 1261

**1. The Tribunal orders Filippou Management Pty Ltd (ACN: 120 880 604) to pay the costs of:

b. Delfin Marketing Australia Pty Ltd (ACN: 079 974 440);

c. Planinsek Property Group Pty Ltd (ACN: 095 897 751); and

in this proceeding, in accordance with Scale C of the Rules of the County Court to be assessed by the Victorian Costs Court in default of agreement.

For: Owners Corporation No. 1 PS542645C, Planinsek Property Group Pty Ltd, Toni Planinsek and Delfin Marketing Australia Pty Ltd

Sweetvale Pty Ltd v Minister for Planning [2004] VCAT 2000 (8 October 2004)

Martin v Fasham Johnson Pty Ltd [2007] VSC 54

Maltall Pty Ltd & J. & C. Iliopoulous v Bevendale Pty Ltd No. 2, 10 November 1998, (1999) V ConvR 58-528

1. This proceeding commenced in November 2009.
2. From 1 to 3 March 2010, I heard the application and related applications. Barristers represented all parties but MREEF.
3. On 22 March 2009, I dismissed Filippou Management Pty Ltd's application, concerning this proceeding, and reserved the issue of costs in this proceeding.
4. Owners Corporation No. 1 PS542645C, Planinsek Property Group Pty Ltd, Toni Planinsek and Delfin Marketing Australia Pty Ltd sought costs orders against Filippou Management Pty Ltd (Filippou) in this proceeding.
5. On 9 June 2010 June 2010, I heard the costs application (and related applications not addressed here). Ms M. Sharpe of counsel represented the applicants for a costs order. Mr Nick Joakim and Artemis Nominees Pty Ltd did not apply for costs and did not appear at the hearing. Mr S. Kalotihos appeared for Filippou. I reserved my decision.

1. My orders and reasons of 22 March 2010 in this proceeding detail the background to this proceeding and my detailed reasons dealing with complex evidence, submissions, findings and conclusions. A short recap follows.
2. The Q2 Building is a relatively new office building in Queen Street in Melbourne's CBD. It comprises 12 floors with retail space on the ground floor, office space above and a 'Corporate Centre' (the Centre). It is structured as an owners corporation with approximately 110 lots. The Centre is located in Lots 10.06 and 10.07.
3. Filippou Management Pty Ltd (Filippou) owns and lets all the lots on the ground floor.
4. Mr Spiros Kalotihos is a director and operations manger of Filippou.
5. Ms Toni Planinsek is the owners corporation manager (via Planinsek Property Group Pty Ltd, a company she controls) and a lot owner (via Delfin Marketing Australia Pty Ltd) of lot 10.07.
6. Mr Nick Joakim is a lot owner (of lot 10.06, via Artemis Nominees Pty Ltd), and seven other lots and chairperson of the committee of the owners corporation.
7. Filippou was dissatisfied with the operation and cost of the Centre. At hearing, Filippou sought orders:

1. that the OC reimburse it for all fees paid relating to the Centre. It alleged the OC acted without power in operating the Centre and charging the fees; 2. that the OC re-issue the current invoice with charges relating to the Centre removed;

1. that the OC reimburse to it any monies paid by it for use of the Centre;

1. revoking the appointment of Planinsek Property as OC manager; 2. removing Mr Nick Joakim as chair of the OC Committee; and 3. declaring the leases for lots 10.06 and 10.07 (where the Centre is located) void and lot owners not indebted with respect to them.
2. In the original written application to VCAT, Filippou:

1. named MREEF, a subsidiary of Macquarie Bank, as 1st Respondent. MREEF did not appear at the hearing. It developed the Q2 project. Its involvement had ended; 2. stated it sought payment of $371,000. Filippou did not pursue this amount at hearing; and

1. sought orders against the OC with respect to all lot owners. For example, "Lot Owners to be reimbursed all fees relating to the 'Corporate Centre'". At hearing, Filippou sought orders only with respect to itself, apart from seeking leases to be declared void.

(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 subsection (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;

(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.

(4) If the Tribunal considers that the representative of a party, rather than the party, is responsible for conduct described in subsection (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.

(5) Before making an order under subsection (4), the Tribunal must give the representative a reasonable opportunity to be heard.

(6) If the Tribunal makes an order for costs before the end of a proceeding, the Tribunal may require that the order be complied with before it continues with the proceeding.

1. Morris J in Sweetvale Pty Ltd v Minister for Planning [2004] VCAT 2000 (8 October 2004) said (at paragraph 17),

Section 109 of the VCAT Act gives the tribunal a broad discretion in relation to costs. The existence of such a discretion enables the tribunal to do its best to provide a just outcome, subject to the basic principle that each party will usually bear its own costs. There is much to be said for the existence of such a broad discretion. But, equally, it is important that the obligation to pay costs be predictable; as this promotes certainty. A proper balance is likely to be promoted if decisions as to costs are only made after serious and close consideration of the statutory provisions; and then according to principles and practices that develop in relation to particular provisions, cases or lists.

In my opinion, for an award of costs to be made it is not sufficient to demonstrate that the nature of the proceeding has a strong resemblance to inter-parties litigation in a court. Section 109(1) of the VCAT Act is designed to cover proceedings in all lists of the tribunal, including those where proceedings are characteristically similar to those conducted in the County Court of the Supreme Court. But paragraph (d) of section 109(3) of the VCAT Act anticipates that certain types of proceedings will be brought before the tribunal which will be of a character to enable the tribunal to be satisfied that an order should be made as to costs. How are these cases to be identified? No doubt it would be convenient if a list of such cases was published. But I think it would be unwise to essay such a list; that will have to emerge over time.

What can be said is this. It is more likely that the nature and complexity of a proceeding will make it fair to make an order as to costs if:

* the proceeding was in the tribunal's original jurisdiction, not its review jurisdiction;

* the proceeding involved a large number of issues, or a small number of particularly complex issues;

* the proceeding involved a large sum of money or a major issue affecting the welfare of a party or the community;

* the proceeding succeeded and was a type which was required to be brought, either by reason of a statutory duty or by reason of some unlawful or improper conduct by another party which warranted redress;

* the proceeding failed and was a type where a party has asserted a right which it knew, or ought to have known, was tenuous;

* a practice has developed that costs are routinely awarded in a particular type of proceeding, thus making an award of costs more predictable for the proceeding in question.

I am satisfied that the present case is of a character which can found an award of costs. I rely upon the nature of the issues involved (which involved judicial review in the tribunal's original jurisdiction), the amount at stake, the commercial nature of the objectives sought to be achieved, the complexity of the legal questions, and the requirement that a presidential member hear the case. The high quality of counsel arguing the proceeding is an indicia of the importance and complexity of the case. I also take into account the tenuous nature of the claim as an additional factor, even though this would not be sufficient in itself to make it fair to award costs. I also believe these same factors mean that it is appropriate that costs be assessed on the Supreme Court scale.

1. Bell J in Martin v Fasham Johnson Pty Ltd [2007] VSC 54 at para 33 said of the above section,

Usually parties must bear their own costs, which no doubt reflects the general object of the Act. That object, as identified by the President [of the Tribunal], is to promote access to justice generally and to minimise the overall level of costs in tribunal proceedings as far as practicable.

The considerations relevant to the exercise of the Tribunal's costs discretion are specified in s 109(3) (see also s 78(2)(c)). As we have seen, it must be satisfied it is fair to make a costs order having regard to a number of specified matters. With one exception to which I will come, the matters specified are all case-connected - the conduct of the proceeding, unreasonable delay, making untenable claims, the nature and complexity of the proceeding (and the fact the Tribunal has struck the proceeding out).

The exception is a catch-all consideration - any other matter the Tribunal considers relevant. I would not wish to say anything that might restrict the circumstances in which such other matters may arise. This has been left to the Tribunal to determine on a case by case basis.

1. Counsel for the Owners Corporation No. 1 PS542645C, Delfin Marketing Australia Pty Ltd, Planinsek Property Group Pty Ltd and Toni Planinsek submitted, with regard to section 109(3)(d) of the VCAT Act, costs should be awarded given the nature and complexity of the proceeding. The claims were tenuous, the owners corporation is of commercial character and if successful VCAT's orders would have changed the face of the OC and had serious implications for Ms Planinsek and her companies. She cited Sweetvale (see above) as authority for her submissions.
2. Mr Kalotihos for Filippou submitted each party should pay its own cost. It brought the application because he and his wife were concerned at what was in their view dishonest and inappropriate behaviour by those running the OC. Their attempts to have the issues addressed 'internally' at the OC had failed. VCAT is supposed to be "inexpensive". The respondents did not need to be represented by lawyers. Toni Planinsek and Nick Joakim could have simply turned up and given evidence. The claim was not commercial in that for the most part the issues in this proceeding did not concern fees. It was about the conduct of those involved in the OC. That said, he recognised and respected that while I agreed with the some of the complaints, I did not find the issues complained of serious enough to find in Filippou's favour.

1. I order Filippou Management Pty Ltd to pay the costs of Owners Corporation No. 1 PS542645C, Delfin Marketing Australia Pty Ltd, Planinsek Property Group Pty Ltd and Toni Planinsek in this proceeding, in accordance with Scale C of the Rules of the County Court to be assessed by the Victorian Costs Court in default of agreement.
2. I do so because, while the general rule under section 109 is that each party is to bear their own costs in the proceeding, I am satisfied that it is fair to order costs against Filippou. I see Parliament using "fair" in section 109 as meaning, "just or appropriate in the circumstances" (Compact Oxford Dictionary of Current English, 3rd edition revised, June 2008). I had regard to the factors set out in section 109(3). In my view, "(d) the nature and complexity of the proceeding" and "(e) any other matter the Tribunal considers relevant", are relevant.
3. I considered the following factors as supporting costs orders:
   1. it was more than reasonable that the OC, Delfin Marketing Australia Pty Ltd, Planinsek Property Group Pty Ltd and Toni Planinsek were represented at the three-day hearing. Toni Planinsek and Nick Joakim would have been unwise to, as Mr Kalotihos put it, simply turned up and given evidence.

Filippou's original application was very broad. It sought payment of $371,000 and sought orders against the OC with respect to all lot owners. For example, "Lot Owners to be reimbursed all fees relating to the 'Corporate Centre'". At hearing, Filippou sought orders only with respect to itself, apart from seeking that leases on the Lots where the Centre was located be declared void.

Orders refunding the fees relating to the Centre would have a serious detrimental effect on Q2. It is unclear if the OC had the money to refund the fees. Perhaps it would mean the end of the Centre (in this case, in my view, a matter best left to lot owners at an annual general meeting). Such orders may also restrict the OC's abilities to provide other services at Q2. They may also result in lot owners seeking refunds. If fees were levied to refund fees, they would come from the same or other lot owners.

Also, the application seriously challenged the credibility and competence and/or income of Planinsek Property Group Pty Ltd, Delfin Marketing Australia Pty Ltd and Toni Planinsek.

1. I am satisfied Filippou was aware the Q2 Corporate Centre was to be and was established. It was or should have been aware that in some way lot owners would pay for the Centre. The Centre as established was within the parameters of what was advertised;

1. only one lot owner, Filippou, is an applicant in this proceeding. Where there is significant dissatisfaction with an owners corporation, VCAT may sees multiple lot owner applicants. There is no evidence before me that other lot owners were dissatisfied to the point where they supported Filippou's application. It was evident for minutes of an Annual General Meeting that those present were well aware of problems with the Centre and trying to formulate a strategy to address the issues;

1. not making costs orders would result in all lot owners paying part of the costs of defending this proceeding, that the OC would be liable to pay. Relying in part on evidence before me in Owners Corporation 6514 v Carlson (Civil Claims) [2009] VCAT 889 (15 May 2009), I understand annual fees as calculated by professional managers of owners corporations do not usually include a component for costs of legal proceedings;
2. this application concerned a commercial property. The lots are either shops or offices. In my view it is more appropriate that parties will bear their costs in an owners corporation dispute before VCAT (that do not relate to fee recovery) where issues are of a commercial rather than of a domestic nature. I reject the submission that the application was not commercial in that for the most part the issues in this proceeding did not concern fees and was about the conduct of those involved in the OC. Apart from the commercial nature of the OC, the original application sought payment of $371,000 and the refund of all fees paid concerning the Centre.

I agree with Deputy President Macnamara's observation in Maltall Pty Ltd & J. & C. Iliopoulous v Bevendale Pty Ltd No. 2, 10 November 1998, (1999) V ConvR 58-528 that the commercial or non-commercial nature of a dispute can be relevant to a costs application. He considered section 109 in the context of the first costs application in VCAT's then new Retail Tenancies List. He said in part (at 58-528),

Sub-paragraph [109(3)] (d) however seems more apposite. This refers as a relevant consideration to the nature and complexity of the proceeding. Mr Dreyfus' submission is that this is in substance ordinary commercial litigation. In my view there is much force in that submission. It is not every matter in the Tribunal's original jurisdiction that attracts that description. Certainly the Civil Claims List as now constituted is solely a list dealing with claims between consumers and traders. In those circumstances whilst the traders might be regarded as involved in commercial litigation in one sense, the consumers certainly are not. Accordingly it would be wrong to enunciate any sort of general principle across the Tribunal's civil jurisdiction. It is however in my view appropriate to consider whether having regard to the nature and complexity of the matters that appear in this list that some general view and policy should be adopted.

I accept Mr Dreyfus' submissions that proceedings in this list are in the nature of inter parties commercial litigation and having regard to the inherent complexity of the law of landlord and tenant, I believe that at least at the Tribunal level the proceedings in this list merit the description in general terms as complex. In my view these considerations lead to the conclusion that in this list the general presumption that parties bear their own costs should not apply and that subject always to the overall and very flexible discretion which attends all costs orders, a successful party should normally expect to receive in this list, a costs order in favour of that successful party absent any specific consideration to the contrary.

However, it is not my view that in the Owners Corporation List there is a general presumption where the owners corporation operates a commercial property that a successful party should normally expect to receive a costs order in favour of that successful party. As Bell J. said in Martin, any decision about costs has been left to the Tribunal to determine on a case by case basis; and

1. the respondents submit Filippou did not raise concerns about the operation of the Centre until late 2009. Filippou submits its attempts to deal with the issue internally within the OC were thwarted. The evidence before me has not enabled me to form a clear view on this. While my decision does not turn on this issue, my tentative view is that Filippou could have gone further in trying to resolve the issue at the OC. It could have attempted to call a special general meeting under section 74 of the OC Act, as an avenue to raise its concerns. It could have made a complaint under section 152 of the OC Act concerning alleged breaches by a lot owner or an occupier of a lot or a manager of an obligation imposed on that person by this Act or the regulations or the rules of the owners corporation.

1. In making my decision I considered whether each party should bear its own cost given the what in my previous reasons I described as the unfortunate aspects of the conduct of some respondents being:

1. the Act sets out the powers of the OC. It provides for delegation of powers to among others, the committee and/or manager of the OC. Ms Planinsek appears to have assumed to have authority, which was not delegated to her; 2. Planinsek Property should have held an OC meeting and requested the appropriate delegations to perform her role, in terms of entering contracts;

1. Ms Planinsek and/or Macquarie should have placed on the record (in annual general meeting minutes) the complete details of the arrangements regarding the Centre. If lot owners approved, very well. If not, the issue could be resolved within the OC;

1. Ms Planinsek was unwise to attempt to 'wear so many hats' in transactions concerning the Centre. She should have placed on the record (in annual general meeting minutes) the complete details of the arrangements regarding the Centre; and 2. Planinsek Property allowed the OC to enter into contracts other than as set out in the Act. Sections 19 to 21 of the Act set out the procedure whereby an OC may enter into a contract.
2. I decided these issues should not alter my decision. As I previously said, in my view, Ms Planinsek, who controls Planinsek Property and Delfin Marketing Australia Pty Ltd, acted honestly and in good faith throughout, if in retrospect not always prudently. I found she exercised due care and diligence.
3. Ms Planinsek and her company worked hard for the OC. Without that effort, the whole Q2 enterprise would have suffered. She assumed Macquarie had taken the proper steps to lay the foundations for the Centre, such as having appropriate special resolution drafted for the minutes of the first annual general meeting. She acted in accord with the apparent intention of Macquarie and the annual general meeting. Incoming lot owners expected the Centre would be provided. At times, Ms Planinsek took risks upon Planinsek Property, which she could have caused the OC to bear.