Mackie v Volkswagen Group Australia Pty Ltd (Civil Claims) [2019] VCAT 1363

1. Peter Mackie shall pay Volkswagen Group Australia Pty Ltd's costs of this proceeding and Michael Beamish (Mornington) Pty Ltd's costs of this proceeding, each to be assessed by the Costs Court on a standard basis under the County Court Scale, subject to the following principles:

1. Volkswagen Group Australia Pty Ltd is entitled to its legal costs of the 2 days of hearing on 10 and 11 December 2018.
2. Michael Beamish (Mornington) Pty Ltd is entitled to its legal costs of the 2 days of hearing on 10 and 11 December 2018.

1. Michael Beamish (Mornington) Pty Ltd is entitled to its legal costs of this application for costs.

1. Peter Mackie shall pay Volkswagen Group Australia Pty Ltd's costs and disbursements incurred in engaging its expert in this proceeding.

1. Peter Mackie shall pay Michael Beamish (Mornington) Pty Ltd's costs and disbursements incurred in connection with engaging its expert in this proceeding.

1. Peter Mackie shall pay Volkswagen Group Australia Pty Ltd's costs of obtaining transcript, in the amount of $1,663.20.

Mr Andrew Dowling, Customer Experience Compliance Manager

1. On 21 March 2019 the Tribunal's Order and Reasons[1] were issued to the parties. Costs were reserved in that Order. On 23 April 2019 applications for costs were filed by Volkswagen Australia Pty Ltd (Volkswagen), and on 24 April 2019 applications for costs were filed by Michael Beamish (Mornington) Pty Ltd trading as Peninsula Volkswagen Mornington (Peninsula). At the hearing of the costs application Volkswagen was represented by its Customer Experience Compliance Manager, Mr Andrew Dowling. Peninsula was represented by Mr Triaca of counsel, and Mr Mackie was represented by Mr Squirrel of counsel.
2. As none of the parties had served a relevant offer of compromise, the applications for costs must be dealt with under section 109(1) of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act).
3. Section 109 of the VCAT Act provides as follows:

(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.

1. Before turning to the submissions, it is appropriate to set out a short chronology of the proceedings:

1. The proceeding was issued on 19 March 2018 by Peter Mackie against Volkswagen only. Mr Mackie was not legally represented. He prepared the application himself, and represented himself throughout the proceeding. 2. A Directions Hearing was held on 23 May 2018, at which Mr Mackie was given leave to join Peninsula as Second Respondent. Mr Mackie did so on 12 June 2018, and filed Points of Claim, a chronology of events and a so-called "Victim's Statement" in which he described his loss or damage as $73,069.64.

1. In his Points of Claim, Mr Mackie described taking his Volkswagen Touareg R50 to Peninsula to address a problem with oil leaking into the coolant. Mr Mackie recorded that Peninsula had been unable to resolve the problem. Mr Mackie outlined that, shortly after this, he gave adverse feedback in a Volkswagen survey about the services provided by Peninsula, following which, Volkswagen offered to have another service outlet, Bayford Volkswagen, review the car. Mr Mackie asserted that both Peninsula and Volkswagen had failed to resolve the problem with his car, and that he had to replace the engine as a result. Mr Mackie claimed damages of $73,100.64.

1. On 30 May 2018, a Compulsory Conference was conducted. Naturally the parties' negotiations have not been revealed, but one can see from the Order made at the end of the Compulsory Conference that the parties were not able to reach settlement, and that Mr Mackie was ordered to permit Peninsula and Volkswagen, and their Experts, to inspect the original engine that had been removed from the car. 2. On 20 September 2018 Volkswagen's application for summary dismissal of the proceeding under s 75 of the VCAT Act was heard and dismissed. Further orders were made giving Mr Mackie leave to amend his claim to include allegations that Bayford Volkswagen failed to undertake work on Mr Mackie's car correctly, and to allege any loss or damage resulting from that work. Mr Mackie elected not to make any such amendment. 3. On 3 November 2018 a further application under s 75 of the VCAT Act by Volkswagen was heard and dismissed. The proceeding was listed for hearing for 5 days commencing 10 December 2018. 4. I conducted a hearing over two days on 10 and 11 December 2018.
2. As I have noted above, the Tribunal is empowered to award costs under s 109(2) of the VCAT Act, only if satisfied that it is fair to do so having regard to the criteria set out in s 109(3). I turn now to the criteria set out in s 109(3) of the VCAT Act.

1. Peninsula asserted that Mr Mackie had conducted the proceedings in a manner which disadvantaged the respondents because his Points of Claim and supporting materials did not clearly articulate the basis on which he brought his claim. As can be seen from the chronology above, Mr Mackie's initial application was not clear, and he required a number of prompts to get his application into a proper order.
2. However, I do not consider that this amounts to conducting the proceeding in a way that disadvantaged another party, in the sense used in s 109(3)(a)(i) of the VCAT Act. The Tribunal grants considerable latitude to parties who appear without legal representation, as the Tribunal recognises that people who are not lawyers regularly engaged in litigation are not necessarily familiar with the usual ways in which claims are presented. Nor does the Tribunal expect unrepresented parties to have a sophisticated understanding of the relevant applicable legal principles.
3. It is well established that s 109(3)(a) is not concerned with the fact of bringing an application, but rather, requires the Tribunal to look at the steps that the parties took in progressing the proceeding. The mere fact of bringing a difficult application to the Tribunal will not amount to conducting proceedings in a manner which disadvantaged another party.
4. As far as the factors that are set out in s 109(3)(a)(i) to (iv) are concerned, it is clear that Mr Mackie did not fail to comply with orders or directions of the Tribunal without reasonable excuse, nor fail to comply with the VCAT Act, the regulations, the rules or other relevant legislation. Nor did Mr Mackie seek an adjournment as a result of such failures, or, by his conduct, cause an adjournment.
5. Peninsula asserted that, by prosecuting a claim without disclosing all of the relevant facts, including the nature of work carried out by other mechanical experts, Mr Mackie attempted to deceive another party or the Tribunal within the meaning of s 109(3)(a)(v).
6. It is fair to say that some aspects of Mr Mackie's claim only became clear during the hearing. However, I do not find this to amount to an attempt to deceive of the kind contemplated by s 109(3)(a)(v).[2]
7. Although Mr Mackie's application as against Peninsula proceeded on a mistaken apprehension about the consumer guarantees in the Australian Consumer Law (ACL) relating to the provision of services, I do not consider that this amounts to vexatiously conducting the proceeding within the meaning of s 109(3)(a)(vi). Generally, for there to be a finding that the proceeding was conducted vexatiously within the meaning of s 109(3)(a)(vi) of the VCAT Act there must be some element of ulterior purpose,[3] or conduct that is "seriously and unfairly burdensome, prejudicial or damaging".[4] What emerged in the hearing was that Mr Mackie's contention was that, because Peninsula was not able to diagnose the cause of the fault in his car, the services that Peninsula provided were therefore not carried out with due care and skill. Mr Mackie's expert did not give evidence that the cause of the fault in the car was readily identifiable, nor was it his evidence that the services provided by the respondents were not carried out with due care and skill. The evidence before the Tribunal did not bear out Mr Mackie's contention.
8. Mr Mackie's application against Volkswagen failed because Mr Mackie was not able to show that there had been a failure to apply due care and skill in providing services, nor any loss or damage flowing from the conduct of Volkswagen. Had there been evidence that Mr Mackie had, for example, knowing the weakness of his case, brought the proceeding with the objective of leveraging payment by Volkswagen in settlement of the proceeding, that would indeed have amounted to conducting the proceedings vexatiously. However, there is no evidence before me that this was the case.

Section 109(3)(b) - Conduct prolonging the proceeding

1. There was no conduct on the part of Mr Mackie that could be said to be conduct which unreasonably prolonged the conduct of the proceeding.

Section 109(3)(c) - The relative strengths of the claims made by each party

1. As I have noted above, the claims brought by Mr Mackie were misconceived. It was not, however, possible to determine that they were clearly "doomed to fail" at the outset, because of the lack of clarity in the way the claims were put. It was necessary to examine the evidence to come to a decision on the claims.
2. After hearing, and considering the evidence, I found that there were no grounds to support a finding that there had been a failure to render service with due care and skill, in contravention of s 60 of the ACL. Accordingly, I found that there was no basis on which a claim for damages under s 267(4) of the ACL could be made out. Accordingly, I dismissed Mr Mackie's claims against each of the respondents.
3. After hearing all of the evidence, and considering the relevant law, Mr Mackie's claim was revealed as patently without basis in fact or law.

Section 109(3)(d) - The nature and complexity of the proceeding

1. I am satisfied that the proceeding was sufficiently complex and high in value to fall within subsection 109(d), and to have warranted the parties retaining legal practitioners and expert witnesses. This was not a claim that was so straightforward that the decision to engage legal practitioners was unnecessary. Peninsula was clearly justified in retaining legal practitioners.
2. It would be unfair to Peninsula, and to Volkswagen not to award appropriate costs of the proceeding.
3. Taking all of these issues into account, I am satisfied that in all the circumstances of the proceeding it is fair to make an order that Mr Mackie pay the costs of Volkswagen and Peninsula.

1. Volkswagen sought to recover the following costs:

1. the costs of attendance of its expert witness at the hearing $3,172.95; 2. the costs of the expert witness' report $2,214.30;

1. the cost of flights, accommodation and taxi fares for its representative, Mr Dowling, to attend both the Compulsory Conference on 30 August 2018 and the hearing on 10 and 11 December 2018: totalling $2,465.02; and 2. external legal fees of $4,800.00.
2. Peninsula sought to recover

1. the costs of engaging its expert, $5,460.00; 2. counsel's fees on an indemnity basis of $17,600.00; and

1. solicitors' fees on an indemnity basis in relation to the 4 days of hearing; and

1. costs of the costs application hearing.
2. It is appropriate to order Mr Mackie to pay the costs incurred by each of the respondents in engaging expert witnesses, and the costs incurred by Volkswagen in obtaining a transcript.
3. It is not usual to order reimbursement of travel and accommodation costs, and no order will be made in relation to the transport and accommodation of Volkswagen's representative.
4. Peninsula has sought its legal costs on an indemnity basis. The usual basis for costs, when they are awarded by this Tribunal, is on a standard basis. Costs allowed on a standard basis are costs 'reasonably incurred and of reasonable amount'. Costs allowed on an indemnity basis are all costs except insofar as they are of an unreasonable amount or have been unreasonably incurred.[5]
5. In the courts, where costs are generally awarded to the successful party, the award of indemnity costs is reserved for those circumstances where the unsuccessful party has engaged in conduct that has unreasonably prolonged the proceedings, or unreasonably refused an offer of compromise.[6] In this Tribunal, where the general rule is that costs are not awarded, the factors that are relevant in the courts to the award of indemnity costs are equivalent to the factors set out in s 109 of the VCAT Act relating to the award of costs at all. In this Tribunal it is well established that it will only be in the most exceptional circumstances that an order for indemnity costs will be made; for instance where a party has engaged in contumelious or high handed conduct.[7] I do not consider Mr Mackie to have engaged in such conduct. Accordingly, it would not be fair to award costs on an indemnity basis in this proceeding.
6. In relation to legal fees, an order will be made for payment, on a standard basis, of the costs incurred by each respondent in relation to the proceeding. The appropriate scale of costs is the County Court Costs Scale, and, in the absence of agreement between the parties, it is appropriate for the costs to be determined by the Costs Court.
7. Peninsula has also sought its costs of the costs application hearing.
8. In circumstances where Peninsula was legally represented throughout the hearing, it was appropriate for it to be legally represented in the costs application, and, where there is an order for payment of costs of the proceeding, it is appropriate for an order to be made for payment of the costs of the costs application, on a standard basis.

[1] [2019] VCAT 391.

[2] To make a finding of intentional deception for the purposes of s 109(3)(a)(v) has been described as "a very strong thing": Jordan v Vuletic [2007] VCAT 1068 at [12].

[3] Country Endeavours Pty Ltd v Casacir Pty Ltd [2013] VSC 22 at [49].

[4] 24 Hour Fitness Pty Ltd v W&B Investment Group Pty Ltd [2015] VSCA 216 at [4].

[5] Southage v Vescovi [2014] VSC 176 at [41] per Macaulay J.

[6] Colgate Palmolive v Cussons [1993] FCA 536; (1993) 46 FCR 225, at 233.

[7] Seachange Management Pty Ltd v Bevnol Constructions & Developments Pty Ltd [2011] VCAT 1406 at [13].