//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2009] VCAT 1898
defendant. The proceeding was dismissed, and the applicants were ordered to pay the respondent $1,500 in costs.
The applicants' limited use of shared property did not, by itself, let them reduce fees that legislation required to be based on their lot liability. Different fee proportions could be agreed by all owners, but the Tribunal did not decide the precise amount owing for the final year because the owners corporation was not a party. The Tribunal found that the manager had not breached its duties. It dismissed the case and ordered the applicants to pay $1,500 towards the manager's costs, partly because of the scale and weak basis of their damages claim.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
2,590 words · generated 02/10/2026
Joseph and Jin McCarthy owned Lot 1 of a four-lot owners corporation from December 2000. The plan gave each lot equal lot entitlement and lot liability, each being 100 out of 400 [1]. The owners corporation was responsible for common property consisting of a driveway and garden. The owners of Lots 2, 3 and 4 had keys to the entrance gate and front doors opening onto the common property. The McCarthys had no key, no door opening onto it, and a separate garden and driveway. The Tribunal accepted that the other owners derived substantially greater practical benefit from the common property, although the McCarthys had a right of access [5].
2 cited instruments linked from this judgment.
The dispute was not simply about whether the common property was used differently. It concerned the legal effect of equal lot liabilities on fees, and whether the manager had acted properly while administering the owners corporation. The McCarthys alleged that the manager, Dandenong Region Body Corporate Services trading as D R Strata Management (DRSM), had failed to act in good faith and with due care. They sought $103,000 in compensation and an order revoking DRSM's appointment [4]. They also withheld $575 from the invoiced fees for the financial year ending 31 July 2009 [the procedural discussion before “Jurisdiction”; “Resolutions Concerning Fees”].
There had been earlier attempts to accommodate the McCarthys. In 2002, the owners corporation resolved that they would be exempt from specified electrical power, garden maintenance and water costs, with the relevant costs apportioned to Lots 2, 3 and 4, subject to conditions. The Tribunal said that after this resolution the owners paid fees on a different basis from their lot liabilities, apparently by agreement. It also referred to a 2005 decision to maintain that arrangement [“Resolutions Concerning Fees”]. In 2007, a resolution provided for Lots 2, 3 and 4 to contribute an additional $330 each towards driveway, garden and cleaning costs. The McCarthys considered that amount insufficient and made their own calculations.
The owners corporation was not a party to the VCAT proceeding. That mattered because any unpaid fee would be owed to the owners corporation, not the manager. The Tribunal therefore said it could not finally determine the fee payable for the last financial year or make a declaration affecting the owners corporation's rights without it being joined and heard [“A Procedural Difficulty”].
The Tribunal dismissed the proceeding and ordered the McCarthys to pay DRSM $1,500 in costs. It did not determine the final fee balance.
The central legal distinction was between prospective fees and retrospective contributions for particular works. Sections 23(1) and (3) of the Owners Corporations Act 2006 (Vic) allow annual fees for administration, maintenance and repairs, insurance and other recurrent obligations, and require those fees to be based on lot liability. Section 24 similarly requires special fees and charges to be based on lot liability. Section 28(1) makes lot owners liable for amounts owing in respect of their lots.
The McCarthys relied on the benefit-based rule in s 28(2) and (3), and on the predecessor provisions and regulation 209. The Tribunal read those provisions as addressing a different kind of liability. Where a particular repair, maintenance task or other work has been undertaken wholly or substantially for the benefit of only some lots, the owners who benefit more may be required to pay more than their lot liability. The Tribunal said that this is a retrospective demand arising from particular expenditure, not a reason to reduce fees set prospectively on the basis of a budget [“Liability to Pay Fees: The Law”].
That distinction drove the result. The McCarthys' lower practical benefit from the common driveway and garden did not, on its own, change the statutory basis for annual fees. The Tribunal also reasoned that permitting individual owners to adjust budgeted fees after the event would make it difficult for an owners corporation to budget and meet its obligations [“Liability to Pay Fees: The Law”].
The decision did not mean that lot owners could never agree to a different allocation. The Tribunal considered it legally possible for the owners, for the time being, to agree among themselves that they would pay fees in proportions other than their lot liabilities and authorise collection on that basis. It treated the 2002 and 2005 arrangements as potentially supported by agreement, including because owners subsequently paid in accordance with them. By contrast, the 2007 resolution was not unanimous, and the McCarthys calculated their payments differently. That meant the Tribunal could not treat it as an agreement by all owners to a particular adjustment [“Liability to Pay Fees: The Law”].
The Tribunal did not decide which fees were ultimately payable for the last year. It identified issues that would arise in a proceeding involving the owners corporation, including whether the McCarthys were bound by resolutions to which they had not agreed, whether the 2005 agreement remained operative, and the correct calculation [“Liability to Pay Fees: The Law”]. This is important: the dismissal rejected the applicants' broad legal argument against prospective fees, but did not finally resolve the accounting dispute.
The Tribunal also addressed its jurisdiction over the claims against DRSM. Section 122 required a manager to act honestly and in good faith and exercise due care and diligence. The Tribunal saw no reason to confine that duty to the owners corporation, and considered it capable of being owed to each lot owner. It also relied on ss 162, 163 and 165 for jurisdiction to determine an owners corporation dispute with a manager and for powers that included damages and revocation of appointment [“Jurisdiction”]. Having established jurisdiction, it found the evidence did not establish a breach or legally attributable loss.
The costs result involved a separate balance. Section 109 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) sets a general rule that parties bear their own costs, subject to a discretion. The respondent had made a written offer to resolve the matter by having it struck out with no order as to costs. The Tribunal referred to Transport Accident Commission v Coyle [2001] VSCA 236; (2001) 3 VR 589, which it said treated a similar offer as an offer to settle for the statutory costs provisions. It nevertheless considered the character of the offer and that it was made to self-represented litigants justified departing from the ordinary post-offer costs consequence. It then awarded $1,500 under the broader costs discretion, citing the size and flimsy basis of the $103,000 claim and the additional hearing and defence costs it generated [“Costs”].
The judgment describes the legislation then in force as continuing an established scheme under which owners corporation fees were set or levied by reference to lot liability [3]. The relevant statutory provisions were ss 23, 24 and 28 of the Owners Corporations Act. The decision’s principal clarification is interpretive: the Tribunal separated prospective budget-based fees from retrospective amounts for particular works.
Before this decision, the dispute had been framed by the applicants as a fairness question: if one lot benefits less, should its owner pay less? The Tribunal’s answer was that the statutory mechanism matters. A difference in benefit may be relevant to a retrospective charge for works of the kind described in s 28(3) and s 49(2), but not to a prospective annual fee that must be set according to lot liability. In that way, the decision limited the use of the “lot that benefits more pays more” formulation to the setting the Tribunal understood the legislation to cover.
The decision also recognised a separate consensual route. Owners could agree among themselves to a different allocation, even though the plan continued to show equal lot liabilities. The decision did not set out a comprehensive test for proving such an agreement. Its treatment of the earlier arrangements depended on the resolutions and subsequent conduct described in the evidence. It left open whether the 2005 arrangement continued to bind the parties and whether the 2007 resolution had any binding effect on owners who did not agree.
On managers' duties, the Tribunal stated that s 122 could support a claim by an individual lot owner, rather than only by the owners corporation. This was a jurisdictional and duty-scope conclusion in the context of the statutory provisions cited. The Tribunal did not find a breach on the facts.
The judgment does not establish what later courts or tribunals have decided about its reasoning. The supplied text contains no later treatment of McCarthy. The only other case it discusses is the earlier Court of Appeal decision in Coyle, in connection with settlement offers and costs. Any account of later treatment would require later authorities not included in the judgment provided here.
The Tribunal stated: “The fees and charges must be set and levied according to lot liability” [“Liability to Pay Fees: The Law”]. In plain English, an owner’s ordinary share of prospective fees followed the proportion recorded as that lot’s liability, not the owner’s assessment of how much common property the owner personally used.
The Tribunal distinguished those fees from particular work costs. It explained that the “lot that benefits more pays more” rule applied to the cost of works, “not to the setting and levying of fees for future anticipated expenditure” [“Liability to Pay Fees: The Law”]. In plain English, a difference in benefit could matter when the owners corporation charged for a specific job, but it did not automatically change the share of a general budget.
On the manager’s duty, the Tribunal said it saw no reason to regard s 122 as a duty owed only to the owners corporation, and considered it capable of being owed “to each lot owner” [“Jurisdiction”]. This supported the Tribunal’s conclusion that an individual owner could bring a claim alleging breach. It did not mean every disagreement over fees was a claim against the manager: the judgment stressed that the fees themselves were payable to the owners corporation.
Assessing DRSM’s conduct, the Tribunal found it had “tried conscientiously to achieve the right balance between the interests of all lot owners” [38]. It considered particular incidents, including an unfortunate comment that the manager had to “support the majority”, an error in not circulating minutes, correspondence, refusal to attend mediation without authority, the choice of meeting venue, and debt collection. It found these incidents did not establish breach or justify revocation [38–54].
On costs, the Tribunal described the $103,000 claim as built on a “flimsy basis” and “irresponsible” [“Loss and Damage”]. The point was not that self-represented applicants should generally face costs when unsuccessful. The Tribunal expressly recognised the importance of not deterring people from bringing genuine grievances. It considered a partial costs order fair here because the large damages claim made the defence and hearing more costly [“Costs”].
The decision is most directly relevant where an owners corporation sets prospective annual fees according to lot liability and an owner argues that their lot receives less practical benefit from common property. The distinction drawn by the Tribunal suggests that the owner’s unequal use of common property does not, by itself, displace the statutory basis for those fees.
A different issue arises where the owners corporation seeks a retrospective contribution for identifiable repairs, maintenance or other works that benefit some lots substantially more than others. The judgment treats that type of expenditure as potentially engaging the benefit-based provisions. The precise application depends on the nature of the amount demanded and the statutory provisions governing it.
The decision is also relevant where all lot owners have agreed to a different fee allocation. It recognises that a consensual arrangement may operate differently from the allocation shown by lot liability. However, it does not settle the evidentiary or legal effect of every resolution, particularly where a resolution is not unanimous, an owner did not agree, or later conduct may be inconsistent with it.
For claims against a manager, the decision addresses allegations that management conduct breached the statutory duties of good faith and due care and diligence. It distinguishes a dispute over the owners corporation’s fee entitlement from a claim that the manager mishandled its functions. The judgment’s conclusion depended on its assessment of the specific conduct and evidence, not merely on the fact that a dispute existed.
Finally, the costs discussion may be relevant where a party relies on a written offer to settle in VCAT proceedings. The judgment illustrates that a qualifying offer can engage statutory costs consequences while the Tribunal retains discretion to order otherwise. It also shows that the conduct and scale of the claims may be considered when deciding whether a costs order is fair.
The supplied judgment does not identify any later court or tribunal decisions that applied, followed, distinguished or criticised McCarthy. No later-treatment history can therefore be stated on the material provided.
The judgment itself refers to Transport Accident Commission v Coyle [2001] VSCA 236; (2001) 3 VR 589. It treated Coyle as authority that an offer in similar terms could be an offer to settle for the purposes of the VCAT Act provisions, and that s 112(2) could override the general costs position while leaving discretion in the words “unless the Tribunal orders otherwise” [“Costs”]. Coyle is prior authority discussed in McCarthy, not later treatment of McCarthy.
The distinction is significant for research use. The propositions in this decision should be attributed to Senior Member Vassie’s reasons and the statutory text as discussed there. The supplied material alone does not establish whether later appellate authority has adopted or qualified those propositions.
The most immediate unresolved question in the proceeding was the amount of fees payable for the financial year ending 31 July 2009. The owners corporation was not a party, and the Tribunal expressly declined finally to determine its rights or the balance claimed. It identified questions about whether the applicants were bound by resolutions to which they had not agreed, whether the 2005 agreement continued, and how the amount should be calculated [“Liability to Pay Fees: The Law”].
The judgment also leaves open how an agreement to depart from lot liability should be established in other cases. It found that the earlier arrangements appeared to be agreed because the owners paid fees on that basis, but did not formulate a general rule about the required form, duration or scope of an agreement. Nor did it decide the effect of the 2007 resolution on each owner.
The decision mentions a possible application under s 34D of the Subdivision Act 1988 (Vic), by which a lot owner could apply to VCAT for an order requiring the owners corporation to seek an alteration to lot entitlements and liabilities. The Tribunal described that as a potentially more appropriate way to address the source of the fee grievance, but did not decide such an application or whether any proposed alteration should be made [“An Alternative Legal Recourse”].
The boundaries of the manager’s s 122 duties also remain open beyond the conclusion that they may be owed to individual lot owners. The Tribunal found no breach on the incidents before it. It did not comprehensively define the standard of care in other management situations or determine how the statutory duty would apply to conduct outside the history examined.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on, relying on, or using this analysis, have it checked by a qualified Australian lawyer.
Owners Corporation - proceeding by lot owners against manager - claims for declarations, for order revoking the manager's appointment and for damages - proceeding dismissed.
Duty of manager to lot owners to act in good faith and with due care - Owners Corporations Act 2006 s122.
Fees - set on basis of lot liability - whether lot owners who obtain little benefit from common property are entitled to pay less than the fees set - agreement by all lot owners to adjust the fees payable - Owners Corporations Act 2006 ss23, 24, 25, 49(2); Subdivision Act 1998 s29(4), (7); Subdivision (Body Corporate) Regulations 2001 reg. 209.
Costs - whether costs should be awarded to successful respondent - effect of written offer to settle - Victorian Civil and Administrative Tribunal Act 1998 ss109, 112, 113.
Dandenong Region Body Corporate Services (Aust) Pty Ltd (ACN: 062 704 750) t/as D R Strata Management
McCarthy v Dandenong Region Body Corporate Services (Aust) Pty Ltd t/as D R Strata Management (Civil Claims) [2009] VCAT 1898
The applicants, Joseph McCarthy and Jin McCarthy, have been since December 2000 the owners of Lot 1 on Plan of Subdivision No. PS 416266R ("the plan"). The street address of their home on Lot 1 is 1/868 Malvern Road Armadale. The other lots shown on the plan are Lots 2, 3 and 4. The plan shows common property. An owners corporation, the members of which are the lot owners for the time being, is responsible for the common property. The lot entitlement and lot liability of each lot owner, as shown on the plan, is equal: 100 out of 400.
At all material times the respondent, Dandenong Region Body Corporate Services (Aust) Pty Ltd, which trades under the name D R Strata Management ("DRSM"), has been the manager appointed by the owners corporation. Its most recent appointment has been under a written contract of appointment dated 1 August 2008 for a term of one year from that date.
At all material times the scheme of legislation governing owners corporations (formerly called bodies corporate) has been that an owners corporation is entitled to set or levy fees, based on lot liability, in order to discharge its obligations to maintain and insure common property, and that the lot owners are liable to pay these fees. The legislation has been the Subdivision Act 1988, the Subdivision (Body Corporate) Regulations 2001 and, since 31 December 2007, the Owners Corporations Act 2006 ("OC Act"). Sections 23(1) and (3) and 28(1) of the OC Act presently reflect that scheme. Accordingly when, as with the owners corporation in the present case, the lot liability of the lot owners is equal, the result of the scheme is that each becomes liable to pay an equal share of the overall annual fee set or levied.
The grievance which Mr and Mrs McCarthy have had since they became the owners of Lot 1, and which has led to this proceeding, arises from the undoubted fact that the owners of Lots 2, 3 and 4 derive a much greater benefit from the common property than Mr and Mrs McCarthy derive. Indeed Mr and Mrs McCarthy maintain that they derive no benefit at all from the common property. They have tried to persuade the other lot owners and DRSM to their point of view that the fees which they should have to pay should be lower than the fees charged to other lot owners. As will appear below, they have had some measure of success in that regard but not as much as they have sought. They blame DRSM for this. They allege that DRSM has failed in its duty to them, as lot owners, to act with good faith and with due care to ensure that the fees which they have to pay are fair. They claim monetary compensation totalling $103,000.00. They also seek an order revoking DRSM's appointment as manager.
The common property consists of a driveway and garden area. There is a locked gate at the entrance to the driveway off Malvern Road. The front doors of the houses on Lots 2, 3 and 4 respectively open out onto the common property. Each of the owners of those three lots has a key to the gate and has ready access to the driveway and garden. No door to the home on Lot 1 opens out onto the common property. There is a window that overlooks a small part of the common property, but that is all. Mr and Mrs McCarthy do not have a key to the gate. Lot 1 has its own garden and driveway. While Mr and Mrs McCarthy have no particular need to use or have access to the common property, the fact is that they do not use it and, although they have a right of access to it, they have no ready means of access to it. That is why I have said that it is the undoubted fact that the other lot owners derive a much greater benefit from the common property than they derive from it.
I heard the proceeding on 10 and 11 August 2009. Mr and Mrs McCarthy appeared in person. Each gave evidence. By leave, Mr McNab of Counsel appeared for DRSM. Its general manager, John Boyd Cooper, gave evidence on its behalf. Mr and Mrs McCarthy asked me to give written reasons for my decision. I reserved my decision.
John and Jin McCarthy, Owners of Unit 1/868 Malvern Road, Armadale 3143, shall be exempt from body corporate contributions for Electrical Power, Lawn Mowing/Garden Maintenance and Water Rates commencing from 01/08/2001 and that the value of fees and actual expenses directly related to the above shall be equally apportioned to the owners of Units 2, 3 & 4 - on condition that all following clauses are accepted and actioned accordingly:
6. This motion does not change the "Units of Liability" of each owner
The position that obtained after 17 September 2002, therefore, was that by agreement of the lot owners, as reflected in the resolution passed at the annual general meeting, Mr and Mrs McCarthy were to pay to the owners corporation an annual fee that was less than their lot liability made them liable to pay, and that each of the other lot owners was to pay to the owners corporation an annual fee that was more than the lot liability obliged that owner to pay. The resolution recognised that this was an agreement between the persons who were lot owners as at 17 September 2002 and that if there were a change of ownership a future lot owner would not be bound by it. This was to the satisfaction of Mr and Mrs McCarthy, and fees were charged in accordance with the resolution, and paid, without any further ado until September 2006. By September 2005 there had been a change of ownership but at an annual general meeting on 20 September 2005 the lot owners resolved, in effect, to maintain the status quo since the 2002 resolution, and thereafter fees were charged and paid accordingly.
On 23 September 2006 Mr and Mrs McCarthy wrote to DRSM asking for an explanation for certain expenditure and intimating that in accordance with resolutions of members of the owners corporation they should not be required to pay for it. Jon Kacew of DRSM was looking after the management of the owners corporation by this time. He distributed to the other lot owners copies of Mr and Mrs McCarthy's letter. They have taken umbrage at this. They had not given permission. By a letter to Mr and Mrs McCarthy dated 23 November 2006 Mr Kacew of DRSM proposed certain new proposed fees, again on the basis of Mr and Mrs McCarthy paying fees which were lower (by more than $600.00 per year) than the fees which other lot owners would be paying. On 6 February 2007 DRSM informed Mr and Mrs McCarthy that the other lot owners had agreed to his proposed figures. This was to Mr and Mrs McCarthy's satisfaction. However, they asked DRSM to provide information as to the exact content of the other lot owners' replies to the proposal - they did not tell me why they wanted that information - and DRSM declined to give it, citing "privacy" concerns. This began a fresh downturn in the relations between Mr and Mrs McCarthy and DRSM.
By a letter dated 25 October 2007 DRSM suggested to the lot owners that they pass a resolution for a formal change to the lot liabilities shown on the plan. This was an important letter. In paragraph 50 below I shall refer to it in detail.
On 31 October 2007, at an annual general meeting at which Mrs McCarthy was present but Mr McCarthy was not, the members of the owners corporation did not resolve to change the lot liabilities, but did resolve to adopt a proposed budget which was "amended" and did resolve "that lots 2, 3 and 4 will contribute an additional $330.00 each towards the driveway/garden and cleaning". Although I was not specifically told so, I have inferred from the minutes of the meeting, which refer to a "75% majority", that all members present except Mrs McCarthy voted in favour of the resolution.
Mr and Mrs McCarthy are not content with that outcome. They contend that the additional contributions of the other lot owners, if properly calculated in accordance with earlier agreements, should be greater. They have made their own calculations and, on the basis of them, have withheld $575.00 from the fees for which they have been invoiced for the financial year ending on 31 July 2009.
209. Costs of repairs, maintenance or other work
A body corporate may recover the cost of repairs, maintenance or other work undertaken substantially for the benefit of some of the lots from the members who are the owners of those lots, but the amount payable by those lots is to be calculated on the basis that the lot that benefits more pays more.
(2) An owners corporation may recover as a debt the cost of repairs, maintenance or other works undertaken wholly or substantially for the benefit of some only of the lots from the lot owners, but the amount payable by those lot owners is to be calculated on the basis that the lot owner of the lot that benefits more pays more.
(1) An owners corporation may set annual fees to cover -
(d) other recurrent obligations of the owners corporation.
(1) An owners corporation may levy special fees and charges designed to cover extraordinary items of expenditure.
(1) The owners for the time being and any purchaser in possession of, and any person entitled to receive the rents and profits from, a lot are liable to pay any outstanding fees, charge, contribution or amount owing to the owners corporation in respect of that lot.
(2) A lot owner is not liable to pay or contribute to the funds of the owners corporation a proportion of any amount required to discharge a liability of the owners corporation exceeding the lot owner's lot liability.
(3) Sub-section (2) does not apply to an amount payable to an owners corporation for repairs, maintenance or other works that are undertaken by the owners corporation on common property or a lot and which are wholly or substantially for the benefit of some or one, but not all, of the lots affected by the owners corporation.
The sections deal with four different categories of liability for payment to an owners corporation: fees, charges, contributions and other amounts owing. As for fees, the combined effect of Section 23(1) and (3) and Section 28(1) is that a lot owner is liable to pay an amount which has been based on lot liability. As for special fees and charges, the combined effect of Section 24(1) and (3) and Section 28(1) is, likewise, that a lot owner is liable to pay an amount which has been based upon lot liability. Section 28 talks also of contributions or amounts owing. They are things that are distinct from fees, special fees or charges. The effect of Section 28(2) and (3) upon liability to pay for contributions or other amounts is that there is a general rule and an exception. The general rule is that lot owners bear them in proportion to their lot liability. The exception operates in the case where the requirement to pay a contribution or other amount has resulted from repairs, maintenance or other works which were wholly or substantially for the benefit of some or one, but not all, of the lots. In that case, those lot owners who have benefited more can be required to pay an amount that exceeds their lot liability, and it follows that those who have benefited less would be entitled to pay an amount that was less than their lot liability.
Generally speaking, fees and charges are amounts that are set and levied prospectively: as a consequence of a budget prepared in anticipation of further expenditure; whereas contributions or other amounts are demanded of lot owners retrospectively, as a consequence of particular expenditure, not budgeted for, which has become necessary. For the purpose of the retrospective demand, it becomes relevant to enquire whether the expenditure has conferred a benefit upon some lot owners more than others. If it has, the exception referred to above may apply. It never becomes relevant to enquire whether fees and charges, set and levied prospectively, might become spent on things that benefit some lot owners more than others. The fees and charges must be set and levied according to lot liability. There is no right for a lot owner to try to make an adjustment of them later by reason of them actually having been spent upon things that have not benefited that lot owner, or to try to make an adjustment to the setting of them by reason of a likelihood that they will be spent upon things that do not benefit that lot owner.
The legislative provision which was Regulation 209 and is now Section 49(2) of the OC Act becomes explicable in this context. It is dealing with something which has given rise to an entitlement to demand a contribution or other amount. It has nothing to do with fees or charges which have been set or levied as a consequence of the adoption of a budget. The rule that "the lot that benefits more pays more" applies to liability to pay for the costs of repairs, maintenance and other works required and done, not to the setting and levying of fees for future anticipated expenditure.
So, from first to last, the legislation has provided that fees and charges, set and levied prospectively, are payable according to lot liability.
Suppose that it were possible for a lot owner to say that his fees should be less than in accordance with lot liability, because "the lot that benefits more pays more". First, the consequence would be that fees would have to be levied against other lot owners in amounts that were greater than in accordance with lot liability. That would be flatly contrary to Section 23(1) and not permissible. Secondly, it would become very difficult for an owners corporation ever to budget properly, and obtain funds sufficient for the discharge of its obligations under the OC Act in respect of common property, if its budget was always at risk of reduction by a lot owner, after the event of expenditure, saying that he should not have had to pay part of the fee because the expenditure was not for his benefit.
Even though the legislation provides that fees are to be set according to lot liability, it is legally possible for lot owners for the time being to agree amongst themselves that the amounts or proportions in which they are to pay fees should be determined in some way other than in accordance with lot liability, and to authorise the owners corporation to collect those fees accordingly. That is what the lot owners in the present case agreed to do, apparently, in 2002 and again in 2005. While there is no evidence that resolutions passed at meetings held during those years were unanimous, all lot owners appear to have paid fees subsequently in accordance with those resolutions and thereby to have acknowledged that they agreed.
The resolution passed at the meeting on 31 October 2007 was not unanimous. The fees which Mr and Mrs McCarthy have paid since that date have been calculated by them otherwise than in accordance with that resolution. So the resolution cannot be said to have led to an agreement by all lot owners that the fees be calculated or adjusted in a particular way.
I do not attempt to decide what fees were payable by Mr and Mrs McCarthy during the last financial year. If the owners corporation were to bring a VCAT proceeding claiming unpaid fees, or if Mr and Mrs McCarthy were to bring a VCAT proceeding against the owners corporation (not against the manager) asking for a determination of the amount of the fees that were payable, the matter would properly arise for decision. It does not at the moment. If it were to arise, the questions involved would include these. Are Mr and Mrs McCarthy bound by resolutions made to which they have not agreed? If not, are they and the owners corporation still bound by the agreement reached in 2005? In either case, what is the correct calculation of the fees?
All I shall do, for the reasons given above which reject Mr and Mrs McCarthy's central argument in the matter of fees, is to refuse to make the declaration they seek, that there are no fees presently payable by them to the owners corporation.
When they first enquired of DRSM why all lot owners were being billed equally for fees when they (Mr and Mrs McCarthy) received so little benefit from the common property, DRSM manager Mr Cooper gave a written reply dated 19 October 2001 in which Mr Cooper, I think, underestimated the extent to which the other lot owners were benefiting from the common property in comparison to Mr and Mrs McCarthy. This reply did little to dispel the impression that Mr and Mrs McCarthy were under, that DRSM was favouring other lot owners at their expense. Nevertheless, the impression was wrong then and is wrong now. I am quite satisfied, from the evidence, that at all times DRSM has tried conscientiously to achieve the right balance between the interests of all lot owners.
This was the meeting at which Mr and Mrs McCarthy tried to persuade other lot owners to agree to unequal payment of fees. The then owner of Lot 2 objected vigorously and the meeting ended in acrimony. Mr and Mrs McCarthy allege that Mr Cooper, who was present, failed to control the meeting. I infer that Mr Cooper was appointed chairman of the meeting for it is common for lot owners to appoint the manager's representative as chairman. Disputes between members would test the tact and impartiality of any chairman. An attempt to rein in one member who appeared to be disrupting the meeting could easily be misinterpreted as partiality. In my opinion it was the conduct of the objecting lot owner, not the conduct of DRSM, which led to Mr and Mrs McCarthy not achieving their desired outcome at the meeting.
On 9 April 2002 Mr and Mrs McCarthy wrote to Mr Cooper of DRSM, asking eleven questions. The first was: "What is your understanding and interpretation of Body Corporation Regulation 209?" Some of the other questions concerned the same regulation. Mr Cooper replied on behalf of DRSM on 15 April 2002. The reply to the first question was: "Regulation 209. I refer you to Regulation 201(a), 202(1)(a) and 207. These clauses refer specifically to the common property."
Not having been satisfied with the letter of 15 April 2002, Mr and Mrs McCarthy tried to engage the other lot owners and DRSM in a mediation under the auspices of the Department of Justice Dispute Settlement Centre. That was an admirable idea. The dispute, of course, was about their liability for fees despite the little benefit they obtained from the common property. They got the response that the other lot owners were not prepared to participate in a mediation. Next, Mr and Mrs McCarthy asked DRSM to participate in a mediation without the lot owners. The response from DRSM was that it would not attend such a mediation in its own right, that its representative would attend a mediation on behalf of the other lot owners if they authorised it to attend, but it would charge the owners corporation for its time at the rate of $100.00 per hour if it did attend.
In the second half of 2002 Mr and Mrs McCarthy asked for the venue for the next annual general meeting to be at a venue other than another lot owner's home. The request was the consequence of the unpleasant experience they had had at the special general meeting held in November 2001, which had become acrimonious. DRSM did not accede to the request. All meetings since have been held at a member's home.
I mentioned this matter in paragraph 19 above. Mr Kacew of DRSM sent copies of Mr and Mrs McCarthy's correspondence, without permission, to other lot owners, yet refused to disclose the contents of correspondence which those other lot owners had sent. The handling of that particular matter was not ideal. It was not, however, as Mr and Mrs McCarthy alleged, indicative of any partiality to the other lot owners at their expense.
This was the letter from Mr Kacew of DRSM which proposed a formal change to the lot entitlements and lot liabilities. In substance, the letter contained the following:
(a) Mr Kacew recited that there had been the 2002 resolution about fees and that the resolution had been "reaffirmed" in 2006. (There had been a new resolution in 2005. I am not sure what, if anything, was "reaffirmed" in 2006.)
(b) Mr Kacew stated that he had made a mistake in calculations in 2006 and that additional work had been required "to amend the budget and change the fees levied".
(c) He proposed that, to avoid similar expense in future, there be a resolution to approach the Registrar of Titles for a change in lot entitlements and lot liabilities to reflect the way in which contributions towards fees had, by agreement, become unequal. He set out the text of a proposed resolution. He provided a table of figures in support of the proposal to change Mr and Mrs McCarthy's lot liability to 80 out of 400 instead of 100 out of 400.
(d) He stated that if the members of the owners corporation did not change the lot liability, DRSM would have to charge extra for the task of making adjustments to fees manually, at the rate of $120.00 per hour.
By mid-2008 Josephine Lastro had replaced Mr Kacew. Mr and Mrs McCarthy had withheld some of the fees demanded of them. Ms Lastro wrote to them claiming that they owed $247.50. She did not reply to a letter querying the amount. By October 2008 DRSM was claiming that $575.00 was owing. Then it became $822.50. No explanation of any of the figures was forthcoming. Then Mr and Mrs McCarthy received a debt collector's letter in which the amount claimed was $1,089.69. (DRSM's evidence at the hearing was that $575.00 was, and is, the correct figure.) In view of the rather fraught history of the matter, of which Ms Lastro should have been aware, this was a needlessly heavy-handed approach to adopt. Nevertheless, in my opinion it is not evidence of any breach of duty.
None of the incidents set out above affords any reason for making an order revoking DRSM's appointment as manager of the owners corporation, or for concluding that DRSM was in breach of its duty to Mr and Mrs McCarthy to act in good faith and with due care or was in any other way responsible in law for any loss or damage which they may have suffered.
Although in view of my decision on liability it is not necessary for me to deal with the loss and damage which Mr and Mrs McCarthy claim they suffered, I propose to deal with that matter briefly, because it has a bearing upon my decision about the costs of the proceeding.
Mr and Mrs McCarthy claimed $103,000.00 in total. In their points of claim they put that sum as a total of three amounts.
The first amount was $7,654.00, being $4,880.00 plus "compound interest". They explained the figure of $4,880.00 as the total of what could be attributed, from fees they had paid, to their share of the management expenses which the owners corporation had budgeted for when the fees were set. Of course they were liable to pay those fees in any event. If, however, they had made out a claim that DRSM's management had been so partial to the other lot owners and so heedless of their interests that DRSM's management had been worthless to them, the claim for $4,880.00 would have had a rational basis. They did not make out such a claim. How they claimed to be entitled to "compound interest", and how they calculated it, were not explained.
The second amount was $30,000.00, about which the points of claim stated: "As a direct result of the manager's failings, we have been forced to spend an inordinate amount of time over a nine year period, attempting to resolve this matter." The few occasional "failings" I have mentioned above did not warrant the spending of an inordinate amount of time. Mr and Mrs McCarthy did not give any other explanation of or justification for the amount. The claim for it was far-fetched and extravagant.
The third amount was $66,000.00. This was said to be the amount by which the value of their lot had decreased as a result of the realisation that although there was equality of lot entitlement and lot liability with other lot owners there was inequality of opportunity to use the common property. The only evidence put forward in support of the amount was a municipal valuation showing that the capital improved value is $880,000.00 and anecdotal evidence from estate agent acquaintances about decrease in value. When they purchased Lot 1 they knew or ought to have known of the equality of lot entitlement and lot liability. Their discovery of the inequality of opportunity to use the common property had nothing to do with DRSM, and the limitations on the success in rectifying what they saw as an unfair fees burden has had very little to do with anything that DRSM did or failed to do.
As I have said, a claim for $4,880.00 would have had a rational basis. Even a claim for $10,000.00 would not have attracted any adverse comment from me. I have to say, however, that I regard a claim for a sum as large as $103,000.00, built on such a flimsy basis, as irresponsible.
(2) If this section applies and unless the Tribunal orders otherwise, a party who made an offer referred to in sub-section (1)(a) is entitled to an order that the party who did not accept the offer pay all costs incurred by the offering party after the offer was made.
One is tempted to say that the offer made on 16 April 2009 was not an offer to settle at all, but merely an offer to accept a capitulation. One cannot say that, however, in the light of the decision of the Court of Appeal in Transport Accident Commission v Coyle [2001] VSCA 236; (2001) 3 VR 589. In that case the offer was in very similar terms to the offer in the present case. The Court of Appeal decided that the offer was an offer to settle within the meaning of Section 113 and so Section 112 applied. The Court of Appeal decision also confirmed that Section 112(2) overrides the "general statement" (at page 593) in Section 109(1) that the parties to VCAT proceedings are to bear their own costs, but emphasised the discretion that the words "unless the Tribunal orders otherwise" confers so that, amongst other things, the "harshness" of the potential operation of Section 112(2) in a case like the present or like the Coyle case (see page 599) can be mitigated. In my opinion, the combination of the nature of the "offer" and the fact that it was made to self-represented litigants justifies the exercise of a discretion to make an order as to costs different from the one described in Section 112(2).
Section 112(2) not having been decisive on the question of costs, one must then apply Section 109. It lays down the general rule referred to above, that parties bear their own costs, but confers a discretion to make an order that one party pay another party's costs if the Tribunal is satisfied that it is fair to do so, having regard to a number of matters specified in sub-section (3), including any matters that the Tribunal considers relevant. The specified matters include the relevant strengths of the claims made by each of the parties and the nature and complexity of the proceeding.
One matter which DRSM relied upon, in support of the argument that it is fair to make an order for payment of its costs, was the assertion that under the terms of its contract of appointment with the owners corporation it has a right of indemnity in respect of its legal costs incurred in defending this proceeding. If there is indeed such a right of indemnity, the practical outcome would be that all four lot owners would have to contribute equally to the amount of the indemnity. That would be hard on the other three lot owners, who seem to have made conscientious efforts to meet Mr and Mrs McCarthy's concerns about fees. Accordingly, it was argued, it is fair for the burden of the costs to fall upon Mr and Mrs McCarthy only. I have looked at the contract of appointment. Whether it does confer a right of indemnity in respect of the costs of this particular proceeding is, I think, very debatable. I have not had the benefit of hearing any debate about it. So I do not think that the possibility of the indemnity should dominate the issue of costs.
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.
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 applies 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.
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 part of DRSM's costs. I shall order them to pay $1,500.00 in costs.
McCarthy
Dandenong Region Body Corporate Services
(2001) 3 VR 589
The proceeding was dismissed, and the applicants were ordered to pay the respondent $1,500 in costs.