1. Save for the costs of the fourth respondent, the parties' costs of and incidental to the applicant's Application for Directions/Orders dated 8 October 2012 are costs in the proceeding, subject always to the provisions of s109 of the Victorian Civil and Administrative Tribunal Act 1998.
2. There are no orders as to costs as between the applicant and the fourth respondent.

1. On 8 October 2012 the applicant builder ('MK Builders') filed an 'Application for Directions/Orders' seeking a freezing order in relation to the proceeds of the sale of the property at 420 Balcombe Road Beaumaris ('the property') of which the fourth respondent, 420 Balcombe Road Pty Ltd ('420 Balcombe Road') is the sole proprietor. MK Builders requested an urgent hearing of the application as settlement of the sale of the property was due to take place on or before 20 October 2012. The application was supported by an affidavit by Tom Lefkovic, a director of MK Builders.
2. On 10 October 2012 the respondents' lawyers wrote to the tribunal requesting the application be listed for hearing the following week to enable their clients time to prepare material in response. The application was listed for hearing on Monday 15 October 2012.
3. At 2.19pm on Friday 12 October 2012 the respondents filed by facsimile, an affidavit by Taky Kaplan, the second respondent, and director of each of the respondent companies. In his affidavit Mr Kaplan deposes as to the distribution of the proceeds of sale of the property, showing a shortfall in funds to meet 420 Balcombe Road's liabilities in relation to that property, and further that 'No monies will be paid out of the proceeds of the sale of the Property to any of the Respondents'.
4. At the commencement of the hearing on 15 October 2012, I enquired of Mr Shnookal, counsel for the applicant, as to MK Builder's intentions in relation to the application for a freezing order in light of Mr Kaplan's affidavit. After a short adjournment to allow the parties an opportunity to discuss the matter, Mr Shnookal indicated that MK Builders was withdrawing its application for a freezing order given that it would be of no utility in the circumstances set out in Mr Kaplan's affidavit. Further, MK Builders was granted leave to withdraw the proceeding as against 420 Balcombe Road. The only relief sought against 420 Balcombe Road in the substantive proceeding was a freezing order, requiring it to deposit any surplus funds from the sale proceeds of the property into an interest bearing trust account in the names of the applicant and the third and fourth respondents, and from dissipating any assets or the proceeds of the sale after paying out all secured creditors.
5. Mr Styring of Counsel, who appeared on behalf of the respondents, submitted the application for a freezing order ought to be dismissed with costs.
6. As the application was withdrawn before it was heard and determined, dismissal is not an appropriate order.

1. On 25 January 2006, MK Builders and 36 Warrigal Road Pty Ltd ('36 Warrigal Road') entered into a building contract for the construction of four townhouses at 36 Warrigal Road Mentone for $1,100,000 inclusive of GST.
2. MK Builders and 36 Warrigal Road subsequently agreed to establish a joint venture to minimise the building costs, share the profits upon sale of the townhouses, and varied the building contract to reflect their agreement.
3. 36 Warrigal Road nominated Mondland to undertake the administration of the building contract, and to act as its representative for all matters required under the terms of the building contract.
4. The townhouses were completed in 2007 and subsequently sold.
5. MK Builders claims it has not received its share of the profits of the sale, and that it is owed money under the building contract. It commenced these proceedings on 8 October 2012.
6. There are four respondents to this proceeding who are closely inter-related. The following summary is prepared by reference to the Points of Claim and the applicant's submissions in support of the application for a freezing order:

36 Warrigal Road Pty Ltd ('36 Warrigal Road') (first respondent)

Trustee of a Trust of which Mondland is the sole beneficiary.

Mondland Pty Ltd ('Mondland') (third respondent)

- Sole beneficiary of two trusts operated by 36 Warrigal Road and 420 Balcombe Road respectively.

- As beneficiary of the trading trust of which 36 Warrigal Road is Trustee, Mondland is liable to indemnify 36 Warrigal Road for any debts incurred in trading as trustee.

- The entitlement to an indemnity from Mondland is 36 Warrigal Road's only asset.

- Mondland's only asset is the settlement proceeds of the sale of 420 Balcombe Road.

420 Balcombe Road Pty Ltd (420 Balcombe Road)(fourth respondent)

Co-trustee of a Trust of which Mondland is the sole beneficiary

Each of the above companies share a common principal place of business.

1. There is no cause of action set out against either Mondland nor 420 Balcombe Road in the Points of Claim. It is pleaded that if the tribunal makes orders in favour of MK Builders against 36 Warrigal Road, then 36 Warrigal Road will be entitled to indemnity for that liability from the trust property of the 36 Warrigal Road Trust (of which it is the trustee) and from Mondland, the sole beneficiary of the Trust. Further, if such orders are made, MK Builders will proceed to wind up 36 Warrigal Road and appoint a liquidator who will be entitled to indemnity from Mondland for liabilities incurred by 36 Warrigal Road. As set out above, Mondland is the sole beneficiary of the Trust of which 420 Balcombe Road is co-trustee. The property is the only asset of the Trust, and in the normal course the proceeds of sale of that property would be distributed to the third respondent. Accordingly, orders are sought freezing the proceeds of sale of the property.

1. Mr Styring submitted that costs should be awarded to the respondents on an indemnity basis because the application for a freezing order was always hopeless and doomed to fail.
2. Mr Shnookal submitted that the costs of the application should be costs in the proceeding.
3. Counsel for both parties provided written submissions to which they spoke.
4. The respondents contend they should be awarded their costs of the application on an indemnity basis on the ground that, properly advised, MKB [the applicant] should have known that it had no chance of success on the application. Although Mr Styring repeatedly submitted that the application had been brought without bona fides and for an ulterior purpose, not once did he expand upon this contention and indicate the factual basis upon which it was made.
5. Somewhat surprisingly, the respondents' written submissions do not address or even mention the statutory regime under which costs may be ordered by the tribunal as set out in s109 of the Victorian Civil and Administrative Tribunal Act 1998 ('the VCAT Act'). Rather, the respondents rely on the often quoted comments of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd[1] as applied recently by the Victorian Court of Appeal in Karam v Palmone Shoes Pty Ltd & Anor[2]. His honour said:

...it is appropriate to consider awarding 'solicitor and client' or 'indemnity costs' whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have know than he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.

1. Unlike the courts, the tribunal does not have an unfettered discretion to award costs. In considering any application for costs I must have regard to s109 of the VCAT Act which provides that each party must bear its own costs of a proceeding unless the tribunal is persuaded it should exercise its discretion under s109(2) having regard to the matters set out in s109(3), and then, only if it is satisfied it is fair to do so. Section 109 provides:

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

(a) whether a party has conducted the proceeding in a way that unnecessarily disadvantaged another party to the proceeding by conduct such as -

(i) failing to comply with an order or direction of the Tribunal without reasonable excuse;

(ii) failing to comply with this Act, the regulations, the rules or an enabling enactment;

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

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

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

(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. When invited to do so, Mr Styring made oral submissions as to why I should exercise the tribunal's discretion under s109(2) relying on the matters set out in s109(3)(d) and (e).
2. It is clear that the application for a freezing order raised complex questions of fact and law. Mr Styring, relying in part on the principles set out by the High Court in Cardile v LED Builders Pty Ltd[3] to be considered in determining whether to make an asset preservation order against third parties, submitted there was no legal basis upon which the tribunal could have granted the application.
3. Mr Shnookal submitted that the application was arguable given the close inter-relationship between the respondents and, in particular, 36 Warrigal Road's entitlement to be indemnified by Mondland as the sole beneficiary of the trust, in circumstances where, but for the shortfall, Mondland's sole asset would have been the proceeds of the sale of 420 Balcombe Road. In the event the applicant is successful in its claim against 46 Warrigal Road it will seek to appoint a liquidator to 46 Warrigal Road who, the applicant anticipates, would then pursue the claims against the beneficiary, Mondland. Further, that a freezing order in relation to those assets would have been appropriate as a trustee cannot be allowed to enter into a building contract, then dispose of the assets to the beneficiary to avoid any liability it might have to the builder. In such circumstances, the beneficiary of the trust assets should be subject of freezing orders.
4. Although counsel for both parties provided me with their written submissions it was not necessary to determine the application as it was withdrawn. Nor did I hear any evidence from the deponents to the affidavits filed by both parties to the application. However, having heard briefly from counsel for both parties, and having had the opportunity of reading their submissions I am not satisfied the application was not manifestly hopeless that MKB Builders, if properly advised, should have known it would have no chance of success. This does not mean the application would necessarily have been granted if it had proceeded to hearing and determination.
5. The mere fact that one or more of the matters set out in s109(3) is engaged does not necessarily mean that an order for costs will follow. In Vero Insurance Ltd v The Gombac Group Pty Ltd[4] Gillard J set out the approach to be taken by the Tribunal when considering an application for costs:
   1. The prima facie rule is that each party should bear their own costs of the proceeding.
   2. The Tribunal may make an order awarding costs, being all or a specified part of costs, only if it is satisfied that it is fair to do so having regard to the matters stated in s109(3). That is a finding essential to making an order. (emphasis added)
6. Whilst s109(3)(d) is engaged, I am not persuaded it would be fair to order the applicant to pay the respondents' costs of this application. Rather, the appropriate order is that the costs of this application be costs in the proceeding, subject always to the provisions of s109.
7. The proceeding having been withdrawn as against 420 Balcombe Road it also seeks its costs of the proceeding. As conceded by Mr Styring during the hearing, 420 Balcombe Road has not incurred any costs other than those associated with the hearing of this application. Leave was sought to withdraw the proceeding as against 420 Balcombe Road when MKB Builders having become aware of the shortfall in the proceeds of the sale of the property withdrew its application for an urgent freezing order. In those circumstances, having regard to s109 of the VCAT Act I consider the appropriate order as between MK Builders and 420 Balcombe Road is that there be no orders as to costs.

[1] [1988] FCA 202; (1988) 81 ALR 397

[2] [2012] VSCA 97

[3] [1999] HCA 18; (1999) 198 CLR 380 at 401

[4] [2007] VSC 117