Owners Corporation 1 Plan No. PS718154U v Wang (Owners Corporations) [2025] VCAT 452

1. The respondent must pay to Owners Corporation 1 Plan No. PS718154U the sums of:

for levies and interest to the date of final fee notice (the date being 17 September 2024);

For interest from the date of the final fee notice to the date of the hearing

for reasonable costs incurred in recovering the unpaid amount other than costs in the proceeding; and

1. The respondent must pay to Owners Corporation 2 Plan No. PS718154U the sums of:

for levies and interest to the date of final fee notice (the date being 17 September 2024);

For interest from the date of the final fee notice to the date of the hearing

1. Both applicants must remove all legal cost recovery charges, debt collection charges, letter of demand charges, final fee notice charges and like charges, as well any corresponding interest charges from the respondent's account forthwith.

1. The applicants, Owners Corporation 1 Plan No. PS718154U ('OC 1') and Owners Corporation 2 Plan No. PS718154U ('OC 2'), jointly filed an application at the Tribunal on 15 November 2024, seeking to recover unpaid levies from the respondent, Ms Wang. Ms Wang is the owner of lot 710 affected by the applicant owners corporations.
2. The applicants seek payment of amounts set out in 30 fee notices issued under section 31 of the Owners Corporations Act 2006 (Vic) ('the OC Act'), the earliest of which is dated 3 October 2020 and the latest of which is dated 23 July 2024, and the final fee notice dated 17 September 2024 ('Final Fee Notice') issued under section 32 of the OC Act.
3. In the application, the applicants sought payment of $32,431.88 as detailed in the Final Fee Notice together with additional accrued interest and the costs of the applicants in bringing the application.
4. Due to the high quantum being claimed in the application, the Tribunal determined that this matter was not appropriate to hear 'on the papers' under section 100(2) of the Victoria Civil and Administrative Tribunal Act 1997 (Vic) ('the VCAT Act') as is the standard method of conducting fee recovery matters. The Tribunal listed the matter for a fee recovery hearing via telephone on 10 April 2025.
5. The applicants' solicitor filed a statutory declaration in the form of a Summary of Proofs and bundle of documents of 473 pages in support of the claim with the Tribunal on 3 March 2025. In the Summary of Proofs the amounts claimed are stated to be:
   1. $26,378.47 for levies to the date of the final fee notice;
   2. $4,799.41 for interest to the date of the final fee notice;
   3. $1,254.00 reasonable costs incurred (other than costs in the proceeding); and
   4. $5,510.11 costs in the proceeding (including the application fee).
6. By way of email dated 9 April 2024, the applicants' solicitor refined the claim for fees and interest to the date of the Final Fee Notice as follows:
   1. $21,668.59 for levies for OC 1 to the date of the Final Fee Notice;
   2. $4,335.67 for interest for OC1 to the date of the Final Fee Notice;
   3. $4,321.94 for levies for OC 2 to the date of the Final Fee Notice; and
   4. $817.83 for interest for OC2 to the date of the Final Fee Notice.
7. The hearing of the matter proceeded before me on 10 April 2025, and the applicants were represented by a solicitor, Ms Torry.
8. The respondent did not appear and was not represented at the hearing. The respondent did not send any documents to the Tribunal in respect to the claim. Having examined the documents on the file, including the registry's record of documents sent to the parties, I am satisfied that Ms Wang has been served with a copy of the application, and notice of the hearing and determination of the application on the papers.
9. At the conclusion of the hearing I reserved my decision. I now provide my orders and accompanying written reasons.

The claim for levies and interest to the date of the Final Fee Notice and for interest from the date of the Final Fee Notice to the hearing date

1. The items on the Final Fee Notice may be broadly categorised as standard levies which have been validly levied under section 23 of the OC Act, non-standard levies which for the reasons set out below I find the applicants have no legal basis to claim from Ms Wang, and 'reasonable costs' which are claimed under section 165(1)(ca) of the OC Act.
2. Section 29 of the OC Act allows owners corporations to charge penalty interest on outstanding fees, provided that the interest charged does not exceed the maximum rate of interest payable under the Penalty Interest Rates Act 1983 (Vic), and that they pass a resolution at an annual general meeting authorising them to do so.
3. The applicants passed ordinary resolutions at their annual general meetings in 2019, 2021, 2022, 2023, and 2024 authorising them to charge interest on arrears. The applicants are therefore entitled to charge the respondent interest on any 'standard fees' and 'extraordinary fees' found to be owing, both up to the date of the Final Fee Notice, and then to the date of the hearing.

The amount payable by Ms Wang for standard levies and interest

1. I am satisfied having regard to the documents filed by the applicants that each of the following standard levies is included in a valid fee notice which is dated at least 28 days prior to the due date listed for payment of the relevant standard levy, in accordance with section 31 of the OC Act. The Tribunal awards to OC 1 the following items and attendant interest on the Final Fee Notice:

1. The interest from the date of the final fee notice to the date of hearing owing to OC 1 is $1,171.59.
2. I am satisfied having regard to the documents filed by the applicants that each of the following standard levies is included in a valid fee notice which is dated at least 28 days prior to the due date listed for payment of the relevant standard levy, in accordance with section 31 of the OC Act. The Tribunal awards to OC 2 the following items and attendant interest on the Final Fee Notice:

1. The interest from the date of the final fee notice to today owing to OC 2 is $165.71.

The claim for the standard levy for the period 1 February 2022 to 30 April 2022

1. Both of the applicants seek to recover a standard levy for the period 1 February 2022 to 30 April 2022. The amount claimed by OC 1 for this levy and accrued interest in the Final Fee Notice is $1,634.50, and for OC 2 the amount claimed is $179.00.
2. Each applicant relies on a fee notice dated 17 March 2022. In each of the fee notices dated 17 March 2022, it is stated that the due date for the standard levy for the period 1 February 2022 to 30 April 2022 is 1 February 2022.
3. Section 31(1) of the OC Act requires that owners corporations must give notice to a lot owner in the approved form of any fees and charges due and payable by the lot owner to the owners corporation.
4. The approved fee notice form, which is available on Consumer Affairs Victoria's website: https://www.consumer.vic.gov.au, states at page 4 under the heading, "Due dates on notices":

If there is only one due date, this date must be at least 28 days after the date of the first notice. If there is more than one due date, the first due date listed for payment must be at least 28 days after the date of the first notice.

1. Section 31(2)(a) of the OC Act requires that the fee notice must state that the lot owner has an obligation to pay the fees and charges within 28 days after the date of the notice.
2. The fee notices dated 17 March 2022 have a due date for payment of 1 February 2022 for the levies for the period 1 February 2022 to 30 April 2022. These due dates are evidently not 28 days from the date of the respective notices.
3. Ms Torry submitted that the reason for this may be that the applicants had not yet had an annual general meeting to set their fees at the start of the levy period, and had issued the fee notices at the time they did because they had then had an annual general meeting to set those fees. Further, the due date may have been given to accord with the standard quarterly payment cycle and to make it clear to lot owners which quarterly fee they were paying.
4. Whatever the reason may have been for the applicants sending these two fee notices as they did, the fact remains that they are not in the approved form, do not comply with the mandatory requirements of section 31 of the OC Act, and are not valid. Even if OC 1 and OC 2 were issuing fee notices "out of cycle" they still needed to turn their attention to the requirements of section 31 of the OC Act, as these must be complied with in all circumstances. The claim for the standard levies for the period 1 February 2022 to 30 April 2022 is dismissed.
5. Although Ms Torry did not make any submission to this effect, I note for the sake of completeness that the defect of stating a due date which precedes the date of the fee notice or fails to allow 28 days from the date of the notice, is not cured by the blanket statement in the fee notices that:

The following fees, extraordinary fees, charges or other contributions are due and payable within 28 days of the date of this Notice or by the later due date specified below.

1. The claim for standard levy for the period 1 February 2022 to 30 April 2022 is dismissed because it is not supported by a valid fee notice.

The claim for non-standard levy 'balance brought forward'

1. The first two line items on the Final Fee Notice are 'balance brought forward' for OC 1 in the sum of $1,638.87 and 'balance brought forward' for OC 2 in the sum of $1,156.47 ('Balances Brought Forward').
2. Ms Torry explained that this has occurred because the owners corporation manager changed software management systems, and that fee notices which relate to the amounts comprising the Balances Brought Forward cannot be accessed as a result of the system change. Ms Torry directed me to information in the bundle of documents which identified which charges comprise the Balances Brought Forward and suggested that this should be sufficient information for the Tribunal to award those amounts to the applicants.
3. The ability of an owners corporation to claim unpaid levies at the Tribunal is predicated on that amount being included in a validly given final fee notice.[1] The ability of an owners corporation to include a levy in a final fee notice is in turn predicated on that amount having been included in a validly given fee notice under section 31 of the OC Act.[2] The Tribunal must be satisfied that these criteria are met for any levies it awards to applicants in fee recovery matters.
4. It may be unfortunate that it is not possible to provide the Tribunal with copies of the fee notices which were originally sent to Ms Wang due to a change in technology effected without retaining earlier records, however this cannot change the evidentiary standard which the applicants must meet.
5. The claim for the Balances Brought Forward is dismissed because the amounts comprising the Balances Brought Forward are not supported by valid fee notices.

The claim for non-standard levy 'penalty interest' charges

1. Each of the applicants seeks to recover a 'penalty interest' charge. The amount claimed by OC 1 for this charge in the Final Fee Notice is $319.11, and for OC 2 the amount claimed is $34.98 ('Penalty Interest Charges').
2. It appears that the Penalty Interest Charges are purported to be levied under section 29 of the OC Act.
3. I queried with Ms Torry what these amounts relate to, noting that for each levy in the Final Fee Notice, there is an individual calculation of interest for that item. To have a separate charge for penalty interest that does not relate to anything in particular seems on the face of it to be a doubling up.
4. Ms Torry stated that she is not sure what the Penalty Interest Charges relate to, but that the best idea she has is that they are interest on the Balances Brought Forward amounts, since these are the only levies on the Final Fee Notice which do not have interest individually calculated and clearly set out.
5. An examination of the Final Fee Notice reveals that the Balances Brought Forward do have individual calculations for interest. I am not satisfied that the applicants had any legal basis to charge the Penalty Interest Charges to Ms Wang.
6. Each applicant relies on a fee notice dated 17 March 2022. In each of the fee notices dated 17 March 2022, it is stated that the due date for the Penalty Interest Charges is 7 March 2022.
7. Even if there was a lawful basis for charging the Penalty Interest Charges I would not award them to the applicants because the due date for these charges precedes the date of the fee notice they originally appeared on.
8. The claim for Penalty Interest Charges is dismissed.

The claim for non-standard levy maintenance fund special levies

1. OC 1 claims the following amounts for Maintenance Fund Special Levy which are supported by fee notices dated 28 March 2024 and 23 May 2024 respectively:
   1. 1st instalment of $735.60 with a due date of 1 May 2024; and
   2. 2nd instalment of $735.60 with a due date of 21 June 2024.
2. OC 2 claims the following amounts for Maintenance Fund Special Levy which are supported by fee notices dated 28 March 2024 and 23 May 2024 respectively:
   1. 1st instalment of $414.53 with a due date of 1 May 2024; and
   2. 2nd instalment of $414.53 with a due date of 21 June 2024.

1. In support of the claim for the Special Levies, the applicants have provided a letter dated 28 March 2024 which indicates that the Special Levies were raised by the committees of the applicants. The letter states:

We can now confirm:

OC 1 is unfunded in the amount of $402,748.50 (inc. GST).

OC 2 is unfunded in the amount of $223,740.00 (inc. GST).

This leaves a total amount of $626,488.50 (inc. GST) which is required to be raised to all Lot Owners to ensure the Owners Corporations' funds are in line with the approved maintenance plan.

The OC Committee has resolved, via ordinary resolution, that this amount will be recouped in full via the issuance of a special levy, calculated as per lot liability, to be paid in two instalments.

1. In any claim before the Tribunal, the applicant bears the onus of proof and must produce evidence to satisfy the Tribunal to the civil standard of proof, being the balance of probabilities, that they are entitled to the amounts they are claiming. Here, the Tribunal must be satisfied on the balance of probabilities that the committees had been delegated the power under section 11 of the OC Act to pass a resolution to raise the Special Levies, and that the committees validly passed a resolution to raise the Special Levies in accordance with the requirements of Part 5 of the OC Act.
2. The minutes of the Annual General Meeting held on 28 June 2023 include a valid delegation to the committees of both applicants of all powers and functions capable of delegation under the OC Act. This means that the committees had the power to pass a resolution to raise the Special Levies.
3. Committees are required under section 114(3)(d) of the OC Act to keep minutes of meetings including all resolutions of the Committee. The cover letter of 28 March 2024 does not include the minutes of a meeting of the committees of the applicants, and is not of itself sufficient evidence of the committees' resolutions. If the letter had referred to the date the resolutions were passed and the text of the resolutions, this may have been more persuasive evidence of resolutions having been validly passed. Ms Torry did not contend that the required committee meeting minutes would be available upon further investigation or request additional time to provide further documents to support the claim for the Special Levies.
4. The claim for the Special Levies is dismissed because it is not supported by sufficient evidence.

1. On further examination of the Final Fee Notice following the hearing, I note that it includes a claim for $152.62 to OC 1 for 'Standard Levy' which fell due on 18 October 2021, and a claim for $33.85 to OC 1 for 'Outstanding Levies Lot 710 - Wang' which fell due on 31 August 2023.
2. It is unclear what these levies relate to, however I note that there is no power in the OC Act to impose a charge for issuing a fee notice, or for raising a "standard levy".
3. Further, a fee notice dated at least 28 days before the due date has not been provided to support either item claimed. Therefore there is no evidence that this item is properly included in the Final Fee Notice.
4. The claim for 'Standard Levy' is dismissed.
5. The claim for 'Outstanding Levies Lot 710 - Wang' is dismissed.

The Tribunal's view of legal and administrative fees

1. Prior to the introduction of the amendment to the OC Act which brought section 165(1)(ca) into force, the Tribunal had made its position clear in respect to the liability of lot owners to pay 100% of administrative or legal costs associated with recovering unpaid levies from them.
2. In Owners Corporation - PS507084R v Kiran[3] Senior Member Lulham, as he then was, considered whether a lot owner was liable to pay for 8 final fee notices which were charged to them, totalling $1,034.00, and concluded that:

by a combination of apparent exaggeration by the Manager as encouraged by the Resolution, the Resolution itself not authorising or directing the manager to assert that the $1,320.00 is payable, and the obvious error in the section 32 notice as to the fee of $165.00, the sum of $1,320.00 is not recoverable.[4]

1. In Owners Corporation RP002044 v Finch[5] Member Rowland considered whether a lot owner was liable to pay an array of manager's legal cost recovery charges, debt collection charges, and letter of demand charges which had been charged to a lot owner. Member Rowland ordered that those costs be removed from the lot owner's account and stated that:

There is no power under the Owners Corporation Act 2006, Regulations or Rules which enables an owners corporation to require a lot owner to pay an administrative or legal cost on a user pays basis. There is also no power under the Owners Corporation Act 2006, Regulations or Rules to enable an owners corporation to validly pass a special rule or a resolution requiring a lot owner to pay the owners corporation's administrative and legal costs of debt collection against that lot owner. The scheme of the Owners Corporations Act 2006 requires all administrative costs to be paid by lot owners in accordance with lot liability.[6]

1. Section 165(1)(ca) of the OC Act provides that in determining an owners corporation dispute, VCAT may make any order it considers fair including one or more of the following...an order requiring a lot owner to pay to the owners corporation reasonable costs incurred by the owners corporation in recovering an unpaid amount from the lot owner (other than costs in the proceeding).
2. Section 165(1)(ca) of the OC Act grants the Tribunal a discretionary power to award 'reasonable costs' to an owners corporation, where the Tribunal is satisfied that it is fair to do so. There is no obligation on the Tribunal in any case to make orders under this section.
3. In determining whether it would be fair to make an order under section 165(1)(ca) of the OC Act, the Tribunal must take into account the considerations at section 167 of the OC Act. These considerations, not all of which are relevant in the fee recovery context, are:

(a) the conduct of the parties;

(b) an act or omission or proposed act or omission by a party;

(c) the impact of a resolution or proposed resolution on the lot owners as a whole;

(d) whether a resolution or proposed resolution is oppressive to, unfairly prejudicial to or unfairly discriminates against, a lot owner or lot owners;

(e) any other matter VCAT thinks relevant.

The Tribunal's interpretation of section 165(1)(ca) of the OC Act

1. In Owners Corporation 1 Plan No. PS735439F v Singh[7] ('Singh'), Deputy President Wilson, Acting Deputy President Warren, as he then was, and Senior Member Price provided a comprehensive examination of the discretionary nature of Tribunal's new power under section 165(1)(ca) of the OC Act and the considerations that may be relevant in exercising the discretion in the future.
2. In undertaking this task the Tribunal confirmed that section 165(1)(ca) of the OC Act does not alter the legal position that there is no underlying obligation on lot owners to pay these fees, and these fees do not become a debt payable to the owners corporation unless or until the Tribunal orders that they be paid.[8]
3. The Tribunal confirmed that there must be a nexus between incurring the claimed cost and the recovery of an unpaid amount, and set out which factors will be relevant when determining whether costs are 'reasonable':

In examining what is 'reasonable', the Tribunal will give consideration to whether the claimed cost incurred by the owners corporation was reasonably incurred, reasonable in amount, and reasonable considering the proportionality of the cost incurred relevant to the substantive claim for amounts owing.[9]

1. The Tribunal observed that when considering the reasonableness of each cost claimed under section 165(1)(ca) of the OC Act, the Tribunal must also take into account the duties owed by owners corporations, managers, and committees, and drew particular attention to the then newly introduced statutory duty at section 122(1)(d) of the OC Act which requires managers to 'take reasonable steps to ensure that any goods or services procured by the manager on behalf of the owners corporation are procured at competitive prices and on competitive terms'.[10]
2. The Tribunal stated its view that "the fact that costs incurred might be reasonable does not mean that it is necessarily fair for the Tribunal to order that they be paid by the lot owner"[11] and "a contractually agreed fee as between an owners corporation and its OC manager, will not necessarily be either reasonable or fair to order to be paid by the lot owner in the circumstances of a particular proceeding".[12]
3. The Tribunal concluded its reasons in Singh with what is to my mind a powerful warning to owners corporations about continuing to place legal and administrative charges on final fee notices, which seems to have not been heeded by many in the owners corporation industry and certainly has not been heeded in the case before me:

... it is impossible to rationally comprehend how an unlawful demand for a wrongful claim provides any clarity at all to a lot owner as to what is in truth legally due and payable by the lot owner as a debt to an owners corporation. To the contrary, it creates uncertainty and confusion and complexity. Where this happens it creates room for dispute that can be avoided entirely by accurate statements of account in a final fee notice issued to lot owners...

...

...In future cases the Tribunal may not be inclined to allow any amount under s 165(1)(ca) if this practice is observed in the final fee notices relied on in evidence by owners corporations... in a future case the Tribunal may also refuse to award costs it might otherwise have awarded under s 109 of the VCAT Act in favour of an otherwise successful applicant owners corporation or exercise its discretion to make an adverse costs order.[13]

1. I will return to this very important point in considering the amounts to be awarded under both section 165(1)(ca) of the OC Act and section 109 of the VCAT Act.

Were the items claimed by the applicants reasonably incurred in recovering an unpaid amount from Ms Wang?

1. OC 1 claims the following costs as 'reasonable costs' under section 165(1)(ca) of the OC Act:

Oncharge of solicitors fee for debt recovery work to your apartment

Oncharge of solicitors invoice for debt recovery work to your apartment

July 2024 - BAGL legal costs for recovery of overdue levies for lot 710

1. OC 2 claims the following costs as 'reasonable costs' under section 165(1)(ca) of the OC Act:

1. None of the items listed in the preceding two tables appears on a fee notice which is dated 28 days before the due date for payment. While this of itself would preclude the recovery of a standard or extraordinary levy issued to a respondent, it does not preclude the applicants from being able to obtain an order for payment of these fees. This is because these items are not levied to lot owners under sections 23, 23A or 24 of the OC Act, and owners corporations have no inherent legal right to include these items in a fee or final fee notice at all.
2. I asked Ms Torry on what legal basis the applicants purported to have charged these items in full to Ms Wang and placed them on fee notices. Ms Torry stated that they had done so pursuant to section 23, 23A, and 24 of the OC Act but did not elaborate on this assertion.
3. Nothing in the OC Act, Regulations or Rules enables an owners corporation to require a lot owner to pay an administrative or legal cost on a user pays basis. Subject to sections 24, 49 and 53 of the OC Act, a lot owner is not liable to pay or contribute a proportion of any amount exceeding their lot liability.[14]
4. Ms Torry also directed me to resolutions passed at annual general meetings on 9 March 2022 and 26 June 2023 which she says authorise OC 1 and OC 2 to place legal and administrative charges on the individual accounts of lot owners. On my reading of those resolutions they do not purport to give such authorisation. Even if they did, such resolutions would not be valid as owners corporations have no power to pass resolutions to that effect.
5. Apart from the final fee notice charges, the costs claimed by OC 1 are all costs charged to it by solicitors. Copies of actual invoices from the legal firm to OC 1 have not been provided as evidence that OC 1 actually incurred these costs. While it is best practice to provide such invoices to the Tribunal, omitting the actual invoices will not necessarily be fatal to a claim such as this. Ms Torry provided oral evidence that the invoices had been sent to OC 1 and described what work the invoices relate to. This oral evidence was supported by line items in fee notices to the respondent and a written breakdown of professional fees provided to the Tribunal in the bundle of documents provided by the applicants' solicitors.
6. Copies of invoices from the owners corporation manager to the owners corporations for sending final fee notices were also not produced. Ms Torry explained that it is not practicable to provide invoices for the sending of final fee notices as these appear amongst other charges on monthly invoices to the owners corporations, and do not always state to which lot the charge relates. I accept Ms Torry's evidence on this point and also note that the claim that the costs were incurred is uncontradicted.
7. On balance, I am satisfied that each of the costs claimed were incurred by the applicants.
8. With the exception of the cost of $176.00 charged to the respondent on 28 February 2023 for a letter of demand, the items which are claimed for legal work provide no explanation of what work was undertaken. Ms Torry provided me with the following explanations of these charges, which I accept to be true, which she said that she read from the electronic record on the firm's system of what was in the relevant invoices:
   1. $132.00 charged on 2 February 2023 was for "the cost of obtaining owner ledgers and seeking instructions from the client over a course of 3 months for work that was done between 26 October 2022 to 2 December 2022".
   2. $33.00 charged on 27 April 2023 was for "seeking instructions from the owners corporation and preparing a request for trust funds".
   3. $44.00 charged on 27 April 2023 was for "obtaining and reviewing the owner ledger and following up with the managing agent for instructions".
   4. $121.00 charged on 28 February 2024 was for "obtaining and reviewing the ledger for payments and seeking further instructions from the owners corporation manager".
   5. $242.00 charged on 21 April 2024 was for "responding to queries to the owners corporation manager and the issue of a fresh demand letter".
   6. $66.00 charged on 12 September 2024 was for "obtaining and reviewing the ledger and an email sent to the owners corporation manager."
9. There is not automatically a nexus between incurring a cost for work being undertaken to demand payment, and the actual recovery of an unpaid amount. Where there is no strong temporal connection between the work for which the cost is claimed, and the actual legal action to recover the unpaid amount, I do not think that it can be said that those costs are incurred by the owners corporation in recovering an unpaid amount.
10. Sending a letter of demand or final fee notice to a lot owner and then waiting months or years to initiate legal proceedings, in circumstances where it would have been appropriate and prudent to escalate the matter by issuing proceedings shortly after doing so, is not in my view connected to recovering an unpaid amount.
11. I do not mean by this, that a cost will only be incurred in recovering an unpaid amount if the work to which it relates was successful in recovering an unpaid amount. What I wish to stress is that the incurring of a cost must form part of a logical and timely sequence of events that leads to taking legal action to recover the unpaid amounts.
12. In the matter before me, the application to VCAT was filed on 15 November 2024. I find that the work undertaken by the solicitors between 26 October 2022 to 17 September 2024 did not advance OC 1 in recovering any unpaid amount from Ms Wang and the costs were not incurred in recovering any unpaid amount.
13. Likewise, the issuing of final fee notices by OC 1 and OC 2 until the final fee notice which forms the basis of the application to the Tribunal, did nothing to advance the progress of the applicants in recovering the unpaid amount.
14. There is no requirement under the OC Act to issue a final fee notice other than as a pre-requisite to proceedings. It appears in this case that final fee notices were issued regularly simply as a matter of course, rather than as a step towards recovering an unpaid amount.
15. If I am wrong, and the costs are incurred in recovering an unpaid amount, I do not think that these costs can be said to be reasonably incurred. It is not, to my mind, reasonable to incur debt recovery costs where there is no intention to presently take the action which is ultimately necessary to recover a debt, being the commencement of legal proceedings.
16. Further, based on the descriptions of the work undertaken by the legal firm, it appears that the work undertaken other than sending of letters of demand was in the nature of the solicitors following up the manager, and not connected to taking substantive action to recover money from Ms Wang.
17. Of the items claimed under section 165(1)(ca), I find that the only cost which was reasonably incurred by the owners corporations in recovering an unpaid amount is the cost of the Final Fee Notice. This is the final fee notice upon which the application is based.
18. Each of OC 1 and OC 2 claim an amount of $55.00 for a final fee notice dated 17 September 2024 on the apparent basis that both owners corporations issued a final fee notice. Only one final fee notice dated 17 September 2024 has been provided to the Tribunal. The Final Fee Notice lists all amounts owing to both OC 1 and OC 2 so it is not clear whether, and if so why, both applicants would have issued a final fee notice. It would not be reasonable for both applicants to issue an identical final fee notice.

Would it be fair for Ms Wang to pay the costs reasonably incurred by the owners corporation?

1. Once the Tribunal is satisfied that costs have been 'reasonably incurred', to make an award to the applicant under section 165(1)(ca) of the OC Act the Tribunal must also be satisfied that it would be fair to make an order that the respondent pay those costs.
2. Ms Torry opined that it would not be fair generally for the other innocent lot owners to bear the brunt of paying legal costs in circumstances where Ms Wang's longstanding non-payment of fees in breach of her obligation under section 28 of the OC Act is the reason for the owners corporation incurring costs, and specifically because to the best of her knowledge Ms Wang is receiving the fee notices and other correspondence in relation to her unpaid fees, the property in question is an investment unit, and the reason Ms Wang has given in the past for not paying the fees is that she cannot afford them.
3. These are all valid points to make and I agree that these considerations tend in favour of a finding that it would be fair for Ms Wang to pay the costs I have found to have been reasonably incurred by the owners corporation in recovering an unpaid amount from her.
4. If I had been satisfied that either applicant had reasonably incurred costs other than the cost of the Final Fee Notice in recovering an unpaid amount from Ms Wang, I would not have found that it is fair to order Ms Wang to pay any further costs. I consider that it was misleading of OC 1 and OC 2 to include the other claimed costs in the Final Fee Notice and the fee notices which preceded it. This is relevant to the consideration at section 167(1)(a) of the OC Act, being the conduct of the parties.
5. Ms Torry stated at the hearing that the applicants are entitled to include these items in fee and final fee notices because "when the OC puts those amounts on the ledger it is saying we believe you owe these amounts it is not saying these amounts have been assessed by the Tribunal as being due and payable by you. If you rule that none of the costs claimed are claimable then they will be removed."
6. I find this statement to be disingenuous. When an owners corporation places an item on a fee notice, this constitutes a statement that that amount is owing and it constitutes a demand for payment. This is repeated more forcefully by placing those items on a final fee notice. The Final Fee Notice states that the full amount listed on the final fee notice is payable immediately and if it is not paid within 28 days then legal action may be commenced to recover the overdue fees and charges. Final fee notices are in fact required under section 32 of the OC Act to include this information.
7. Placing legal and administrative costs on fee and final fee notices constitutes an unlawful demand for payment and creates unnecessary confusion about what amount is actually, legally, owed to the owners corporation by the lot owner. This practice too often results in lot owners withholding payment of standard levies because they are unsure what they really owe, or paying for things which they are not required by law to pay.
8. It is unrealistic to suggest that the average lot owner would see these items on a final fee notice and conclude that they do not really have to pay them until the Tribunal makes a determination that they must. Even if this were a natural conclusion for a lot owner to draw, what then is the savvy lot owner to do? It seems that they would be left in the position of having to wait for action to be taken against them, or to commence action at the Tribunal seeking orders that these amounts be removed from their ledger, or to make a direction about how their payment is to be attributed each time they make payment of standard levies to the owners corporation. None of these options is efficient or desirable, and the obvious conclusion is that legal and administrative costs simply should not be included in fee and final fee notices.
9. I award to OC 1 the sum of $55.00 being the cost of the final fee notice dated 17 September 2024 and otherwise dismiss the claim for 'reasonable costs'. I make this award to OC 1 rather than OC 2 because OC 1 is the applicant by whom the majority of reasonable costs, and all costs in the proceeding, are claimed. The amount of $55.00 would be properly payable to either applicant, or split between them.
10. Subject to my statement in the paragraph above, I dismiss the claim for 'reasonable costs' made by OC 2.

1. It is the standard practice in fee recovery proceedings, whether in an on the papers context or in a fee recovery hearing as in this case, that the Tribunal also assesses an order for 'costs in the proceeding'. The award for legal costs includes reimbursement of payment of fees paid in Tribunal proceedings.
2. The starting point at the Tribunal is that each party will bear its own costs. Orders for costs in the proceeding are discretionary orders the Tribunal is empowered to make under s 109(2) of the VCAT Act if it is satisfied that it is fair to make the order, having regard to the matters set out at section 109(3). These are:

(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);

(iv) causing an adjournment;

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

(vi) vexatiously conducting the proceeding;

(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;

(d) the nature and complexity of the proceeding;

(e) any other matter the Tribunal considers relevant.

1. In the ordinary course of a fee recovery matter, as in this particular matter, most of the considerations are not relevant. The Tribunal's approach to costs in the proceeding is 'broad brushed' so as to create a level of predictability across cases decided by the Tribunal.[15]
2. The Tribunal generally does not investigate the detail of the professional fees which make up a claim for costs in the proceeding. Provided that the claim falls within the spectrum of what the Tribunal's usual award for claims of that monetary range is, the Tribunal is unlikely to look behind the claim.
3. OC 2 makes no claim for costs in the proceeding. OC 1 claims $5,510.11 for costs in the proceeding. A spreadsheet setting out a breakdown of the professional fees and disbursements of the legal firm representing the applicants is provided in the bundle of documents provided to the Tribunal at pages 388 and 389 of 473.
4. Of the individual line items which total the claimed amount of $5,510.11 for costs in the proceeding, I noted in preparing these reasons that there is considerable overlap with the items which are claimed as 'reasonable costs'.
5. The following charges appear to be claimed as both 'reasonable costs' and costs in the proceedings by OC 1.

1. OC 1 cannot be awarded these items as both costs in the proceeding and as 'reasonable costs'. This is clear from the wording of section 165(1)(ca) of the OC Act which confers on the Tribunal the discretionary power to make an order that lot owners pay reasonable costs to the owners corporation incurred in recovering unpaid amounts from lot owners (other than costs in the proceeding) (emphasis added).
2. In Singh the Tribunal made clear that in a fee recovery proceeding in which both 'reasonable costs' and costs in the proceeding are claimed, part of the consideration for the Tribunal is which category a particular cost claimed falls into, and that this will be a question of fact in each case but "in all cases the onus will rest with the applicant to clearly distinguish between the two types of costs."[16]
3. The items referred to above relate to work undertaken between 10 October 2022 and 18 July 2022. The application to the Tribunal was filed on 15 November 2024. These costs were incurred well before the proceeding began and cannot be characterised as costs in the proceeding. I have already considered and dismissed a claim for these costs as 'reasonable costs'.
4. It is at best misconceived to claim these amounts as costs in the proceeding. When taking into consideration that these costs have been claimed from the respondent twice, the claim may be viewed less favourably.
5. Having regard to the relative strength of the uncontested claims made by the applicants, I am satisfied that at the time that the application was made to the Tribunal, Ms Wang was in considerable arrears and had been for an extended period of time. In one sense, the applicant's claim for the recovery of unpaid fees and levies was strong and they certainly have been substantially successful in their claim. On the other hand and as elaborated above, OC 1 has made many claims which have no tenable basis in fact or law.
6. Having regard to the nature and complexity of the proceeding, this was not an overly complex proceeding. Insofar as there was complexity, it lay in the Tribunal having to make an uncommonly large number of enquiries about what the items claimed related to, and what their legal basis was. That the proceeding included a claim for many items which were not clearly identified and to which the applicants were not ultimately entitled is not a reason to award costs in favour of the applicants. Some complexity for the Tribunal also arose from the Tribunal having to somewhat laboriously calculate the amounts owing to each of the applicants due to the layout of the final fee notice. The complexity of the case does not justify incurring costs of $5,510.11.
7. In terms of other matters the Tribunal considers relevant, I take into consideration that it is not obligatory or necessary for an owners corporation to engage lawyers to make fee recovery applications to the Tribunal but neither is it unreasonable. In most cases it is fair that the defaulting lot owner should contribute more to the costs of the fee recovery application than the innocent lot owners.
8. Owners corporations are at liberty to choose whichever legal firm they like to represent them in fee recovery hearings. However, if they choose a firm which does not charge substantially in line with the consistent awards made by the Tribunal, as most firms appearing at the Tribunal do, then I think that the owners corporation must bear the consequences of this choice, and not the defaulting lot owner. The costs claimed in this proceeding are in no way referable to what the Tribunal was likely to award.
9. Finally, and as foreshadowed earlier in my reasons, I think it is relevant that where the Tribunal observes an applicant owners corporation making wrongful and unlawful demands in final fee notices relied upon in its application to the Tribunal, the Tribunal may refuse to award costs it might otherwise have awarded to an otherwise successful applicant owners corporation under section 109 of the VCAT Act, as well as under section 165(1)(ca) of the OC Act.
10. On balance I find that it would not be fair for the Tribunal to award costs in the proceeding to OC 1 other than reimbursement of their application fee of $767.50. The conduct of OC 1, however it may have been intended, was such as to potentially mislead Ms Wang into paying thousands of dollars which she was not liable to pay, and to mislead the Tribunal into awarding an amount of $814.00 as both costs in the proceeding and 'reasonable costs.'
11. I dismiss OC 1's claim for costs pursuant to section 109 of the VCAT Act, and award reimbursement of the application fee of $797.50 pursuant to section 115B of the VCAT Act.

[1] Section 163(2) of the OC Act states "An application to VCAT by the owners corporation for an order requiring a lot owner to pay an amount payable by the lot owner to the owners corporation can only be made if the amount is not paid within 28 days after the final notice is given under section 32."

[2] Section 32(1) of the OC Act states "If the money owing is not paid within 28 days after the date of the fee notice, the owners corporation may give a final notice in the approved form to the lot owner."

[3] (Owners Corporation) (Civil Claims) [2010] VCAT 1968.

[5] (Owners Corporations) [2016] VCAT 2166.

[7] (Owners Corporations) [2022] VCAT 389.