The applicant is an owners corporation. The respondent owns two lots in the subdivision. The applicant owners corporation's claim in this proceeding was a claim for $29,769.12 in unpaid owners corporation fees and charges and interest levied under the Owners Corporations Act 2006 (OC Act). The applicant relied on Final Fee Notices dated 11 October 2021 issued in respect of each lot.
The respondent denied that he was liable to pay the fees, charges and interest claimed by the applicant. The respondent asserted that he had an agreement with the applicant, arising out of emails exchanged between himself and employees of the former manager of the applicant, that the respondent could "off set" costs he incurred in repairs to his lot and or to common property of damage caused by water ingress against owners corporations fees.
There were four days of hearing, on 8 November 2022, 18 April 2023, 2 November 2023 and 23 November 2023. The respondent attended the first three days of hearing, but did not appear on the last day of hearing on 23 November 2023. I was not satisfied, on the evidence before me that the respondent had proved either the circumstances of the formation of the agreement he sought to rely upon, or its terms. Accordingly, the respondent was not successful in his defence. The applicant produced satisfactory evidence to support its claim, and to demonstrate compliance with the relevant provisions of the OC Act.
On 23 November 2023, I made an Order that the respondent pay the applicant a total of $33,035.99:
I found that $5,242.61 was owing in unpaid fees and charges in respect of Lot 37, together with interest of $1,110.28 from the date of the final fee notice, a total of $6,352.89. In respect of Lot 116, I found that $22,019.22 was owing in unpaid fees and charges, together with interest of $4,663.88 from the date of the final fee notice, a total of $26,683.10.
The respondent pay the applicant's costs on the County Court of Victoria Scale of Costs from commencement of the proceeding on 3 December 2021 up to and including to 9 February 2024, the amount of which is to be agreed between the parties, and failing that, to be assessed by the Victorian Costs Court.
The respondent pay the applicant's costs of this application in the sum of $2,200 plus GST. [1]
The applicant also seeks reimbursement of the application and hearing fees paid by the applicant in the proceeding, which total $1,262.90.
The applicant's submissions in support of its application for costs are set out in an affidavit of its solicitor Jonathan Barry Cohen dated 16 February 2024. I summarise those submissions under the relevant headings below.
The respondent filed a Reply to the Applicant's Submissions, in which he canvassed in some detail the issues he had raised orally and in written submissions in the hearings, asserted failures of the applicant to comply with orders of the Tribunal, and criticised the procedure of the Tribunal. The respondent did not address, in his Reply, the provisions of the VCAT Act relied upon by the applicant.
I accept that the respondent is self-represented, and was perhaps encouraged to focus on those issues in an attempt to respond to the first 40 paragraphs of the applicant's submissions which recounted a chronology of the conduct of the proceeding in some detail. I note, also, that the 19 paragraphs of the applicant's submissions addressing the provisions on which it relies, are somewhat lacking in particulars as to the manner in which the applicant says the provisions are satisfied. That deficiency may have affected the respondent's ability to make a Reply focussed on the considerations before the Tribunal. Nevertheless, I am unable to give weight to that part of the respondent's submissions which seek to reagitate his defence. The substantive claims by the applicant against the respondent have been determined.
In summary, as far as is relevant to the costs application, the respondent's Reply asserts that the applicant itself caused delay in the conduct of the proceeding,[2] that the applicant failed to make adequate and timely response to the respondent's requests for discovery,[3] and by that conduct, the applicant thereby caused its own costs to increase unnecessarily.[4]
[2]
Should a costs order be made in the applicant's favour?
[3]
The general rule is that each party to a VCAT proceeding bears their own costs.[5] However, the Tribunal may order that a party shall pay all or a specified part of the costs of another party to the proceeding if it is satisfied that it is fair to do so having regard to matters that are set out in s 109(3) of the VCAT Act.[6]
In determining whether it is fair to make a costs order against a party the Tribunal must have regard to the matters set out in VCAT Act s109(3); paragraph 109(3)(e) permits the Tribunal also take into account any other matter that it considers relevant.[7]
The applicant relies on s 109(3)(a), 109(3)(b) and 19(3)(c) and 109(3)(e) of the VCAT Act.
[4]
S109(3)(a) -whether a party conducted the proceeding in a way that unnecessarily disadvantaged the applicant
[5]
The applicant submits that the respondent's application to reopen the Order dated 23 November 2023, rather than complying with that order, in itself amounts to conduct that unnecessarily disadvantaged the applicant.[8]
The applicant submits further, that the respondent conducted the proceeding vexatiously by:
requesting multiple adjournments of the proceeding;
failing to file and serve evidence in support of its contentions;
making allegations as to the judicial standing of a senior member of the Tribunal without proper basis and which was inevitably rejected;
lodging an application to reopen the Orders made against it without proper or any evidence in support of such application and which was dismissed.[9]
A proceeding may be considered to be conducted in a vexatious way if it is "conducted in a way productive of serious and unjustified trouble or harassment, or if there is conduct which is seriously and unfairly burdensome, prejudicial or damaging".[10]
The respondent's application to reopen the Order dated 23 November 2023 was misconceived; such an application may only be made by a party who did not appear and was not represented at the hearing. The respondent attended 3 of the 4 days of hearing. Deputy President Wilson heard the respondent's application for reopening, and dismissed the application, reserving costs.
I agree that the respondent caused a number of adjournments in the proceeding. It is true also that the applicant also caused adjournments.
A hearing listed on 28 April 2022 had to be converted to a directions hearing. The applicant was ordered to file further materials, and the respondent to file Amended Points of Defence and documents. The Tribunal's Order on that date indicates that the applicant's case was not adequately prepared at the date of that hearing. The applicant failed to file its documents within the time specified in the Tribunal's Order dated 28 April 2022, leaving insufficient time for the respondent to file documents in reply, with the consequence that a hearing scheduled for 19 August 2022, was also vacated.
Two further adjournments were caused by the respondent. The hearing listed for 5 October 2022, was adjourned in order to direct the respondent to file Amended Points of Defence, and documents on which he relied. A hearing listed for 8 November 2022 was also adjourned, and further orders made directing the respondent to file and serve documents evidencing the agreement to offset unpaid owners corporations fees against invoices for work done by the respondent on common property. Both of these adjournments were made on the initiative of the Tribunal in order to meet the Tribunal's obligation to ensure a fair hearing for a self-represented party who was not adequately prepared at the hearing.
A hearing conducted on 18 April 2023 was adjourned because the respondent had not filed all documents on which he intended to rely. Shortly before the adjourned hearing (scheduled for 18 July 2023) the respondent sought adjournment of the hearing on the grounds that he was a close associate of a person who had contracted COVID-19.
At the resumed hearing on 2 November 2023 the respondent made an application under s108 of the VCAT Act that the Tribunal be reconstituted. That application was refused the same day by Deputy President Proctor. It is open to find that that application amounts to vexatious conduct of the proceeding by the respondent.
On resumption of the hearing, after Deputy President Proctor's determination, the respondent indicated that he was so unwell as to require an ambulance. An ambulance was called, and the hearing was adjourned to 23 November 2023. The respondent sent an email to the Tribunal on the morning of 23 November 2023 stating that he was unwell, and would not attend the hearing, but provided no medical evidence and made no application for adjournment.
While there were inadequacies on the applicant's part, the respondent did not conduct his defence in a businesslike manner. The records the respondent sought to rely on as evidence of the agreement to off set owners corporations fees demonstrated a rudimentary grasp of company account keeping. On the other hand, I note that the respondent's task was not made easy by the manner in which the applicant conducted its case: as late as the last day of hearing the applicant made a number of deductions from the claim due to inadequate attention to detail.
[6]
S109(3)(b) whether a party conducted the proceeding in a way that unreasonably prolonged the time take to complete the proceeding
[7]
The applicant submits that the respondent conducted the proceeding in a way that unreasonably prolonged the time take to complete the proceeding by
defending the proceeding in circumstances where it was clear that the defences in the proceeding were bound to fail; and
not complying with the orders made on 23 November 2023 to pay the applicant the amounts ordered but also lodging the section 120 application "which inevitably was dismissed". The applicant submits that the respondent "agitated matters which were improper and baseless, however the applicant was required to defend the proceeding and incur further costs in addition to those already incurred in doing so"[11]
Further, the applicant submits, that the respondent's conduct caused the applicant to incur legal costs in the proceeding "unnecessarily and unreasonably" by:
Having to commence the fee recovery application because of the respondent's failure to acknowledge the outstanding debt owed by it to the applicant;
Filing and necessitating review of a significant amount of documents, which the applicant asserts were improper, baseless or otherwise irrelevant to the claims made by the applicant against the respondent;
Having to prepare and prosecute its claim generally in circumstances where the respondent's defences were "improper, baseless and bound to fail"; and
preparation for and appearing at directions hearings and at the Hearings of the Proceeding in which in all circumstances the Respondent's defences were Improper, baseless and bound to fail, including a Review Healing brought on by the Respondent's application.
The applicant submits that by reason of the matters set out in paragraphs 15 and 16 above, "sections 109(3)(a) and 109(3)(b) are enlivened and a costs order is justified".[12]
The respondent submits that it was the applicant's own conduct that unnecessarily prolonged the proceeding. The respondent asserts that the applicant failed to make proper discovery in a timely way. I note that the Tribunal's Order dated 8 November 2022 identified a number of shortcomings in the applicant's discovery and sought to address this.[13]
Although the applicant makes submissions in terms of provisions of section 109 of the VCAT Act being "enlivened" and a cost order being "justified", as I have noted above, the Tribunal must be satisfied that it is fair to so, having regard to the matters set out in s109. Merely identifying criteria that might be classified within the headings in s109 does not of itself demonstrate that it will be fair to make a costs order.
The fact that the applicant had to commence the proceeding because the respondent had not paid the fees and charges levied is not conduct that unnecessarily prolonged the proceeding. That conduct of the respondent occurred long before the proceeding commenced. Conduct prior to the commencement of the proceeding is not a relevant consideration under s 109(3)(b) of the VCAT Act.[14]
Were the respondent's defences "improper, baseless and bound to fail"? At first instance, the defence that the respondent had an agreement with the Owners Corporation to set off the cost of works carried out to common property, or to rectify damage arising from a failure of the Owners Corporation to maintain common property, was not an "improper" defence. The respondent's defence, had he been able to produce cogent evidence to demonstrate the formation of such a contract, and its terms, may well have succeeded.
Looking at the proceeding as a whole, it appears to me that when this proceeding commenced, the respondent may have held a genuine belief that he had a good defence founded on an agreement formed with the previous owners corporation manager to set off invoices for works on common property against owners corporation's fees. However, on the evidence produced by the respondent, at its highest, any such agreement was no more than an agreement to consider such a proposal at a later date. The respondent was not able to prove the formation and elements of the alleged agreement.
While the defence was not conceptually "doomed to fail"; the respondent failed to prove the defence. In my view, the respondent's failure to produce cogent evidence establishing the formation of that agreement, or the specific works said to have been carried out, certainly meant that it was inevitable that his defence would fail. Continuing to maintain the defence in those circumstances certainly prolonged the proceeding unnecessarily.
A considerable part of the respondent's voluminous submissions sought to assert that lot owners or committee members were not financial at the time they voted in favour of the budget measures that formed the foundation of the levies that were the subject of this proceeding. The respondent made no real attempt to particularise those allegations, and proceeded as though, simply by raising such an allegation, the owners corporation had the burden of disproving it. While it is true to say that an applicant must prove its case, a respondent who defends a claim must place plausible evidence before the Tribunal to support his defence. The respondent asserted that he was unable to access documents from the applicant. However, the respondent made no attempt to engage with the details of the applicant's documentary evidence. I consider that the respondent's conduct, in raising such issues without supporting them with substantiating evidence, did indeed contribute to the prolongation of the proceeding.
[8]
S 109(3)(c) the relative strengths of the claims made by each party, including whether a party has made a claim that has no tenable basis in fact or law
[9]
The applicant submits that the submissions filed by the respondent demonstrate that his defence had no tenable basis in fact or law. The applicant submits also that, because orders were made in the applicant's favour on 23 November 2023 and on 9 February 2024, these demonstrate that the respondent's claims had no tenable basis in fact or law.
The respondent maintains, despite the absence of evidence, that he had a defence to the applicant's claim.
It is well established that the fact that one party was successful is not the only relevant factor to the consideration of whether it would be fair to make a costs order.[15] Similarly, the fact that one party's case may be weaker than the other's does not, by itself, justify a costs order. It is generally accepted that the criterion in s 109(3)(c) requires that "a substantial disparity between the strength of one claim and the weakness of its competitor must exist before an order for costs will be fair".[16]
For the reasons I have given above, at least in the early stages of the proceeding, the respondent's defence was not conceptually "doomed to fail", although the respondent ultimately failed to prove his defence. In the absence of persuasive evidence to support his defence, the respondent's defence was indeed without tenable basis in fact.
[10]
S109(3)(e) any other matter the Tribunal considers relevant
[11]
The applicant submits that the Tribunal should have regard to the following factors:
the respondent's failure to comply with Tribunal orders;
the respondent's failure "to provide cogent evidence in relation to his alleged defence of an agreement to set off;
the respondent "improperly" seeking adjournments;
the respondent having "baselessly" sought reconstitution of the Tribunal; and
the respondent's application to reopen the orders made against it without evidence or proper basis.
The applicant's submissions under this criterion repeat the submissions made earlier.
It is fair to say that the application in this proceeding was complicated by the fact that the financial records of the owners corporation had been completely rebuilt after the departure of a previous owners corporation manager. Nevertheless, despite this complexity, the applicant's preparation of its claim in the proceeding was not of an exemplary standard. The Summary of Proofs filed in support of the claim, dated 9 March 2022, relied on a single fee notice dated 2 September 2021 and a Final Fee Notice dated 11 October 2021. The fee notices included substantial "opening balances" and charges for "miscellaneous charges". The applicant filed no documents as to the particulars of the opening balances or the miscellaneous charges. That oversight contributed to the first adjournment.
Further adjournments were made on 5 October 2022, 8 November 2022 and 18 April 2023 because the respondent was not sufficiently prepared to present his defence. The respondent failed to comply with the Orders made on 5 October 2022, requiring further extensions of time to comply.
Taking all of the circumstances of this proceeding into account, including the respondent's misconceived application for reopening, and having considered the submissions of the applicant and of the respondent, I consider that it is fair to order the respondent to pay the applicant's costs of the proceeding on a standard basis, from 5 October 2022 to 9 February 2024 both dates inclusive. Those costs are awarded on a standard basis at County Court scale as assessed by the Costs Court.
I will also order the respondent to pay the applicant's costs of this application, fixed in the sum of $2,420.00, which represents the amount claimed $2,200.00 plus GST.
The applicant having substantially succeeded in its application, it is appropriate to order the respondent to reimburse the applicant the application and hearing fees paid by it.
[12]
[1] Applicant's submissions as to costs dated 16 February 2024.
[13]
[2] Respondent's Reply to the Applicant's Submissions paragraphs 2, 4, 5, 6, 21,
lodging an application to reopen the Orders made against it without proper or any evidence in support of such application and which was dismissed.[9]
in which in all circumstances the Respondent's defences were Improper, baseless and bound to fail, including a Review Healing brought on by the Respondent's application.