Medium Neutral Citation [2001] VCAT 2219

1. That the Respondent's application for costs in the proceeding, commenced by the Applicants, and in relation to the Respondent's application under section 75 of the Victorian Civil and Administrative Tribunal Act 1998 is dismissed.

[1]

The original Applicants in this proceeding whom I call the Taylors, sought against the original Respondent which I call Third Szable, a declaration that Third Szable had breached certain key requirements of the Consumer Credit Victoria Code which I call the Code and had charged certain fees which they said were unconscionable under the Code.

[2]

Third Szable applied to have the proceedings struck out or dismissed under s.75 of the Victorian Civil and Administrative Tribunal Act 1998 which I call the VCAT Act. On 28 August 2001 this Tribunal granted that application and struck out the proceeding.

[3]

Third Szable now applies for its costs in relation to the whole proceeding, that is the substantive proceeding, and the strike out application. It asks for costs on an indemnity basis. The Taylors oppose the application. I have before me written submissions from the parties on the application.

[4]

I first deal with the Tribunal's power to order costs where a proceeding is struck out under s.75.

[5]

Third Szable says that this power is primarily conferred by s.75(2). It says that the Tribunal also has power in relation to orders as to costs under s.109 of the VCAT Act. It bases its arguments for orders for costs in its favour on both these sections but says that the effect of each section is different. It is argued for the Taylors that the effect of both provisions is in practical terms the same. In my view the effect of each of these provisions is different.

[6]

Section 75(2) of the VCAT Act provides -

"(2) If the Tribunal makes an order under sub-section (1), it may order the Applicant to pay any other party an amount to compensate the party for any costs, expenses, loss, inconvenience and embarrassment resulting from the proceeding."

"Applicant" in this context means the persons who originated the proceeding - that is, who made the original application to VCAT or the request to have the matter referred to VCAT - in other words, as I've said, the person who initiated the substantive proceeding.

[7]

The effect of s.109 of the VCAT Act is that subject to that division, that is Division 8 of part 4, each party is to bear their own costs in a proceeding. Sub-section (2) provides,

"(2) At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in the proceeding."

[8]

The effect of sub-s.(3) is that the Tribunal may only order costs under sub-s.(2) if satisfied it is fair to do so having regard to a number of listed factors. I do not need to set out the list here.

[9]

As I've said, the section is part of Division 8 of part 4 of the VCAT Act. That division is headed "Costs". Section 109 sets out general rule as to costs. Other provisions of the division make a different provision for specific situations. So, s.110 deals with costs of intervention. Sections 112-115 deal with costs where an offer of settlement has been made and not accepted.

[10]

But there are, elsewhere in the VCAT Act in other divisions and parts apart from Division 8 of part 4, other provisions concerning the power to order costs. Section 75(2) is one. Section 74(2)(b) is another. That provides that where an Applicant withdraws an application or referral "The Tribunal may make an order that the Applicant pay all or any part of the costs of the other parties to the proceeding".

[11]

A third provision is s.78(2)(c). That permits the Tribunal, if satisfied that a party has conducted a proceeding in a manner that unnecessarily disadvantages another party to "Make an order for costs under s.109".

[12]

In my view these different formulations of the Tribunal's power to order costs cannot be treated as if they were drafted in the same words. They are drafted differently and have different meanings. They are separate powers. There are important differences between s.109 and 75(2).

[13]

The differences are in summary these. Section 109 creates a general rule that costs lie where they fall unless the Tribunal, after considering a number of specified factors, considers it fair to order otherwise. It relates to any part of the proceeding and to any party. It speaks only of costs. Section 75(2) permits the Tribunal to make an order in relation to an Applicant - that is, the initiator of the proceeding, requiring that Applicant to pay costs where a proceeding is struck out or dismissed.

[14]

In addition to the word "Costs" it uses words such as "Expenses, loss, inconvenience or embarrassment". It does not state a rule similar to the general rule to be found in s.109(1). It is a simple and absolute discretion to order costs against the initiator of a proceeding. Section 74(2)(c) is similar but applies only to costs. It does not include the additional words. (Compare Fernandez v. Amatech Pty Ltd, a decision of VCAT dated 7 September 2001).

[15]

Section 78(2)(c) is a hybrid. It specifies the person against whom a costs order can be made - here the party who has conducted the proceeding in a way that disadvantages another party but applies s.109 to that situation. Section 75(2) could have provided similarly to this but did not.

[16]

Section 109 is a general provision concerning costs. In my view section 75(2) is a specific provision. Neither provision specifically applies or disapplies the other. It may well be that depending on whether a Respondent who has successfully applied to have a proceeding struck out applies for costs under s.75(2) or s.109(2), the result may be different.

[17]

Section 109(2) and (3) permit a departure from the general rule that costs lie where they fall, if it is fair to order costs having regard to a number of specified factors and relate only to costs in the traditional sense. Section 75(2) gives the Tribunal an unfettered discretion and is broader as to what can be ordered. I do not think that Parliament intended that a party's choice of statutory provision should dictate the basis on which an award of costs should be made. In my view ss.109 and 75(2) are intended to work in the following way.

[18]

Section 109(1) applies generally to establish a general rule that costs lie where they fall in all proceedings before VCAT. This rule is not only subject to the other provisions of Division 8 of part 4 as s.109(1) specifically states. It is also subject to other specific powers to order costs conferred on the Tribunal elsewhere in the VCAT Act or, for that matter, by an enabling enactment. Section 109(2) and (3) contain a general power to order costs. Where a specific power to order costs is given elsewhere in the VCAT Act or by an enabling enactment those sub-sections do not apply and the specific power applies. So a Respondent who successfully applies to have a proceeding struck out can only apply for costs against the Applicant or originator of that proceeding under s.75(2). Other costs applications relating to that proceeding are however still governed by s.109(2) and (3).

[19]

My view is consistent with the general maxims of statutory interpretation which are to the effect that provisions dealing with special circumstances prevail over provisions of general application.

[20]

What then are the circumstances in which s.75(2) applies? In my view that sub-section confers an unfettered discretion to be exercised according to the circumstances of the particular case. If this is so, one should not apply any general rule that costs should follow the event, irrespective of the circumstances of the particular case. I must consider each case on its own merits.

[21]

In the exercise of that discretion I can see no reason why I should not take into account the factors listed in s.109(3). These relate, for example, to the conduct of the proceeding such as whether one party has conducted the proceeding in a way that unnecessarily disadvantages the other, has breached Tribunal directions, has unnecessarily prolonged the proceeding, whether a person has made a claim with no tenable basis, the nature and complexity of the proceeding and any other relevant factors.

[22]

As far as the nature of the proceeding is concerned, I take into account that this is a proceeding under the Code, the aims of which are to promote truth in lending - that is, to promote the disclosure by credit providers to debtors of information relating to credit transactions - and in certain circumstances to permit debtors to obtain relief where certain fees are unconscionable, certain circumstances surrounding the entering into of a credit contract are unjust or where there has been a breach of the requirement of the Code concerning the credit contract or a related matter.

[23]

I also take into account that this purpose might be undermined or frustrated if debtors were deterred from exercising their rights under the Code for fear that costs might automatically be awarded against them if their applications to the Tribunal were unsuccessful or if they ultimately turned out to be wrong in their belief that the code applied to them.

[24]

It seems to me that one of the reasons underlying the presumption in s.11 of the Code, that the Code applies if that is what is asserted in proceedings and until the contrary is established, is to make it easier for a debtor to exercise his or her rights under the Code. Proceedings under the Code cannot, in my view, be said to be wholly of a commercial nature. From the point of view of a credit provider indeed, a credit transaction is part of a business and is a commercial transaction.

[25]

However, the Code's protection is only available for debtors where credit is provided predominantly for non-business purposes, that is, for personal, household or domestic purposes. That protection consists of relief in various forms from the obligations which the credit transaction would otherwise impose on the debtor.

[26]

I now turn to the particular factors relied on by Third Szable to justify an award of costs in its favour. I summarise these as follows.

[27]

(A) The Tribunal has struck out the proceeding as manifestly hopeless. Although the Tribunal indicated in its reasons for decision that the matter might be curable by amendment, the Taylors have not filed an amended application.

[28]

(B) The proceeding should not have been brought. Once the application to strike it out had been made, the Taylors resisted that application in circumstances where they ought reasonably to have known that the proceeding was bound to fail.

[29]

(C) Where the instituting of this proceeding has meant that Third Szable has then been put to the costs of applying to have it struck out and has then been successful in that application is unfair not to order costs in its favour.

[30]

I summarise the Taylor's submissions opposing this application in the following way.

[31]

(A) The proceeding was not brought in circumstances where the Taylors knew or ought reasonably to have known it was bound to fail. Ultimately it failed because of the way in which the Tribunal construed s.6(1) of the Code. The Tribunal's conclusion was that where all the material before the credit provider indicated that the loan was for investment purposes, that is, not for personal, household or domestic purposes and there was nothing in the material which would have put the credit provider to enquiry or led it to believe that there was a reasonable prospect that the loan was for some other purpose, the loan cannot be treated as provided for domestic, personal or household purposes. Therefore the Code did not apply. The Taylors say that there was no previously decided case on this matter. In these circumstances they say that it could not be said that this proceeding was brought by them knowing it was bound to fail or that they ought reasonably to have suspected it was bound to fail. They had relied on general propositions in various cases that the Code should be interpreted beneficially as far as the debtor was concerned.

[32]

(B) The Taylors have not filed an amended application given the particular nature of the Tribunal's findings.

[33]

(C) Although the Tribunal ultimately determined the strike out application against the Taylors, the Tribunal rejected two out of the three submissions made by Third Szable in support of its application.

[34]

After weighing all these submissions I am not satisfied that I should exercise my discretion to order costs against the Taylors. This being so, s.109(1) applies and costs lie where they fall. I take into account the nature of the proceeding in this jurisdiction as I have described it. In my view it could not be said that the Taylors ought to have known their application was bound to fail when they instituted it or at any time before the Tribunal decided the strike out application. There should therefore be no order for costs in relation to the strike-out application.

[35]

I am also of the view that the costs of the substantive proceeding should lie where they fall. Apart from the strike-out application, the only other submission about the substantive proceeding which Third Szable made was that the Taylors conducted the proceeding unreasonably by making what in effect Third Szable argues was an unreasonable and unfounded application to stay proceedings in the Magistrates' Court instituted by Third Szable against the Taylors.

[36]

The matter was raised at a directions hearing before me in June 2001. At that hearing the Taylors requested the Tribunal to order Third Szable not to continue with its proceeding in the Magistrates' Court until this proceeding was determined. The Tribunal treated this as an application for a stay and dismissed the application on the basis that the application should, in the first instance, be made to the Magistrates' Court. Ultimately the Magistrates' Court proceedings were stayed by the consent of the parties.

[37]

I am not satisfied that these circumstances warrant a departure from the rule that costs lie where they fall. I would add one final comment. The position as to costs under the VCAT Act is different to that in relation to other tribunals exercising jurisdiction under the Code. Different statutory provisions govern the awards of costs in those tribunals. (See for example McCarthy v. Custom Credit Corporation 1993, A.S.C. 56-208).

[38]

The position under the VCAT Act is also different from the position of the former Credit Tribunal under s.83 of the Credit (Administration) Act 1984. Under that section, if a claim exceeded $3000 in amount, the Tribunal had an unfettered discretion as to whether or not to order costs. Where a claim did not exceed that amount, no costs were allowable.

[39]

I also note that in some of the other jurisdictions in which the Code operates, the approach by tribunals has been influenced by the fact that in certain circumstances the courts have concurrent jurisdiction under the legislation, concurrent with the Tribunal. The same is true in Victoria in relation to the Code. (See Consumer Credit (Victoria) Act 1995, s.8). However, this Tribunal has exclusive jurisdiction under the provisions of the Code which are the subject of this application.

[40]

The provisions of the VCAT Act relating to costs are also different from those, for example, relating to the Supreme Court's power under the Supreme Court Act and its Rules to order costs. I conclude therefore that no order as to costs, either in the substantive proceeding or on the strike-out application should be made.

[41]

That concludes my reasons for decision.