1. This is the second application by the applicant by counterclaim for an order against the second and third respondents by counterclaim pursuant to s78 of the Victorian Civil and Administrative Tribunal Act 1998 ("the Act") determining the proceeding in its favour, and for consequential orders determining quantum in the amount of about $1,242,103.09 plus interest of $236.58 per day from 30 September 2025.

1. The applicant by counterclaim (the "former landlord") is the owner of premises known as the Southbank Retail Precinct in central Melbourne.
2. The former landlord leased a shop in the precinct to the former applicant in the proceeding ("Blue Train"). The lease commenced on 13 August 2013 ("the lease").
3. The lease was brought to an end by disclaimer of the liquidators of Blue Train on 25 February 2025.
4. The first and second respondents by counterclaim (the "guarantors") guaranteed Blue Train's obligations under the lease.
5. On 8 May 2023, Blue Train filed an amended points of claim in the proceeding seeking damages against the former landlord, relying upon the former landlord's alleged breaches of provisions of the Retail Leases Act 2003.
6. On 30 August 2023, the former landlord filed points of defence and points of counterclaim against Blue Train and the guarantors.
7. On 21 December 2023, Blue Train and the guarantors filed a defence to counterclaim.
8. On 27 March 2024, Blue Train filed and served an expert's report dated 27 March 2024 in which the expert expressed the view that Blue Train had lost net profit of $1,094,061 during the financial years 2017-2023 by reason of matters alleged in the amended points of claim.
9. By order dated 20 March 2025, consequent upon Blue Train going into liquidation, Blue Train's claim was struck out.
10. On 26 March 2025, the former landlord filed amended points of counterclaim.
11. By orders dated 20 March 2025, the guarantors were required to file and serve a defence to the amended points of counterclaim by 7 April 2025.
12. The guarantors did not file their defence to the amended points of counterclaim by 7 April 2025.
13. By reason of this latest failure by the guarantors to comply with orders of the Tribunal, on 15 May 2025 the former landlord filed its first s78 application.
14. The guarantors subsequently filed their defence to amended points of counterclaim on 13 June 2025. They alleged that their liability to the former landlord must be determined taking into account an equitable set off claimed by them to have been available to Blue Train against the former landlord's demands, being the amount of loss and damage allegedly incurred by Blue Train by reason of alleged breach by the former landlord of s52 Retail Leases Act 2003, and the amount of compensation to which Blue Train was allegedly entitled pursuant to s54 Retail Leases Act 2003 (which had been the subject of Blue Train's amended points of claim dated 8 May 2023).
15. The former landlord's solicitors took the view that the defence to the amended points of claim was defective in a number of respects, as described in their letter to the then solicitors for the guarantors dated 15 July 2025.
16. The former landlord's first s78 application was heard by SM Forde on 13 August 2025. Both the former landlord and the guarantors were represented by counsel.
17. The former landlord relied on affidavits sworn on 10 February 2024, 4 May 2024, 15 May 2025 and 12 August 2025 by the partner at the law firm responsible for conducting the litigation on behalf of the former landlord. It relied on various failures by the guarantors to comply with procedural orders. The guarantors relied on an unsworn affidavit dated 13 July 2025 by their then solicitor Mr Curtis. The former landlord also submitted that, for the reasons given by them in their letter dated 15 July 2025, the defence to the amended points of defence was deficient.
18. SM Forde made the following orders on 13 August 2025 ("the orders"):

1. The [former landlord's] application under s78 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) filed 15 May 2025 is dismissed.
2. The time for the [guarantors] to file and serve [further] expert evidence in accordance with order 8 of the orders dated 20 March 2025 is extended [from 24 August 2025] to 1 September 2025.
3. By 22 September 2025, the [guarantors] must file and serve a Further (sic) Amended Points of Defence to [Amended Points of] Counterclaim.
4. By 29 September 2025, the [former landlord] must file and serve witness statements in support of the counterclaim (not in response to the Further Amended Points of Defence to Counterclaim). Each statement must consist of a narrative of the evidence to be given by each lay witness and must be relevant to the issues raised in the proceeding. The witness statement is to stand as the evidence in chief of the witness. Any document to be relied upon at the hearing must be exhibited to a witness statement.
5. The proceeding is listed for a directions hearing on 8 October 2025 by online video conference with an estimated hearing time of 30 minutes. The purpose of the directions hearing is to check compliance with these orders and make orders for the future conduct of the proceeding. The parties will be notified of the hearing arrangements before that time.
6. The [guarantors] must pay the [former landlord's] costs of and incidental to the s 78 application filed 15 May 2025 in an amount to be assessed by the Costs Court on a standard basis pursuant to the County Court costs scale as defined in Rule 1.13 of Chapter I of the Rules of the County Court as in force on 31 December 2024.
7. Liberty to apply.

1. On 15 September 2025, the Tribunal sent to the respective solicitors for the parties a notice of hearing fixed for 8 October 2025. The hearing date had been fixed by order 5 of the orders for the purpose of checking the guarantors' compliance with the orders 2 and 3 of the orders.
2. I find that it was only by the notice of hearing dated 15 September 2025 (the "notice of hearing"), sent over a month after the hearing before SM Forde on 13 August 2025 when the orders were made, that the guarantors' then solicitors received a copy of the orders.
3. The guarantors' solicitors filed notice of ceasing to act on 15 September 2025.
4. The former landlord complied with order 4 of the orders by filing a witness statement of Jelena Luci dated 22 September 2025 in support of the amounts claimed in the counterclaim.
5. On 1 October 2025, the solicitors for the former landlord filed their second s78 application, relying upon the guarantors having failed to comply with order 3 of the orders (and, therefore, they later submitted, s78(2)(b)(i) of the Act was again engaged). The former landlord relied on the affidavit of Ms Bradonjic of its solicitors sworn on 1 October 2025 in support of the application.
6. When the matter came before me on 8 October 2025, there was no evidence that the guarantors' former solicitors had sent to the guarantors a copy of the orders they received with the notice of hearing prior to their filing their notice of ceasing to act. The guarantors, who appeared in person, were also unable to assist on this point with any degree of assurance.
7. I wished to know for the purpose of dealing with the second s78 application, whether the guarantors had become aware of the orders after they were made on 15 August 2025 (and prior to their former solicitors receiving the orders with the notice of hearing) because, if so, they would have had a generous amount of time to comply with the orders.
8. At the hearing on 8 October 2025, when the guarantors were both present, I therefore made the following orders:

1. The application pursuant to s78 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) of the [former landlord] for an order that the [guarantors] pay the applicant by counterclaim $1,242,103.09 plus interest at the rate of $236.58 per day from 30 September 2025 until the date the order is made ("the application"), in reliance on:

(a) the witness statement of Jelena Lucic dated 22 September 2025, and her affidavit sworn 8 October 2025;

(b) the affidavit of Jasmina Bradonjic sworn 1 October 2025;

(c) the material that was before Senior Member Forde at the directions hearing on 13 August 2025, including submissions of counsel;

is adjourned for decision.

1. The [guarantors] must by 4:00pm on 30 October 2025 file and serve an affidavit stating the extent to which (if at all), prior to receiving [a copy of the orders] with the [notice of hearing], they became aware of the contents of the orders.
2. The affidavit filed and served by [guarantors] pursuant to order 2 must state when, in the event that the [former landlord's] s78 application is dismissed, they will comply with orders 2 and 3 of the orders.
3. The [former landlord] must file and serve any affidavit or submissions in response by 4:00pm on 10 November 2025.
4. The s 78 application will be determined in Chambers, unless the Tribunal considers that a further hearing is necessary.
5. The [former landlord's] costs of this day, and of its s78 application are reserved.
6. By affidavit sworn 30 October 2025 (the "Dimattina affidavit"), filed on behalf of both guarantors, they no longer having legal representation,[1] one of the guarantors Xavier Francis Dimattina stated:

1. [in response to order 2 of the orders dated 8 October 2025, requiring the guarantors to state, in effect, whether they became aware of the orders prior to receiving them with the notice of hearing dated 15 September 2025] I was not aware of the detailed content of [the orders]. When we made the decision to not retain legal representation [on about 15 September 2025] we did not properly review those orders and apologise to the tribunal for this oversight.
2. We were trying to work out what was required leading up to the...hearing [on 8 October 2025] and the sheer volume of material in this matter provided challenging (sic) particularly when there was Court of Appeal material involved.
3. We have now had the benefit of reviewing [the orders] and respond as follows.
4. [In response to order 3 of the orders dated 8 October 2025], we now understand that we require an expert witness in this regard and subject to payment of an outstanding invoice we will have the final report from them to file with the Tribunal. The delay in [complying with order 2 of the orders] was the costs required to advance our case which is reflected in the termination of legal services...
5. [In further response to order 3 of the orders dated 8 October 2025], we will file an amended defence to counterclaim but we do seek an indulgence from the other side to provide us with their most recent counterclaim to ensure we are addressing the correct document for the benefit of the Tribunal...
6. Finally, we do apologise for unnecessarily taking up the Tribunal's resources in this matter and will endeavour to ensure we comply with the Tribunal's orders moving forward and to the hearing.
7. In response to paragraph 7 of the Dimattina affidavit, the former landlord's solicitors emailed the guarantors on 31 October 2026, attaching a copy of the amended points of counterclaim dated 26 March 2025.
8. The email also put the guarantors on notice that the former landlord's solicitors were of the view that the Dimattina affidavit failed to address paragraph 2 of the orders dated 8 October 2025, and invited them to make a further affidavit, to which there has been no response from the guarantors.
9. Further to the guarantors' response in paragraph 6 of the Dimattina affidavit, on 18 November 2025 the guarantors filed and served an updated expert's report dated 5 November 2025 ("the updated expert's report") in which the expert expresses the view that Blue Train lost net profit of $1,758.825 during the financial years 2017-2025 by reason of the alleged breaches of the above provisions of the Retail Leases Act 2003. The expert's report therefore updated the loss and damage claimed to have been incurred by Blue Train from 2017-23 (see the expert's first report dated 27 March 2024, referred to above) to 2017-25.

(1) This section applies if the Tribunal believes that a party to a proceeding is conducting the proceeding in a way that unnecessarily disadvantages another party to the proceeding by conduct such as -

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

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

(c) asking for an adjournment as a result of (a) or (b); or

(d) causing an adjournment; or

(e) attempting to deceive another party or the tribunal; or

(f) vexatiously conducting the proceeding; or

(g) failing to attend mediation or the hearing of the proceeding.

(b) if the party causing the disadvantage is not the applicant-

(i) determine the proceeding in favour of the applicant and make any appropriate orders; or

(ii) order that the party causing the disadvantage be struck out of the proceeding;

(c) make an order for costs under section 109.

1. The principles governing the application of these provisions are not in doubt. In what the Court of Appeal has described[2] as the leading case Bell Corp Victoria Pty Ltd v Stephenson ("Bell Corp"),[3] Ashley J stated that the Tribunal's exercise of discretion in a s78 application required consideration of the following matters:
   1. In my opinion, bearing in mind the submissions of counsel directed to the provision here under scrutiny, the subject matter, scope and purpose of the Act show that if the Tribunal forms a belief concerning the matters required by s. 78(1)(a) of the Act the following matters must be considered in the exercise of the discretion under sub-s. (2):
      • The subject matter of the belief formed by the Tribunal for the purposes of sub-s. 1.
      • The nature of the power conferred by sub-s (2) in the context of the armoury of power conferred upon the Tribunal by ss 75-77. By this I mean, particularly, that s. 78(2) operates in circumstances which at least do not require that the proceeding be frivolous, vexatious, misconceived, lacking in substance or otherwise an abuse of process; and which at least do not require that the circumstances demonstrate want of prosecution. Put it another way, the sub-section contemplates that making of an order with very serious consequences in circumstances that very probably would not fit the templates set up by ss 75 and 76. Whist it can rightly be said that the creation of such a remedy in the situation contemplated by s. 78(1) shows that an intention that orders be made in some cases where the situation exists, it should also be firmly concluded, in statutory context, that the remedy should be of last resort and not first resort.
      • The requirement imposed upon the Tribunal by s. 97. That section should be considered to import the concept that, ordinarily, the interests of case management should not be employed so as to shut a party out of litigating its case. The ultimate aim of the Tribunal, as much as of a court, must be the attainment of justice in respect of issues joined.
      • The requirement as imposed by s. 98(1)(a), to the extent that a party should ordinarily be given an opportunity to be head upon the merits. That opportunity is not absolute. It may be lost without breach of the rules of natural justice. But the consequence that the making of an order under s 78(2) will deprive a party of an opportunity to be heard upon the merits is surely relevant to the exercise of the discretion whether to so order.
      • The power to make costs orders conferred by ss 109(2)(3) and 78(2)(c). The last mentioned, it appears, might be exercised even though no order is made under s 78(1)(a) or (b).
   2. It may be that in a particular case the Tribunal will consider some other matter to be relevant...
2. In ACN 115 918 959 Pty Ltd v Moulieris[4] Senior Member Kirton (as she was then) stated:

1. It is well established that the discretion under s78 is one "that should only be exercised when there is no other way to achieve a just outcome"[5] and provides a remedy "of last resort not first resort".[6]

1. [the Senior Member referred to the above considerations in Bell Corp]
2. In other words, before making an order under ss(2), I must consider whether the belief I have formed as to the applicant's conduct warrants the making of an order, whether an alternative remedy would suffice, ordinarily case management should not be employed so as to shut a party out of litigating, the attainment of justice is paramount, and ordinarily a party should be given an opportunity to be heard on the merits.
3. In my view, the nature of the applicant's conduct [as earlier described by the Senior Member] is sufficiently disadvantageous as to warrant an order being made under ss(2). Further, there is no alternative remedy available that will not cause extreme prejudice to the respondent...
4. Second, even if [the request for a self-executing order] were granted, there is no guarantee that the respondent would comply with the order. Given the applicant's failure to comply with orders throughout the proceeding, I have no confidence that it would do so... [7]
5. I also respectfully adopt the summary of the Senior Member in Moulieris of the considerations that apply where there has been a delay or default by a party in taking a required step in a proceeding, and when a s78 application is made in consequence.
6. In this instance, therefore, I would need to satisfy myself, in the particular circumstances of this case, that:

(a) the conduct of the guarantors is of a type that warrants the making of an order;

(b) that the conduct has unnecessarily disadvantaged the respondents; and

(c) there is no alternative remedy available that would not cause extreme prejudice to the former landlord.

1. The former landlord's solicitors submit that given the guarantor's persistent failures, as canvassed before Member Forde on 13 August 2025, there should be a determination of the proceeding in favour of the former landlord pursuant to s78(2)(b)(i) of the Act, and an order made in its favour for damages in the amount particularised by the former landlord.

Findings-conduct of the guarantors not of a type that warrants the making of an order

1. I am not satisfied that that the Dimattina affidavit satisfactorily addresses order 2 of my orders dated 8 October 2025. It is a poorly drafted response to the order. It does not state whether, after the orders were made, the guarantors' former solicitors conveyed to the guarantors the substance of the orders.
2. Giving some latitude to the deponent Mr Dimattina, being one of the guarantors who, at the time of swearing the affidavit were no longer legally represented, paragraphs 3 and 4 of the Dimattina affidavit suggest that it is not unlikely that the guarantors first became aware of the orders dated 13 August 2025 (extending the time for the guarantors to file and serve any expert's evidence to 1 September 2025, and requiring the guarantors to file and serve a further amended points of defence to counterclaim by 22 September 2025) only by their receipt from their former solicitors of the notice of hearing dated 15 September 2025. Such circumstance, in my view, ameliorates the failure by a party to comply with orders of the Tribunal.
3. There is also evidence in paragraph 6 of the Dimattina affidavit that the guarantors have also been facing pressing financial issues. That is to say, they were unable to comply with order 2 of the orders, requiring them to file further expert material, until payment of the expert's further fees that at the Dimattina affidavit were then outstanding. It will be recalled that the updated expert's report was filed by the guarantors on 18 November 2025. Also, Mr Dimattina attests in paragraph 6 to withdrawing instructions from their former solicitors for financial reasons.
4. I find in the circumstances that the guarantors had a reasonable excuse for not complying with the orders, and therefore the conduct of the guarantors was not of a type that warrants the making of an order of the type sought by the former landlord.
5. I am not satisfied that the situation fairly calls for the exercise of the "last resort" power of the Tribunal under s78 of the Act, given:

(a) the particular consequences of the guarantors not being heard in respect of their substantial claim for $1,758.825 which, if proved on the facts and subject to any legal argument, would stand as a complete set off to the amount claimed in the former landlord's amended points of counterclaim; and

(b) by their service of the updated expert's report, although being a late compliance with order 2 of the orders, the guarantors have acted consistently with their stated desire to comply with future orders of the Tribunal, and so that their defence may be heard on its merits.

Whether conduct of the guarantors caused unnecessary disadvantage to the former landlord

1. I have found that there is a reasonable excuse within the meaning of s78(1)(a) of the Act for the conduct of the guarantors in failing to file and serve its defence pursuant to the various orders, and that there is therefore no conduct on its part that warrants the making of an order under s78.
2. It becomes unnecessary for me to decide whether this conduct unnecessarily disadvantaged the former landlord within the meaning of s78(1) of the Act.
3. I am not satisfied that the continuation of the litigation, leading to a hearing in due course, would cause extreme prejudice to the former landlord.
4. The application is therefore dismissed.
5. I will reserve the former landlord's costs.

[1] The guarantors improperly adopted an intitulement representing that their former solicitors were still acting for them.

[2] ACN 115 918 959 Pty Ltd v Moulieris [2024] VSCA 71 at [27].

[3] [2003] VSC 255.

[4] (Building and Property) (Corrected) [2021] VCAT 1136.

[5] Davies v Diversii Pty Ltd [2010] VCAT 1126 at [41].

[6] Bell Corp Victoria Pty Ltd v Stephenson [2003] VSC 255 at [51].

[7] The Senior Member's approach was endorsed by the Court of Appeal: see ACN 115 918 959 Pty Ltd v Moulieris [2024] VSCA 71 at [78].