A recent decision reminds us that s109(1) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (VCAT Act) enshrines the general approach of the Tribunal when it comes to costs – namely that each party bear its own costs. If the Tribunal chooses to take a different approach, it will consider a variety of factors for whether it is fair overall to make an order for costs.

Key take-aways

An owners corporation (OC) has an obligation to act in the best interests of its members, which arguably extends to conducting litigation in a way that protects its right of recovery of legal costs. While OCs often assume that success in a proceeding guarantees an award of costs in their favour, this is not always the case. Without seeing the terms of the offer made, this case is a timely reminder that offers are most useful when they reflect the current state of a matter and that parties are not prevented from making more than one offer if their case changes.

Facts of the case

College had installed an air conditioner on its lot which was attached to a common wall with the neighbouring lot. The lots were interior facing and the common wall was part of common property. The OC wanted College to remove the air-conditioner and make good the penetrations to the wall. The OC attempted dispute resolution prior to commencing litigation, but College did not apparently engage in the process or take action in relation to any of the Notices to Rectify Breach issued.

The proceedings were ultimately resolved on the basis that College agreed to relocate the unit to a carpark lot it owned and rectify the damage to the common walls. The OC sought its costs of the proceedings under s109(3) of the VCAT Act which gives the Tribunal the discretion to make an order for costs if it is satisfied that it is fair to do so, considering the following factors:

• whether a party has conducted the proceeding in a way that unnecessarily disadvantaged another party
• whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding
• 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
• the nature and complexity of the proceeding
• any other matter the Tribunal considers relevant.

Judgment

In declining to make an order for costs, Member Sharkie made the following comments:

1. The apparent refusal by College to engage in the dispute resolution process was not a factor ‘in this proceeding’ and was deemed to be irrelevant to the consideration of costs.
2. The Tribunal did not accept that the failure of College to engage an expert in the timeframe contemplated by the orders, which resulted in the hearing date being vacated, was a basis to find that College conducted the proceeding in such a way that unnecessarily disadvantaged the OC or prolonged the matter unreasonably. Whilst Covid-19 and the Christmas shutdown period were acknowledged to have caused delays, the Member noted that consent orders had been filed in relation to vacating the hearing and took this to mean the deferment was agreed.
3. As the matter did not proceed to final hearing, the Tribunal was unable to determine the relative strengths of each party’s position and could not comment on whether College’s defence was untenable at law.
4. Although the Tribunal agreed the proceeding was complex, the Member did not consider this factor alone necessarily permitted a costs order to be made.
5. The OC had made an open offer to College during the proceeding, which was ultimately adopted as part of the settlement of the dispute. The OC contended that, pursuant to s112 of the VCAT Act, it was entitled to costs as the ultimate orders made were not more favourable to College than the offer. Although the Tribunal accepted an ‘order’ for the purposes of s112 could be by consent, it did not agree the offer was more favourable to the OC as the terms were slightly different.

Further information / assistance regarding the issues raised in this article is available from the authors, Fabienne Loncar, Partner, Chris Philactides, Senior Associate or your usual contact at Moray & Agnew.