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Property Update - Costs orders in hopeless proceedings

Property Update - Costs orders in hopeless proceedings

By Cain McGirr
April 1, 2016

Costs orders are being awarded against applicants bringing hopeless proceedings before VCAT

Vexatious and hopeless proceedings under the Retail Leases Act

Under section 92 of the Retail Leases Act 2003 (RLA), each party to a proceeding brought before the Victorian Civil and Administrative Tribunal (VCAT) must bears it own costs of the proceeding. This makes obtaining costs orders in retail tenancies disputes difficult.

Parties bringing proceedings in Victorian courts are subject to certain overarching obligations under the Civil procedure Act 2010. One such obligation states a person must not make any claim or respond to any claim that is frivolous, vexatious, an abuse of process or bring a claim that does not have a proper basis. As VCAT is a Tribunal, and not a court, the overarching obligations that parties are subject to under the Victorian Courts under the Civil Procedure Act do not apply. Therefore there is no requirement that a person bringing a claim to VCAT have a proper legal or factual basis for bringing their claim. As such, frivolous and vexatious claims or claims brought without a proper basis are heard before VCAT and each party, whether they succeed or not, will bear their own costs.

Section 75 of the Victorian Civil and Administrative Tribunal Act (VCAT Act) allows a party to a proceeding to apply to have a claim that is frivolous, vexatious, misconceived or lacking in substance, or otherwise an abuse of process to be stuck out. This is again at the cost of the party who applies for the summary dismissal of the frivolous or vexatious claim.

Section 92 of the RLA provides the only exception and it gives VCAT the power to award costs in a retail tenancy dispute if the Tribunal is satisfied that:

  • the party conducted the proceeding in a vexatious way that unnecessarily disadvantaged the other party to the proceeding; or
  • the party refused to take part in or withdrew from mediation or other form of alternative dispute resolution.

Judge Bowman in State of Victoria v Bradto Pty Ltd and Timbook Pty Ltd [2006] VCAT 1813 stated a proceeding that is conducted in a vexatious manner is a proceeding which “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”. 

24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSCA 216

Recently, in 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSCA 216 the Court, on appeal from VCAT, stated the applicant’s case had no chance of success and was in fact a ‘hopeless case’. As such, bringing a ‘hopeless case’ can be deemed vexatious and in this instance costs were awarded against the applicant.

Wells v Krasny (Civil Claims) [2014] VCAT 1462

Similar to the above case, an application brought before VCAT was dismissed with the applicant to pay the respondents’ costs for bringing a hopeless proceeding. In this matter, the applicant sought compensation from his landlord and the landlord’s real estate agent for $130,000 within the Residential Tenancies List of VCAT. The reasons for the application were unclear as the applicant failed to produce sufficient points of claim.

At the first hearing of the matter, Deputy President Lulham ordered the applicant produce proper particulars of his claim and adjourned the matter to a later date. After requesting an extension of time twice to file full particulars of his claim, the applicant wrote a letter to VCAT now claiming compensation in excess of $21 million although failed to produce any points of claim. The matter was transferred to the Civil Claims List where Deputy President Lulham ordered the application be dismissed and the applicant pay the respondents costs for bringing a “flawed” claim that contained “many deficiencies and irregularities” as well as unreasonably prolonging the proceeding by requesting two extensions of time and not producing a proper claim.

This serves to show that lengthy time delays, claims that lack any proper substance and applications that have no prospects of success can lead to costs orders against the applicant despite section 92 of the RLA.

For more information please contact Lisa Rennie of our office.