Nick Markessinis Maria Markessinis Owners Corporation PS425929R. Melbourne Senior Member B Steele Costs hearing. 2 January 2015

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1 VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL CIVIL DIVISION OWNERS CORPORATIONS LIST VCAT reference no. OC2170/2012 FIRST APPLICANT: SECOND APPLICANT: THIRD APPLICANT: FIRST RESPONDENT: SECOND RESPONDENT: THIRD RESPONDENT: FOURTH RESPONDENT: Nick Markessinis Maria Markessinis Owners Corporation PS425929R D.S.M. Coatings Pty Ltd (ACN: ) Chambers (Aust) Pty Ltd and Damian Monkhorst Plumbing Services (both trading as Monkhorst Fina Plumbing) CHU Underwriting Agency Pty Ltd (ACN: ) (Withdrawn by order dated 31 October 2013) Body Corporate Guardians Pty Ltd (ACN: ) WHERE HELD BEFORE HEARING TYPE Melbourne Senior Member B Steele Costs hearing DATE OF HEARING 22 October 2014 DATE OF ORDER AND REASONS CITATION 2 January 2015 Markessinis v D S M Coatings Pty Ltd (Owners Corporations) [2015] VCAT 50 ORDER 1. The third respondent s application for an order for costs is dismissed. 2. Each party shall bear its own costs B Steele Senior Member

2 APPEARANCES: For Applicants: For the First Respondent For the Second Respondent For the Fourth Respondent Fraser Cameron, of Counsel In person, In person David Free, solicitor VCAT Reference No. OC2170/2012 Page 2 of 10

3 Introduction REASONS 1. An owners corporation and the owners of one of the lots forming part of it brought this claim about leaks from a skylight and rendered walls. The respondents were the manager of the owners corporation, an insurer and two firms who had carried out works. On 13 March 2014, I ordered that each of the first and fourth respondents pay to the owners corporation the sum of $ The first and second applicants were Mr and Mrs Markessinis, owners of unit 1, a town house, part of the owners corporation. 2. On 22 October 2014, I heard a costs application made by the third respondent and reserved my decision. At the hearing, the parties indicated that they relied on their written submissions. 3. Only two written submissions had been made in response to my earlier orders. They were: application by the third respondent dated 8 April 2014 for an order for costs against the first and second applicants; submission in response from the first and second applicants dated 22 April Therefore, there being only one application and response, the issue for decision was whether the first and second applicants should be ordered to pay all or any part of the costs of the third respondent. 5. On 31 October 2013 (not 2014 as asserted in the third respondent s written submission) the third respondent was excused from further participation in the proceeding brought by Mr. and Mrs Markassenis (the first and second applicant) and the owners corporation of which they are members ( the third applicant). The third respondent was excused because the applicants at that time sought to withdraw their claim against the third respondent. Costs were reserved and when the proceeding had been determined, the parties had an opportunity to make their submissions about costs. 6. The application was made originally in September 2012 and the third respondent was joined by order of the tribunal made on 13 February That order followed a number of directions hearings and listed hearings which had not proceeded for one reason or another. The applicants were for most of that time self-represented litigants. The law 7. Section 109 of the VCAT 1998 relevantly provides: (1) Subject to this Division, each party is to bear their own costs in the proceeding. (2) At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in a proceeding. (3) The Tribunal may make an order under subsection (2) only if satisfied that it is fair to do so, having regard to VCAT Reference No. OC2170/2012 Page 3 of 10

4 (a) (b) (c) (d) (e) whether a party has conducted the proceeding in a way that unnecessarily disadvantaged another party to the proceeding by conduct such as (i) (ii) failing to comply with an order or direction of the Tribunal without reasonable excuse; failing to comply with this Act, the regulations, the rules or an enabling enactment; (iii) asking for an adjournment as a result of (i) or (ii); (iv) causing an adjournment; (v) attempting to deceive another party or the Tribunal; (vi) vexatiously conducting the proceeding; 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. 8. Sections 111 and 112 relevantly provide: 111. If the Tribunal makes an order for costs, the Tribunal (a) (b) may fix the amount of costs itself; or may order that costs be assessed, settled, taxed or reviewed by the Costs Court. 112 (1). This section applies if (a) (b) (c) (d) a party to a proceeding (other than a proceeding for review of a decision) gives another party an offer in writing to settle the proceeding; and the other party does not accept the offer within the time the offer is open; and the offer complies with sections 113 and 114; and in the opinion of the Tribunal, the orders made by the Tribunal in the proceeding are not more favourable to the other party than the offer. (2) If this section applies and unless the Tribunal orders otherwise, a party who made an offer referred to in subsection (1)(a) is entitled to an order that the party who did not accept the offer pay all costs incurred by the offering party after the offer was made. (3) In determining whether its orders are or are not more favourable to a party than an offer, the Tribunal VCAT Reference No. OC2170/2012 Page 4 of 10

5 (a) (b) must take into account any costs it would have ordered on the date the offer was made; and must disregard any interest or costs it ordered in respect of any period after the date the offer was received. 9. The starting point, as has often been said, is that each party bears its own costs. Then if the tribunal considers it fair to do so it may make an order for costs, having regard to the matters set out in sub-section (3) and any other relevant matter. Section 112 is of course a relevant matter. 10. For most of the time this proceeding was on foot, the applicants were selfrepresented. The third respondent on the other hand was represented by a solicitor at all times and counsel for much of the time. I respectfully agree with Senior Member Vassie s observations in 1IQ Pty Ltd and anor v Delaney Associated Pty Ltd [2011] VCAT He described the provisions of the VCAT Act 1998 which permit litigants to represent themselves at VCAT and then said (at paras 30 to 31): Generally speaking, I say that it is important that would-be applicants are not deterred from airing genuine grievances, and making genuine claims, by the fear that the Tribunal will award costs against them if they lose, particularly if they lose because they have made a legal mistake. On the other hand, the right to air a grievance and make a claim needs to be exercised responsibly. It would be unfair to respondents for the Tribunal to permit applicants to think that they can, with impunity, pursue any claim that they have a mind to make. It is trite to say that the purpose of an award of costs is to indemnify the party incurring those costs, not to punish the party causing those costs to be incurred. There are cases in which justice requires that a party be indemnified, even though the effect of the indemnity is to penalize financially a self-represented litigant. 11. In that proceeding, the learned senior member was considering a claim for costs in a proceeding that had been struck out under section 75 of the VCAT Act 1998 for want of jurisdiction. The amount claimed had been close to $50,000. There had been five hearings in that matter, but no hearing on the merits. The respondents complained that the material served by the applicants was voluminous. They were successful in having the matter struck out for want of jurisdiction. Ultimately, the learned senior member did not order that the applicants pay any of the respondents costs. There are some parallels with this proceeding. 12. The third respondent s claim was based on a number of aspects of the proceeding and I will address each aspect in turn. The third respondent s application for costs That the claim was doomed to fail as misconceived 13. The third respondent contended the applicants claim against it was doomed to fail and was misconceived and that it was incorrect to bring the claim in light of the disputed facts. In support of this, the third respondent noted that VCAT Reference No. OC2170/2012 Page 5 of 10

6 the subject of the applicants claim was a defective skylight and that the third respondent s policy does not cover defective building, whereas it does cover resultant damage and the third respondent has paid claims about resultant internal damage. In that regard, the third respondent s submission referred to a payment of $1540 for an invoice from Gibsons. 14. The applicants contend in response to this that these matters were never raised by the third respondent either with the applicants or in the course of the proceeding, before 31 October 2013, when they were clearly stated by counsel for the third respondent, at which point the applicants sought to withdraw their claim against the third respondent. 15. I agree that these issues were not clearly outlined in documents on the file at any time before 31 October The Defence filed by the third respondent on 6 June 2013 was quite neutral and formal in nature. It recorded a number of non-admissions and claimed that the applicants lacked standing. For most of the applicants points of claim, it did not plead, pointing out that few direct facts were asserted against it. It would be difficult for a layperson to understand the import of any of this formal defence. 16. There was attached to the Defence an Expert Report from Mr John Merlo dated 17 April The Report documented some damage, blamed the leaks on the poor construction of the building and found that attempted repairs to the skylight and rendered walls had failed to protect the building from further leaks. While the Defence outlined in general terms that the third respondent did not have a policy with the third applicant which covered the cause the type and the character of the loss and damage alleged, it did not explain what the policies with the third respondent did cover. 17. Also attached to the Defence was a report from Rod Pemberton, apparently an engineer, which said in part: "CHU instructed our office to inform the damage is not the result of, or associated with, an accident or claimable event and therefore does not comprise an admissible claim. It went on to say that the damage was within excluded perils and listed a number of exclusion clauses from a policy. It also directed attention to the need to prevent further loss or damage. It was addressed to BCG (Body Corporate Guardians, the manager of the owners corporation) and mentioned a claim, though it did not explain what that claim was. This would have made the position clear to the applicants if they had had information from BCG about what claim had been made. However, there was no evidence that was the case. Further, the report concerned a claim for later internal damage, not the claim made by the applicants about the external damage and repairs. 18. It could be said that that formal Defence need not contain an explanation of what policies were in place and what they covered. However, there were no documents on the file (and there were many documents) in which the third respondent had attempted to explain that clearly to the applicants. The VCAT Reference No. OC2170/2012 Page 6 of 10

7 Defence, as the applicants said in their submissions, was a neutral holding defence which provided no particulars and did not attempt to address the applicants confusion about what policies their owners corporation had and what damage was covered by them. 19. Further, the applicants had written to the third respondent before applying to join it as a party. The applicants ed the third respondent three times in January 2013, as outlined in their written submissions. Copies of these s also appear on the tribunal's file, having been filed on 5 February 2013 in support of the application to join the third respondent. 20. On the first occasion, 24 January 2013, the applicants asked (a) does the internal insurance apply to fix the external damage causing the internal damage? (b) Can CHU chase after the tradesmen under warranty for failed works? On 25 January, they received the following reply from a claims consultant at the third respondent: A claim has already been lodged by your OC manager (Body Corporate Guardians) which is looking in the matter regarding the skylights. Suggest you contact Zoe from Body Corporate Guardians to discuss the issue. Unfortunately, CHU do not chase tradesmen under warranty for failed works, this is up to you as an owner to sort out. 21. The other two s asking what claim had been lodged by BCG went unanswered, according to the applicants submission and to material filed on 5 February There was no reply to the question about whether external damage was covered by any policy. 22. It may be that BCG should have provided more information to the lot owners, including the first and second applicants, about the insurance policies with the third respondent and what claims had been made and paid. I noted that the minutes of the 2009 AGM and the minutes of the 2012 AGM, which were the only ones among the parties documents, did not mention any insurance payments. The financial statement for the year ending 30 June 2011 mentioned a payment by CHU. However, at the hearing I also found that the financial statements were not copied to the lot owners before meetings (see paragraph 73 of my reasons for decision). This added to the applicants confusion about what insurance cover they had and what claims had been made. 23. Further, I found that Jenny Barass, an employee of BCG, had wrongly advised one of the applicants that leak problems would all be covered by the owners corporation s insurance. (See paragraph 54 and 55 of my decision). This also contributed to the confusion for the applicants. 24. The third respondent has made no claim for costs against BCG, which was at the end of the substantive proceeding ordered to compensate the applicants in part as a result of BCG s poor management of the leaks in Unit 1. VCAT Reference No. OC2170/2012 Page 7 of 10

8 25. The applicants also noted that the invoice from Gibsons for $1540 (mentioned in the third respondent s costs application) was an invoice for internal repairs related to leakage in the southern front bedroom window and balcony door. It was not at all related to the western internal skylight and associated areas which were the subject of the dispute. It was odd to encounter such an error at this stage of the proceeding. 26. Finally, on this aspect of the third respondent s costs submission, I note that the language used: misconceived, doomed to fail and lacking in substance is the language frequently used in applications for a matter to be struck out. Those applications are made under section 75 of the VCAT Act 1998, often early in the proceeding so as to avoid either party, especially the respondent making the application, suffering unnecessary costs. It was open to the third respondent to make such an application at any time after the applicants filed their points of claim in March 2013, but no such application was made. 27. While the third respondent is correct in saying that the claim against it was bound to fail, taking all the above matters into account, that is not a ground for ordering that the first and second applicants pay the third respondent s costs. Vexatiously conducting the proceeding 28. The third respondent contended that the first and second applicants conducted the proceeding vexatiously in that they filed copious volumes of material with the tribunal and made ex parte communications and applications without knowledge of the other parties. The application gave few details about his except to say that the materials that were finally copied to it did not reveal any evidence supporting a case against it. 29. It is true that the file in this proceeding is about three times the size of most tribunal files for a matter of this size and there were many documents filed which were repetitive. It is not clear that all of them were served on the other parties. Applicants represented by a lawyer would not have made those mistakes. However, I was not persuaded that this should occasion an order for costs, frustrating as it was for all concerned. 30. A simple letter from the third respondent explaining what policies the applicants had with it and what was and was not covered would have dispelled the applicants confusion and may well have persuaded them earlier not to continue with their claim against the third respondent. Instead, there were formal responses which did not enlighten the applicants. In any case, much of the material filed did not require much attention from the insurers as it was about the external damage and works being done by the other respondents. 31. Further, the nature and complexity of the proceeding was a function of the involvement and behaviour of the other parties who were found to be responsible for some of the claims made by the applicants. In those VCAT Reference No. OC2170/2012 Page 8 of 10

9 circumstances, it would not be fair to order the first and second applicants alone to bear the third respondent s costs. No application was made for a costs order against the other parties. The nature and complexity of the proceeding 32. Concerning the nature and complexity of the proceeding, the third respondent points out that there were several iterations of the points of claim and of other documents form the other parties. Further, it says that the copious documents filed by the first and second applicants caused the third respondent unnecessary legal costs. 33. The applicants in reply contended that the conduct of the third respondent was not without fault in that it asked for adjournment of a hearing with very late notice. The applicants mad many other complaints about the behaviours of the third respondent. They include: routinely claiming that documents were not received despite them being sent by registered mail ; insisting on a directions hearing and not allowing time for compliance with requests; claiming that no special meeting had been held when (according to the applicants) it had been held; persistently requesting reworks of documentation. I am not in a position to decide whether these complaints are justified. However, the tenor indicates to me that the third respondent took all the legal points it could in the period before 31 October 2013, even though for almost all of that period it was dealing with a self-represented litigant. 34. The claim made against the third respondent was not complex in terms of size. In the applicants points of claim dated 28 March 2013, the particulars given of the claim against the third respondent were that it was liable for $7799 for internal damage. No other specific amount was claimed against the third respondent. 35. While the number of parties made the claim somewhat complex, the third respondent s defence was always a simple one. Therefore, I am not persuaded that the nature or complexity of the proceeding indicates it would be fair to order that the applicants pay the costs of the third respondent. The offer of settlement 36. About 13 May 2013, the third respondent served an offer of settlement in accord with the provisions of section 112 of the VCAT Act The applicants did not contest that this had occurred. 37. The third respondent offered to pay the first and second applicant $ in full and final settlement of the claim against it, including interest and costs. The offer was open for acceptance for 17 days. The applicants did not reply to that offer. 38. I agree that section 112 creates a presumption in favour of an order for costs, where the person who rejected the offer does not receive a more favourable outcome at the hearing, as is the case here. VCAT Reference No. OC2170/2012 Page 9 of 10

10 39. The applicants in response submitted that the evasive, obstructive and unhelpful manner in which the third respondents conducted its defence of the claim up until 31 October 2013, combined with the clearly derogatory tone of the cover letter accompanying the settlement offer ought to satisfy the tribunal that no order as to costs should be made. 40. The letter of 13 May 2013 said in part: These proceedings often result in legal costs of between $10,000 and $20,000 being expended by our client. To be blunt Maria, we are of the view that your claim is without merit, lacks any basis in fact, is poorly thought through, and is embarrassing. The building which is the subject of this proceeding contains inherent building defects from the date of its construction. Our client has no liability to repair those defects. Further, until those defects, that have caused the resultant damage are repaired, our client is entitled to request the repair of those defects prior to any repair of any resultant damage. 41. I agree that the tone of this letter is derogatory. The use of the applicant s first name, without any other friendly word, is belittling. Further, the statement that the claim is embarrassing appears insulting. If it were addressed to another legal practitioner, it would be interpreted differently. In that context, embarrassing means professionally embarrassing in the sense that a lawyer should be embarrassed by sub-standard work. It cannot have that meaning for a layperson. 42. Further, the offer does not distinguish between the third respondent and the other respondents. The offer itself, attached to the letter says The third respondent offers to pay the first and second applicant one payment of $500 in full and final settlement of the first and second applicants claim, interest, and costs in this proceeding. It does not mention that the applicants could accept the offer and still proceed with their claim against the other respondents. Again, a lawyer representing the first and second applicants would have understood this, but the first and second applicants were selfrepresented and would probably never have seen a letter like this. 43. In the circumstances that the offer was not clearly explained, that the covering letter was derogatory in tone and that the first and second applicants were self-represented so not in a position to interpret the letter correctly, the presumption in favour of a costs order is rebutted. Conclusion 44. Taking all these matters into account, I am not persuaded it would be fair to make an order for costs in this proceeding. Each party is to bear its own costs. B Steele Senior Member VCAT Reference No. OC2170/2012 Page 10 of 10