“To the Victor Goes the Spoils…Unless It’s The Costs Award Powers Under Section 109 Of The Victorian Civil And Administrative Tribunal Act”
By Stephen Smith, Managing Partner, Lovegrove Solicitors
It has been a long standing legal maxim that the winner should be compensated by an award of costs. The rationale is that the winner of a case should be reimbursed for funding a litigation in circumstances where he/she has been wronged, prejudiced or disadvantaged by another party that has occasioned that wrong. Pretty much common sense when you think about it.
Section 109 of the Victorian Civil and Administrative Tribunal Act 1998 is a legislative provision at odds with what is ordinarily considered to be an axiomatic jurisprudential entitlement, and it is a big problem. We recently had conduct of a case that took a number of years to resolve at trial. Alas the passage of time that evolved from initiation of legal proceedings to the concluded trial was 3 years. The actual hearing ran for 3 weeks although it was part heard, in that the case proceeded for a couple of years and then the final hearing had to be adjourned because in the interim, the contractor went into liquidation – such was the burden of being out of pocket for the large sum of money that was owed to it and the costs of pursuing the debt.
There was at the end of it all a pyrrhric victory of sorts, because our client won the case and it was found that the owner (a commercial developer) had not only failed to pay properly due and owing progress claims, but had moreover repudiated the contract ie wrongfully terminated the contract and taken possession of his almost complete development to the detriment of the builder. Judgment was handed down in favour of the builder to the tune of approximately $220,000.
Absent a provision like section 109, conventional jurisprudential leanings would be such that the victor ie the person who wins the case would be awarded the majority of costs. Not in this instance, not in this case, it was ordered that each party had to bear their own costs. Pretty good outcome for the loser, because he had the benefit of using the $220,000 for a few years to invest and enjoy.
In another case a small retailer of building materials was wrongfully sued in VCAT. After spending significant costs defending the claims against him including obtaining an expert report, the claimant realised the claim was misconceived. Section 109 operated such that the totally innocent party who had been dragged into VCAT was ejected from the proceeding by the claimant without any costs to compensate his loss at the hands of a misguided claimant. The wrongdoer again won on the issue of costs.
Now apart from the obvious ramifications, why is this problematic? Firstly, it is a major disincentive to utilising the VCAT to resolve disputes. If it were the courts or arbitration for that matter the party that was wronged at law would be reimbursed the legal costs by the party that occasioned the wrong. Small to mid sized businesses and consumers have finite financial resources. If they don’t get the costs back that are expended on pursuing that to which they are lawfully entitled in the first place, then that is a very sad and parlous state of affairs. It does not sit easily with conventional notions or connotations of justice.
Another consideration that exacerbates the vagary even more is the fact that if one is embroiled in a domestic building dispute then one is ‘incarcerated’ by the VCAT, because invariably all domestic building disputes have to be resolved in the VCAT.
This legislation is in dire need of amendment, the VCAT Act needs to reintroduce the conventional and equitable notions of fairness to give the remedy of costs following the victory. As it stands this disquieting provision is increasingly visiting additional harm upon those whom have been wronged by parties subsequently found to have been ‘in the wrong’ all along.
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© Lovegrove Solicitors 2013
