4S Constructions Pty Ltd v Owners Corporation PS268502Y (Costs)
[2025] VSC 617
•30 September 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2024 04958
| 4S Constructions Pty Ltd (ACN 083 248 122) | Applicant |
| v | |
| Owners Corporation PS628502Y | Respondent |
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JUDGE: | Quigley J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 June 2025 |
DATE OF JUDGMENT: | 30 September 2025 |
CASE MAY BE CITED AS: | 4S Constructions Pty Ltd v Owners Corporation PS268502Y (Costs) |
MEDIUM NEUTRAL CITATION: | [2025] VSC 617 |
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COSTS — Appeal proceeding dismissed by consent — Section 148 appeal from VCAT — Whether indemnity costs appropriate in the circumstances — Exercise of the Court’s discretion — Costs awarded on a standard basis — Supreme Court Act 1986 (Vic) s 24 — Rokon Holding Pty Ltd v River St Property Nominees Pty Ltd (No 2) [2025] VSC 252, considered.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr N. Dragojlovic | Zervos Lawyers |
| For the Respondent | Mr D. Diaz | CLP Lawyers |
HER HONOUR:
INTRODUCTION
This costs decision follows the parties’ consent to dismiss the appeal proceeding.
The Applicant offered to pay the Respondent’s costs on a standard basis, to be taxed in default of agreement.
The Respondent sought its costs from the Applicant on an indemnity basis.
In accordance with the reasons set out below, I will order that the Applicant pay the Respondent’s costs on a standard basis, including the costs of the application for costs, to be taxed in default of agreement.
BACKGROUND
The substantive proceeding was an appeal brought by the Applicant pursuant to section 148 of the Victorian Civil and Administrative Tribunal Act 1998 (the ‘VCAT Act’) against the orders made by the Victorian Civil and Administrative Tribunal (the ‘Tribunal’). The Applicant sought a review of the Tribunal’s orders of 21 August 2024, in which the Tribunal refused an application to stay a proceeding before the Tribunal, alleging that the Member incorrectly construed section 176(c) and related provisions of the Owners Corporation Act 2006 (the ‘Owners Corporation Act’), misconstrued prior VCAT orders, and failed to take into account relevant matters.
The application concerns a building located at 2–4 Hutton Street, Dandenong (the ‘Premises’), for which the Respondent is the Owners Corporation, and the Applicant is the builder and owner of certain lots at the Premises.
On 16 June 2025, the parties sought to dispose of the Applicant’s appeal from the Tribunal’s Orders in this Court by seeking proposed consent orders which were provided to the Court as follows:
THE COURT ORDERS THAT:
1.The proceeding be dismissed with no adjudication on the merits.
2.The Applicant pay the Respondent’s costs on the standard basis, to be taxed in default of agreement.
Whilst recognising and accepting that the Applicant’s claim ought be brought to an end, the parties could not agree on the question of costs. The Respondent formally opposed the withdrawal on the basis that it had accrued substantial costs in preparing for this matter and was seeking indemnity costs from the Applicant.
On 19 June 2025, the parties made oral submissions as to costs before me, and I reserved my decision.
RESPONDENT’S SUBMISSIONS ON COSTS
It was submitted that, if this matter had run its full course to hearing and there was merit on both sides, it would have been expected that the usual costs orders following the event on a standard basis would have been made.[1]
[1]Transcript of Proceedings, 4S Constructions v Owners Corporation (Costs) (Supreme Court of Victoria, S ECI 2024 04958, Quigley J, 19 June 2025) 2 (‘Transcript’).
However, the Court has broad discretionary powers to order costs. That includes the ability to make an award on an indemnity basis where special circumstances are present. Reference was made to the observation in Rokon Holdings Pty Ltd v River St Property Nominees Pty Ltd (No 2) (‘Rokon’), that the category of what is considered ‘special circumstances [is] not closed.’ In effect, the Court must exercise its discretion according to the circumstances of the case.[2]
[2]Rokon Holding Pty Ltd v River St Property Nominees Pty Ltd (No 2) [2025] VSC 252 (‘Rokon’); Transcript, 2.
It was submitted in the factual and legal circumstances of this proceeding it ought be concluded that the Applicant had brought a ‘hopeless case’ that was ‘unmeritorious’.
In determining the relevant circumstances which would support a higher award of costs in favour of the Respondent than on a standard basis, the Respondent argued that the Court should take into account the appeal’s lack of merit and the Applicant’s late decision to seek to withdraw from the proceeding.
In respect of the lack of merit or hopelessness of the appeal, it was argued that the appeal had no legal merit, in summary, for the following reasons:
(a) The appeal concerned a claim made by the Respondent which is the Owners Corporation, against the Applicant who was the builder of the lots at the Premises and also an owner of some of those lots. It was submitted that both legislation[3] and case law[4] support the concept of an owners corporation being governed by its committee as separate from the concept of an owners corporation being subject to an administrator. Thus, to try and cross‑pollinate those two concepts would have no merit whatsoever.
(b) Further, there are other proceedings before this Court which raise the same or similar questions as raised here and involve the Applicant. These proceedings are a duplication of the same or similar issues involving the same parties or individuals and raise the same question of the proper construction of sections 24 and 25 of the Owners Corporation Act.[5]
[3]Section 18 of the Owners Corporation Act 2006 (Vic).
[4]McKinnon v Adams [2003] VSC 116, [18] (Bongiorno J).
[5]Transcript, 5.
The Respondent noted that at no stage had the Applicant filed, to their understanding, an overarching obligations certificate or proper basis certificate. It was submitted that this omission only amplifies their concerns regarding the merits of the Applicant’s case.
It was submitted, pursuant to the reasons in Rokon, that part of the justification for an award of costs on an indemnity basis is the proposition that ‘unmeritorious appeals should not be pursued to the financial detriment of the responding party.’[6]
[6]Transcript, 4; Roken [37] (Quigley J).
The lateness of the capitulation by the Applicant was submitted to be of consequence. The Applicant’s desertion of their appeal on the ‘eve’ of the hearing was said to be behaviour which ought sound in the Respondent’s favour.
APPLICANT’S SUBMISSIONS ON COSTS
It was accepted that costs are at the discretion of the Court. However, in the circumstances of this case, costs should be award on a standard basis and the Applicant should pay the Respondent’s costs on that basis.
There is a long list of authorities that deal with the well‑settled principles which guide the Court’s discretion as to costs. Some of the usual categories the Court considers are as follows:
(a) when there has been a false allegation of fraud — that does not apply in this case;
(b) that a party engages in misconduct that causes loss of time to both the Court and the opposite party — that does not apply in this case;
(c) that the party commences or continues a proceeding for an ulterior motive — that is not being suggested in this case;
(d) that a party imprudently refuses a reasonable offer of compromise — that is not being suggested in this case; and
(e) that a party commences or continues a proceeding in wilful disregard of known facts or law.
It was submitted that the above seems to be the umbrella under which the Respondent seeks to rely in their submissions to suggest that the Applicant’s case was hopeless. In response to the claim by the Respondent that the Applicant’s case was hopeless, it was submitted that it would be very difficult for the Court to make such an assessment without actually proceeding with the trial.
The parties have exchanged written submissions pertaining to the issue of the construction of the relevant provisions of the Owners Corporation Act, which was the subject matter of the appeal.
It was submitted that the Respondent’s submissions do not squarely address the issues that were the subject of the application before the Tribunal, and which are the subject of this appeal.
The Applicant submitted that the authority of McKinnon v Adams[7] referred to the idea or the concept that there can be a co‑existence of the functioning of an owners corporation under its usual framework, that is, a committee and an owners corporation manager (the ‘OC manager’), concurrently or co‑extensively with the appointment of an administrator. When an administrator is appointed, the committee and the OC manager is, in effect, suspended. It would not make sense for them both to run at the same time. That is the proposition for which that authority stands and Bongiorno J in that case did not consider the issue that is the subject of this appeal. That is, ‘once appointed what is the scope of the administrator’s powers?’[8]
[7][2003] VSC 116.
[8]Transcript, 8.
It was submitted that the above is the Applicant’s argument ‘in a nutshell’, that the Owners Corporation Act specifies expressly what the powers of an administrator are. It says that the powers of an administrator are the powers of the owners corporation, or that it has the same powers as the owners corporation, subject to any orders of VCAT. In other words, the Tribunal has the power to curtail or constrain the powers of an administrator. The starting position is that the administrator has the same powers as an owners corporation. The Respondent further set out in some detail the legal arguments it raised in its appeal, the detail of which is unnecessary to repeat for the purpose of this costs judgment.
It was further submitted, having regard to the authorities, and the matters raised in the written submissions, that it is unquestionable that the Applicant at the very least had an arguable case. The Applicant would thus meet the test of having a ‘real prospect of success’ under section 148(2)(a) of the VCAT Act.
In relation to there being no proper basis and the overarching obligations certificates, it was submitted that it was an oversight by the Applicant and, if required, that could be addressed. However, in the Applicant’s submission, that does not take the Respondent’s application for indemnity costs any further.
It was submitted by the Applicant in relation to other extant proceedings in this Court, those proceedings are irrelevant to the issues for the Court to consider on an application for costs in this proceeding. The proceeding that the Respondent refers to does not involve the Applicant. It was submitted that the Applicant is not a party to that proceeding. Further, that proceeding has a range of plaintiffs and it has two defendants arising from two different Tribunal proceedings. One of the those defendants is the owners corporation who is a party to this proceeding.
Moreover, the Court is not being asked to consider how another proceeding relates to this proceeding, so that the efficiencies or synergies can be identified and exploited. It is being raised in the context of an application for indemnity costs. There is nothing that the other proceeding, which was only commenced in the last few weeks, could provide in terms of questions that are relevant as to the course of discretion about indemnity costs.
In relation to the Respondent’s submission that the Applicant ‘unexpectedly capitulated’ their proceeding, it is submitted that the parties have obligations under the Civil Procedure Act 2010 (Vic) (the ‘Civil Procedure Act’). The parties have general moral and commercial considerations, if not legal, about the conduct of proceedings in this Court. Thus, the Applicant has consented to orders that the proceeding be dismissed, and it consented to orders that it pay the Respondent’s costs. Thus, any enquiry as to the basis or the reasons for that, in the Applicant’s submission, are inappropriate. And, in the Applicant’s respectful submission, it would not be appropriate for the Court to speculate on those reasons.
Lastly, it was submitted that this proceeding has been conducted extremely economically and efficiently. The Applicant filed and served a notice of appeal with the grounds of appeal, and filed and served one affidavit, which contained all the relevant information from the Tribunal. The Applicant decided not to continue with this proceeding one week before the trial date, thus the costs application represents the first and only appearance so far that has been required in this proceeding. There was no application for a stay made by the Applicant for the orders below, whilst this appeal was to be heard. Therefore, there is no collateral benefit for the Applicant and no benefit has been derived, or could be said to have derived, from bringing this appeal.
It was also submitted that a review of the Applicant’s conduct shows nothing at all that would attract the Court’s discretion to move against the Applicant for an award of indemnity costs. On the contrary, it was submitted that, having regard to the provisions of the Civil Procedure Act, the fact that the Respondent sought to be heard today instead of dealing with this question about costs between the parties has, in effect, most likely expended more time, energy, effort and cost for the parties.
It would be very unfortunate if the costs that were sought to be saved by the parties in compromising the proceeding were, in effect, lost because the parties instead ended up spending the same or similar amount in arguing about the costs.
CONSIDERATION
There is a broad discretion on this Court in determining the question of costs.[9] The general rule is that costs should follow the event and, absent any disqualifying conduct, the successful party should recover its costs.[10] In the circumstances of this proceeding, there has been no adjudication on the merits and the Applicant has sought to withdraw from the litigation without adjudication on the merits. Consent orders to this effect are before the Court. Hence, the question which is before me is whether there is conduct on behalf of the Applicant which should persuade me to award the Respondent indemnity costs rather than standard costs.
[9]Amcor Ltd v Barnes [2020] VSC 585, [35] (Sloss J), citing s 24(1) of the Supreme Court Act 1986 (Vic), s 49(3)(k) and part 4.5 of the Civil Procedure Act 2010 (Vic), and rr 63.02, 63.03 and 63.04 of the Supreme Court (General Civil Procedure) Rules 2025 (Vic).
[10]David Weiping Chen v Kim Man Chan (No 2) [2009] VSCA 233, [10(1)] (Maxwell P, Redlich JA and Forrest AJA).
The power to award costs, by virtue of the Supreme Court Act[11] and the Supreme Court (General Civil Procedure) Rules 2025 (Vic) (‘Supreme Court Rules’), endow this Court with flexibility in the exercise of its discretion as to costs awards. The Court endeavours to do substantial justice between the parties as to costs and, in doing so, may consider the realities of the case.[12]
[11]Section 24 of the Supreme Court Act 1986 (Vic).
[12]David Weiping Chen v Kim Man Chan (No 2) [2009] VSCA 233, [10(2)] (Maxwell P, Redlich JA and Forrest AJA).
Settlement of disputes without the need for the Court’s adjudication is always to be encouraged. That expectation is also encouraged by the Civil Procedure Act.
That said, despite significant effort on behalf of the Applicant to convince the Court that the Applicant would be able to establish it had a real prospect of success, I am not as confident as the Applicant of that outcome. However, without full argument, that debate is left unsettled.
The decision to withdraw its claim at the eleventh hour, in circumstances where there is a defence strongly mounted, raises questions without any apparent answer as to the motivation of the Applicant. This is particularly so when the identity of the person sitting behind the corporate entity is considered. In my view, the Applicant’s submission that the Court should not speculate as to a party’s motivation to capitulate in its pursuit of litigation is not as quarantined as the Applicant might suggest. However, I need not take that issue any further for the purposes of the disposal of the costs issue before me.
Unmeritorious claims ought not be litigated as the cost to the community through the use of the Court’s resources and the direct costs to the opposing party or parties cannot be justified.
The eleventh hour withdrawal by the Applicant no doubt has created angst to the Respondent which has incurred legal costs in defending the claim which they had already formed the view was unmeritorious.
It would not be a sensible or effective use of the Court’s resources to now enter into a considered appraisal of the strengths or weaknesses of the parties’ respective legal positions, which effectively is required if the Court were to be inclined to award costs on an indemnity basis.
I am not persuaded that, in the context of this litigation, the factors are on all fours with the Rokon decision cited by the Respondent. The lack of merit in the Rokon appeal was clear. Whilst the arguments put by the Respondent have some force, I do not consider the circumstances here to be such that indemnity cost must follow. The exercise of discretion to award costs is wide and the circumstance relevant to each determination of costs will be specific to those particular circumstances.
Accordingly, I will order that the proceeding be dismissed and that the Applicant pay the Respondent’s cost of the proceeding, including the costs of the application for costs made on 19 June 2025 on a standard basis to be taxed in default of agreement.
I have included the costs of the cost’s application as I am of the view that, whilst ultimately unsuccessful in that larger claim, the Respondent’s position was not without some substance. On balance, to do justice to the parties, taking into account the respective obligations under the Civil Procedure Act and the efficient use of the Court’s resources, I have determined that the costs be paid on a standard basis.
I will make orders accordingly.
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