VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
CIVIL DIVISION
BUILDING AND PROPERTY LIST	
vcat reference No. BP423/2022	
CATCHWORDS	
COSTS – s92 of the Retail Leases Act 2003 (Vic) - 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSCA 216 applied - Victorian Education Foundation Ltd v Brislugan Pty Ltd [2009] VCAT 317 applied – s 146 of the Property Law Act 1958 (Vic) – vexatious conduct failing to serve notice to remedy.	

FIRST APPLICANT	FNB Hotel Pty Ltd (ACN 625 822 120)	
SECOND APPLICANT	Liam Matthews	
THIRD APPLICANT	Singa Unlayati	
FOURTH APPLICANT	Joel Morrison	
RESPONDENT	Hotel Carringbush Pty Ltd (ACN 624 252 357)	
WHERE HELD	Melbourne	
BEFORE	H Nash, Acting Senior Member	
HEARING TYPE	On the Papers	
DATE OF FINAL SUBMISSIONS 	13 December 2023	
DATE OF ORDER	7 May 2024	
CITATION	FNB Hotel Pty Ltd v Hotel Carringbush Pty Ltd (Building and Property) [2024] VCAT 426	

Order
1.	The respondent must pay the applicant’s cost of and incidental to the application dated 19 October 2023 including the costs of and incidental to this costs application. In default of agreement, such costs are to be taxed by the Victorian Costs Court on the County Court scale on a standard basis.

H Nash
Acting Senior Member			

Reasons
1	On 19 October 2023 the respondent (‘landlord’) applied for an interlocutory injunction to restrain the conduct of the applicant (‘tenant’) relating to both conduct at the premises under the terms of a lease and conduct under the terms of a licence. The landlord made 6 complaints about the tenant’s conduct which related to either the licensed area, and the lease and some complaints relate to neither.
2	The landlord sought the following orders:
1.	The Tenant is to immediately grant the Landlord access to Licenced Area and otherwise refrain from obstructing the Landlord’s access; and 
2.	The Tenant to immediately reinstate operation of the garage door to the Licenced Area; 
3.	The Tenant is to immediately cease playing music at the Premises at excessive volume levels at any time and cease playing music outside of trading hours; 
4.	The Tenant to cease from destructing and interfering with any property of the Landlord on the Premises and in the Licenced Area; 
5.	The Tenant to immediately return to the Landlord the cameras; 
6.	The Tenant and its affiliates to cease contact or otherwise harass Mr Cornips and Ms Buckley; and
7.	Costs.
Background
3	In 2018 the parties entered into lease pursuant to which the first applicant tenant entered into possession and occupation of the property. The lease was for a term of 5 years commencing on 1 November 2018 and has three further terms of 5 years as options. The use of the premises is as a vegan and/or vegetarian restaurant and bar. At the same time as entry into the lease, the parties also entered into a licence for an adjoining outside space.
4	The parties have long been in dispute over the lease which disputes are the subject of this proceeding and within which this application has been made.
5	On 28 November 2023 I made orders refusing the injunctions but ordered the return of the CCTV camera to the respondent and ordered the respondent to preserve the information on the CCTV camera until the final hearing in the proceeding. 
6	The application was substantially unsuccessful. The tenant now seeks its costs of defending that application pursuant to s 92 of the Retail Leases Act 2003 (Vic).
POWER TO AWARD COSTS  
7	Section 92 of the Retail Leases Act 2003 (Vic) (‘RLA’) provides:
Each party bears its own costs 
(1)	Despite anything to the contrary in Division 8 of Part 4 of the Victorian Civil and Administrative Tribunal Act 1998, each party to a proceeding before the Tribunal under this Part is to bear its own costs in the proceeding. 
(2)	However, at any time the Tribunal may make an order that a party pay all or a specified part of the costs of another party in the proceeding but only if the Tribunal is satisfied that it is fair to do so because— 
(i)	the party conducted the proceeding in a vexatious way that unnecessarily disadvantaged the other party to the proceeding; or 
(ii)	the party refused to take part in or withdrew from mediation or other form of alternative dispute resolution under this Part. 
(3)	In this section, "costs" includes fees, charges and disbursements. 
8	When considering an application for costs in a dispute with respect to a retail tenancy, the presumption is that each party is to bear its own costs.
9	To make an order for payment of costs under s 92(2)(a) of the RLA I must be satisfied that it is fair to do so because the landlord has conducted the proceeding in a vexatious way that unnecessarily disadvantages the tenant
10	The Court of Appeal considered s 92 of the RLA in 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd:
Section 92(2)(a) was considered by Deputy President Bowman [sic] in State of Victoria v Bradto Pty Ltd and Timbrook Pty Ltd (‘Bradto’). He observed that the provision requires the Tribunal to be satisfied that it is fair to order costs because a party conducted the proceeding in a vexatious way and that such conduct unnecessarily disadvantaged another party to the proceeding. Deputy President Bowman referred to the distinction between a proceeding which is conducted in a vexatious manner and the bringing or nature of the proceeding being vexatious. He held that a proceeding is conducted in a vexatious manner “if it 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”. This encapsulates the circumstances in which conduct may be classified as vexatious.  
11	In Giswick Pty Ltd v Ajaimi Judge Jenkins with respect to s 92(2)(a) of the RLA said: 
18. 	On its literal wording, the section does not refer to a proceeding that is brought vexatiously but rather to the manner in which a proceeding is conducted. It is the conduct of the proceeding and not the proceeding itself that must be found to be vexatious, However, the strength of an applicant’s claim for damages may still be a relevant factor to take into account. 
19. 	Whether or not conduct is vexatious must be judged at the time the conduct takes place and not with the benefit of hindsight. That applies whether the conduct amounts to the bringing of a proceeding that is thought to be vexatious, the continuance of such a proceeding when it ought to be apparent that to do so would be vexatious or to conducting the proceeding in a manner which is found to be vexatious. 
20. 	It is not necessary to find that the Respondent has engaged in the whole or substantially the whole range of vexatious conduct described in the above cases. Each case creates its own set of circumstances in which the Tribunal must assess what is the vexatious conduct on the part of the Respondent and what is the consequent unnecessary disadvantage to the Applicant. 
21. 	The test for conduct which might attract the description “vexatious” is set out in Oceanic Sunline Special Shipping Company Inc v Fray: 
vexatious should be understood as ......... productive of serious and unjustified trouble and harassment or ...conduct which is seriously and unfairly burdensome, prejudicial or damaging.
22. 	Whilst there is no question that a party is entitled to challenge the evidence of an applicant and raise any legitimate legal impediments to claims being made, legal proceedings are not intended to be an avenue for merely frustrating such claims or pursuing groundless disputes. A party should not have to incur substantial legal costs in contested proceedings in order to prosecute a claim to which there is no arguable answer. 
23. 	In my view, for the reasons further enunciated below, the Respondent persisted in conducting the proceeding in pursuit of baseless resistance and objections. Save for the date of commencement of the claims, which the Applicant partially conceded at the Hearing, the Respondent was wholly unsuccessful in his defence and legal objections. His conduct can be properly described as “…conduct which is seriously and unfairly burdensome, prejudicial or damaging.”
24. 	In my view, the Applicant was caused substantial legal costs together with additional time in case management and hearing before the Tribunal, which unnecessarily disadvantaged the Applicant because of the substantial costs it had to incur and time the Directors had to devote in preparation, as a result.
12	A further decision considering an application under s 92 of the RLA is that of Deputy President Macnamara (as his Honour was then) in Victorian Education Foundation Ltd v Brislugan Pty Ltd. His Honour held
[21] 	I turn then to the third of the matters relied upon by Mr McKenzie, the complaint that what has happened now leaves his client all dressed up with nowhere to go having spent a fortune on new clothes. I am very sympathetic to that argument. The question is however whether what has occurred amounts to vexatious conduct. Certainly it is clear that merely bringing a proceeding which is unsuccessful is not in itself vexatious. Section 92 was intended to operate as a very stern restriction on the Tribunal’s discretion to award costs. Its effect and intent is to make the award of costs as between party and party the exception rather than the rule. Should a party therefore be any worse off in acknowledging either weaknesses in its own case or strengths in the opposing case and crying off before final hearing. In my view as a matter of policy, it would be a most unfortunate message to give to litigants that it was better to blast on than to face reality. I think that what Victorian Education Foundation did in determining not to go on with this proceeding was in itself not vexatious but a responsible step. The only respect in which it could be suggested that Victorian Education Foundation acted vexatiously would be to say that the entire proceeding was vexatious, that it was vexatious even to make the claim or make the claim and press it on for some time. In my view nothing has been put to me that will enable me to make so strong a finding.
[22] 	It follows therefore that despite my feeling strong sympathy for Brislugan’s situation, the proper course is to dismiss the costs application. 
(emphasis added)
TENANT’S ARGUMENT
13	The tenant argues that the landlord’s conduct in bringing the application for an interlocutory injunction was vexatious as the application was without merit and that there was no proper basis for the application to give the landlord the relief sought.
14	A letter setting out, in detail, the reasons why the application was without merit, and why it should be withdrawn, was sent by the tenant’s lawyers to the landlord’s lawyers who responded denying that the application was without merit.
15	The tenant argues that in refusing to grant the injunctions sought, the Tribunal largely accepted the matters raised by the tenant in that correspondence which indicates that the landlord ought to have withdrawn the application and that because it did not, it acted vexatiously.
LANDLORD’S ARGUMENT
16	The landlord argues that it was successful with respect to the camera, and in any event, merely being unsuccessful does not constitute vexatious conduct. Something more is required.
DISCUSSION
17	I agree, something more than losing is required to establish vexatious conduct. It is not vexatious conduct merely because a finding is made against a party. Nor is it vexatious conduct per se for a party to pursue a claim through to hearing and lose. If it was, then every losing party would be deemed to be vexatious. As the case law demonstrates, much more is required.
18	There is significant animosity between the landlord and the tenant which is in itself disappointing given the business relationship between them. While that is not relevant to the question of vexatious conduct it does inform the conduct and the longer these proceedings continue, the more the animosity seems to escalate.
19	That said, the orders sought were either outside the jurisdiction of the Tribunal or concerned matters about which there was no evidence of the tenant having breached the lease or caused the matters being complained of.
20	The landlord made 6 complaints about the tenant’s conduct – which relate to the licensed area and to the lease and some complaints relate to neither.
21	With respect to the alleged breaches of the lease by the tenant, the landlord did not serve any notices of breach for any alleged breach of the lease by the tenant, and therefore the tenant was not afforded an opportunity to rectify the alleged breach in accordance with the terms of the lease. The same can be said for any alleged breach of the licence. Although the landlord had its solicitor send a letter of demand to the tenant it did not reflect the requirements of a notice under the lease nor a notice under s 146 of the Property Law Act 1958 (Vic).
22	In failing to serve a notice under s 146 of the Property Law Act 1958 (Vic) with respect to the alleged breaches of the lease, the landlord acted with complete disregard to its obligations under the lease and the necessity of serving such a notice in order to allow the tenant a reasonable opportunity to remedy any alleged breach. The consequences of a finding of breach of a lease such as to allow the landlord to terminate the lease, when the tenant is operating a business from those premises, is significant for a tenant, hence the requirement to give a tenant a reasonable opportunity to remedy the breach (if it is remediable).
23	That the landlord failed to comply with these basic obligations before issuing the application in the Tribunal is conduct which I consider to be vexatious.
24	In those circumstances, I find that the landlord’s conduct with respect to the application dated 19 October 2023 was vexatious and under s 92 of the RLA, the tenant is entitled to its costs of the application. I will make orders to this effect.

H Nash
Acting Senior Member