August 25, 2015
My friend Robert Hay has recently published here a useful summary of the recent Court of Appeal in 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd  VSCA 216.
The Court of Appeal upheld a decision by Judge Jenkins, sitting as a Vice President of VCAT, to order costs against an applicant who brought a case that the Tribunal found was hopeless. See here or a discussion about the decision at first instance.
Section 92 of the RLA 2003 means costs orders in retail tenancies disputes are very difficult to obtain. Many retail tenancies disputes settle because the cost of obtaining judgment exceed the potential benefits to litigants.
This, in turn, increases the leverage that can be exerted in negotiations by a claimant with a weak case. The conversation in a mediation often unfolds something like this:
Your claim is for $50,000. I have a weak counterclaim for $100,000. It will cost you more than $50,000 to run your case and defend my counterclaim, so you will not see a net return from the litigation, even if you win.
Unsurprisingly, this often prompts a settlement that is favourable to the person with the weak counterclaim.
It often arises where a landlord has a simple claim for rent arrears against a tenant who brings a complex and expensive counterclaim for damages.
One way to mitigate the impact of the ‘no cost‘ rule is to serve a well-crafted Calderbank-style letter (see here).
For the Calderbank-style letter to work, there needs to be substance to the threat than the Tribunal will award costs in a hopeless case.
The Court of Appeal’s decision adds weight to that threat, as it provides a real example, sanctioned by a superior court, of a costs award being made against a litigant pressing a hopeless case.
Consequently, the decision could potentially impact settlement negotiations when one litigant is pressing a very weak case.