VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
CIVIL DIVISION
BUILDING AND PROPERTY LIST	
vcat reference No. BP497/2019	

CATCHWORDS	
Victorian Civil and Administrative Tribunal Act 1998 – s. 109 – application for costs - considerations 	

APPLICANT	Gerard K. House Pty Ltd (ACN 005 865 163)	
first respondent	Phenix Holdings Pty Ltd ACN: 102 604 008 	
SECOND RESPONDENT	Scott Jackman	
WHERE HELD 	Melbourne 	
BEFORE 	Senior Member R Walker 	
HEARING TYPE 	In chambers 	
DATE OF ORDER 	30 September 2021	
CITATION 	Gerard K. House Pty Ltd v Phenix Holdings Pty Ltd (Costs) (Building and Property) [2021] VCAT 1132	

ORDER

1	Order the First Respondent pay 90% of the Applicant’s costs of this proceeding, including any reserved costs and the costs of this application, such costs, if not agreed, to be assessed by the Victorian Costs Court on the standard basis in accordance with the County Court Scale.
2	No order for costs as between the Applicant and the Second Respondent.

R Walker
Senior Member			
APPEARANCES:		
Written submissions for the Applicant	Mr     Mr R. Rozenberg of Counsel	
Written submissions for the Respondents
	.     Mr A. Beck-Godoy of Counsel
	
REASONS FOR DECISION
The proceeding
1	This proceeding was a claim by the Applicant to recover money said to be due to it, pursuant to a building contract it entered into in early 2014 with the First Respondent (“the Developer”). The Second Respondent, Mr Jackman, is the director of the Developer.
The hearing
2	The matter came before me for hearing on 12 May 2021, with 5 days allocated. Mr R. Rozenberg of Counsel appeared for the Applicant and Mr A. Beck-Godoy of Counsel appeared for the Respondents.
3	Evidence concluded on 15 May and I heard submissions on 31 May 2021.  
The decision
4	A written decision was handed down on 26 July 2021, that the Developer pay to the Applicant $677,387.68, plus damages in the nature of interest, calculated at $168,140.61, making together the sum of $845,528.29. 
5	The personal claim against Mr Jackman and the Developer’s counterclaim were both dismissed. Costs were reserved. 
6	Both the Applicant and Mr Jackman now seek orders for their costs.
Power to award costs
7	The general power of the Tribunal to award costs is conferred by s.109 of the Victorian Civil and Administrative Tribunal Act 1998 (“the Act”) which, where relevant, as in the following terms:
“Power to award costs
(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—
(a)	whether a party has conducted the proceeding in a way that unnecessarily disadvantaged another party to the proceeding by conduct such as—
(i)   failing to comply with an order or direction of the Tribunal without reasonable excuse;
(ii)   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;
(b)	whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding;
(c)	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;
(d)	the nature and complexity of the proceeding;
(e)	any other matter the Tribunal considers relevant.
…………………………………………………………………………………”
8	As to how this power should be exercised, in Vero Insurance Ltd v The Gombac Group Pty Ltd [2007] VSC 117 Gillard J said (at para 20 et seq.):
“20. In approaching the question of any application for costs pursuant to s.109 in any proceeding in VCAT, the Tribunal should approach the question on a step by step basis, as follows –
i.	The prima facie rule is that each party should bear their own costs of the proceeding.
ii.	The Tribunal may make an order awarding costs, being all or a specified part of costs, only if it is satisfied that it is fair to do so. That is a finding essential to making an order.
iii.	In determining whether it is fair to do so, that is, to award costs, the Tribunal must have regard to the matters stated in s.109(3). The Tribunal must have regard to the specified matters in determining the question, and by reason of paragraph (e) the Tribunal may also take into account any other matter that it considers relevant to the question.”
9	His Honour added (at para 22):
“22. Whilst it is appropriate for the Tribunal to consider each of the specified matters in s.109(3) and express a view as to the weight that should be attached to the particular matters relied upon, in the end it is important that the Tribunal consider all the matters together and determine whether it is fair to make an order for costs. When dealt with in isolation, each of the matters may lead to the conclusion that it is not fair to make an order for costs, but when taken together, the Tribunal may be satisfied that it is fair to do so. It is the totality of all relevant matters under s.109(3) that must be considered in the context of the prima facie rule.”
The Applicant’s submissions
10	As to the nature and complexity of the proceeding, Mr Rozenberg submitted, correctly, that this was a complicated building dispute involving extensive evidence and a Tribunal Book of more than 2000 pages, which was assembled at considerable expense. 
11	He said that the Developer took every available point in an effort to establish that the Applicant was in “substantial breach” of the contract at the time of termination.  The legal points raised were complex, the case was factually dense and the hearing extended over five days.
12	He said the case was costly to conduct and it was unreasonable in the circumstances for the Developer to have put the Applicant to that expense in order to establish and enforce its rights. 
13	He submitted that the relative strengths of the claims made by each of the parties was also supportive of an order for costs in favour of the Applicant.
14	He said that the only witness for the Developer was its director, Mr Jackman, who is a financial planner and a mortgage broker without any building qualification.
15	He pointed to the failure of the Developer to call expert evidence on the key point, whether the Applicant could have progressed the work, given the state of the plans and the evidence of Mr House and Mr Spiers, who were both experienced builders, that it was not possible. 
16	On the programming of the work, he pointed out that the Developer did not call any expert evidence to contradict the evidence of the Applicant’s expert, Mr Andrews.
17	Likewise, he said that the Developer called no evidence that the Applicant could have installed the lintels or the bored piers, given the problem of the contaminated soil.
18	As to “other matters” under s.109(3)(e) of the Act, Mr Rozenberg relies on its offer to accept payment of the sum of $400,000.00 in full and final settlement of the case.
19	The offer was made by a letter from the Applicant’s solicitors to the Developer’s solicitors in 30 March 2021 and was expressed to be open for acceptance up to 4pm on 1 April 2021.
20	Mr Rozenberg said that that represented a much better outcome for the Developer than the outcome of the proceeding and that I should find that the Developer’s failure to accept the offer was unreasonable. He said that this was “a relevant and telling consideration”.
The Developer’s submissions
21	By a letter from its solicitors dated 2 April 2021, the Developer and Mr Jackman offered:
“… to resolve the matter on the basis that all parties discontinue their respective claims/counterclaims and bear their own costs.”
22	Since the order against it was that it pay a substantial sum to the Applicant, I do not see that offer as assisting the Developer. 
23	The Developer contends that the offer made by it on 30 March 2021 is flawed because: 
a.	The offer expressly does not comply with the section 114 of the VCAT Act 1998. That is true; 
b.	The offer was received at 6.17pm on 30 March 2021, and open until 4.00pm on 1 April 2021, i.e. less than 48 hours. Certainly, there was very little time to respond to it;
c.	It was made approximately one week prior to the final hearing date listed at that time for 6 April 2021; 
d.	On the same day as the offer, namely 30 March 2021, the Applicant filed Mr House’s Supplementary Witness Statement, providing significant new evidence in relation to GKH’s claim and so the Respondents were not in a position to seriously consider the Applicant’s offer. It further submits that I should find that the offer was not a genuine attempt to resolve the matter.
e.	The offer made by the Applicant was made not only to the Developer, but to the Developer and Mr Jackman together. Since the Applicant’s claim against Mr Jackman was dismissed, the Respondents together achieved a better result than the offer. Mr Jackman had a better result but I have to determine the costs claims between them individually.
f.	In addition, the claim against Mr Jackman was dismissed, but was doomed to fail. That is so, but that has nothing to do with the Developer.
g.	The Respondents made a joint offer to the Applicant on 2 April 2020 for all parties to withdraw and pay their own costs. That is not relevant to the claim for costs against the Developer alone. There was never any case against Mr Jackman. The case was always against the Developer, and it was a substantial one.
24	It was submitted that the absence of expert evidence is not of itself sufficient to award costs and that the conduct of the Applicant in regard to interlocutory matters was not exemplary. 
Mr Jackman’s submissions
25	Mr Jackman submits that the allegations against him were: 
a.	flawed from the outset, and despite attempts were never properly or adequately articulated; 
b.	not founded on a tenable basis either in fact or in law; and 
c.	made to put additional pressure on a third party to the contract; and 
d.	bound to fail. 
26	I found that the case pleaded against him was not made out. However, it was clear that Mr House was led to believe by Mr Jackman that there would be plans provided and there were not.  I have no doubt that Mr Jackman informed Mr House on more than one occasion that plans were imminent when he must have known they were not. That was the genesis of the claim against Mr Jackman. However, merely being misled does not necessarily amount to a cause of action. Mr House was content to enter into the contract, despite the fact that the plans had not yet been obtained, and I found there to be an absence of causation.
What order should fairly be made
27	In order to make an order for costs, I must find that it is fair to do so, having regard to the matters referred to in s.109(3). The relevant factors identified by counsel are the relative strengths of the parties’ cases, and the nature and complexity of the proceeding and the offers that were made..
The nature and complexity of the case
28	I agree with Mr Rozenberg that the nature and great complexity of this proceeding as between the Applicant and the Developer is such as to suggest that an order for costs might be fair and appropriate in the circumstances. As between the Applicant and Mr Jackman, there was really never a case and very little time was spent on it.
29	In particular, the number and complexity of the issues involved, the evidence that had to be assembled and the length and complexity of the very able submissions prepared by counsel on both sides, show clearly that this is a case that would have been quite beyond an unrepresented person and would have been very expensive indeed to conduct. But all that related on the case between the Applicant and the Developer, not on the case between the Applicant and Mr Jackman.
The relative strengths of the parties’ cases
30	Mr Rozenberg is correct that without expert evidence, the Developer’s case was bound to fail. Mr Jackman was not able to give expert evidence.
31	The only evidence I had as to what could be done on site, given the state of the plans, was that of the Applicant’s witnesses. That evidence was critical to the allegations, particularly concerning a suspension of works.
32	The only programming evidence that I had was that of Mr Andrews, whose evidence I accepted, there being as “no contrary expert evidence”.
33	If the Developer was not going to call the required expert evidence to support its defence, it ought not to have put the Applicant to the considerable expense of this hearing.
34	As to the case between the Applicant and Mr Jackman, there never was a case and I do not believe that anyone would have thought that there was.
Other matters – the offer of settlement
35	I accept that the making of an offer of settlement that is rejected is relevant to deciding whether it is fair to make an order for costs.
36	The settlement offer made by the Applicant was a substantial discount on what the Applicant was ultimately awarded against the Developer. In assessing the reasonableness or otherwise of the Developer’s failure to accept the offer, I must take into account the very short period of time during which it as open for acceptance. No doubt the short period was driven by the proximity of the trial which did not allow much time before expensive preparation would need to be undertaken.
37	It is reasonable to assume that, at the time the offer was made, the Developer would have been in contact with its solicitors and I think that it had sufficient time to accept the offer if it had wanted to do so. Certainly, at that time it ought to have had in mind that it did not have the evidence assembled to support its defence. By continuing with its defence when it had this opportunity to resolve the matter was foolish and expensive for itself, as well as the Applicant.
38	I accept that it had to consider the late material served upon it, but at that stage of the proceeding, immediately before trial, the focus is squarely on the case and decisions like this need to be made.
What is fair?
39	As between the Applicant and the Developer, I think that it would be fair to make an order that the Developer pay the Applicant’s cost of the proceeding.
40	As between the Applicant and Mr Jackman, he and the Developer had common representation throughout and no time was spent on the case against him. The focus was on the case against the Developer, not Mr Jackman. There was no legal or factual complexity about the claim against him. I see no reason to depart from the prima facie rule of s.109(1) and make no order as to costs.
41	To avoid the practical difficulties of the Victorian Costs Court having to sort out those parts of the costs that relate to the dispute involving Mr Jackman, since they had common representation, I will simply order that the costs against the Developer be reduced by 10%.
Orders to be made
42	There will be an order that the First Respondent pay 90% of the Applicant’s costs of this proceeding, including any reserved costs and the costs of this application, such costs, if not agreed, to be assessed by the Victorian Costs Court on the standard basis in accordance with the County Court Scale.
43	There will be no order for costs as between the Applicant and the Second Respondent.

R Walker
Senior Member