VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
civil DIVISION
CIVIL CLAIMS LIST		VCAT REFERENCE NO. C5876/2019
CATCHWORDS	
Costs application under s112 of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act): Whether a determination is first required as to whether costs would have been awarded under s109(3) of the VCAT Act: John Hopkins v Joshua Hopkins (No.2) [2015] VSC 50 and Re Williams: Smith v Thwaites (No.2) [2017] VSC 771 considered. Tribunal’s discretion not to award costs under s112(2) ‘unless the Tribunal orders otherwise’, considered and applied, in circumstances where the difference between the s112 offer and the award of damages made was very small and within a range open to error. Discretion exercised, costs refused under s112(2).
S44 Interpretation of Legislation Act 1984: Calculation of days over which an offer is expressed to be open. 
Calderbank offers and principles considered: Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No.2) [2005] VSCA 298. Costs allowed pursuant to a second Calderbank offer. 
Indemnity costs: Consideration of principles as to when may be awarded at VCAT: Pacific Indemnity Underwriting Agency Pty Ltd v Maclaw No 651 Pty Ltd [2005] VSCA 165; McCann v Shangri-la Construction Pty Ltd [2020] VCAT 918; Thurin v Krongold Constructions (Aust) Pty Ltd [2019] VCAT 1773. Indemnity costs refused. 	

APPLICANT	Peter Parkins	
RESPONDENT	Procycles (Hornsby) Pty Ltd ACN: 001 794 583	
WHERE HELD	Melbourne	
BEFORE	MJF Sweeney OAM, Member	
HEARING TYPE	Chambers costs application on the papers 	
SUBMISSIONS	Applicant: 11 January 2022 and 8 February 2022
Respondent: 31 January 2022	
DATE OF ORDER AND REASONS 	19 April 2022	
CITATION	Parkins v Procycles (Hornsby) Pty Ltd (Civil Claims) (Costs) [2022] VCAT 421	

Order
1.	Being satisfied that it is fair to do so and being satisfied that the applicant is entitled to costs pursuant to a Calderbank offer made on 17 October 2020, the respondent must pay the applicant’s costs of the proceeding from 17 October 2020 to the date of the Tribunal’s order, together with costs of the costs application, on a standard basis to be taxed by the Costs Court on the County Court scale.  
2.	The applicant’s costs claim pursuant to s112(2) of the Victorian Civil and Administrative Tribunal Act 1998 is dismissed. 

3.	All other costs claims are dismissed.  

MJF Sweeney, OAM
Member			

Reasons
Background 
1	This dispute in this proceeding arose from a bailment of an electric motor cycle to the respondent for custody and for the purposes of investigating the rectification of a faulty charger and undertaking repairs.
2	The applicant claimed that the respondent failed to undertake the repair and failed to take care of the motor cycle whilst in the respondent’s custody.
3	I heard the matter on 6 April 2021 and reserved my decision. Following the subsequent delivery of written submissions, I provided reasons for decision on 10 December 2021 and made orders in favour of the applicant. Orders 2 and 3 required the respondent to pay the applicant damages in the sum of $18,049.70. Orders 5 and 6 provided for the transfer of ownership and collection of the motor cycle by the respondent. Costs were reserved.  
4	Pursuant to orders 7 and 8 of the above orders, and the applicant’s application dated 12 January 2022, the applicant now seeks an order for costs, to be determined in chambers on the written submissions of the parties as directed by order number 8. 
5	The applicant’s costs submission is dated 11 January 2022. The respondent’s costs response is dated 31 January 2022. The applicant’s costs reply is dated 8 February 2022. By minutes of consent orders dated 20 January 2022, the parties agreed to amend dates for the above filings. The submissions are in material compliance. 
6	The applicant submits it is entitled to a costs order pursuant to s112 to s114 of the VCAT Act in respect of a settlement offer made on 25 September 2020.
7	It also submits it is entitled to a costs order pursuant to s109(3) of the VCAT Act, including ss(3)(e), any other matter considered relevant, being offers to settle on 17 October 2020 and 25 September 2020, made as Calderbank offers. 
8	The offer to settle made on 17 October 2020 is submitted by the applicant as being made only as a Calderbank offer. The applicant does not submit it as an offer made pursuant to s112 of the VCAT Act.
Legal principles on costs 
Victorian Civil and Administrative Tribunal Act 1998 – s109 
9	The power of the Tribunal to award costs of a proceeding is conferred by s109 of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act). It relevantly provides:
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.
…
10	Consideration of the application of this section was made by Gillard J in Vero Insurance Ltd v The Gombac Group Pty Ltd:
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.
…
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.
11	The Tribunal has a discretion on whether to make a costs order. It must be satisfied that it is fair to do so. Being satisfied that it is fair to do so is guided by the non exhaustive considerations provided for in s109(3). In the absence of such a finding, s109(1) prevails and the parties must each pay their own costs.   
Settlement offer - s112 to s114 VCAT Act 
12	Section 112 of The VCAT Act relevantly provides:
Presumption of order for costs if settlement offer is rejected
(1) This section applies if—
(a) a party to a proceeding (other than a proceeding for review of a decision) 
gives another party an offer in writing to settle the proceeding; and
(b) the other party does not accept the offer within the time the offer is open; and
(c) the offer complies with sections 113 and 114; and
(d) in the opinion of the Tribunal, the orders made by the Tribunal in the proceeding are not more favourable to the other party than the offer.
(2) If this section applies and unless the Tribunal orders otherwise, a party who made an offer referred to in subsection (1)(a) is entitled to an order that the party who did not accept the offer pay all costs incurred by the offering party after the offer was made.
(3) In determining whether its orders are or are not more favourable to a party than an offer, the Tribunal—
(a) must take into account any costs it would have ordered on the date the offer was made; and
(b) must disregard any interest or costs it ordered in respect of any period after the date the offer was received.
13	In order to determine whether the order made in the present case is not more favourable to the respondent than the offer that was made by the applicant, a comparison must be made between the orders made and the offer, as may be adjusted for the matters referred to in sub section (3). 
14	There may be an anterior question. In the decision of Daly AsJ in John Hopkins v Joshua Hopkins (No.2)   Her Honour held that the enquiry required by s112(3)(a) is a mult-stage process. First, a determination is required as to whether any costs would have been ordered at the time of the offer, having regard to the provisions of s109 of the VCAT Act. Secondly, if so determined, what type of costs order it would have made, namely, what scale, what type of order and quantum of the costs on the date of offer. That is, the exercise required by s112(3)(a) is not simply limited to the calculation of quantum of costs. 
15	In Re Williams: Smith v Thwaites (No 2) McMillan J observed:
•	There is also some authority that the Court must look at the time when the relevant offer was made and ascertain what, if any, decision as to costs would have been made and what form the costs would have taken. [John Hopkins v Joshua Hopkins (No. 2) – citation omitted] 
•	While it is not a requirement to determine whether a costs award would have been found in favour of the plaintiff at the time of the defendant’s offer, it is useful to assess what the plaintiff now says are the actual costs incurred by her up to the date of the defendant’s first offer.       
16	Whether it may or may not be a requirement to examine whether any costs order would have been made at the date of the offer, and so have regard to the considerations under s109(3), a broad discretion is granted under s112(2) ‘unless the Tribunal orders otherwise’. The exercise of that discretion is informed by general principles as to the exercise of discretion, including that it is not an arbitrary or capricious process. A useful guide may include the consideration of fairness having regard to the matters expressed in s109(3) and other pertinent matters to the case in question.         
Calderbank offers and indemnity costs at the Tribunal 
17	The settlement offer regime under s112 to s114 of the VCAT Act does not preclude the making of an offer to settle outside the operation of those sections (Velardo & Anor v Andonov). 
18	In assessing whether or not it is fair to make an order for costs, the Tribunal may take into account any other matter that it considers relevant (s109(3)(e)) and it is well settled that that will include an offer to settle that was rejected.
19	In the courts, where orders for costs are usually made in favour of the successful party, Calderbank offers are relied upon to justify an application for costs on an indemnity basis instead of the standard basis. 
20	In Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2), the Court of Appeal held:
20 The correct approach, in our view, is to treat the rejection of a Calderbank offer as a matter to which the Court should have regard when considering whether to order indemnity costs. As Gyles, J.A. stated in SMEC Testing Services Pty Ltd v Campbelltown City Council -
In the end the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rules as to costs...
21	The court held that the answer to this question should turn on whether the rejection of the offer was unreasonable in the circumstance. As to the factors relevant to assessing reasonableness, the court held:
25 The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
22	At VCAT, where the prima facie position is that parties pay their own costs, a Calderbank offer may be relied upon to justify an order for costs on either a standard or indemnity basis. The assessement of whether the rejection of the offer itself was unreasonable may be guided by the principles applied in Hazeldene’s case, above. 
23	On the question of whether a special costs order should be made by the Tribunal, such as on an indemnity basis, an examination of the authorities was made by DP Aird in McCann v Shangri-la Construction Pty Ltd (Building and Property) and Thurin v Krongold Constructions (Aust) Pty Ltd.  In particular the Deputy President said in McCann:
… Section 109 starts with the presumption that each party bears their own costs of the proceeding. Once the Tribunal is satisfied it is fair to depart from that presumption, and make an order for costs, it is a very high hurdle for a successful party to demonstrate that a special order for costs should be made.
  
24	In Thurin (above), the Deputy President said: 
Special costs orders are most unusual in the Tribunal and are only awarded in exceptional circumstances as noted by Nettle JA in Pacific Indemnity Underwriting Agency Pty Ltd v MACLAW No 651 Pty Ltd. 
Applicant’s submissions 
25	The applicant submits for costs order on essentially three grounds. 
26	The first submission, a settlement offer made 25 September 2020 (First Offer) pursuant to s112 to s114 of the VCAT Act, which if proved, provides for a costs order to be made from the date the offer is made.
27	Under the First Offer, the applicant’s letter offered settlement by the respondent paying $28,000. The offer was made inclusive of costs. The applicant contends that its costs up to 25 September 2020 are $13,672.  
28	The applicant contends, after adjusting for costs pursuant to s112(3)(a), costs that would have been ordered on the date the offer was made, the adjusted ‘damages component’ of the applicant’s First Offer may be regarded as $14,328. This compares to the damages actually awarded of $18,050 (rounded), a difference of $3,722 (rounded). 
29	In summary, the applicant concludes therefore that the damages awarded are ‘not more favourable to the other party’ (respondent) compared to the First Offer, such that it meets the criteria required by s112(3)(a).
30	The second submission for costs, is based on a second offer made on 17 October 2020 (Second Offer), made in accordance with the principles of Calderbank v Calderbank (above). No claim is made under s112 in respect of the Second Offer. 
31	The second submission also contends that the First Offer, in the alternative to the claim asserted under s112, also constitutes a Calderbank offer. It is contended that both Calderbank offers arise for consideration by the Tribunal under the exception provided under s109(3)(e) ‘any other matter the Tribunal considers relevant’.
32	An adjustment to backout costs at the time of each offer, from the all inclusive First Offer and Second Offer, is required to make the relevant assessment of the Calderbank offer as against the damages awarded. The applicant says that the costs incurred at the time of both offers are the same. Thus, the comparable adjusted First Offer (to be compared to the damages awarded), remains $14,328 (as calculated under paragraphs 27 and 28 above). 
33	The comparable adjusted Second Offer (to be compared to the damages awarded), is $4,828 ($18,500 less costs $13,672). Compared to the damages actually awarded of $18,050 (rounded), the comparable adjusted Second Offer is $13,222 (rounded). 
34	In summary, the applicant concludes that both Calderbank offers are substantially more favourable to the respondent should it have accepted the same compared to the damages actually awarded by the Tribunal.
35	The third submission for costs is briefly put pursuant to s109(3)(b) of the VCAT Act, prolonging unreasonably the time taken to complete the proceeding evidenced by unreasonably failing to accept the offers. The submission is also made under s109(3)(e), any other matter the Tribunal considers relevant, with the contention that the respondent conducted itself unreasonably, including by prolonging the proceeding. 
Respondent’s submissions
36	In relation to the applicant’s first submission, First Offer made pursuant to s112 of the VCAT Act, the respondent submits that it does not comply with s114(2). It contends that the minimum period over which the offer must remain open, 14 days, has not been complied with. 
37	The respondent submits that the calculation of the 14 day period must be made in accordance with s44(1) of the Interpretation of Legislation Act 1984. It says that this results in the offer being only open for 13 days and is therefore non compliant. 
38	The respondent submits the period between 25 September 2020 and 9 October 2020 is only 13 days as the time only started running on 26 September.
39	It submits that the costs application, in respect of the First Offer made under s112 of the VCAT Act, therefore fails. 
40	The respondent makes a like submission in respect of the Second Offer. It submits the Second Offer does not comply with the requirements of s114(2) of the VCAT Act and contends that the period between 17 October 2020 and 30 October 2020 is also only 13 days, as the time only started running on 18 October. 
41	Given the asserted non compliance with the 14 day period applicable under the VCAT Act, the respondent concludes that, as both offers were open for less than 14 days, both offers are not conforming settlement offers under the VCAT Act.
42	With its reliance on asserted non compliance with s114(2), the respondent has not engaged with the applicant about the comparison of offers to the award of damages made by the Tribunal, and the requirements of s112(2) and (3) of the VCAT Act.  
43	The respondent says both offers may be offers to settle on the terms contained within the offer(s) itself.  The respondent submits that both offers purport to be settlement offers in the form of Calderbank letters. 
44	In so far as either or both of the applicant’s offers constitute Calderbank offers, the respondent appears to contend that as the Calderbank offers were open for a period of less than 14 days, they fail, for like reasoning under the Interpretation of Legislation Act 1984. At least that appears to be the contention flowing from paragraph 12 of the respondent’s submission which submits that the same provisions of s114(2) are applicable, including the counting of days under the Interpretation of Legislation Act 1984.
45	Apart from the submissions concerning the 14 day periods, the respondent has not otherwise engaged the applicant’s submissions to the extent that both offers are made as Calderbank offers and that the respondent’s non acceptance of the Calderbank offers was unreasonable, including on the grounds that the offers made are more favourable to the respondent than the ultimate award of damages by the Tribunal.
46	The respondent submits that the presumption against payment of costs under s109(1) of the VCAT Act prevails. It contends that the considerations under s109(3) have not been enlivened by its conduct or otherwise.
47	The respondent submits that the requirement for the Tribunal to be satisfied of the matters referred to in s109(3)(a) is concerned with conducting the proceeding in a way that ‘unnecessarily disadvantaged’ another party, not merely disadvantaging the other party.
48	It also submits, in relation to the element referred to in s109(3)(b), that the respondent cannot be taken to have prolonged unreasonably the time taken to complete the proceeding.
49	On the matters of unnecessarily disadvantaging and prolonging unreasonably the proceeding, the respondent submits that there was nothing extraordinary or exceptional about the case, no adjournment was caused and no orders of the Tribunal were not unreasonably complied with.
50	The respondent rejects the contention of the applicant that by merely not accepting the offers, this constitutes prolonging the proceeding. It submits that it is entitled to force a party to prove its case, particularly as to quantum and that the case conducted by the respondent was not the pressing of a hopeless case. 
51	The respondent concludes that the presumption that each party bear its own costs under s109(1) of the VCAT Act should prevail.
Offer made pursuant to s112 VCAT Act
Whether the offer period was open for 14 days minimum
52	The respondent submits the First Offer (and Second Offer) is not compliant with s114 of the VCAT Act because the minimum period for an offer to be open of 14 days was not complied with.
53	The Interpretation of Legislation Act 1984 provides:
Time
(1)     Where in an Act or subordinate instrument a period of time is expressed to begin on, or to be reckoned from, a particular day, that day shall not be included in the period. [emphasis added]
(2)     Where in an Act or subordinate instrument a period of time is expressed to end on, or to be reckoned to, a particular day, that day shall be included in the period. [emphasis added] 
54	In making its calculation of days, the respondent has properly excluded the first day the First Offer was sent, namely, 25 September. In accordance with s44(1), counting begins from and includes the 26th.
55	In making its calculation of the last day of the period over which the First Offer was expressed to be open, the respondent has improperly excluded the last day the First Offer was expressed to be open, namely 9 October. In accordance with s44(2), counting ends on and includes the 9th.
56	The period for which the First Offer was open complies with the minimum period of 14 days stipulated under s114(2) of the VCAT Act. The applicant’s First Offer made pursuant s112 is not deficient by reason of the period it was expressed to be open for acceptance. 
57	To the extent the respondent makes a similar submission in respect of the Second Offer, it is not necessary to decide the matter as the applicant does not assert that the Second Offer was made pursuant to s112. Instead, the applicant submits the Second Offer is made on the basis of a Calderbank offer only. 
Whether any costs order would have been ordered on the date the offer was made
58	In Hopkins case, paragraph 15 above, this consideration was observed as being the first step in the application of s112(3)(a) of the VCAT Act. Whether this first step is a mandatory requirement may be open to some debate given the observations of McMillan J in Re Williams case, paragraph 16 above. 
59	However, it not in doubt that the Tribunal possesses an unequivocal discretion under s112(2) to not to make an order for costs arising from the qualification: ‘unless the Tribunal otherwise orders.’
60	As discussed in paragraph 17 above, the exercise of the discretion is informed by general principles as to the exercise of discretion, including that it is not an arbitrary or capricious process. I also discussed that a useful guide may include the consideration of fairness having regard to the matters expressed in s109(3) and other pertinent matters to the case in question.
61	The respondent’s submission against the application of s112 presumption for a costs order is confined to the proposition that the First Offer is not compliant with the 14 day requirement, a matter which I have determined against the respondent for the reasons given above. 
62	In Kamel v Transport Accident Commission, DP Galvin observed that for the discretion to be exercised, there must be some aspect of the application that significantly distinguished itself from the ordinary to displace the clear presumption in favour of the offering party. The onus is on the offeree to point to some feature of the case that distinguished it from most other cases. 
63	The respondent has not proved the existence of a material consideration that is sufficient to distinguish the position of the respondent so as to displace the presumption in favour of the offering party, the applicant. Had the respondent, as one example, demonstrated that the making of a costs order under s112(2) would be unfair to do so having regard to identified circumstances of the case, that itself may be cause for the Tribunal to consider the exercise its discretion against the presumption to order costs. 
64	While this finding may lead to a conclusion that the presumption in favour of a costs order under s112(1) and (2) should follow, there are other considerations which I must take into account which have a bearing on the exercise by the Tribunal of its discretion to order otherwise.

Whether the Tribunal’s orders are not more favourable to the respondent 
65	The respondent has not engaged with the applicant’s submissions made to address the requirements of s112(1)(d) and s112(3) of the VCAT Act, referred to in paragraph 13 above.
66	Section 112(1)(d) requires the Tribunal to form an opinion as to whether the orders made by the Tribunal are not more favourable to the other party (the respondent in this case) than the offer. 
67	Further, pursuant to s112(3), in determining whether the orders are or are not more favourable to a party (the respondent in this case) than the offer, the Tribunal:
(a)	must take into account any costs it would have ordered on the date the offer was made; and
(b)	must disregard any interest or costs it ordered in respect of any period after the date the offer was received. 
68	The applicant has addressed part (a) concerning costs and sought to make an adjustment to allow for costs otherwise included in the First Offer made under s112. I consider the applicant’s submission in this regard later. 
69	However, the applicant has not made the adjustment required by part (b) in respect of interest, included in the orders of the Tribunal, which must be deducted from the damages awarded before determining whether the Tribunal’s orders are more or are not more favourable to the respondent. 
Adjustment to amount ordered by Tribunal, as required by s112(3)(b) – interest
70	The process for the adjustment required to be undertaken under s112(3)(b) is as follows:
(a)	for the reasons given in paragraph 243 of my decision, interest was ordered for the period 13 February 2020 to 10 December 2021, being 665 days, for interest of $2,782.00 (rounded). 
(b)	the number of days in the period 13 February 2020 to the date the First Offer was made, 25 September 2020, is 224 days. Interest for this period is $937 rounded;
(c)	the balance of interest from 26 September 2020 to 10 December 2021 is $1,845.00 (rounded). This amount is to be excluded under the adjustment required by s112(3)(b) from the total sum of damages awarded of $18,050.00 (rounded).
(d)	After the adjustment for interest of $1,845.00 pursuant to s112(3)(b), adjusted damages are $16,205.00.
 
71	Adjusted damages, for the purpose of disregarding certain interest under s112(3)(b) of the VCAT Act, is $16,205.00. This is the amount against which an assessment may be made to determine whether this sum is more favourable to the respondent than the First Offer, as adjusted.
Adjustment to amount of First Offer, as required by s112(3)(a) – costs
72	Before any determination can be made under s112(1)(d) as to whether the First Offer constitutes a valid statutory offer ‘not more favourable’ to the respondent than the (adjusted) damages awarded, I am also required to make a further adjustment in respect of costs pursuant to s112(3)(a). That is, the costs element to the date of the non accepted offer must be deducted from First Offer so as to enable the statutory comparison. 
73	This adjustment for costs, requires the deduction of costs, as the Tribunal may have ordered up to 25 September 2020, from the amount of the First Offer of $28,000.00 (expressed as inclusive of costs).
74	The applicant submits that costs at or about 25 September 2020 (submitted as being the same costs level at the date of the Second Offer, 17 October 2020) were $13,672.00. These costs are assessed by it from the date of points of claim up to the date of the First Offer, 25 September 2020 (also applicable as of the date of the Second Offer).
75	I do not consider that an assessment of costs that the Tribunal ‘would have ordered on the date the offer was made’ would have included an allowance for costs in respect of the applicant’s points of claim. 
76	I refer to my determination, paragraph 243, that the relevant period for interest to begin to accrue as being from 13 February 2020. This is the date of the Amended Points of Claim, served in response to directions of the Tribunal. I made this determination because that was the first time the applicant’s case was clearly made out and which then enabled the respondent to draw Points of Defence in response. 
77	The same reasoning applies in respect of costs. From the claimed costs, a deduction should be made to remove costs associated with the applicant’s initial points of claim. The points of claim did not serve to clearly articulate the applicant’s case and to a material degree were redrafted to make clearer the case put against the respondent. If a costs order is to be made, the respondent should not be penalised by having to pay for the points of claim subsequently substantially redrafted. 
78	I must make an assessment of the likely costs. Such assessment is akin to difficulties sometimes faced by a court when making an assessment of damages. A court is nevertheless required, in making the assessment, to do the best it can. I estimate that costs attributable to initial points of claim not claimable as $1,000.00. This estimate is informed by the material provided by the applicant in respect of its costs, supported by affidavit. 
79	The second aspect is whether the applicant’s asserted costs of $13,672.00 (less $1,000) are reasonable as of the date of the First Offer. The costs have not been contested by the respondent. The costs are not remarkable. For the purposes of my consideration under s112(3)(a) of the VCAT Act, costs that would have been ordered, I have no reason not to accept the evidence put to me in the affidavit material in support. The net costs, allowing for the deduction of $1,000.00 is $12,672.00.
80	For the purpose of s112(3)(a) of the VCAT Act, I estimate that the costs that would have been awarded on the date the First Offer was made is $12,672.00. 
81	Costs in the amount of $12,672.00 is the amount of costs found as being required to be taken into account and deducted from the First Offer of $28,000.00. The comparable First Offer for the purposes of s112(3)(a) of the VCAT Act is $15,328.00.  
Conclusion: whether the Tribunal’s orders are not more favourable to the respondent than the First Offer and VCAT’s discretion
82	Orders 2 and 3 of the Tribunal’s orders dated 10 December 2021 are for damages and interest in the sum of $18,050.00. Adjusted as is required by s112(3)(b) of the VCAT Act, for the purposes of the statutory comparison, the adjusted damages are $16,205.00 (refer paragraph 74 above).
83	Adjusted as is required by s112(3)(a) of the VCAT Act for costs, for the purposes of the statutory comparison, the adjusted First Offer is $15,328.00. 
84	The difference between the adjusted damages and the adjusted First Offer is $877.00.
85	The orders made by the Tribunal on 10 December 2021, adjusted pursuant to s112(3)(b), are not more favourable to the respondent than the First Offer, adjusted pursuant to s112(3)(a), albeit to a relatively small extent.
86	As a result, pursuant to s112(2), the applicant may be entitled to an order for all costs incurred after the offer was made, being 25 September 2020, but with the caveat: ‘unless the Tribunal orders otherwise’.
87	The proviso in s112(2) confers a discretion and it is one that I must consider in the circumstances of the present case.  
88	The first matter that may be observed is that the amount of $877.00 is a relatively small sum, from which significant costs consequences flow. In Transport Accident Commission v Coyle the Court of Appeal observed that the exercise of the discretion conferred by s112(2) ‘is perhaps the only means available to the Tribunal of relieving against any harshness in the operation of s112.’ The court went on to observe that the discretion could be exercised properly only in the light of all the relevant facts and circumstances of the case. 
89	The party who refused the settlement offer bears the onus of showing that the Tribunal should exercise its discretion to order that the consequences set out in s112(2) do not apply: Paleka v J Suvak t/a Suvak Constructions Pty Ltd. The respondent has submitted that the prima facie rule under s109(1) is that each party should bear their own costs of the proceeding, noting that the Tribunal has a discretion, if it is satisfied that it is fair to do so, having regard to the considerations in s109(3). 
90	On the basis that I have discussed in paragraph 16 above, it is appropriate for me to be guided by considerations, including those set out in s109(3), which sensibly, in its non exhaustive definition, includes reference in ss(e) to having regard to ‘any other matter the Tribunal considers relevant’. 
91	It must be that the relative smallness of the difference between the damages ordered (after adjustment) and the First Offer (after adjustment for costs) is a relevant consideration, especially where the costs consequences that flow are significant. 
92	Moreover, the relative smallness of the difference makes it more susceptible to error in circumstances where an estimate of the costs that would have been ordered at the date of the First Offer on 25 September 2020 are not of an order of accuracy as one would expect from a formal assessment by the Costs Court having access to all required documentation put in evidence as support. 
93	For the above reasons, I am not satisfied that it is fair to order under s112(2) that the respondent pay costs, in the circumstances where my finding that the orders made by me as to damages being not more favourable to the respondent than the offer, is such a small difference, a difference which is within a range that is open to error. 
94	Pursuant to s112(2), I determine that it is appropriate to ‘order otherwise’ and refuse the application for an order for costs under s112(2). The applicant’s application for costs pursuant to s112(2) of the VCAT Act is dismissed.
First and Second Offer made as a Calderbank Offers 
95	The applicant submission is made in respect of two Calderbank offers, one made pursuant to the First Offer and the other made pursuant to the Second Offer. 
96	In respect of the First Offer as a Calderbank Offer, if I am satisfied that it otherwise conforms with the requirements for a valid Calderbank offer, and after making relevant adjustments which would result in a comparison not dissimilar to that summarised in paragraph 85 to 87 above, the level of the First Offer will equally be very close to the adjusted level of the damages awarded.
97	Even if the First Offer conforms with the requirements for a valid Calderbank offer (which, I am of the opinion is does, given my considerations in respect of the Second Offer, below), I am not satisfied that it is fair to order that the respondent pays costs.
98	For the same reasons as discussed in paragraphs 91 to 96 above, in respect to the First Offer made as a Calderbank offer, I am not satisfied that it is fair to order that the respondent pay costs, in the circumstances where a finding that the orders made by me as to damages are not more favourable to the respondent than the First Offer, rests on such a small difference, a difference which is open to error.
99	The clearer case for consideration as to whether rejection is unreasonable is in relation to the Second Offer as a Calderbank offer.
100	I refer to paragraphs 17 to 22 above discussing the applicable principles for considering Calderbank offers.
101	The Second Offer was made by letter to the respondent on 17 October 2020. The offer was open until no later than 4.00 pm on 30 October 2020, to settle proceedings on an all inclusive basis for the sum of $18,500.
102	First, the settlement offer regime under s112 to s114 of the VCAT Act does not preclude the making of an offer to settle outside the operation of those sections (Velardo & Anor v Andonov). 
103	Second, in assessing whether or not it is fair to make an order for costs, the Tribunal may take into account any other matter that it considers relevant (s109(3)(e)) and it is well settled that that will include an offer to settle that was rejected.
104	Third, in Hazeldene’s Chicken Farm Pty Ltd (above), the Court of Appeal, citing SMEC Testing Services Pty Ltd v Campbelltown City Council, held:
The correct approach, in our view, is to treat the rejection of a Calderbank offer as a matter to which the Court should have regard when considering whether to order indemnity costs. As Gyles, J.A. stated in -
In the end the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rules as to costs...
105	Fourth, the court held that the answer to this question should turn on whether the rejection of the offer was unreasonable in the circumstance. As to the factors relevant to assessing reasonableness, the court held:
25 The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
106	Fifth, at VCAT, where the prima facie position is that parties pay their own costs, a Calderbank offer may be relied upon to justify an order for costs on either a standard or indemnity basis. The assessement of whether the rejection of the offer itself was unreasonable may be guided by the principles applied in Hazeldene’s case, above. 
107	Sixth, as to whether VCAT should make a costs order on other than a standard basis, regard should be had to the statutory position of the Tribunal, which unlike the courts, the ordinary rules as to costs is a presumption against costs. In this regard the authorities referred to in paragraphs 23 and 24, above, are pertinent as to whether to order costs should be ordered on other than a standard basis.  
108	The respondent submits that the calculation of days in respect of the period over which the Second Offer was expressed to be open is 13 days. The respondent’s calculation is correct in line with s44 of the Interpretation of Legislation Act 1984. 
109	However, the Second Offer has only been submitted by the applicant as being put as a Calderbank offer. The period is expressed in the offer as ending at 4.00pm on 30 October 2020. The offer was not accepted by that time. The 14 day requirement under s114(2) of the VCAT Act has no application in respect of the Second Offer made as a Calderbank offer. 
110	The question is whether such a period is a reasonable time for the respondent to consider the offer. The respondent has not submitted on the basis that 13 days was an unreasonable period. There is nothing otherwise in the circumstances of the offer that suggests the13 day period was unreasonable, particularly where the respondent had had a recent and earlier opportunity to study a similarly structured offer, being the First Offer, so as to be in a position to give an informed and timely consideration.
111	The Second Offer remains to be considered under the principles set out in Hazeldene’s Chicken Farm Pty Ltd, as noted above. Other than submissions in respect of considerations under s109(3) of the VCAT Act, the respondent has not directly submitted on the considerations referred to in Hazeldene’s Chicken Farm Pty Ltd in respect of the Calderbank offer. 
112	I must consider, according to those considerations, whether the rejection by the respondent of the Calderbank offer made under the Second Offer was unreasonable in the circumstances. I find that the rejection of the Second Offer was unreasonable in the circumstances.
113	The offer was made shortly after the conduct of a mediation, being at a time by which it is reasonable for the parties have formed a view of the comparative strengths and weaknesses of the cases put, thereby informing the parties of respective prospects of success. 
114	The Second Offer has not been complained about for a lack of clarity and nor does a perusal of its contents warrant such a conclusion. 
115	The extent of the Second Offer must be considered. The Second Offer (for the second option) was to settle for the sum of $18,500 inclusive of costs. Adopting the same calculation referred to in paragraphs 83 and 84 above, costs are estimated as $12,672.00 at the date of the Second Offer. Subtracting these costs from the Second Offer’s all inclusive sum gives a damages component of the all inclusive offer of $5,828. 
116	The damages component of the Second Offer to settle of $5,828 is significantly more favourable to the respondent than the damages awarded by me to the applicant of $18,050.
117	On all the evidence, I am satisfied that the failure of the respondent to accept the Second Offer as a Calderbank offer was unreasonable. The applicant is entitled to an order for costs from the date of the Second Offer, being 17 October 2020. 
Whether costs ordered on a standard basis or indemnity basis
118	First, in relation to indemnity costs submitted for by the applicant under s112(2) where the Tribunal may order the party to pay ‘all costs’, I refer to the decision of SM Walker in Paleka v J Suvak t/a Suvak Constructions Pty Ltd. He commented that VCAT has an unfettered discretion to decide whether ‘all costs’ in a particular case means party-party costs, solicitor-client costs or indemnity costs. He observed that indemnity costs are ordered where the party’s conduct is particularly blameworthy. 
119	In relation to the general position of VCAT concerning ordering indemnity costs, I refer to the decisions of DP Aird in McCann v Shangri-la Construction (paragraph 24, above) and Thurin v Krongold Constructions (paragraph 25, above).
120	In Thurin, DP Aird noted the comment of Nettle JA in Pacific Indemnity Underwriting Agency Pty Ltd v Maclaw No 651 Pty Ltd stating that special costs orders are most unusual in the Tribunal and are only awarded in exceptional circumstances.  
121	The position in respect of s112 and the more general application by the Tribunal against indemnity costs orders, highlights the very different environment in which the Tribunal is placed compared to the courts. Simply, the starting point at the Tribunal is a statutory presumption against costs. The courts starting point is a common law presumption that costs follow the event.
122	There is nothing in the applicant’s submissions that demonstrates such a degree of behaviour or of unreasonableness on the part of the respondent as would merit the ordering of indemnity costs. The proceeding could not be said to have been prolonged, simply by refusal of settlement offers. In circumstances, such as the present case, where a party’s case cannot be described as hopeless, a party is not to be penalised by pressing its case and putting an applicant to its proofs. 
123	For the foregoing reasons it is inappropriate to order costs on an indemnity basis. The applicant is entitled to an order for costs on a standard basis.
Whether costs are payable under s109(3) of the VCAT Act 
124	To the extent that the applicant submits, as an independent claim for costs under s109(2) and (3) for all costs from the commencement of the proceeding, without derogating from my specific determinations above, I am not satisfied for the above reasons that it is fair to make an order for all costs based on a considerations of the non exhaustive elements of ss(3). The case for such an order has not been proved by the applicant.  
125	I accept the respondent’s submission in reply that the applicant has not proved that it has been unnecessarily disadvantaged by the conduct of the respondent. The considerations under s109(3)(a) relate to the conduct of a party of the proceeding, not the character of its case. The applicant has not established such conduct on the part of the respondent.
126	I have referred to ss(b) above concerning a party prolonging a proceeding. Again, merely not accepting a settlement offer does not constitute an impermissible prolonging of a proceeding, but is an exercise of judgment taken at a particular time after assessment of risks. 
127	It has not been established that the nature and complexity of the proceeding was peculiarly so in the present case. 
128	For the sake of clarity, this finding does not derogate from my determination as to costs in respect of the Calderbank offer as found.
Costs of costs application and costs of costs compromise
129	The applicant seeks costs of a ‘costs compromise’ on an indemnity basis for an asserted unreasonable failure of the respondent to accept the costs compromise on Calderbank principles. Further, it seeks such costs on an indemnity basis.
130	I see no convincing reason to order costs other than costs of the costs application on a standard basis. 
131	I am not convinced by the brief submission of the applicant that there is a case that has established entitlement to costs based on the ‘costs compromise’ or to depart from applying the same considerations in respect of indemnity costs that I have referred to in paragraphs 121 to 125 above. 
132	The application for costs pursuant to the ‘costs compromise’ is dismissed.  
133	I determine that the applicant is entitled to costs of this costs application on a standard basis.
Conclusion 
134	The applicant’s entitlement to costs pursuant to a Calderbank offer, the Second Offer, payable from 17 October 2020 is proved. 
135	Being satisfied that it is fair to do so, the respondent must pay the applicant’s costs of the proceeding from 17 October 2020 to the date of the Tribunal’s order, together with costs of the costs application, on a standard basis to be taxed by the Costs Court on the County Court scale.
136	The applicant’s costs claim pursuant to s112(2) of the VCAT Act is dismissed. 
137	All other costs claims are dismissed.

MJF Sweeney, OAM
Member