The respondents must pay the applicant's costs of the proceeding up to and including 15 August 1999.

For the Applicant: Ms C. Anagnostou of Counsel instructed by Craig Terrill & Associates

For the Respondents: Ms C. Kirton of Counsel appeared on behalf of Streamline Partitioning (Aust) Pty Ltd instructed by Phillips Fox

Ms B. Lim of Counsel, appeared on behalf of Graham Nicholas Pty Ltd instructed by Elizabeth Solomon

1. By order made 26 August 1999, I awarded $91,558 damages pursuant to Section 16 of the Water Act 1989 to the applicant Alphaprint Pty Ltd. This order made against the respondent Streamline Partitioning (Aust) Pty Ltd and Graham Nicholas Pty Ltd related to damage and business interruption suffered by the applicant Alphaprint as a result of a flow of water from premises which were the subject of redevelopment or renovation.

2. As a consequence of that order, Ms Anagnostou on behalf of the successful applicant has sought orders:

1. That there be an order for the payment of interest upon the damages which I have ordered; and

2. That the respondents be required to pay the applicant's costs of the proceeding to be taxed in accordance with County Court Scale D.

3. I enquired of Ms Anagnostou by what authority she submitted that interest should be awarded. She said that since the jurisdiction to deal with matters arising under Section 16 of the Water Act 1989 was vested solely in this Tribunal, a party seeking a remedy under that section would be at a disadvantage if there were no powers to make an award of interest or damages in the nature of interest. She conceded as I understood it, that there was no express provision to be found in Part 1 of the Water Act which would authorise this Tribunal to make an award of costs.

4. I accept in the general sense that the interests of justice do require this Tribunal in so far as it exercises the jurisdiction under Part 1 of the Water Act to have power to award interest or damages in the nature of interest. There is nothing in Part 1 of the Water Act and nothing in the Victorian Civil and Administrative Tribunal Act 1998 which would appear to grant that authority. Courts of common law did not have power to make awards of interest. In certain exceptional circumstances which have been considered on a few occasions by the High Court in recent years, there is power to make awards of interest and compound interest as a head of damages. There are certainly award of power in a court of equity to order the payment of interest by way of equitable compensation or to require a defaulting fiduciary to pay interest. None of those matters have been suggested to be relevant here.

5. I am faced with the simple absence of any power to make an award of interest. There is certainly a provision in the Domestic Building Contracts Act 1995 [Section 53(2)(b)(ii)] which provides the jurisdiction of another List in this Tribunal for the Tribunal to make an award of interest or damages by way of interest and that power is to be found in Section 108(2)(b)(ii) of the Fair Trading Act 1999; but the existence of those powers to award interest in one statute and their absence in the Water Act only serves to underline the lack of any power form to make such an award in this instance and accordingly I deny that applies.

6. The second issue, namely the issue of costs raises far more complex matters. All Counsel referred me to Section 109 of the Victorian Civil and Administrative Tribunal Act 1998. This is a long section and I do not propose for the purposes of these reasons to read it in full. Sub-section (1) provides a general presumption that in Tribunal matters costs lie where they fall. Sub-sections (2) and (3) provide for a departure from that general rule in certain circumstances therein described and sub-section (3) refers to circumstances which are numbered as paragraphs (a) to (e) in which the Tribunal may make costs awards or perhaps consideration by reference to which it might consider making costs awards.

7. Ms Anagnostou referred to and relied upon one of my own decisions in which sitting in the retail tenancies jurisdiction in the matter of Malthall Pty Ltd and J. & C. Illiopoulos v Bevendale Pty Ltd (No. 2) (1998) V Con R 58-528 I said that proceedings in the Retail Tenancies List were generally in the nature of commercial litigation and one would expect that a successful applicant there would have an order for the payment of his, her or it's costs. In that regard I noted that one of the specific matters referred to in sub-section (3) of Section 109 justifying a departure from the general rule in the Tribunal that costs lie where they fall is the nature and complexity of the proceedings. I saw within the Malthall case a piece of commercial litigation and awarded costs accordingly.

8. By way of contrast, Ms Kirton on behalf of the first respondent, referred me to a number of decisions of His Honour Judge Davey, Vice President of the Civil Division of this Tribunal. Notably in Stelridge Pty Ltd v Hand Bags International Pty Ltd (1999) V Con R 58 -532 in which His Honour rejected the approach which I had adopted in the Malthall case and said that what Section 109 required was a case by case analysis as to the nature of the proceedings. In the particular situation before His Honour, even although it was a competition between landlord and tenant in a retail tenancy matter and therefore perhaps in the nature of commercial litigation, His Honour thought it was inappropriate to make an order as to costs.

9. Ms Kirton referred me to a passage at the conclusion of Paragraph 3 of His Honour's decision in which he made the following observation:

"In my opinion the fact that the settlement offer provisions and those of provisions [of Section 112 of the VCAT Act and following] are found in the same Division in juxtaposition to the section dealing with costs is indicative of the scheme to encourage parties to settle by offering a costs carrot. One objective of the scheme was to encourage more cases to settle prior to the hearing and thus save the parties costs and expense. In furtherance of that objective, the Tribunal should be careful to avoid the situation where a list is regarded as one where the costs normally follow the event."

10. I was also referred to another of His Honour's decisions, the matter of Thirty-fourth Enterprise Pty Ltd v Leggetts Squash Centre Pty Ltd [1999] VCAT 27. His Honour there observed with respect to the provision in Section 109(3)(c) of the Victorian Civil and Administrative Tribunal Act requiring the Tribunal when considering a costs issue to determine the relative strengths of the claims of the parties, did not of itself indicate that mere success by a party was a ground for making a costs order. His Honour said at paragraph 7:

"The sub-section does not merely mean that because one party has been successful and is entitled to his costs. The reference to "the claim that has no tenable basis in fact of law indicates that he was intended to refer to cases where one party had an extremely weak or even an untenable case but persisted in putting it when it had no reasonable prospects of success."

11. In those circumstances the primary submission made by Ms Kirton was that there should be no order for costs at all. Ms Lim who appeared for the second respondent made submissions to the same effect.

12. I was also referred to a number of other considerations relative to any costs order which contrary to the submissions made by the respondents I might consider making. I will defer the consideration of those matters for the moment and consider first, whether in the circumstances, it is appropriate to make any costs order at all. It is notable and perhaps surprising that none of the Counsel before me have seen fit to refer to any drainage decisions of this Tribunal or previous Tribunals whatsoever. This is after all a matter arising in Part 1 of the Water Act 1989. In the matter of C. & H. Hough v Shire of Mitchell 8th July 1998, I had to consider a costs issue in a proceeding which was originated in the Administrative Appeals Tribunal as a drainage matter.

13. I had published a decision in the Administrative Appeals Tribunal dismissing the claim upon the basis that it was barred by the Limitation of Actions Act 1958. When the Administrative Appeals Tribunal was abolished and this Tribunal took its place, the issue of costs arising out of the determination that I had made remained outstanding.

14. In the course of my decision as to costs, I examined the history of drainage matters. I noted that they first became matters within the exclusive realm of Tribunals with the passage of the Drainage of Land Act 1975 which established the Drainage Tribunal. Section 44 of that Act imported the same rules as to costs which apply in the Supreme Court, that is that costs follow the event.

15. In due course the Drainage Tribunal was abolished and was incorporated in the Planning Appeals Board established by what was initially called the Planning Appeals Board Act 1980 and after the Planning Appeals Board itself was abolished, simply the Planning Appeals Act 1980. As part of the incorporation of the old Drainage Tribunal into the Planning Appeals Board, Section 44 of the Drainage of Land Act 1975 was repealed and drainage matters were subject to the general provision of Section 58 of the Planning Appeals Act 1980 which included a similar presumption against the ordering of costs as against one party or the other to the one which is to be found in Section 109 of the Victorian Civil and Administrative Tribunal Act. The Planning Appeals Board itself was incorporated into the Planning Division of the Administrative Appeals Tribunal and Section 58 continued to govern. In due course, the Victorian Civil and Administrative Tribunal Act abolished the Administrative Appeals Tribunal, Planning Division and vested the jurisdiction in drainage matters, which by then arose under Part 1 of the Water Act 1989 in this Tribunal and the rules assigned to this List.

16. It was an aphorism in the old Tribunals that in drainage matters costs follow the event. I refer to some of the authorities to that effect in Hough's case. That rule was adopted despite Section 58, though it was the subject of debate from time to time. It seems to me that this history is relevant when one considers the issue of the nature of these proceedings. In so far as that is a material matter to be dealt with in the application of Section 109 of the Victorian Civil and Administrative Tribunal Act.

17. In my view this is clearly a proceeding which is in the nature of inter partes litigation. Section 109 of the Victorian Civil and Administrative Tribunal Act is perhaps rather like the lubrication oil referred to in a well known commercial for Castrol some years ago. This oil was not the high quality Castrol product being advertised but some other product which was described in the commercial as "super multi-grade all purpose". Section 109 covers such a wide range of matters in this Tribunal and provides so many discretions that it gives very little guidance as to how matters are to be dealt with in particular cases.

18. Judge Davey in Stelridge's case was critical of the approach which I adopted in the Malthall case' but I must say that I remain unrepentant. His Honour said that what I did amounted to the adoption of a list by list approach. Perhaps my language was a little inexact. What I was really wishing to convey was that in the Retail Tenancies List a consideration of any individual proceeding would find it to have the character of commercial litigation. That led me to the conclusion that generally costs would follow the event in the Retail Tenancies List.

19. In my view, therefore, one considers the nature of this proceeding and it is a proceeding for damages of the sort which historically would have been dealt with in one of the courts. Why should matters be any different now that it is heard and determined in a Tribunal which has a wide ranging discretion to award costs if it regards it as appropriate. In my view the history of how costs in drainage matters was dealt with by a predecessor of Tribunals is relevant to all this. I see no reason to think that when the drainage jurisdiction was shifted first from the old Drainage Tribunal to the Planning Appeals Board, thence to the Planning Division of the Administrative Appeals Tribunal and now to this Tribunal, that there was any intent to upset the basis upon which it was originally to be exercised, namely that the costs rules were to be similar to those which applied in the Courts. This is perhaps a bold approach but when I consider the number of proceedings in this List, to say that claims under Part 1 of the Water Act do contrary to the general rule attract costs orders in the same way as proceedings in Court do, in no sense does it subvert the wider operation of Section 109 because the number of proceedings in this List is so small. Section 109(1) of the Victorian Civil and Administrative Tribunal Act continues to deny costs in the vast bulk of matters which are dealt with in this Tribunal.

20. Accordingly, in so far as the submission is made that there should be no costs order simply because this is a Tribunal matter rather than a matter in Court, I reject that submission.

21. I turn now to consider what was descried as a Calderbank letter. The hearing in this proceeding commenced on the 16th of August this year and concluded on the 17th of August. On the morning of the 13th of August a transmission by facsimile was sent from the solicitors for the first respondent to the solicitors for the applicant, headed "without prejudice save as to costs". The letter stated inter alia:

"I confirm that my client and the second respondent proceeding 796 of 1998 Graham Nicholas are willing to settle that proceeding with your client for the total sum of $120,000 inclusive of costs. This offer is made in order to prevent the incurring of costs at the hearing in the VCAT and is open to acceptance until 9.30 a.m. Monday 16th of August 1999."

22. Before considering the effect of this letter further, it is appropriate to notice that provisions for the making of offers of compromise are to be found set out in Sections 112 to 115 of the Victorian Civil and Administrative Tribunal Act 1998. It is also appropriate to note that by force of Section 114(2) an offer made in accordance with those provisions, which to some degree mirror the terms of Order 26 of the Rules of Civil Procedure, must remain open for a period of 14 days. It is common ground I think that the transmission which I have referred to clearly is not made in accordance with those provisions, though it is clearly made in a manner analogous to the operations of those provisions. It was referred to as a Calderbank letter, making reference to a matrimonial matter of Calderbank v Calderbank [1976] Fam 93 in which the English Court of Appeal gave consideration to an offer made in similar terms in a family law matter.

23. In so far as this letter might be thought to operate as an obstacle to the making of a costs order in favour of the applicant Ms Anagnostou on behalf of the applicant referred me to a decision of His Honour Spender J. sitting in the Federal Court of Australia in the matter of Smallacombe v Lockyer Investment Co Pty Ltd (1993) 43 FCR 97. In that instance at a late stage prior to the proceeding, it may actually have been during the proceeding, a letter including an all in offer of compromise of some $400,000 was made. His Honour was not ultimately influenced by that letter. He concluded at paragraph 32 that he was satisfied that he could not regard the making of the offer as a Calderbank nor was it in accordance with a decision of Rogers J. as he then was in Messiter v Hutchison (1987) 10 NSWLR 525.

24. His Honour referred to another decision of the English Court of Appeal in Cuts v Head [1984] Ch 290 where the Court said that one ought not have regard to a Calderbank letter in circumstances where a payment into court procedure was available. In the matrimonial jurisdiction which Calderbank was heard, apparently no such opportunity was available. His Honour at page 38 was also critical of the uncertainty of the offer in so far as it was an "all up offer".

25. In that regard I should also note the matters which have been urged upon me by Ms Lim and Ms Kirton. They have observed that in June/July in response to notices to admit, their clients admitted certain factual issues which the applicant called upon them to admit. On the 13th of August they indicated that the issue of liability would no longer be in dispute and that the issue of quantum was the only one in dispute. Moreover, the material served by way of witness statement on behalf of the respondents, indicated a view as to the quantum of damage which was largely, if not totally, accepted in the determination which I ultimately made. Ms Kirton's calculation, which I did not understand to be dissented from by any other party, was that the result of the orders which I made was to put the applicant some $5,000 and no more ahead of where it would have been had the assessment been made simply upon the basis of the witness statements filed on behalf of the respondents. Ms Kirton and Ms Lim said that analysis would show that the respondents had taken every step that they could to narrow issues and to shorten the length of the hearing and in so far as Section 109 of the Victorian Civil and Administrative Tribunal Act focussed upon the conduct of the parties, the respondents would be seen to have acted in a most responsible manner. The applicant on the other hand, despite having received the offer already described by the 13th of October, continued to press for a much higher award of damages, some 40% higher than was ultimately awarded and failed in circumstances where the findings which I made entailed a clear objection of the evidence relied upon for the applicant and by and large an acceptance of the evidence relied upon by the respondents. The fact remains however that the respondents persisted in a denial of liability up to the very last day before the hearing of the matter. It seems to me with all respect that the respondents flatter themselves more than a little in suggesting that this was a responsible course of conduct to follow.

26. As to the offer of compromise itself, constituted by the facsimile transmission dated 13 August, I have to consider how the ultimate outcome of this proceeding differed from the offer that was then made. The offer was of an all-in nature and Ms Anagnostou says that for that reason alone, it should not be paid any head to because of the inherent uncertainty of an all in offer. No taxation had been had at the time that her client received the offer and none has yet been undertaken, therefore it remains in the realms of debate just how the financial consequences of acceptance of that offer would have played out against the financial consequences which have ultimately resulted. This was at the heart of the criticism made by Spender J. in Smallacombe of the offer of comprise which he had to consider. In my view however, Ms Anagnostou rather overstates the uncertainty of the present situation. She concedes that as at the 13th of August the costs as rendered between her client and its solicitor on a solicitor and client basis was of the order of $30,000. These costs were rendered on the basis it seems of a time costing regime which does not directly relate to the mode of costs fixation adopted under court scales. Nevertheless, it is reasonable for me to conclude and I do conclude that the costs rendered as between solicitor and own client would be materially higher than those which could be recovered upon taxation between party and party, absent some special order that costs were to be assessed on a full indemnity basis and no party has made any submission to that effect before me today.

27. In those circumstances it is to my mind quite plain that this applicant has done no better than it would have done had it simply accepted the offer of $120,000 made on the 13th of August. It is likewise plain however that it has done better by the sum of $5,000 than it would have done had the matter proceeded to settlement simply on the basis of accepting the evidence that appeared in the respondent's witness statements as to quantum which I ultimately accepted with the exception of the additional $5,000 reward. Which then brings me back to the very short period of time that this offer was open, apparently rather less than one business day, since the facsimile was transmitted later so it seems than 9.30 a.m. on the 13th of August. Responsible solicitors would have briefed Counsel by the 13th of August and effectively the costs of the first day of hearing would already have been expended. Ms Kirton submits that if any order were made for costs of the applicant or indeed if any costs order were to be made at all, her client should have the costs of the second day of the hearing because the second day was undertaken in circumstances where the applicant achieved absolutely nothing. In a general sense I think that Ms Kirton's criticism is correct and I would have accepted her submission were it not for the very late stage at which this offer was made. We know from the provisions of the Victorian Civil and Administrative Tribunal Act which I have already referred to, that the Parliament in the context of proceedings such as this regards 14 days as a reasonable period. That is not to say that no offer open for a lesser period than that should not be given some weight in the consideration of costs, however, the fact that 14 days is stipulated in the Victorian Civil and Administrative Tribunal Act shows that any offer open for a shorter period of time is moving away from the bounds of reason. One that remains open for effectively less than one business day is to my mind open for so short a time and made at so late a stage in the proceeding that it would be unreasonable to give it any effect to the extent of requiring the recipient to pay the offeror's costs as distinct from perhaps curtailing the costs which the recipient might otherwise have recovered.

28. After that lengthy excursus it seems to me the situation is this, that for reasons already given, prima facie, the applicant is the successful party - successful in achieving an award of damages, successful in achieving an award of damages some $5,000 larger than the case ultimately made by the respondents would have allowed would be entitled to its costs, however, it has failed to do better than an offer made, albeit at a very late stage. [There is provision in the Tribunal for payments into Court. Most reasoning in Smallacombe is not strictly applicable.]

29. In my view the proper order in all the circumstances is that the respondents should pay the applicants costs of this proceeding up to and including the 13th of August 1999 and there should be no order as to costs thereafter. The order sought by Ms Anagnostou is to be in accordance with County Court Scale D and I did not understand either of the other Counsel who appeared, to quarrel with the scale as distinct from whether an award should be made or not and I propose to make that award in accordance with County Court Scale D.