(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.

1. I provided an opportunity to the parties to be heard in respect of the claim for costs in relevant orders.
2. The applicants advised they were content for the costs claim to be determined 'on the papers' on the basis of submissions and associated affidavits. The respondent did not notify the Tribunal of any request to be heard within time.

1. I have considered the costs submissions for each party, including all affidavits provided in support.
2. They are retained on the Tribunal's file for the record, and I highlight key points as relevant to my determination.

1. The applicants sought an order for the reimbursement of their legal costs in the proceeding to the value of $45,000, comprising solicitors' costs and counsel fees.[2]
2. Alternatively, they sought costs in the sum of $20,000 since the respondent purportedly rejected what they referred to as a 'Calderbank offer' dated 25 November 2025.
3. They submitted it was fair to depart from the 'ordinary rule' that each party bear its own costs since the respondent had caused unnecessary delay, expense and prolongation of the proceeding.
4. Their supporting Affidavit explained:[3]

The Respondent's refusal to resolve the dispute, maintenance of a counterclaim, and rejection of a genuine settlement offer resulted in the matter proceeding to a contested hearing and caused the Applicants to incur substantial additional legal costs.

1. They pointed to a series of factors as to why costs should be awarded, including a perceived lack of willingness to mediate at key times in the proceeding, causing an adjournment and a lack of response to a written settlement offer.
2. They also sought to demonstrate that the respondent's counterclaim had caused significant additional cost to defend, necessitating legal representation.

1. The respondent opposed the claim for costs. It submitted that the circumstances of the case did not warrant a departure from the ordinary rule that each party should pay its own costs in the proceeding.
2. More specifically, it submitted that:
   • the counterclaim based on quantum meruit was consistent with case law principles (citing relevant examples where claims had been upheld);
   • he had not unreasonably delayed the proceeding and an adjournment had been granted for medical and confirmed travel reasons;
   • the applicants had not met timelines within orders of the Tribunal for service of various documents in the proceeding;
   • the original settlement offer made by the applicants sought the equivalent of a refund for all agreed works and was therefore not an acceptable proposition;
   • the second settlement offer did not comply with the provisions of section 112 of the VCAT Act and in any event, the Tribunal made an order substantially less than the offer in favour of the applicants; and
   • he observed that the applicants relied on expert evidence provided by the respondent in the proceeding as to the nature of the defects and their value, rather than calling their own evidence.

1. I accept it was reasonable for the applicants to engage legal representation given the nature and complexity of this case. I further acknowledge that the applicants' costs in the proceeding have exceeded the amount ultimately awarded to them.
2. I also recognise that the overall time taken to resolve this proceeding has been lengthy.
3. While unfortunate, these factors do not of themselves indicate that the respondent should be liable for the applicants' costs (or part) on the facts of this case.
4. The circumstances of this case taken as a whole lead me to the outcome that it is reasonable for each party to bear its own costs in the proceeding in line with section 109(1) of the VCAT Act.
5. I find it would not be fair to make an order for costs in favour of the applicants simply because they were ultimately successful (or at least partly successful) in their claim for defective/incomplete works.
6. First, I am not persuaded that there are any circumstances of the type listed in section 109(3) that would justify such an award.
7. The respondent has not engaged in any identifiable conduct in the proceeding of a kind that would warrant costs.
8. He did not fail to comply with orders or directions of the Tribunal without reasonable excuse. Likewise, he did not fail to comply with relevant legislation or rules.
9. The adjournment occasioned by the respondent was supported on its particular facts and did not result in costs 'thrown away'.
10. I do not accept that the respondent unreasonably prolonged the proceeding. He proceeded with a counterclaim having regard to legal advice.
11. Likewise, the relative strengths of the case for each party are relevant.
12. Ultimately, his claim was not supported having regard to discretionary considerations, but it was nevertheless open in circumstances where there was an unenforceable (unsigned) major building contract/agreement. However, it was not vexatious or untenable.
13. Factors that lean against an award of costs in favour of the applicants include:
    • they initially sought reimbursement of the full amount of the agreed works in the proceeding, notwithstanding they retained substantial benefit from these works - this was not a reasonable proposition;
    • I found with the benefit of evidence that the applicants had not sought to mitigate their loss and the value of rectification should be back-dated to when they became aware of the defects, not on more current figures as claimed; and
    • they were misguided when they sought to pursue the claim for misleading and deceptive conduct. It was reasonable for them to abandon this aspect of their claim once identified by the Tribunal at the start of the hearing, but I acknowledge that some costs were also incurred by the respondent in preparing to defend this allegation.
14. Another relevant consideration is that the applicants did not separately provide independent evidence supporting their claim or the value of the defective works as part of their Points of Amended Claim or supporting documentation.
15. In fact, the amount claimed was not clearly articulated until the hearing.
16. At that stage, they overwhelmingly relied on the expert evidence provided by the respondent which they had not commissioned or contributed financially to (as distinct from a joint expert report).
17. I acknowledge the commendable steps taken by solicitors for the applicants to try to mediate the matter, although I note that some of these attendances pre-dated the application to the Tribunal and would not have been regarded as 'costs in the proceeding' in any event.
18. To the extent the applicants made a written offer to settle to the respondent's solicitor on 24 November 2025, I find it is not in the nature of a 'Calderbank offer', or one that would meet the requirements of section 112 of the VCAT Act for a number of reasons, largely as identified in the respondent's reply submissions.
19. The offer did not comply with the detailed provisions of section 114(2) of the VCAT Act, being open for a minimum 14 day period. Accordingly, the presumption for an order for costs does not arise in this proceeding under section 112.
20. In any event, the amount sought in the offer far exceeded the amount ultimately awarded to the applicants in the proceeding (which does not satisfy section 112(1)(d) of the VCAT Act). In hindsight, it was not unreasonable for the respondent to continue with its defence.
21. For completeness, in my opinion, the applicants' submission that they were 'required' to live in a house with portions that were unfinished and required rectification is not of itself a reason supporting an award of costs.
22. The determination of the substantive claim has resolved this issue in a monetary sense and did not include any claim for quantifiable consequential loss.
23. Likewise, the reliance on financial pressure and stress affecting their wellbeing is germane to this type of proceeding and is not determinative of the claim for costs.

1. The applicants' claim for costs in the proceeding is refused.
2. Each party must bear its own costs.

[1] (Building and Property) [2025] VCAT 1138.

[2] It is not clear to me that the applicants have actually incurred or paid these costs, noting that a portion of the solicitors costs were discounted and a portion of counsel's fees had not been paid at the date the affidavit was sworn. However, this is not determinative in circumstances where I have found it is not fair to make an award in favour of the applicants as the threshold question.

[3] At [54], Affidavit of Sumitra Yerramilli, the applicants' solicitor.