1. The Second Respondent applies for the costs of an application that it brought in September this year that the claim against it be dismissed pursuant to s.75 of the Victorian Civil and Administrative Tribunal Act 1998 ("the Act").

2. The application was initiated by letter to the Tribunal dated 20 July 2004. A copy of the letter is exhibited to an affidavit sworn by the solicitor for the Second Respondent on 20 December 2004. Also exhibited to that affidavit was some correspondence that preceded it.

3. On 22 June 2004 the solicitors for the Second Respondent wrote to the solicitors for the Applicant foreshadowing such an application. The full text of this letter was referred to by Mr Herskope in argument and paragraph 3 was referred to and relied upon by Mr Laird. Paragraph 3 is in the following terms:

"3. We presume that the claim against our client will be maintained in any amendment, notwithstanding that we are of the view that it is untenable at law. Accordingly, we now formerly foreshadow our client's intention to bring a strike out application against your client once we have received the proposed amendment, as our client is of the view that the issue is not one of form, but one of substance."

4. Other paragraphs of the letter criticise the absence of a pleading of reliance and the establishment of a causal nexus between the loss claimed and the breach of duty complained about. There are also complaints that the loss and damage alleged is the same is that alleged against the First Respondent, the owner-builder of the house that is the subject of these proceedings.

5. The cause of action that had been pleaded by the Applicant against the Second Respondent was for loss and damage arising form misleading and deceptive conduct in breach of the Fair Trading Act and, in the alternative, damages for negligence. In each instance, the basis of the claim was said to be a negligently prepared report as to the condition of a dwelling house purchased by the Applicant from the First Respondent. In essence, the report claimed that the house was free of defects. The damages sought against both the First and the Second Respondent with respect to both causes of action were the same, and were the cost of rectifying the alleged defects.

6. Section 75(1) & (2) of the Act is in the following terms:

"75. Summary dismissal of unjustified proceedings

_(1) At any time, the Tribunal may make an order summarily dismissing or striking out all, or any part, of a proceeding that, in its opinion - _

(a) is frivolous, vexatious, misconceived or lacking in substance; or

(2) If the Tribunal makes an order under sub-section (1), it may order the applicant to pay any other party an amount to compensate that party for any costs, expenses, loss, inconvenience and embarrassment resulting from the proceeding."

7. Pursuant to directions given by the Tribunal submissions were exchanged by the parties and the matter came on before me for hearing on 30 September and 1 October 2004. My decision in the matter was handed down on 21 October 2004. I upheld the submission that the damages sought by the Applicant against the Second Respondent were not recoverable at law either in negligence or with respect to the claim under the Fair Trading Act. This is because the authorities clearly establish that in such circumstances, the damage recoverable is not the cost of rectifying any defects but rather, the difference (if any) between the price paid for the property and its value at the time of purchase. In paragraph 44 of my Reasons for Decision I stated:

"The Applicant cannot simply claim the cost of repairs as she has done in this case. As presently pleaded, the damages sought are not recoverable and, since damages are an essential part of the cause of action under both heads, the proceeding itself is not maintainable."

8. I then indicated that I propose to give the Applicant an opportunity to put her case in order by directing that she file and serve Further Amended Points of Claim against the Second Respondent within twenty-one days and that, if she should not do so, the application will be dismissed against the Second Respondent pursuant to s.75 of the Act.

9. Pursuant to this leave further Points of Claim have been filed and served claiming as damages under each head the difference between the purchase price paid by the Applicant for the property and its value at the time of purchase. A valuation has also since been filed on behalf of the Applicant setting out what is said to have been the value of the property as at 16 September 2002. That was the date of the Second Respondent's inspection, but the date upon which the property was purchased was 1 November 2002. No valuation of the property as at that later date has been filed.

10. The Second Respondent now seeks the costs of the application under s.75 of the Act and the Applicant seeks an order that those costs either be apportioned, made in the cause or that there be no order as to costs. The Second Respondent makes the application under s.75(2) or, in the alternative, under s.109(3).

11. The application for costs came before me for hearing on 21 December 2004. After dealing with some directions which I made at the time I indicated that I would reserve my decision on the costs argument after submissions were made by Mr Laird on behalf of the Applicant and Mr Herskope on behalf of the Second Respondent. The solicitor for the First Respondent, Mr Hassall was excused from further attendance following the making of the directions which affected his client.

12**.** Mr Herskope submitted that the case against his client, in the form in which it was pleaded, was untenable at law. He referred to the wording of s.75(2) and submitted that where proceedings are struck out under s.75(1), an order for costs should be made under that subsection and not pursuant to s.109(1). He referred me to the Tribunal's decision in Howell v Supa Group Pty Ltd [2003] VCAT 711 where the Tribunal adopted this approach.

13. Mr Laird's submitted that I can only make an order for costs under s.75(2) if I have made an order under sub-section (1). That is what the section says. Mr Laird pointed out that my order dismissing the proceeding was only to come into effect if no further Points of Claim were filed and, since they were filed, it never came into effect. He said that, as a consequence, there was no order made under sub-section (1). I do not accept this submission. Although the order that I made was self-executing and never took effect, it was nonetheless an order under s.75(1). I did not make the order under any other section of the Act.

14. The presence of the word "may" in s.75(2) makes it clear that I have a discretion as to whether costs should be ordered. In exercising that discretion I should, I think, have regard to similar considerations to those set out in s.109(3). It therefore probably makes little difference whether I make the order under s.75(2) or s.109(3). This was the approach adopted by the Tribunal in the case of Herniman Associates Pty Ltd v Williams (Costs) [2004] VCAT 2348. However, I think that the appropriate section to make any order for costs is s.75(2) and I approach the application on that basis.

15. Mr Herskope said that in exercising my discretion I should determine that costs should follow the event and that in determining the costs to which the Second Respondent is entitled, I should have due regard to:

(a) The circumstances giving rise to the application;

(c) The quantum of the claim against the Second Respondent.

16. As to the circumstances giving rise to the application, Mr Herskope pointed out that before the application was brought the Second Respondent had raised the difficulties it had with the Application in several letters to the Applicant's solicitors but the Applicant "stood mute". Indeed, her solicitors said ij their letter to the Second Respondent's solicitors of 25 June 2004:

"We do not propose to deal with each and every other allegation contained in your letter under reply at this stage."

17. Amended Points of Claim were subsequently served which continued to claim as damages against the Second Respondent the cost of rectifying the alleged defects. Mr Herskope submitted that the Second Respondent was therefore forced to make the application. Then, he said, instead of acceding to it or repleading its case, the Applicant instead elected to resist the application. Indeed, in a letter dated 28 July 2004 her solicitors suggested that the foreshadowed application was "misconceived in both fact and law". They continued:

"We place your client on notice that if your client proceeds with the threatened application this letter will be produced at the appropriate time in the proceedings in regard to the question of costs and the basis upon which such costs should be paid by your client."

18. As to s.109(3)(c) of the Act i.e. 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, Mr Herskope pointed out that I had found in my reasons that the claim as pleaded had not basis in fact or law. That is true, but I did not find that there was no merit in the Applicant making some claim against the Second Respondent by reason of the inspection report. Rather, I found that the damages sought in the action were not legally recoverable and since damages were an essential part of both of the causes of action relied upon, the application could not succeed.

19. Mr Herscope also referred me to s.109(3)(b) of the Act, which relates to the nature and complexity of the proceedings. As will be apparent from the detailed Reasons for Decision handed down, the legal arguments involved in dealing with the Second Respondent's application under s.75 were complex and required considerable preparation and argument by Counsel from both sides.

20. As to the quantum of the claim at the time of the application, it was said to be $364,950.00 and was expected to increase. This is well within the Supreme Court jurisdiction were it not a domestic building dispute.

21. On all these grounds Mr Herskope said that an order for costs should be made. He also said that the Second Respondent had incurred significant costs in bringing the application and should not be out of pocket. To avoid this, he submitted that I should make an order for indemnity costs. I was referred in particular to the following passage from the judgment of Sheppard J. in Colgate Palmolive Co and another v Cussons Pty Ltd [1993] FCA 536; (1993) 118 ALR 248, where His Honour set out (on p.257 of the report) some or the circumstances in which the normal practice of awarding costs on a party/party basis might be departed from. He said:

"...it is useful to note some of the circumstances which would be thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud...evidence of the particular misconduct that causes loss of time to the Court and to other parties...the fact that the proceedings were commenced or continued for some ulterior motive...or in wilful disregard of known facts or clearly established law...the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions...an imprudent refusal of an offer the compromise...and an award of costs on an indemnity basis against a contemnor.... Other categorises of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis."

22. Mr Laird submitted that there were three substantive issues raised by the Second Respondent and dealt with on the hearing of the s.75 application. These were:

(a) That the Applicant could not possibly come within the class of person to whom the Archicentre "Blue Ribbon" report was directed;

(b) That the Second Respondent could not possibly owe a duty of care to the Applicant;

(c) That the Applicant could not possibly claim the cost of rectifying the defects in her property as damages from the Second Respondent.

23. Of these, he said that the Applicant succeeded on the first two and lost only on the third. He also pointed out that another important matter dealt with in argument was the impact of Part IVAA of the Wrongs Act 1958 which, he said the Reasons for Decision did not deal with. As to the first three issues, Mr Laird is correct. I considered that the question whether the Applicant was owed a duty of care by the Second Respondent should go to a full hearing and the Applicant ought to be able to call evidence as to the contents of the Second Respondent's website in order to establish an awareness on the part of the Second Respondent that a report prepared by it might be used by a vendor as a marketing tool. Of these two, the more substantive issue was the question of the duty of care. But the most substantive of the three was the question of damages and this applied to both the negligence action and the claim under the Fair Trading Act . On this point, in both causes of action, the Second Respondent succeeded.

24. As to the claim under the Wrongs Act I indicated in argument that I believed that perhaps I did not deal with that because the provision would not become relevant unless and until a cause of action against the Second Respondent was established. On further consideration that is my view, and so on that issue I think the Second Respondent can be considered to have succeeded as well.

25. Mr Laird said that the amendments made in the Further Amended Points of Claim filed pursuant to the leave that I gave involved only a revision to the particulars of the Applicant's loss and minor amendments to the particulars to paragraph 22. That is true, but they are of far reaching importance. The fact was that there was no maintainable cause of action until those amendments were made.

26. Mr Laird also suggested that the Second Respondent had failed in the application under s.75 because it had failed to have the proceeding dismissed. I do not accept this interpretation. The application succeeded and the proceeding was not struck out only because I considered that I ought to give the Applicant an opportunity to put her case on a proper basis. The Second Respondent succeeded in substance in this application.

27. I was referred to the decision of Ashley J. in the case of Barbon & another v West Homes Australia Pty Ltd [2001] VSC 405 where his Honour had something to say about amendments to pleadings in the Tribunal. He said in paragraph 16 and 17 of his judgement:

"16. I would not want it thought for a moment, because the Tribunal is not a court of pleading, and because the Act encourages a degree of informality in proceedings, that Rafferty's Rules should prevail. They should not. Any party, perhaps particularly a party facing a long, drawn out hearing in the Tribunal ... is well entitled to know what case it must met before the hearing commences. That is not to say that the case must be outlined with exquisite particularity. It is not to say that a defendant is entitled to evidence rather than particularization. Nonetheless a defendant is entitled to expect that a claim will be laid out with a degree of specificity such that, if it is obvious that the claimant seeks to pursue a claim which is untenable, that can be the subject of an application before trial; such that, moreover, if adequate particularisation is not provided, the matter will be clear to the Tribunal on application by an agreed party.

17. Having said that a party is entitled to know the case that it must met in a Tribunal proceeding, I do not wish it thought that a party to such a proceeding should be entitled or encouraged to conduct length applications of a pleadings type. Such application should not be encouraged in proceedings before the Tribunal."

28. Mr Laird said that it was difficult to image what greater encouragement the Tribunal could provide to the bringing of applications of the nature of this s.75 application than to reward the party bringing it with an award of costs, even when the application was largely unsuccessful. I do not agree that it was largely unsuccessful and I see nothing untoward in making an award of costs to a successful party where the circumstances otherwise warrant it.

29. Mr Laird also suggested that it was a sterile application but I cannot agree. The evidence that would have been required to support the proceeding as originally pleaded was different to that which will now be required. Expert evidence to establish the cost of rectifying the defects in the property not picked up in the inspection report would not have established any cause of action against the Second Respondent. Mr Herskope is quite right in saying that the case could have been dismissed without him having to call evidence. I do not accept that the member of the Tribunal could simply have made a finding that the value of the property was what the Applicant paid for it less the cost of rectification. Such a finding could only have been made on the basis of expert evidence as to value and such evidence would not have been relevant to the cases original pleaded.

30. I do not accept Mr Laird's submission that the costs of the application should be apportioned according to the success of the parties on individual issues. This would be an unusual approach and would set any Court or Tribunal a very formidable task in most cases. Counsel commonly raise many points in argument that might not have been raised in the absence of the principal reason for the application.

31. The Second Respondent put the Applicant on notice as to the need to put her case on a proper basis. The Applicant refused to do so and the Second Respondent was forced to bring the application. It was resisted by the Applicant with great vigour and the Second Respondent succeeded. The case is now on a proper basis as it should have been at the beginning. In these circumstances I think the Second Respondent should be awarded costs.

32. I do not accept Mr Herskope's submissions that costs should be on an indemnity basis. There is no lack of bona fides on the part of the Applicant or her legal advisors. They formed a view that the case had been properly pleaded and that the damages sought were properly recoverable. The Second Respondent and its advisors were of a different view, hence the application was brought. I preferred the position of the Second Respondent but there is no lack of bona fides or anything else in the conduct of the Applicant or her advisors which would warrant making anything other than a party/party order for costs.

33. There will be an order that the Applicant to pay the Second Respondent's costs of the application to be assessed if not agreed, by the Registrar in accordance with the Supreme Court Scale.