3. Commencement of proceedings may be said to be vexatious if they were instituted with the intention of annoying or embarrassing the other party or if they were obviously untenable or manifestly groundless (Cabot v City of Keilor [1994] 1VR 220 and Al-Hakim v Arthur Robinson and Hedderwicks [2001] VCAT 1767). There is no evidence before me to support any finding that this was the intention of the Applicant in bringing this proceeding. It cannot be said that the conduct of the Applicant during the course of the proceeding was vexatious - it may have adopted an intransigent position but intransigence is not vexatiousness.

4. Although the Respondents were not entirely successful they did succeed insofar as the application was dismissed and the Applicant was found to have repudiated the contract. Ultimately this matter would not have come before the Tribunal but for the Applicant's fundamental breach of its obligations under the contract, to check the site levels and advise the owners it would be impossible to build the house in accordance with the approved plans and specifications, and its persistent refusal to accept responsibility for that breach. Although it might be said that the owners were initially seeking what appeared and, indeed, was found to be an unreasonable outcome - the demolition of the house - this does not mean that the basis of their substantive claims were unfounded.

5. It was submitted on behalf of the Applicant that if I was minded to make an order for costs I should only do so in relation to a proportion of the costs incurred by the Respondents. I was referred to my decision in Harmonius Blend Building Corporation Pty Ltd v Pocock [2002] VCAT 1770 where the Applicant builder was ordered to pay 50% of the costs of the Respondent owners. However, the circumstances in that case were quite different to those currently before me. In Harmonius Blend the primary reason for the reduction in the costs awarded to the owners was because their conduct of the case led to an unnecessary prolongation of the hearing which disadvantaged the builder. There was nothing in the manner in which the hearing was conducted by either party which could be said to have unreasonably prolonged the hearing of this case

6. Whilst I accept that some additional time may have been spent testing the evidence of the expert witnesses, in particular that of Mr Kosa and Mr Hay, which would not have been necessary but for the lack of detail in their reports, I am not satisfied this had a significant impact on the hearing time. It was submitted on behalf of the Applicant that I should take into account that the builder 'was put to the expense of defending claims that did not succeed and a considerable amount of time was spent in the Tribunal arguing these points'. Likewise, it must be said that the owners were put to considerable expense defending the builder's application which was dismissed in its entirety. I note that the estimated hearing time was seven days and the hearing was completed in seven and a half days with an additional half a day for final submissions.

7. The primary focus of the builder's conduct of the hearing was to attempt to absolve itself of all responsibility for what was ultimately found to be a fundamental breach of its contractual and statutory obligations. Although the amount awarded to the owners was significantly less than they were claiming they succeeded insofar as the builder's application was dismissed, and their substantive allegation of repudiation was upheld. They did not succeed in relation to some relatively minor matters, and the award of damages was less than they were seeking. However, this cannot detract from the builder's fundamental breach of its contractual and statutory obligations which led to this matter coming before the Tribunal.

8. Although it might be said that the conduct of the owners in seeking leave to file and serve amended Points of Counterclaim shortly before the hearing disadvantaged the builder, the builder has been compensated for any disadvantage suffered by the granting of such an indulgence by an order for costs which I understand was settled by the owners agreeing to pay the sum of $11,000. This is therefore not a matter which should properly be taken into account in determining whether an order for costs should be made. I accept this matter only came before the Tribunal because of the Applicant's refusal to accept responsibility for its fundamental breach of its contractual and statutory obligations. I am of the view that this proceeding involved complex questions of law including repudiation and its acceptance, and having regard to the provisions of s109(3)(d) and s109(3)(e) I am satisfied it is fair that an order for cost should be made in favour of the Respondents.

9. Although the parties were reminded of the provisions of s109(1) during the course of the hearing, I do not consider this to be an impediment to the exercising of my discretion under s109(3) following the final determination of the proceeding.

10. I will therefore order that the Applicant pay the Respondents' costs of this proceeding. Obviously it is not intended that this order will have any impact on previous orders made during the interlocutory process. Given the complexity of the issues, the evidence and the law I am satisfied that the appropriate scale is Scale 'D' of the Country Court.

Application for Stay of Orders of 9 August 2004

10. At the conclusion of the costs hearing application was made on behalf of the builder for a stay of my orders of 9 August or an extension of time in which to appeal that decision pending the decision on costs. This application was made at a time when the Applicant was still well within time to seek leave to appeal the decision on the substantive issues had it wished to do so and the application was refused. I draw no negative inference from the making of the application. Further, having regard to the provisions of s148 it seems to me that any application for an extension of time in which to appeal the decision of 9 August 2004 should be made to the Supreme Court, and having regard to the provisions of s149 that any stay of an order of the Tribunal can only be made after the institution of any appeal.