The respondent MGS Products Pty Ltd must pay the costs of the respondent Body Corporate Plan of Subdivision no. 3251784:

(a) of and incidental to this proceeding including all reserved costs; and

to be taxed in default of agreement in accordance with County Court Scale "D"; together with

(c) of this application on and after 15 August 2002 on a full indemnity basis with the intent that that respondent will receive a full indemnity for all those costs incurred except in so far as any item was unreasonably incurred or is an unreasonable amount.

For the first respondent: Mr P. Kistler, instructed by Warren Graham and Murphy

For the second respondent: Mr G. Hellyer, instructed by Nathan Kuperholz

1. This proceeding was brought under the Water Act 1989 by Ms Duggan, the owner and now occupier of a unit in a multi-storey block of residential units in Sturt Street, South Melbourne. She said that her unit had been damaged by the ingress of water from above. She joined the owners of the penthouse unit located above unit, MGS Products Pty Ltd and Melbourne Inner City Management Pty Ltd, a company engaged by the Body Corporate to provide management services.

2. Melbourne Inner City Management Pty Ltd applied to have the claim against it dismissed and I made such an order dismissing on the 4th of April this year.

3. MGS then brought a claim seeking indemnity for any liability to which it might be subject to Ms Duggan, against Body Corporate Plan of Subdivision No. 325178U, the relevant body corporate.

4. The matter proceeded to hearing and determination as a three day hearing before a Tribunal constituted by me and Mr Gould. We substantially accepted the contentions made by Ms Duggan and made an award of damages and also granted an interlocutory injunction requiring MGS to carry out remedial works to prevent the further ingress of water. We rejected the contentions put by MGS that the body corporate was responsible. Those contentions, inter alia entailed a suggestion that lack of maintenance in the area of the body corporate's plant work on the roof of the complex was the true cause of the damage to Ms Duggan's unit.

5. Without going to the detail of our determination which is in writing and published, the effect was that we accepted Ms Duggan's contentions against MGS and rejected MGS' contentions against the body corporate. Further, MGS contended that if contrary to its primary case there were maintenance problems in the area of its penthouse, a more limited program of maintenance was required than the one suggested by Ms Duggan and as it turned out by the body corporate. With respect to this question also we determined in favour of Ms Duggan and to some degree in favour of the body corporate and against MGS. By consent Mr Gould and I have already made orders that MGS pay Ms Duggan's costs to be taxed in default of agreement in accordance with County Court Scale "D".

6. Mr Hellyer, Counsel for the body corporate makes a similar application with respect to his client's costs. He submits that the order should be at least as generous a form as the one which we made in favour of Ms Duggan but also he submits in the special circumstances affecting the body corporate, some or all of the costs should be fixed as between solicitor and client, rather than on the simple party party scale which was ordered in favour of Ms Duggan. Mr Hellyer says that the particular circumstances which would lead to this conclusion are first, that on the afternoon of the first day of the three day hearing, at the close a view and also immediately after the Tribunal reconvened following the view, offers were made by the body corporate to carry out maintenance on the plant room, indeed as I recall it, the statement was made that this maintenance work would be carried out in any event, whatever the outcome of the proceeding. In those circumstances Mr Hellyer says, solicitor client costs were appropriate perhaps the second or certainly the third day of the hearing. He observes that there are authorities which state with respect to offers, that a recipient of an offer made in the running of a proceeding should be allowed at least 24 hours for consideration before a costs penalty comes in. More generally Mr Hellyer drew attention to the comprehensive failure of the case put by MGS both against the body corporate and against Ms Duggan.

7. Mr Kistler on behalf of MGS submits either that there should be no order as to costs at all, that is, that costs should lie where they fall or that if a costs order is to be made it should be made on County Court Scale "A". He draws attention to the history of this matter which a substantial amount of preliminary investigative work was carried out by contractors engaged by the body corporate and it seemed for the considerable time prior to the issue of the present proceeding that the body corporate would accept liability and would commission work which would meet the concerns raised by Ms Duggan.

8. Mr Kistler says it was only virtually on the eve of the commencement of this proceeding that the body corporate made plain its position of denial of liability. Moreover, he says that when this matter came on for hearing both MGS and the body corporate had the advantage of experts and its was only in the course of the hearing that the full differences between the experts were laid out and examined. The proceeding came on within a matter of months and in the circumstances it was not unreasonable, Mr Kistler says, for MGS to take the line that it did in light of the expert advice which it had. Mr Kistler drew attention to one of my own decisions in the matter of Trycala Importers and Wholesalers Pty Ltd v Growmac Imports Pty Ltd [2001] VCAT 1445 a decision published on the 21st of June 2001 where I stated that costs orders by way of full indemnity should be rarer in the Tribunal than they are in Court. Of course an order for the payment of costs fixed as between solicitor and client falls short of a full indemnity order. However, I accept that the logic of what I said in the Trycala Importers' case would lead similarly to the conclusion that solicitor client costs orders should be more sparingly made in the Tribunal than they are in Court.

9. Turning then to the principles which must guide me in determining this application. Section 109(1) of the Victorian Civil and Administrative Tribunal Act 1998 sets a prima facie situation that costs in the Tribunal should lie where they fall. Sub-sections (2) and (3) then set out a lengthy series of examples where that prima facie rule or presumption if you will, will be departed from. The first thing that one should note is that the Real Property List in which this matter is heard and determined, represents a mere handful of cases relative to the Tribunal's total jurisdiction. A flea bite one might say. Anything that is done here could scarcely constitute subversion of the general presumption which we find in Section 109(1) against costs being ordered. Secondly, I note that one of the circumstances which may justify departure from the general rule is a consideration in accordance with Section 109(3)(d) of the nature and complexity of proceedings. Both Counsel were disposed to concede that these were proceedings of some complexity involving the weighing of competing expert opinion and determination upon the question of the source of water ingress which is notoriously a difficult matter. Certainly, we may say that they are vastly more complex than the ordinary run of proceedings in the Tribunal which are found in their culpious numbers in the Residential Tenancies List. Further, I should note that since drainage and water flow matters became an exclusive Tribunal jurisdiction under the Drainage and Land Act 1975 the almost invariable practice of the various Boards and Tribunals that have exercised that jurisdiction is to adopt the principle of costs follow the event. This practice was followed even during the years when the jurisdiction was exercised successively by the Planning Appeals Board and the Planning Division of the Administrative Appeals Tribunal. Both of those bodies discharged the jurisdiction under a regime where Section 58 of the Planning Appeals Board Act 1980 and later the Planning Appeals Act 1980 created a presumption against the award of costs. The decisions in the present Tribunal in the Water Act jurisdiction have followed the same line. It seems to me that having regard to the nature and complexity of these proceedings and the historical analysis that I have given, it is appropriate that there be an order for costs as between the parties and appropriate that the presumption in Section 109(1) of the VCAT Act should be departed from.

10. Mr Hellyer raised a number of other matters justifying the departure and referred to a number of other paragraphs in Section 109(3) of the statute. In light of what I have already said it is unnecessary for me to consider those further contentions.

11. The next question is according to what scale should the costs be fixed. Mr Hellyer drew attention to the costs of the remedial work which had been ordered, namely costs between $55,000 and $70,000 according to the monetary scales applying in the County Court, this would bring the matter within Scale "D".

12. Mr Kistler said that his client's case was that some lesser amount of maintenance or remedial work is necessary and therefore a much lower scale should be applied. In fact what happened was that the applicant and the body corporate were put to proof on what was potentially a much larger maintenance figure. MGS sought amongst other things a complete indemnity from a liability which has turned out to be more than $50,000. In those circumstances it seems to me an appropriate application of the monetary scale would lead us to County Court Scale "D" rather than "A".

13. Next I turn to the question as to whether these costs should be upon the simple party party scale or if some part or the whole being ordered to be taxed as between solicitor and client. I accept the submission made by Mr Kistler that in light of the presumption against the award of costs at all, costs as between solicitor and client must be rarer birds in the Tribunal than they are even in Court - and they are rare birds even there.

14. Mr Hellyer has drawn attention to a number of the contentions put by MGS against body corporate and their round rejection in our reasons. Nevertheless it is inherent in every contested piece of litigation that one party's contentions will be accepted and another will be rejected. That in itself justifies a higher than party party scale as between the litigants at the conclusion, party party costs will be the exception rather than the rule. In my view there is nothing to constitute this proceeding other than an ordinary fair fight by way of litigation.

15. Secondly, as to the offers and statements made at the conclusion of the first day of hearing, it is to be noted that this was but a three day hearing. Section 112 of the Victorian Civil and Administrative Tribunal Act 1998 makes specific provision for offers of compromise along the same lines as does Order 26 of the Rules of the Supreme Court. Both of those regimes provide for offers to be open for a period of 14 days. This indicates a policy of enabling the offeree to have time for reflection and time to obtain instructions. Offers made in the running are in the teeth of that policy, particularly where they are made at what is close to the mid-point of a relatively short hearing. In my view in the circumstances that this was a three day hearing, the offers and statements were made at too late a stage to have any impact upon the ultimate costs wash-up.

16. In my view therefore the proper order is that MGS Products Pty Ltd pay the costs of the Body Corporate to be taxed in default of agreement in accordance with County Court Scale "D".

17. As a consequence of the costs order I have just made there is now an application by the Body Corporate through its Counsel that MGS pays costs of the costs application and further, it submits that on and from the 15th of August this year, those costs should be on a full indemnity basis. That contention flows from a letter marked "Without Prejudice except as to costs", transmitted by facsimile on that date and stating generally that the Body Corporate was entitled to its costs on a rate more generous than County Court Scale "D" but that to avoid costs, delay and contention, the Body Corporate would accept an order in those terms. On page 2 of the facsimile transmission, the solicitor for the body Corporate stated:

"Accordingly I am instructed to offer that by consent of your client and my client an order be made by the Tribunal that my client's costs of and incidental to this proceeding (including all reserved costs) be fixed and taxed in default of agreement on a party party basis in accordance with Scale D of the County Court Scale."

18. Mr Hellyer on behalf of the Body Corporate relies upon Section 112 of the Victorian Civil and Administrative Tribunal Act 1998. That section provides as follows:

(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 sub-section (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."

19. It has not been submitted by Mr Kistler on behalf of MGS as I understood him that there was any failure to comply with Sections 113 and 114 of the Act. He draws attention however, to further correspondence with respect to the offer on the 27th of August. The solicitors for MGS denied the claims entitlement for costs above County Court Scale "A". The letter continued that:

"However on a without prejudice basis and in accordance with the proposal put you might submit to us your costs itemisation on a party party basis."

20. This led to a letter dated the 4th of September 2002 which had the solicitors for the Body Corporate joining issue as to a number of the matters raised which in the circumstances it is unnecessary to go to but the letter said that the Body Corporate wished to avoid the costs of preparation of a taxable bill without an assurance that it would be paid.

21. Finally, in a letter of the 24th of September 2002 the solicitor for the Body Corporate maintained his refusal to submit a bill in taxable form however he set out a number of charges based upon his firm's internal costing system. The letter concluded that unless these costings were accepted, the matter would be listed for hearing today, as indeed it has been. Mr Kistler on behalf of MGS submits that in regard to the correspondence just summarised, it would be inappropriate in considering the making of any order on a higher scale than party party to commence any earlier than the 24th of September, which really represents, as it were, the close of the correspondence.

22. Mr Hellyer submits that the simple terms of Section 112 take the matter back to the 15th August being the date of the offer which his client now relies upon with respect to his client's. I will turn in a moment to the issue as to the basis upon which any uplifted order for costs should be made and consider now whether there is justification for any costs uplift beyond the simple party party basis. It seems to me that what has occurred complies literally with Section 112. As I have noted there has been no suggestion that the letter of the 15th of August is other than one in accordance with Section 112, 113 and 114 of the Victorian Civil and Administrative Tribunal Act 1998. The without prejudice offer made was, if I may say so, with respect, a very well weighted one indeed because it is precisely the order which I pronounced without having the advantage or disadvantage of knowing that a costs order on that basis was the subject of a without prejudice offer. It is clear in the circumstances that the orders which the Body Corporate has now obtained are not more favourable to the other party than the offer, neither more favourable nor less favourable, precisely what was offered. It follows therefore that the enhanced costs order provided by Section 112 should follow unless anything would lead me to a contrary view. The presumption is in favour of such an order. It seems to me the fact that the parties continued with some negotiations and that the offer was extended until the 6th of September are beside the point. The positions taken by the parties are from the one side and the other side quite understandable. Obviously a party committing to costs taxed on a particular scale would like a greater "feel" as to how many dollars are involved. On the other hand the party invited to furnish an itemised account would be aware that the task is either an excessively burdensome one for a solicitor's firm internally or a quite costly one to achieve by the use of external cost consultants.

23. The positions of the parties are therefore quite understandable. However, their understandable views and the understandable way in which matters unfolded does not alter the fact Mr Hellyer as observed that the letter of the 15th of August was done in compliance with Section 112 and Sections 113 and 114 and contains an offer which has not been bettered today. Accordingly, in my view, it is appropriate that an enhanced costs order as contemplated by Section 112 should be made.

24. The next question is the basis upon which that order is to be made. The sub-section refers to all costs. There is a decision to which I have not been taken with which the parties concede exists of His Honour Judge Davey, as the Vice-President of the Tribunal to the effect that the expression all costs means costs on a solicitor client basis as distinct from costs on a fully indemnity basis. Balmford J in the matter of Anteden Pty Ltd v Glen Eira Council (2000) 17 VAR 334, 344 [26] stated that in the interests of consistency of Tribunal decisions, a Tribunal member particularly a non-judicial one, should generally follow a decision of a judicial member, either in this Tribunal or one of its predecessors. Her Honour faulted and reversed the decision of a non-judicial member of this Tribunal who declined to follow the decision of a Judge then President of the former Administrative Appeals Tribunal. This approach established a heavy burden in favour of my following Judge Davey's decision on this point. However there are countervailing considerations. If one looks at the Victorian Civil and Administrative Tribunal Act 1998 in general, one finds a tendency to eschew the traditional technical language which is to be found in statutes establishing Courts and delineating and regulating their jurisdiction. Section 109 the principal costs section is a particular example of that drafting style. It seems to me therefore there would be an incorrect approach to Section 112(2), which is to be found in the same general part of the statute as Section 109, to say that failure to select the words "on a full indemnity basis" was indicative that Parliament did not intend that as the result of the section. The language chosen is what has come to be popularly known as so called "Plain English". The fact that it leaves me in a position of uncertainty the proper basis of which I should act, suggests that it is not really plain at all; but this style has achieved such a vogue amongst politicians and draftsmen and draftswomen that to cry out against it seems pointless.

25. So I am left to ask what in plain English does the word "all the costs" mean? Some hesitation and with due respect to the contrary view of His Honour Judge Davey has come to, it seems to me that the plain meaning of "all" is "all" and according to the traditional mode of costs fixation provided for in the legal system the full indemnity basis is the one which most closely approximates to the concept of "all costs"; and so I will make the costs order in favour of the Body Corporate with respect to today's application on a full indemnity basis on and after the 15th of August.