1. In this matter, on 25 July 2003, I made a declaration that the contract made between the parties and executed on 27 August 1999 was repudiated by the Respondents on or about 12 April 2002 which repudiation was subsequently accepted by the Applicant: see Fasham Johnson Pty Ltd v Ware & Saunders [2003] VCAT 885. Then, on 19 July 2004, I ordered on the claim that the Respondents pay the Applicant the sum of $83,138.18 and I ordered on the counterclaim that the Applicant pay the Respondents the sum of $24,815.00: see Fasham Johnson Pty Ltd v Ware [2004] VCAT 1361.

2. Costs are now sought by both parties. I am told that the legal costs of the Applicant total over $148,000.00. I am told also that the Respondents have incurred legal costs which total over $107,000.00. As I observed in my earlier Reasons (at [1]) "every reasonable endeavour by the Tribunal to encourage them to resolve their differences has failed". As a result, the parties have both incurred significant legal expenses.

3. There are also claims for interest by the parties.

4. It was submitted I should proceed to set off the sum of $24,815.00 from the sum of $83,138.18 so as to leave a single order in favour of the Applicant in the sum of $58,323.18. I was not persuaded, however, that this was a proper course to adopt. A case I was referred to - Mobil Oil Australia Ltd v Caulfield Tyre Service Pty Ltd [1984] VicRp 35; [1984] VR 440 - does not clearly support the proposition sought to be advanced. I am unaware of any other authority which would compel me to act in the way submitted. The fact is, as I have found, the Respondents have established, to my satisfaction, an entitlement to an order on their counterclaim in the sum of $24,815.00. That, in my view, stands as a separate entitlement belonging to them and a subsisting one. I think it would be wrong of me to see that entitlement disappear by what would be, in effect, an accounting exercise. I do not propose to take that step and I know of no authority, as I say, which requires that step to be taken by me.

5. As regards the question of interest I consider it proper for me to act under ss 53(2)(b)(ii) and 53(2) of the Domestic Building Contracts Act 1995. The calculations have been helpfully done for me in respect of both parties (at the varying rates from time to time) and I accept those calculations as correct. I order on the claim that the Respondents pay interest in the sum of $20,982.72. I order on the counterclaim that the Applicant pay interest in the sum of $4,446.82. This means, all up, that on the claim the Respondents must pay $104,120.90, while on the counterclaim the Applicant must pay, all up, $29,261.82. The difference between the two happens to be $74,859.08. I do not, however, set one off against the other and each stands as a separate entitlement. I shall make final orders accordingly to give effect to interest.

6. I turn then to consider the question of costs. Sections 109(1), (2) and (3) of the Victorian Civil and Administrative Tribunal Act 1998 provide as follows:

(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 sub-section (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);

(v) attempting to deceive another party or the Tribunal;

(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;

(e) any other matter the Tribunal considers relevant.

7. It is quite apparent, from the terms of s109(1), that costs do not follow the event as in the courts. Costs ordinarily follow the event in the courts: see e.g. Dowdell v Knispel Fruit Juices Pty Ltd [2003] FCA 1276. The general rule in the Tribunal, on the other hand, is that "each party is to bear their own costs in [a] proceeding." By s109(2), however, the Tribunal is empowered to depart from this, but it is not bound ever to do so. By s109(3) the Tribunal may make an order under s109(2) only if satisfied it is fair to do so having regard to the matters specified in s109(3). The last of those matters is "any other matter the Tribunal considers relevant ":s109(3)(e). None of the matters specifies the success of a party in a proceeding. Success in a proceeding as such is, thus, not a ground. This is significant, in my view.

8. There are also provisions in the Act which deal with offers of compromise. Sections 112 and 113 provide as follows:

112. Presumption of order for costs if settlement offer is rejected

(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.

(3) In determining whether its orders are or are not more favourable to a party than an offer, the Tribunal--

(a) must take into account any costs it would have ordered on the date the offer was made; and

(b) must disregard any interest or costs it ordered in respect of any period after the date the offer was received.

s. 113

(a) with prejudice, meaning that any party may refer to the offer, or to any terms of the offer, at any time during the proceeding; or

(b) without prejudice, meaning that the Tribunal is not able to be told of the making of the offer until after it has made its orders in respect of the matters in dispute in the proceeding (other than orders in respect of costs).

(2) If an offer does not specify whether it is made with or without prejudice, it is to be treated as if it had been made without prejudice.

(4) If an offer provides for the payment of money, the offer must specify when that money is to be paid.

Acceptance of offers is dealt with in sections 114 and 115 which provide as follows:-

114. Provisions concerning the acceptance of settlement offers

(1) An offer must be open for acceptance until immediately before the Tribunal makes its orders on the matters in dispute, or until the expiry of a specified period after the offer is made, whichever is the shorter period.

(2) The minimum period that can be specified is 14 days.

(3) An offer cannot be withdrawn while it is open for acceptance without the permission of the Tribunal.

(4) In deciding whether to give permission, the Tribunal may examine the offer, even if it was made without prejudice.

(5) If the offer was made without prejudice, a member of the tribunal who examines it for the purposes of sub-section (4) can take no further part in the proceeding after determining whether or not to give permission.

(6) A party can only accept an offer by giving the party who made it a signed notice of acceptance.

(7) A party may accept an offer even though it has made a counter-offer.

115. Consequences if accepted offer is not complied with

If an offer is accepted, but the party who made the offer does not comply with its terms, the Tribunal, at the request of the party who accepted the offer, may--

(a) make an order giving effect to the terms of the offer; or

(b) if the party making the offer was the applicant--

(ii) if the party who accepted the offer made a counterclaim before the offer was made, make an order awarding the party any or all of the things asked for in the counterclaim; or

(c) if the party who accepted the offer is the applicant, make an order awarding the applicant any or all of the things asked for in the application.

9. Having heard from the parties, I am satisfied, in respect of both parties, that it is appropriate that I should not depart from the general rule established by s109(1). In other words, I consider that each party in this case must bear its or their own costs in the proceeding. Further, I am not satisfied that the Applicant has any entitlement to costs arising by virtue of s112(2) of the Act. Lastly, I consider I am not precluded from reaching this conclusion (of no orders as to costs) by having made orders for interest: interest is statutorily an aspect of damages but costs, if ordered, are additional and discretionary.

10. I am not bound to depart from the general rule established by s109(1). Considering the criteria mentioned in s109(3) I am not satisfied, in all the circumstances, that it would be fair to act under s109(2) to depart from that general rule. I do not consider it fair to order the Respondents to pay the costs of the Applicant and I do not consider it fair to order the Applicant to pay the costs of the Respondents. As regards the latter, I could not contemplate, in any event, ordering the Applicant to pay the costs of the Respondents except for their legal costs: see Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403. For costs under s109 means, in my view, legal costs - that is, costs of a lawyer.

11. In my earlier Reasons I made certain observations relevant to the question of costs in this case. See [2003] VCAT 885 at [59]. I there said that considerations relevant to the discretion on costs include these:

* Neither party has wholly succeeded but neither party has wholly failed.

* The Applicant has succeeded on the central issue but only at a late stage conceded there were defects in the works at the premises. Time could have been saved if that concession was made earlier.

* On the other hand the Respondents freely entered into the Agreement of July 2001 but then sought to argue its invalidity. Arguing its validity or alleged invalidity also took hearing time.

* Each party's costs, if ordered, may possibly be in the vicinity of the same amount.

*Neither party has provided me with the detail I need in order to be able to make final orders in favour of that party and there is a need (which should not have occurred) to reconvene the Tribunal. Or, the materials are not sufficiently clear in the case of both parties.

Some of these considerations no longer apply, or need to be qualified, in light of my later Reasons - where I pointed out though, that the Tribunal is under no obligation to order costs: see [2004] VCAT 1361 at [6]. Earlier, in my July 2003 Reasons, I also made the observation (at [1]) that "[r]elations between [these] parties ... soured long ago". Almost throughout the entirety of these proceedings, the parties have been hostile to one another, and unbending. Each has resolutely opposed the other. This has affected each party's conduct of the litigation from its very beginning.

12. Costs are discretionary and it is in the nature of an exercise of discretion that its exercise one way or another cannot be compelled. And under s109 success in a proceeding does not by itself justify an order for costs. Something further must be shown.

13. In any event, there are considerations in my view why costs should not be ordered in favour of either party. First perhaps in order of importance is that neither party has wholly succeeded but neither party has wholly failed. It is true, though, that the Applicant's success has been greater than the Respondents' in terms of monetary amounts involved. The Applicant, however, only at a late stage conceded there were defects in the works at the premises. On the other hand the Respondents entered into an agreement of July 2001 and then sough to argue its invalidity. The Applicant could have conceded the defects very much earlier while I must question why the Respondents would wish to argue the invalidity of an agreement they themselves voluntarily entered into.

14. The Respondents argued various financial and emotional points on the question of costs in an endeavour to persuade me not to order costs against them. For example - that they could not afford to pay a costs order in favour of the Applicant because Mr Ware is on a government pension (for total and permanent incapacity arising out of service in the Vietnam War) and there is no other income coming into the household. He pointed out that he had used his mother's life savings to help fund the litigation. He said his young daughters (aged I think 13 and 8 years) had not had new clothes for 3 years. Apparently Ms Saunders is not working.

15. These are distressing considerations (which, in fairness, the Applicant acknowledged were so) but I regret to say I do not take them into account in the exercise of my discretion on costs. That is to say, if I should be satisfied I should order costs in favour of the Applicant I will not decline to do so by reason of these considerations. It is pointed out to me that the Respondents are yet to pay an order for costs made by the Supreme Court in an unsuccessful appeal of my decision in July 2003. That seems to me to be unworthy conduct. The appeal obviously was destined to fail. Equally, too, I am quite satisfied (as I observed in my decision in July 2004) that this litigation has, until now, become the Respondents' central focus. So much so is this the case, that, if the Respondents have incurred expenditures - as they have - then they have themselves to blame as well. But also at fault is the Applicant too.

16. I return to the fundamental consideration that neither party has wholly succeeded and neither party has wholly failed. Neither case was wholly untenable in fact or law. Each case has had its strengths. But neither party has fully succeeded. The Applicant succeeded on the principal question discussed in my July 2003 Reasons in which I found, as I say, that the Respondents wrongfully repudiated the building contract. On the other hand, this was, in my view, a success of a technical kind in that it arose from defective contractual notices delivered by the Respondents. There were, at the time, grounds for the notices to take effect, as provided for, had they been valid in that, there were, I am in no doubt at all, defects in the Applicant's works at the premises at the time. These defects should not have occurred but it was because they had occurred, and for other reasons also, that the notices were served. Yet it was not acknowledged by the Applicant, at least formally, that there were defects in the works until late in the piece and only really at the commencement of the hearing.

17. That acknowledgement came at the beginning of a hearing estimated by both parties to go for only about 5 days - which has ultimately taken over 20 days over a number of months to conclude. Both parties were legally represented when that estimate was given. And the estimate was quite wrong and should not have been given. Neither party sought a direction for transcript. Transcript would have greatly assisted the Tribunal and the parties themselves but evidently they gave no consideration to this. Neither party was fully prepared, at the principal hearing, on the question of quantum in light of what I could, and did, determine. It should not have been necessary to hold a separate hearing, by having to reconvene the Tribunal, to determine the question of quantum. Resources and time were wasted in consequence.

18. There is nothing in any of this that persuades me, as regards either party, that any of the criteria mentioned in s109(3) can be identified such that it is fair that I should order costs under s109(2) and depart from the general rule in s109(1). Each party, moreover, has been as steadfastly uncompromising as the other. Each might, or will, claim, of course, or will continue to claim that it is the other party's fault. Not only has neither party wholly succeeded or wholly failed but there is unworthy conduct on the part of both. I wish to make it clear I do not comment adversely about the legal practitioners. Conduct I mention for inclusion is the expectation by the Applicant, for instance, that the Respondents should have to pay for an air conditioning unit left just gathering dust somewhere. But the Respondents took nearly every point they might - many trivial and some plainly wrong - and delayed the proceedings in that way. Then again the Applicant took several attempts at establishing the figures in its quantum and that took up valuable Tribunal time too.

19. Not only am I unable to identify a single criterion under s109(3) that persuades me that either party should have its legal costs but there are, then, considerations, going to the discretion on costs, which, in my view, are adverse to both parties. Nothing in s109(3) predominates in favour of one party over the other in my view. And the success alone of one party or the other is not sufficient.

20. There remains for consideration a Settlement Offer of the Applicant dated 17 February 2003. Each of the parties served on each other, so I learn, two offers of compromise. This Settlement Offer (more realistic than the others) is expressed as follows:

1. The Applicant hereby offers to settle this proceeding as follows:

(a) the Respondents pay to the Applicant the sum of $90,506.00 on the claim; and

(b) the Respondents to pay to the Applicant the costs on the claim up to the date of acceptance of this offer on the appropriate County Court Scale, with such costs to be agreed, or in default of agreement, to be taxed by the Principal Registrar of the Tribunal; and

(c) the Applicant to pay to the Respondents the sum of $30,000.00 on the Counterclaim; and

(d) the Applicant to pay to the Respondents the costs on the Counterclaim up to the date of acceptance of this officer on the appropriate County Court Scale, with such costs to be agreed, or, in default of agreement, to be taxed by the Principal Registrar of the Tribunal;

2. The offer is open for acceptance for a period of fourteen (14) days after service of the offer.

3. The offer is made without prejudice and is served in accordance with Part 4, Division 8 of the Victorian Civil and Administrative Tribunal Act 1998.

4. Further or in the alternative the offer is made without prejudice and the Respondent intends to rely on this offer on the question of costs if in all the circumstances it is appropriate to do so and is made in accordance with the principles contained in Calderbank v Calderbank [1995] 3 All ER 333 and Cutts v Heads [1983] EWCA Civ 8; [1984] 1 All ER 597.

21. It is argued by the Applicant that it has an entitlement to costs under s112(2) as a result of this Settlement Offer. It is pointed out that the Applicant in the proceedings has recovered more than $90,506.00 (if I include interest) while the Respondents have themselves recovered less than $30,000.00 (even taking interest into account). From this it is said to follow that, unless I order otherwise, the Applicant is entitled to costs from the date of the Offer. As I followed the argument, it was submitted even that the Applicant should get indemnity costs from that date.

22. I cannot agree that the Settlement Offer brings s112(2) into operation. The Tribunal may act under s112(2) only if an offer complies with ss 113 and 114: see s112(1)(c). But I cannot agree that the Offer complies with s113 in that, in my view, as an offer that provides for the payment of money, it fails to "specify when that money is to be paid." There is nothing in the Offer which specifies when either the $90,506.00 or the $30,000.00 is to be paid. It was submitted that either such sum was to be paid within 14 days - being the period for acceptance of the offer. But that period is a different period to the one which must be specified by s113(4). See s114(2). The two are different. In failing to specify when the money is to be paid the Offer does not, in my view, comply with s113 as required by s112(1)(c). Further, s113(4) is a mandatory requirement ("must") that cannot be overlooked. No provision in the Act entitles me to dispense with the requirement in s113(4) and I am not at liberty simply to disregard it. The requirement, moreover, is not met by saying in the Offer that it is served in accordance with Part 4 Division 8 of the Act - presumably it was, but it does not specify any date for the payment of money as required by s113(4).

23. In my view, then, the Settlement Offer in question does not attract the operation of s112(2). Furthermore, in specifying reliance on Calderbank v Calderbank [1985] 3 All ER 333 and Cutts v Head [1983] EWCA Civ 8; [1984] 1 All ER 597 the Settlement Offer, despite what it says, does not seem to be one that complies with the regime fixed by Part 4 Division 8. These authorities (and the reference to them in the Offer) do not seem to be "terms" on which a party is prepared to settle a proceeding but seem to be extraneous. In any event, even if s112(2) did operate in this case, I am satisfied, for the reasons I have given, that I should "otherwise" order, as permitted by the provision, in that the case is such that there are discretionary considerations pointing away from a conclusion that the Applicant should be rewarded by an order for costs.

24. In light of the regime fixed by ss 112, 113, 114 and 115 of the Act, I would be in doubt that there is any room for a Calderbank v Calderbank offer to be made in proceedings in the Tribunal. I would think an Offer of Compromise that does not comply with that regime cannot operate as an offer of compromise at all. The existence of that regime moreover, seems to mean Calderbank offers are unnecessary: in Cutts v Head at page 610, Oliver LJ., speaking of the Calderbank letter said that "it should not be thought that ... such a letter can now be used as a substitute for a payment into court, where a payment into court is appropriate." However, the Calderbank letter has been said to be "such a useful and flexible weapon for litigants" (see Henderson v Amadio, FCA, Heerey J, 22 March 1996_)_ that I should not rule that the provisions of the Act in ss112-115 impliedly preclude one being sent. In any event, the Settlement Offer, in mentioning a Calderbank point, was hardly in the form of a conciliatory letter offering a compromise - or even in the form of a letter, for that matter. Possibly even it was intimidatory. Nor did it specify an actual amount for costs which would be accepted to see the matter finalized, as it might have done. Strictly, I doubt it even mentions a Calderbank amount. Also, it was not straight forwardly a Calderbank offer - it says that it is made in accordance with the principles in that case and in Cutts v Head, but how can this be so if it purports to be an offer of compromise under Part 4 Division 8 of the Act? Expressing it within the context of an Offer of Compromise, I think, confuses the issue and robs it of a distinctly Calderbank effect also. In any event, even if a Calderbank type offer was successfully conveyed by the Settlement Offer, I would still be not under any obligation to award costs to the Applicant. A Calderbank offer (if this was one) cannot fetter my discretion on costs under s109. That discretion rests with me and I cannot be compelled to exercise it one way or the other providing I proceed "judicially" as that expression is understood. And I am satisfied there are discretionary considerations pointing away from an award of costs to the Applicant.

25. I am satisfied also, as I have said, that there are discretionary considerations pointing away from an award of costs to the Respondents as well.

26. In all the circumstances, I do not consider that either party should be rewarded for its conduct in and of the proceedings by an order for costs.

27. The result, therefore, is this - I rely upon s109(1) of the Act; each party must bear its own costs.