Victorian Civil and Administrative Tribunal|2020-06-26

For the reasons given, I have found that there should be an order for costs in favour of the Owner pursuant the power conferred by s.109(2) and also, pursuant to s.112, in regard to costs incurred after 26 April 2019.
Costs are generally assessed on the standard basis unless the Tribunal considers that, in the circumstances of the case, they should be assessed on some other basis. (see: Velardo v. Andanov [2010] VSCA 38; Paleka v. Suvak [2000] VCAT 58; Pacific Indemnity Underwriting v Maclaw No 651 Pty Ltd & anor [2005] VSCA 165; Mardel Constructions Pty Ltd v Sinha [2009] VCAT 1523).
Mr Harris seeks costs on a full indemnity basis. In support of his application, he referred me to a number of authorities.
In Fountain Selected Meats (Pty Ltd ) - v.- International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397, Woodward J said (at p.401):

In Colgate-Palmolive v Cussons [1993] FCA 536; (1993) 46 FCR 225, Sheppard J said (at para. 24:

"24. It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:-

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4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (39 Ch D at 141) said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require." Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ((1982) 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo, "The categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata.

5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been 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 (both referred to by Woodward J in Fountain and also by Gummow J in Thors v. Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v. Hutchinson (1987) 10 NSWLR 525, Maitland Hospital v. Fisher (No. 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal), Crisp v. Keng (Supreme Court of New South Wales, 27 September 1993, unreported, Court of Appeal) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories 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."

Reference was also made to Pacific Indemnity Underwriting Agency Pty Ltd v Maclaw [2005] VSCA 165 at paras. 89 92.
Although acknowledging that the Tribunal should only award indemnity costs in exceptional cases, Mr Harris said that this was such an exceptional case because:

(a) the Builder continually flouted orders made by the Tribunal;

(b) the Builder's case was hopeless and without merit, particularly in regard to the plastering and for suspending works for no reason;

(c) the Builder sought, very late, to introduce new claims that had not been agitated before, being a baseless claim for quantum meruit, which was not subsequently sought to be proven, the claim that the rectification work resulted in betterment for the Owner and a claim for an extension of time of 441 days, which was first raised at the start of the hearing. Only 13 days extension were allowed in the final decision.

I think that this is one of those exceptional cases in which indemnity costs should be awarded. The extent of default on the part of the Builder in complying with directions by the Tribunal in the interlocutory stages of this proceeding was extraordinary. The additional costs caused to the Owner by reason of those defaults must have been substantial.
More significantly, the Builder's claims had no tenable basis in fact or law and the Owner should not have been put to the expense of contesting them. No experienced builder could have genuinely believed that the Builder was entitled to receive the fixing stage payment or suspend work when it was not paid. Yet the Builder issued this proceeding to recover money which Mr Hummel must have known it was not entitled to receive.
The Builder, properly advised, should have known that it had no chance of success. To paraphrase what Woodward J said in Fountain Selected Meats, in such a case the proceeding must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Whether it was to dissuade the Owner from pursuing a counterclaim to recover the very large losses that she had suffered by reason of the Builder's conduct or something else is not material. The proceeding should not have been brought.

There will be an order that the Builder pay the Owner's costs of this proceeding, including reserved costs and the costs of this application for

costs, such costs if not agreed to be assessed by the Victorian Costs Court on an indemnity basis in accordance with the County Court Scale.

Civil and Administrative Tribunal Act 1998

Hummel Homes Pty Ltd v Mitchell (Building and Property) (Costs) [2020] VCAT 659 (26 June 2020)

Each of these offers was stated to be made pursuant to sections 112 to 115 of the Act and was open for acceptance for 14 days.
Mr Harris submitted that the first of these offers was more favourable to the Builder than the order made in the proceeding because, if the sum of $25,000.00 is deducted for the Owner's costs, the net amount the Owner was willing to receive with respect to her claim was $245,000.00, being less than the amount awarded. To accept that submission I would have to make a finding that, if I had made an order for payment of costs on 17 December 2018, those costs would have been assessed at no less than $25,000.00.
Some guidance as to the process to be followed in forming an opinion as to the amount of costs that would have been awarded is found in the judgment of Garde J in Metricon Homes Pty Ltd v Sawyer [2013] VSC 518. In that case, his Honour said (at para 36):

The proper approach to be taken in regard to an application for costs under s.109, is as set out in the following passage from the judgment of Gillard J in Vero Insurance Ltd v The Gombac Group Pty Ltd [2007] VSC 117. In that case, the learned judge said (at para 20):

Quite obviously, in every case, the Tribunal will have considered the case of the successful party to have been stronger than that of an unsuccessful party against whom the order for costs is sought. This part of the section is concerned with a situation where there is a substantial disparity between the strengths of the two claims (see Beasley v Department of Education and Training [2006] VCAT 2044, the Tribunal (at para.20).
The extent of this disparity must be considered, along with any other factors, to determine whether it is fair in all the circumstances that an order for costs be made. The greater the disparity the more significant this factor is.
Mr Harris submitted that the relative strengths fell heavily in favour of the Owner. He said that the Builder's attempt to justify "what was clearly a shoddy job", particularly in regard to the plastering, required the Owner to call Mr Mackie, her expert, Mr Lombardi, the replacement Builder and Mr Powell, the plasterer who had to rectify much of the bad workmanship.
I accept that there was a very substantial disparity indeed in the strengths of the respective cases. I found that the Builder's claims were quite without merit. Mr Hummel's claim that fixing stage had been reached was clearly not maintainable and the Builder had no basis whatsoever for suspending work when it was not paid. It was quite obvious that the plastering was very bad indeed and yet the Builder refused to rectify it. The claim in the Points of Claim that the Builder was entitled to be paid $95,104.00, which changed in Mr Hummel's witness statement to $109,347.01, was without any merit whatsoever.
There was also a late claim for a quantum meruit and then no evidence was given to prove the value of the work.
I think the large disparity in the strengths of the two parties' cases weighs heavily in favour of an order for costs.

Hummel Homes Pty Ltd v Mitchell

At a glance

Court

Decision date

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Judgment (14 paragraphs)

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Legislation Cited (1)

Cases Cited (9)

Hummel Homes Pty Ltd v Mitchell (Building and Property) (Costs) [2020] VCAT 659 (26 June 2020)