3. The cost of the rectification works is relevant to the issue of costs of the proceeding. When the Applicant did not perform the rectification works as required by the Respondent, the Respondent settled the matter with the building owner and provided the sum of $51,481 so that the works could be carried out by another builder. The Respondent submitted to me at the costs hearing that the costs order in its favour ought to be made according to County Court Scale D (which applies to matters where the sum at issue is in excess of $50,000).

4. In determining whether I should make an order for costs I must have regard to the provisions of Section 109 of the Victorian Civil and Administrative Tribunal Act 1998. Section 109(1) provides that each party should bear their own costs of the proceeding. However, the Tribunal has a discretion to order that one party pay all or part of the costs of another if the Tribunal is satisfied it is fair to do so having regard to the provisions of section 109(3)(a) to (e). The parties accepted before me that the relevant paragraphs of section 109(3) in this instance are paragraphs (c), (d) and (e) which provide:

"(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."

5. The Respondent submitted that it is not unusual in the Domestic Building List for a successful party to be awarded its costs, referring to previous decisions by the Tribunal in this List including Australia's Country Homes Pty Ltd v Vasiliou, unreported VCAT 5 May 1999 and Samaras v Housing Guarantee Fund [2001] VCAT 661. The Respondent pointed in particular to Senior Member Young's statement in the latter case that in an inter partes commercial dispute the most significant criteria under section 109(3) is the relative strength of the cases. The Respondent further submitted that its claim must obviously have been the stronger one as it had been successful.

6. The Applicant on the other hand submitted that a presumption that the parties in a commercial dispute should have an order for costs if they succeed would trample on the discretion provided by section 109 for the Tribunal. The Applicant also submitted that the fact that the Respondent had been successful was not the only matter to be taken into consideration when deciding what had been the relative strengths of the claims made by each of the parties. I agree. It is logical to interpret section 109(3)(c) as allowing for degrees of relativity. If not, it could simply provide that a decision about costs should take into account whether or not the parties succeeded. The proceeding was not one in which, before the hearing, an objective observer would have said that the Applicant's case was without a prayer. The Applicant argued that the works required by the Respondent were not necessary or reasonable. Ultimately, the Applicant lost that argument, but only after exhaustive sifting of a lot of information, some of it not available until it was prepared for the purpose of the hearing. The answer to the question of whether or not the rectification works were necessary and reasonable was not an obvious answer.

7. The Respondent submitted that the proceeding was complex in a technical sense given the many and at times conflicting expert reports involved, the length of the proceeding and the number of interlocutory matters. The Applicant submitted on the other hand that the proceeding was not complex except that it was a dispute between experts and suggested that it was a point in the Applicant's favour that the Respondent itself had been unsure for some time before it ordered the rectification works that the builder ought to be held responsible. In my view this was not a particularly complex proceeding, except in terms of the technical information involved.

8. The Respondent submitted that an order for costs in its favour would promote the statutory insurance scheme, encouraging builders to be more careful about disputing the insurer's decision. The Applicant disputed that this would encourage the statutory scheme. I was not persuaded that an order for costs would support the scheme. It is an essential part of the statutory scheme that the parties may apply for review of the insurer's decision. While certainty in commercial matters ought to be encouraged, there is a need to balance this against the rights of parties to seek review of an insurer's decision where they think the decision is unfair, so that the insurer is encouraged to behave fairly and reasonably.

9. The Tribunal found the builder's view of matters to be incorrect in the end, confirming the insurer's decision that the builder should carry out rectification works. However, coming to this view required careful analysis by the Tribunal.

10. Taking all these matters into account, I have formed the view that this is an appropriate case for the exercise of the Tribunal's discretion to order that one party pay part of the costs of the other party. The Respondent is entitled to a part of its costs. Taking into account particularly the relative strengths of the claims made by each of the parties and the nature and complexity of the proceeding, it is my view that an order for costs on County Court Scale D would not be appropriate. While commercial considerations do apply it is my view that it would not be fair in this case to order costs at the highest possible scale. Rather, I should take into account the difficulties the builder faced in coming to a view about the rectification works. They were the same difficulties faced by the Tribunal.

11. Accordingly I order that the Applicant pay the Respondent's costs of the proceeding to be taxed in default of agreement on County Court Scale A.