1. The Owner must pay the Builder's costs on a standard basis and unless the amount is agreed by the parties, to be taxed on the County Court scale for the following:

(a) costs reasonably incurred on and from the date of the first letter of offer, namely, from 28 November 2019;

(b) costs reasonably incurred prior to 28 November 2019, but limited to the cost of the expert's report and the associated legal costs directly attendant to instructions for and obtaining the expert's report; and

1. The respondent (Builder) undertook building construction works for the applicant (Owner) at her home in Greenvale. An occupancy permit was issued on 20 September 2017. In January 2019, the Owner brought proceedings for recovery of the cost of repairs and completion of approximately $35,000.
2. The proceeding was heard in December 2019 and August 2020. The decision and orders were made on 28 August 2020 (Orders) ordering the Builder to pay the Owner $886.50, but otherwise dismissing the Owner's claim.
3. Costs were reserved with any application for costs to be made by written submission with any replies by no later than 18 September 2020. The Builder served and filed its submission for costs on 11 September 2020 (with supporting affidavit and invoices).[1] The Owner sought an extension of time within which to serve and file a reply. In the event, the Owner's reply submission was provided in material compliance with the Orders.

1. Section 109 of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act) provides that each party must bear its own costs of the proceeding, unless it exercises its discretion under s109(2) to order a party to pay all or a specified part of the costs of another party.
2. Section 109(3) provides as follows:

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.

1. In Vero Insurance Ltd v The Gombac Group Pty Ltd[2] the Tribunal is required to approach the question on an application for costs as follows:

(i) The prima facie rule is that each party should bear their own costs of the proceeding

(ii) The Tribunal may make an order awarding costs, being all or a specified part of costs, only if it is satisfied that it is fair to do so[3]. That is a finding essential to making an order.

(iii) In determining whether it is fair to do so, that is, to award costs, the Tribunal must have regard to the matters stated in s109(3). The Tribunal must have regard to the specified matters in determining the question, and by reason of paragraph (e) the Tribunal must also take into account any other matter that it considers relevant to the question.

1. In respect of s109(3)(a)(vi), whether the proceeding was vexatiously conducted, the sub section is concerned with the manner in which the proceeding was conducted, not with whether the proceeding itself was vexatious. A proceeding is conducted in a vexatious way 'if it conducted in a way productive of serious and unjustified trouble or harassment, or if there is conduct which is seriously and unfairly burdensome, prejudicial or damaging'.[4]
2. Further, in Country Endeavours Pty Ltd v Casacir Pty Ltd [5], Emerton J held on an appeal from VCAT that it is open to the Tribunal to find that 'the enforcement proceeding was brought for an ulterior purpose and was vexatious'. In considering whether an ulterior purpose, the Tribunal is entitled to look at matters outside the proceeding.
3. The present proceeding is also concerned with non acceptance by the Owner of two Calderbank offers and the operation of s112 and s114 of the VCAT Act. It is common ground that the offers did not comply with s112(1)(c) and s114(2), in that each offer was not open for the requisite period. In Velardo v Andonov,[6] the Court of Appeal held that an offer that does not meet the description of an offer under s112 'can be relevant to costs'.
4. In GJ Stanbrook Pty Ltd (t/a Gardner Homes) v East[7] it was found that the rejection of a Calderbank offer that did not meet the requirements of an offer under s114 was unreasonable and entitled the offeror to be paid costs, in that case, on an indemnity basis.

1. The Builder seeks an order for costs pursuant to s109(2) of the VCAT Act in the following alternatives:

(a) on an indemnity basis, fixed in the sum of $28,615.56 or otherwise as fixed by the Tribunal;

(b) to be taxed on an indemnity basis by the Costs Court;

(c) to be taxed on a standard basis by the Costs Court.

1. The Builder submits that the Tribunal should be satisfied that it is fair to make a costs order, having regard to the factors set out in ss109(3)(e), (a) and (c) of the VCAT Act.
2. First, in respect of the submission under s109(3)(a), the Owner's conduct of the proceeding. The Builder submits that the Owner's conduct unnecessarily disadvantaged the Builder by:

(a) Failing to file and serve an appropriate itemised list of defects on three occasions, being a non complex task; failure to do so is not explicable because the Owner was self represented. The list emailed on 10 October 2019 was not fit for purpose as it did not elucidate the alleged defects in any way;

(b) Failing to bring all relevant claims to the attention of the Builder's expert when he attended the Owner's property;

(c) Tendering at the hearing a large volume of undated photographs without previously serving them on the Builder in accordance with Directions, unnecessarily adding to the length of the hearing;

(d) Refusing to mitigate costs by agreeing for closing submissions to be made by written submissions;

(e) Vexatiously conducting the proceeding in the manner of rejecting offers of settlement, threatening the Builder with legal costs, claiming for defects not within the scope of the building contract (garage side door and laundry step), inconsistent, exaggerated and misleading evidence without probative value.

1. Second, in respect of the submission under s109(3)(e), 'any other matters the Tribunal considers relevant'. The Builder submits that two Calderbank offers were made consecutively on 28 November and 29 November 2019 following delivery of the Owner's expert report on 27 November 2019. The first offer proposed settlement by the Builder paying the Owner $1,900.00. This was rejected within 24 hours. The second offer the next day proposed settlement by the Builder paying the Owner $3,878.50. This was rejected within 3 days.
2. Both offers did not meet the requirements of s114(2) for the minimum period of 14 days during which an offer must remain open, as a trigger for a reversal of the presumption. However, the Builder submits that the offers are a relevant consideration for the Tribunal in the determination of the question of costs.
3. Another offer was made by the Builder on 1 September 2020, just after the decision was released, to settle on the Owner paying an amount of costs. This was also rejected by the Owner. The Builder submits that the Owner's rejections of these offers were unreasonable and that their rejection entitles the Builder to an order for costs on an indemnity basis.
4. Third, in respect of the submission under s109(3)(c), concerning relative strengths of the claims made by the parties. The Builder submits that the Owner simply failed to present any probative evidence capable of substantiating her claims, including where some of her evidence (or evidence of her witness) was inconsistent, exaggerated or misleading.
5. On these grounds, the Builder submits that the Tribunal can be satisfied that it is fair to order that the Owner pay costs, including that they be paid on an indemnity basis.

1. First, in respect of the Builder's submission under s109(3)(a) that the conduct of the proceeding caused unnecessary disadvantage (refer to sub paragraphs 13(a) to (c) above), the Owner submits that any failure to file an itemised list of defects that was fit for purpose, any failure to identify all defects during the expert inspection or any failure to tender all evidence in advance of the hearing, do not constitute the causing of unnecessary disadvantage.
2. The Owner submits that the disadvantage complained of was within normal and reasonable bounds which can be expected of a self represented litigant before the Tribunal and does not offend against the considerations referred to in ss(3)(a) (i) to (vi).
3. Also, in respect of the allegation of vexatiously conducting the proceeding (refer sub paragraph 13(e) above), the Owner submits:

(a) the Builder's offers were not made until almost a year after the issue of proceedings. It was not unreasonable to reject the offers based on her expectation that the offers would be completely insufficient to rectify the defects;

(b) any language used in an exchange with the Builder's representative in the 'heat of the moment' cannot reasonably be considered to demonstrate an ulterior motive for bringing the proceedings;

(c) the inclusion in the claim, of works not performed by the Builder, arose due to confusion on the part of the Owner, as a self represented litigant, and in the circumstances where works of the earlier builder were left incomplete;

(d) inconsistent, exaggerated or misleading evidence as the basis of vexatious conduct, is not to be determined based on the standard of assessing evidence under the VBA Guide to Standards and Tolerances. Vexatiousness is concerned with the manner in which the proceeding is conducted. That certain photographic evidence did not comply with the VBA Guide arose because the Owner, being a self represented litigant, was unaware of the requirement, not because of some ulterior purpose.

1. Second, in respect of the Builder's submission under s109(3)(e), any other matters, rejection of offers of settlement, the Owner submits:

(a) the offers did not meet the requirements of s112(1) (c), s112(2) and s114(2) of the VCAT Act;

(b) the Builder failed to adequately explain to a self represented litigant the cost consequences of rejecting the offers, the meaning of indemnity costs and sufficient legal authorities.

1. The Owner also submits on other relevant matters for the Tribunal to consider are:

(a) the bringing of the proceeding was not frivolous;

(c) the public interest would not be served by the making of a costs order where it would act as a deterrence against the bringing of meritorious claims.

1. Third, in respect of the submission under s109(3)(c), relative strengths and that the Owner simply failed to present any probative evidence, the Owner submits that her failure due to a lack of sufficient evidence does not mean the claim was completely without merit in fact or law from the outset.
2. The Owner submits she lacked financial resources to use an expert, beyond evidence that was tendered by various quotes. However, the claim had merit in that she was successful in part and that part of the Builder's work was defective.
3. Lastly, the Owner also submits, under s109(3)(d) of the VCAT Act, that the proceeding was not complex in nature and did not warrant the attendance of solicitor or counsel on the one and a half days across which the matter was heard.

1. The Builder submits that the Owner should pay costs under s109(3)(a) on grounds that she conducted the proceeding in a way that unnecessarily disadvantaged the Builder. This was particularised as including providing insufficient and inadequate points of claim or itemised list, failing to identify all alleged defects to the expert during at site visit, late tender of photos having no or insufficient provenance and by refusing to agree to save costs by agreeing to written closing submissions.
2. Whilst it may be that the conduct of the Owner has been productive of frustration and annoyance for the Builder, these manifestations of conduct are not untypical of self represented parties at the Tribunal. I have observed the Owner, Ms Jones, at the hearing on the first day of the hearing in December 2019 and later on during the part day hearing in August. Ms Jones's presentation of her case was at time frustrating, including the unverified, undated and unnumbered photos put in evidence.
3. However, Ms Jones conduct of the proceeding was in my opinion not by design or signifying an ulterior motive or lack of good faith. The conduct complained of did not unnecessarily or unreasonably prolong the hearing. The reversal of the presumption against costs in s109(1) of the VCAT Act is a matter subject to the discretion of the Member. For the reasons above, there are insufficient grounds to exercise that discretion based on her conduct of the proceeding.
4. The Builder also submits that Ms Jones's conduct, under s109(3)(a)(vi), unnecessarily disadvantaged the Builder in that her conduct of the proceeding was vexatious. The considerations are not dissimilar to those referred to in paragraphs 28 and 29 above.
5. Vexatious conduct is not made out by refusing offers of settlement or florid language stating a desire to cost the other party a significant amount of legal fees. Emotion and heat of the fray are co-existent in the pursuit of litigation, especially for a self represented party. Nor is vexatious conduct made out by the presentation of evidence that does not meet a general observational guideline provided for under standards and tolerances guidelines.
6. Further, presentation of evidence pressing a claim for matters beyond the scope of the contract by the Owner, in the circumstances of this case, were of a minor nature, not conducive of material disadvantage to the Builder. Again, whilst a represented party would likely have withdrawn those parts of the claim when presented with clear evidence of the contract scope, a self represented party is less attuned to such matters and how to respond.
7. The authorities on what constitutes vexations conduct of a proceeding are, in the main, uncontroversially captured in 24 Hour Fitness Pty Ltd v W&B Investment Group Pty Ltd.[8] On that assessment and test, I do not find that the above behaviours constitute seriously and unfairly burdensome, prejudicial or damaging conduct.
8. The determinative issue on the question of costs in all the circumstances of this case, arises under s109(3)(c) of the VCAT Act, namely the relative strengths and weaknesses of the parties' cases. The issue is whether the Owner should have formed an appreciation of the relative strengths and weaknesses of her case and the Builder's defence, in the manner contemplated by ss3(c), and concluded that her claim would be substantially unsuccessful. If the answer is that she ought reasonably to have come to such a conclusion, at what time should she have done so.
9. The Builder's letters of offer to settle on 28 and 29 November 2019 included the expert's report. Whilst they do not comply with the requirements of s112 and s114 of the VCAT Act, relying on the authorities referred to at paragraphs 10 and 11 above, I may nevertheless have regard to the letters of offer.
10. An assessment of the relative strengths and weaknesses of the Owner's case, including whether it had no tenable basis in fact or law, pursuant to s109(3)(c) of the VCAT Act, must be considered prospectively rather than retrospectively after my decision was made.[9] Thus, an objective assessment of the strengths or weaknesses of the Owner's case, prospectively, at the time of the letters of offer and prior to the hearing is the pertinent consideration.
11. In the offer letters, the Builder's solicitors summarised the core reasons why the expert found much of the claim would be unlikely to be made out. It is central to the Builder's submission that, at the time of receiving the offers, the Owner, even though self represented, should have appreciated that her claim lacked sufficient strengths and was, on the factual basis asserted by her, unlikely to succeed.
12. The letters summarised the four reasons stated in the expert report as to why, save for one matter, the remaining claims listed by her would fail. The four reasons are:

(a) Damage was caused by the occupants of the property;

(b) Works were not included in the Contract, scope of works;

(c) Items, where damaged, resulted from fair wear and tear; and/or

(d) Other items are not classified as defective in accordance with the VBA Guide to Standards and Tolerances and the Australian Standards.

1. The Owner submits that, whilst many of her claims ultimately failed due to lack of evidence, this is not the same as finding 'my claims were completely without merit in fact or law from the outset.'[10] Further, that the Owner's claim 'was undeniably meritorious to an extent; I was ultimately successful in establishing that the Respondent was liable for some of the defects claimed and was awarded damages as a result.'[11]
2. It is important to note that s109(3)(c) requires VCAT to consider a number of factors 'including' whether a party has advanced an untenable claim. An order for costs can still be justified even if untenability may not be established: Brown v Mornington Peninsula SC.[12] In Australia's Country Homes Pty Ltd v Vasiliou[13] VCAT found that it could have regard to the relative strengths of the parties' claims under s109(3)(c) even if the losing party's case was not 'bereft of merit'. In Hickey v Port Phillip CC[14] it was stated that the section is meaning to identify circumstances in which one party 'has expressed a clearly implausible, manifestly weak or incredible case'.[15] In Beasley v Victoria[16] it was stated that the expression means that 'a substantial disparity between the strength of one claim and the weakness of its competitor must exist before an order for costs will be fair'.
3. The above and like authorities provide a guide. A for those cases, it is important here to consider the operation of s109(3) in the factual context. In my opinion, the letters of offer, particularly the four reasons summarised and the attaching of the expert's report, made clear for a lay person the basis of the expert's conclusion. That is the four specific reasons why, in their view, liability does not attach to the Builder.
4. The Owner may have been self represented, but she was not a novice to building disputes. As referred to in my decision, paragraphs 1 to 5, she came to the present claim after having suffered the plight of her original builder going into liquidation with the VMIA making a thorough assessment of works to be completed and rectified by the present Builder after a tender process. The Owner was involved in that lengthy process and was aware of the process and recording of the agreed list of items settled by the insurer as requiring completion, those requiring rectification and those that were excluded.
5. It was reasonable for the Owners as a self represented litigant at the time she was presented with the expert report, 28 November 2019, to digest and consider her position, and it was reasonable for her to come to the conclusion that the relative strengths and weaknesses of her case meant that she was unlikely to substantially succeed against the Builder. The expert report demonstrated the existence of a substantial disparity between the strength of the Builder's defence on the claims and the weakness of the Owner's claims. Whilst the Owner's claims may not have been 'bereft of merit', noting that the claims found to be beyond the scope of the Builder's contract were bereft of merit, the overwhelming weight of the claims, save as to the minor findings in favour of the Owner, were manifestly weak.
6. In my view it was unreasonable for the Owner to press on, including without any probative expert opinion, in a vain hope of that the expert opinion of the Builder, including as to the four reasons referred to above, would be generally rejected and that she might reasonably anticipate an outcome in her favour, including an outcome more favourable than the settlement sums offered in letters of offer, dated 28 November 2019, of $1,900.00, or offer, dated 29 November 2019, of $3,878.50.
7. Given the importance of the expert report in providing an opportunity for the Owner to review and assess the relative strengths/weaknesses of her case, a consideration under s109(3)(c) of the VCAT Act, and my finding that it was unreasonable for her to press on with her full claim, I am satisfied that it is fair that the Owner pay costs properly incurred from and after the date of the first letter of offer, 28 November 2019.
8. I am satisfied that the requirement for fairness in Vero Insurance Ltd v The Gombac Group (refer paragraph 6 above) is made out after considering the matters referred to in s109(3). Conversely, I am satisfied that it would not be fair to the Builder to suffer the costs of defending its position, at least to the limited extent found in paragraph 45 above. Moreover, I am satisfied that it is fair to do so where my finding on liability for costs is limited, subject to paragraph 47 below, to costs incurred after the time at which I have found, in all the circumstances, it was unreasonable for the Owner to continue to press her case.
9. As referred to above, there are some additional costs that, on the same legal basis described above, I am satisfied it is fair that the Owner pay. These costs are costs incurred by the Builder prior to 28 November 2019, but limited to the cost of the expert's report and the associated legal costs directly attendant to instructions for and obtaining the expert's report. It is fair to do so because the expert report (and the expert's later oral evidence based on the report) were necessary to the Builder's proof of case, including this costs application.
10. Having found for an order for part of the costs, the Builder's application is that they be ordered on an indemnity basis. As a preliminary observation, I note the comments of DP Aird in McCann v Shangri-la Construction Pty Ltd[17] that s109 starts with the presumption that each party bear its own costs. Once the Tribunal is satisfied it is fair to depart from the presumption and make an order for costs it is a very high hurdle to demonstrate that a special order for costs should be made.
11. That is the starting point when moving to consider whether an indemnity costs order should be made. Factors relevant to whether an indemnity costs order is warranted were set out in Ugly Tribe Company Pty Ltd v Silcola.[18] It is not necessary to set out each of the factors, but instead refer to the ones relevant to the present matter. These factors are whether conduct of the Owner has caused loss of time to the other party, the continuation of the proceeding is for an ulterior motive or is in wilful disregard of known facts.
12. I have considered above whether there was vexatious conduct by the Owner. Given my findings of insufficient support establishing vexatious conduct and the matters considered, I find, for like reasons, that there is an insufficient basis to demonstrate that indemnity costs are warranted. A self represented owner is entitled to some latitude and the Tribunal must afford the same so as to ensure a fair hearing. There was not any persuasive evidence of an ulterior motive or of wilful disregard and insufficient evidence of a material loss of time. The application for an order on an indemnity basis is refused.

1. The Owner must pay the Builder's costs on a standard basis and unless the amount is agreed by the parties, to be taxed on the County Court scale for the following:

(a) costs reasonably incurred on and from the date of the first letter of offer, namely, from 28 November 2019;

(b) costs reasonably incurred prior to 28 November 2019, but limited to the cost of the expert's report and the associated legal costs directly attendant to instructions for and obtaining the expert's report; and

[1] Affidavit of Mustafa (Chris) Yorenc, sworn 10 September 2020; Solicitor's invoice dated 10 September 2020 and Counsel's invoices dated 18 December 2019 and 5 August 2020.

[2] [2007] VSC 117 at [20] per Gillard J.

[3] Underlining emphasis of Gillard J in Vero Insurance Ltd v The Gombac Group Pty Ltd, supra.

[4] Victoria v Bradto Pty Ltd [2006] VCAT 1813 at [67] cited with approval in 24 Hour Fitness Pty Ltd v W&B Investment Group Pty Ltd [2015] VSCA 216 AT [4].

[5] [2013] VSC 22 at [49] and [50].

[6] (2010) 24 VR 240; [2010] VSCA 38 at [39].

[7] [2015] VCAT 417 at [38].

[8] [2015] VSCA 216 at [4].

[9] Cooper v Boroondara CC [2001] VCAT 2429 at [31].

[10] Applicant's reply to respondent's submissions, paragraph 10.

[12] [2004] VCAT 1140 at [34].

[13] Unreported, VCAT, Young M, 5 May 1999; Pizer [VCAT.109.200].

[14] [2001] VCAT 231.

[16] [2006] VCAT 2044 at [20].

[17] [2020] VCAT 918 at [30].

[18] [2001] VSC 189 per Harper J.