In reading it [in reference to the 23 November letter] I became confused and seek clarity; your client is seeking to withdraw from the matter and provided two days (by 23 November 2018) for me to agree to do likewise, otherwise your client will vigorously pursue it.

The statements indicate a mixed message, particularly given the short time frame provided scant opportunity to consider what is loosely termed an offer.

In terms of my being in breach of the VCAT order, the statement is incorrect. The requisite documents were provided within the prescribed time frame, however VCAT did not action same due to an administrative error... Your client had open (sic) and read copy of counterclaim addressed her to which she return (sic).

1. The Builder's letter then set out a list of items that the Builder said had not been paid for by the Owner, in breach of the Contract, totalling some $12,437.87 (excluding a claim for interest on the amount claimed). It went on to assert dates where the Builder said he had attempted to inspect the property but had been refused entry. In this regard it noted that the Builder said he emailed the Owner on 20 November 2018 requesting permission to enter the property, and that on 21 November 2018 he had been refused entry. He said he had returned on 22 November 2018, but no one had answered, and again on 23 November 2018 where he said he had observed a party at home, but they did not answer the door. The Builder concluded the letter stating, 'At this stage as the deadline of 23 November has passed the matter will continue unless of course your client elects to pay the amount outstanding'.
2. By email dated 12 December 2018 the Owner's solicitors wrote to the Tribunal, noting that the Owner had only received the Builder's counterclaim on 20 November 2018[12] and seeking an extension of time within which the Owner was required to file her Reply and Defence to the Counterclaim. It also referred to the Tribunal's orders made on 18 October 2018 requiring the Owner to allow the Builder access to the property, noting that the Owner had yet to facilitate access and could not do so until the New Year. The date by which the Owner was to allow access to the Builder was subsequently extended by order of the Tribunal to 24 January 2019.
3. At a directions hearing held on 21 January 2019 the Owner, who was represented by her solicitor, was given leave to file amended points of claim, and the dispute was referred to a half day mediation on 5 March 2019.
4. Amended points of claim, drawn by Counsel, were filed on 24 January 2019. The amended claim, as pleaded, sought damages of $25,148.10 based on breach of the terms of the Contract and the statutory warranties, in that it was alleged the works carried out by the Builder were defective and or incomplete. A further claim for interest of $11,000 owing under the terms of the Contract, and continuing, was also sought.
5. On 21 March 2019 a 'formal' offer to settle the case was made by the Owner in accordance with the relevant provisions of the VCAT Act,[13] on the basis the Owner would accept $16,000 in full and final settlement of the claim and counterclaim. The offer was said to involve a 'write off' of the interest component of the claim ($11,000) and $13,000 in legal fees which had been incurred since 21 November 2018, when the walk away offer was rejected.
6. On 3 July 2019, a solicitor acting on behalf of the Builder, contacted the Owner's solicitor asking whether the Owner would reconsider the offer of 21 November 2018, namely, the matter be resolved on the basis that each party walk away.
7. By letter dated 9 July 2019, the offer to each walk away was rejected by the Owner and a further offer, again made in accordance with the relevant VCAT provisions, was made, namely, that the Owner would accept the sum of $26,287.03. That offer was said to represent $20,000 of legal fees and expert fees that the Owner had paid to date, and 25% of the amount claimed by damages, namely 25% of $25,148.10, being $6,287.03.
8. By reason of amendments and concessions made both at the start of, and during, the hearing, the amount claimed by the Owner by way of damages for defective and incomplete building work was revised on the first day of hearing to $19,353.50 (excluding interest).

1. The Owner asserts it would be fair to award costs in her favour relying upon the grounds described in s 109(3)(c), (d) and (e) of the VCAT Act. Before I deal with each of the grounds relied upon by the Owner, I note the Builder has submitted, as a preliminary matter, that the Owner's application for costs should be dismissed as it had not been filed in accordance with the Tribunal's order dated 23 March 2020. That order required any application for costs to be filed by 4pm on 6 April 2020; the Owner's application for costs was filed at 4:40pm on 6 April 2020.
2. Under s 126 of the VCAT Act, the Tribunal may, on its own initiative, waive compliance with any procedural requirement, other than a time limit that the Tribunal does not have power to extend or abridge. Further, the Tribunal may extend time or waive compliance even if the time or period of compliance had expired before the extension of time is ordered.[14] The purpose of the provision is to allow matters to be determined, rather than avoided, on their real and substantial merits.
3. I am satisfied that it is appropriate to extend the time within which the Owner could comply with the orders made on 23 March 2020. The Builder has not been prejudiced by the 'late' filing and the filing of the submissions 40 minutes after the specified time, I consider, is a 'technical breach'.

The relative strengths of the claims, including whether a party has made a claim that has no tenable basis in fact or law (s 109(3)(c))

1. It was submitted that whilst parts of the Owner's claims were not upheld or were substantially reduced in quantum, none of the claims were 'hopeless or untenable'. The Owner's submission noted that 'on the occasions in which anything came to light to materially undermine a particular aspect of her claims, concessions were clearly, promptly and properly made'.
2. It was also said that, regardless of the extent of the damages awarded, the fact was the Builder's work was defective, the Owner suffered loss, and the Owner 'has necessarily had to incur substantial expenses to obtain that relief to which she is entitled'. It was said the Builder's approach 'left the Owner with no option but to run her case before the Tribunal if she wished to recover even one dollar of the relief' and that the Builder 'consistently disclaimed responsibility for the most obvious defects for which he had no evidence and no conceivable defence'.
3. Conversely, it was submitted that the Builder's counterclaim was 'weak, untenable and obviously so'.
4. The Builder said the sum awarded to the Owner showed 'how exaggerated and unjustified the claim was'.
5. It is long established that the fact that one party was successful 'does not automatically mean that the strength of the claim of the other party was so weak as to attract the operation of s 109(3)(c ).[15] It is usual during litigious proceedings between parties that one party's argument succeeds, which means the other party's argument fails, but that does not render the losing party's argument to have been untenable.
6. In Beasley v Victoria[16] the Tribunal said the expression 'no tenable basis in fact or law' 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'. In Dennis Family Corporation Pty Ltd v Casey CC[17] the Tribunal said, in reference to s 109(3)(c):

This certainly cannot mean that an unsuccessful party should be required to pay costs because, at the end of the case, that party's claims have been found to be untenable in fact or law to the extent that they were not upheld and were not successful. That would amount to 'costs following the event'. It would compromise the general rule created in s 109(1).

As I have said, I do not think that the consideration indicates an order for costs where there are strong cases on either side or perhaps evenly balanced cases on either side.

I am not minded to go so far as to say that a weak case will necessarily indicate an order for costs. The word 'untenable' is stronger than 'weak'. The Macquarie Dictionary, second revision, defines 'untenable' as incapable of being held against attack, incapable of being maintained against argument, as an opinion, scheme etc.

I think 'untenable' in the context of section 109(3)(c) means something like so weak as to be unarguable, rather than merely weak.'

1. The Builder was successful in defending more than 80% of the claim pursued against him at the hearing, being, as a dollar value, $16,044. In this regard I do not agree with the submission that the Builder 'consistently disclaimed responsibility for the most obvious defects for which he had no evidence and no conceivable defence'.
2. The Owner defended the counterclaim which, as a dollar value, was $12,437.87. That sum, coupled with the amount ordered to be paid to the Owner of $3,309.50[18] equates, as a dollar value, to a total of $15,747.37. If viewed in this way, whilst overall the net amount of money flowed to the Owner, I do not think it can be said there was a 'substantial disparity' between the parties' relative positions.
3. Invariably I think it can be said any party who commences a proceeding at the Tribunal has done so because they were 'left with no option'. As stated above, the fact a party ultimately succeeds in their claim, a result which, on its face, justifies the action they took in initiating the proceeding, does not then mean any legal costs incurred will be met by the other side. Further, the fact an applicant has expended substantial legal expense in litigating a dispute at the Tribunal does not, in and of itself, mean the party is entitled to a cost order. I acknowledge the amount spent on legal fees by the Owner in this dispute is significant. However, whether the Owner is entitled to an order for some or all of those costs falls to be determined by consideration of the matters under s 109(3).
4. In the circumstances I am not persuaded that s 109(3)(c) of the VCAT Act gives rise to an entitlement on the Owner's part to costs.

Nature and complexity of the proceeding (s 109(3)(d))

1. It was submitted on behalf of the Owner that the proceeding was both legally and factually complex and could not have been conducted by the Owner without expert evidence and substantial legal assistance. It was said this was a factor which 'typically tends in favour of an award of costs in domestic building matters.' I note the submissions also stated 'Costs are commonly awarded in domestic building disputes because such cases, by their nature, have a propensity to fall within the exceptions contained in s 109(3) particularly having regard to 'the nature and complexity of the proceeding'.
2. The Builder submitted that the matter did not require legal expertise. He said 'The [Owner] chose to get legal assistance at her own expense as it was more of a tactic and clutching at last straws that was used by the [Owner] to stop [me] from entering the property and gaining further evidence that could be used against the [Owner]'.
3. In Hyndman v Hurtob Homes Pty Ltd[19] the Tribunal observed:

Proceedings concerning domestic building disputes are normally costly to conduct. Experts' reports are usually required which are expensive. The discovery process of even a modest building dispute is usually arduous and costly involving a large number of documents on both sides. Witness statements are usually ordered, and they are most commonly drawn or settled by counsel. There are generally many factual issues involved as well as legal issues, often requiring complex legal argument. The hearing will usually occupy several days. For these reasons, the "nature and complexity of the proceeding" is commonly regarded as warranting an order for costs in favour of a successful party.

In each case the question is whether it is fair in the circumstances of the particular case that a party be ordered to pay the costs of another party. The onus of establishing that is on the party seeking the order for costs. Since every case is different, reference to what occurred in other cases is of little assistance.

1. As I observed in the Decision, this dispute raised complex legal issues, including:

1. the question of law concerning the validity of the Final Certificate; 2. the question of law concerning the contention that the Builder was barred from issuing the Counterclaim because he had not disputed any progress claims in the manner required by the Contract;

1. the question of law concerning whether the Owner's claim for damages was not a claim for money owing under the Contract, and therefore the Final Certificate could not bar her claim; and

1. the effect and relevance of the parties' subsequent conduct after the issuing of the Final Certificate.
2. Further, it was appropriate that the Owner rely upon expert evidence in presenting her case. The dispute was heard over two hearing days of which 1.5 days of hearing time was taken for the Owner's claim. In particular, the Owner's expert evidence, in support of the damages sought for the cost of rectifying defective and incomplete building work, occupied the first hearing day. Evidence in relation to the Builder's counterclaim for unpaid work and labour carried out, was heard in the afternoon of the second day of hearing.
3. I therefore agree that the complexity and nature of the dispute included issues which warranted the engagement of legal representation and technical experts. I am satisfied that, in these circumstances, it is fair that the Owner, as the overall successful party, is entitled to an order that the Builder pay 'part of or a specified part of' her costs.

Any other matter the Tribunal considers relevant (s 109(3)(e))

1. The Owner submitted that the Builder unreasonably refused the offer to 'walk away' proposed in the Owner's solicitors letter dated 21 November 2018, which they say was before any legal costs had been incurred.
2. It was submitted that:

1. notwithstanding the walk away offer was not made in accordance with ss 112 - 115 of the VCAT Act, it was still a relevant matter to costs and ought to be determined according to 'ordinary principles relating to settlement offers, namely whether it was 'unreasonable in the circumstances' for the offer to be rejected'; 2. the Builder's rejection of the offer was 'patently unreasonable', it was said, as the Builder had the expert reports and the Architect's assessment of defects, and 'all three reports concluded that his work was defective in multiple respects'. It was said that as a matter of pure logic the Owner could do no worse on her claim than the zero damages she was at that point offering to accept from the Builder; and

1. the offer was 'so obviously advantageous that he would have required no time or thought to consider' and rejecting it flew in the face of reason. It was said 'the only proviso in accepting the offer was that the Builder discontinue a counterclaim 'which was manifestly hopeless in any event and which he had obviously only commenced in response to the Owner bringing her initial claim against him'.

1. The Builder said that the walk away offer only gave him a very short time frame within which he was to consider the offer, and that it had been given at a time when he had not been allowed to visit the property. He said he believed the Owner refused to allow him to enter the property 'to coverup evidence of what works were carried out on the property that the [Owner] was claiming for during the hearing at VCAT.' He said it was his view that the Owner had recognised her claim was not justified and was exaggerated and that she was avoiding paying for building costs, material and works that he had carried out under the contract. The Builder emphasised that the refusal of entry onto the property at that time was in breach of the Tribunal's order.
2. I accept, notwithstanding the walk away offer was not made in accordance with sections 112 - 114 of the VCAT Act, an unreasonable rejection by an offeree of what is known as a Calderbank offer may be considered as a relevant matter within the meaning of s 109(3)(e) when deciding whether it is fair to order costs in a proceeding.
3. A Calderbank offer is where the offeror states in the offer that, although it is made 'without prejudice', the offeror reserved its right to produce it to the Tribunal on the question of costs.
4. The question that I must consider is whether the rejection of the offer by the Builder was unreasonable in the circumstances.[20]
5. In my view, given the circumstance surrounding the walk away offer, it was not unreasonable for the Builder not to have accepted it. In this regard I have considered the shortness of time for which the offer was open, namely 2 days, which left little time for the Builder to consider whether it was reasonable to accept it or not. The Builder said in his letter of response to the offer that he was 'confused' and sought 'clarity'. No further clarification was given. The offer did not set out why it was a reasonable offer and ought to be accepted. For example, it did not explain why any counterclaim would fail or would be met with a defence that it was precluded at law, by reason of the terms of the Contract.
6. Further, whilst it was said that the Owner had only denied access to the Builder when he had attempted to enter the property without notice, the fact is the walk away offer was made in circumstances where the Builder had not, at the relevant time, had access to the site to view the items alleged by the Owner. In this regard whilst 'as a matter of pure logic the Owner could do no worse than the offer of zero damages she was offering at that time', such a statement does not take into account the counterclaim which had been issued at that time by the Builder, and which the Builder was asked to withdraw in the event he accepted the offer to walk away. From the Builder's point of view, the Owner was using an inflated claim to avoid paying for building materials and costs, the subject of the counterclaim. Although I ultimately dismissed the Builder's counterclaim, it was not because it had no tenable basis in fact or law.[21] In my opinion, attending the site was relevant and necessary in order for the Builder to assess the strength of the Owner's claims and the defence to them. Without that assessment, the reasonableness of the offer could not be 'weighed' against the counterclaim.
7. I therefore am not satisfied that the rejection of the walk away offer is something I should consider under s 109(3)(e).
8. Finally, for completeness, I do not accept the Builder's statement that 'every attempt was willingly made' by him to rectify any concerns of the Owner, and that he had 'willingly done everything required of him in the VBA report' (in reference to the Fenton Report). The Fenton Report, which was relied upon in the Decision with respect to three main items of work, concluded that there were defects in the work carried out by the Builder and which had not been rectified by him as at the date of the report, being April 2015. There was no dispute that the Builder had not returned to the site after April 2015 to carry out any further rectification work. In those circumstances it is true that, in order for the Owner to receive the compensation arising from the identified defective items, she was required to initiate the proceedings at the Tribunal. However, as discussed above, that in and of itself is not a reason to order the Builder to pay the Owner's costs.

1. For the reasons stated, having regard to all of the matters detailed under s 109(3), in particular s 109(3)(d), I am satisfied that it is fair to order the Builder to pay part of the Owner's costs incurred in this proceeding.
2. The Owner submitted that an order for indemnity costs was justified in this case because 'the very reason the Builder imprudently rejected a 'walk away' settlement offer was solely in order to maintain a counterclaim which had no chance of success'.
3. I reject this submission. It is well established that it will only be in the most exceptional circumstances that an order for indemnity costs will be made: for instance where a party has engaged in contumelious or high handed conduct.[22] I am not satisfied that the circumstances of this proceeding can be regarded as exceptional. As I have explained above, I do not think the Builder's rejection of the walk away offer at that time was unreasonable, nor did I find that the counterclaim had 'no chance' of success. Accordingly, I am satisfied costs ought to be paid on a 'standard basis' being costs 'reasonably incurred and of a reasonable amount'.[23]
4. In the alternative, the Owner sought an award of costs on the County Court scale. The Owner also requested that I fix costs, rather than have them taxed, 'having regard to the amounts in issue and the fact the Builder is unrepresented.' It was submitted that 70% of the costs incurred, excluding disbursements, was the appropriate method to adopt in calculating the amount of costs to be ordered.
5. Section 111 of the VCAT Act provides that if the Tribunal makes an order for costs, the Tribunal may fix the amount of costs itself, or may order that costs be assessed by the Costs Court. In this regard the Tribunal will usually identify the basis and scale of costs upon which the costs should be assessed or 'taxed', in the event the parties do not reach agreement on the sum of costs to be paid.
6. The first issue which arises for consideration is whether I ought to fix the amount of costs.
7. The legal fees and disbursements incurred by the Owner total $47,000. Whilst the supporting affidavit material exhibited the legal bills invoiced by the Owner's solicitors throughout the duration of the proceeding, having regard to the significant amount claimed, and to the usual practice of the Tribunal, I am not satisfied it is appropriate that I fix costs.
8. The issue which then falls for my consideration is whether it is appropriate that an order for costs be made on the County Court Scale, as submitted by the Owner. For the following reasons, I think in this instance a lesser level is fair and appropriate.
9. The Owner was awarded a sum representing less than 15% of the sum claimed in the amended points of claim. I found that items claimed by the Owner were not justified. This was because I did not accept that all items of alleged defective work were defective or that they were the responsibility of the Builder and also because I found that the reasonable cost of rectifying the defective works for which the Builder was responsible was considerably less than the sum claimed by the Owner. Further, in my view, an additional day of hearing was largely required because of arguments about claims pursued by the Owner, for which the Owner was not successful.
10. I am of the view that these matters are relevant considerations and should be taken into account in determining the sum of costs which I will order the Builder to pay to the Owner.
11. Accordingly, having regard to above matters, I consider it fair in this case that the Owner's legal costs should be assessed pursuant to Magistrates' Court Civil Scale of Costs, Scale B, being the scale for claims in the quantum range of $500 to $5,000. In relation to Mr Limburg's fees, whilst there is an allowance in Scale B for expert witness expenses, I consider it is fair to allow Mr Limburg's costs of attending the hearing on 13 July 2019 of $3,607.50. I am of the view the amount is reasonable, having regard to the fact that it includes preparation time, as well as the costs of attendance at the hearing.

1. I order pursuant to s 111(b) of the VCAT Act that the Builder must pay:
   1. the Owner's legal costs of the proceeding, if not agreed, to be assessed by the Victorian Costs Court on a standard basis pursuant to Magistrates' Court Scale of Costs, Scale B; and
   2. the Owner's expert witness fees of Mr Limburg fixed at $3,607.50.
2. I also consider it fair to order the Builder to reimburse the applicant the filing fee of this application for costs in the amount of $373.20.

[1] Kelly v Lombardi (Building and Property) [2020] VCAT 284 (Decision).

[2] By reason of s 8 of the Domestic Building Contracts Act 1995.

[3] Email dated 30 March 2020 forwarded to the Tribunal by the Owner's legal representatives.

[4] Refer paragraphs [58], [77], [78] and [135] of the Decision.

[5] Pizer's Annotated VCAT Act, 6th edition, para [119.30], referencing Smeaton v Accident Compensation Conciliation Service [2010] VCAT 1514.

[6] Refer to Pizer's Annotated VCAT Act, 6th edition, para [119.30], citing Cube Building Pty Ltd v Fois [2012] VCAT 78.

[8] Pizer [109.60] and caselaw there referred to.

[9] Vero Insurance Ltd v The Gombac Group Pty Ltd [2007] VSC 117.

[10] Affidavit of Peter Lynch, Owner's solicitor, sworn 6 April 2020.

[11] The stated items were external paintwork ($11,820), bay window painting ($275) and repair and cracks in the new plasterboard in bedroom 3 ($670).

[12] In the Points of Defence to Counterclaim filed on behalf of the Owner it was stated that the Owner received the Builder's Counterclaim on 22 November 2018.

[15] Katefanis v Bookmakers & Bookmakers' Clerks Registration Committee [2008] VCAT 577.

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

[17] [2008] VCAT 691.

[19] [2014] VCAT 1126.

[20] Hazeldene Chicken Farm v Victorian Workcover Authority [2005] VSCA 298.

[21] In the Decision, I rejected the Owner's submission that the Builder was precluded, by reason of the relevant provisions in the Contract, from even bringing the counterclaim.

[22] Seachange Management Pty Ltd (ACN 091 443 211) v Bevnol Constructions and Developments Pty Ltd (ACN 079170577) and Ors [2011] VCAT 1406.

[23] Southage v Vescovi [2014] VSC 176.