1. This proceeding concerns an appeal by the Applicant builder ("the Builder") against a decision made by the Insurer ("the Insurer") on 16 February 2004.

2. The decision concerned alleged defects in a dwelling house constructed by the Builder as owner / builder at 16 Farm Lane, Berwick which he sold to the Joined Parties ("the Owners") on 10 January 2002. Following the purchase of the house by the Owners they experienced problems with heaving foundations and stumps. They made a claim on the Insurer as the domestic building insurer which sent an engineer out to inspect the property.

3. After considering the engineer's report the Insurer made a decision, which it communicated to the Builder by letter of 16 February 2004, to the effect that it accepted liability for items set out in an attached work schedule. The attached schedule required an agricultural drain to be installed to the northern side of the house. It did not deal with any consequential damage to the house caused by the foundation problem.

4. Following the communication of the decision to the Builder, correspondence and telephone conversations took place between the Builder or his solicitor on one side and the Insurer and its solicitor on the other. In particular, a letter was sent to the Insurer by the Builder on 20 February 2004 pointing out that there were four "cut off drains" relating to the area in question. The Insurer replied that if there were such drains they were not operating efficiently. This proceeding was then issued.

5. Following further investigation by the Insurer it forwarded a letter by facsimile to the Builder, requiring him to carry out the work listed in a Schedule of Works which was attached to the letter within twenty-eight days. The Schedule of Works is entirely different to the original schedule required by the decision which is the subject of this proceeding. In effect, it requires the existing agricultural drainage system to the rectified and for consequential damage to the house to be repaired. None of this was the subject of the earlier decision.

6. On the day after this facsimile transmission was sent to the Builder, the Respondent applied for and obtained an order from the Tribunal joining the Owners as parties to the proceeding.

7. Further correspondence then ensued in the course of which the Builder intimated that, although he did not agree that he ought to carry out the Schedule of Works, he was prepared to do so. In particular, a letter dated 14 July 2004 to the Respondent by the Builder's solicitor includes the paragraphs:

"In these circumstances Mr Martin has contacted us again and instructed us to put to you that he will now carry out the rectification works as set out the Schedule of Works forwarded with your letter dated 5 May 2004 to our client.

Our client will now arrange for his contractors to attend to the property for this purpose."

The letter goes on to suggest that these proceedings be adjourned for a sufficient time to enable the works to be completed.

8. In its response, the Insurer's solicitor sought details as to the identity of the registered builder and when the works would be commenced and completed. The author of the letter goes on to suggest that this proceeding is now redundant and ought to be withdrawn and states:

"My client will consent to the withdrawal of your client's VCAT application on the basis that my client's party/party costs of the proceeding are paid."

The Builder's solicitor responded stating that no costs would be paid.

9. Further correspondence then took place relating to further inspections of the property and the proposed works to be carried out by the Builder's contractor, Excelcon Pty Ltd. Access to the property was requested by the Builder from the Insurer which was referred on to the Owners. It should be stressed that none of this related to this proceeding. It related to a later decision which is not the subject of this appeal.

10. The Insurer's solicitors continued to insist that their costs of this proceeding be paid. The matter was referred to mediation but was not resolved. A directions hearing was held at which it was suggested that the Insurer would seek to have this proceeding struck out pursuant to s.75 of the Victorian Civil and Administrative Tribunal Act 1998 ("the Act"). The Builder's Counsel suggested that perhaps the proceeding ought to be amended to include an application for a review of the decision made on 5 May and what might be said to be decisions made in subsequent correspondence. Directions were given for the determination of these foreshadowed applications.

10. Extensive affidavit material has now been filed, principally on behalf of the Builder. The matter came before me for hearing on 14 October 2004. Mr Devries appeared on behalf of the Builder, Mr Moshidis on behalf of the Insurer and Mr Whitelaw, Solicitor, appeared on behalf of the Owners.

11. Mr Devries applied to amend the application to seek also a review of the decision made on 5 May and other decisions that he said were made in subsequent letters notably 16 July, 3 August and 11 August.

12. Mr Moshidis argued that the proceeding should be struck out under s. 75 of the Act, since the decision with respect to which it was commenced had been amended. He submitted that no amendment of the proceeding should be allowed to appeal against any later decision because an appeal against any decisions of the nature referred to by Mr Devries, including the decision of 5 May (if it was a decision) was taken within the twenty-eight day period allowed by the Act. He referred to the well know Hunter Valley principles as to when time should be extended pursuant to s. 126 of the Act. He said that there was no excuse for the delay in applying to review these decisions earlier, that it did not appear that the Builder had any dispute with the decision of 5 May and that there was nothing therefore to be determined on the merits if an appeal against that decision were allowed. He also said that the Insurer and the Owners would be prejudiced if time were extended in that further costs would be incurred.

13. Mr Whitelaw complained that his clients had been joined to the proceeding after the decision which it was sought to review had been abandoned by the Insurer. He sought an order for his costs against either the Builder or the Insurer but principally, he said, against the Insurer.

14. There may be times when an insurer changes its mind and makes an adjustment or small alteration to a decision that it has made in the light of further information that comes to light or in response to representations made by one or other of the parties. It may be that these alterations or variations are not such as to justify one classifying the decision to alter the original decision as being a fresh decision in itself. However, that is clearly not the case here.

15. The decision of 5 May 2004 cannot possibly sit side by side with the original decision. It is an entirely different decision with an entirely different subject matter. It is quite clear that on 5 May 2004 the Insurer was no longer insisting on its decision of 16 February 2004 and had elected to abandon it entirely. It also appears that the Owners were content to rely upon the substituted decision. In those circumstances, there was no reason to continue with this proceeding since the only relief sought was to review the first decision. Since that decision had been abandoned, there was nothing for the Tribunal to determine. The proceeding should have ended there and then. The Tribunal's time ought not to be wasted keeping matters alive when the subject matter of the dispute is gone. Hence the need, if these proceedings are to be kept alive, of Mr Devries' application.

17. As to that application to amend the proceeding, I think the only decision made in any of the correspondence to which Mr Devries has referred is that of 5 May. I do not agree with Mr Devries' submission that any of the other letters contains a decision. As to the 5 May decision, the Builder has made it clear in correspondence several times that he is proposing to abide by it, and so I think it would be futile and pointless to allow him now to appeal against the decision out of time, particularly when it appears that it is still his intention to abide by it. The application to amend the proceeding will be refused.

18. The Insurer asks that the proceeding be struck out as being vexatious under s.75 of the Act but I have considerable doubt that the power conferred by that section ought to be used in a situation where, at the time the proceeding was commenced, it was a valid appeal and not demonstrably frivolous, vexatious, misconceived or lacking in substance or otherwise an abuse of process. What has happened here is that the subject matter of the proceeding has disappeared in practical terms because the decision appealed from is not only abandoned by the Insurer but another decision quite inconsistent with it has been made in its place. Where as result of settlement, a case of action has been satisfied, the proceeding is struck out under the general power of the Tribunal to regulate its own procedure. The same should occur where the cause of action disappears for any other reason.

19. The time for appealing against the decision of 5 May has expired with no appeal having been taken against it. Since I have refused to allow the amendment of the present proceeding to encompass an appeal against that decision, that decision stands.

20. Since the subject matter of this proceeding has disappeared, this proceeding should be struck out, because there is nothing left for the Tribunal to decide except the question of costs. I now turn to that question.

21. I am satisfied that, if the Insurer had been prepared to agree to the proceeding being withdrawn after 5 May, the Builder would have withdrawn it. However, the Insurer required that the Builder agree to pay its costs.

22. I can see no justification for the Insurer's insistence that, if the proceeding were withdrawn, its costs should have been paid. Since it had abandoned the decision that was appealed against and substituted a different decision, it had not succeeded in successfully resisting the appeal. Indeed, it might have been argued on behalf of the Builder that he had succeeded in demonstrating that the decision against which he was appealing was incorrect and made an application for costs himself.

23. On the other hand, I think the appropriate course for the Builder to have adopted once the original decision was abandoned was to apply to withdraw the proceedings and argue the question of costs if the Insurer were to make such an application. Keeping the proceedings alive simply to prevent such an application from being made might have been thought to be tactically desirable but the costs of doing so could not be said to have been incurred for the purpose of prosecuting the proceeding.

24. I do not see any reason why either the Builder or the Insurer should be entitled to any order for costs after 5 May when the original decision was abandoned. As to the costs before that date, it seems to me that the parties should have been able to sort out the simple fact that there was already a storm water system in place and this should have resolved the matter. I think I should award the Builder the issuing fee since he had to issue the proceedings in order to keep his options open until such time as he was able to demonstrate to the Insurer that there was an agricultural drain installed and the decision therefore should be revisited. I don't think any other costs orders are justified as between those two parties.

25. As for the costs of the Owners, I think the Insurer should pay those. It was quite inappropriate to join them to an application which had already become redundant at the time of the joinder.

26 The proceeding will be struck out and the Insurer will be ordered to pay the Builder's costs fixed at $257.00 and the costs of the Owners to be assessed if not agreed on Scale A of the County Court Scale. Otherwise, there shall be no order as to costs.