1. The respondent must pay the applicants' costs of and incidental to their joinder application dated 17 October 2019 and 14 November 2019 up to and including 18 March 2020.
2. The respondent must pay the applicants' costs of and incidental to the applicants' application for further discovery, with no costs allowed for the directions hearing on 27 November 2020 noting the costs of the directions hearing on 27 November 2020 are included in the costs order for the second joinder application.
3. The orders for costs in orders 1 and 2 include the costs of the applicants' costs application filed on 24 February 2020.
4. The applicants must pay the respondent's costs of and incidental to the applicants' costs application from 18 March 2020.
5. In default of agreement the costs to be paid pursuant to these orders are to be assessed by the Victorian Costs Court on the County Court Scale on a standard basis.

1. The applicants ('the Owners') have been the owners of a home in Box Hill since January 2017. The home was built for the previous owners by the respondent builder ('the Builder') under a building contract dated 31 May 2011. The owners commenced this proceeding in May 2019 claiming the cost of rectification of alleged defective works.
2. The Builder made two unsuccessful applications for joinder of the former owners of the property as respondents for the purposes of a proportionate liability defence under Part IVAA of the Wrongs Act 1958. The first was refused at a directions hearing on 17 October 2019 when oral reasons were given. The second was refused by Orders with Reasons dated 23 January 2020.[1] ('my earlier decision')
3. The Owners have applied for orders that their costs of and incidental to the Builder's unsuccessful joinder applications, and the costs of and incidental to their application for further discovery be paid by the Builder, on an indemnity basis. They also ask that the Tribunal certifies the fees for their solicitor's preparation and appearance as counsel at each of the three directions hearings when the joinder applications were heard, at $2,500 per day: a total of $7,500.
4. The Owners rely on their Submissions dated 24 February 2020 filed with their costs application and their Reply Submissions dated 17 April 2020. The Builder relies on its Submissions filed on or about 26 March 2020.
5. The Owners' application for costs is dated 24 February 2020. The Builder made an open offer, by letter dated 18 March 2020, to settle the Owners' application for costs by paying their costs of the two joinder applications to be taxed on the standard basis in default of agreement. This offer was open for acceptance until 5pm on 25 March 2020. Further, if the Owners claim for indemnity costs is unsuccessful the Builder claims its costs from the date of the offer which it estimates at $2,500.
6. The Owners did not accept this offer maintaining their claim that their costs be paid on an indemnity basis, and also noting that it was unsatisfactory that the offer did not indicate when their costs would be paid.
7. For the reasons which follow I am satisfied that it is fair to exercise the Tribunal's discretion and order the Builder to pay the Owners' costs of and incidental to the joinder applications and their costs of their further discovery application with no allowance for the appearance at the directions hearing on 27 November 2019 as those costs are included in the costs awarded in relation to the joinder applications. The order for costs includes the costs of this costs application until and including 18 March 2020. In default of agreement the costs are to be assessed by the Victorian Costs Court on a standard basis.
8. I am not persuaded that it would be fair to certify for the Owners' solicitor appearing as counsel at the three directions hearing.
9. I am also satisfied it is fair to exercise the Tribunal's discretion and order that the Owners pay the Builder's costs from 18 March 2020 with such costs to be assessed by the Victorian Costs Court on a standard basis, in default of agreement.

1. Section 109 of the VCAT Act provides that each party must bear its own costs of a proceeding unless the Tribunal is persuaded it should exercise its discretion under s109(2) having regard to the matters set out in s109(3), and then, only if it is satisfied it is fair to do so. Section 109(3) provides:

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 [2007] VSC 117, Gillard J set out the approach to be taken by the Tribunal when considering an application for costs under s109:
   1. The prima facie rule is that each party should bear their own costs of the proceeding.
   2. 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 having regard to the matters stated in s109(3). That is a finding essential to making an order. (emphasis added)

1. The Builder made two unsuccessful applications for joinder of the previous owners: on 17 October 2019 and 14 November 2019; initially as joined parties and then as the second and third respondents for the purposes of a proportionate liability defence under Part IVAA of the Wrongs Act 1958.
2. As I noted in my earlier decision:
   1. The Builder has had four attempts at drafting proposed pleadings seeking to rely on a Part IVAA defence. The first which is headed 'Points of Claim' dated 17 October 2019 accompanied the first application for joinder which was filed on 17 October 2019. The second, which is again headed 'Proposed Points of Claim' dated 14 November 2019 (although my orders of 30 October 2019 required the filing of 'Draft Proposed Points of Defence') accompanied the renewed application for joinder which was filed on 27 November 2019. A document headed 'Points of Defence' also dated 14 November 2019 was subsequently filed in support of the renewed joinder application. The fourth proposed Points of Defence are dated 9 December 2019.
   2. When refusing the first application for joinder, I drew counsel's attention to the recent decisions of the Tribunal including Equiset. As noted above, after I adjourned the further application for joinder part-heard I arranged for registry to email the parties details of the relevant authorities.
3. I refused the first application at a directions hearing on 30 October 2019 when I gave oral reasons, and gave the builder leave to renew the application by filing and serving draft Proposed Points of Defence ('PPD') clearly setting out the allegations that the previous owners are concurrent wrongdoers.
4. I indicated to counsel for the Builder at the directions hearing on 30 October 2019 that if the Builder was to persist with its application to join the previous owners alleging they were concurrent wrongdoers, it would need to file proposed Points of Defence clearly setting out the cause of action it says the Owners would have against the previous owners. I made the following relevant orders:
   1. ...
   2. The respondent's application for joinder is refused.
   3. The respondent may renew its application for joinder by filing and serving Draft Proposed Points of Defence clearly setting out its allegations that the proposed parties are concurrent wrongdoers including particulars by 14 November 2019.
   4. ...
   5. By 14 November 2019 any application for orders or directions hearing must be filed and served together with supporting material. The Tribunal notes the applicant has foreshadowed an application for further orders having alleged the respondent has not complied with order 2 of the Tribunal's orders dated 6 August 2019 [the order for discovery].
5. The renewed application was listed for hearing at a directions hearing on 27 November 2019 when I raised concerns as to whether the Owners' claim as set out in their Points of Claim dated 5 May 2019 is an apportionable claim, and also whether the Proposed Points of Defence clearly set out the cause of action the Builder says the Owners would have against the proposed joined parties. At the request of counsel for the Builder I adjourned the application part-heard to 12 December 2019 and orders were made for Further Proposed Points of Defence to be filed and served. The Further Proposed Points of Defence are dated 9 December 2019.
6. Following the directions hearing I arranged for registry to email the parties drawing their attention to the following decisions:

McClafferty v Greg Smith Pty Ltd [2019] VCAT 299

Owners Corporation 1 Plan No PS63800J v Equiset Construction Melbourne Pty Ltd [2019] VCAT 671 ('Equiset')

Owners Corporation 1 PS538430Y v H Building Pty Ltd (ACN 091 236 912) (under external administration) [2019] VCAT 680

Owners Corporation PS646781P v Verve Constructions Pty Ltd [2019] VCAT 642

LU Simon Builders Pty Ltd v Allianz Australia Insurance Ltd & Ors [2013] VCAT 468

Owners Corporation No 1 of BS613436T v LU Simon Builders Pty Ltd [2019] VCAT 286

Jinalea Pty Ltd v Mace) [2019] VCAT 1732

1. The first four decisions set out the matters the Tribunal needs to be satisfied about when considering an application for joinder for the purposes of a Part IVAA defence. The last three decisions consider whether a claim for a breach of the warranties set out in s8 of the Domestic Building Contracts Act 1995 ('the DBCA') is an apportionable claim. For the reasons set out in my earlier decision I determined that the Owners' claim was not an apportionable claim.

1. The Owners contend that it is fair for the Tribunal to exercise its discretion under s109 of the VCAT Act and order the Builder to pay their costs of the first joinder application and further that such costs should be assessed on an indemnity basis because:
   1. the first application was doomed to fail as the Builder applied to join the former owners as third parties by filing proposed Points of Claim when, in fact, they were seeking to join them as concurrent wrongdoers for the purposes of a Part IVAA defence. Accordingly, the application had no tenable basis in fact or law and therefore an order for costs should be made having regard to s109(3)(c).
   2. The Builder served 200 pages of documentation in support of the first joinder application and therefore an order for costs should be made having regard to s109(3)(d)
   3. The Builder failed to serve one of the owners prior to the directions hearing and therefore an order for costs should be made having regard to s109(3)(a)(iv).

1. The Owners contend that it is fair for the Tribunal to exercise its discretion under s109 of the VCAT Act and order the Builder to pay their costs of the joinder applications and further that such costs should be assessed on an indemnity basis because:
   1. When renewing the application for joinder the Builder filed proposed Points of Claim rather than proposed Points of Defence as ordered on 30 October 2019.
   2. The Builder filed final Points of Defence on 14 November 2019 including the former owners as respondents when leave had not been given to join them.
   3. The application was adjourned part-heard from 27 November to 12 December 2019 to enable the Builder to comply with the Orders dated 30 October 2019 and file further Proposed Points of Defence [I note this was due to the inadequacy of the proposed pleading).
   4. The Owners were unnecessarily disadvantaged by their lawyers having to prepare for and appear at the directions hearings on 27 November and 12 December 2019.
   5. The Owners have also been disadvantaged by delays to the final determination of their claims.
   6. Accordingly, an order for costs should be made having regard to s109(3)(a)(i) and (ii).
   7. Further, the second application for joinder had no tenable basis in fact or law.
   8. The Owners suffered significant delays in the determination of their claims by the hearing of the joinder applications not being completed until 12 December 2019.
   9. Accordingly, an order for costs should be made having regard to s109(3)(c) and (d).

1. The Builder contends the joinder applications were 'run of the mill' joinder applications, and if I consider it fair to exercise the Tribunal's discretion and order it to pay the Owners' costs, such costs should be assessed on a standard basis. Further, that I should not certify for the Owners' solicitor appearing as counsel.

1. Although the Builder sought to bring a Part IVAA defence in Points of Claim that, of itself, is not sufficient reason to order costs. Had I been satisfied that the Points of Claim set out a cause of action the Owners would have against the former owners, and otherwise satisfied the factors for joinder for the purposes of a Part IVAA defence, I would have allowed the application. Bearing in mind the Tribunal is not a court of pleadings, this is a technicality which could have easily been remedied. The application was refused because the factors for a Part IVAA defence had not been clearly articulated.
2. Having regard to the matters set out in 109(3)(c) and (d): the relative strengths of the parties claims and complexity, I am satisfied it is fair to exercise the Tribunal's discretion and order the Builder to pay the Owners' costs of and incidental to the first joinder application.

1. The second joinder application is dated 14 November 2019. It was listed for hearing on 27 November 2019 when I raised various concerns about the adequacy of the proposed Points of Defence. At the request of counsel for the Builder the directions hearing was adjourned to 9 December 2020 when Further Proposed Points of Defence were filed.
2. It was surprising that the second application for joinder was once again accompanied by proposed Points of Claim notwithstanding my clear orders that proposed Points of Defence were required if the Builder was seeking to rely on a Part IVAA proportionate liability defence.
3. The second joinder application was also refused. As I noted in my earlier decision:
   1. In the FPPD the Builder does no more than allege that the Spurias carried out the defective works which are the subject of the Owners' claims and are therefore responsible for the Owners' loss and damage. In paragraph 9.1 it alleges:

It further says that if the Applicants suffered loss and damage then such loss and damage was caused in whole or in part by the conduct of the First Owners as set out in paragraphs 4 to 4.2 herein.

1. In reality this pleading is no more than the Builder's defence to the Owners' claim. In effect, the Builder is saying that the Owners have sued the wrong person because, it says, it did not carry out the works which are the subject of their claim. Although it alleges that the s137C warranties apply, there are no allegations that the Spurias were owner-builders, and if that allegation is somehow implied because of the reliance on s137C how it is said they became owner-builders. In any event, this is irrelevant as, for the reasons which follow, I am not satisfied that the Owners' claim is an apportionable claim.
2. Having regard to the matters set out in 109(3)(c) and (d): the relative strengths of the parties claims and complexity, I am satisfied it is fair to exercise the Tribunal's discretion and order the Builder to pay the Owners' costs of and incidental to the second joinder application.

1. The Owners filed an Application for Directions Hearing or Orders on 14 November 2019 accompanied by an affidavit by their solicitor, Melissa Henderson, seeking orders for further discovery from the Builder. This application was heard at the directions hearing on 27 November 2020 when an order was made for the respondent by its proper officer to file and serve an affidavit of documents in accordance with the Rules of Civil Procedure.
2. In circumstances where the Builder failed to comply with its discovery obligations and comply with the orders dated 6 August 2019, I am satisfied it is fair to order the Builder to pay the Owners' costs of preparing the Application for further discovery and the supporting affidavit. However, as the application was heard at the directions hearing on 27 November 2019, which was also concerned with the second joinder application, I am not persuaded it would be fair to order any costs for that appearance.

1. The Owners seek an order that their costs of the joinder applications be assessed on an indemnity basis. Section 109(2) of the VCAT Act provides that the Tribunal can make an order for costs if it is satisfied it is fair to do so having regard to the matters set out in s109(3), all of which concern the conduct or merits of the proceeding. Section 109 starts with the presumption that each party bears their own costs of the proceeding. Once the Tribunal is satisfied it is fair to depart from that presumption, and make an order for costs, it is a very high hurdle for a successful party to demonstrate that a special order for costs should be made.
2. Both parties rely on the factors set out by Harper J in Ugly Tribe Company Pty Ltd v Silcola [2] when considering whether a special costs order should be made. In Ugly Tribe Harper J set out some of the circumstances which might give rise to a special costs order. These were summarised by Senior Member Dea in Giurina v Deak[3] at [21]:
   1. The making of an allegation, known to be false, that the opposite party is guilty of fraud.
   2. The making of an irrelevant allegation of fraud.
   3. Conduct which causes loss of time to the court and to other parties.
   4. The commencement or continuation of proceedings for an ulterior motive.
   5. Conduct which amounts to a contempt of court.
   6. The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.
   7. The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial.
3. I refer to my comments in Thurin v Krongold Constructions (Aust) Pty Ltd[4]
   1. Insofar as the Contractor relies on the principles set out in Ugly Tribe Company Pty Ltd v Silcola,[5] not only does the Contractor fail to indicate which specific principle/s it relies on, I note that an order for indemnity costs was not made in Ugly Tribe. As Senior Member Dea observed in Giurina v Deak (Costs)[6]

In Ugly Tribe, Harper J declined to make an indemnity costs order despite submissions the plaintiff had no arguable cause of action and that would have been 'so plain as to be obvious to the most incompetent of solicitors'. There were allegations the commencement of the proceeding was, or was tantamount to, an abuse of process and that heavy-handed tactics were used. His Honour did not find sufficient evidence to support those submissions.[7] His Honour commented:

It seems to me that I could only accede to the first defendant's application for costs on an indemnity basis were I satisfied that the plaintiff in fact appreciated the hopelessness of its position. There is no direct evidence that it did. The first defendant asked me to draw the necessary inference. I do not think that I can do so, although I have some sympathy with the first defendant's position. The courts are daily faced with examples of surprising ignorance.[8]

1. Special costs orders are most unusual in the Tribunal and are only awarded in exceptional circumstances as noted by Nettle JA in Pacific Indemnity Underwriting Agency Pty Ltd v Maclaw No 651 Pty Ltd[9]:

... where an order for costs is made in favour of the successful party in domestic building list proceeding, the costs should ordinarily be assessed on a party/party basis ... Of course there may be occasions when it is appropriate to award costs in favour of the successful client in domestic building proceedings on an indemnity basis. Those occasions would be exceptional ...'

1. A joinder application is an interlocutory application. The joinder applications were made at a relatively early stage of the proceeding and although they were unsuccessful, I am not persuaded that any of the Ugly Tribe factors apply. Further, although it is submitted on behalf of the Owners that the hearing of the joinder applications has caused significant delays in the final determination of the Owners' claims I note that the application was lodged on 14 May 2019; the first directions hearing was held on 6 August 2019; the first application for joinder was made on 17 October 2019 which was heard on 30 October 2019; the second application for joinder was heard on 27 November 2020 and 9 December 2020 and determined on 23 January 2020 - a little over three months after the first joinder application was made.
2. Although I am persuaded that it is fair to exercise the Tribunal's discretion and order the Builder to pay the Owners' costs of the joinder applications, I am not persuaded that the Builder's conduct in bringing the joinder applications warrants a special costs order.
3. One of the factors to be taken into account in deciding whether it is fair to exercise the discretion to order costs, as set out in s109(3)(d) is: 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. [underlining added] This informs the Tribunal's discretion to depart from the usual rule in s109(1) that each party bears their own costs; it is not a reason to make a special costs order.

Should the Tribunal certify for the Owners' solicitor appearing as Counsel?

1. The Owners seek orders that the Tribunal certify that it was necessary and proper for a solicitor to appear as counsel at each of the directions hearings, and certifies the fees for preparation and appearance as counsel at $2,500 per day being $7,500 for the three days.
2. I am not prepared to so certify. First, each of the directions hearings were listed for one hour. No submissions were prepared or filed in relation to the joinder applications. No reasons are provided as to why the costs should be so certified other than the Owners' solicitor appeared as counsel and was opposed by counsel retained by the Builder. It is not unusual, and could be said to be fairly commonplace for solicitors to appear at directions hearings in this List on behalf of their clients at the hearing of interlocutory applications.

1. Although one of the reasons given by the Owners in their letter of 25 March 2020 refusing the Builder's offer was that no time was provided for the payment of their costs, I note that no application has been made in this application for a time to be fixed for their payment or for an order that they be assessed prior to the completion of the proceeding. Where costs are to be assessed by the Costs Court, it is unusual for that to occur prior to the final determination of a proceeding. Rule 63.20.1 of the SCR provides:

63.20.1 Taxation of costs on an interlocutory application or hearing

If an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs be taxed immediately.

1. Accordingly, there will be no order for the costs to be assessed prior to the final determination of the proceeding although the Owners may exercise their liberty to apply to make an application for them to be assessed earlier.

1. It is regrettable that the Owners rejected the Builder's very fair offer to pay their costs of and incidental to the joinder applications to be assessed on a standard basis in default of agreement.
2. This rejection led to both the Owners and the Builder incurring further, unnecessary costs. I note the Builder's letter of 18 March 2020 contained the following warning:

If this offer is not accepted, our client will rely on it in support of submissions that our client should not be ordered to pay any costs beyond the date of this offer and in support of an application that your client pays our client's costs of defending the application for costs after the date of this offer.

1. Although the Builder's offer did not include any costs for the Owner's application for further discovery, no mention is made in their letter of 25 March 2020 to the rejection of the offer being because it did not include an offer to pay those costs. Rather, it seems that the refusal of the Builder's offer was primarily because of the Owners' misconceived expectation that they would obtain an order for their costs of the joinder applications to be paid on an indemnity basis.
2. I am satisfied it is fair to exercise the Tribunal's discretion under s109(2) and order the Owners to pay the Builder's costs of and incidental to the Owners' application for costs of the joinder applications from 18 March 2020. In default of agreement such costs are to be assessed by the Victorian Costs Court on a standard basis.

[1] McCann v Shangri-la Construction Pty Ltd [2020] VCAT 80

[2] [2001] VSC 189

[3] [2018] VCAT 683

[4] [2019] VCAT 1773

[5] [2001] VSC 189 at [7] - [8]

[6] [2018] VCAT 683

[9] [2005] VSCA 165 at [91-92]