On behalf of the first, second and fourth respondents we consent to order number one which was sought by the applicant dated 27 October 2009.

The reference is to the orders quoted in paragraph 2 above. The necessary inference is that the Respondents did not consent to the second order sought, for costs of and associated with the application.

1. On 25 November 2009 the Respondents' solicitors wrote to the Tribunal to ask whether the directions hearing listed for 27 November 2009 would still proceed. The next day the Applicant's solicitors wrote to the Tribunal stating that she sought her costs on an indemnity basis, therefore it was necessary for the directions hearing to proceed.
2. The hearing regarding costs commenced on 27 November 2009 and was adjourned to 4 December 2009 at 9.00 am in part because Mr Downie of Counsel, who appeared for the Respondents said his instructor had not been given grounds of the basis upon which the Applicant sought indemnity costs. Mr Downie was also poorly briefed and had to be provided with copies of earlier affidavits. It was possible that the hearing could have continued later in the day, after Mr Downie had read the material. However Mr Pumpa was due to appear in a compulsory conference in another proceeding commencing that morning and although it was scheduled to start at 10:30 rather than 10:00, there would have been barely sufficient time to deal with the application even if Mr Downie had been properly briefed.
3. I also reserved the costs of 27 November 2009.

1. Section 109 of the Victorian Civil and Administrative Tribunal Act 1998 says in part:

s.109:

(1) Subject to this Division, each party is to bear their own costs in the proceeding.

(2) At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in a proceeding.

(3) The Tribunal may make an order under subsection (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);

(iv) causing an adjournment;

(v) attempting to deceive another party or the Tribunal;

(vi) vexatiously conducting the proceeding;

(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. As emphasised by the Supreme Court in the matter of Vero Insurance Limited v Gombac Group [2007] VSC 117 at [20], the Tribunal should approach the question of entitlement to costs on a step-by-step basis:

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

(ii) The Tribunal should 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; 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 s.109(3). The Tribunal must have regard to the specified matters in determining the question, and by reason of (e) the Tribunal may also take into account any other matter that it considers relevant to the question.

1. Mr Pumpa and Mr Downie appeared again on 4 December 2009. As Mr Pumpa submitted, the general position under s109(1) of the VCAT Act is that each party bears their own costs.
2. I find that it is reasonable that the Applicant receive her costs of and incidental to the hearing of 9 October 2009. The Respondents, by their submissions of 27 August 2009 caused a delay in conclusion of the proceeding and their submissions of 9 October 2009 had very little, if any, merit. The requirements of s109(3)(b) and (c) are fulfilled. The proceeding should have ended on 27 August 2009 and the fact that it did not end then is entirely due to the submissions of the Respondents.
3. The question is whether the costs should be on a party-party basis or on an indemnity basis.

1. Mr Pumpa acknowledged that indemnity costs will only be ordered where there are exceptional circumstances. He said the exceptional circumstances are "the Respondents' actions opposing orders to give effect to terms of settlement freely entered into between the parties" the adjournment of the proceeding on 27 August 2009 and the inaccurate reference in an affidavit by Mr Plotnik, the second respondent, to having paid "all costs in the original proceeding" when, as described in the reasons of 9 October 2009, those costs were for only two hearings.
2. Mr Pumpa also said that the first order applied for by the Applicant on 27 October 2009 could not be agreed to by the Respondents, because it did not specify a scale of costs.
3. As I said at paragraph 9 of the reasons of 9 October 2009, the reason why I did not simply order costs on the day the proceeding was reinstated was because the Respondents submitted that there had already been an order for costs concerning events before the second reinstatement. It was submitted on behalf of the Respondents and then appeared in an affidavit by the Second Respondent which I found "... inadvertently or otherwise ... could have misled the Tribunal."
4. Mr Pumpa submitted that I should have regard to the Tribunal's decision in Theiss v The Metropolis Corporate Centre [2004] VCAT 1088 at [16] where Deputy President Cremean said:

A factor of critical importance, as I see it, is, in the words of Woodward J in Fountain Selected Meats (Sale) Pty Ltd v International Produce Merchant Pty Ltd[1] whether I can be satisfied that the Applicant's proceeding has been commenced or continued "in circumstances where the Applicant, properly advised, should have known that he had no chance of success". For if so, Woodward J says it "must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law". [Emphasis added]

1. Mr Pumpa also referred to Avonwood Homes v Milodanovic[2] a proceeding where the respondents were ordered to pay costs having been found to have attempted to deceive the Tribunal, Baranov v Bronson No 2[3] where the respondent was also ordered to pay indemnity costs for actions which were "highhanded and meritless". He also referred me to the costs decision of Senior Member Young in Pratley v Racine[4] where party-party costs were ordered until an offer to compromise under s112[5] of the VCAT Act was made, and indemnity costs were ordered thereafter.
2. As mentioned above, no-one has told me of any offer to which s112 of the VCAT Act would apply, and the difference between the Theiss and Avonwood cases and this one is that I am not satisfied that there was a deliberate attempt to mislead, although the possibility remains.
3. In Pacific Indemnity Underwriting Agency Pty Ltd v Maclaw No 651Pty Ltd and Anor[6] Nettle J said that where an order for costs is made in a proceeding before the Domestic Building List they will ordinarily be party-party. He added:

Of course there may be occasions when it is appropriate to award costs in favour of a successful claimant in the Domestic Building List on an indemnity basis. But those occasions will be exceptional and, broadly speaking, circumscribed by the same criteria as govern the award of indemnity costs pursuant to Rule 63.28(c) of the Supreme Court (General Civil Procedure) Rules 1996.

1. I have been assisted by Mr Downie's summary of the basis upon which the Supreme Court will consider making an order for indemnity costs, drawn from the decision of Balmford J in Scholl Nicholson Pty Ltd v Chapman (No 2)[7]. To further summarise, they are:
   1. Whether a party has been forced to take legal proceedings entirely through the wrongful or inappropriate conduct of the other party;
   2. Whether an action has been commenced or continued in circumstances where the applicant, properly advised, should have known he had no chance of success;
   3. Where a party persists in what should, on proper consideration, be seen to be a hopeless case;
   4. Whether the party against whom indemnity costs are sought has made a false allegation of fraud;
   5. Particular misconduct that causes a loss of time to the Court and the parties;
   6. Commencing or continuing proceedings for an ulterior motive or in wilful disregard of known facts or clearly established law;
   7. Making allegations which ought never to have been made or undue prolongation of a case by groundless contentions, and
   8. An imprudent refusal of an offer of compromise.
2. The ground I have numbered vii above is close to being satisfied. Had the Respondents and their lawyers considered the history of the proceeding with greater care, they would not have caused the adjournment of the hearing of 27 August 2009.

1. As Mr Downie submitted, the first mention of indemnity costs of which I am aware was a letter from the Applicant's solicitors to the Respondents' solicitors on 25 November 2009; two days before the hearing fixed for 27 November. Mr Downie submitted that the Respondents should not have to pay costs at all, because the Applicant failed to state the level of costs sought; the matter could have been dealt with informally between the parties; the Respondents' lawyers consented to order 1; order 2 was unlikely to succeed and the Applicant first communicated her demand for indemnity costs of 25 November at which time her lawyers made no attempt to negotiate.

1. If the Applicant had stated in the application of 27 October 2009 that indemnity costs were sought, it would probably have avoided the adjournment of 27 November 2009, because there would have been no reasonable grounds to grant it. Nevertheless, parties coming before the Domestic Building List frequently seek "costs" without stating the type or scale of costs sought and I do not consider that this objection is fatal to the Applicant's application for costs.

1. The failure of the Applicant's solicitors to write to or telephone the Respondents' solicitors seems wasteful, but again, is not fatal to an application for costs. I note that there is a long history between the parties and I make no assumption about whether a letter or telephone call would have been effective. If the Applicant's solicitors considered it would not, it would only have had the effect of adding an unnecessary step to the inevitable application.

Consent to order 1, and order 2 unlikely to be made

1. The Respondents acted properly in consenting to order 1, although the order could not be made in precisely the form sought by the Applicant.
2. When a party obtains an order for costs of an application, it is common that they also get costs incidental to the application. It was always more likely than not that order 2 would be made.
3. In an ideal world, the Respondents would have consented to both orders and the solicitors would have had a brief conversation to work out the precise orders to be made. The world is not ideal. As the Respondents' purported acceptance did not include order 2, it would not have brought an end to this last point of contention between the parties.

Indemnity costs not mentioned until 25 November 2009

1. This late notification of the full extent of the application, whether by oversight or otherwise, was not helpful and contributed to the need to adjourn the costs hearing of 27 November 2009, but is not sufficient to deprive the Applicant of an order for costs.

1. Returning to the Gillard J's words in Gombac, what is fair between the parties? The Respondents made submissions which were very weak and relied on an affidavit which was potentially misleading. On the other hand, there are grounds for criticising the Applicant's conduct with respect to the application of 27 October 2009 and everything that followed. I am therefore not persuaded that an order for indemnity costs is warranted although I am persuaded that costs beyond those contemplated in my reasons of 9 October 2009 are warranted.
2. I consider that it is fair that the Respondents pay the Applicant's costs of and incidental to the application dated 10 July 2009 and all subsequent costs on a party-party basis on County Court Scale D.

[1] [1988] FCA 202; (1988) 81 ALR 397 at 400 - 1

[5] Given the recent decision of the Victorian Court of Appeal in Verlado & Anor v Andonov [2010] VSCA 38, particularly at [47] there is now less support for the view that a party who makes a successful offer to which s112 of the VCAT Act applies is entitled to an order for indemnity costs.

[7] [2001] VSC 462