Note: These written reasons consist of an edited transcription of reasons given orally at the conclusion of the hearing.

1 I recently published reasons in these proceedings which concerned Prohibition Notices issued by the respondent - Victorian Workcover Authority - to Mildura Rural City Council and Gray Bruni Constructions Pty Ltd with regard to trenching works which was being carried on within the City's municipal district. For reasons which I gave in my written determination, I concluded that the prohibition notices should be set aside and determined the matters in favour of the applicants. As a consequence, the applicants have now sought orders that the Victorian Workcover Authority should pay their costs of the proceedings on a full indemnity basis.

2 The applicants were represented at the hearing by two counsel, viz, Dr Neal SC with the leading brief and Mr Rozen as his junior.

3 The respondent opposes the making of any such order. It submits that the prima facie situation in the Tribunal is that costs lie where they fall and that is the appropriate disposition of the issue of costs here. If contrary to its primary contention, any costs orders were to be made, it submits it should be made on a party/party basis and that the scale which should be applied is the Magistrates' Court scale. Moreover, it submits that there are certain matters within this proceeding which, even if an order were to be made in favour of the applicants, ought not be covered by that order.

4 First, it says that no certificate should be given for two counsel or for senior counsel. Secondly, it says that insofar as the applicants resisted orders that these two proceedings be tried together, the costs of their opposition ought not, on any view, be allowed and thirdly, it is said that insofar as the review applications included a contention that the system of work being employed in the trenching operations were safe and such ground was not pursued at trial, then the costs associated with that matter ought not be allowed.

5 Before turning to the detail of the parties' submissions, it is appropriate I think that I make some general observations as to the costs regime in the Tribunal to set the scene for a consideration of the detailed submissions.

6 Section 109 of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act) is the provision governing costs in the present circumstances. Sub-section (1) establishes a general rule that -

(1) each party is to bear their own costs in the proceeding;

Sub-section (2) however, gives the Tribunal a discretion to order that one party pay "all or a specified part of the costs of another party in a proceeding". Sub-section (3) states that the Tribunal may only make an order under sub-section (2) "if satisfied that it is fair to do so". And the sub-section refers to a number of matters numerated by paragraph letters (a) to (e) which may be considered in exercising the discretion under sub-section (2). The various paragraphs are extensive and I will not take the trouble to read them all out. I will, however, note the last three, viz, paragraphs (c), (d) and (e) -

(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;

(d)

the nature and complexity of the proceeding; and

(e)

any other matter the Tribunal considers relevant.

7 The section does not deal specifically with the issue of scales of costs at all. The Tribunal does not have its own scales of costs, as the courts do, and there is no provision in s 109 or elsewhere in the statute dealing specifically with or distinguishing between concepts such as party/party costs, solicitor/client costs, solicitor own/client costs or costs on a full indemnity basis. Most of those concepts are dealt with in the existing rules which apply in the Supreme and County Courts and all of them have been given some application in the legal system over the years. The issue of scales therefore is at large for the Tribunal to determine.

8 The next point to note is that the starting point in any analysis in the Tribunal is that costs lie where they fall. Hence, in considering authorities in court, which deal with uplifted scales of costs, such as solicitor/client costs or costs on a full indemnity basis, one must note a significantly different context in court from the ones which apply in the Tribunal. In court, the general rule is that costs follow the event. A party that discontinues a proceeding will, as a matter of course be required, unless that party has negotiated a release from the liability, pay the costs of the defendant in the discontinued proceeding. Here, no such rules apply. We start from the proposition that costs lie where they fall.

9 I should also note the existence of s 112 of the VCAT Act which deals with settlement offers. Its framework and effect is substantially similar to that of Order 26 of the Rules of the Supreme and County Courts dealing with offers of compromise. However, there are material differences. The most important difference is that this section and those that follow it do not apply to proceedings in the Tribunal's review jurisdiction. Proceedings under the Transport Accident Act 1986 are an exception to the rule. The section does not therefore apply in the present proceeding.

10 The second point to note is that in a Court of Appeal proceeding the section deals with offers of settlement. It is not necessary for the section to operate and lead a party making a settlement offer to become entitled to costs on a higher scale than would otherwise be payable to show that the offer of settlement is not of a compromise. It is sufficient if it is an offer to terminate the proceeding [TAC v Coyle (2001) 3VR 589]. With that general context, I now turn to the submissions made in support of the applicants' application.

11 Mr Rozen did not contend that there had been any conduct in the proceedings by the respondent that unnecessarily disadvantaged his clients; a matter which is a ground for the award of costs under s 109(3)(a) of the VCAT Act. Nor did he suggest in accordance with paragraph (b) of the section that the Authority had been responsible for prolonging unreasonably the time taken to conclude the proceeding. He did, however, place reliance upon a consideration of the relative strengths of the claims made by each of the parties. He said that the ground upon which both applicants succeeded had been fully articulated in an internal review application made by the applicants to the respondent authority.

12 Those arguments which had been fully and properly articulated in the internal review proceeding had been pressed a second time before the Tribunal and had been accepted. He submitted that these were strong and fair arguments and they were put consistently and those factors in accordance with s 109(3)(c) should provide an important ground for exercising the Tribunal's discretion to make the orders which he sought. He also relied upon sub-paragraph (e) which entitles the Tribunal to consider any other matters that it considers relevant. In that respect, he relied upon two things. The first of those matters related to the internal review procedure adopted by the authority. In my principal reasons, I explained in some detail, the framework of the Occupational Health and Safety Act 2004 and the jurisdiction which it bestows upon the Tribunal. In broad terms, the Tribunal's jurisdiction may be invoked to review a determination by an inspector to issue a notice only after an internal review procedure under s 128 of the Act has been undertaken by the authority. The Authority and its review officer in these matters adopted the approach that it was not obliged to carry out a full merits review. Rather, its obligation was to conduct what might be described as an appeal procedure in the strict sense. That is, to consider whether there was material before the two inspectors who issued the relevant Prohibition Notices which were justified. The inspectors in issuing the notices and in making the necessary findings of fact as basis for those notices. I concluded in my determination that the full merits review was required under s 128 and in a recently published decision in the matter of A B Oxford [Victorian Workcover Authority v A B Oxford Cold Storage Pty Ltd 1 September 2006] the Court of Appeal reached a similar conclusion. Hence, said Mr Rozen, the applicants came to this Tribunal not only as review applicants with strong cases which ultimately prevailed but as review applicants who had been deprived of an important right to administrative review bestowed upon them by the statute but not afforded to them by virtue of the approach taken by the authority and its review officer.

13 Secondly, Mr Rozen drew my attention to a number of items of correspondence which had passed between the parties. There were letters expressed to be "without prejudice except as to costs" on 5 July, 28 July and 31 July 2006, from solicitors acting for the applicants, effectively inviting the Authority to consent to the prohibition notices being set aside.

14 The hearing in the Tribunal commenced on 16 August and a further letter was sent to the same effect but, in this case, specifically stating that if the Authority consented to the notices being set aside each party would bear its own costs. None of those offers was accepted and the letter stated that if the proposals were not accepted, these items of correspondence would be relied upon in support of an application for an award of costs on a full indemnity basis and in the events that have occurred, this is precisely what is being done.

15 Mr Rozen said that these matters should be seen in the context of an independent statutory power vested in the Authority under what is I believe s 114 of the statute to cancel or vary prohibition notices on its own motion independently of any internal review procedure or any proceedings in the Tribunal. Hence as, said Mr Rozen, the Authority had ample statutory power to mould an arrangement which would have entailed acceptance of his clients' proposals and it would be wrong for effect not to be given to the letters expressed to be "without prejudice except as to costs" where the applicants had achieved the victory which these items of correspondence predicted that they would have.

16 Mr Rosen submitted that I should apply s 112 of the statute to some degree by analogy or as providing some form of guidance in approaching the Calderbank letter issue. Mr Rozen also submitted that it would be inappropriate to disallow any of the costs which were specifically the subject of a proposal for disallowance by Mr Pizer who appeared for the Authority. He said that with regard to the proposal that these matters not be heard together, the contentions put by the applicants even although they did not prevail were not unreasonable. Those contentions were, he said, that there were separate considerations relative to the prohibition notices addressed to the two applicants and that hearing the matters together would tend to blur the distinctions. Moreover, he said it was not customary for particular points which were not met with success to be singled out and removed from a costs order in favour of a successful litigant. There were exceptional cases he said that where such a thing might be done where an issue was discrete but the matters relied upon by the respondent, according to Mr Rozen, were not sufficiently distinct for it to be made the subject of a separate exclusion. It would, he said, be practically difficult for a taxing officer to disentangle the costs incurred with respect to one issue from those costs incurred with regard to the merits of the proceeding as a whole. He submitted that this was an important proceeding potentially and one which could be regarded as a test case and so it was reasonable for his clients to retain two counsel, one of whom was a senior counsel well known in the occupation of health and safety jurisdiction.

17 Mr Pizer's submission, on behalf of the Authority, commenced by an observation that generally the various matters referred to in s 109(3) as justifying the award of costs by the Tribunal did not apply to the present proceeding. He said that there was no conduct of the proceeding which unnecessarily disadvantaged another party (paragraph (a)) or an unreasonable prolongation of the proceeding (paragraph (b)). Mr Pizer's submissions, I think, accorded with the concessions made by Mr Rozen. He also said that there was no occasion for a consideration of the relative strengths of the claims made by each of the parties. It was not a matter of simply identifying that the contentions of one party had prevailed and those of the other party had been rejected for this occurs in every proceeding. What had to be shown was that there were contentions advanced which were clearly implausible or incredible and nothing of the sort had been shown here.

18 A consideration of the nature and complexity of the proceeding according to Mr Pizer indicated not that there should be an award of costs but rather reinforced the view that there should not be. He referred me to determinations of Judge Higgins and Mr Byard in the matters Mornington Peninsula Shire Council v Fox 24 October 2003 at para [16] and Greenwedge Protection Group Inc v Nillumbik SC [2005] VCAT 1116 at [30]. This latter decision was by Mr Byard Senior Member. In both those cases, the Tribunals as constituted said that the fact that matters were of novelty and potentially could be regarded as test cases could be judged as a ground for not making an award of costs because of the public importance of having these matters determined.

19 Mr Pizer said that the Occupational Health and Safety jurisdiction of the Tribunal was a new one and there was, I think, only one previous full scale determination of the Tribunal and there was a lack of authoritative guidance on a number of important matters including the issue which was argued before me as to what constituted an appropriate approach to the matter of internal review pursuant to s 128 of the Act.

20 Mr Pizer said that to employ the Calderbank [Calderbank v Calderbank [1976] Fam 93] doctrines in the context of the present proceedings would be to fly in the face of Parliament's clear intention where it excluded s 112 operation with regard to settlement offers from review proceedings such as this. To apply Calderbank here would, he submitted, be to make an "end run" around s 112 which he said manifested an intention to exclude these sorts of doctrines from the Tribunal's review jurisdiction. He said, in any event, the various Calderbank letters should be given very little weight, they amounted to no more than demands on the part of the applicants or the Authority to surrender. Moreover, care needed to be taken, he said, in simply adopting words and approaches he found in court to the Tribunal's situation. In court the rule is that costs follow the event, the discontinuing party pays the other party's costs. Neither of these propositions apply in the Tribunal and therefore much that is said in court on this subject is simply inapplicable.

21 He also referred me to a decision of Cavanough J in Thomopoulos v Faulks & Anor (No 2) [2006] VSC 286 where his Honour in determining what effect was to be given to a Calderbank style offer of settlement made shortly before a trial considered that the Trial Division was bound by an authoritivative determination of the Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298 which included a joint judgment of Warren CJ, Maxwell P and Harper AJA. In that judgment, the Court identified certain specific matters as being relative to the operation of Calderbank style letters; that is, letters of settlement expressed to be without prejudice except as to costs. This was not an exhaustive list but a highly relevant one, he submitted. The list was as follows :

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed; and

(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it.

22 Mr Pizer placed specific reliance upon a consideration of the extent of the compromise offer. Here, he said there was no compromise offer at all, simply a demand to surrender and in analysing these matters, he submitted that in the review application, there was no ground for making any distinction between applicants and respondents.

23 It seems to me that I need to consider this matter in two stages. First, whether there should be an award of costs at all and, secondly, if there should be such an award, should it be made on a full indemnity basis or on some lesser basis and should any of the exclusions specifically identified by Mr Pizer be made.

24 I consider first therefore whether there should be an award of costs at all. To start off with the presumption that costs should lie where they fall, I accept Mr Pizer's submission that merely because one party has won and the other party has lost does not in itself indicate that the winning party should have the fruits of costs awarded. To approach matters in this way would be to make the award of costs the rule rather than the exception. Section 109(1) indicates the Tribunal generally that the award of costs is to be the exception and not the rule. I accept that the purposes of s 109(3)(c) is that only where an implausible or incredible case in fact or more has been adopted that one should regard the discretions to award costs as being enlivened, or perhaps to follow more precisely the words used by the paragraph where "a claim that .... has no tenable basis in fact or law" has been made. In my view, while in this proceeding, there has been a winner and a loser as in every proceeding there is, there is no basis for saying that anything of that sort occurred. And so I can put that matter to one side.

25 I accept Mr Pizer's submission that there may be occasions as it were in the public interest where something that is either clearly a test case or might potentially be a test case a consideration of the nature and complexity of such a proceeding might lead to the view that costs should lie where they fall because the proceeding as a whole was taken in the public interest. As to the authorities in support of that principle, the decisions in Fox's case and Greenwedge, I do not understand the Tribunal in either case as saying that this was a matter of universal application, merely that this is a consideration that may in a particular case lead to the exercise of the costs of discretion in a particular way. There are many instances where the Tribunal has taken the view that the nature and complexity of a proceeding is properly characterised by regarding it as heavy duty commercial litigation and treated that as a ground for making a costs award. Accepting that there is an element of novelty in this proceeding, I do not believe that it is one that is of such a character as would attract the principle enunciated in Fox's case. In my view, fundamentally this is a dispute between these applicants and the Workcover Authority and the fact that it is to some degree a trail blazer does not change that. Hence, I do not regard consideration of the nature and complexity of the present proceedings as pointing me in the one direction or the other on the issue as to costs.

26 The final and if you like "catch all" consideration, viz, any other matters which the Tribunal considers relevant, in my view, throws up two matters.

27 The first is a consideration of the ultimate as significance of these proceedings. It seemed at one stage that there might be a contention put by the respondent that these proceedings were effectively moot. They related to prohibition notices which to use the customary terminology had been risk rectified. That is, it had been demonstrated to the Authority that the risk the subject matter of the prohibition notices had been removed. However, as a historical fact the imposition of the prohibition notices remained. The applicants felt that being made subject unfairly as they saw the prohibition notices created a slur upon their corporate reputations. They were also conscious that having been recipients of prohibition notices might be regarded in subsequent proceedings under the Occupational Health and Safety legislation as effectively "priors". Ultimately, it was not suggested that these proceedings were moot. There was a legitimate reason for these applicants to seek to have the prohibition notices set aside. One view might be, however, that this was to some degree an approach which allowed these applicants something of a luxury. In other words, they were taking a step that was not strictly essential, perhaps desirable. The question then would be whether in allowing themselves this relative luxury when they succeeded, these applicants should be entitled to pass costs of the operation upon the Workcover Authority and hence, ultimately, upon the public purse. The counter argument I suppose, however, is that these applicants have ultimately demonstrated that they should not have been subject to the prohibition notices at all and corporate good standing is a legitimate consideration.

28 The other miscellaneous factor is a matter relating to the internal review. The finding which I made was that the internal review which was carried out was not the one which was contemplated by the statute. Hence, these applicants came to the Tribunal to be vindicated not as parties that have been accorded their proper internal review rights but as parties who had been denied those rights by a misconceived application of the statute by the Authority. In my view, the latter consideration is the countervailing one. That is, it is of greater significance that these applicants did not have the internal review that they were entitled to have and so had to come to this Tribunal to have it. Mr Pizer said that there was no ground for thinking that a review carried out in the manner which the Court of Appeal in the A B Oxford case said should have been done internally would have reached any different conclusion. That may or may not be true but, as Mr Rozen correctly observed, it was the Authority's misdirection of itself that deprived these applicants of the opportunity of finding out. This seems to me to be a most significant matter and ultimately tends against any view that these applicants were, if you will, allowing themselves a luxury. Had they had a proper internal review procedure, this matter might have been reviewed differently. For the reasons already explained, they did not. In my view, putting these considerations together and weighing them as I have indicated, it is fair, to use the words of s 109(3) that there should be a costs award in favour of the applicants for their costs of these proceedings.

29 What then of the issue of their application for costs on a full indemnity basis. Even in court the usual rule is that costs are awarded on a party/party basis. Awards of costs on a full indemnity basis a generation ago were almost unheard of. Now they are more common but still the exception rather than the rule. In the Tribunal the starting point is that there are no costs awards at all and that the costs lie where they fall. I take the view as I have in a number of other costs determinations that awards of costs on a full indemnity basis must be made more sparingly in the Tribunal than they are made in court and the making of such awards even in court today is relatively sparing.

30 The only ground which has been advanced in support of the application for costs on a full indemnity basis is the various Calderbank letters to which I made reference earlier. In my view, the ultimate question with regards to these Calderbank letters is to consider whether in all the circumstances it was unreasonable for the Workcover Authority to reject them. This is the ultimate question for determination as analysed by the Court of Appeal in Hazeldene's case as applied by Cavanough J in Thomopoulos. If we start with the last of those letters made actually in the running of the hearing, I have no doubt that it was not unreasonable for the Authority not to accept that proposal. It was made far too late. That was the fullest and most detailed of the letters. As for the others, while they were made in plenty of time, and did not exhibit the vice of lateness which the letter of 17 August did. I believe it was not unreasonable for the Authority to reject them because they effectively offered no compromise at all. They were merely demands to surrender. In that respect, whilst the Court of Appeal has said that demands to surrender is an offer of settlement the provisions of s 112 which led the court to that conclusion have no application to the present proceeding.

31 I should also respond to the submission made by Mr Pizer that the exclusion of the s 112 procedure implicitly excludes the Calderbank procedure. I reject that submission. Order 26 of the Rules in the Supreme and County Courts lays down a regime similar though not identical to s 112 and yet as cases such as Thomopoulos show the court nevertheless does entertain and consider Calderbank letters even although they fall outside the strict terms of Order 26. Put another way, the very wide discretion given to the Tribunal by s 109 to consider all matters including Calderbank's letters ought not to be implicitly read down.

32 There is a further reason why I think care should be taken in using Calderbank letters in the way that the indemnity costs application seeks to use them. The first was explained by Cavanough J in his judgment in Thomopoulos [18] where his Honour said :

It seems to me that this is a case in which very little was offered by way of compromise and whilst that may have been, in a sense, inevitable, I think in the end that this factor tends in favour of the plaintiff. It may just be that in certain kinds of cases (such as the present) there is little or no room for relevant compromise and so the ordinary party-party rule may be very difficult to displace by the sending of a Calderbank letter.

33 Each applicant here was the subject of one prohibition notice. The matter could not have been compromised in respect of either applicant by as it were making it the subject of half a prohibition notice. To put it another way, this was a proceeding which was not really open to compromise; it was either going to be won by the Authority or won by the applicants.

34 Secondly, the form of Calderbank letter which was employed not only by the applicants but also, on one occasion, by the respondent in letters dated 4 August addressed to both applicants can be open to abuse in the review jurisdiction. The general rule here in the Tribunal is that there are no orders as to costs as to between parties, that is particularly important in review matters. The review jurisdiction and its prima facie liberty from the burden of costs orders as between party/party could, upon the arguments that have been put to me today, be subverted simply by the one party or the other party writing letters saying "surrender or we will ask for indemnity costs". The entire costs regime in the Tribunal cannot be overset as easily as that. Hence, in my judgment, the Calderbank letters provide no basis here for the making of any uplifted award of costs on full indemnity basis. So far as the issue of the inappropriate form of internal review, that has already done its work in convincing me that there should be a costs award but I do not believe it would be appropriate as it were to make it do double duty to justify not merely that but that the award should be on the uplifted full indemnity basis. Hence, insofar as it is contended that the award of costs should be on a full indemnity basis, I reject that submission and the application in that regard.

35 Next, within the context of party/party costs, I consider the issue of the scale upon which such award should be made. Mr Pizer's contention was that since this jurisdiction was inherited from the Magistrates' Court the scale or scales in that court should be the appropriate one. Mr Rozen submitted, however, that where a jurisdiction is given to a court or Tribunal by Parliament, Parliament takes that court or tribunal as it finds them. It should be regarded as picking up the costs regime which applies in that court or tribunal. The approach which has certainly been taken by me and I believe by many others in the Tribunal, is to regard the County Court scales as the appropriate guides in all the circumstances. Such I think is evident from a determination of my own which Mr Pizer referred me to, viz, Trycala Importers & Wholesalers Pty Ltd v Growmac Imports Pty Ltd [2001] VCAT 1445 [31].

36 The next question is upon what scale? It will be recalled that Mr Pizer submitted that these proceedings had the potential to be test cases and precedents. He did not venture any conclusion as to whether ultimately they would or had achieved that status already. In my view, these were matters of some complexity that required lengthy evidence. Even although it is not possible to ascribe a particular monetary value to the proceedings, I believe that they were of such complexity and importance that within the context of the County Court scales, the top scale, Scale D is the appropriate one to apply.

37 Finally, I turn to the proposed exclusions identified by Mr Pizer. I accept the contention put by Mr Rozen that it is only in exceptional cases that it is possible to identify discrete issues which should be excluded from a general costs order in a proceeding. In my view, the attempt to identify particular issues would not be successful here. I would, I think, in attempting to make such a distinction be creating a conundrum and an impossible problem for both the cost consultant preparing the bill of costs and the Tribunal's taxing officer were I to attempt to do so. Further, I do not believe it is the practice in court generally to distinguish between the points upon which the victorious plaintiff won and those which were not sustained.

38 The more difficult issue is whether there should be certificates to counsel. Mr Pizer said that his opponent today, Mr Rozen who was junior at the substantive hearing, is extensively experienced in the occupational health and safety jurisdiction and the author of a standard work on the subject. He also noted a remark made by his leader Dr Neal SC to the effect that the written submissions were written by Mr Rozen and further he noted that Mr Rozen cross-examined a number of important witnesses in the course of the hearing.

39 Mr Pizer referred to the well known formulation by the Full Court in Oldaker v Currington [1987] VicRp 61; [1987] VR 712 at 715 where the court said that a certificate for senior counsel should only be certified in a costs order as between party/party where the court was satisfied that the retention of senior counsel was "reasonably necessary for the attainment of justice or the enforcement of the applicant's rights". This is, I think, one of the more difficult issues in the costs determination. What I have said, however, about the relative novelty of the Tribunal in this matter and of the novelty of some parts of the 2004 Act and the complexity of the evidence satisfies me having had the advantage of sitting through the entire hearing that it was reasonably necessary for the attainment of justice that the applicants retained two counsel, one of whom was senior counsel and so I will certify for two counsel and also for senior counsel.

40 The final point is the question as to whether I should make any exclusion for the costs of the Directions Hearing which was held to determine whether these matters should be heard together or not. Ultimately, I perceived no difficulty in these matters being heard together. However, I am not satisfied it was unreasonable for the respondent to submit that the two proceedings should be severed. That being the case, I do not believe I should make any special exclusion for the costs of that Directions Hearing. My orders therefore will be that the respondent should pay the costs of the applicants in these proceedings to be taxed in default of agreement in accordance with County Court Scale D and I certify this was a matter proper for the retention of two counsel, one of whom was senior counsel.