Pacific Indemnity Underwriting Agency Pty Ltd v Maclaw No 651 Pty Ltd [2003] VSC 40

Supreme Court of Victoria|2003-02-28|Before: SMITH J

JUDICIAL REVIEW - VCAT - Error of law - Interpretation of "reasonable costs" - interest on costs - Exercise of procedural discretion. INSURANCE - Domestic building contract insurance - Meaning of "reasonable costs".

This is an appeal from decisions made on 14 December 2001 and consequential orders made on 13th February 2002 by the Victorian Civil and Administrative Tribunal (VCAT) in proceedings DBL A508/98 and DBL A508/98.

Those proceedings were commenced in VCAT's Domestic Building List by Maclaw No. 651 Pty Ltd ("Maclaw"- the first respondent to this appeal) against, inter alia, Pacific Indemnity Underwriting Agency Pty Ltd ("PIU" - the appellant in this appeal) and Gordian Run Off Limited ("GIO" - second respondent to this appeal).[1] A proceeding was also commenced against HIH Casualty and General Insurance Ltd (in liquidation) ("HIH"), being DBL No A 507/98. It was heard with the other proceedings but is not the subject of this appeal.

Maclaw was the owner of land in Flemington on which it proposed to construct a multi-storey residential development. The builder engaged to carry out the construction was Dwyer and Johnson Constructions Pty Ltd. It carried domestic building contract insurance as required by law[2].

The relevant insurance obliged the insurers, once indemnity was granted, to pay "the reasonable costs and expenses of the party making the Claim against the Insured". This was consistent with the Ministerial Order specifying the minimum policy terms.[3] In particular, the Order spells out the extent to which liability may be limited, inter alia, by limiting liability under the policy to $100,000 per home "plus reasonable legal costs and expenses of any claimant against the insured associated with the successful enforcement of a claim against the insured or the insurer; ..."[4]

In May 1998, the builder became insolvent and was unable to complete the project. Maclaw made claims under the relevant insurance. Liability was denied. Maclaw commenced the above proceedings against PIU and GIO on or about 22 July 1998.

Prior to August 1999, the parties were involved primarily in the argument and the determination of a preliminary issue - whether the building works were within the definition of domestic building work under s 3 of the Domestic Building Contracts Act 1995. A determination by the Tribunal that they were within the definition was taken by the insurers to the Court of Appeal. On 6 December 1999, their application for leave to appeal and their appeal were heard and dismissed with costs.

The parties then partially settled the proceedings.

(a) A 508/98. A settlement offer was made by the insurer pursuant to Part 4 of the Victorian Civil and Administrative Act 1998, and accepted, on 19 May 2000, by Maclaw. The offer provided , inter alia, that the insurers:

"IN FULL AND FINAL SETTLEMENT of all claims in this proceeding ... pay to the Applicant: -- 1. The sum of $112,627.00 (inclusive of interest, if any), such payment to be made within 30 days of acceptance of this offer; AND 2. The applicant's reasonable legal costs and expenses to be assessed by the Tribunal in default of agreement between the parties, such payment to be made within 30 days of agreement by the parties or assessment and determination by the Tribunal ..."

(b) A 509/98. The parties entered into terms of settlement on 3 October 2000, under which, inter alia, the insurers agreed to the following:

"1. The insurers agree to pay the Applicant $1.2 million in full settlement of the Applicant's claim and interest, such sum to be paid within 21 days. 2. In addition to paragraph 1 hereof, the insurers agree to pay the Applicant's reasonable legal costs and expenses in relation to the claim and the proceeding, the amount of such reasonable costs and expenses to be determined by VCAT in default of agreement, and it is acknowledged that the Applicant's rights under paragraph 4 of the Order made 29 May 2000 are reserved and that these terms of settlement do not affect or alter the Applicant's rights pursuant to the order of the Court of Appeal. ... 6. The Insurers agree to indemnify the Applicant in relation to any GST liability that may be imposed on the Applicant with respect to the payment to it by the Insurers of the said sum of $1.2 million but only to the extent to which such GST liability is not the subject of or matched by a GST imput credit claimed by the applicant. 7. The Applicant, subject to compliance by the Insurers with these Terms of Settlement, and the Insurers release and forever discharge each other from and against all claims, actions, demands, causes of action, liabilities or costs of any description which they have or but for these terms would have had arising out of or in any way related in relation to the subject matter of the proceeding and Flemington Stage 1."

In paragraph 2 of the above terms of settlement, reference was made to paragraph 4 of an order made on 29 May 2000. That order recorded a series of consent declarations as to the relative rights of the applicant and the insurers. Paragraph 4 read as follows:

"Under the indemnity provided by the insurers under the Ministerial Order, the Certificate of Insurance, Clauses 1 and 9 of that part of the policy headed Conditions and Clause 1 of that part of the policy headed Policy Clauses, the owner is entitled to claim only a maximum of $100,000 for each home at the property (inclusive of associated works) and reasonable legal costs and expenses."

On 6 December 2000, the solicitors for the insurers wrote to the solicitors acting for Maclaw seeking separate bills in taxable form. On 1 March 2001, the solicitors for Maclaw wrote to the insurers' solicitors enclosing a schedule of legal costs and expenses totalling $639,760.98. The letter informed the insurers' solicitors that, relying upon Reid's case, Maclaw was entitled to payment of its costs and expenses on a full indemnity basis and in the circumstances was under no obligation to provide a bill in taxable form. The letter foreshadowed an application to VCAT in the event that payment was not made.[5]

After further correspondence, by summonses dated 22 May 2001 and issued on 27 July 2002 in the VCAT proceedings, Maclaw sought orders, inter alia, against PIU and GIO that they pay its "reasonable legal costs and expenses of the claim and the proceeding".[6] It is common ground that it did so pursuant to its entitlement under paragraph 2 of the settlement offer referred to above and paragraph 2 of the Terms of Settlement referred to above.[7]

In support of the application, affidavits were sworn and filed on 22 May 2001 by Mr Appelboom, giving the details of the legal bills given to Maclaw, and Mr Weingart, commenting on those bills as a costs expert. After failing to comply with directions made on 31 July 2001, and extensions, the insurers filed Statements of Facts and Contentions and submissions shortly prior to the hearing. In particular, the insurers filed and served documentation challenging details of the costs claims.

PIU (the appellant in this appeal) also filed applications in each proceeding on 16 October 2001 seeking directions that Maclaw file and serve a bill in taxable form.[8]

On 29 and 30 October 2001, a hearing of the above applications occurred at VCAT before Deputy Vice-President Cremean. The insurers were unsuccessful in their application for directions that a bill in taxable form be supplied. There was debate as to the meaning of the terms of settlement and the offer and acceptance and there was some cross-examination of the plaintiff's expert, Mr Weingart. Some issues were raised in oral argument, in addition to those raised in writing by the insurers, as to the items in the costs claimed. The Tribunal reserved its decision.

On 14 December 2001 it pronounced the following decisions relevant to the proceedings A508/98 and A509/98:

1. Maclaw was to be paid its "'reasonable costs" in accordance with the settlements reached";

2. the expression 'reasonable costs' was to be interpreted in accordance with the decision in Reid v FAI General Insurance Co Ltd [1999] VCAT 1773;

3. Maclaw was "entitled to interest on its costs in accordance with law at the rate prevailing from time to time";

4. Maclaw was entitled to costs in the costs proceedings "(including reserved costs) according to the Supreme Court Scale on indemnity basis under section 109 of the Victorian Civil and Administrative Tribunals Act 1998".

The precise form and details of the orders remained to be clarified. In particular, it was necessary that costs be apportioned between the proceedings. The Tribunal gave directions for the preparation and service of draft orders and directed a further directions hearing to be held on 14 January 2002. The hearing of the claims was adjourned to 13 February 2002. The parties filed further material.

On 13 February 2002, the hearing was resumed. Among other things, counsel for GIO queried some items and also argued that Maclaw was not entitled to interest on costs pursuant to the settlements. At the conclusion of submissions, the Tribunal gave brief reasons including reasons accepting some of the submissions made as to the precise quantum of the costs to be awarded. The Tribunal then made formal orders in the proceedings to the following effect:

1. Maclaw's costs were to be paid by PIU and GIO fixed at $39,292.12 in A508/98 and $325,414.46 in A509/98.

2. Interest on the aforesaid sum of $39,292.12 was to be paid from 19 May 2000 and interest upon the sum of $325,414.46 was to be paid from 3 October 2000 (being the respective dates of settlement between the parties) at the rate of 12.3 per cent to 16 April 2001 and 11.5 per cent from 17 April 2001.

3. The insurers' applications for orders for bills in taxable form were dismissed.

4. PIU and GIO were to pay Maclaw's costs (including reserved costs)[9] of the costs application and the costs of the directions hearing on 13th Feb 2002 including the cost of Senior Counsel and the costs in relation to the application filed 22 May 2001 according to the Supreme Court Scale on an indemnity basis.

On 15 April 2002, Master Wheeler granted PIU leave to appeal from the above costs determinations and orders of VCAT. In the notice of appeal dated 24 April 2002, the following questions of law were identified as arising in the appeal:

1. What is the meaning of the expression "reasonable costs" as the expression appears in the Settlement Offer dated 8 May 2000 and the Terms of Settlement dated 3 October 2000, and, in particular, does it mean costs:

2. Did the Tribunal have power to order interest on costs, and if so, from what date? 3. In what circumstances is a party entitled to have the bills of costs in taxable form delivered to it, and have the bills taxed before any final order for costs is made by the Tribunal?

In its reasons for decision, the Tribunal referred to the above costs provisions in the terms of settlement and offer and acceptance. It then addressed an issue that had been raised as to whether costs should be ordered against the respondents jointly or one or other of them.

The Tribunal then referred to evidence as to the quantum of the costs. It considered the positions taken by the insurers. It noted that they did not contend that Maclaw was not entitled to costs. After noting that the insurers claimed a right to an order that Maclaw provide bills in taxable form, it stated that PIU argued that any costs ordered should be on a party/party basis while GIO argued that they should be on a solicitor/client basis.

After referring to the request by the insurers for separate bills of costs, the Tribunal returned to the issue of the construction of the clauses entitling Maclaw to "reasonable costs and expenses in relation to the claim and our proceeding".

The Tribunal referred to the argument advanced for Maclaw that the words attracted "the principles and established line of authorities set out in Reid v FAI General Insurance Co Ltd [1999] VCAT 1773". The Tribunal quoted several passages from that decision. In particular it noted:[10]

"In my view there is a line of authority which shows that in appropriate circumstances 'reasonable legal costs' equates with the rates at which those services must be purchased in the ordinary market."

"In my view this policy should be regarded as giving an indemnity and a full indemnity for the legal costs. Costs are not to be regarded as other than "reasonable" merely because they represent what the market rates are. Indeed it is that very congruence with the market which makes those fees reasonable. I reach this conclusion with the greater confidence in the knowledge that the form of policy relied upon here is issued pursuant to statute as a consumer protection measure."

After referring to the subsequent decision of White v Secretary to Department of Justice,[12] the Tribunal referred to the opposing arguments of PIU. It had relied upon Spencer v Dowling[13] for the proposition that "reasonable costs mean costs on a party/party basis". The Tribunal also referred to the argument advanced for GIO that "reasonable legal costs" may mean costs on a solicitor/client basis and the reliance of GIO on the Supreme Court Rules. It referred to issues raised about the reliability and reasonableness of bills based upon time charging - the method employed in this case.

The Tribunal then expressed its conclusions. It said that it saw the views expressed in Reid's case as views that were applicable in the present context. The Tribunal noted:[14]

"It is true that one factor influencing the learned Deputy President was the circumstance that what was there involved in the issue before him was a policy of insurance. That policy, he said, should be regarded as giving an indemnity and a full indemnity for legal costs. I consider that attitude is equally applicable here. I consider also that on the meaning of the term 'reasonable costs and expenses', I am, in the event of ambiguity, entitled to refer to the 'objective framework of facts within which the contract [of settlement] came into existence and to the parties presumed intention in this setting' see per Mason J: Codelfa Constructions and Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 C. L. R. 337 at 353. That objective framework of facts (or 'factual matrix' as Lord Wilberforce called it in Reardon and Smith Line Ltd v Hansen-Tangen [1976] 3 All ER 570 at 575) includes in my view the fact that the Third and Fourth Respondents are both insurers and that they are insurers of domestic building work under legislation (including the Building Act 1993 (Vic) the obvious aim of which is consumer protection. Other factors include the terms of the relevant Ministerial Order, the provision it makes and the form of expression used in the settlement terms."

The Tribunal dismissed the insurers' arguments that it should not look at context. It then referred to the insurers' argument based on Spencer v Dowling, stating:[15]

"In my view that latter decision says nothing at all to the contrary. It is clear, when the whole of the judgment of Winneke P. is read, that the President was speaking in a very specific context -- that of s 47(2) of the Equal Opportunity Act 1984 (Vic). His remarks on that sub-section can have no bearing on the decision in this case, concerned as it is with particular Terms of Settlement".

The Tribunal then turned to the arguments relating to misgivings about the time charging approach. The Tribunal expressed the conclusion that the specific errors and uncertainties raised by the insurers were proved in its view to be without foundation on analysis. It also commented that if the insurers had wished to confine the form in which the claim for costs would be presented they should have negotiated further terms. After referring to other matters the Tribunal commented that:

"... there was nothing here in these bills which looked to me to be untoward or obviously unreasonable."

The Tribunal then concluded[16] that it was satisfied that the respondents should be ordered to pay the amounts of the bills in question. The Tribunal noted also that it relied on the affidavits of Mr Appelboom and Mr Weingart to say that "the fees charged, at the charge-out rates applied, were appropriate and reasonable". It also relied upon the affidavit of Mr Appelboom in finding that the time intervals and attendances were incurred in relation to the proceedings.

PIU and GIO submit that VCAT erred in law in concluding that the term "reasonable costs" in the settlement documents should be construed as entitling Maclaw to indemnity costs. Counsel submitted that the phrase should have been construed as meaning payment of costs on a party/party basis. Counsel advanced a number of reasons to support the construction advanced independent of any authority.

It was submitted that the plain and ordinary meaning of the term "reasonable costs", as understood by lawyers is party/party costs. It was put that to add "reasonable" added nothing to the word "costs" except to qualify it. That is the usual measure of costs and it would be incongruous for VCAT, which is a no cost jurisdiction, to construe "reasonable costs" on a higher basis. Reliance was placed on Spencer v Dowling[17] and Carbure Pty Ltd v Brile Pty Ltd[18] and the cases there cited.

Alternatively, if the phrase was unclear or ambiguous, it should be construed, in light of the relevant factual matrix, as meaning costs on a party/party basis. The relevant factual matrix was said to include the following:

* the phrase appears in agreements to settle disputes in which a number of issues were in dispute and were compromised in the settlement;

* the compromises were made in proceeding brought in a prima facie no cost jurisdiction;[19]

* in a compromise, a party would not agree to provide 100 percent of the very thing claimed;

* if the parties had intended a higher measure of cost to apply they could have, and should have specified "indemnity costs" or "solicitor/client costs";

* so far as the offer was concerned, it should be construed in the context of the provisions of the Act, particularly sections 112 to 115, which regulate procedure for settlement offers, their acceptance and the cost consequences of non acceptance, being the VCAT equivalent to offer of compromise procedures under rule 26 of the Supreme Court Rules. An offer under those Rules carries with it payment of costs on a party/party basis, the intent being to encourage and facilitate settlement of legal proceedings - so to with offers under the Act.

Counsel for PIU and GIO also submitted that the Tribunal was in error in relying upon the decision of Reid v F.A.I. General Insurance Company Ltd,[20] it being erroneously decided. Counsel submitted that there was no ambiguity in the language in the policy and that "reasonable costs" was a reference to party/party costs. Counsel referred to the statements of Deputy President McNamara in Reid that "the policy should be regarded as giving an indemnity, and a full indemnity, for legal costs."[21] Counsel submitted that he attempted to rewrite the policy and was ignoring the requirement that the costs be "reasonable". The decision was also questioned on the basis that it relied upon authority, New South Wales Crime Commissioner v Fleming,[22] a case dealing with statutory provisions entitling a suspect to payment of his or her legal costs from property and funds sought to be confiscated by the Crown.

Alternatively, counsel submitted that, if Reid was correctly decided, it was not applicable in the present case because it related to the construction of an insurance policy. Here the issue arises in settlement agreements in which Maclaw was prepared to settle for less than it claimed. Counsel for GIO drew attention to the fact that Deputy President McNamara distinguished a New Zealand case, Ministry of Works and Development v Cromwell Farm Machinery Ltd[23] where the words in the relevant legislation "reasonable costs" were construed as meaning that while a full indemnity on a solicitor client basis was not provided something more generous than party/party costs should be provided. Deputy President McNamara distinguished this decision on the basis that the problems were different. In the case before him, the costs were not incurred in litigation at all and were costs insured against under a policy of indemnity insurance.[24] Counsel in the present appeal argued that the relevant costs were costs incurred in litigation. Counsel also relied upon the distinction taken by Deputy President McNamara in White v Secretary to Department of Justice.[25] In that case the claim was made on the Estate Agents Guarantee Fund. There was a statutory entitlement to "reasonable costs". The Deputy President considered his view expressed in Reid's case that: [26]

"the balance of authority in litigious matters is that "reasonable legal costs" meaning costs fixed as between solicitor and client rather than upon a full indemnity basis."

"A claim made upon a statutory compensation fund is perhaps neither one situation nor the other. In my view however it more closely resembles litigation in the situation of a claim made under an insurance policy."

He had earlier noted that he had based his decision in Reid's case:[28]

"particularly upon the fact that I was construing a policy of indemnity insurance and to give it any meaning other than the one to which I ascribed it would lead to the beneficiary of the indemnity not being fully indemnify."

Counsel emphasised that in the present case the claim is based on the settlement terms and is not a claim made directly pursuant to a policy.

Counsel for GIO referred to a number of authorities dealing with the construction of various clauses entitling persons to recover costs in mortgages and leases. Counsel also submitted that the case of Abigroup Ltd v Sandtara Pty Ltd[29] was more relevant than Reid's case. In the Abigroup case, an indemnity was given by a guarantor to the landlord in respect, inter alia, of "costs and expenses which the Landlord may suffer or incur consequent upon or arising directly or indirectly out of any breach or non-observance by the Tenant of any of the covenants terms provisions restrictions or conditions in this lease ..."

The Court of Appeal expressed its conclusions as follows:[30]

"Ultimately, it is a matter of construing the words of the indemnity in cl 18.02. It seems to me that the language of the indemnity, in particular its reference to all costs and expenses, means costs on a solicitor/client basis."

The court approved the statements in Halsbury's Laws of England that ordinarily an indemnifier would be liable for the full costs as between solicitor and client.[31]

The first issue to be considered is the argument put by PIU and GIO that the phrase "reasonable legal costs and expenses" is clear and unambiguous and refers only to party/party costs.

It may be said that the more this issue was explored the clearer it became that the phrase in question is flexible in meaning and that its meaning is determined by the context in which it is found. This proposition finds clear support in statements in Spencer v Dowling.[32]

The reality is that the phrase "reasonable legal costs and expenses" is capable, depending on its context, of referring to party/party, solicitor/client and indemnity costs and, for that matter, none of them. Careful attention has to be given to the context in which they appear.

Counsel for Maclaw submitted that the expression authorised the use of market rates and the reasonable indemnification of a claimant. Counsel drew attention to:

* the fact that the settlement terms related to issues arising under an exclusion in an indemnity insurance contract;

* the indemnity insurance was provided pursuant to consumer protection legislation;

* the protection was intended to cover costs incurred in non-litigious situations as well as litigious situations;

* the interpretation expressed in Reid's case was of long-standing at the time the terms of settlement were entered into;

Counsel asked rhetorically why anyone drafting or settling the settlement documents would use an expression like "reasonable cost and expenses" unless it was intended to pick up a phrase well understood and in common use in the jurisdiction. Counsel submitted that the intent was to preserve the claim that Maclaw had under the policy for "reasonable legal costs and expenses".

In interpreting the phrase in its factual context, the primary position of Maclaw appears to be that the phrase encompassed a well understood expression which had a particular meaning in the jurisdiction and that meaning was the meaning that had been in place at least since Reid's case.

This analysis may well be correct. But it is not something of which I am able to take judicial notice and there is insufficient evidence as to acceptance or non-acceptance of the decision in Reid's case within the jurisdiction.

The issue is to be resolved, in my view, on the basis rather that what the parties clearly did was settle the claims related to the direct losses caused by the builder and to take to VCAT the other aspect of the claim brought under the policies, namely the claim for "reasonable legal costs and expenses". That is, the parties used the phrase from the policies so that their rights under the policies were preserved by the settlement terms. As a result the determination of the entitlement of Maclaw under the settlement terms would turn principally on the meaning of the phrase "reasonable legal costs and expenses" in the policies.

Turning then to the construction of the phrase, in my view, the interpretation adopted by Deputy President McNamara and Deputy President Cremean is the correct interpretation. I draw particular attention to the fact that:

* the policies are provided pursuant to consumer protection legislation;

* the approach taken to providing consumer protection is to use insurance;

* the policies, while subject to limits, are intended to offer indemnity insurance with an obligation to protect up to the limits provided in the policies;

* if the entitlement to costs were to be less than an indemnity, it would inevitably result in successful claimants having to meet a significant portion of the costs and expenses of pursuing their claim out of the moneys intended to compensate them for the direct losses flowing from the builder's default. This would severely impede and could defeat the purpose of the legislation.

* in most cases, there will be a significant difference in the financial strength of the claimants and the insurers. I refer not merely to the fact that the insurers are likely to have access to significantly greater financial resources but also to the fact that, typically, claims will be made by claimants under financial pressure because of default by builders. To adopt the interpretation sought by PIU and GIO would place claimants at a serious disadvantage in any negotiation because they could not afford to embark upon any contest with the insurer and the insurer would be well aware of that fact. To create such a situation would, in my view, severely impede if not defeat the purpose of the legislation.[33] To adopt the interpretation advanced by Maclaw, however, reduces any imbalance. The insurer is protected by the requirement of reasonableness.

For these reasons I have come to the conclusion that the phrase "reasonable legal costs and expenses" in the offer and acceptance and the terms of settlement is to be construed as entitling Maclaw to reasonable legal costs and expenses assessed on an indemnity basis - the construction adopted below.

It emerged in the course of argument that there was no dispute that VCAT had the jurisdictional power to award interest on costs awarded by it. Counsel for Maclaw relied, inter alia, upon the provisions of the Domestic Buildings Contract Act 1993[34] and the Insurance Contract Act 1984.[35] But the relevant ground of appeal stated in the Notice of Appeal is that the Tribunal erred in law in determining that Maclaw was entitled to interest on the costs fixed by the Tribunal.

The principal issue is whether a claim for interest on "reasonable legal costs and expenses" awarded by the Tribunal remained open in light of the resolution of the parties' rights in the offer and acceptance and terms of settlement.

Counsel for PIU and GIO submitted that there was no power in the Tribunal to consider the issue of interest on costs because the parties had not reserved that issue for determination in the agreed settlement documents. Further, if the issue of interest on costs remained to be determined, the settlement terms placed no obligation upon PIU or GIO to pay any such costs until 30 days had elapsed from agreement or assessment and determination by the Tribunal and that time had not elapsed. Finally, it was submitted that VCAT was in error in awarding interest from the dates of the offer and the settlement because the costs were determined after those dates and some of the costs on which interest was ordered had not been incurred at the relevant time. Counsel submitted that the earliest date upon which the costs were determined was when they were fixed by the Tribunal on 13 February 2002.

As to the operation of the terms of settlement, counsel for Maclaw submitted that the terms of settlement expressly preserved a claim being a claim for reasonable cost and expenses which the parties had not been able to settle at the time. The parties had settled the claim for compensation in respect of the default of the builder together with interest in respect of that part of the claim but the interest potentially payable on the claim not compromised was not caught by the terms of settlement.

It is necessary to analyse first the offer and acceptance and then the terms of settlement.

The offer that was made by PIU and GIO was that they would pay $112,627. 00 in full and final settlement of "all claims" and "the applicants reasonable legal costs and expenses to be assessed by the Tribunal in default of agreement between the parties". There being no reservation of a claim for interest on such costs it seems to me that Maclaw is unable to pursue that claim, it having been settled by the acceptance of the offer.

Turning to the terms of settlement, they provided that the insurer would pay Maclaw $1.2 million in full settlement of its "claim and interest" and pay its "reasonable legal costs and expenses in relation to the claim and the proceeding, ... to be determined by VCAT in default of agreement ..." The terms concluded in paragraph 7 with the provision that subject to compliance with the terms by the insurers, Maclaw and the insurers:

"release and forever discharge each other from and against all claims, actions, demands, causes of action, liabilities or costs of any description which they have or but for these terms would have had arising out of or in one anyway related to the subject matter of the proceeding."

Again, it seems to me that the claim reserved for determination was the claim for the reasonable legal costs and expenses of Maclaw and that the claim for interest on any such legal costs and expenses was not kept open by the terms of settlement.

It follows that PIU and GIO were released in both instances by the settlement terms from any liability for interest on costs.

The Tribunal had assumed that Maclaw was entitled to such interest and was seeking it. The entitlement to such interest, however, was challenged by the insurers before the Tribunal on 13 February 2002 prior to any order being made. The Tribunal then ruled against the insurers. I am satisfied that it erred in law in doing so.

It is unnecessary, therefore, to consider the other arguments advanced for the appellant.

As noted above, the insurers expressed to the Tribunal their dissatisfaction with the approach taken by Maclaw in formulating its claim for costs by supplying the details of the time based charges submitted to Maclaw each month by its solicitors. The insurers sought what they described as bills in taxable form. The Tribunal declined to direct Maclaw to supply such bills and resolved the matter on the basis of the evidence referred to above and the specific challenges made by the insurers to items in the lists of charges.

I accept the submission made on behalf of Maclaw that what the insurers are seeking to do is to challenge the exercise of the Tribunal's discretion in the conduct of the hearing.

The Tribunal is given broad powers to regulate its own procedures and is directed to conduct its proceedings:

"with as little formality and technicality, and determine each proceeding with as much speed, as the requirements of this Act and the enabling enactment and a proper consideration of the matters before it permit".

It must, of course, act fairly, according to the substantial merits of the case and is bound by the rules of natural justice.[36]

Before me, the insurers raised a number of criticisms about the procedure followed in identifying the costs and expenses claimed by Maclaw and in testing its claims. They do not, however, demonstrate a breach of the Tribunal's obligations and they do not demonstrate that the Tribunal was required to direct Maclaw to put forward a bill in taxable form. The insurers had detailed information of the claims made and had it within their own power to investigate those claims further if they had so wished. The highest the case for the insurers can be put is that views could differ as to the best procedure to be followed in this case. They cannot, however, demonstrate error of law in the exercise by the Tribunal of its procedural discretions.

I am satisfied that the Tribunal considered the evidence and considered the specific criticisms raised, a number of which were repeated before me. The insurers were given a reasonable opportunity to be heard by the Tribunal. No error of law can be demonstrated in the decision to refuse to order Maclaw to deliver a bill in taxable form.

For the foregoing reasons, the appeal against the order for the payment of interest on the costs awarded is successful. Otherwise, the appeal fails.

I will invite submissions from counsel before making final orders.

[1] Gordian Run Off Ltd was formerly known as GIO and was referred to in the proceedings as GIO.

[2 ] Building Act 1993 Part 9 Division 3; Ministerial Order, Victorian Government Gazette, s 115, 1.10.96.

[3] If inconsistent, the builder and owner would have been entitled to rely on the Order, which prevails; see cl 13 of policy.

[7 ] It also sought the costs and expenses on alternative bases but was successful on its primary basis.

[19] Victorian Civil and Administrative Tribunal Act, s 109.

[32] [1996] VSC 51; [1997] 2 VR 127. Winneke, P said (at 146):

"The nature and content of the "costs [reasonably incurred]" which the board is empowered to award under section 47 is undefined. Its meaning must be derived from the context of the legislation in which the power is conferred ..."

"The expression "costs reasonably incurred" could be construed as referring neither to party and party or to solicitor and client costs, but I do not think that that construction should be adopted."

[33] It was for similar reasons that the Court of Appeal in Spencer v Dowling, above, construed the expression "costs reasonably incurred" in their context to mean costs on a party party basis; eg, at 146.

At a glance

Court

Decision date

Before

Source

Judgment (124 paragraphs)

Parties

Cases Cited (1)