For the applicant: Mr G. Hardy of Counsel with Mr S.P. Hardy, instructed by Lewis Holdway

For the respondent: Mr Logan, Solicitor with Mr Moyle, Solicitor

1. Mrs Herbert is apparently a property developer. She entered into an agreement with Fasham Johnston with respect to a property, at 6 Ramsay, Brighton to erect thereon a substantial house with a contract price of $568,629. About the time when the property was completed Pure Capital Investments Pty Ltd, the applicant in this proceeding entered into a contract to purchase this house dated the 3rd of February 2001. Mr Moignard, Pure Capital's principal was not entirely satisfied with the décor of the property as constructed and his company engaged a number of tradesmen to carry out intensive modifications including repainting the interior of the house, installation of a sound system and an extensive program of rewiring which upgraded the level of lighting throughout the house. This lighting upgrade consisted principally of the introduction of additional low voltage downlights. The effect of all the work was, at least for a time, to remit the house to the state of a building site, rather than a habitable residence.

2. By letter dated the 2nd of March 2001 Mrs Herbert drew the builder's attention to some 50 items which she said should be rectified. She conceded that these matters were not, for the most part, of significance. She observed that some of them had been on previous lists. Mrs Herbert's architect was, around the same time, willing to assess the property as complete for the purposes of discharge of his duties to Ms Herbert.

3. There then followed a series of items of increasingly strained correspondence between those acting for Mr Moignard and the builders.

4. In March, Pure Capital's solicitors advised Fasham Johnson that their client had taken an assignment of the rights to the developer under the building contract. By letter dated the 26th of April the solicitors complained about a number of defects. The course of correspondence from there on was somewhat complex and it is unnecessary for me to trace every twist and turn. Representatives of Fasham Johnson carried out at least two investigations on the property around this time. In the course of those investigations or at least some of them, it saw the intensive alteration work which Pure Capital's tradesmen were undertaking.

5. In May a report was obtained by Pure Capital or its solicitors from the building consultant known as BSS which identified some 102 items of defect. Some weeks later this report was forwarded to the builder Fasham Johnson with a demand that the matters identified as defects be attended to. Further investigation was carried out by Fasham Johnson which responded accepting liability to carry out certain of the items but rejecting liability for others. As appears from notations, one infers made by Fasham Johnson officers on that response and also from "a without prejudice" letter addressed to Pure Capital solicitors from Fasham Johnson's solicitors the cost of carrying out those works according to Fasham Johnson's costings was $1,595. Meanwhile Mr Moignard has become increasingly disenchanted.

6. In April 2001 in an uncharacteristically wet month after a number of dry years in Melbourne, there were serious problems with water leaks in the ceiling. The ceiling of the garage had collapsed and came close to inflicting serious damage on the motor vehicle owned by Mr Moignard.

7. There was extensive debate and discussion between the parties as to the precise interpretation of what occurred and when. The view which has been urged by Fasham Johnson's legal representatives, Mr Logan and Mr Moyle is that whilst Fasham Johnson was willing to respond to and deal with the items in the BSS report either by rectification (as to the costing of which I have already made reference), or further monitoring and investigation, Mr Moignard and his solicitors unreasonably deprived Fasham Johnson of the opportunity to carry out that rectification work. Debate centred upon the question whether Mr Moignard was to be regarded as having formed an irrevocable decision as some of his evidence suggests he did on Friday the 6th of July to dispense with Fasham Johnson and carry out his own rectification, sending in his own tradesmen or whether as some of the correspondence, particularly from Pure Capital's solicitors would have it Fasham Johnson retained the possibility of negotiating a rectification program until mid-day on the 9th of July. It is clear that by the end of the 9th of July or the 10th of July the solicitors acting for Pure Capital had told Fasham Johnson that their response to the BSS report was unsatisfactory. There was in Pure Capital's view both a lack of expedition on the part of Fasham Johnson and also a failure to admit liability to rectify a number of items being the more expensive ones on BSS's list.

8. The present proceeding was commenced in the Tribunal in October 2001.

9. Meanwhile, additional reports were obtained by Pure Capital and its solicitors on the 28th of November 2001 from Mr Perry Setford and on the 3rd of April 2002 from a Mr Anderson.

10. The matter came on for hearing before me on the 11th of June, at that time Mr G.A. Hardy, Counsel represented the applicant Pure Capital Company which had brought proceedings against the builders, seeking damages for breach of contract and a breach of the implied warrant established by the Domestic Building Contracts Act 1995. In response to a question from me Mr Hardy quantified his client's claim in the sum of approximately $125,000. I requested that he provide a written itemisation of the claim and in a document dated the 17th of June he provided an itemisation of some $75,586.44. The matter proceeded before me for five days in June, one of the days being taken out with a view at the premises. Thereafter it was adjourned to resume for a further 15 days this month.

11. After further discussions on the first of the appointed 15 days, on the morning of the second it was announced the subject of the matter had been resolved and the only matter which remained outstanding was the question of costs. The basis of the settlement was that Fasham Johnson was to pay Pure Capital Investments the sum of $52,000 in full and final settlement of the claim. The terms, included the usual form of wide ranging release. The question of costs was reserved leaving the applicant the opportunity to seek those costs by application to the Tribunal. That application has now been made.

12. The applicant today is represented by Mr Hardy and Mr S.P. Hardy. The application was resisted by Fasham Johnson represented by Mr James Logan and Mr Moyle. The gravamen of the application made on behalf of Pure Capital is that Pure Capital has in the circumstances described, obtained a victory and should receive a costs indemnity.

13. Pure Capital's Counsel submitted that in the circumstances, in terms of principles laid down by Section 109 of the Victorian Civil and Administrative Tribunal Act 1998 it was the fair and appropriate order to take and further that the costs should be taxed in accordance with County Court Scale "D" and taxed on the basis as between solicitor and client. Mr Logan and Mr Moyle however submit that the proper approach is to award no costs following the exchange in July 2001 to which I have already made reference. Mr Moyle submitted that had Mr Moignard and Pure Capital's solicitors taken reasonable action at that time, these proceedings might not have been necessary. Accordingly no costs should be awarded, they said, after this date. Given that July is some three months prior to October when these proceedings were commenced, the effect would seem to be that no costs should be awarded at all because this proceeding had not commenced as at July.

14. Before proceeding further it is necessary to say something in a general sense about costs in the Tribunal. The rules as to costs for present purposes are to be found in Section 109(1). That sub-section provides as a general provision that "each party is to bear their own costs in the proceeding". Sub-section (2) however empowers the Tribunal to order "that a party pay all or its specified party the costs of another party in a proceeding". I note that the powers to order the payment of costs is "in a proceeding", hence the events of July, months before the proceeding cannot be the subject of an order. Section 109(3) provides "the Tribunal may make an order under sub-section (2) only if satisfied that it is just to do so having regard to" and there follow a series of specific matters numbered (a) to (e). The last of those matters, one wonders whether it is appropriate to call it specific at all, is "any other matter the Tribunal considers relevant".

15. Paragraph (a) deals with unsatisfactory conduct in a proceeding disadvantaging another party. I do not understand that the reliance was placed on that paragraph or paragraph (b) which is in prolonging the hearing at the Tribunal. However, paragraphs (c) and (d) were relied upon by Counsel for Pure Capital so I will read them in full:

"(c) The relative strength of the claims made by each of the parties including whether the party has made a claim that is untenable basis of fact or law and

(d) the nature and complexity of the proceeding."

16. Mr Hardy took me to a number of my own decisions in the Real Property List and the Retail Tenancies List in which I awarded costs to successful applicants. In those matters I determined that despite the presumption against the award of costs between party and party set out in Section 109(1) it was appropriate to award costs to victorious parties in retail tenancies matters and also drainage of land matters. I noted in those decisions with regard to retail tenancy matters that the law of landlord and tenant is inherently complex, that engages paragraph (d) and also that the nature of such proceedings is by way of commercial litigation. With regard to the drainage of land matters I concluded that the practice over the years since they became Tribunal matters rather than court matters in the Drainage of Land Tribunal (under the Drainage of Land Act)and under Section 58 of the Planning Appeals Board Act and the Planning Appeals Act was, despite the presumption against the award of costs in the Planning Appeals Board and the Planning Division of the Administrative Appeals Tribunal to award costs in those matters. Only relatively few years ago a matter such as this would have been heard in the County Court. There is no doubt that the presumption there was that costs would follow the event. If one considers the nature of the proceedings and how these matters were dealt with in court one would depart from the general rule. However, before becoming part of this Tribunal's jurisdiction domestic building matters were heard by a freestanding Tribunal established by what was then known as the Domestic Building Contracts and Tribunal Act 1995. Costs in that Tribunal were dealt with by Section 93 of the Act which stated:

"At the end of a proceeding the Tribunal may award the parties to a proceeding some or all of the costs incurred by another party to the proceeding as a result of Section 2 provided a Tribunal may only make such an order if it is satisfied that it is fair to do so having regard to

(a) the conduct of the parties in a proceeding; and

(c) expense claim made by each of the parties in a proceeding; and

(e) any other matter the Tribunal thinks is relevant.

17. The resemblance between this provision and Section 109 of this Tribunal's statute is obvious. Sub-section (3) said that a party was not entitled to order the costs merely because that party was the successful party in the proceeding. Sub-section (4) enabled the Domestic Building Tribunal at its discretion to adopt a County Court or Magistrates' Court scale for taxation purposes.

18. Against that historical background I do not believe that there is anything in the nature of this proceeding which would justify my adopting the same approach I had in retail tenancies matters. There is nothing in the nature of the proceeding which would justify departure from the presumption against the making of costs orders.

19. What then of the complexity of these proceedings? The case was listed for five days and then for a further 15 days. This indicates a degree of complexity in fact and law in itself. Further in so far as I have noted that there was extensive remodelling work carried out by the tradesmen engaged by Pure Capital there is a difficult factual issue to determine, that is the degree which the state of the house as it now stands was attributable to the acts of Fasham Johnson and its subcontractors or the action of the tradesmen who were engaged by Pure Capital. It is this consideration which more than any other that led to the very extensive requirements of evidence. As Mr Hardy noted, the applicant felt obliged to call evidence apart from evidence of its own principal and expert consultants also from the tradesman who were involved I the provision of work with a view to avoiding the making of Jones v Dunkel [(1959) 101 CLR 298] comments. The effect however has been to create a proceeding which is factually complex and it is perhaps merciful that I do not have the responsibility of writing final determination as to its merits. It seems to me, however, that consideration of how extensive the evidence was and also the fact that this was a house and contract priced above the common level justifies the view that a proceeding relative to it is of such complexity to justify the departure of the presumption that costs should lie where they fall set out in Section 109. It seems to me therefore that my discretion despite Section 109(2) order costs as between the parties is enlivened. The question then becomes are there circumstances which suggest that discretion could be exercised favourably to Mr Hardy's client or rather, are there considerations as Mr Logan and Mr Moyle had it that point in the other direction? The principal consideration urged by Mr Logan and Mr Moyle was that Pure Capital adopted a course in July 2001 which unreasonably had deprived their client of the opportunity to resolve these matters there and then by permitting it to carry out rectification works. I have already described the extent of rectification works which Fasham Johnson proposed and its the cost. However one characterises the $52,000 which forms the basis of the settlement of this proceeding it is clear that what was offered in July 2001 fell far short of the liabilities which Fasham Johnson ultimately accepted. Mr Logan and Mr Moyle observed however that this far greater and more extensive liability to accept that only after the addition of the report from Mr Setford and Mr Anderson commissioned on behalf of the applicant; and after the respondent had obtained his own expert report from Mr Sims. On the other hand in so far as Mr Logan said rhetorically on a number of occasions that his client was at all times ready, willing and able to perform the rectification works in accordance with the expert report I must take leave to express some scepticism. I have been shown an offer of settlement made according to Section 112 of the Victorian Civil and Administrative Tribunal Act 1998 (the equivalent of Order 25 of the Rules of the Supreme Court) made the 6th June. It says the respondent thereby offered to pay the applicant the sum of $4,000 in full and final settlement of the applicant's claim and inclusive of costs. Having regard to the costs incurred in bringing the matter as close to trial as it was on the 6th of June it is obvious that the offer was no more than a token and is scarcely consistent with the view that the respondent was at all times ready, willing and able to carry out extensive rectification works the cost of which when conducted by an external builder was $52,000. Moreover if the builder was taking the stand Mr Logan says I should regard it as having taken viz. willing to rectify defects. I cannot see why it would have been impossible for the building to make an offer under Section 112 to rectify rather than to pay money. I enquired of Counsel whether there was anything that they could see in Section 112 and the following provisions which preclude a making of an offer in non-monetary terms. Nobody drew my attention to any provision, except Mr Moyle and Mr Logan who referred to Section 113(4) of the Act stating that where an offer provides for the payment of money the offer must specify where the money is to be paid. Not only does this not indicate that a non-monetary offer cannot be made it clearly implies and indicates the contrary. It seems to me that so far as the suggestion was made that it all could have been solved in July 2001 there an air of unreality to it. The general resistance to acceptance of substantial liability by the builder was evident right up to the eve of trial and is reiterated in closing offer of settlement dated the 6th of June. A series of offers was made immediately prior to the arranging of the final settlement. I do not believe precise progress of those offers sheds any light on the issue that I have before me, namely the interpretation of events from July 2001 until trial and the initial adjournment.

20. What then is the appropriate view of these events? First I do not accept that things could have been simply resolved in July 2001. The works which the builder offered were far less expensive than the liability which it ultimately accepted. Moreover I am unaware of any legal obligation of the part of Pure Capital to accept rectification by the builder rather than damages to pay for its own tradesmen to carry out the repairs. Mr Logan has drawn my attention to its power of the Tribunal under Section 53 of the Domestic Buildings Contracts Act to order a builder to carry out rectification works. He observed that in the building guarantee warranty cases the initial step was for the insurer or guarantor to issue a rectification schedule to the builder. However, there is no absolute legal obligation on Pure Capital to accept rectification rather than monetary compensation. Given that the evidence disclosed that in the course of April 2001 there had been serious problems encountered both from wet areas within the house and other parts, I cannot think that it was unreasonable of Mr Moignard to have in effect lost confidence in the builder. Now was it unreasonable of Mr Moignard to be dissatisfied with Fasham Johnson's response to the BSS report. It may well be that in one way or the other than Mr Moignard felt that there were perhaps more fundamental things wrong with the house. The applicant has had a substantial though not a crushing victory. I do not believe that any of the matters which occurred in the unfolding of the dispute or the progress of these proceedings are such as to render it other than fair that the applicant should have some form of indemnity for costs incurred. In so far as an application was made for costs as between solicitor and client, I cannot see that there is any justification for this. Certainly the applicant has not had a total success. There is nothing to indicate, even although the settlement which has ultimately been made entails some acceptance of liability that the builder had so poor a case that somehow it was vexatious for it to defend the proceedings. Nor was there any conduct by the builder during the proceeding which was vexatious. Accordingly there is in my view no justification for awarding costs on a party party basis. I should also observe that since the presumption in Section 109(1) against costs orders means that the Tribunal should be a low costs or no costs jurisdiction. Costs orders on a solicitor client basis are rarer in the Tribunal than they are in Court - and they are rare even in Court.

21. Accordingly I order under Section 109(2) is that the respondent pay the applicant's costs of this proceeding to be taxed in default of agreement in accordance with County Court Scale "D". I select that scale as being appropriate one in light of the quantification of the claim and the amount of the settlement sum.