Watpac Construction v Cota Residential Investments; Bucktowar v Watpac Construction [2025] VCC 850

1. This decision concerns applications for costs made in two related proceedings: CI‑23‑02997 (Watpac Proceeding), and CI-23-05643, which was formerly VCAT proceeding BP2065/2020 (Bucktowar Proceeding).
2. The applications are made by the defendants/respondents Cota Residential Investments Pty Ltd (Cota), M.E.A. Australia Pty Ltd (MEA) and Nick Snart (Snart) against Watpac Construction (Vic) Pty Ltd (Watpac), which is the plaintiff in the Watpac Proceeding and the first defendant in the Bucktowar Proceeding.
3. Cota is the first defendant in the Watpac Proceeding and the second defendant in the Bucktowar Proceeding. MEA is the second defendant in the Watpac Proceeding and the third defendant in the Bucktowar Proceeding. Snart is the third defendant in the Watpac Proceeding and the fourth defendant in the Bucktowar Proceeding.
4. The background facts are agreed.[1] A homeowner, Anjana Bucktowar, commenced the Bucktowar Proceeding in VCAT in December 2020, against the builder, Watpac. In April 2021, on Watpac's application, VCAT made orders joining Cota, MEA and Snart to the Bucktowar Proceeding on the basis that they may be concurrent wrongdoers for the purposes of Part IVAA of the Wrongs Act 1958 (Vic) (Wrongs Act). Between April and October 2022 Watpac purported to bring claims for contribution and other relief from the joined parties pursuant to Part IV of the Wrongs Act.
5. On 9 June 2023, Watpac separately commenced the Watpac Proceeding in the Court, seeking contribution or indemnity from Cota, MEA and Snart in respect of the claims made by Bucktowar in the Bucktowar Proceeding. Watpac's claims against Cota, MEA and Snart in the Watpac Proceeding 'closely follows the narrative'[2] in Watpac's proposed Points of Claim in the Bucktowar Proceeding. Watpac chose to issue in the Court rather than VCAT as a result of the decision of Vaughan Constructions Pty Ltd v Melbourne Water Corporation[3] (Vaughan), where it was determined that VCAT lacked jurisdiction over claims for contribution.
6. In November 2022, Cota and Snart had applied for summary dismissal of the contribution claims in the VCAT Bucktowar Proceeding. Those applications were never determined, as the Tribunal instead determined that a federal law claim had been raised in the proceeding and therefore the Tribunal lacked jurisdiction over the whole matter. Orders were made on 22 June 2023 striking out the VCAT Bucktowar Proceeding and referring the matter to this Court, under ss 77(1) and 77(3) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (VCAT Act).
7. In November 2023, Cota and Snart applied for summary dismissal of the Watpac Proceeding, on the basis that Watpac was statute barred from claiming contribution by operation of s 24(4)(a) of the Wrongs Act.
8. In December 2023, MEA applied to strike out parts of Watpac's Points of Claim and Watpac's Statement of Claim, in both proceedings.
9. MEA's strike out applications together with Cota and Snart's summary judgment applications were listed for hearing before me. At the commencement of the hearing, Counsel for Watpac informed the Court and the other parties (for the first time) that it sought to discontinue the Watpac Proceeding on the basis that the effect of the decisions handed down in Vaughan[4] and Krongold Constructions (Aust) Pty Ltd v Thurin[5] (Krongold [2023]) was that the Watpac Proceeding had been commenced out of time. It also advised that it would not be pursuing its third-party claims in the Bucktowar Proceeding.
10. Cota, MEA and Snart consented to Watpac being given leave to discontinue its claims against them, subject to costs. By orders made on 8 March 2024, I gave Watpac leave to discontinue the Watpac Proceeding, and noted in the Bucktowar Proceeding that Cota, MEA and Snart remained as parties for the purpose of apportionment only. I ordered each party to file written submissions on costs, to be determined on the papers.
11. Each of the respondents sought their costs on similar bases:

(a) For their costs of the Watpac Proceeding, they rely on s 78A(1) of the County Court Act 1958 (Vic) (County Court Act) and r 25.05 and r 63A.15 of the County Court Civil Procedure Rules 2018 (Vic) (Rules).

(b) The costs of the Bucktowar Proceeding were incurred partly in the Court and partly in VCAT. For the costs incurred in the Court, the respondents rely on the same s 78A(1) and r 25.05 and r 63A.15. For the costs incurred in VCAT, they claim these as costs 'incidental to' the Watpac Proceeding, within the meaning of s 78A(1) of the County Court Act.

(c) Alternatively, the respondents seek their costs of both proceedings, following Watpac's alleged unreasonable rejection of offers of compromise made by each of them at various times.

1. I have reviewed each party's detailed submissions. For the following reasons, I am satisfied that the appropriate order is that each party bear their own costs of the Watpac Proceeding and the Bucktowar Proceeding (which includes the costs incurred in VCAT and in the Court).

The principles relevant to the Watpac Proceeding

1. In respect of the Watpac Proceeding in the County Court, each of Cota, MEA and Snart rely on r 63A.15 to found an order that Watpac should pay their costs following its withdrawal of the proceeding. The principles to be applied under that rule are not controversial. Each party referred to various matters in their submissions,[6] which I summarise as follows.
2. The Court is given a broad discretion to award costs under s 78A(1) of the County Court Act:

The costs of and incidental to all proceedings are in the discretion of the Court and the Court may determine by whom and to what extent the costs are to be paid.

Where a proceeding, counterclaim or claim by third party notice is discontinued, or where part of a proceeding, counterclaim or third party notice is withdrawn, liability for costs shall be determined in accordance with r 63A.15.

Unless the Court otherwise orders, a party who discontinues or withdraws a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.

1. The Court has an absolute discretion in awarding costs.[7] While that discretion is absolute, it must be exercised judicially. Costs will normally follow the event, but the rule does not give rise to a presumption that costs will be ordered against the discontinuing party.[8] All the relevant circumstances and not just the fact of discontinuance, should be considered.[9] A relevant consideration is whether the plaintiff acted reasonably in commencing the proceeding.
2. The reasons for the discontinuance can bear heavily on the exercise of the discretion as to costs.[10] For example, where the proceedings have been rendered unnecessary by circumstances beyond the plaintiff's control, such as where a supervening event, removes or modifies the subject of the dispute.[11]
3. The timing of the discontinuance is relevant, such as where the proceedings are discontinued prior to any hearing on the merits.[12]
4. The purpose of an award for costs is to compensate, not to punish the unsuccessful party.[13]
5. The ordinary rule is that costs are awarded on a standard basis and the Court should not make an order for costs on another basis unless the circumstances justify departure from the usual course.[14] The commencement of a case that was bound to fail or has no prospect of success can justify such a departure.[15]
6. Where a plaintiff discontinues a case that was bound to fail, indemnity costs do not follow merely because the proceeding had no or substantially no prospect of success.[16] Instead, the jurisdiction is enlivened 'by the fact that the litigant knew or should have known, on proper consideration, that the case was hopeless'.[17] A Court should therefore guard against relying on hindsight to make that evaluation.[18]

The principles relevant to the Bucktowar Proceeding

1. As noted above, the Bucktowar Proceeding was commenced in VCAT (proceeding no. BP2065/2020). The proceeding was then struck out by VCAT, and an order was made referring the matter to this Court as a more appropriate forum to deal with the subject matter of the dispute.
2. In respect of the costs of the Bucktowar Proceeding which were incurred in the Court, each of Cota, MEA and Snart rely on r 63A.15 to found an order that Watpac pay their costs following its withdrawal of the proceeding.
3. Cota, MEA and Snart also seek an order for the costs they incurred when the Bucktowar Proceeding was in VCAT. The principles are not so settled in respect of this Court's power to make orders for that part of their costs. I asked the parties to specifically address the legal basis upon which this Court might make an order for the costs of the VCAT proceeding in circumstances where it was struck out for lack of jurisdiction.
4. Cota, MEA and Snart submitted that the phrase 'the costs of and incidental to all proceedings' in s 78A of the County Court Act is broad enough to encompass the costs of the proceeding initiated in VCAT. The nature of the referral under s 77 of the VCAT Act means that the pleadings and documents filed in the VCAT proceeding before the referral of the proceeding to the County Court stand as if they were made and filed in the Bucktowar Proceeding. This was confirmed by the Court's Orders dated 8 November 2023 which expressly made that order.
5. They also submitted that this interpretation is consistent with the decision of Krongold [2023],[19] where the Court of Appeal determined that a referral from VCAT to a Court pursuant to s 77(3) does not have the effect of issuing a fresh proceeding in the Court to which the matter is referred. A referral does not change that the proceeding was issued, and the 'referred proceeding' is taken to have commenced at the time the VCAT proceeding was issued.
6. The respondents also submitted that the principles of 'unjustness' and 'unfairness' applied by his Honour Justice Garde in Krongold [2024],[20] in interpreting s 77 in the context of time limits, should apply to the issue of costs. They say it would be 'unjust and unfair' if a defendant was disentitled to any right it has to costs, simply because a plaintiff or party commenced the proceeding against it in VCAT, which lacked jurisdiction to determine the matter.
7. Watpac does not agree with these submissions. It refers to the word 'proceedings' in s 78A of the County Court Act and said this does not include VCAT proceedings. The word 'proceedings' is not defined in the County Court Act. Instead, the singular 'proceeding' is defined to mean 'any matter in the court' (emphasis added). Accordingly, Watpac says, costs incurred by the respondents in the VCAT proceedings are not costs of and incidental to a 'proceeding' as defined under the County Court Act.
8. Watpac also submits that the principles of unjustness and unfairness relied on by Garde J in Krongold [2024] were used in the context of an extension of time limits. They do not have equivalency in the context of costs 'carrying over' from VCAT to the County Court.

Discussion and conclusion on the principles relevant to the Bucktowar Proceeding

1. In my view, it is inaccurate to characterise the costs incurred in VCAT and the costs incurred in the Court as having been incurred in two distinct and separate proceedings, one in VCAT and one in the Court, such that s 78A applies to one and not the other.
2. Instead, applying the principles set out by the Court of Appeal in Krongold [2023], they are the costs of the one matter, incurred in two jurisdictions. The Court of Appeal has established that the referral made under s 77 of the VCAT Act does not have the effect of issuing a fresh or new proceeding in the County Court. The 'referred proceeding' is at all times taken to have commenced at the time the VCAT proceeding was issued.[21]
3. The Bucktowar Proceeding was struck out in VCAT, which merely removed it from the list of active cases.[22] It was not dismissed; rather the Tribunal determined that this Court was a more appropriate forum to deal with the subject matter of the dispute,[23] and the referral order was made.
4. In accordance with this Court's procedures, which I explained in Koolio Pty Ltd v Owners Corporation 1 PS618397Y,[24] Bucktowar did not file an originating motion to invoke this Court's jurisdiction. Instead, after the referral order was made, the County Court Registry sent the parties a case management information form, as an administrative step to collect information from the parties. The proceeding number CI-23-05643 was allocated. Orders were then made in chambers authorising Bucktowar to commence the proceeding in the Court, dispensing with the need to file a writ or originating motion, and accepting all documents filed in the VCAT proceeding as being filed with the Court.
5. This process is consistent with the following comments of the Court of Appeal in Krongold [2023]:

The purpose of commencing a proceeding is to enliven the jurisdiction of the court. In the context of a referral under s 77, that step is achieved by the making of the referral itself. Once the Court's jurisdiction is thereby enlivened, the filing of some fresh initiating process would not be necessary for that purpose.[25]

1. This was confirmed by Justice Garde in Krongold [2024] where he repeated the Court of Appeal's findings:

The purpose of commencing a proceeding is to enliven the jurisdiction of the court. In the context of a referral under s 77, that step is achieved by the making of the referral. Once the court's jurisdiction is enlivened by the referral, the filing of fresh initiating process is not necessary for that task.[26]

At least in the first instance, the premise of s 77 is that VCAT will not determine the proceeding and the subject matter will be sent elsewhere. The fact that the proceeding is struck out rather than dismissed reinforces the general notion that underpins s 77 that the subject matter will be determined or considered by the appropriate forum. The strike out mechanism also supports the view that s 77 is not concerned to terminate the controversy without resolution, but serves to ensure that the subject matter is dealt with in the appropriate forum. To a significant extent, the purpose is to ensure a measure of continuity rather than to treat the striking out of the proceeding as the end of the matter. A referral to the Supreme Court under s 77 of the VCAT Act invokes the jurisdiction of the Court without the need for any further initiating process.[27]

1. Based on those authorities, in my view it is an inaccurate distinction to say there were two separate or independent proceedings. Instead, a proceeding was commenced in VCAT, and, for all intents and purposes, it continued in the County Court after VCAT referred the matter to the Court by the orders made under s 77(3) of the VCAT Act. It had a different proceeding number and was in a different jurisdiction, but it involved the same controversy or subject matter for determination.

Any material difference between a 'proceeding' and a 'matter'?

1. I acknowledge there is a difference between a 'proceeding' and a 'matter'. Justice Garde discussed this in Krongold [2024], with reference to the findings of the Court of Appeal in Krongold [2022]. He posed the question in the heading and continued:

Is there a difference between 'matter' and 'proceeding'?

It is well established that the identification of a 'matter' in federal jurisdiction does not depend on the form taken by the proceeding in question. The 'matter' is not co-extensive with any legal proceeding, but is the subject matter for determination in a proceeding or the 'controversies which might come before a Court of Justice.

A 'matter' might take shape before all of the issues had been delineated in pleadings at all, for example in correspondence between the parties.

The ordinary meaning of the word 'matter' conveys the subject matter of the proceeding to which s 77(1) refers, namely, the controversy that has been brought before VCAT, without implying that such subject matter must be justiciable in VCAT. A controversy, or 'matter', exists independently of the question where jurisdiction lies to hear and determine it.[28]

1. Although there is a distinction between 'the subject matter for determination' and a 'legal proceeding', in my view s 78A of the County Court Act is broad enough to encompass both scenarios. The County Court Act defines 'proceeding' as 'any matter in the Court'.[29] The reference in s 78A to 'the costs of and incidental to all proceedings' can therefore be read as 'the costs of and incidental to all matters in the Court'.[30]
2. Similarly, the Rules define 'proceeding' as 'any matter in the Court commenced by writ or originating motion or as otherwise provided by or under any Act or these Rules'.[31] In the present case, the matter was not commenced in the Court by writ or originating motion, and it is not provided for by the Rules. Instead, it was referred to the Court by the VCAT Act. The references in rr 25.05 and 63A.15 can therefore be read respectively as 'Where a matter referred to the Court ... is discontinued..., liability for costs shall be determined in accordance with r 63A.15' and '...a party who discontinues or withdraws a matter referred to the Court ... shall pay the costs ...'.
3. In my view that is sufficient for me to conclude that s 78A and rr 25.05 and 63A.15 apply to the referred matter, and for all intents and purposes, the referred matter is the same proceeding as was commenced in VCAT.

Does the current wording of s 77(4) and s 77(4A) contradict this interpretation?

1. I pause here to note that the current wording of ss 77(4) and ss 77(4A) may appear contrary to the findings in Krongold [2023] and my interpretation that there are not two separate proceedings. Subsection 77(4) uses the phrases 'so as to allow the proceeding to be commenced' in the Court after 'a proceeding in the Tribunal' was struck out and 'the matter' was referred. I accept that this language could support a conclusion that government understood or intended that the referred matter would be a new proceeding in the Court.
2. However this inconsistency was explained and resolved by his Honour Justice Garde in Krongold [2024]. Sections 77(4) and 77(4A) were substituted and inserted into s 77 by the Justice Legislation Amendment Bill 2023 (the Bill), which was enacted after Krongold [2022] in an attempt by government to remedy the issues raised by the Court of Appeal in that decision.
3. Justice Garde noted that the Bill was drafted in the period between the decision in Krongold [2022] and the decision in Krongold [2023] being handed down_._[32] At the time the Bill was drafted, the view of the Attorney-General of Victoria was that a fresh proceeding might be necessary if a matter was referred to a Court by VCAT. However, during the hearing of Krongold [2023], the Attorney-General changed their position and submitted to the Court of Appeal that a separate proceeding was not required to be issued once a referral invoked the jurisdiction of the Court. However, notwithstanding this change of position, the Bill was not subsequently amended.
4. His Honour Justice Garde recorded the history as follows:

During the second referral hearing in the Court of Appeal, the Solicitor-General appearing for the Attorney-General for Victoria submitted that it was necessary for a separate proceeding to be commenced in the Supreme Court following a referral from VCAT. However, in oral argument, the Solicitor General varied this submission and contended that a separate proceeding was not required to be issued once a referral invoked the jurisdiction of the Court. The Bill was drafted at a time when the Attorney General's view was that a fresh proceeding would or might be necessary if a matter was referred by VCAT to a court of competent jurisdiction under s 75(3) of the VCAT Act. It was not subsequently amended.[33]

1. Justice Garde noted that if there is an inconsistency between the plain language of ss 77(4) and (4A) and the findings of the Court of Appeal in Krongold [2023], a construction of s 77 which promotes the purpose or object underlying the Act is to be preferred to a construction that would not promote that purpose or object.[34]
2. His Honour concluded by referring to the purpose of ss 77(4) and 77(4A) as:

Parliament was concerned to remedy this mischief through s 77(4), which provides a court with jurisdiction to make orders which preserve the position and rights of parties where federal jurisdiction is invoked subject to satisfying certain conditions. It would be unjust and unfair if the parties to a VCAT proceeding were to lose or be adversely affected in their rights because of the expiration of limitation periods in these circumstances_.[35]_

1. I agree with (and am in any event bound by) the approach of his Honour Justice Garde and the findings of the Court of Appeal in Krongold [2023]. Any inconsistency with s 77(4) and (4A) must be interpreted in the context of the purpose or object of s 77 and the submissions of the Attorney-General during Krongold [2023]. There was no separate proceeding commenced in this Court following the referral of the Bucktowar Proceeding.
2. Further, although Krongold [2024] was decided in the context of time limits, there is no reason to conclude that the same principle should not apply in respect of costs. In my view, it would be 'unjust and unfair' if a defendant was disentitled to any right it has to costs, simply because a plaintiff or party commenced the proceeding against it in VCAT, which lacked jurisdiction to determine the matter. This is particularly so where the Tribunal may have had jurisdiction when the proceeding was commenced but then loses it when a respondent subsequently raises a federal matter. In the present case, the federal matter (being the Trade Practices Act 1974 (Cth) (TPA)) was first raised nearly 2 years after the proceeding was commenced in VCAT and before Krongold [2022] was decided. It would be 'unjust and unfair' to interpret s 77 to mean parties are disentitled to their costs of that period.
3. In conclusion, my view is that the correct approach to dealing with the costs incurred in VCAT is to characterise them as part of the costs of the one matter, albeit incurred in two jurisdictions. The rules applicable to the matter at the time the costs order is made should apply to the whole matter, especially in circumstances where VCAT may lack jurisdiction to make any other orders (such as here where a federal matter had been raised).

Are they costs 'incidental to' - s 78A of the County Court Act?

1. If I am wrong about the above conclusion, and if there are two distinct and independent proceedings, I am nevertheless satisfied that the costs incurred in the VCAT proceeding BP2065/2020 are costs 'incidental to' the costs incurred in this Court's proceeding CI-23-05643, within the meaning of s 78A of the County Court Act.
2. For the reasons set out above, it is unarguable that there is only one 'matter', even if it was dealt with in two proceedings. It is also unarguable that the costs have been incurred in defending the one 'matter'. It was the 'matter' which was referred to this Court by VCAT's order. Therefore, the costs incurred in defending the matter in VCAT are unarguably incidental to the costs incurred in defending the matter in proceeding CI-23-05643. The discretion given to me by s 78A(1) is broad enough to allow me to include the costs incurred in VCAT as part of the costs order made in this County Court proceeding.
3. As the costs order is made under the County Court Act, it is the discretion given to me under that Act and the Rules which I must apply. I reject Watpac's submission that as there is no pre-existing right of any of the respondents to costs in the VCAT proceeding (s 109(1) VCAT Act), I need to be satisfied of the matters in ss 109(2) and (3) of the VCAT Act before applying r 63A.15. I disagree. Section 109 of the VCAT Act is not relevant.

Rule 63A.09 of the County Court Civil Procedure Rules 2018

1. For the sake of completeness, although no party referred to this, I also note this Court's power under r 63A.09 of the Rules which provides:

Where proceedings in another court or before a tribunal are remitted or transferred to or removed into the Court or an appeal to the Court is brought from another court or a tribunal, and the Court makes an order as to the costs of proceedings in that court or before that tribunal, the Court may -

(a) specify the amount of the costs to be allowed;

(b) order that the costs be taxed in the Costs Court; or

(c) order that the amount of the costs be determined in the court or tribunal in such manner it directs.

1. I have located only one reported decision, where the Supreme Court applied the equivalent r 63.03 of the Supreme Court (General Civil Procedure) Rules. Ajaimi v Giswick Pty Ltd (No 2)[36] concerned an appeal from VCAT in a retail lease matter. His Honour M Osborne J had upheld the appeal and set aside the orders of VCAT, including costs orders made there, and was asked to determine the costs of the appeal and also the costs of the VCAT proceeding itself. There was little discussion of how the rule should be applied. He held as follows, then proceeded to assess the costs at VCAT under s 92 of the Retail Leases Act 2003 (Vic):

Having set aside [the] costs orders in the original [VCAT] trial, I propose now to exercise the power under r 63.03 of the Supreme Court (General Civil Procedure) Rules to determine the VCAT costs. That rule provides:

In my view it would cause unnecessary delays to remit the matter to VCAT for further determination. All of the evidence that a VCAT member might consider is already before me. Moreover, both the landlord and the tenant submitted that the issue of the VCAT costs should be determined in this court.

1. As I have not had the benefit of submissions from the parties on the application of this rule, I make no findings as to its relevance to the present matter. It is a question for argument on another occasion if r 63A.09 can be applied only when VCAT itself had the power to make a costs order, or if it can be applied even when VCAT lacked jurisdiction to make a costs order, such as the present case where a federal matter had been raised.

1. Having set out the relevant principles above, I will now apply them to the present applications. Each of Cota, MEA and Snart rely on r 63A.15 to found an order that Watpac should pay their costs following its withdrawal of the Watpac Proceeding and the Bucktowar Proceeding, and submit there is no reason for the Court to depart from the rule.
2. Each also submit that costs should be awarded on an indemnity basis (from various dates), rather than the standard basis, for two reasons:

(a) that the claims were hopeless and bound to fail, which Watpac should have known; and/or

(b) Watpac unreasonably refused offers made by each of them to withdraw the claims. Cota's offer was made on or around 29 July 2021, MEA's on 2 May 2022, alternatively 7 February 2023, and Snart's on 30 November 2022.

Should Watpac have known the claims were hopeless or bound to fail?

1. Cota says that Watpac was bound to fail in both proceedings, as it failed to initiate a contribution claim against Cota within the period provided for under the relevant legislation. Further or alternatively, Watpac was bound to fail by reason of its failure to file its Points of Claim within time, which was admitted by Watpac's counsel at the hearing.
2. Although Watpac relies on the uncertainty of the law at the time, Cota says that Watpac should have known before initiating the Watpac Proceeding that it was bound to fail, from the reasoning of the Court of Appeal, the correspondence from MEA sent on 3 May 2022, and the issues raised in Cota's summary dismissal application in the Bucktowar Proceeding.

1. MEA refers to communications between it and Watpac in 2022 which it says demonstrate that Watpac should have known its claim was hopeless. Between 26 April 2022 and 19 May 2022 MEA communicated with Watpac's solicitors in the Bucktowar Proceeding. Watpac had indicated an intention to bring claims for contribution in its defence, and MEA advised Watpac that that approach was misconceived and instead Watpac would need to make an application for leave to file and serve Points of Claim or file a third-party claim in that proceeding. By email dated 3 May 2022, MEA put Watpac on notice that it was statute barred from introducing a contribution claim against MEA and the other respondents because the limitation periods under ss 24(4)(a)(i) and (ii) had expired.
2. Despite the above matters and MEA having informed Watpac that it was out of time to bring a claim for contribution against it, on 12 October 2022 Watpac filed Points of Claim in the Bucktowar Proceeding claiming contribution and other relief from MEA and the other respondents.

1. As with the other defendants, Snart says Watpac knew or should have known its claim was hopeless and it had no chance of success. As evidence of this it relies on the comments of Watpac's Counsel at the directions hearing on 8 March 2024, and Watpac's written submissions dated 5 December 2023 which conceded the 'writ in the action' was filed more than 10 years after the occupancy permit was issued. Snart says he put Watpac on notice of this issue in his submissions filed 18 December 2023. Further, Watpac is misconceived if it submits that the claim became time barred as a consequence of the decision of Krongold [2022], as the relevant 'writ in the action' was filed a year after that decision.

Did Watpac act unreasonably in refusing the Calderbank offers?

1. Cota relies on an offer made on or around 29 July 2021, that Watpac should withdraw its claims against Cota. They submit that the offer was made in accordance with the principals set out in Calderbank v Calderbank[37] (Calderbank) and Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2][38] (Hazeldene's).
2. In Hazeldene's, the Court stated that the correct approach is to treat the rejection of a Calderbank offer as a matter to which the court should have regard when considering whether to award indemnity costs. The question is whether an offeree's failure to accept a Calderbank offer justifies, in all of the circumstances, a departure from the ordinary rule as to costs. The competing considerations can be accommodated by applying a test of unreasonableness, the key question being whether the rejection of the offer was unreasonable in all the circumstances.
3. Cota submits that Watpac's failure to discontinue its case against Cota upon receipt of the offer was unreasonable. It says that the offer included statements that informed Watpac that there was no evidence that Cota had actually performed the works at the relevant property. While the offer was made at an early juncture, it was never rebutted or responded to in reply correspondence or affidavits.

1. MEA relies on its Calderbank offer made in the Bucktowar Proceeding on 7 February 2023. This was prior to Watpac commencing the Watpac Proceeding on 7 June 2023. MEA offered for Watpac to discontinue all claims against MEA in the Bucktowar Proceeding, in exchange for MEA agreeing to bear its own costs. MEA says that the Calderbank offer clearly enunciated why any contribution claim Watpac might make against MEA was bound to fail and expressly foreshadowed an application for indemnity costs in the event that the offer was rejected.
2. MEA seeks its costs of and incidental to the Bucktowar Proceeding on the basis that, had Watpac acted in accordance with the course of action proposed in MEA's Calderbank offer, MEA would not have been put to the trouble and expense of initiating a strike-out application in respect of the Bucktowar Proceeding.

1. Snart relies on a Calderbank offer he made dated 30 November 2022 in the Bucktowar Proceeding. By that date Snart had filed an application to dismiss the claim against him, on the grounds it was time-barred. Snart says that the offer set out why Watpac's claims were bound to fail and he offered to consent to the contribution claims being dismissed with payment of approximately half of his legal costs at that time. Snart says that Watpac therefore ought to have known from, at the latest, 25 November 2022, that it was time-barred, and ought to have agreed to pay the small sum of $4,500 offered to end its contribution claim against Snart. Since then, he has incurred significantly greater costs, both in the Bucktowar Proceeding and in the Watpac Proceeding.
2. In the alternative, Snart seeks costs on a standard basis, in accordance with rr 25.05 and 63A.15. He says Watpac has identified no ground or good reason to depart from the starting position.

(a) there is good reason for the Court to depart from r 63A.15, and make no order for costs, and/or

(b) it was not unreasonable for it to refuse the Calderbank offers, and so this is not a matter to which the Court should have regard.

1. In defending the three costs applications, Watpac says that the defendants' submissions fail to appreciate the agreed chronology, that is, the defendants fail to acknowledge and / or have any proper regard to the unsettled state of the law with respect to limitation periods for claims for contribution under the Wrongs Act at the time that Watpac's claims for contribution were made in each of the VCAT Bucktowar Proceeding and the Watpac Proceeding. It says there was a proper basis on which to make the claims at the times they were made, and it is not correct that (at least at the time) it was obvious they were 'statute-barred' and 'bound to fail'.
2. Watpac relies on the following salient facts, which are agreed:[39]

(a) Bucktowar commenced the Bucktowar Proceeding in VCAT in December 2020 against Watpac, alleging breaches by Watpac of the implied warranties under the Domestic Building Contracts Act 1995 (Vic);

(b) on Watpac's application, VCAT made orders on 14 April 2021 that Cota, MEA and Snart be joined to the VCAT proceeding on the basis that they may be concurrent wrongdoers for the purposes of the Wrongs Act;

(c) Bucktowar did not directly plead against Cota, MEA and Snart prior to expiration of the limitation period under s 134 of the Building Act 1993 (Vic), which was 3 March 2022;

(d) on 8 March 2022, Bucktowar filed and served Amended Points of Claim in the VCAT Bucktowar Proceeding, in which she amended the implied warranties alleged to have been breached by Watpac and on which she sought to rely;

(e) on 27 April 2022, Watpac foreshadowed an intent to make claims for contribution against Cota, MEA and Snart;

(f) on 3 May 2022, MEA wrote to Watpac asserting that Watpac was time-barred from making a claim for contribution on the basis that the limitation period under s 24(4)(a)(ii) of the Wrongs Act had expired;

(g) on 19 May 2022, Watpac responded to MEA's 3 May 2022 correspondence noting (amongst other things) that s 24(4) of the Wrongs Act was expressed in terms of court proceedings rather than VCAT proceedings and, in any event, Watpac considered that it was not time-barred;

(h) on 12 October 2022, Watpac submitted Points of Claim in which Watpac made claims for contribution against Cota, MEA and Snart and relied on the TPA. This appears to be the first time a federal claim was raised in the proceeding;

(i) on 20 October 2022, the decision of Krongold [2022] was handed down, in which it was held that VCAT lacked federal jurisdiction and VCAT lacked jurisdiction to determine a proceeding in which a federal matter (such as the TPA) had been raised;

(j) on 6 December 2022, and in light of Krongold [2022], Watpac made application under s 77 of the VCAT Act to strike out the VCAT proceeding and refer the matter to the County Court, given Watpac's claims against Cota, MEA and Snart concerned allegations involving the TPA;

(k) on 6 March 2023, the decision of Vaughan was handed down, in which it was determined that VCAT lacked jurisdiction to determine claims for contribution;

(l) in light of the decision in Vaughan, Watpac commenced the Watpac Proceeding in which it made claims for contribution against Cota, MEA and Snart in the County Court;

(m) on 22 June 2023, the Tribunal made orders referring the VCAT Bucktowar Proceeding to the County Court;

(n) on 17 August 2023, the decision of Krongold [2023] was handed down, in which it was held that a referral under s 77 of the VCAT Act does not require a fresh process to be filed in the Court;

(o) on 10 October 2023, the Justice Legislation Amendment Act 2023 (Vic) (Amendment Act) was given royal assent;

(p) on 16 February 2024, the decision in Krongold [2024] was handed down;

(q) on 8 March 2024, Watpac advised (by its Counsel) that it would be discontinuing the Watpac Proceeding.

1. Watpac's claims for contribution were first made in the VCAT proceeding. It says that it is uncontroversial that at the time the claims were made:

(a) it was common practice for VCAT to hear and determine claims for contribution under Part IV of the Wrongs Act, notwithstanding that the VCAT Act does not contain a provision, nor is one found in an enabling enactment, allowing for the institution of third-party claims for contribution;

(b) the terms 'court' and 'writ' in s 24(4) of the Wrongs Act were not defined to include VCAT or VCAT application;

(c) the term 'commence' is also not defined in the Wrongs Act and there is no definition in the VCAT Act for the term 'commence' or 'commencement';

(d) the rules and practices of the Supreme Court of Victoria in relation to third party claims have not been adopted by the Tribunal;

(e) procedures which are not otherwise specified by the VCAT Act, enabling enactment or the VCAT Rules are dealt with in the practice notes issued by the Tribunal;

(f) joinder of parties in the Building and Property List is regulated by Practice Note PNBP1. Consequently, it is arguable that the date of commencement for the claims of contribution is the date on which the application for joinder is filed (being 1 April 2021 - which was within the time prescribed by s 24(4)(a) of the Wrongs Act);

(g) alternatively, the plaintiff in the Bucktowar Proceeding 'served her writ' (for the purpose of s 24(4) of the Wrongs Act) or finalised her claims upon service of her 'writ' (being the proposed Amended Points of Claim on 19 February 2022), as it was only at this time that Bucktowar's claim was properly made. On 12 October 2022, Watpac filed its Defence and Points of Claim to these claims, being within the 12-month period contemplated by s 24(4) of the Wrongs Act.

1. I accept Watpac's submission that it had a proper basis for commencing, or attempting to commence, its claims for contribution in the VCAT Bucktowar Proceeding at the time it did so. I do not agree that Watpac should have known at that time that the claims were hopeless or bound to fail.
2. There was no certainty at that time about the operation of time limits in the Wrongs Act in the Tribunal, particularly with the terms 'court', 'writ' and 'commence' not being defined in that Act, nor being expressed in the VCAT Act. As noted in Watpac's submissions, it is the VCAT Practice Note 'PNBP1 Building and Property List (building disputes) - General Procedures', which regulates the method of joining parties. It is arguable that the date on which an application was made in accordance with that Practice Note is the date the claim for contribution commenced.[40] In the present matter, the application was made on 1 April 2021, which is within the time prescribed by s 24(4)(a) of the Wrongs Act.
3. Further, the decision of Vaughan had not been handed down at that time.
4. I agree with Watpac's suggestion that if Cota and Snart's applications had been heard in VCAT when they were made in late 2022, it is likely that they would not have overcome the threshold required by s 75, namely that if there is any doubt as to the arguable nature of a claim, it should not be met with a summary dismissal.[41]
5. The Bucktowar Proceeding was further complicated by the decision in Krongold [2022] and the subsequent delays before the proceeding was struck out and referred to the Court. These were occurrences outside the control or fault of Watpac. It is also relevant that these two proceedings were part of four related proceedings, all of which were being case managed together. It would not have been feasible, or prudent, for Watpac to act in isolation to discontinue the Watpac Proceeding and its claims in the Bucktowar Proceeding any sooner than it did.
6. Accordingly, I consider that in these proceedings, it is appropriate to exercise my discretion to order otherwise than the presumption in r 63A.15.

1. For the same reasons, I find that I was not unreasonable for Watpac to have rejected each of the Calderbank offers at the times they were made, and accordingly this is not a relevant factor in my consideration.
2. I agree with Watpac's submission that:

(a) due to the timing of the offers, it was reasonable for it not to accept the Calderbank offers made by the defendants at the time that those offers were made, for the reasons outlined above;

(b) when assessed at the time of the offers, Watpac's case was not unarguable and matters largely depended on statutory interpretation and new evolving case law determined by the Supreme Court and Court of Appeal; and

(c) in all the circumstances, having regard to the prospects of Watpac's case as at the dates of the offers, this is not a case in which it is appropriate for this Court to make a special costs order.

1. Cota's offer was made on 29 July 2021. This was well within the first year after the Bucktowar Proceeding was commenced. In its submissions, Cota said that the offer included statements that informed Watpac that there was no evidence that Cota had actually performed the works at the relevant property. It therefore appears that Cota's objection to the claim was based on disputed facts, not on any question of time limits or jurisdiction. Bucktowar's refusal of the offer at that time was not unreasonable in circumstances where she had purchased the property, Watpac's proposed defence attributed liability to Cota as its subcontractor, discovery had not occurred, and she had no knowledge of who was involved in the construction process. I also note that no determination has been made as the success or otherwise of Cota's foreshadowed defence.
2. MEA's Calderbank offer was made in the Bucktowar Proceeding on 7 February 2023, prior to Watpac commencing the Watpac Proceeding. MEA set out the reasons why it said any contribution claim was bound to fail, which included factual and legal disputes over MEA's role and any duty of care, representations allegedly made and relied on, Watpac's own defective work, the nature of the claims made by Bucktowar, and the time limit under the Wrongs Act. I am not satisfied that Watpac acted unreasonably in refusing the offer, as no determination has been made as the success or otherwise of MEA's defences. The question of time under the Wrongs Act was open to argument, as discussed above.
3. Snart's Calderbank offer was made on 30 November 2022 in the Bucktowar Proceeding. Snart's offer says that the claim against it was bound to fail on the grounds it was time-barred by the Wrongs Act. Again, as discussed above, I accept that the question of time under the Wrongs Act was open to argument. Accordingly, I am not satisfied that Watpac acted unreasonably in refusing the offer.

1. For those reasons I will order that each party bear their own costs of the Watpac Proceeding and the Bucktowar Proceeding (which includes the costs incurred in VCAT and in the Court), including the costs of and associated with this costs application.

I certify that these 25 pages are a true copy of the ruling of her Honour Judge Kirton delivered on 24 June 2025.

[1] Parties' agreed Chronology dated 12 April 2024.

[2] Joint Chronology dated 12 April 2024, 7.

[3] [2023] VCAT 233 ('Vaughan').

[5] [2023] VSCA 191 ('Krongold [2023]').

[6] Cota Residential Investments Pty Ltd's Costs Submissions dated 12 April 2024, 2 [2.1] - [2.8]; MEA Australia Pty Ltd's Costs Submissions, 4-5 [12]-[13]; Watpac Construction (Vic) Pty Ltd's Costs Submissions, 8 [33] ('Cota, MEA and Watpac Costs Submissions').

[7] County Court Act 1958 (Vic) s 78A(1); County Court Civil Procedure Rules 2008 (Vic) r 63A.02; Johnson & Anor v Clancy & Anor NSWSC 1301 [21] (Hallen AsJ); Watpac Construction (Vic) Pty Ltd's Costs Submissions dated 3 May 2024, 8 [33].

[8] See 'Cota, MEA and Watpac Costs Submissions' (n 6).

[9] See 'Cota, MEA and Watpac Costs Submissions' (n 6).

[10] See 'Cota, MEA and Watpac Costs Submissions' (n 6).

[11] See 'Cota, MEA and Watpac Costs Submissions' (n 6).

[12] See 'Cota, MEA and Watpac Costs Submissions' (n 6).

[13] See 'Cota, MEA and Watpac Costs Submissions' (n 6).

[14] Colgate Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 [256]; Cota's Costs Submissions dated 12 April 2024, 3 [2.6].

[15] Cota's Costs Submissions dated 12 April 2024, 3 [2.6]; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1998) 81 ALR 397, 401 (Woodward J); Macedon Ranges Shire Council v Thompson [2009] VSCA 209 [15] (Redlich JA and Beach AJA).

[16] Love v Victoria (No 2) [2009] VSC 531; Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 289; Sidameneo (No 456) Pty Ltd v Ward [2011] VSC 559 [25].

[17] Winslow Constructors Pty Ltd v Head, Transport for Victoria (Costs) (2021) 64 VR 2000.

[18] Sidameneo (No 456) Pty Ltd v Ward [2011] VSC 559 [25].

[19] Krongold [2023] (n 5) [68], [80].

[20] Thurin v Krongold Constructions (Aust) Pty Ltd [2024] VSC 42 ('Krongold [2024]').

[21] Krongold [2023] (n 5) [3], [79].

[22] Thurin v Krongold Constructions (Aust) Pty Ltd [2022] VSCA 226 [150] ('Krongold [2022]').

[23] Krongold [2023] (n 5) [68], [80].

[24] Koolio Pty Ltd v Owners Corporation 1 PS618397Y [2024] VCAT 273 [19] - [21].

[26] Krongold [2024] (n 20) [46].

[27] Krongold [2024] (n 20) [47] (emphasis added) (citations omitted).

[28] Krongold [2024] (n 20)[42]-[44] (emphasis added) (citations omitted).

[29] County Court Act 1958 (Vic) s 3 (definition of 'proceeding').

[30] County Court Act 1958 (Vic) s 78A(1).

[31] County Court Civil Procedure Rules 2018 (Vic) r 1.13 (definition of 'proceeding').

[32] Krongold [2024] (n 19), [13].

[36] [2022] VSC 275 [29] - [30].

[37] [1976] Fam 93 ('Calderbank').

[38] (2005) 13 VR 435 ('Hazeldene's').

[39] Parties' agreed Chronology dated 12 April 2024.

[40] Deputy President Aird (as she then was) accepted this proposition as arguable in Owners Corporation 1 PS538430Y v H Building Pty Ltd (under external administration) and Ors [2019] VCAT 1485 at [26], [32] and [33]. I note she was one of the authors of the Practice Note and so speaks with authority.

[41] See, Smeaton v WorkSafe Victoria (General) [2010] VCAT 1437 [18] where Deputy President Macnamara (as he then was) said '... what those cases establish is, that no summary dismissal under section 75 should be made in a case where there is any doubt as to the arguable nature of a claim. If a claim is at all arguable it should not be met with a summary dismissal'.