Vero Insurance Ltd v The Gombac Group Pty Ltd
[2007] VSC 117
•2 May 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 5347 of 2006
| VERO INSURANCE LTD (ACN 005 297 807) | Plaintiff |
| v | |
| THE GOMBAC GROUP PTY LTD (ACN 006 580 990) | Defendant |
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JUDGE: | GILLARD J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 April 2007 | |
DATE OF JUDGMENT: | 2 May 2007 | |
CASE MAY BE CITED AS: | Vero Insurance Ltd v The Gombac Group Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 117 | |
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APPEAL FROM VCAT – Appeal in respect of costs in Domestic Building dispute - VCAT proceeding review of insurer’s decision made under Domestic Building Contracts Act 1995 – Application for costs by successful insurer on review under s.109 of the Victorian Civil and Administrative Tribunal Act 1998 – Tribunal refused costs – Erred in applying a guideline rule that costs in an administrative review less likely to be awarded than in an inter-partes commercial dispute – Guideline not supported by authority and contrary to s.109 – Necessary to consider an entitlement to costs in accordance with s.109(3) of the VCAT Act.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr K.C. Oliver | Rodriguez Lawyers |
| For the Defendant | Mr S.W. Stuckey | Lennon Settle Mazzeo |
TABLE OF CONTENTS
Parties................................................................................................................................................... 2
Proceedings in VCAT........................................................................................................................ 2
Leave to Appeal.................................................................................................................................. 3
Costs Orders in VCAT....................................................................................................................... 5
Tribunal Reasons on Costs.............................................................................................................. 8
Guidelines......................................................................................................................................... 11
The Guideline Established in the Kaldawi Case....................................................................... 15
Error on Part of Deputy President................................................................................................. 21
Proceeding a Review Proceeding?................................................................................................ 23
Conclusion......................................................................................................................................... 25
HIS HONOUR:
In this proceeding instituted by originating motion, the plaintiff sought leave to appeal orders made by the Victorian Civil and Administrative Tribunal (“VCAT”) on 24 February 2006. On 28 July 2006, the Senior Master granted leave to appeal under s.148 of the Victorian Civil and Administrative Tribunal Act 1998 (“the Act”) on two questions of law. He refused leave in respect to other grounds. The plaintiff appealed the Senior Master’s refusal to a judge. Mandie J ordered on 1 September 2006 that the appeal by the plaintiff against the order of the Senior Master be heard by the judge hearing the appeal in respect to the questions of law which were the subject of the order for leave to appeal.
Parties
The plaintiff, Vero Insurance Ltd (“the plaintiff”), is an insurance company that insures homeowners and builders in respect to building work undertaken by the builder.
The defendant, The Gombac Group Pty Ltd (“the defendant”), was a builder which constructed eight residential apartments at 32 David Street, Fitzroy (“the development”). The insurance policy in respect to the development was issued by the plaintiff pursuant to the Ministerial order made under s.135(1) of the Building Act1993. This required a builder entering into a major domestic building contract to be covered by insurance.
Proceedings in VCAT
There have been two proceedings in VCAT and a previous appeal to this Court.
The background to the proceedings can be briefly summarized.
On 13 June 2000, the defendant entered into a domestic building contract with a developer to erect eight apartments in Fitzroy. On 18 September 2001, apartment No 1 was sold by the developer to two purchasers. The plaintiff was the insurer under the policy taken out by the defendant under the Building Act 1993. The purchasers made a claim under the policy in respect to defective workmanship concerning the flooring of their apartment.
On 13 November 2002, the plaintiff rejected the claim, but it was subsequently accepted. The defendant, in letters written in December 2002 and January 2003, requested the plaintiff to reconsider the decision. After considering the material, the plaintiff affirmed its decision to allow the claim. The practical effect of that decision was that the plaintiff had the right to compel reinstatement of the defective workmanship by the defendant and/or require the defendant to indemnify it. By reason of the insurance policy, the plaintiff, if it paid the claim, was subrogated to the building owners’ rights against the builder.
This led to the first proceeding in the Tribunal. The defendant applied to VCAT for a review of the plaintiff’s decision to allow the claim pursuant to s.61 of the Domestic Building Contracts Act 1995.
The defendant joined as parties the plaintiff and the two purchasers. The review was heard before a Deputy President of VCAT during November and December 2004. On 23 December 2004, the Deputy President published her reasons and ordered that the application for review of the plaintiff’s decision be dismissed. The Deputy President granted leave to the parties to apply in respect to the question of costs.
The defendant sought leave of the Court to appeal the orders made by the Deputy President in dismissing the application. Leave was granted but the appeal, heard by Osborn J, was dismissed and the defendant was ordered to pay the plaintiff’s costs of that proceeding.[1] On 14 December 2005, the Deputy President heard an application for costs made by the plaintiff insurer and the purchasers. The Deputy President published her reasons on 24 February 2006 dismissing the application for costs.
[1]See The Gombac Group Pty Ltd v Vero Insurance Ltd, Tom Papaioannou and Greg Wodetzki [2005] VSC 442.
Leave to Appeal
On 24 March 2006, an originating motion was issued in this Court seeking leave to appeal the order made dismissing the application for costs by the plaintiff. By reason of s.148 of the VCAT Act, a party to a proceeding may appeal to this Court from an order of the Tribunal on a question of law, but the right of appeal is subject to the grant of leave to appeal. Leave granted will be restricted to a question of law.
The Senior Master was prepared to grant leave to appeal in respect to two questions of law, namely –
(i)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the VCAT proceeding, failed adequately to have regard to sub-ss.109(3)(c) and (d) of the VCAT Act 1998.
(ii)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the proceeding, misconstrued sub-s.109(3)(d) of the VCAT Act in finding that the existence of a number of complex technical issues to be considered and determined tended against an award of costs rather than in favour of an award of costs.
The plaintiff sought a number of other questions of law to be determined and sought leave in respect to them. They were –
(i)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the proceeding, erred in law in finding that the jurisdiction conferred on it by s.61 of the Domestic Building Contracts Act 1995 was a review decision. VCAT should have found that the jurisdiction was in its original jurisdiction.
(ii)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the proceeding, took into account an irrelevant consideration, namely, that the proceeding was in the nature of an application for a review of an insurer’s decision under s 61 of the Domestic Building Contracts Act 1995.
(iii)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the proceeding, acted upon a wrong principle, namely that VCAT is less likely to award costs in a proceeding in the nature of a review of an insurer’s decision under s 61 of the Domestic Building Contracts Act 1995 than in a proceeding in the nature of an inter‑partes dispute.
(iv)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the proceeding, erred in law in finding that an application for a review of the decision of an insurer under s 61 of the Domestic Building Contracts Act 1995 is a form of administrative review.
All these grounds are somewhat similar and raise the important question of whether there is a different approach to the question of costs under s.109 of the VCAT Act 1998 in respect to an administrative review proceeding when compared with a proceeding in the Tribunal’s original jurisdiction.
As stated, the plaintiff appealed from the Senior Master’s refusal to allow those questions of law to be considered and determined by the Court. The appeal against the refusal is to be heard at the same time as the appeal in respect of the leave which was granted. If I am of the opinion that leave should have been granted in the other grounds, I will allow the appeal from the Senior Master, grant leave to appeal and hear the appeal.
Costs Orders in VCAT
Section 109 of the VCAT Act deals with costs. It provides –
“109. Power to award costs
(1)Subject to this Division, each party is to bear their own costs in the proceeding.
(2)At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in a proceeding.
(3)The Tribunal may make an order under sub-section (2) only if satisfied that it is fair to do so, having regard to –
(a)whether a party has conducted the proceeding in a way that unnecessarily disadvantaged another party to the proceeding by conduct such as –
(i)failing to comply with an order or direction of the Tribunal without reasonable excuse;
(ii)failing to comply with this Act, the regulations, the rules or an enabling enactment;
(iii)asking for an adjournment as a result of (i) or (ii);
(iv)causing an adjournment;
(v)attempting to deceive another party or the Tribunal;
(vi)vexatiously conducting the proceeding;
(b)whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding;
(c)the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law;
(d)the nature and complexity of the proceeding;
(e)any other matter the Tribunal considers relevant.
(4)If the Tribunal considers that the representative of a party, rather than the party, is responsible for conduct described in sub-section (3)(a) or (b), the Tribunal may order that the representative in his or her own capacity compensate another party for any costs incurred unnecessarily.
(5)Before making an order under sub-section (4), the Tribunal must give the representative a reasonable opportunity to be heard.
(6)If the Tribunal makes an order for costs before the end of a proceeding, the Tribunal may require that the order be complied with before it continues with the proceeding.”
(Emphases added)
It is important to note that the section is concerned with a “proceeding”. “Proceeding” is defined by s.3 of the VCAT Act as meaning “a proceeding in the Tribunal” including a number of specified hearings which are not relevant to the present proceeding. There is nothing in s.109 which draws a difference between a review and a proceeding in VCAT’s original jurisdiction. Its jurisdiction is divided into two parts by s.40, namely original jurisdiction and review jurisdiction. Section 109 deals with any proceeding in VCAT.
It can be seen that the general rule to apply in all proceedings is that “each party is to bear their own costs in the proceeding.” Despite the general rule, the Tribunal may at any time order a party to pay costs to another party. The general rule expressed in s.109(1) must yield to a finding by the Tribunal pursuant to s.109(3). However, the Tribunal may not make an order unless it is “satisfied that it is fair to do so”, and in arriving at that decision the Tribunal is bound to have regard to a series of matters set out in s.109(3). Despite the fact that the various matters are listed, s.109(3)(e) operates to extend the relevant matters if the Tribunal considers that some other matter is relevant. That is, the listed matters are not exhaustive.
It follows that the general rule applies and the Tribunal may only make an order for costs if it is satisfied that it is fair to do so. That finding is an essential prerequisite to making an order for costs.
In approaching the question of any application for costs pursuant to s.109 in any proceeding in VCAT, the Tribunal should approach the question on a step by step basis, as follows –
(i) The prima facie rule is that each party should bear their own costs of the proceeding.
(ii) The Tribunal may make an order awarding costs, being all or a specified part of costs, only if it is satisfied that it is fair to do so. That is a finding essential to making an order.
(iii) In determining whether it is fair to do so, that is, to award costs, the Tribunal must have regard to the matters stated in s.109(3). The Tribunal must have regard to the specified matters in determining the question, and by reason of paragraph (e) the Tribunal may also take into account any other matter that it considers relevant to the question.
For completeness, it is noted that the Tribunal may order the representative of a party to pay costs if it forms the opinion that the representative was responsible for conduct described in s.109(3)(a) or (b), and it is also noted that the Tribunal may make an order for costs before the end of a proceeding. By reason of s.109(5), before the Tribunal may make an order against the representative of a party, the Tribunal must give that representative a reasonable opportunity to be heard.
Whilst it is appropriate for the Tribunal to consider each of the specified matters in s.109(3) and express a view as to the weight that should be attached to the particular matters relied upon, in the end it is important that the Tribunal consider all the matters together and determine whether it is fair to make an order for costs. When dealt with in isolation, each of the matters may lead to the conclusion that it is not fair to make an order for costs, but when taken together, the Tribunal may be satisfied that it is fair to do so. It is the totality of all relevant matters under s.109(3) that must be considered in the context of the prima facie rule.
Some of the matters specified in s.109(3) provide guidance to the Tribunal as to what orders should be made. For example, findings based on s.109(3)(a) and (b) would lead to an order being made against the party guilty of the conduct identified. Section 109(3)(c) provides some guidance in that if the party makes a claim that has no tenable basis in fact or law, then that party should pay costs. On the other hand, s.109(3)(d) does not provide any guidance as to how a finding in relation to the nature and complexity of the proceeding should result in an order for costs. In this sense the paragraph is neutral, and in considering and having regard to the nature and complexity of a proceeding, the Tribunal may in all the circumstances conclude that a costs order should be made, or it may conclude that by reason of the nature and complexity of the proceeding no costs order should be made. But it must be steadily borne in mind that whatever findings may be made, having considered the matters set out in s.109(3), an order can only be made if the Tribunal is “satisfied that it is fair to do so”.
Tribunal Reasons on Costs
The Deputy President published reasons for her conclusion that the plaintiff was not entitled to costs. The Tribunal’s reasons can be summarised as follows:
· It was noted that the builder’s application for review was dismissed and the successful parties, namely the plaintiff and the owners, sought their costs of the proceeding.
· After referring to s.109 of the VCAT Act, it was stated that the insurer submitted that four factors should be taken into account, namely, the length of time taken to dispose of the hearing, the joinder of four additional parties at the request of the builder and their subsequent release from the proceeding, the relatively low cost of rectification, which was finally agreed at $15,000 and was substantially less than the amount the insurer had spent (in excess of $100,000) in relation to the costs including legal and experts’ costs and, finally, the complexity of the proceeding, particularly the technical issues. These matters were said to be relevant under s.109(3) of the Act.
· Consideration was given to the relative strength of the parties’ claims. It was asserted that the builder’s claim was weaker than the insurer’s position and this was dealt with on the basis that it was not a sufficient reason to exercise the discretion in the insurer’s favour.
· It was submitted on behalf of the builder that a prima facie rule should apply and reference was made to the decision of Kaldawi v Housing Guarantee Fund Ltd[2], which apparently established that the builder’s application was a form of administrative review and that in administrative reviews the Tribunal was less likely to award costs than in a matter which was an inter-partes commercial dispute.
[2][2004] VCAT 2024.
· After noting the submission of the builder that the application for review was one of those matters that an insurer knew would occur and whilst accepting that principle, the Tribunal stated it was not persuaded that costs would not be awarded where an application for review was unsuccessful.
· The Tribunal turned to the question of the conduct of the parties and dealt with the submissions by the insurer in respect to the conduct and decided that these matters would not justify an order for costs. The Tribunal dealt with an argument by the builder that the insurer had prolonged the proceedings. It did not accept the argument.
· The Tribunal then dealt with the question of the low cost of rectification works and did not accept that in the circumstances that was a justification for a costs order.
· The Tribunal, noting that it was submitted that the builder’s application was unmeritorious, observed that there were a number of complex issues to be considered and determined, that the builder had obtained leave to appeal the previous decision and that the appeal was unsuccessful. It observed that the fact that the builder was unsuccessful was not a sufficient reason for the Tribunal to depart from the prima facie rule on costs.
· The Tribunal then considered a submission relating to the insurer appearing on the review. The submission was noted but the Tribunal did not consider that it had substance.
· The Tribunal then stated its decision, namely, that it was not persuaded it was an appropriate case for an order for costs.
· Having stated that conclusion, the Tribunal was of the view that it should determine whether in reviewing the insurer’s decision under s.61, the Tribunal was exercising original or review jurisdiction. This matter had been raised on behalf of the builder with particular reference to the Kaldawi v Housing Guarantee Fund Ltd case. Having dealt with the relevant statutory provisions, the Tribunal concluded that it was exercising review jurisdiction. The Tribunal considered a submission put on behalf of the insurer to distinguish the decision in Kaldawi’s case on the basis that it only applied in respect of an application for review of decisions made by the House Guarantee Fund Limited under the House Contracts Guarantee Act 1987, and it observed that the member responsible for the decision did not draw any such distinction. The Tribunal concluded, based upon the reasoning in Kaldawi, that it applied to a review under s.61 of the Domestic Building Contracts Act 1995.
The conclusion was expressed as follows:
“15.I concur with and adopt these findings (the references in Kaldawi case) which I am satisfied set out the correct and only reasonable interpretation of s.61 in the context of the statutory insurance scheme. In declining to exercise the Tribunal’s discretion under s.109(2) I have had regard to the decision in Kaldawi.”
(Emphasis added).
Mr Stuckey of Counsel, who appeared for the defendant builder below and also in this proceeding, submitted that on a proper reading of the Tribunal’s reasons, it was not applying a different rule depending upon whether the proceeding was in the administrative or original jurisdiction. In my opinion, a fair reading of the reasons clearly demonstrates that the Tribunal did rely upon the decision of Kaldawi v Housing Guarantee Fund Ltd and applied what appeared to be a guideline or rule with respect to costs, namely, that costs were less likely to be awarded where the matter was an administrative review compared with a matter which was an inter‑partes commercial dispute. In my opinion, paragraphs 4 and 15, when read together, make that clear. But in addition, the Tribunal spent some time in considering and determining the issue of whether the proceeding before the Tribunal was in the review jurisdiction or the original jurisdiction. It would have been unnecessary to decide that matter unless the Tribunal was of the opinion that there was a guideline or rule relating to costs in the Tribunal which depended upon whether the proceeding was a review or an original jurisdiction proceeding.
As stated, the Tribunal did conclude that the proceeding was a review proceeding. The Tribunal held that in those circumstances, the decision of Kaldawi meant that costs in a review proceeding were less likely to be awarded than in other types of proceedings. The Deputy President stated that she had regard to the decision in Kaldawi, and in my opinion she applied a principle, in reaching the discretionary judgment, of a pre‑disposition that costs were less likely to be awarded in an administrative review proceeding.
The findings that, first, it was a review proceeding and, secondly, that certain consequences flowed therefrom in relation to costs, raise a number of legal questions. I have set out above the step by step process that should be followed where an application is made for costs in any proceeding in VCAT. The Tribunal accepted that there was a guideline which had been established and applied. That guideline influenced the Tribunal. The question is whether it is a proper guideline to apply. If not, the Tribunal member misdirected herself on a question of law as to the exercise of the Tribunal’s jurisdiction pursuant to s.109.
Guidelines
Section 109 of the VCAT Act gives jurisdiction to the Tribunal to order costs in certain circumstances. Whether or not it does so is a matter of discretion and the result is a discretionary order. When a decision making body is exercising authority to reach a discretionary decision, it is open to the body to establish or rely upon an established guideline with respect to the exercise of the discretion. However, it must be emphasised that the rule is a guideline and only a guideline. This means that it must give way if circumstances dictate. It is sometimes said, especially by appellate courts, that the application of some preconceived principle is a fetter on the discretionary jurisdiction and is not lawful. Sometimes that is the case. But the law permits the application of a guideline or a policy decision to resolve a dispute, provided it is recognised that the application of the guideline or policy may have to give way where the circumstances dictate so.
A guideline is often laid down in respect to particular proceedings based upon previous applications and leading to particular results. In other words, if a similar application is made, then based upon experience in previous similar matters, one would expect the same result. The advantage and benefit of such a guideline is that it provides a degree of certainty as to the outcome of a proceeding, and importantly, provides guidance to the parties concerned and their advisers. However, any such guideline is subject to different circumstances and it is important that the decision-making body concerned bears in mind that the guideline is nothing more than a guideline, and must give way if circumstances dictate. In other words, it does not shut out any party arguing that the guideline should not be applied.
In Norbis v Norbis,[3] Mason and Deane JJ[4], after noting that judges of the highest authority had held that a broad discretion cannot be fettered by the judicial enunciation of guidance in the form of binding rules concerning the exercise of the discretion, went on to say:
“However, it does not follow that, because a discretion is expressed in general terms, Parliament intended that the court should refrain from developing rules or guidelines effecting its exercise. One very significant strand in the development of the law has been the judicial transformation of discretionary remedies into remedies which are granted or refused according to well-settled principles.”
[3](1986) 161 CLR 513.
[4]At 519.
Their Honours went on to explain the benefit of developing rules or guidelines when they said:
“It has been a development which has promoted consistency in decision‑making and diminished the risk of arbitrary and capricious adjudication. The proposition referred to at the beginning of this paragraph should not be seen as inhibiting an appellate court from giving guidance, which falls short of constituting a binding rule, as to the manner in which the discretion should be exercised.”
(Emphasis added).
Their Honours went on to emphasise that a guideline is subject to change. In that case they were dealing with the jurisdiction of the Family Court. Their Honours said:[5]
“Yet guidance must be given in a way that preserves, so far as it is possible to do so, the capacity of the Family Court to do justice according to the needs of the individual case, whatever its complications may be. Reconciliation of these goals suggests that in most, if not all, cases the Full Court of the Family Court should give guidance in the form of guidelines rather than binding principles of law.”
(Emphases added).
[5]At p.520.
Their Honours went on to quote what Lord Wright said in Evans v Bartlam, as follows:[6]
“It is … often convenient in practice to lay down, not rules of law, but some general indications, to help the court in exercising the discretion … “.
(Emphasis added).
[6]At p.520.
It follows that in my opinion, it is open to the Tribunal, based upon past experience with similar applications, to lay down guidelines in respect to the exercise of a discretionary judgment; not rules of law or rules of principle that must be applied, but rules that guide and which may have to give way where circumstances are different.
Brennan J, who generally agreed with the reasons of Mason and Deane JJ, also discussed the establishment of guidelines but was of the view that guidelines cannot become binding legal rules. The wisdom of having guidelines was explained by his Honour when he said:[7]
“The authority of an appellate court to give guidance is not to be doubted. It is inevitable that the wisdom gained in continually supervising the exercise of a statutory discretion will find expression in judicial guidelines. That is not to invest an appellate court with legislative power but rather to acknowledge that, in the way of the common law, a principle which can be seen to be common to a particular class of case will ultimately find judicial expression. The orderly administration of justice requires a decision should be consistent one with another and decision-making should not be open to the reproach that it is adventitious.”
(Emphases added)
[7]At p.536.
Although their Honours’ observations referred to an appellate court, in my respectful opinion the same principles apply to a judge at first instance where over a period of time, wisdom is gained in continually considering and applying a discretion in respect to a particular issue, which results in an appropriate guideline in similar cases.
The principles I have set out above have not been confined to courts of law. It is open to a Tribunal to adopt a rule or guideline which is subject to change if the circumstances dictate it. In Judicial Review of Administrative Action by Professor de Smith, 3rd ed, the learned author said:[8]
“A Tribunal entrusted with a discretion must not, by the adoption of a fixed rule of policy, disable itself from exercising its discretion in individual cases. Thus, a Tribunal which has power to award costs fails to exercise its discretion judicially if it fixes specific amounts to be applied indiscriminately to all cases before it; but its statutory discretion may be wide enough to justify the adoption of a rule not to award any costs save in exceptional circumstances, as distinct from a rule never to award any costs at all.”
(Emphases added).
[8]At p.274.
In R v PLA, ex p., Kynoch Ltd,[9] Banks LJ said:[10]
“There are on the one hand cases where a Tribunal in the honest exercise of its discretion has adopted a policy, and, without refusing to hear an applicant, intimates to him what its policy is, that after hearing him it will in accordance with its policy decide against him, unless there is something exceptional in his case … If a policy has been adopted for reasons which the Tribunal may legitimately entertain, no objection could be taken to such a course. On the other hand there are cases where a Tribunal has passed a rule, or come to a determination, not to hear any application of a particular character by whomsoever made. There is a wide distinction to be drawn between these two classes.”
(Emphases added).
[9][1919] 1 KB 176.
[10]At p.184.
In my opinion, in considering the exercise of the discretion under s.109(2) and (3) of the Act, it would be open to the Tribunal, in considering relevant matters and based upon experience in an appropriate case, to lay down a rule or rules to follow in a similar case. Whether it does so will depend upon whether similar cases result in the same decision. But in so doing, the Tribunal must bear in mind that under s.109(3) an order for costs may only be made if the Tribunal is “satisfied that it is fair to do so”. Section 109(3) specifies what the Tribunal must have regard to before it makes any order for costs. Some of the matters may permit the Tribunal to lay down a general rule as a guideline. But one has to proceed with caution because in the end the determinative is whether the Tribunal is satisfied “that it is fair to do so”, that is, to order costs, thereby overcoming the prima facie rule that each party should bear their own costs. Any guideline must be relevant to the exercise of the discretionary judgment and not inconsistent with any statutory provision.
The Guideline Established in the Kaldawi Case
In Kaldawi v Housing Guarantee Fund Ltd,[11] Senior Member R.J. Young dealt with an application for costs made by an insurer against two individuals, who were owners in a dispute under the Domestic Building Contracts Act. The Senior Member was dealing with, inter alia, an offer of settlement which had been made by the insurer. Section 112 deals with offers but the member ruled that it did not apply in that proceeding because the provision does not apply to a review proceeding. The Senior Member then went on to consider the various matters which had been raised and which were relevant to the discretion under s.109 of the VCAT Act. It was submitted to him that the proceeding had been concerned with a commercial dispute and not an administrative review, and the Senior Member said:
“I consider that an application under s.61 of the Domestic Building Contracts Act 1995 to seek a review of an insurer’s decision is a form of administrative review. I have previously found that costs in administrative reviews are less likely to be awarded than where the matter is an inter-partes commercial dispute: Australia Country Homes v Vasiliou, (unreported 5 May 1999).”
[11][2004] VCAT 2024.
The Senior Member then referred to what Tadgell JA said in Transport Accident Commission v O’Reilly and ors.[12] He was of the opinion that what Tadgell JA said supported the proposition that he had stated in respect to a predisposition of not awarding costs in an administrative review. After noting what was said, the Senior Member went on to state:
“I consider these words are applicable to reviews of the decisions of the respondent (i.e. the insurer) but given these differences in size, purpose, outcomes and statutory function between the Commission and the Fund I consider the Tadgell J (sic) words have less emphasis where decisions of the Fund were involved as opposed to decisions of the Commission.”
[12][1999] 2 VR 436 at paras 18 and 19.
It can be seen from the latter observations that the Senior Member took the view that there may be degrees of likelihood in relation to an administrative review and the question of costs.
In the present proceeding, the Deputy President quoted the statement made by Senior Member Young in paragraph 40, supra.
In my opinion, what Tadgell JA said in the TAC case does not provide any support for the proposition which has been stated and applied by Senior Member Young. Senior Member Young quoted what Tadgell JA said in the TAC decision at paragraphs 18 and 19 of his Honour’s reasons. Before I refer to the content of those paragraphs, it is necessary to state what was the real issue in the TAC case. The Court of Appeal was dealing with four separate appeals from decisions made by the Administrative Appeals Tribunal (“AAT”), involving injured persons seeking a review of decisions made by the Commission under the Transport Accident Act with respect to the degree of impairment resulting from a transport accident. In two cases, the Commission had rejected claims for compensation and the Commission’s decision was upheld. However, the AAT would not give costs to the Commission. In two other cases, the applicants’ review proceedings were discontinued and the AAT ordered that the Commission should pay the costs of each of the said applicants. The TAC appealed the decision on costs. The essential issue in the appeal was the argument put by the Commission in each case “that the Tribunal’s statutory power to award costs is so confined that, prima facie at least, an award should follow the event, as in litigation in courts of law.”[13] The Appeal Court considered the various provisions relevant to the jurisdiction to award costs. In particular, s.50(2) of the Administrative Appeals Tribunal Act 1984 provided for a prima facie rule that each party should bear its own costs but empowered the Tribunal to make an order of costs if there were circumstances justifying it doing so.
[13]Per Tadgell JA at p.439.
The thrust of the argument by the TAC was that the proceedings were analogous to court proceedings and accordingly the rule awarding the successful party its costs should be applied. Reliance was placed upon a New South Wales Court of Appeal decision in Ohn v Walton.[14] That case was concerned with a complaint against a medical practitioner which resulted in an inquiry before a medical Tribunal. The complaint was dismissed. The Tribunal did not award costs to the successful medical practitioner. Gleeson CJ[15] was of the view that the disciplinary proceedings before the Tribunal were curial-type proceedings and concluded that a costs order could be made. He then noted that the purpose of an order for costs is to indemnify or compensate the person in whose favour an order is made. Tadgell JA doubted that what Gleeson CJ had said established a rule which should always be followed, and referred to the more recent High Court case of Oshlack v Richmond River Council.[16] In that High Court case, the majority of the Court emphasised the importance of giving effect to a wide statutory discretion as to costs. Tadgell JA[17] stated that the general propositions in the New South Wales case, upon which the TAC relied, could not be accepted without qualification. His Honour said:[18]
“In particular, a broad and unqualified statutory power to award costs may be exercisable in a particular case by reference to the nature of the proceeding and without any necessary presumption that a successful party should receive or that an unsuccessful party should suffer an order for costs.”
[14](1995) 36 NSWLR 77.
[15]At p.79.
[16](1998) 193 CLR 72.
[17]At p.444.
[18]At para 14 on p.444.
His Honour then noted the real issue in the appeals when he said:[19]
“It was fundamental to the appellant’s submissions to us in each of the four appeals that there were no distinguishing features between the A.A.T. and a court of law such as to justify a difference in the way in which the Tribunal and a court of law should exercise a discretionary power to award costs. That cannot be right as a general proposition: the powers of the A.A.T. to award costs derived from a series of statutes couched in various terms. The applicable statute was ascertained by reference to the nature of the administrative decision that was the subject of review. By comparison, the nature of the discretionary statutory power given to a court to award costs in curial proceedings does not usually vary according to the nature of the particular case.”
(Emphasis added)
[19]At para 15.
His Honour then considered the various provisions relating to costs in a court proceeding and a Tribunal and observed the following:[20]
“It is to my mind very clear that the diverse and disparate powers of the A.A.T. to award costs were generally not to be assimilated to those of courts of law.”
[20]At para 17.
His Honour then considered the role of the TAC under the Transport Accident Act and its various functions. He observed that the proceedings involving the TAC were markedly different to any type of court proceeding. I now turn to paragraphs 18 and 19 of Tadgell JA’s reasons, upon which Senior Member Young relied. His Honour on p.446, after nothing what McHugh J said in a High Court case concerning the object of orders for costs in a court proceeding, said:
“18.In so far as the appearance of the Transport Accident Commission before the AAT it is to be seen as an incident of the management of the statutory scheme, the proceeding cannot be regarded as analogous to a curial proceeding. For this reason, and because the AAT is or was not a court, the practice of the courts over the years in exercising their powers to award costs is of doubtful relevance … In such a case it is by no means obvious that in the ordinary run of proceedings it would be just and reasonable that the Commission should be reimbursed for the cost it incurs in the management or administration of the scheme. It might be said with equal justification that a person making a claim pursuant to the statutory scheme, and reasonably and in good faith pressing it, albeit unsuccessfully, within the limits provided by the constituting statute, should not on that account necessarily be out of pocket. In those circumstances it might be reasonable to regard the Transport Accident Commission as having incurred administrative costs in the management of the scheme rather than as a ‘successful party’ to whom costs should be paid by the applicant. That of course is not to say that, a power to award costs having been given to the AAT, an unsuccessful applicant might not suffer an order for costs in an appropriate case. The task of deciding what is an appropriate case is, however, that of the AAT, without any predisposition against the unsuccessful applicant.”
(Emphasis added)
In my opinion, when taken in context, what Tadgell JA said does not provide any basis for a general rule or guideline concerning the question of costs in an administrative review which says that costs are less likely to be awarded.
Senior Member Young then went on to quote what Tadgell JA observed in paragraph 19, as follows:
“The commission comes before the AAT upon a review of the decision, made under s.47(7)(b), not in any real sense as a reluctant party but essentially as a functionary whose decision, made in the ordinary course of administration of a statutory scheme, is in that capacity subject to a routine review.”
However, it is necessary to refer to what his Honour said prior to that sentence. His Honour said:
“I do not consider that the distinction sought to be made is sufficient to place the Transport Accident Commission in a position equivalent, so far as concerns costs, to that of the common run of litigants.”
That was the issue before the Court of Appeal and it was dealt with by the Court. That is, the issue as to whether the proceeding before the AAT was analogous to a court proceeding. All that the Court decided was that it was not, and accordingly the submission put by the Commission that the ordinary rules relating to the awarding of costs in litigation applied, failed.
In my opinion, there is nothing in what Tadgell JA said in that case, or indeed what the other two members of the Court said, to justify the conclusion that there was some guideline or rule of practice relating to costs in VCAT which was to the effect that in an administrative review proceeding, costs were less likely to be awarded than where the matter was an inter-partes commercial dispute. In my respectful opinion, Senior Member Young was wrong to state such a principle and it follows that the Deputy President was also wrong in applying what she thought was a guideline based upon the proceeding being an administrative review. Not only did Tadgell JA’s comments not justify such a guideline, but any guideline based upon the difference between an administrative proceeding and an original jurisdiction proceeding was contrary to the provisions of s.109.
Section 109 does not draw any distinction between the two forms of proceeding. There is no doubt that the jurisdiction of the Tribunal is divided into original and review jurisdiction – see s.40. Further, there is no doubt that under s.109(3)(d), the nature of a proceeding is a matter that is to be considered on a question of costs. But the submissions made by the parties in relation to whether or not the application for the review was the exercise of original jurisdiction or an administrative review highlighted the impossibility of laying down a guideline which distinguished between administrative reviews on the one hand, and original jurisdiction-type proceedings on the other. Administrative reviews could involve a variety of different types of cases, some of which would be akin to an inter-partes adversarial commercial dispute. In my opinion, it is not open to lay down a guideline based purely and simply on whether it is an administrative review proceeding or an original jurisdiction proceeding. Indeed, what Tadgell JA said in the TAC v Reilly case demonstrates the point.
As his Honour pointed out, there is a large variety of Tribunal proceedings, which vary considerably in the issues involved, the way they are conducted and determined, and as to who are the necessary parties. He also drew attention to the variety of powers relating to costs in respect to various proceedings before the Tribunal. Indeed, Senior Member Young in the Kaldawi case[21] appeared to recognise that his guideline was less likely to be applied in certain circumstances.
[21]At para 10.
Error on Part of Deputy President
This appeal is concerned with a discretionary order refusing costs. The principles stated by the High Court in House v The King[22] apply. Dixon, Evatt and McTiernan JJ said: [23]
“The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so.”
[22](1936) 55 CLR 499.
[23]At 504.
In Australian Coal and Shale Employees’ Federation v The Commonwealth[24], Kitto J at p.627, referring to the interference with a discretionary judgment and the presumption in favour of the correctness of the decision appealed from, went on to say:
“A degree of satisfaction sufficient to overcome the strength of the presumption may exist where there has been an error which consists in acting upon a wrong principle, or giving weight to extraneous or irrelevant matters, or failing to give weight or sufficient weight to relevant considerations, or making a mistake as to the facts.”
[24](1953) 94 CLR 621.
Courts are reluctant to interfere with costs orders. Indeed, if the Court is satisfied that the decision maker has considered the matters which are relevant to the exercise, the Court will normally refuse to interfere even if the reasons given are inadequate.[25]
[25]See Penfold v Penfold (1980) 144 CLR 311 at 315.
However, I am satisfied that the Deputy President erred in applying a guideline that in administrative review proceedings, costs are far less likely to be awarded than where the matter is an inter-partes commercial dispute. There is no justification in law for such a predisposition to the issue of costs in a proceeding before VCAT, and such a guideline, in my view, is plainly inconsistent with the provisions of s.109. Section 109(3)(d) requires the Court to consider the nature of the proceeding. It is the particular characteristics of the particular proceeding before the Tribunal which must be considered. I do not consider that drawing a distinction between an administrative review and an original jurisdiction-type proceeding is helpful. Each proceeding must be considered. It may be that the nature of a particular proceeding would lead to the conclusion that the Tribunal was satisfied that it was fair to make an order for costs, whereas another proceeding may not lead to the same conclusion. It is the very nature of the proceeding which is important. What Tadgell JA said in the TAC case may provide some guidance as to considering the nature of the proceeding and what costs order might flow from it. However, having said that, it must be borne in mind that Tadgell JA was dealing with the question of whether the administrative proceeding in those appeals was analogous to a court proceeding, which may have then led to a conclusion that the rules normally applied in a court proceeding should apply in those appeals. Accordingly, one must approach with a degree of care anything that Tadgell JA said because it must be read in context in respect to the issues before the Court.
It follows that, in my opinion, the order made by the Deputy President must be set aside and the matter remitted to her to reconsider the question in the light of these reasons and without applying any particular guideline as to costs being less likely to be awarded in an administrative proceeding.
The plaintiff has established additional grounds (ii) and (iii).
With respect to the original two questions of law, I am not persuaded that the Deputy President failed adequately to have regard to the matters set out in s.109(3)(c) and (d) or that she approached the matters in sub-section 109(3)(d) on the basis that the existence of complex technical issues tended against an award of costs. As stated, in my opinion, s.109(3)(d) may result in an order for costs or may not, and of course the Tribunal could not make any order for costs unless it was satisfied that it was fair to do so.
Proceeding a Review Proceeding?
It is unnecessary for the Court to consider and determine the issue decided by the Deputy President concerning the nature of the review under s.61 of the Domestic Building Contracts Act 1995. The Deputy President came to the view that in reviewing the insurer’s decision under s.61, the Tribunal was exercising review jurisdiction. I question that conclusion.
The Tribunal is given jurisdiction under ss.60 and 61 of the Domestic Building Contracts Act to review a decision of an insurer. In each section, the application is described as a “review” of a decision of an insurer. Reference to that Act reveals that the word “review” is not defined. The mere fact that the Act describes the application as a “review” does not, in my opinion, answer the question under the VCAT Act. What is meant by “review” in ss.60 and 61 of the Domestic Building Contracts Act depends upon the intention of Parliament. The word “review” has a variety of meanings. Reference to the Shorter Oxford English Dictionary shows a wide variety of meanings, including the “act of looking over something again with a view to correction or improvement”, a “general account or criticism”, and “to view inspect or examine a second time or again”.
In my opinion, one cannot conclude that it was the intention of Parliament when it used the word “review” to mean an administrative review within the meaning of the VCAT Act. The word was appropriate to use in the Domestic Building Contracts Act to describe a reconsideration of a decision.
Section 40 of the VCAT Act divides the Tribunal’s jurisdiction into two, namely, “original jurisdiction” and “review jurisdiction”. Section 42 defines what is “review jurisdiction”. It states:
“42. What is review jurisdiction?
(1)Review jurisdiction is jurisdiction conferred on the Tribunal by or under an enabling enactment to review a decision made by a decision-maker.”
“Decision-maker”, according to s.3, means:
“A person who makes, or is deemed to have made, a decision under an enabling enactment.”
The word “enactment” means, inter alia, an Act.
In my opinion, there is a fairly strongly argument that the review of an insurer’s decision under the Domestic Building Contracts Act is, for the purposes of the proceeding in VCAT, a proceeding pursuant to the original jurisdiction. This is because the insurer does not make, or is not deemed to have made, a decision under the Domestic Building Contracts Act. The decision is made pursuant to a contract of insurance issued by reason of a Ministerial directive. It is unnecessary for me to reach any concluded decision on this issue. Accordingly, I will say no more. The question of whether a costs order should be made under s.109 of the VCAT Act in my opinion does not depend upon the characterisation of the proceeding being an administrative review or an original jurisdiction proceeding. The nature of the proceeding is relevant and that will depend upon the nature of the particular proceeding. In my view, nothing is gained by seeking to divide it between an administrative review and an original jurisdiction proceeding.
Conclusion
In my opinion, the Deputy President erred in applying the guideline that in administrative review proceedings the Tribunal is less likely to make an order for costs. Accordingly, the order refusing costs must be set aside. Subject to any submissions by counsel, I propose to make the following orders:
1.That the appeal against the orders made by the Senior Master on 28 July 2006 be allowed.
2.That the plaintiff have further leave to appeal under s.148 of the Victorian Civil and Administrative Tribunal Act 1998 from the orders made by the Tribunal on 24 February 2006 in proceeding No. D142/2003 on the following questions of law:
(i)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the proceeding, erred in law in finding that the jurisdiction conferred on it by s.61 of the Domestic Building Contracts Act 1995 was a review decision. VCAT should have found that the jurisdiction was in its original jurisdiction.
(ii)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the proceeding, took into account an irrelevant consideration, namely, that the proceeding was in the nature of an application for a review of an insurer’s decision under s 61 of the Domestic Building Contracts Act 1995.
(iii)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the proceeding, acted upon a wrong principle, namely that VCAT is less likely to award costs in a proceeding in the nature of a review of an insurer’s decision under s 61 of the Domestic Building Contracts Act 1995 than in a proceeding in the nature of an inter‑partes dispute.
(iv)Whether VCAT, in declining to order that the defendant pay the plaintiff’s costs of the proceeding, erred in law in finding that an application for a review of the decision of an insurer under s 61 of the Domestic Building Contracts Act 1995 is a form of administrative review.
3.That the appeal against the order made on 24 February 2006 by VCAT that there be no order as to costs as between the defendant builder and the plaintiff insurer be allowed and the order be set aside.
4.That the plaintiff’s application for costs in proceeding No. D142/2003 in the Victorian Civil and Administrative Tribunal be remitted back to the Tribunal to be heard and decided again by Deputy President C. Aird.
5.That the defendant respondent pay the plaintiff appellant’s costs, including reserved costs, of the appeal from the orders made by Senior Master Mahony on 28 July 2006 and the appeal from the order made by the Victorian Civil and Administrative Tribunal on 24 February 2006.
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