The case of G J Stanbrook Pty Ltd trading as Gardner Homes v East (Costs Hearing) (Building and Property)  VCAT 417 in the Victorian Civil and Administrative Tribunal provides an example of the circumstances in which VCAT will order a party to pay another party's costs in a proceeding. Where a party pursues a claim that is unmeritorious or unreasonably rejects a settlement offer VCAT may make an order awarding costs (including on an indemnity basis) if it is satisfied that it is fair to do so.
GJ Stanbrook Pty Ltd (applicant) and Ms East (respondent) entered into a domestic building contract for the construction of a home (Contract). Clause 5 of the Contract provided that neither could assign their rights and duties under the Contract without consent.
The respondent received an invoice for payment for the lock up stage of the works from EWH South Morang Pty Ltd (EWH). The respondent refused to pay the invoice on the basis that she had not consented to the assignment of the Contract to EWH and as such EWH had no contractual basis to claim payment.
The applicant commenced the proceedings seeking payment. On 9 September 2014, the respondent made aCalderbank offer that the proceedings be struck out with no order as to costs (first offer). On 7 October 2014 and 12 December 2014, the respondent made two further offers to pay $10,000 to the applicant in full and final settlement of the proceedings, being a further Calderbank offer and an offer under section 112 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) Act (VCAT Act) (subsequent offers).
The member held in favour of the respondent in finding that the applicant had not consented to the assignment of the Contract and as such EWH had no contractual basis to acclaim payment.
Costs on a party and party basis
The member awarded costs to the respondent on a party/party basis from the date the applicant joined the proceedings to the day before the date of the first offer (8 September 2014) and on an indemnity basis from 9 September 2014 onwards. The member held that in VCAT:
- the prima facie rule is that each party should bear its own costs in the proceeding;
- costs may be awarded if the member is satisfied that it is fair to do so; and
- in determining whether it is fair to award costs, the member must have regard to the matters in section 109(3) of the VCAT Act.
The member awarded costs on a party/party basis pursuant to section 109(3)(c) of the VCAT Act on the basis that the applicant's claim had no tenable basis in fact or law. The member considered a plain reading of clause 5 of the Contract made it clear that the debt could not be assigned without the consent of the respondent.
Costs on an indemnity basis
The member awarded costs on an indemnity basis from the date of the first settlement offer pursuant to section 109(3)(e) of the VCAT Act as he considered it relevant that in all the circumstances the applicant's rejection of the first and subsequent settlement offers was unreasonable