The benefits of settlement offers in VCAT proceedings

Litigation: 23 March 2019

The general rule under s 109(1) of the Victorian Civil and Administrative Tribunal Act 1998 (the Act) is that each party bears its own costs as the Victorian Civil and Administrative Tribunal (VCAT) is a no costs jurisdiction.

However, pursuant to s 109(2) and (3) of the Act VCAT has the discretion to order that a party to a proceeding pay all or some part of the costs of the other party if VCAT is satisfied that it is fair to do so. VCAT must have regard to factors such as whether the party conducted the proceeding in an unnecessarily disadvantageous way to the other party or whether they delayed and prolonged the proceeding.

In line with VCAT's discretion to award costs there is also a presumption of an order for costs should a settlement offer be rejected under s 112 of the Act. So whilst VCAT at first may appear to be a no costs jurisdiction there is benefit in a party serving settlement offers in accordance with s 112 of the Act in an attempt to resolve the proceeding and prevent protracted litigation so if the settlement offer is rejected (unreasonably) it may lead to an order for costs against the party rejecting the settlement offer.

Settlement offers under s 112 of the Act may in their own right provide a presumption that an order for costs be awarded as was discussed in the case of Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority [2005] VSCA 298 which outlined that the unreasonable refusal of a settlement offer is a proper ground for an award of costs. The rejection of a settlement offer may also be considered a factor weighing in favour of VCAT's discretion to award costs under s 109 of the Act.

So although VCAT at the outset is a no costs jurisdiction, there are mechanisms under the Act which attempt to protect a party from having to bear their own costs in instances where the other party has unreasonably rejected a settlement offer served in an attempt to resolve the proceeding.

Settlement offers that meet the requirements under the Act are beneficial and should be utilised by parties that have a desire to resolve a proceeding. This is because they may be accepted by the other party bringing an end to the litigation, or if rejected they may be taken into consideration as a presumption for an order for costs under s 112 of the Act or a factor considered by VCAT in determining whether costs should be awarded under s 109 of the Act.