1.Preheat oven to moderate, 180°C (160°C fan-forced). Line a 12-hole (1/3-cup capacity) muffin pan with paper or foil patty cases.
2.Beat butter and sugar in a small bowl with an electric mixer until light and fluffy. Add combined coffee and water, then beat in eggs, one at a time, beating until just combined between additions. Transfer the mixture to a large bowl.
3.Stir in sifted flour and milk. Spoon mixture into prepared patty cases. Press 3 caramel halves into the centre of each cake; cover with batter. Bake in a moderate oven for about 20 minutes or until browned.
4.Cool in pan for 5 minutes, transfer to rack to cool. Serve dusted with sifted icing sugar.