Further to Thurin – Think twice before commencing a domestic building dispute at VCAT

In the wake of the Court of Appeal decision in Thurin v Krongold [2022] VCSA 226 which held that VCAT lacks jurisdiction to hear or determine proceedings involving an issue arising under Commonwealth legislation[1], focus turns to the choice of forum confronting parties to domestic building disputes.

It is unclear what caseload VCAT will now have in its original jurisdiction to resolve domestic building disputes, given Thurin and recent legislative change expanding the role of the Magistrates’ Court to fill the jurisdictional vacuum left by VCAT’s inability to hear claims involving federal law.[2]

Litigants now have some invidious choices. This is particularly so given the original intention in establishing the Domestic Building Tribunal (now VCAT) was to provide an “inexpensive, time-efficient and expert forum for the resolution of domestic building disputes” [3]. Litigants and would-be litigants experience a very great gap between those lofty intentions and the cost and time realities of multi-party, factually heavy, legally complex disputes, often involving apportionable claims and/or contribution claims, now complicated by jurisdictional issues and questions of appropriate forum.

This cuts in different ways, depending on the status of a proceeding or intended proceeding or decision.

Would-be claimants may choose:

• to commence a VCAT proceeding, and to risk incurring additional and wasted costs and time if a controversy arises under a Commonwealth Act, leading to the striking out of the VCAT proceeding and referral of the matter to an appropriate Court under s77 of the VCAT Act[4]; or
• to commence an application in the Magistrates’ Court seeking that it hear and determine the matter under Part 3A of the VCAT Act [5], which contains the new arrangements for dealing with federal matters, that resemble a VCAT proceeding[6]; or
• to commence a proceeding in an appropriate Court, and to risk the action being stayed on the application of another party if the matter “could be heard by VCAT”[7].

More on that course later.

Parties to an existing VCAT proceeding that is impacted by a controversy arising under Commonwealth legislation may:

• seek the VCAT proceeding be struck out (or struck out and referred to a Court)[8]; and then either:
• commence an application to the Magistrates’ Court seeking that it hear and determine the matter[9]; or
• commence a further proceeding in another Court.

In the case of a VCAT decision already made (before 26 October 2021, when Part 3A of the VCAT Act commenced), s57F of the VCAT Act provides a saving provision for such past invalid decisions of VCAT, allowing these decisions to be treated as if they were decisions of the Magistrates’ Court[10].

In the case of a jurisdictionally invalid decision made after the implementation of Part 3A, recourse for parties is unclear and unsatisfactory. While s57G of the VCAT Act appears to give effect to a jurisdictionally invalid VCAT decision, whenever made, as a valid Magistrates’ Court decision, in fact it is limited by reference to the s57F saving provision which applies only to decisions made before 26 October 2021 when Part 3A commenced. An application for hearing and determination by the Magistrates’ Court under Part 3A of the VCAT Act is unavailable if the VCAT proceeding has not first been struck out for want of jurisdiction.[11] There appears to be a need for amendment of Part 3A to cover decisions of VCAT made after the commencement of Part 3A and up to around the time of the Thurin decision.

The workings of Part 3A of the VCAT Act are complex and so far untested. They are also likely to need expansion to deal with the impact of Thurin. This tends to add complication to a situation for litigants already very far from ideal.

On top of VCAT’s other travails, the Thurin decision drew attention, without deciding the point, to the fact that VCAT appears not to have jurisdiction to make contribution orders under Part IV of the Wrongs Act 1958 (Vic). VCAT’s practice for years – since its commencement – has been to make such orders.[12] This point arises because Part IV does not contain a definition of ‘court’ as encompassing ‘tribunal’, in contrast to the proportionate liability regime in Part IVAA of the same Act. In multi-party VCAT proceedings where only part of the domestic building dispute involves apportionable claims[13], it would be perverse if contribution orders could not validly be made in respect of non-apportionable claims. Yet that appears to be the position.[14]

In the case of an existing domestic building dispute in a Court, s57 of the DBC Act requiring that a Court stay a domestic building dispute commenced in a Court “if the action could be heard by VCAT under this Subdivision”, may come into play. However the operation of s57 of the DBC Act is likely narrowed due to jurisdictional issues. Arguably, VCAT’s lack of jurisdiction is properly considered as part of considering whether VCAT “could” hear a particular dispute, in that VCAT could not determine a proceeding involving matters of federal law.[15]

Further, if a domestic building matter is a dispute involving insurance claims, the preferred forum may be a Court, in part because of the risk of a federal controversy involving the Insurance Contracts Act 1984 (Cth) arising, and in part because the s57 stay mechanism – on its terms, by referring to “under this Subdivision” – appears not to operate in relation to disputes under the Subdivision dealing with insurance claims. VCAT is now relatively even less likely to see domestic building matters involving insurance claims within its original jurisdiction.

Parties to domestic building disputes will rightly be disappointed with the expensive and inefficient workings of the system of justice in relation to domestic building disputes, including the real risk for current proceedings of hearings in two forums. Added to this is the significant loss of expertise amongst decision-makers as a result of reliance on the judicial resources of Courts, especially the Magistrates’ Court, to stand in where expert VCAT members are effectively “sidelined”. This invidious situation indicates a need for streamlining, if not thoroughgoing further reform, within the system of dispute resolution in the broad category known as domestic building disputes.

This article was first written by Catherine Bell and published by KHQ Lawyers on 23 February 2023.

[1] Refer to Catherine Bell’s article on the Thurin decision

[2] Part 3A of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (VCAT Act) which commenced on 26 October 2021 – around a year before the judgment in Thurin was handed down. Part 3A was introduced to overcome separate federal law issues arising from the decision in Burns v Corbett [2018] HCA 15 regarding an NCAT proceeding involving parties in different States and from the decision in Meringnage v Interstate Enterprises [2020] VSCA 30 regarding a VCAT proceeding taken against the Commonwealth.

[3] Victoria, Parliamentary Debates, Legislative Assembly, 24 October 1995, 695, (Jan Wade)

[4] The s77 power is exercisable upon the application of a party or on the initiative of the VCAT

[5] In particular s57B(1)(a) et seq of Part 3A of the VCAT Act

[6] Refer s57C “Substituted Proceedings” within Part 3A of the VCAT Act, including that the Evidence Act 2008 (Vic) may not apply

[7] Under s57 of the Domestic Building Contract Act 1995 (Vic) (DBC Act)

[8] Under s77 of the VCAT Act, exercisable only by a judicial member of VCAT

[9] Under Part 3A of the VCAT Act, in particular s57B et seq

[10] Part 3A of the VCAT Act, in particular s57F

[11] Refer s57B(1)(b) and (c) of the VCAT Act, noting that the relevant date under s57B(1)(c) of 10 August 2021 is different from (but still earlier than) the commencement date of Part 3A, being 26 October 2021

[12] For example, refer note 2 by the Member Kirton in the decision of Peck v Eade [2023] VCAT 80

[13] Refer Owners Corporation PS623721 and ors v Shangri-La Construction Pty Ltd and ors [2022] VCAT 1499 and Catherine Bell’s co-authored KHQ article on that case

[14] The saving provision in s57F of the VCAT Act is insufficiently wide to save the invalidity of past VCAT orders that are invalid due to reasons beyond a purported exercise of a judicial power involving a federal subject matter. Refer definition of “invalid Tribunal decision” in s57A of the VCAT Act

[15] Section 57 of the DBC Act had recently attracted comment as to the width of “could”, doubting that a then-backlogged VCAT “could” hear domestic building disputes commenced in the County Court. See obiter in Impresa Construction v Oxford Building [2021] VCC 1146 and Uber Builders and Developers Pty Ltd v MFA Pty Ltd & Anor [2021] VCC 1677