The Court of Appeal finds VCAT pipeline broken – VCAT has no jurisdiction in federal matters

The jurisdiction of the Victorian Civil and Administrative Tribunal (VCAT) has been curtailed by the decision of the Court of Appeal in Thurin v Krongold Constructions [2022] VSCA 226, holding that VCAT does not have jurisdiction to hear disputes involving Commonwealth legislation.

The decision has far-reaching implications for the administration of justice generally, and for domestic building disputes in particular.

Background

The Thurins (the Applicants) had engaged Krongold Constructions (Aust) Pty Ltd (Krongold) to demolish their old house and build a new one. Several disputes arose in relation to allegedly defective works, including the alleged use of defective pipes in the internal plumbing works. An expert was appointed under the building contract who determined the Applicants had suffered loss and damage of approximately $3.5m.

The Applicants commenced proceedings in VCAT, seeking to enforce the expert’s determination. Krongold pleaded by defence and counterclaim that any loss and damage suffered was apportionable and sought to join the plumber, pipe supplier and architect to the proceeding as concurrent wrongdoers under Part IVAA of the Wrongs Act 1958 (Vic). The apportionment claim in respect of the pipe supplier involved allegations of contravention of the Australian Consumer Law – a federal law.

Court of Appeal’s decision

A multiplicity of proceedings commenced by the Applicant in different forums regarding the same domestic building work led the President of VCAT to appoint a Supreme Court judge as an acting member of VCAT to hear and determine the VCAT proceeding. That judge directed the Supreme Court and VCAT proceedings be heard and determined together, and referred questions of law to the Court of Appeal with the consent of the President of VCAT.

The Court of Appeal found that VCAT lacked jurisdiction to determine a proceeding, once it involved a genuine controversy arising under federal law.[1]

The Court reasoned that:

1. only a ‘court of a State’ is vested with federal jurisdiction by section 39(2) of the Judiciary Act 1903 (Cth), legislation made under a Constitutional power;
2. VCAT is not a ‘court of a State’[2]; and
3. VCAT has jurisdiction under section 77 of the VCAT Act 1998 (Vic) to refer the matter to an appropriate Court.

This aspect of the decision differed from an earlier Federal Court decision[3] that held that section 77 of the VCAT Act did not permit VCAT to refer a matter where VCAT lacked jurisdiction to hear the matter.

The Court further stated that a formal pleading involving a Commonwealth law was not required for a proceeding to fall outside VCAT’s jurisdiction. The Court said a claim or defence genuinely raised and not incapable of legal argument relying on a Commonwealth law is a justiciable matter arising under a law of the Commonwealth, with the potential to take shape ‘before the issues have been delineated in pleadings at all, such as in the parties’ correspondence”.[4]

Implications

The limitations on VCAT’s jurisdiction are significant, both in terms of the impact on cases currently before the Tribunal and the absence of a simple solution to address the issue. The Victorian Parliament is incapable of conferring on a tribunal judicial power in respect of matters conferred by the Constitution on the High Court, and by federal legislation on State Courts.

Given the propensity of domestic building disputes at VCAT (and other disputes dealt with by VCAT) to involve issues arising under federal legislation, such as the Australian Consumer Law (in the Competition and Consumer Act 2010 (Cth)) or the Insurance Contracts Act 1984 (Cth), it is probable that numerous matters before VCAT may need to be referred to appropriate Courts for lack of jurisdiction.

Already at least one multi-party matter before VCAT, begun in 2019/2020, has been struck out and referred to the Supreme Court in light of the Thurin v Krongold decision, on the basis that it was very likely the dispute between the first respondent and the 19^th and 20^th joined parties required determination of a matter under the Insurance Contracts Act 1984 (Cth)[5].

The fact that a genuinely raised controversy arising under a federal law may only come to light relatively late in a VCAT matter, such as upon joinder or proposed joinder (being a common occurrence under the Victorian proportionate liability regime), makes the crisis more acute – for parties, practitioners and the legal system itself.

Immediately, the Courts will see more domestic building disputes before them, either from commencement of proceedings or on referral from VCAT where its jurisdiction is exceeded. It remains to be seen whether recent legislative measures to deal with want of jurisdiction in tribunals[6] will ameliorate the implications of the Thurin decision or whether additional responses may be required.

This article was first written by Catherine Bell and published by KHQ Lawyers on 21 February 2023.

[1] Following Citta Hobart v Cawthorn [2022] HCA16, which dealt with a complaint having parts “of a single justiciable controversy” that were beyond the jurisdiction of a State tribunal, resulting in the whole complaint being dismissed for want of jurisdiction.

[2] Points 1 and 2 following Burns v Corbett (2018) 26 CLR 304

[3] Qantas Airways Limited v Lustig [2015] FCA 253

[4] Thurin v Krongold Constructions [2022] VSCA 226 at [59]

[5] Owners Corporation 1 Plan No. PS640567Y v Shangri-La Construction Pty Ltd [2022] VCAT 1384 (5 December 2022)

[6] Part 3A of the Victorian Civil and Administrative Tribunal Act 1998 (Vic)