VCAT’s Jurisdiction for Domestic Building Works Limited

Case Summary:  Thurin v Krongold Constructions (Aust) Pty Ltd [2022] VSCA 226

On 20 October 2022, the Victorian Supreme Court, Court of Appeal decided that the Victorian Civil and Administrative Tribunal (VCAT) did not have jurisdiction to hear a domestic building dispute involving a matter rising under Commonwealth legislation. This decision is significant for a number of reasons including that it effectively limits the scope of VCAT’s jurisdiction for domestic building disputes.

Background

David and Lisa Thurin (Owners) engaged Krongold Constructions (Aust) Pty Ltd (Builder) to demolish their house in Toorak, Victoria, and build a new residence (Works).

The Works were major domestic building works within the meaning of the Domestic Building Contracts Act 1995 (Vic).

Several disputes arose from the Works being undertaken under the contract including that the Owners alleged that defective pipes were used.

On 31 October 2017, the Owners commenced a proceeding in the Supreme Court of Victoria against Swan Hardware & Staff Pty Ltd (Swan Hardware) and Plumbing Plus Bathroom Kitchen Laundry Pty Ltd (Plumbing Plus). The Owners claimed that Swan Hardware imported allegedly defective materials into Australia and contravened the Trade Practices Act 1974 (Cth) (TPA) by supplying materials to the Builder’s plumbing contractor.

The Owners commenced a proceeding in VCAT against the Builder seeking to enforce an expert determination that the Owners suffered loss and damage of $3.5 million that the Builder refused to pay.

The Builder served points of defence disputing the Owner’s claims. The Builder then filed points of counterclaim and relevantly argued that any loss and damage suffered by the Owners was apportionable to Swan Hardware on the basis that they had breached the implied warranty of fitness for purpose in section 74B of the TPA.

In August 2018, VCAT made an order that joined Swan Hardware to the proceeding.

Supreme Court Appeal

In May 2019, the Builder commenced a proceeding in the Supreme Court of Victoria against Swan Hardware. The Builder claimed against Swan Hardware under the TPA and made additional allegations under the TPA for defective goods and misleading and deceptive conduct.  The Builder argued that VCAT lacked jurisdiction to hear the matter because the matter was one of federal jurisdiction. The Builder also argued that VCAT could not refer the matter to the Supreme Court pursuant to section 77 of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act).

On referral from the judge at first instance, the Victorian Court of Appeal considered several issues relating to VCAT’s jurisdiction.

The Court of Appeal held that where a Commonwealth law is relied on as the source of a claim or defence asserted in the course of a proceeding, the proceeding is one ‘arising under’ a law of the Commonwealth within the meaning of section 76(ii) of the Constitution. Therefore, it is enough that the claim or defence be ‘genuinely in controversy and that it give rise to an issue capable of judicial determination’.

In this case, once the federal claims in respect of Swan Hardware were raised in the Builder’s defence dated 5 August 2018, the matter the subject of the VCAT proceeding came within federal jurisdiction. As a consequence, VCAT lacked jurisdiction to hear and determine that issue. The Supreme Court decided that VCAT lacked power to order that Swan Hardware be joined as a party to the VCAT proceeding.

The Court of Appeal rejected the Builder’s submission that VCAT did not have jurisdiction to hear any dispute involving a corporation as a party. The Court of Appeal confirmed that the case authorities make it clear that if a Commonwealth law is ‘lurking in the background’, or merely an ‘incidental consideration’, then the matter will not be one arising under the Commonwealth law. As such, if the sole connection with a Commonwealth law is that one or more of the parties to the dispute is a corporation incorporated under the Corporations Act, this does not mean that VCAT does not have jurisdiction to hear the matter.

The Court of Appeal also held that VCAT had jurisdiction to refer part or all of the VCAT proceedings to the Supreme Court of Victoria under section 77 of the VCAT Act.

Takeaways from the decision

• The jurisdiction held by VCAT to determine domestic building disputes is significantly limited by the decision in Krongold. In that respect, if any party during a VCAT proceeding raises a matter involving Commonwealth law, such as a claim for misleading and deceptive conduct under the Australian Consumer Law, it is likely that VCAT does not have jurisdiction to hear the matter. If so, a party may apply for the matter to be transferred from VCAT to a suitable Court.
• This means that a party that responds to a claim in VCAT involving Commonwealth law may be able to apply for the matter to be referred to a Court to avoid VCAT. This might be done either to obtain a strategic benefit or in an attempt to delay proceedings (i.e. as a defensive action). This situation may arise if a party is joined to a proceeding and if, following such joined, one or more party ventilates a claim under Commonwealth legislation.
• Further, a party that has brought a claim in VCAT which involves a claim arising under Commonwealth law must consider this jurisdictional issue and evaluate whether VCAT is the proper forum or not. If not, what Court has jurisdiction to hear and determine the matter.
• Given the threshold to determine whether a Commonwealth law is relied upon as the source of a claim and/or defence, a judgment call must be made by litigants presently in VCAT proceedings as to whether VCAT remains the proper jurisdiction to hear their matter or whether the matter ought to be referred to an appropriate forum.

Further limitation on VCAT’s jurisdiction – The Wrongs Act

We also note the decision of VCAT in Vaughan Constructions Pty Ltd v Melbourne Water Corporation (Building and Property) [2023] VCAT 233.

In this case Justice Delany in VCAT decided that VCAT did not have jurisdiction to determine claims for contribution under Part IV of the Wrongs Act due to the fact that VCAT is not a ‘court’. In this respect, section 24 of the Wrongs Act requires that, in proceedings for contribution under section 23B, the amount of contribution recoverable shall be such as may be found by the jury or by the Court.

Parties presently in VCAT, with actions involving claims for contribution under the Wrongs Act, must therefore consider bringing a separate action, for that claim, in a court or seek to refer the VCAT proceeding to a suitable Court that may determine these issues.

If you are currently involved in a domestic building dispute and seek advice or further information as to whether VCAT has jurisdiction to determine the matter, please feel free to contact one of our lawyers in the Building & Construction team for assistance.

Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.