VCAT jurisdiction update – the end of procedural turmoil is in sight

By Zoe Keith and Chris Forder

This has been a big week for property damage claims in the Victorian Civil and Administrative Tribunal (VCAT). The Court of Appeal has clarified what it means for VCAT to ‘refer’ a proceeding to a Court, which should release the brakes on many existing claims. Meanwhile, a draft bill is being proposed in the Victorian Parliament which would address some of the outstanding procedural and jurisdictional issues that have thrown VCAT proceedings into disarray over the last nine months.

We briefly recap below.

• In October 2022 the Court of Appeal issued its judgment in Thurin v Krongold Constructions (Aust) Pty Ltd [2022] VSCA 226. The Court confirmed that VCAT had no jurisdiction to hear the case after issues were raised which involved the exercise of federal jurisdiction.
• While it was clear that this would capture cases involving a right or obligation imposed by federal legislation, VCAT soon confirmed that this would apply to most insurance disputes, on the basis that the parties might rely on the Insurance Contracts Act 1984 (Cth).^[1]
• Meanwhile, it became clear that the procedure for transferring a matter from VCAT to a Court was poorly understood. Where VCAT cannot hear a matter, it has the power to make a ‘referral’ to a Court under section 77 of the Victorian Administrative and Civil Tribunal Act 1998 (Vic). However, it was not clear whether section 77 required the Court to start a fresh proceeding, or whether the existing VCAT action retained any meaning.
• To add fuel to that fire, in March 2023 an issue which had been footnoted in the Krongold judgment was picked up by Justice Delaney in Vaughan Constructions Pty Ltd v Melbourne Water Corporation (Building and Property) [2023] VCAT 233. Due to an apparent oversight in the definition of ‘court’ in Part IV of the Wrongs Act 1958 (Vic), VCAT had no power to determine contribution claims brought under section 23B of that Act. Section 23B contribution claims are extremely common in VCAT, particularly in the Building and Property List.

Those decisions exposed some fundamental problems in the legislation which made many VCAT proceedings unworkable, including for the following reasons.

1. While claims involving federal jurisdiction are uncommon by comparison, almost all claims in VCAT’s Building and Property List, and many in its Civil Claims List, involve contribution claims. This means that it has been difficult to progress existing proceedings in those lists, and any applicants looking to issue new proceedings were faced with significant uncertainty.
2. VCAT is given priority jurisdiction over domestic building disputes and claims arising out of the unreasonable flow of water, and so the applicant is often required to issue in VCAT even if they expect contribution claims or federal jurisdiction will arise in future. Their claim could realistically ‘bounce’ between a Court and VCAT, causing significant costs and delay.
3. Many claims impacted by those issues could not be progressed until the proper meaning of section 77 was understood, because VCAT and the Courts were reluctant to act until they confirmed how limitations periods should apply to those cases. In particular, one arguable interpretation of section 77 would defeat a claim entirely where the claimant issued in VCAT before the limitation period, but was then ‘referred’ to a Court after the time expired.

There have now been two major developments in August 2023, and it appears that the end is in sight for each of those issues.

On 17 August 2023, the Court of Appeal issued its judgment in Krongold v Thurin [2023] VSCA 191. Subject to any special leave application, the Court confirmed the effect of section 77. In short: if the action was originally issued before time expired, then the action is included in the subject matter being referred to the Court. However, there are some potential gaps to be aware of. Where VCAT did not have power to properly join a respondent (in Krongold this was because the joinder required VCAT to exercise federal jurisdiction), then the action against that respondent is not included in the subject matter being referred to the Court. This means that (subject to the second development below), a limitation period could still apply in respect of parties who were not properly joined to the proceeding.

Meanwhile, we understand that several legislative amendments were formally introduced to Parliament on 15 August 2023. The proposed bill^[2] is subject to change, but in its current draft form it appears to have the following effects.

• The Wrongs Act 1958 (Vic) is being updated to include VCAT in the definition of ‘court’, so that it has the power to determine contribution claims. It also proposes to retroactively validate the (thousands of) contribution claims already determined by VCAT previously.
• The Limitation of Actions Act 1958 (Vic) is being amended so that the definition of ‘action’ includes a proceeding in VCAT.
• The Domestic Building Contracts Act 1995 (Vic) is being amended to include a carve-out in VCAT’s priority jurisdiction over domestic building work disputes – the action doesn’t need to be moved to VCAT if the Court has reasonable grounds to consider that federal jurisdiction may be raised in future.
• The Victorian Civil and Administrative Tribunal Act 1998 (Vic) is being amended so that where VCAT makes a ‘referral’ to a Court, the Court is being given the power to extend ‘any limitation period…’ that applies ‘…in relation to the matter’, in certain circumstances. This may arguably capture a limitation period which falls through the gaps in the Krongold appeal decision, mentioned above, being improperly joined respondents.

Once effective, these changes should clear a path to progress many claims which have been delayed throughout 2023. In particular, many existing VCAT proceedings should no longer be paralysed by the inability for respondents to make section 23B contribution claims, and a Court receiving a referral from VCAT can now act on that referral without fearing that their actions will unjustly invalidate claims.

VCAT will still be unable to hear any matters involving federal jurisdiction that cannot be rectified by Victorian legislation because the State of Victoria does not have the power to give federal jurisdiction to VCAT. However, these proposed changes should remove the barriers which were preventing those claims from being moved to a Court, and should minimise the situations where new proceedings are forced into VCAT when it is foreseeable that federal jurisdiction will arise in future.

Accordingly, unless the Krongold judgment is appealed further, and subject to any changes in the draft bill, these developments may be the light at the end of the tunnel for litigants in VCAT.

[1] See, for example, Owners Corporation 1 v Shangri-La Construction (Building and Property) [2022] VCAT 1384.
[2] Justice Legislation Amendment Bill 2023 (Vic).