Australia: What's left of VCATs construction dispute jurisdiction?

"VCAT's long-standing practice of hearing and determining contribution is inconsistent with the statute pursuant to which the Tribunal has purported to determine such claims" - His Honour Justice Delany of the Supreme Court of Victoria, acting as a Member of VCAT, Vaughan Constructions Pty Ltd v Melbourne Water Corporation (Building and Property) [2023] VCAT 233 at [67].

In a significant and wide-reaching decision likely to have a substantial impact on the Building and Property List in the Victorian Civil and Administrative Tribunal (VCAT), the Honourable Justice Delany of the Supreme Court of Victoria held that VCAT does not have jurisdiction to determine claims for contribution brought pursuant to the Wrongs Act 1958 (Vic) (Wrongs Act).

The question of VCAT's jurisdiction to determine Part IV claims was first raised, but not ruled upon, over 20 years ago (see Sensyn Australia v United Colours on Collins Pty Ltd [2000] VCAT 2643). Since then, VCAT has proceeded on the basis that it has jurisdiction. In Vaughan Constructions Pty Ltd v Melbourne Water Corporation (Building and Property) [2023] VCAT 233 (Vaughan), the question was squarely put to Justice Delany:

Does VCAT have jurisdiction to hear a contribution claim pursuant to Part IV of the Wrongs Act?

Put simply, the answer is no.

As a result, any matter where a claim for contribution is pleaded must be struck out of VCAT and relisted in a Court, with the associated delay and increased expense of moving from a no costs jurisdiction. This is in addition to the exodus of claims or defences arising under a law of federal Parliament in VCAT which followed on from last year's decision of Thurin v Krongold Constructions (Aust) Pty Ltd [2022] VSCA 226 (Thurin).

Background and reasoning of Vaughan

The facts of Vaughan are exceedingly complex, involving a claim for damages arising from the flow of water from a drain in Epping onto a site upon which a warehouse was built. A number of parties were involved in the development of the land and construction of the warehouse. Justice Delany has been tasked with managing the Supreme Court proceedings brought by the owners, as well as the four related VCAT proceedings issued to determine claims arising under the Water Act 1989 (Vic) (Water Act). VCAT has exclusive jurisdiction over claims under sections 16 and 157 of the Water Act. In one of the proceedings, a party sought joinder of a number of third parties for the purposes of claiming contribution. This was opposed, and VCAT's jurisdiction over Part IV claims was queried.

His Honour considered the wording of the Wrongs Act, and other relevant legislation, in his decision. A number of Parts of the Wrongs Act specifically define the word 'court' to include a tribunal, meaning that VCAT is able to exercise powers set out in those Parts.

Relevantly, Part IV, which creates a freestanding statutory cause of action for the remedy of contribution, does not include a definition of 'court'. His Honour held that the absence of a definition varying the ordinary meaning of the word 'court' means that powers under Part IV can only be exercised by a court. VCAT, a tribunal, is not a court, and so claims for contribution under Part IV fall outside its jurisdiction.

Impact of decision on Building and Property List

Practitioners in the VCAT Building and Property List are familiar with a common scenario, whereby a homeowner or owners corporation brings a claim against the builder for defects to a dwelling. The builder, in turn, will bring contribution claims against its sub-contractors who performed allegedly defective. The homeowner frequently cannot bring a claim against the sub-contractor directly, as it had no direct relationship with the sub-contractor (subject to notable exceptions not canvassed here).

The above scenario is the bread and butter of the Building and Property List, and would now need to be heard in a court. A matter such as Lacrosse, in which a builder faced a non-apportionable claim and so relies on claims for contribution against its sub-contractors, is no longer able to be determined by the Tribunal. As a result of Thurin, claims or defences under the Australian Consumer Law (Cth) or where issues governed by the Insurance Contracts Act 1984 (Cth) arise, both of which are common in the Building and Property List, are being referred out of VCAT.

It is difficult to see how all but the simplest building and property disputes can be heard in VCAT.

Concluding remarks

Despite the efforts of Members of the Building and Property List, matters in the List have faced significant delays since COVID-19 due to chronic under-resourcing. While the anticipated mass transfer of referral to the County Courts and Supreme Court will ease those delays in VCAT, one hopes that the Supreme Court and County Court of Victoria are adequately resourced to meet the upcoming case load challenge.

A simple solution would be for the Victorian Parliament to amend Part IV of the Wrongs Act to include a definition of 'court' that includes tribunals. Alternatively, any appeal to Justice Delany's decision must be issued by 3 April 2023.

As it currently stands, Vaughan will have flow on effects for the domestic building industry and their insurers, as well as homeowners seeking access to justice.