VCAT and Federal Law

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

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

Overall Implications for VCAT’s Jurisdiction

The 2022 decision in Thurin v Krongold Constructions has surfaced significant implications pertaining to the ability of the Victorian Civil Administrative Tribunal (‘VCAT’) to hear and resolve domestic building dispute matters. The Victorian Court of Appeal held that it is outside VCAT’s jurisdiction to hear domestic building disputes which involve interpreting or applying federal legislation, despite its primary jurisdiction in this area. This decision requires matters to be transferred out of VCAT and referred to a court, implying increased expenses and delays.

Factual Context

Back in 2006, David and Lisa Thurin engaged Krongold Constructions (‘Krongold’) to demolish their home in Toorak and construct a new residence. These works constituted major building works under the Domestic Building Contracts Act 1995 (Vic). After the completion of the building works, Mr and Mrs Thurin claimed the works comprised of defects, which arose a dispute regarding who would be responsible for the payments of the repairs. An appointed expert found that Mr and Mrs Thurin had suffered loss and damages totalling $3,583,437.88, which Krongold refused to pay.

In 2018, Mr and Mrs Thurin wished to enforce the expert determination, hence they commenced a proceeding in VCAT. Krongold’s defence claimed any of the loss and damage suffered by Mr and Mrs Thurin was apportionable. Krongold alleged that the various contractors, namely MDG Plumbing, Swan Hardware, and Casper Architecture had breached the Australian Consumer Law (‘ACL’) and thus were concurrent wrongdoers within the meaning of s 24AH of the Wrongs Act 1958 (Vic). In accordance with his allegations, he sought orders to join the subcontractors as parties to the proceeding.

Decision

The Court of Appeal heard the matter on a question of law. Krongold raised a defence of apportionment and contribution regarding a federal statute (ACL), hence the question the court had to address was whether a matter of this nature fell within the jurisdiction of VCAT, and upon this, whether VCAT was therefore obligated to refer the proceeding to another court.

Essentially, the court held that upon the basis of constitutional principles under chapter III of the Australian Constitution (which details the federal jurisdiction powers of courts), if the source of the rights and duties that are in issue between two parties arises under a federal statute, VCAT lacks the jurisdiction to hear and determine the matter.

The court relied on the following reasoning:

• The fact that a party, in this case Krongold, was incorporated under a Commonwealth Act does not entail a sufficient relation for a matter to convert to one of federal jurisdiction. However, once a Commonwealth law is relied upon as a source of a party’s defence or claim, then the matter falls within the scope of a federal matter.
• Section 77(iii) of the Constitution empowers the Commonwealth Parliament to make laws which invests any State courts with federal jurisdiction. Consequently, federal matters can only be heard by federal courts and state courts, VCAT is not a “state court” for the purposes of section 77(iii).
• Hence, VCAT lacks the jurisdiction to hear and determine proceedings concerning federal legislation.

However, the court held that VCAT has the jurisdiction pursuant to s 77 of the VCAT Act to transfer the proceedings to a more appropriate court, thus facilitating the efficient resolution of the matter in dispute.

Significance

This decision may impose significant disruptions to VCAT’s processes considering VCAT hears a multiplicity of domestic building disputes. Many of these involve issues arising under federal legislation, like the ACL (set out in Competition and Consumer Act 2010). Notably, disputes can be converted to federal matters with relative ease considering a party may raise a claim or defence arising under federal legislation, seemingly at any point of the dispute. Hence, numerous matters currently in VCAT, and future ones, will need to be referred to appropriate courts.

Furthermore, parties may also be hesitant to commence a matter in VCAT even if there are no federal issues initially present, as their case risks being transferred out of VCAT’s jurisdiction (after it has already commenced) because of new claims or parties.

As a result of this decision, individuals seeking to initiate a domestic building dispute must seek careful advice concerning the appropriate forum to pursue their case. Otherwise risking an unnecessary increase in costs, time, and delays if the wrong decision is made. Similarly, respondents must be attentive to the implications of relying upon a defence that may inadvertently convert the case into a federal matter.

Hence, if you have a matter in VCAT regarding this issue or are seeking to initiate a claim under ACL, contact Cogent Legal. We act in many types of matters both in construction and in ACL.