Green light for domestic building disputes to be heard in the County Court of Victoria

The County Court of Victoria’s dismissal of a stay application gives owners and Owners Corporations another green light to pursue their domestic building disputes outside of the Victorian Civil and Administrative Tribunal (VCAT).

This is an update to our August article about the legislative framework and obiter observations of her Honour Judge Burchell in Impresa Construction v Oxford Building & Ors [2021] VCC 1146 (Impresa).

Her Honour Judge Burchell refused the defendants’ stay application brought under section 57 of the Domestic Building Contracts Act 1995 (Vic) (DBC Act) (Uber Builders and Developers Pty Ltd v MIFA Pty Ltd & Anor [2021] VCC 1677 (Uber v MIFA)).

Her Honour agreed with the plaintiff’s submissions (echoing her Honour’s own obiter commentary in Impresa), and concluded that the proceeding "could not be heard by VCAT" for the purposes of section 57 of the DBC Act due to delays and a backlog in VCAT.

As a result of her Honour’s decision, Uber v MIFA remains with the County Court and future plaintiffs/applicants have an additional forum to choose from for the determination of their domestic building dispute.

Background

The County Court’s earlier decision in Impresa

A discussion of Impresa and the legal framework regarding section 57 of the DBC Act was detailed in our article following Impresa.

Briefly, section 57 of the DBC Act provides that a Court must stay a proceeding if:

  • the proceeding arises wholly or predominantly from a domestic building dispute;
  • the action could be heard by VCAT; and
  • the Court has not heard any oral evidence concerning the dispute itself.

Previously, this meant that domestic building disputes would mostly be issued in VCAT’s Building and Property List and, if individual lot owners or Owners Corporations ventured outside of VCAT to issue in the courts, defendants could apply to have the proceeding stayed to effectively force the dispute into the arms of VCAT.

In Impresa, her Honour indicated that a practical approach would be adopted in considering the question of whether an action “could” be heard by VCAT. Acknowledging current under-resourcing at VCAT and the vacation of hearing dates and delays, her Honour considered that the precondition imposed by section 57(2)(a) of the DBC Act arguably:

“cannot be met when read in light of the overarching purpose of the Act. The backlog of matters and shortage of resources at VCAT currently means that this matter in fact could not be heard by VCAT.”[1]

This decision paved the way for proceedings concerning domestic building disputes to be issued in the Supreme and County Courts and warned defendants that their stay applications could be denied.

Uber v MIFA

Notwithstanding Impresa, the defendants in Uber v MIFA brought a stay application after the plaintiff issued proceedings in the County Court of Victoria in late 2020.[2]

The parties to Uber v MIFA agreed that the proceeding concerned a domestic building dispute, and that the Court had not heard any oral evidence concerning the dispute.

Therefore, the issue for determination was limited to whether the Court was obliged to stay the proceeding because “the action could be heard by VCAT under this Subdivision” per section 57(2)(a).

The application to stay the proceeding resulted in the County Court’s October 2021 trial listing being vacated and the application went ahead despite the Court’s orders mid-September 2021 which directed the parties to consider the matters discussed in Impresa.

The defendants’ application

In support of its application, the defendants argued that the phrase “could be heard” related to the jurisdiction of VCAT, rather than importing temporal case management considerations. The defendants argued that her Honour’s commentary in Impresa had been obiter and was not binding.

Further, the wording of section 57(2)(a), the defendants said, did not suggest a temporal element, and the Court could not fill in gaps in the wording of the section. If a temporal consideration were to be read into the phrase “could be heard”, this would require the Court to compare the delay parties would experience in the County Court as opposed to what might be experienced at VCAT which would be both difficult to predict and would not assist in interpreting the DBC Act.

The plaintiff’s position

The plaintiff endorsed and adopted the rationale and approach outlined by her Honour in Impresa.

The plaintiff echoed her Honour’s obiter commentary that the current backlog of matters and shortage of resources at VCAT meant that section 57(2)(a) could not be satisfied. The plaintiff argued that a plain reading of the word “could” does not exclude temporal considerations, and in any case, her Honour’s interpretation fell within the plain meaning of the word. It further endorsed her Honour’s regard to the context and purpose of the DBC Act and other external material such as the second reading speech, both of which afforded weight to considerations of cost and time in interpreting section 57.

The Court’s finding

Her Honour did not accept the defendants’ submissions, instead endorsing the reasoning set out in Impresa as a holistic assessment of the text, context and purpose of the DBC Act.

Her Honour acknowledged the increasing workloads and difficulties imposed on VCAT by the COVID-19 pandemic which meant that the Building and Property List was no longer able to offer hearing dates in a timely manner. Consideration was given to the overarching purpose of the DBC Act and the Civil Procedure Act 2010 (CPA) to facilitate the timely and cost effective resolution of disputes. Her Honour, therefore, held that section 57(2)(a) could not be satisfied and the application to stay the proceeding was unsuccessful.

The defendants’ summons was dismissed and costs awarded to the plaintiff. In the coming days, the parties are due to advise the Court if they are ready to proceed to trial and, if the parties fail to comply, there are orders in place foreshadowing that the proceeding may be struck out without further notice.

Practical implications

Parties to a domestic building dispute now have four potential forums through which to resolve their dispute.

Firstly, home owners and builders (equally) have access to Domestic Building Dispute Resolution Victoria which has the power to issue dispute resolution orders to resolve disputes that are not completely resolved by agreement. This option avoids litigation but is acknowledged as being inappropriate for complex disputes.

Secondly, if the parties agree to a matter being issued in the County Court, parties can also provide written undertakings to the Court to agree that they will not make a stay application under section 57(4) of the DBC Act. Otherwise, any late application to seek to stay the proceeding may have adverse cost implications and other sanctions imposed and powers invoked under the CPA.

Thirdly, in Uber v MIFA, her Honour reminded parties to domestic building cases issued in the Building Cases List of the County Court that a number of County Court judges are appointed as Vice Presidents of VCAT and may hear and determine VCAT proceedings in that capacity.

A claimant may still wish for a proceeding to be heard and determined in VCAT. VCAT has lower fees, different costs rules, different rules of evidence and informality,[3] rendering it an attractive option for self-represented or impecunious claimants. However, her Honour noted that even where parties to issue in VCAT, VCAT may determine that the proceeding would be best managed by a County Court judge acting in their capacity as a VCAT Vice President.

Fourthly, domestic building disputes may also be referred to arbitration by agreement, consistent with the established authority in Swintons v Age Old Builders Pty Ltd (2005) 13 VR 381. On 7 July 2021, the County Court launched its Arbitration List[4] which can be a viable option when a dispute raises a discrete question of law. This option includes time-bound and fixed price schemes.

Notwithstanding each of these options, we readily expect that, in the coming months we will see a significant spike of proceedings issued in the County Court’s Building Cases List and it will be interesting to see how long it takes until a domestic building dispute “could” be heard by VCAT.

 

 

Footnotes

[1] Impresa at [55].

[2] While the defendants’ application was heard approximately two months after Impresa, the defendants’ former solicitors (who went off the record in the proceeding in August 2021) had notified the Court of their intention to make the application on 20 July 2021.

[3] Ibid at [45]

[4] Which is suitable for commercial arbitration proceedings conducted under the Commercial Arbitration Act 2011 (Vic) and for referral of existing County Court proceedings by agreement under section 66(1) of the Civil Procedure Act 2010 (Vic).