Must a Victorian domestic building dispute be issued in VCAT?

Section 57 of the Domestic Building Contracts Act 1995 (Vic) (DBC Act) makes the Victorian Civil and Administrative Tribunal (VCAT) “chiefly responsible for resolving domestic building disputes” and provides that:

“(1) This section applies if a person starts any action arising wholly or predominantly from a domestic building dispute in the Supreme Court, the County Court or the Magistrates' Court.

(2) The Court must stay any such action on the application of a party to the action if:

(a) the action could be heard by VCAT under this Subdivision; and

(b) the Court has not heard any oral evidence concerning the dispute itself.”

The section does not mean that all domestic building matters must be heard in VCAT but:

• that current practice in Victoria is that all domestic building disputes are issued in VCAT and proceedings issued elsewhere (in our experience, usually the County Court of Victoria but on occasion in the Supreme Court of Victoria) appear to have been issued in that jurisdiction in error or perhaps in the hope that the other parties don’t take issue to the chosen jurisdiction – either way, the proceedings usually end up with a stay application and the dispute ultimately moving to VCAT; and
• the use of the word “must” in section 57(2) means that, if a Supreme, County or Magistrates’ Court proceeding is commenced but it could be heard by VCAT and the Court has not heard any oral evidence relevant to the dispute itself, the Court has no discretion and, if a stay is sought, it must be granted.

Section 57 has been criticised for being incompatible with the overarching purpose of the Civil Procedure Act 2010 (Vic)[1] (CPA) or the DBC Act itself because it allows the stay application to be made right up until oral evidence is given by which time the proceeding may have been on foot for many months, if not years.[2] It is hard to see in that scenario, how a late stay application facilities the just, efficient, timely and costs-effective resolution of a dispute.

In his 2017 decision, Justice Ginnane may have felt his hands were tied because he considered that the purpose and the provisions of the CPA could not remove the rights given under section 57 of the DBC Act, which permitted the stay application. However, even if his hands were tied, his Honour was still able to express his displeasure of the lateness of the application noting that the late application was relevant to the question of costs.

However, what was interesting about the decision of Impresa Construction v Oxford Building & Ors [2021] VCC 1146 handed down by the County Court of Victoria on 18 August 2021, is the Court’s comments about whether, in response to that stay application, “the action could be heard by VCAT”[3] as required by section 58(2)(a) of the DBC Act.

Could the action be heard by VCAT?

Whether the action “could be heard by VCAT” has historically not been a particularly interesting question – the simple point has been, if VCAT has jurisdiction, it “could be heard by VCAT”.

However, her Honour took a very practical approach to this question last week.[4]

Her Honour’s judgment cites information publicly available regarding timeframes for hearing disputes in VCAT concluding:

“This inability [of VCAT] to commit to a time frame and/or the inability to deal with disputes due to lack of VCAT resources undermines the objective of the Act and the CPA and VCAT is effectively prevented from being able to perform its function and role.”

Her Honour went on to conclude that:

“the public policy rationale behind s57 of the Act appears to be frustrated. Allowing mandatory stay of proceedings to be heard in VCAT where there is a shortage of resources to meet the backlog of matters, where:

(a) time lines do not apply;

(b) VCAT will contact the parties 8-10 weeks from initiation with the proposed next steps;

(c) currently listed hearings fixed from October 2021 are being vacated and presumably refixed in priority of new initiations to ensure that adjourned hearings are heard within a reasonable timeframe; and

(d) where interlocutory hearings are being fixed some 8 months into the future,

all subvert the purpose of both the Act and the CPA to enable timely and cost-effective dispute resolution.”

In her Honour’s view, given the current under-resourcing of VCAT and the vacation of hearing dates and delays, the precondition imposed by section 57(2)(a) of the BDC 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.”

This paves the way for proceedings to be issued in the Supreme or County Courts with any applications to stay the proceeding under section 57 to be denied.

Practical implications

The Court has paved the way for owners and Owners Corporations to issue outside of VCAT (and, in particular, to issue in the County Court of Victoria).

We would not disagree with the Court’s comments about delays in VCAT and it is certainly a real issue for litigants. One supposes that, if a swifter timetable can be achieved in the County Court, then who could blame plaintiffs for choosing the County Court for their dispute.

However, we make four observations.

Firstly, as stated above, section 57 allows a stay application to be made at any time up to when the Court has heard any evidence relevant to the dispute. Practically, this allows for the stay application to be made extremely late in the proceeding and can even be as trial is due to commence.

If late applications are made without a clear and valid excuse, this would be to the detriment of the parties and the Court as well as to the timely administration of justice. One would hope that the CPA could come to the rescue if the application was made late to secure some sort of strategic advantage (even if misguided), such that parties and/or their advisors would be held accountable through adverse costs orders.

Secondly (and relatedly), there are a number of reasons why VCAT is experiencing delay (including the sheer volume of disputes being issued there and the resources available to VCAT). However, that delay will presumably not be permanent and needs to be addressed rather than the problem moved elsewhere.

Nonetheless, it would disappointing if a plaintiff commenced an action in the County Court of Victoria now but perhaps in a year’s time when the matter is well progressed, a defendant seeks a stay with a view to moving the dispute to VCAT. If wait times were no longer protracted at VCAT, the current wording of the DBC Act would mean that the County Court would have no choice but to allow the stay because the dispute could be heard by VCAT (and perhaps only make an adverse costs order as “punishment” for the late application).

Parties should consider having an open and early dialogue about which is the appropriate jurisdiction to avoid any “surprises” and disputation later in the proceeding.

Thirdly, some parties (particularly owners and Owners Corporations, but also some contractors) will find the informalities of VCAT preferable to the courts and this should remain a live consideration.

Fourthly, while VCAT has a discretion when it comes to costs[5], it is a “no costs” jurisdiction. This ought to be a consideration for owners and Owners Corporation (and/or their solicitors) that might think they can get “swift justice” but they need to query if that justice will it cost effective for those particular plaintiffs? Perhaps it depends how swift the justice is.

Finally we note that her Honour Judge Burchell has opened the door for domestic building disputes to be commenced outside of VCAT. While some of the smaller disputes probably remain best placed in VCAT where they can enjoy the no costs jurisdiction and some informality it may be that the larger and more complex disputes[6] might do well in the County Court of Victoria or the Supreme Court of Victoria.

 

Read other items in the Australian Insurance Brief - October 2021

Read other items in Construction and Engineering Brief - October 2021

 

Footnotes

[1] The overarching purpose of the CPA is to “facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute” as provided for in section 7 of the CPA and also the second reading speech: “The public policy rationale for [s57] is the intention to provide a single, inexpensive, time-efficient and expert forum for the resolution of domestic building disputes. Domestic building disputes are a special category of dispute where timeliness of resolution is critical, and where less formal proceedings are more likely to reach the heart of the matter than the full panoply of the law.”

[2] Radojevic v JDA Design Group Pty Ltd & Anor [2017] VSC 796.

[3] We would add that the Court also found that the dispute before it was not an action arising wholly or predominantly from a “domestic building dispute” and so section 57 was not enlivened but, on its own motion (and without submissions from the parties on this point), the Court explored this further question.

[4] This practical approach was adopted at the Court’s own election as the Court found that the relevant contact was not a “domestic building contract”. In fact, the Court specifically states that these points were made by way of “comment” rather than forming part of the Court’s disposition of the defendants’ application (thereby avoiding an appeal on the Court’s “comment” alone).

[5] As conferred on it by section 109(2) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic).

[6] We suggest “large and complex” does not relate only to quantum and the number of allegations and parties involved (both of which will influence the number of experts involved) are more of a relevant factor.