The limits of VCAT’s jurisdiction

The Court of Appeal has highlighted the severe restriction on VCAT’s jurisdiction that arises from federal issues. Practitioners conducting matters in VCAT will need to understand, and be vigilant of, the extent of federal jurisdiction and consider the consequences for disputes that are or might be in it, or might be brought within it.

Introduction

In Victoria, many disputes are resolved in the Victorian Civil and Administrative Tribunal (VCAT). VCAT has jurisdiction – authority to decide – two main kinds of disputes: (i) administrative decisions, typically in merits review; and (ii) certain kinds of civil disputes. This blog post focuses on the latter category.

In October 2022, the Court of Appeal handed down one of the most consequential decisions since at least 2015 for VCAT’s work: Thurin v Krongold Constructions (Aust) Pty Ltd [2022] VSCA 226 (McLeish, Niall and Walker JJA – notably, all former solicitors-general for the State of Victoria. In 2015, similar issues arose and were determined in the Federal Court in Qantas Airways Ltd v Lustig (2015) 228 FCR 148 (Perry J), where Mr S McLeish SC appeared for the intervener, the Attorney-General of Victoria.)

The Court’s decision in Thurin is significant. Briefly put, where there is or might be a federal issue in a matter, or a dispute otherwise falls within federal jurisdiction, VCAT has no jurisdiction. Practitioners and tribunal members are going to need to have the reach of federal jurisdiction front of mind.

VCAT’s jurisdiction

The first duty of any court or tribunal is to satisfy itself that it has jurisdiction. Whilst VCAT does not have general jurisdiction over civil disputes, this is usually not difficult. For VCAT to have jurisdiction, it is necessary to identify a statute that gives VCAT the authority to decide that dispute. Here’s a list of commonly used sources of VCAT’s jurisdiction:

• Domestic building disputes: Domestic Building Contracts Act 1995
• Retail lease disputes: Retail Leases Act 2003 (RLA)
• Consumer and trader disputes: Australian Consumer Law and Fair Trading Act 2012 (ACLFTA), s 184
• Any cause of action in the Australian Consumer Law (Vic) (ACL (Vic)): ACLFTA, s 224
• Any action for damages under the ACLFTA (which includes the ACL (Vic)): ACLFTA, s 217
• Co-owned property disputes: Property Law Act 1958, Pt IV
• Owners corporations disputes: Owners Corporations Act 2006
• Water-flow disputes: Water Act 1989
• Residential tenancy disputes: Residential Tenancies Act 1997
• Legal practice costs disputes: Legal Profession Uniform Law Application Act 2014, s 99

So, for example, the sale of goods or services generally will fall within the so-called “consumer and trader” dispute jurisdiction – so called because that’s the label that the ACLFTA gives it, but the definition of that jurisdiction does not require identification of either a “consumer” or a “trader”. By contrast, what amounts to a “domestic building dispute” or a “retail lease” can be more contentious in borderline cases.

It can therefore be seen that many kinds of dispute can be sent to VCAT for resolution. VCAT is designed to be adaptable to the variety of matters it handles, from the unrepresented consumer complaining about the length of curtains bought from the local, small retailer, to multimillion-dollar retail leasing or building dispute.

There is no monetary limit to VCAT’s jurisdiction. However, the Constitution and the Judiciary Act 1903 (Cth) (Judiciary Act) together significantly limit VCAT’s jurisdiction.

Thurin: background and issues

Thurin is the natural consequence of a couple of relatively recent decisions.

In Burns v Corbett (2018) 265 CLR 304, the High Court decided that the NSW Civil and Administrative Tribunal (NCAT) could not decide a dispute between residents of different states because:

1. in deciding such a dispute, NCAT was exercising judicial power (and this was not disputed in Burns);
2. NCAT was not a “court of a State”;
3. a dispute between residents of different states is within federal jurisdiction (being one of the types of matters in ss 75 and 76 of the Constitution);
4. s 39 of the Judiciary Act conferred federal jurisdiction on the courts of the States, which, because of s 109 of the Constitution, rendered inoperative any inconsistent conferral of federal jurisdiction by a state parliament;
5. it was beyond the legislative power of state parliaments to confer federal jurisdiction on a non-court tribunal.

In Meringnage v Interstate Enterprises Pty Ltd (2020) 60 VR 361, the Court of Appeal decided, perhaps unsurprisingly, that VCAT is not a “court of a State”. VCAT therefore did not have jurisdiction to decide a dispute in which the Commonwealth was a party (a matter of federal jurisdiction).

Following that decision, Parliament inserted Pt 3A into the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act). Where VCAT would have jurisdiction but for a federal issue, a party may commence the proceeding in the Magistrates’ Court, and that court has the same powers as VCAT (in addition to its own). The Magistrates’ Court may also transfer the proceeding to the County Court or the Supreme Court, who also retain VCAT’s powers.

The Thurins were homeowners and Krongold was a builder in a domestic building dispute. The Thurins’ dispute with Krongold involved numerous parties, extended to multiple proceedings in both VCAT and the Supreme Court and included issues under the Trade Practices Act 1974 (Cth) (TPA) (the former name of the Competition and Consumer Act 2010 (CCA)).

The VCAT proceeding and two related Supreme Court proceedings were referred to Riordan J as an hoc member of VCAT and, for the purposes of the two related Supreme Court proceedings, as a judge of the Court. His Honour directed that all proceedings be heard and determined together and then referred several questions to the Court of Appeal for determination, which were directed to the extent of VCAT’s jurisdiction.

Federal jurisdiction

Federal jurisdiction has its source in Ch 3 of the Constitution. The relevant provisions in the Constitution are ss 75 to 77. By s 39(2) of the Judiciary Act, the Commonwealth Parliament has, with some limitations, invested federal jurisdiction in “the several Courts of the States”. Federal jurisdiction includes, under s 76(ii) of the Constitution, “any matter … arising under any laws made by the [Commonwealth] Parliament”. The Court of Appeal explained the constitutional and statutory framework ([41]-[43], citation omitted):

Chapter III of the Constitution is entitled ‘The Judicature’. Section 75 provides for the original jurisdiction of the High Court. Section 76 enables the Parliament to make laws conferring additional original jurisdiction on the High Court:

The Parliament may make laws conferring original jurisdiction on the High Court in any matter:

(i) arising under this Constitution, or involving its interpretation;

(ii) arising under any laws made by the Parliament;

(iii) of Admiralty and maritime jurisdiction;

(iv) relating to the same subject-matter claimed under the laws of different States.

By s 77, the Commonwealth Parliament is empowered to make laws with respect to matters mentioned in ss 75 and 76 defining the jurisdiction of any federal court other than the High Court, defining the extent to which the jurisdiction of any federal court shall be exclusive of all courts of the States, and ‘investing any court of a State with federal jurisdiction’.

The Commonwealth Parliament has deployed the power in s 77(iii) to enact (among other provisions) s 39(2) of the Judiciary Act 1903 (Cth), which invests ‘the several Courts of the States’ with federal jurisdiction in all matters in which the High Court has original jurisdiction, or in which original jurisdiction can be conferred upon the High Court, subject to certain exceptions and conditions.

The Court observed ([44]) that VCAT has not been invested with federal jurisdiction. It then discussed the meaning of “matter” in ss 75 and 76 of the Constitution. Referring ([47]) to Palmer v Ayres (2017) 259 CLR 478, the Court said ([48]):

a ‘matter’ is a controversy, being the subject matter of a dispute which may be litigated in a legal proceeding. It encompasses all claims made within the scope of the controversy, whether or not those claims are ultimately established.

The Court did not decide whether the separate proceedings in Thurin constituted a single “matter”. But it decided that the TPA claims “brought the VCAT proceeding into federal jurisdiction” and the proceeding was therefore beyond VCAT’s jurisdiction. The Court said ([55], citing Citta Hobart Pty Ltd v Cawthorn (2022) 400 ALR 1; 96 ALJR 476):

Where a Commonwealth law is relied on as the source of a claim or defence asserted in the course of a justiciable controversy, the controversy is one ‘arising under’ a law of the Commonwealth within the meaning of s 76(ii) of the Constitution. For that purpose, it is enough that the claim or defence be ‘genuinely in controversy and that it give rise to an issue capable of judicial determination’; that is, it is ‘enough that the claim or defence be genuinely raised and not incapable on its face of legal argument’.

Further ([58]-[59], [63], citations omitted):

It is well established that the identification of a ‘matter’ in federal jurisdiction does not depend on the form taken by the proceedings in question. The ‘matter’ is not co-extensive with any legal proceeding but is the subject matter for determination in a legal proceeding or ‘controversies which might come before a Court of Justice’.

The ‘matter’ might therefore take shape before the issues have been delineated in pleadings at all, for example in correspondence between the parties. …

Since the claims form part of the matter as soon as they are raised, the question of jurisdiction arises and must be answered as at that point. Issues of parties to a proceeding and joinder are irrelevant to the identification of the matter and must likewise be irrelevant to deciding whether the matter so identified is genuinely raised and capable of legal argument.

(Note the use of the word “might” in the above quoted passages. The High Court emphasised it in Palmer.)

The next question that the Court addressed was whether, without more, making a claim against a corporation brought a “matter” within federal jurisdiction. Perhaps (again) unsurprisingly, the answer to that was “no”. However, in its reasons for that conclusion, the Court considered the scope of when a “matter” is one “arising under” a law made by the Commonwealth Parliament.

The following two propositions ([78]) were not controversial:

1. “a dispute that concerns a right or duty that has its immediate source in a Commonwealth law … would fall within the scope of s 76(ii)”; and
2. “a dispute in which a party claims a defence that has its immediate source in a Commonwealth law would fall within the scope of s 76(ii)”.

The Court added ([79]):

“there is a third category of matters that can be properly characterised as arising under a Commonwealth law, namely where the subject-matter of the controversy, although not arising directly under a Commonwealth law, is sufficiently connected to a Commonwealth law so that it is properly characterised as arising under that law, albeit indirectly”.

The Court considered several authorities that dealt with that third category.

The first authority was R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141. In that case, an organisation registered under the Commonwealth Conciliation and Arbitration Act 1904 had rules that were enforceable by complaint to the Arbitration Court. Even though the rules were created by agreement and not by statute, it was competent for the Commonwealth to confer jurisdiction on the Arbitration Court for their enforcement because the Act gave the rules characteristics that they otherwise did not have.

The next was Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457. There, the question was whether a claim litigated in the NSW Supreme Court was in federal jurisdiction. The causes of action were couched in the general law and stemmed from a licence agreement with respect to certain trade names and trade marks. As ownership of the trade marks was in issue, the rights of the parties owed their existence to the Trade Marks Act then in force.

Another authority that related to the third category was LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575. That case concerned the enforcement of an agreement concerning units of quota for car importations. Even though the source of the parties’ rights lay principally in the agreement, the units of quota were made under a law of the Commonwealth, namely regulations made under the Customs Act 1901. A plurality of the High Court said (quoted in Thurin, [101]):

When it is said that a matter will arise under a law of the Parliament only if the right or duty in question in the matter owes its existence to a law of the Parliament that does not mean that the question depends on the form of the relief sought and on whether that relief depends on federal law. A claim for damages for breach or for specific performance of a contract, or a claim for relief for breach of trust, is a claim for relief of a kind which is available under State law, but if the contract or trust is in respect of a right or property which is the creation of federal law, the claim arises under federal law. The subject matter of the contract or trust in such a case exists as a result of the federal law.

And further (quoted at [102]):

The contracts in the present matter were concerned solely with entitlements under the Regulations. The object of the plaintiff’s claim was identified in the statement of claim as ‘any benefit accruing’ after a certain time as a result of the utilization of a quota under the Regulations. It is common ground that the ‘benefit’ mentioned is any ‘benefit’ which might accrue under the Regulations. The subject matter of the contracts and of the action arose under and existed only by reason of the provisions of the Regulations and the Act in pursuance of which the Regulations were made. …

The present case is not, to use the words of Windeyer J in Felton v Mulligan, one in which the Regulations are merely ‘lurking in the background’. The very subject of the issue between the parties is an entitlement under the Regulations. In substance the plaintiff’s primary claim is to the benefit of rights and privileges under the Regulations. In these circumstances the matter involved in the action arose under laws made by the Parliament.

Having considered those authorities (among others), the Court summarised the authorities on the point ([115]):

where the source of the rights and duties that are in issue between the parties is a Commonwealth law, the matter will properly be characterised as one ‘arising under’ that law. That will include a matter where the claim is one directly founded on a law of the Commonwealth. It will also include a claim at common law or equity, or under a law of a State, where the claim concerns a right or property which is the creation of federal law.

Although not referred to in Thurin, one of the leading Full Federal Court authorities on the extent of federal jurisdiction is Rana v Google Inc (2017) 254 FCR 1, where Allsop CJ, Besako and White JJ set out the relevant principles (5-7 [16]-[22]). In addition to Thurin, that passage in Rana should be compulsory for all practitioners conducting litigation in VCAT. One key message to take from Rana is that, once a matter is within federal jurisdiction, it remains within federal jurisdiction, irrespective of the fate of any federal claims (including where they are struck out or summarily dismissed).

Where to litigate?

Where parties have a dispute that can or must go to VCAT, Thurin gives them pause for thought.

First, if acting for an initiating party, practitioners will need to consider whether commencing in VCAT is desirable. Many factors will fall for consideration and, depending on the client and the nature of the dispute, some may be more important than others. For example, the rules with respect to costs may be attractive or unattractive (consider provisions such as s 109 of the VCAT Act or s 92 of the RLA). The time it takes VCAT to list disputes for final hearing may be important; currently, it is suffering from backlogs and lack of resources, and a court may be a more attractive option for those looking for a quicker resolution. (Judge Burchell’s decisions in Impresa Construction Pty Ltd v Oxford Building Group Pty Ltd [2021] VCC 1146, [45]-[60] and Uber Builders and Developers Pty Ltd v MIFA Pty Ltd [2021] VCC 1677, [23]-[45] expand on this issue.)

Secondly, consider the risk of any interlocutory relief later being found void or avoided for want of jurisdiction. For example, VCAT may grant an interlocutory injunction, such as an order restraining a landlord from terminating a lease, but it may later be said that the injunction was a nullity or later nullified by the matter being in or brought into federal jurisdiction.

Thirdly, if acting for a respondent in VCAT, you may wish to consider whether you want to move the matter into a court. The Court of Appeal held in Thurin that, although VCAT may lack jurisdiction, it nevertheless retains the power under s 77 of the VCAT Act to “refer” a matter commenced in VCAT to a more appropriate forum (which necessarily involves that forum having jurisdiction, as discussed below).This is so notwithstanding the provision in Part 3A for commencement in the Magistrates’ Court in its federal “VCAT” jurisdiction. (Notably, Perry J rejected that submission in Qantas v Lustig: 173 [105].)

Since Thurin, other issues impacting the conduct of litigation in VCAT have been identified.

There are conflicting decisions of the Supreme Court about the applicability of section 5(1) of the Limitation of Actions Act 1958: Lanigan v Circus Oz [2022] VSC 35 (McDonald J) and Ajaimi v Giswick Pty Ltd [2022] VSC 131 (M Osborne J). In Lanigan, it was held that because VCAT is not a “court”, s 5(1) has no application, and in Ajaimi (which was heard before but decided after Lanigan) it was observed that the definition of “action” (where the word “court” is used) is not exhaustive. However, the cause of action in Lanigan was held not to be an “[action] for damages for breach of a statutory duty” (the claim being made under the Equal Opportunity Act 2010) and in Ajaimi, which concerned a retail lease dispute, it was held that because the cause of action was contractual, s 5(1) did apply.

Further, in Vaughan Constructions Pty Ltd v Melbourne Water Corporation [2023] VCAT 233, Delaney J, sitting as an acting member of VCAT, held that VCAT has no jurisdiction under Part IV of the Wrongs Act 1958 to determine claims for contribution.

Bringing a matter into federal jurisdiction

Sometimes, a federal issue will emerge as a necessity of the parties’ conduct. However, in modern commercial disputes, it is often very easy to make an allegation of a contravention of the Australian Consumer Law (ACL).

It is now critically important that practitioners understand what the Australian Consumer Law is. It is not a single national law. There is no single ACL. The ACL has several emanations: there is a Commonwealth emanation, and there is an emanation in each State and Territory. By their application statutes, provisions may be added, omitted or given different meanings.

When pleading the ACL, it is critical to express whether the allegation concerns the ACL (Vic) (given effect as a law of Victoria by s 8 of the ACLFTA) or the ACL (Cth) (given effect as a law of the Commonwealth by s 131 of the Competition and Consumer Act 2010 (Cth) (CCA). If it is the latter, the word “person” in, for example, s 18 (misleading or deceptive conduct) must be read as “corporation”, unless the expanded operation of s 6 of the CCA applies.

Bear in mind, also, that the pleadings do not define whether a matter is in federal jurisdiction: as the Court of Appeal observed, this can be done before pleadings by way of correspondence – so think ahead!

Two questions that will likely need to be resolved in future litigation are:

1. When does a matter comes within federal jurisdiction?
2. Will bringing a matter within federal jurisdiction have retrospective effect?

In Citta, the High Court reminded us that a claim of some right within federal jurisdiction is sufficient to bring the matter within federal jurisdiction: “it is enough that the claim or defence be genuinely raised and not incapable on its face of legal argument”. However, is the assertion of the claim necessary? Assume a matter where a plaintiff asserts that a corporate defendant made a representation that was misleading or deceptive in trade or commerce and that the plaintiff consequently suffered loss. Without more, is the matter within federal jurisdiction? The plaintiff might assert that the defendant contravened s 18 of the ACL (Vic), but be silent about the equally applicable ACL (Cth). Can it not be said that the claim under the ACL (Cth) is a controversy “which might come before a Court of Justice”? Or is the assertion of the federal law a necessary condition of attracting federal jurisdiction?

Assume that the assertion of a some right attracting federal jurisdiction is a necessary (as well as sufficient) condition of engaging that jurisdiction. Assume that our plaintiff carefully does not assert that the corporate defendant contravened s 18 of the ACL (Cth), but confines the controversy to an alleged contravention of s 18 the ACL (Vic), and does so because our plaintiff wishes to litigate in VCAT and commences a proceeding there. Our plaintiff (applicant) obtains a freezing order against the corporate respondent in VCAT at an early stage. Later, the applicant amends its points of claim to assert contravention of the ACL (Cth). The whole controversy is within federal jurisdiction; State jurisdiction cannot be exercised concurrently with it. VCAT refers the proceeding to the County Court under s 77 of the VCAT Act. Does the freezing order cease to have effect as beyond VCAT’s jurisdiction? In my view, if the whole matter is singularly within federal jurisdiction, VCAT’s orders are beyond jurisdiction and of no effect. It cannot be that the matter is fragmented so that the orders already made stand outside federal jurisdiction and within VCAT’s jurisdiction.

If the late assertion of a right under a federal law is enough to have retrospective effect of avoiding earlier VCAT orders, does this suggest that the assertion of federal jurisdiction is not a necessary condition of federal jurisdiction? Logically, if the late assertion of a federal right based on unchanged facts is effective to bring the matter within federal jurisdiction, it follows that, before the assertion was made, the controversy could be described as one that might come before a court; ergo, it was always a controversy within federal jurisdiction. If that is so, it seems to me that where the alleged facts of a matter lend themselves to assertions of a right or liability under both a State law and a federal law, the matter is – independently of the asserted sources of the parties’ rights – within federal jurisdiction and beyond VCAT’s jurisdiction. Put differently, where the respondent in a VCAT proceeding is a corporation and the applicant asserts a contravention of the ACL (Vic), the claim is almost always going to be beyond VCAT’s jurisdiction because the applicant might assert that the same conduct is a contravention of the ACL (Cth). If this is correct, then VCAT’s jurisdiction has been largely eviscerated and its place in the Victorian justice system is greatly diminished.

Procedural conundrums

Courts have concurrent jurisdiction with VCAT for many matters. Domestic building disputes commenced in a court are subject to stay applications to force the proceeding into VCAT. However, a stay application would now be easily defeated by reference to a federal issue.

But what about matters where the Victorian parliament has (purportedly) conferred exclusive jurisdiction on VCAT? One option is to commence in the Magistrates’ Court under Part 3A of the VCAT Act. It is unclear whether, how and when that court would refer a dispute to the County Court or the Supreme Court. The important consequence of commencing under Part 3A is that the court retains the powers of VCAT and the rules of evidence do not (necessarily) apply. However, if a proceeding is commenced, for example, in the County Court in its own federal jurisdiction, the court does not inherit VCAT’s powers and the rules of evidence will apply.

Further, if a matter is within federal jurisdiction, s 39B of the Judiciary Act invests the Federal Court with jurisdiction to hear and determine it (as to which see Rana), and that court may be a viable alternative forum.

In some matters, the Victorian parliament has (purportedly) conferred exclusive jurisdiction on VCAT. For example, the RLA provides that, generally, VCAT has exclusive jurisdiction to hear and determine a retail lease dispute. Section 39(2) of the Judiciary Act confers federal jurisdiction on state courts “within the limits of their several jurisdictions, whether such limits are as to locality, subject-matter, or otherwise”. So, it seems, the jurisdiction provisions of the RLA have the consequence that it is not competent to commence a “federal” retail lease dispute in a state court otherwise than under Part 3A (but it would be competent to commence in the Federal Court). Similarly, where VCAT has “exclusive” jurisdiction, it is probably not competent for VCAT to refer, under s 77 of the VCAT Act, an invalidly commenced proceeding to a state court. However, it is probably within VCAT’s power to refer such a matter to the Federal Court. (This is consistent with the intervener’s submission in Qantas v Lustig: 172 [103].)

It is unclear how the Federal Court would exercise its powers with respect to costs in a proceeding that otherwise would have been exclusively within VCAT’s jurisdiction. Presumably, in most cases it would be exercised in the ordinary way. But in the case of retail lease disputes, which, if heard in VCAT or in a Victorian court under Part 3A, would be subject to s 92 of the RLA (which provides that, in most cases, each party is to bear its own costs), the Court might be persuaded to exercise its discretion consistently with that provision.

Conclusion

The consequences of Thurin cannot be underestimated. Almost any (civil) dispute being heard in VCAT may be derailed at any time. Parties and practitioners conducting litigation there must remain vigilant. Equally, raising a federal issue can be a powerful procedural device for those whom it benefits.

In Owners Corporation v Shangri-La Construction Pty Ltd [2022] VCAT 1384, Vice-President Judge Marks referred a long-running and apparently complex dispute to the Supreme Court because of a single “very likely” federal issue between 2 of more than 20 parties.

Given the uncertainty that now overshadows VCAT’s jurisdiction, might this be the beginning of the end for VCAT as a viable forum for commercial litigation?