The Curtailing of VCAT’s Powers and the Victorian Consumer
VCAT: Victorian Civil and Administrative Tribunal; a legal system providing affordable and efficient justice, but limited to state law disputes only.
‘Fair, efficient and affordable justice for the Victorian community’. The Victorian Civil and Administrative Tribunal has been a staple of Victoria’s legal system for over two decades, providing applicants with expedient access to justice without the need for legal representation. Further, VCAT cuts costs and wait times with its heavy emphasis on settlement and dispute resolution.
VCAT’s significance in our legal system is particularly evident in section 57 of the Domestic Building Contracts Act 1995 which allows parties to a domestic building dispute before a court to apply for a stay which the court must grant if the matter ‘could be heard in VCAT’.
In September 2006 David and Lisa Thurin contacted Krongold Constructions to demolish and rebuild their Toorak home. The Thurins alleged major defects in the construction work and in 2017 appointed an expert who found that the Thurins had suffered losses of over $3.5 million which Krongold refused to pay.
The VCAT proceedings which followed gave rise to claims in relation to the consumer law section of the Competition and Consumer Act 2010, a federal statute. On appeal, the Supreme Court held that for Constitutional reasons, VCAT lacked the jurisdiction to determine the parties’ rights and liabilities under a federal statute and thus the matter had to be referred to a court.
This is because the Court reasoned that ‘if a party raises a bona fide claim or defence under a federal piece of legislation, the entire dispute becomes a federal matter’. The Court’s reasoning built on the 2018 case Burns v Corbett  HCA 15 353 ALR 386, which established that, under the Commonwealth Constitution, only federal ‘courts’ and state ‘courts’ are empowered to hear ‘federal matters’. VCAT, which is not a court, therefore lacks the power to hear any matters which concern federal legislation. It should be noted that Burns v Corbett had an identical impact on the New South Wales Civil and Administrative Tribunal (NCAT), and similarly limited the cases that could be heard there.
In practice, these cumulative decisions have two significant impacts.
First, VCAT can no longer hear matters under Commonwealth Law. Most notably, this means that claims against traders or merchants under the Consumer Law can no longer be decided by VCAT. If, for instance, a natural person buys a car from a dealership which has serious defects within a year of purchase, and no warranty was made under the contract of sale, the only remedy available to them would be a claim for refund or replacement under the Consumer Law. Such a claim can no longer be heard in the Civil Claims List (or any other List) at VCAT.
Second, the Thurin v Krongold decision allows any party to a VCAT matter to halt the proceedings at any time, by making the argument that their claims, counterclaim, or claim against a third party incorporates federal legislation. Given the expansiveness of various provisions of federal law (particularly the Consumer Law), this would not be a difficult argument to make in most circumstances. As soon as such a claim is laid, VCAT no longer has jurisdiction to hear the case. Under Section 77 of the Victorian Civil and Administrative Tribunal Act 1998, it is then required to refer the matter to a Court.
There are now two categories of cases affected by the limitation of VCAT’s jurisdiction. Some cases (such as an action for breach of contract) do not, at face value, rely on Commonwealth law, and so can be heard by VCAT up until the time any of the parties chooses to ‘evaporate’ VCAT’s jurisdiction by making a claim of the involvement of Commonwealth law. Others, notably consumer cases, must rely on Commonwealth law in the original application, and therefore cannot even begin to be heard by VCAT.
It should be noted that these phenomena represent a substantial disincentive for any claim to be made in VCAT in the first place. Instead, claimants will have to enter a claim in a court, and will not even be able to enter such a claim in the Magistrates’ Court if the claim is over the maximum value of a claim which can be heard in the Magistrates’ Court (currently $100,000).
The consequences of these implications are perhaps the starkest for consumer claims relating primarily to the right to replacement or refund of faulty goods, and the misleading and deceptive conduct of merchants or service providers. Many such claims had heretofore been capable of being heard without the need for the claimant to employ legal representation and at a minimum of cost and inconvenience. Consumer claims are often the most in need of inexpensive and accessible justice, and this development substantially prejudices that requirement.
The Victorian Parliament intervened in 2021 to prevent past VCAT decisions on federal matters being overturned wholesale. The legislative amendment added to the Victorian Civil and Administrative Tribunal Act ruled that any federal matter previously decided by VCAT is to be regarded as having the force of an order of the Magistrates’ Court, thus preserving the legality of the rulings.
It remains unclear why the Victorian government did not simply extend this logic to all future VCAT decisions. One possible explanation is that it envisaged a possibility that the Act would not survive a challenge on Constitutional grounds. This is because one might advance the hypothesis that the Act essentially constitutes the exercise of federal, judicatory power by a State Parliament, insofar as the Act entails the ‘signing off’ of VCAT judgements which are themselves invalid, and in effect the adoption into Victorian law of individual determinations about specific cases concerning federal law. State Parliaments are not federal courts, and cannot exercise their judicial power reserved therefor or their federal jurisdiction under the Constitution, as interpreted by the High Court.
It may appear at first glance that the solution to this problem is simple. The federal Parliament could intervene, and allow VCAT to have federal jurisdiction. However, under Section 77 of the Constitution, the Parliament is only empowered to grant federal jurisdiction to the ‘Courts of the States’. It deployed this power to all such courts in the 1903 Judiciary Act. Thus, in order to regain its federal jurisdiction, VCAT would have to be designated as a court. This definitional change may not be entirely straightforward for the federal Parliament given the possibility of a court finding that the Constitution implies a certain definition of what a ‘court’ is.
In addition, any Act to this effect could be reviewed and invalidated on the basis that, if VCAT were defined in statute to be a ‘court’, that it would in effect play a role as both an executive and judicial body. Such a body would be unconstitutional and invalid under the 1956 Boilermakers’ Case.
The impacts of these legal considerations are considerable – consumers are no longer able to seek remedy for their Consumer Law rights in VCAT, and VCAT in general has been deeply compromised in a way that may not be easily reparable by the federal government.
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