State of play for contribution claims in VCAT

The Building and Property List in the Victorian Civil and Administrative Tribunal (VCAT) hears a wide variety of domestic and commercial building disputes. Often, these disputes are between a property owner and a builder, who frequently have engaged multiple sub-contractors to carry out aspects of their contractual obligations. In practice, this results in a property owner making a claim for defective work against a builder and the builder responding by making contribution claims against the sub-contractors. The Building and Properly List regularly deals with contribution claims of this nature. .

The recent VCAT decision by Justice Delany in Vaughan Constructions Pty Ltd v Melbourne Water Corporation (Building and Property) [2023] VCAT 233 (Vaughan) dealt with the question of whether VCAT has the jurisdiction to hear contribution claims. Contribution claims can be brought pursuant to Part IV of the Wrongs Act, which mainly deals with the entitlement to contribution and the recovery of contribution.

The three questions that Justice Delany was required to answer were:

• Does VCAT have jurisdiction to hear a contribution claim pursuant to Part IV of the Wrongs Act?
• If yes, does the jurisdiction extend to a claim for contribution based on breach of contract and negligence in a building dispute?
• If yes, can the contribution claim be incorporated in the points of defence or is a separate points of claim seeking contribution or indemnity required to be filed under s 23B of the Wrongs Act?

Justice Delany held that that contribution claims can only be determined by a Court and not by VCAT.

Background

The facts in Vaughan are complex owing to the number of parties and proceedings on foot. However, at its core this matter concerned a claim brought by Vaughan Constructions Pty Ltd, along with KV Cooper Pty Ltd and Drakon Investments Pty Ltd against the Melbourne Water Corporation, Reeds Consulting Pty Ltd and Tonkin + Taylors Pty Ltd. The parties were involved in a project together, which allegedly caused a nearby drain to flow water resulting in damage.

Due to the number of parties, 25 contribution claims were made. This decision strictly concerns contribution claims made under Part IV of the Wrongs Act, meaning that there is no implication on apportionment claims being heard by VCAT.

Determination

In short, Justice Delany decided that VCAT did not have the jurisdiction to hear a contribution claim pursuant to Part IV of the Wrongs Act.

While Justice Delany accepted that s 23B of the Wrongs Act creates a freestanding statutory cause of action for the recovery of contribution’ [49], VCAT is not a Court, unless a statement is expressly made in the contrary [64].

Justice Delany further stated that VCAT’s ‘long-standing practice of hearing and determining contribution is inconsistent with the statute pursuant to which the Tribunal has purported to determine such claims’. [67]

Practical impact

This decision comes after the Court of Appeal decision in Thurin v Krongold Constructions (Aust) Pty Ltd [2022] VSCA 226 (Thurin) which concerned a challenge to VCAT’s jurisdiction to hear disputes under the Domestic Building Contracts Act 1995 dealing with ‘any laws made by the Parliament’ within the meaning of s 76(ii) of the Australian Constitution [24]. It was held that VCAT lacked the jurisdiction to hear and determine matters of federal jurisdiction. In the judgment, Part IV of the Wrongs Act was mentioned: ‘the word “court” is not defined in [Part IV of the Wrongs Act], raising the possibility that VCAT lacks jurisdiction to determine claims for contribution’. [26].

Both Vaughan and Thurin have limited VCAT’s jurisdiction, contrary to accepted practice but moving towards a stricter reading of the key legislation.

In the past, VCAT has advised that there is legislative change on the horizon to expressly allow VCAT to hear contribution claims. However, this has yet to occur.

Parties who currently have a contribution claim in VCAT have the following options available.

• Firstly, the parties can transfer the dispute to a Court for determination.
• Secondly, if parties are agreeable, they can proceed with informal discussions and/or mediations, to resolve the matter.

It is worth flagging that some matters are incapable of staying in VCAT and the former option must be taken if the dispute includes an Australian Consumer Law component, in addition with a contribution claim.

The practical impact of these decisions on insurers and insureds is that there are likely to be significant delays and increased costs in resolving matters. Furthermore, the difficulty in resolving matters is worsened when companies go into liquidation, as we have seen recently seen in many claims. While these delays will make it harder to resolve matters quickly, these decisions do not preclude parties for attempting to resolve the matter through mediation and/or conferences.

Before the end of the year, there is a strong likelihood that VCAT may circulate a Practice Note discussing these decisions or there will be legislation change to reinstate VCAT’s jurisdiction and this may provide some certainty on these issues.