Case Summary: Owners Corporation PS632748Q v Shangri-La Constructions Pty Ltd  VCAT 511
On 5 May 2023, in Owners Corporation PS632748Q v Shangri-La Constructions Pty Ltd  VCAT 511 (Shangri-La), Judge Marks, sitting as a judicial member of Victorian Civil and Administrative Tribunal (VCAT), confirmed that VCAT did not have jurisdiction to hear a domestic building dispute requiring determination of issues under Commonwealth legislation and, on that basis, determined that the proceeding be struck out without delay.
This determination is significant because it followed the Victorian Supreme Court, Court of Appeal’s decision in Thurin v Krongold Constructions (Aust) Pty Ltd  VSCA 226 (Krongold). In Krongold, the Court confirmed that VCAT’s jurisdiction was limited in that it could not determine Federal claims. In Krongold, the Court outlined the process of transferring the proceeding to, or re-commencing the dispute in, an appropriate court with suitable jurisdiction. In this decision, the respondent builder being Shangri-La had entered into liquidation in the lead up to the determination.
We previously published an article on our website in March of this year summarising the decision in Krongold and outlining its significance as it effectively limits the scope of VCAT’S jurisdiction for domestic building disputes. That article can be found here.
On 4 May 2023, the Shangri-La proceeding was listed for a directions hearing before Vice President Judge Marks for the consideration of making orders under section 77 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (VCAT Act).
The resolution of the dispute between the parties in Shangri-La required the determination of issues arising under federal legislation. The Tribunal determined that, given federal claims had been raised in this proceeding (under Schedule 2 of the Competition and Consumer Act 2010 (Cth) and the Insurance Contracts Act 1984 (Cth)), the Tribunal lacked jurisdiction to hear and determine these matters.
Significantly, in coming to this determination, the Tribunal in Shangri-La followed the reasoning in Krongold about this issue. There was no dispute between the parties that the Tribunal lacked jurisdiction and that the Tribunal needed to make an order striking out the proceeding.
The key issue in Shangri-La was to determine when the Tribunal should make a striking out order, i.e. immediately make that order or consider the parties’ circumstances and wait a period of time to allow the parties to take steps to continue the dispute in an appropriate court?
On 27 February 2023, Shangri-La Constructions Pty Ltd, the first respondent builder in the proceeding, made submissions to the Tribunal which outlined options which may arise following the Tribunal’s strike out order. These options were as follows:
- The applicant, Owners Corporation, issue a new proceeding in the Magistrates’ Court by following the procedural steps under section 57B of the VCAT Act; or
- VCAT refer the existing proceeding to the Supreme Court of Victoria or County Court of Victoria, under section 77(3) of the VCAT Act (the first respondent preferred this second option).
Liquidation of the respondent builder
On 31 March 2023, a liquidator was appointed to Shangri-La Constructions Pty Ltd. Pursuant to section 500(2) of the Corporations Act 2001 (Cth) (Corporations Act), by the appointment of a liquidator, ‘no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.’ This generally means that, if a builder’s company proceeds to administration or liquidation, there is a moratorium on bringing an action / proceeding against a company in administration or liquidation unless leave of the Court is sought and obtained.
In response to the liquidation of Shangri-La Constructions Pty Ltd, other parties to the dispute made submissions as to how the Tribunal should proceed. These essentially focused on granting the parties some time to consider next steps and delay any further action by the Tribunal:
- Arch Underwriting at Lloyd’s (Australia) Pty Ltd, the party first joined to the proceeding by the respondent builder, made submissions that given the Tribunal lacked jurisdiction, the Tribunal could not make any order other than orders pursuant to section 77 of the VCAT Act (to refer the proceeding) and that it was a matter for the builder’s liquidator whether the liquidator wished to press the builder’s claims;
- The applicant, Owners Corporation PS632748Q, made submissions that the Tribunal should not make any striking out order yet as it needed time to make an application to a Court (not the Tribunal) for leave under section 500(3) of the Corporations Act to proceed with the dispute to a court. In the event that leave was granted, the applicant would apply to the Tribunal to have the proceeding referred to a Court (such as the Supreme Court or County Court of Victoria) under section 77(3) of the VCAT Act.
- The applicant further submitted that given the proceeding had been stayed pursuant to the moratorium under section 500 of the Corporations Act, ‘there is no need for any action to be taken by the Tribunal until the parties, and the First Respondent’s liquidator, have exhausted the avenues available to them’.
The Tribunal struck out the proceedings
The Tribunal made orders to strike out the proceeding under section 77(1) of the VCAT Act.
Vice President Judge Marks determined that it was not appropriate for the Tribunal to make an order listing the proceeding for an administrative mention in 4 months’ time.
Vice President Judge Marks stated the following at paragraphs 11 and 12 of the determination:
‘It is not appropriate for [the proceeding] to somehow sit in a no-man’s land where it stays listed at the Tribunal when the Tribunal has no power to deal with it. The proceeding should be struck out now – removed from the list of cases entered on the Tribunal’s list of cases for hearing: Krongold .’
‘Once it is struck out, of course a new proceeding can be commenced at a later stage, in any appropriate court which has jurisdiction.’
The applicant had raised concerns about statute of limitations in the event of the proceeding being struck out before its application for leave pursuant to s 500(2) of the Corporations Act was determined. The Tribunal suggested that the applicant could commence a substituted proceeding in the Magistrates’ Court after the strike out order is made by VCAT. In doing so the applicant could apply for an extension of a limitation period under s 57D of the VCAT Act, and that such a substituted proceeding could then be transferred to the Supreme Court or County Court pursuant to section 57J of the VCAT Act.
Importantly, it was unclear to the Tribunal on the basis of the current authorities what the effect of a referral under s 77(3) of the VCAT Act would be. The Tribunal queried whether, if the matter was referred under this provision, the applicant’s claims would be statute barred. The Tribunal was therefore not satisfied that it was appropriate to make the referral and instead made the strike out order.
Key takeaways from the determination
- This determination further confirms that, following Krongold, VCAT has no jurisdiction to determine domestic building disputes involving federal laws. It is therefore likely that, if any party during a VCAT proceeding raises a matter involving Commonwealth law, such as a claim for misleading and deceptive conduct under the Australian Consumer Law, it is likely that VCAT does not have jurisdiction to hear the matter.
- In circumstances where VCAT does not have jurisdiction, the proceeding must be struck out without delay. It is inappropriate for the Tribunal to ‘hold’ on making that decision when the position is clear: that the Tribunal does not have jurisdiction to determine the Federal issues.
- In circumstances where a party to the proceeding has entered into liquidation, i.e. a builder or another respondent, the Tribunal cannot ‘wait and see’ what the liquidator for that party (or other parties to the dispute) will do.
- It is therefore critical that parties, who are yet to commence litigation for their dispute, bring their dispute in the correct jurisdiction (and make an appropriate judgement-call about whether VCAT has jurisdiction at first instance). For parties who are already in VCAT, it is important to understand VCAT’s statutory powers in striking out or otherwise transferring the proceeding to an appropriate court.
For further information regarding this article, please contact the authors or any member of our Building & Construction team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.