Challenges in complex litigation in Victoria: Supreme Court of Victoria quashes VCAT's longest running case

The case of Lloyd's v Shangri-La was one of VCAT's longest-running matters, with a trial lasting 55 days and involving 33 parties (although some parties settled along the way). The Supreme Court of Victoria upon hearing the Appeal recently quashed the judgment, on the basis that VCAT lacked jurisdiction. The case highlights the:

• perils of choosing the wrong forum in complex construction disputes
• practical advantages of early commercial resolution in complex disputes, and that partial rather than global settlements remain an option (although not without risks).

Background

The Appeal focused on two VCAT decisions regarding construction defects and insurance claims associated with the "Willansby" apartments in Brighton. The owners made a claim against the builder, which in turn made claims against subcontractors and consultants involved in the design and construction of the apartments.

Jurisdictional issues

Some claims were made under federal law, including allegations of misleading and deceptive conduct. Once claims involving federal law were raised, VCAT lost jurisdiction. However, VCAT proceeded to hear and make determinations on these claims.

Whilst the Victorian parliament, by way of the Justice Legislation Amendment Act 2023 (Vic) rectified one jurisdictional limitation of VCAT (i.e. VCAT's ability to hear contribution claims) it has not remedied all jurisdictional issues. Namely, VCAT remains unable to hear and determine causes of action arising under federal law.

The Court's decision to set aside VCAT's decisions illustrates the importance of respecting the constitutional limits of state tribunals. It also serves as a stark reminder to carefully select the appropriate forum and ensure you are litigating in the correct forum. A failure to do so, or continuing to litigate in the wrong forum, can lead to wasted time, increased cost, and potentially having to transfer or revisit the litigation altogether in another forum (or having the outcome quashed).

Settlement

Early commercial settlement in multi-party disputes has many advantages, including avoiding unpredictable outcomes and curtailing expense. However, in multi-party disputes it can be a challenge to extricate one or more parties without resolution on a global basis. These challenges include the ability of other parties to make contribution claims, or to raise proportionate liability defences (which may require a party to remain a named respondent). A settling respondent can still also be named in judgments if they remain in proceedings for apportionment, which may give rise to reputational risks if adverse findings are made.

Key takeaways

The Court's decision:

• highlights that careful consideration is required to determine the right jurisdiction for complex disputes
• provides a timely reminder that whilst global settlements are generally preferable, early partial settlement with some of the parties remains an option - but is not without attendant risks.

Authors: Jason Chew, Annelise James and Natasha Stojanovich

References

1. Certain Underwriters at Lloyd's Subscribing to Policy Number P0003310PI2016AU0 v Shangri-La Construction Pty Ltd (In Liquidation) [2024] VSC 556.
2. Owners Corporation PS623721 & Ors v Shangri-La Construction Pty Ltd & Ors (Building and Property) (Final Orders Defects) [2023] VCAT 501.
3. Owners Corporation PS623721 & Ors v Shangri-La Construction Pty Ltd & Ors (Building and Property) (Insurance) [2023] VCAT 502.
4. Thurin v Krongold Constructions (Aust) Pty Ltd & Ors (2022) 407 ALR 187.
5. Vaughan Constructions Pty Ltd v Melbourne Water Corporation [2023] VCAT 233.
6. Justice Legislation Amendment Act 2023 (Vic).