Appellant v First Respondent Second Respondent Third Respondent

1 This is an appeal against an order of Master Kings made on 14 December 2004 refusing leave to appeal against a decision of the Victorian Civil and Administrative Tribunal ("the Tribunal") made on 1 June 2004 in the Domestic Building List of the Tribunal. The appeal was conducted by re-hearing de novo in accordance with Rule 77.05(7) of Chapter I of the Supreme Court Rules ("the Rules").

2 Section 148 of the Victorian Civil and Administrative Tribunal Act 1998 ("the VCAT Act") provides that a party to a proceeding may appeal on a question of law from an order of the Tribunal. An application for leave to appeal is to be made in accordance with the Rules. Rule 4.09(1) of Chapter II of the Rules provides that a Master may grant or refuse leave to appeal. Rule 4.09(2) provides that the Master may refuse leave to appeal if satisfied that the applicant does not have a prima facie case on appeal or that to refuse leave would impose no substantial injustice.

3 In Secretary, Department of Premier and Cabinet v Hulls[1] Phillips JA summarised as follows the considerations which bear upon the granting of leave to appeal under section 148:

. . . it will be necessary for the applicant to identify a question of law which is relevant to the granting of the relief sought on appeal. The importance of the question, either generally or to the would-be applicant in the particular case, will probably be relevant. The applicant must show that there is a real or significant argument to be put on that question of law at least to this extent: that there is sufficient doubt about it to justify the grant of leave. Moreover, it may have to be shown that to allow the error to go uncorrected would impose substantial injustice, although, where the order below is final, that injustice will often be more readily discernible.

4 The appellant ("the insurer") is the successor to Reward Insurance Limited ("Reward"), having taken over the domestic warranty insurance portfolio of Reward pursuant to a consent order of the Federal Court on or about 1 March 2004. Reward is the first respondent in the Tribunal proceeding.

5 The first respondent in the present proceeding ("Ms Graham") is the owner of a home being unit 3/103 Tennyson Street Elwood ("the unit"), which was the subject of the dispute in the VCAT proceeding. She is the applicant in that proceeding. The second and third respondents are the owner-builders of the unit. They took no part in the Tribunal proceeding or in the application to the Master. Mr Ruta announced his appearance for the second respondent but then at his request was excused from further participation in the appeal.

6 Ms Graham purchased the unit on 2 February 2001. Reward issued a policy on 30 January 2001 insuring certain extension works which had been performed on the unit by the second and third respondents. The policy was issued in accordance with Ministerial Order S122 ("the Ministerial Order") made under section 135 of the Building Act 1993 ("the Building Act"). The introductory paragraph of the Ministerial Order relevantly requires an owner builder "to purchase on behalf of the building owner or purchaser, as the case may be, the required insurance of the kind and amount specified hereunder".

7 Clause 8.5 of the Ministerial Order provides that a policy must contain a provision to the effect that:

Where a written claim is not determined as to liability by the insurer within ninety (90) days of receipt then, unless the insurer obtains an extension of time from the insured or the Tribunal the insurer shall be deemed to have accepted liability for the claim.

If the Insurer does not determine liability for a claim within 90 days of receipt, the Insurer will be deemed to have accepted liability for the claim unless the Insurer has obtained an extension of time from the Insured or VCAT. The Insurer reserves the right to appeal any decision of VCAT and/or liability which the Insurer has been deemed to have accepted.

9 On 22 July 2003 Reward's agent received a claim from Ms Graham in respect of what she claimed to be defects in the insured works. On 21 October 2003 Reward made a determination accepting some of the items claimed and rejecting others. It is common ground that that determination was made on the ninety-first day after the receipt of Ms Graham's claim by Reward and accordingly that prima facie the insurer is deemed to have accepted liability for her claim, in accordance with clause 8.5 of the Ministerial Order and clause 3.6.2 of the policy. Reward sought the consent of Ms Graham to an extension of time for it to make the determination, but this was refused.

10 Jurisdiction to resolve domestic building disputes is conferred on the Tribunal by section 53 of the Domestic Building Contracts Act 1995 ("the DBC Act"). This matter came before the Tribunal, constituted by Deputy President Cremean, on 23 April 2004. The insurer submitted that clause 8.5 of the Ministerial Order was ultra vires the Building Act. That submission was rejected by the Tribunal, and although before the Master the insurer again relied on that submission, it was abandoned on this appeal.

11 The other submission of the insurer before the Tribunal was that an extension of time should be granted to it for the making of the determination as to liability. This submission was rejected by the Tribunal in the following terms:

I am unable to see how the 90 day period can be extended. The parties are unable to confer jurisdiction in this way on the Tribunal in my view. The Tribunal has jurisdiction given to it by [the VCAT Act] under enabling enactments only, and it has any additional powers and jurisdiction given to it by that Act or other Acts as well. But s126(1) of [the VCAT Act] only enables the Tribunal to extend time under an enabling enactment for the commencement of a proceeding. Even if power did exist otherwise under s126, it would still be a question whether there was a prejudice or detriment under s126(4) which could not be compensated for by costs - in that [Ms Graham] has obtained a deemed liability which is a vested valuable right.

It follows, in my view, that I should reject any application to extend time, as lacking jurisdictional foundation. From the further fact that I find the parties agreed to have clause 3.6.2 in their arrangements, and the period of 90 days expired before a decision was notified, I must, accordingly, regard Reward as having accepted liability in [Ms Graham's] case by virtue of that provision. [Emphasis in the original.]

12 The insurer applied to Master Kings pursuant to section 148 of the VCAT Act for leave to appeal against that decision to the Trial Division of this Court. The Master accepted the submission of the insurer that clause 8.5 of the Ministerial Order was ultra vires the Building Act. However, she found that the insurer was, in any case, bound by the insurance contract which it had entered into and which included clause 3.6.2, and refused leave to appeal on that ground.

13 As to the application for an extension of time, the Master adopted the passage cited above from the decision of the Tribunal. However, the insurer raised before her other arguments relating to the operation of section 59A of the DBC Act and the claimed inherent power of the Tribunal, both of which had been put to the Tribunal but not dealt with by it.

(1) The Tribunal has jurisdiction to hear and determine any dispute concerning an insurance claim concerning domestic building work or an insurer's decision on such a claim.

(2) The Tribunal may make any order it considers fair to resolve a dispute referred to in sub-section (1).

(3) The Tribunal may hear and determine dispute under this section on the application of -

(b) the Director acting on behalf of one or more building owners who are parties to the dispute.

15 Master Kings did not deal with any submission relying on the claimed inherent power of the Tribunal. As to sections 59A and 60 of the DBC Act, she said:

Counsel for [the insurer] submitted that there was a dispute between [the insurer] and [Ms Graham] as to whether [the insurer] should be deemed to accept liability because it was one day late in deciding the claim.

As to section 59A, I accept that there is no dispute concerning the question of liability of an insurance claim concerning domestic building work or an insurers decision on such a claim. Liability had been accepted by the insurer because of the operation of the provision in the Policy. There was no decision by the insurer on the claim. Section 60 of the [DBC Act] provides that the Tribunal may review and change an insurer's decision. As to section 60, that section does not apply because there was no decision of the insurer. In any event, the power of review in section 60 is not given to the insurer but to the person affected by the decision of the insurer. Accordingly I do not propose to grant leave to appeal.

16 The matter was argued before me on the issue of whether the Tribunal had jurisdiction, after the expiry of ninety days from the receipt of a claim, to grant an extension of time to the insurer within which to determine that claim. If the Tribunal does not have jurisdiction to grant such an extension of time the insurer does not have a prima facie case on appeal from the Tribunal. Mr Manly, for the insurer, submitted that there were three sources of jurisdiction in the Tribunal to grant the insurer an extension of time, namely clause 8.5 of the Ministerial Order , section 59A of the DBC Act and a claimed inherent jurisdiction of the Tribunal.

17 He sought leave to file an amended notice of appeal, deleting the ground claiming that clause 8.5 was ultra vires the Building Act, and including as a ground that that clause was a source of jurisdiction to grant an extension of time. Having considered the matter, I find it appropriate to grant leave to file the amended notice of appeal and I do so.

18 Mr Manly referred to sections 39 to 44 of the VCAT Act, providing that jurisdiction is conferred on the Tribunal by enabling enactments. He submitted that by virtue of the inclusion of the Building Act in the enabling enactments allocated to the Domestic Building List of the Tribunal by Schedule 1 of the Victorian Civil and Administrative Tribunal Rules 1998 ("the VCAT Rules"), the definition of "enabling enactment" in section 3 of the VCAT Act, and the definition of "subordinate instrument" in section 38 of the Interpretation of Legislation Act 1984 ("the Interpretation Act"), the Ministerial Order was an "enabling enactment" for the purposes of the Domestic Building List. Accordingly, the passage reading "unless the insurer obtains an extension of time from . . . the Tribunal" in clause 8.5 conferred jurisdiction on the Tribunal to grant an extension of time under that provision.

19 Mr Lally submitted that the purpose of the Ministerial Order as appearing from section 135 of the Building Act and from the Ministerial Order itself, was to codify the terms of the contract of insurance which Parliament required builders to purchase, and which accordingly must be offered by any insurer wishing to operate in the field of domestic building insurance. Section 135 confers on the Minister power to do certain things by a Ministerial Order, which is delegated legislation. That provision confers no power for the Minister, by delegated legislation, to confer jurisdiction on the Tribunal. The relevant jurisdiction of the Tribunal was conferred by the DBC Act. A subordinate instrument made under the Building Act was not to be construed as extending the jurisdiction conferred upon the Tribunal by the DBC Act. The fact that clause 8.5 recognised that there might be a right to apply to the Tribunal for an extension of time did not make clause 8.5 the source of such a right.

20 Mr Lally submitted further that the words "unless the insurer obtains an extension of time" in clause 8.5 of the Ministerial Order indicated, as a matter of construction, that the extension of time must be obtained before the expiry of the ninety days. Clause 3.6.5 of the policy uses the words "unless the Insurer has obtained an extension of time", thereby making clear what was the proper construction of clause 8.5.

21 He submitted that the Tribunal was correct in finding that the deemed liability obtained by Ms Graham was a vested, valuable right. The effect of the deeming provision, after the expiry of the ninety days, was analogous to the effect of a self-executing order after the occurrence of the events on which it depended. The consequence of the expiry of the ninety days was that the insurer was deemed to have accepted liability for the claim. That consequence became effective immediately upon the expiry of the ninety days and it was accordingly not possible to extend the time thereafter, other than by reaching agreement with Ms Graham as a matter of contract, which she had refused to do. It was significant that clause 8.5 employed the past perfect tense.

22 I note that in Coates v Commissioner for Railways[2] Kinsella and Collins JJ pointed out that where a statute provides that something is to be deemed to be a fact, it is implicit in that provision that the assumption may be contrary to the fact. The statutory provision in that case had the effect that an injury to a worker was to be deemed to have happened at a certain time. The court held that it was not open to the worker to establish that he had in fact received the injury before that time.

23 I accept the submissions of Mr Lally and find that clause 8.5 of the Ministerial Order does not confer on the Tribunal jurisdiction to extend the time within which the insurer may determine the claim.

Section 59A of the Domestic Building Contracts Act

24 Section 59A of the DBC Act is set out in [14] above. Mr Manly submitted that the issue as to whether the insurer is entitled to an extension of time was a "dispute concerning an insurance claim concerning domestic building work or an insurer's decision on such a claim" in terms of section 59A. Accordingly the Tribunal had power to make any order it considered fair to resolve such a claim, and an order extending time would be fair.

25 On this point Mr Lally submitted that there was no such dispute and no such decision. Liability on the claim had been accepted by the insurer before the matter came to the Tribunal because of the operation of clause 3.6.2 of the policy, which was a contract between the insurer and the insured. The acceptance of liability had not been effected by any decision of the insurer on the claim. For there to be a dispute, it would have to have been created prior to the expiry of the ninety days. He pointed out that section 59A appears in Subdivision 2 of Division 2 of Part 5 of the DBC Act, and that the heading to that subdivision is "Disputes involving insurance claims and insurance decisions" and submitted that there was no "dispute involving an insurance claim".[3]

26 I accept the submission of Mr Lally. As the Master found, liability was accepted by the insurer because of the operation of the provision in the policy, and there was no relevant dispute.

27 Mr Manly submitted that the Tribunal had inherent power to extend the time available to the insurer to make a determination. He provided me with a list of decisions said to support that submission. He did not take me specifically to any of the decisions of VCAT included in the list, which in any case are not binding on this Court. Of the cases which he considered of sufficient relevance to draw to my attention, Biala v Mallina Holdings[4] was a decision of the Supreme Court of Western Australia and related to the powers of that Court. The Tribunal does not have the inherent powers of the Supreme Court of a State. The Tribunal is the creature of statute and has only those powers expressly conferred upon it by the VCAT Act or an enabling enactment. The comment by Byrne J in Greenhill Homes Pty Ltd v Domestic Building Tribunal[5] , adopted by Hollingworth J in Vero Insurance v Witherow [6] that the Tribunal is intended to be a "one stop shop" is not authority for the proposition that the Tribunal has an inherent power to extend time.

28 Mr Lally referred me to Palmer v Clarke[7] where Kirby P cited with approval the following passage relating to the New South Wales Licensing Court from the judgment of the Full Court of the Supreme Court of New South Wales (Herron CJ, Wallace P and Manning JA) in Ex parte Currie; Re Dempsey:[8]

. . . it is clear that the court is intended to exercise only the powers conferred by the statute. It is purely a statutory tribunal subject to the well-recognized limitations of power of such a court. If the power does not flow from the Act as properly construed, it cannot exist. The jurisdiction of an inferior court is defined by the Act of Parliament by which it is constituted or such general provisions of statutes which extend such jurisdiction. It is in connection with jurisdiction that lie the chief distinctions between superior and inferior courts. Prima facie, no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown to be so while nothing is within the jurisdiction of an inferior court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular court.

That passage is equally applicable to the Tribunal, and makes clear that it has no inherent power to extend the time for the making of a determination by the insurer after the expiration of the ninety days.

29 I find that the claim of Ms Graham has been determined by virtue of the operation of condition 3.6.2 of the policy, and the Tribunal has no jurisdiction to extend the time for determination of the claim. Accordingly, the insurer does not have a prima facie case on appeal from the Tribunal. That being so, the appeal against the order of Master Kings is dismissed.

30 Counsel may wish to make submissions as to costs.

1. [1] [1999] VSCA 117; [1999] 3 VR 331 at 337
2. [2] (1961) 78 WN (NSW) 377 at 384
3. [3] I note that section 36 of the Interpretation of Legislation Act 1984 provides that headings to subdivisions into which an Act is divided form part of the Act.
4. [4] (1989) 2 WAR 381
5. [5] [1998] VSC 34 at [17]
6. [6] [2004] VSC 272
7. [7] (1989) 19 NSWLR 158 at 166-7
8. [8] (1969) 70 SR (NSW) 443 at 447