‘AN UNDESIRABLE SITUATION’ – VICTORIAN COURT OF APPEAL DECISION
CASE : METRICON V SOFTLEY
Parties seeking leave to appeal a decision of the Victorian Civil and Administrative Tribunal (Tribunal) will face now two different threshold tests, depending on the Tribunal Member who decided the case.
While the Court of Appeal indicated that the two different tests ‘can be expected to produce the same result in the vast majority of cases’, Chief Justice Warren stated that ‘this is an undesirable situation’ and called on the legislature to amend the VCAT Act so that the ‘real prospect of success’ test applies to all appeals from the Tribunal.
Handed down this week, Metricon Homes Pty Ltd v Softley1 is a decision of the Victorian Court of Appeal relating to the 2014 Tribunal decision of Vice President Judge McNamara and Member Cameron.2
In 2009, the Softleys contracted with Metricon, one of Australia’s biggest residential builders, to build a new home in Melton, west of Melbourne. Soon after moving in, large cracks appeared in the plaster and brickwork. Investigations revealed significant ‘slab heave’.
The Tribunal found that Metricon failed to carry out the construction of the home’s ‘waffle’ slab in a proper and workmanlike manner, breaching its contractual obligations to Mr and Mrs Softley. Metricon was ordered to pay the cost to demolish and reconstruct the house, and the cost of removalists and rental accommodation. Metricon appealed.
THRESHOLD TEST FOR LEAVE TO APPEAL
A preliminary question for the Court of Appeal was which test applied in determining whether leave to appeal a Tribunal decision should be granted.
Prior to 10 November 2014, appeals from the Tribunal were dealt with under s 148 of the VCAT Act. Under that regime, leave to appeal a decision of the Tribunal and the appeal itself would be heard:
The test to decide whether leave to appeal should be granted was based on the decision in Secretary to the Department of Premier and Cabinet v Hulls (Hulls).3 Hulls set out a number of factors for a court to consider when faced with an application for leave to appeal, including that there must be must be a question of law for which there is ‘a real or significant argument to be put that error exists’ or about which there is ‘sufficient doubt’ to justify granting leave.
However, on 10 November 2014, a new regime commenced in relation to civil appeals to the Court of Appeal. The new regime, provides that ‘The Court of Appeal may grant an application for leave to appeal…only if it is satisfied that the appeal has a real prospect of success’.4
The new regime did not explicitly override s 148 of the VCAT Act or the factors set out in Hulls.
In Metricon v Softley, with the two regimes running in apparent parallel, the Court of Appeal faced the question of which test applied to an appeal to the Court of Appeal: ‘the real prospect of success’ test in the new regime, or the test set out in Hulls?
The Court of Appeal held that the ‘real prospect of success test’ in the new regime applied to appeals to the Court of Appeal, not the regime in s 148 of the VCAT Act. However, the new regime only applies to appeals to the Court of Appeal.
Consequently, the Court acknowledged that where the appeal from VCAT was to the Trial Division of the Supreme Court (because the decision was by a normal Tribunal member, not the President or a Vice President), the old Hulls test still applied.
While concluding that “[i]n practice, however, the two tests can be expected to produce the same result in the vast majority of cases.”,5 Her Honour Chief Justice Warren nevertheless stated:
“This is an undesirable situation. It would mean that an application for leave to appeal from a VCAT matter could be subject to one of two different tests, determined solely by whether the Tribunal in that matter was constituted by the President or a Vice President”;6
“As I have stated, this is an undesirable situation. It appears to be the result of an oversight by the legislature. It is an anomaly that will need to be rectified by legislative amendment, for example by the insertion of a subsection in s 148 of the VCAT Act stating expressly that the applicable test for leave to appeal from VCAT to the Trial Division is the ‘real prospect of success test”.7
DECISION ON APPEAL
Metricon appealed the Tribunal’s decision on the basis that it had incorrectly assessed the Softley’s damages as the cost to demolish and rebuild their home, rather than the significantly lower cost of the minor works Metricon said were necessary to rectify the damage.
The Court dismissed Metricon’s appeal. The Court was satisfied with the Tribunal’s reasoning that the well-established tests for assessing damages in breach of building contract cases applied to the Softley’s claim.8 It upheld the Tribunal’s decision that the appropriate remedy was to put the Softley’s in the position that they would have been had the foundations been properly built. Given the uncertainties around the effectiveness of Metricon’s rectification works, the appropriate remedy was damages representing the cost to demolish and reconstruct the house.
The Court of Appeal has clearly flagged that an amendment to the VCAT Act is required to ensure that a consistent test applies to appeals from the Tribunal. It remains to be seen if and when Parliament will respond.
Since the decision, well-known plaintiff law firms have indicated that the case has precedent value for similarly-affected home owners. The decision may see a number of claims brought in the Tribunal relating to slab heave arising from the improper construction of foundations of houses in Melbourne’s west, an area of ongoing residential expansion known for its highly reactive clay soils.
Source : DLA PIPER
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