Caught Between States: Why Interstate Leasing Disputes Skip VCAT for the Magistrates’ Court

By Morgan Collens

If you’re involved in a commercial leasing dispute and one of the parties resides interstate, you may be surprised to learn that the Victorian Civil and Administrative Tribunal (VCAT) cannot hear your case. This situation often leaves parties wondering why they must take their dispute to the Magistrates’ Court instead.

Here’s an explanation of why this occurs and what it means for your case.

VCAT’s Jurisdiction Limits

VCAT is a specialised tribunal that handles a wide range of civil disputes in Victoria, including retail and commercial leasing matters. However, its jurisdiction is limited by the Victorian Civil and Administrative Tribunal Act 1998.

Specifically, VCAT can only hear cases where all parties either reside or have their principal place of business in Victoria. This limitation exists because VCAT’s orders are not automatically enforceable in other Australian states or territories.

Why VCAT Cannot Hear Interstate Cases

The matter of Thurin v Krongold Constructions (Aust) Pty Ltd is instrumental in explaining why VCAT can’t handle interstate cases.

The Court of Appeal delivered this decision in 20 October 2022. It follows key rulings from the High Court in Burns v Corbett and Citta Hobart Pty Ltd v Cawthorn.

The decision confirms that VCAT cannot exercise federal jurisdiction in disputes because it is not considered a Chapter III Court under the Australian Constitution. In Victoria, the courts that fall under Chapter III include the Supreme Court, County Court, and Magistrates’ Court.

This means that VCAT cannot hear cases where a federal issue genuinely arises, which happens when the case requires the application or interpretation of federal law. A federal matter typically arises when one of the parties asks for the case to be decided under Commonwealth legislation (a federal law), rather than Victorian Law.

You can easily spot Commonwealth laws by the inclusion of ‘(Cth)’ at the end of the Act or Regulation title, while Victorian laws will have ‘(Vic)’ at the end.

For example: Insurance Contracts Act 1984 (Cth) (a federal law), Residential Tenancies Act 1997 (Vic) (a Victorian law).

The earlier case of Meringnage v Interstate Enterprises Pty Ltd was handed down by the Court of Appeal in February 2020, and confirmed the following:

1. VCAT cannot hear the parties are residents of different Australian states, or the Commonwealth of Australia is a party.

2. VCAT decides if the parties are residents of different states based on when the application is lodged, not when the dispute started and whether a party lives permanently in a state.

3. This decision does not affect a party who is identified as one of the following:

a. a corporation or State political entity

b. a resident of a territory (they are not a resident of a state)

c. an overseas resident.

The Role of the Magistrates’ Court

For interstate commercial leasing disputes, the Magistrates’ Court has the authority to hear and resolve cases where one party is outside Victoria. The court’s rulings are legally binding and enforceable across Australia.

This makes the Magistrates’ Court the appropriate forum for disputes involving parties from different states, providing a more streamlined and enforceable outcome for all involved.

What This Means for You

If you’re involved in a commercial leasing dispute where the landlord or tenant lives outside Victoria, your case must be filed in the Magistrates’ Court rather than VCAT. Although this may seem like an extra step, taking your case to the Magistrates’ Court ensures that any decision made is enforceable nationwide, providing a clear path to resolving the dispute.

In summary, while VCAT is a convenient and efficient venue for many local disputes, its jurisdiction is limited to cases where all parties are based in Victoria. When interstate parties are involved, the Magistrates’ Court is the proper forum to ensure that any rulings can be legally enforced across state lines, offering a fair and comprehensive resolution to your commercial leasing dispute.

Disclaimer: This publication contains comments of a general and introductory nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional legal advice. You should always speak to us and obtain legal advice before taking any action relating to matters raised in this publication.