VCAT can reopen a $49,011 order but cannot decide the insurance dispute itself

What happened

A policyholder brought a claim in VCAT's Consumer Division against an insurance company over an insurance claim. On 18 July 2023 the Tribunal ordered the insurer to pay him $49,011.47. That order was made because the insurer did not attend the hearing.

The insurer later explained what happened. An employee received a letter titled "Notice to attend a teleconference directions hearing", dated 11 November 2022, on 16 November 2022. The insurer said the letter "was mistaken for a letter of demand and ignored", the file was then closed by mistake, and nothing further was passed on to its team. On 22 September 2023 the insurer applied under section 120 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) to reopen the 18 July 2023 orders. Section 120 lets VCAT revoke or vary an order where a party had a reasonable excuse for not attending the hearing, has a reasonable case to argue, and where it is appropriate to hear the application having regard to any prejudice to the other party.

The insurer said it had an arguable defence: that the policyholder failed to disclose relevant information when taking out the policy, that its underwriting guidelines said a policy should be declined in those circumstances, and that the Australian Financial Complaints Authority (AFCA, the free external complaints body for financial firms) had reviewed and agreed with its decision. In a separate letter it relied on section 28 of the Insurance Contracts Act 1984 (Cth), saying it acted within its power to reduce its liability because the policyholder had breached the duty of disclosure in section 21 of that Act.

At a review hearing on 23 February 2024 the presiding member noticed a problem. Both sides were relying on the Insurance Contracts Act, which is Commonwealth (federal) legislation. Victorian tribunals such as VCAT cannot decide a dispute that falls within "federal jurisdiction" — broadly, a controversy about rights and duties arising under Commonwealth law. The proceeding was referred to a presidential member, and in August 2025 the President's chambers wrote to the parties asking for submissions on three questions: whether the matter was in federal jurisdiction, whether VCAT could still decide the section 120 reopening application if it was, and whether VCAT could instead strike the proceeding out under section 77. The policyholder filed no submissions by the due date. The insurer filed submissions on 15 September 2025.

What each side wanted

The insurer accepted that the underlying dispute was in federal jurisdiction, because the key issues were the policyholder's duty of disclosure under section 21 of the Insurance Contracts Act, the insurer's duty to inform him of that duty under section 22, and whether it acted within its rights under section 60 in cancelling the general insurance contract. Its main argument was that VCAT could still strike the proceeding out under section 77 of the VCAT Act, because section 77 allows a strike-out "at any time" and the word "proceeding" is not limited to one in which no final order has been made; it said the proceeding was still ongoing because of the reopening application, the further hearings and the exchange of submissions. In the alternative, it argued VCAT could decide the section 120 application on its own, because section 120 does not require the Tribunal to decide the ultimate outcome of the dispute, only whether the orders can be set aside. The policyholder put nothing before the Tribunal on these questions.

What the tribunal decided

The President, Justice Woodward, decided three things. First, the dispute the policyholder brought is within federal jurisdiction, because it clearly involves legal rights and duties arising under the Insurance Contracts Act, a Commonwealth law. VCAT therefore has no jurisdiction to hear the substantive insurance dispute. Second, VCAT cannot make orders under section 77 at this stage, because the proceeding was finalised by the 18 July 2023 orders. Third, VCAT can hear and determine the insurer's section 120 application, because that application is a separate matter and is not itself within federal jurisdiction.

No money orders were made in this ruling. The $49,011.47 order of 18 July 2023 still stands and continues to have legal effect unless and until it is revoked or varied.

On next steps, the President said it was premature to decide whether the orders should be reopened, because the policyholder had not yet had a chance to respond and the insurer would ordinarily be able to make oral submissions. He considered it appropriate to decide the section 120 application "on the papers" — without an oral hearing — after allowing both parties to make brief submissions, and said that if none are received he will decide on the material already available. He also set out what would follow: if the final orders are revoked, VCAT will have to strike the proceeding out under section 77(1) because it cannot hear the insurance dispute, and may refer the matter to a court under section 77(3). Given the nature of the claim and the amount, he said the Magistrates' Court is likely to be an appropriate forum, and that rather than VCAT referring it, the more suitable course may be to strike the proceeding out and let the policyholder himself apply to the Magistrates' Court for a "substituted proceeding" under section 57B of the VCAT Act, where that court can exercise the same powers VCAT would have had. That is to be dealt with in further orders.

Why the tribunal decided it that way

On federal jurisdiction, the President applied the approach set out in the appeal court decision in Thurin v Krongold Constructions and the High Court decision in Citta Hobart Pty Ltd v Cawthorn. Where a claim or defence genuinely relies on a Commonwealth law and raises an issue capable of being decided by a court, the whole controversy falls within federal jurisdiction, and a state tribunal like VCAT cannot decide it. Here both sides relied on the Insurance Contracts Act, so the insurance dispute itself was outside VCAT's power.

On section 77, the President held that once VCAT makes final orders it is "functus officio" — a Latin term meaning its job in the case is done and its powers are exhausted. VCAT has no general power to go back and fix its own decision, even if it has spotted an error. It keeps only the specific powers Parliament has given it, such as section 119 (correcting clerical slips) and sections 120 and 120A (reopening or varying orders). Section 77 is not in that category. Section 77(1) lets VCAT strike out a proceeding if the subject matter "would be more appropriately dealt with" by another court, tribunal or body, and the President reasoned that if the subject matter has already been decided by final orders there is nothing left for another forum to deal with. The words "at any time" must attach to a live subject matter. Even if some part of the proceeding is still active — the reopening application and the jurisdiction question — neither could usefully go anywhere else, because only VCAT can decide its own jurisdiction and only VCAT can exercise the section 120 power.

On whether VCAT could decide the reopening application, the President distinguished between the "matter" (the real controversy and the rights in issue) and the "proceeding" (the case file). Drawing on High Court authority, he held that the section 120 application is its own controversy: whether the insurer is entitled to have the 18 July 2023 orders revoked or varied so it can defend the claim. The parties' relationship in that controversy is defined by the statutory tests in section 120, not by their positions as insurer and insured. The fact that the relief sought would affect the consequences of the earlier orders does not merge the two matters into one.

He then asked whether that separate matter arises under Commonwealth law. The only law being directly applied in a section 120 application is section 120 itself, a Victorian law. Deciding whether a party has a "reasonable case to argue" involves no final decision on the merits of that case. While the Tribunal must at least look at the insurer's arguments under sections 21 and 28 of the Insurance Contracts Act, those defences are not genuinely in controversy yet: the final orders still stand, so the defences are directed at a hypothetical dispute only, and they become capable of legal argument — and capable of attracting federal jurisdiction — only if the orders are revoked. At most the Insurance Contracts Act issues are an incidental consideration, which is not enough to take the reopening application outside VCAT's power. The President also acknowledged that some of the questions were unprecedented and legally complex, and thanked the parties for their patience.

What this means if you are in a similar position

If you are in a similar position, this decision shows two separate things about how the rules are applied. The first is about which forum can decide an insurance dispute. VCAT is a state tribunal, and where the real argument turns on rights and duties under a Commonwealth law such as the Insurance Contracts Act — non-disclosure, the duty to tell you about your duty of disclosure, reducing liability, cancelling a policy — the dispute falls within federal jurisdiction and VCAT cannot decide it, no matter how far the case has got. The decision shows that this can surface late, and that the usual route is then a court such as the Magistrates' Court, which under the VCAT Act can run a "substituted proceeding" using the same powers VCAT would have had.

The second is about what happens when a party does not turn up. A tribunal order made in a party's absence is a real order with real legal effect, and it keeps that effect unless and until it is revoked or varied. The only way back in is the specific statutory power — here section 120 — which asks whether there was a reasonable excuse for not attending, whether there is a reasonable case to argue, and what prejudice the other side would suffer. The decision also shows that the tribunal has no general power to revisit its own final orders once they are made, and that finding a "reasonable case to argue" decides nothing about who ultimately wins.

In an insurance dispute, the step most people take first is a written complaint to the insurer setting out what happened, what the policy says and what they want, followed by a complaint to AFCA if the insurer refuses, and only then an application to a tribunal or court. This is general information about how the decision was reached, not advice about your own situation.

How to apply: our step-by-step guide to a VCAT application. More decisions: VCAT cases and other civil disputes.

Source: Bonadio v Auto & General Services Pty Ltd [2026] VCAT 804 (read the full decision). This summary was prepared from the published decision for general information. It is not legal advice, and the tribunal’s own reasons are the authoritative record.