ACAT’s Missing Powers; Episode 5 – The Counterclaim Strikes Back

In one of the prequels I updated y’all on ACAT recently having its civil jurisdiction updated from $10,000 to $25,000. Like all prequels  the updated ACAT powers neglected key elements that are fundamental to helping ACAT perform coherently with the other elements of the wider system. (with the exceptions of Batman Begins, Casino Royale and Temple of Doom; Rise of Planets of the Apes did not work and I won’t hear differently).


The ACAT’s civil jurisdiction limit means that any case commenced in the ACAT must be for a claim of less than $25,000. Various requirements exist for the calculation of that amount such as no interest to be included unless under contract, though this is arguable once again due to limited wording. As a claim for interest under a contract or agreed rate is really a contractual debt and not strictly interest on an unpaid amount, but maybe i’ll cover this later (The Interest Awakens, Rogue Interest…leave it with me).

Totally Not A Recent Case

So let’s say Joe Alow starts a matter for $10,001 against Joe Blow in ACAT for building work defects. Joe Alow has no choice because his amount is within the new ACAT jurisdiction. Joe Blow as the builder is owed $25,001 under the final contract payment.

Joe Blow would have normally been allowed to commence his claim in the Magistrates Court and would therefore have been allowed legal costs for his troubles. Even if Joe Blow agreed that there was about $10,001 in set-offs, he still could have commenced in the Magistrates Court and have been allowed costs because, giving each party full credit, should still result in a payment of $15,000 in his favour. So Joe Blow would get his costs, which for a matter such as this could be anywhere between $8,000 to $18,000, if not lots more or a little less, depending on the law firm and depending on the litigation philosophy of each lawyer.

What’s the Problem?

Well, because Joe Alow commenced first in the ACAT,  Joe Blow is required to bring all claims in the same action that are related to the same material facts thanks to a genuinely great principle called Anshun Estoppel. Anshun Estoppel is a principle cemented in the case Port of Melbourne Authority v Anshun Pty Ltd. The principle essentially states that, to save the parties, the courts and the public, time and money, litigation should be conducted as efficiently as possible with similar matters being dealt with concurrently. Which means that if you have matters and arguments against the same parties relating to the same material facts or matters, then those should all be brought up in the same case. If you fail to bring it up, you may be estopped (stopped) from raising it later.

This is a great principle brought about by good intentions, but then the legislature accidentally gets in the way.

So What Happens to Joe Blow?

Joe Blow is required to present his counter-claim in the ACAT action but has now brought a counter-claim that exceeds the ACAT jurisdiction. Which means that ACAT is not jurisdictionally competent to hear the claim.

Joe Blow’s claim could be transferred to the Supreme Court under s83 of the ACAT act, however this requires the parties to jointly apply to ACAT to transfer that matter. No other power of ACAT exists to transfer matters between jurisdictions. BY CONSENT ONLY.

Alternatively, the ACAT Act allows parties to drop any portion of a claim, without surrendering the right, that is over the jurisdictional limit under s21 of the ACAT act, however once again, this requires that party’s consent. So if a party refuses, there is no mechanism for resolution.

There are additional inherent powers of the Supreme Court to accept an application to transfer the matter to the Supreme Court, but nothing on the books. But even if this were to occur, the Supreme Court has the exclusive jurisdiction of $250,001 and above for civil claims, so Joe Blow may face an adverse costs order for wasting the Supreme Courts time with a claim that essentially zeros out at $15,000.

Further, s266A of the Magistrates Court Act specifically prohibits bringing claims that should be commenced in the ACAT due to the limit of $25,000.

So within the world of this legislative maze, withholding consent can be the nuclear option in litigation. How lame.


Fabian ACAT tactics

So if you are Joe Alow, and know that you will go down on the claim of $25,001 because it’s a legitimate claim, you could start a smaller claim first on a questionable basis and refuse to consent to any transfer. The matter is then permanently trapped in ACAT which has no power to adjudicate on it or transfer it to a higher court, or even award costs if it eventually goes ahead and you are unsuccessful. Joe Blow would have to drop any portion of his claim over $25,000. There are ways for the ACAT to award costs in very limited circumstances, but you could totally avoid the stage that this is even accessible by refusing to consent.

Alternatively if you are Joe Blow and doubt the veracity of your $25,001 claim then you could do the converse and refuse to consent and let Joe Alow rack up costs chasing you.

Tactically, this is the perfect time to order your lawyers to turn the dial to all-stop and allow the other side to rack up maximum costs, in a no-costs jurisdiction, until a subtle “walk-away” offer becomes amicable to both sides.



This is insane. Both Joes are bound by law to bring their claims in their jurisdictions. Both Joes are bound by law to keep their claims in ACAT and both Joes are bound by law to never have their claims resolved if the other never concedes. Like a weird Byzantine, Schopenhauer, Kafka hybrid system. Scary stuff.

A simple legislative amendment would fix this and it could be as simple as: “new s21A: all claims or counter-claims that exceed the jurisdiction of the ACAT can be transferred to any court or tribunal the ACAT considers appropriate on either the application of either party or on the ACAT’s own initiative.”  Now I’m typing off the cuff here, but on the face of it, this would probably work. Ironically, any misapplication of a rule like this would result in an application to ACAT, but let’s start with small steps.

I’ve drafted legislation previously, so I sympathise with the position that a well-meaning, well-written law can lead to distorted outcomes. But given that matters have been filed that gave rise to this issue previously, it seems unacceptable that this wouldn’t have been fixed sooner.

ACAT’s Missing Powers; Episode 4 – A New Limit

On 15 December 2016 the ACAT will change its civil jurisdiction from $10,000 to $25,000. In the explanatory memoranda, then-Attorney-General Simon Corbell MLA, explained that this increase was to ensure that the jurisdiction of the ACAT kept up in real terms with the original jurisdiction of $10,000 as it existed in 1997 under the Small Claims Court which was then superseded by the ACAT in 2008 when it was set up.

Unfortunately, the more likely result will be that recovering debts for small businesses and individuals is about to get a lot harder and a lot more expensive.

Ulterior Reasons

The reasons behind the changes are likely more chimeric than the explanatory memoranda stated and have the serendipitous benefit of alleviating the busy court system with no additional expenditure. For numerous years, the legal fraternity and the judiciary were calling for a 5th full-time Supreme Court Judge to try to deal with the back-log and for a long time were allocated several Acting Justices and supplementary Federal and interstate judges, but even with the appointment of a 5th Justice in July 2016 the situation does not appear to have significantly eased. This is not limited to the Supreme Court with a similar situation existing in the Magistrates Court, where Special Magistrates are used to help meet the immense work load faced by the Court there.

Over the last few years there has been bandaid tweaking to the court administration such as creating new listing allocations and making it easier to transfer matters such as the simplified committal process. Some methods such as the bulk call-overs and multiple listings on the same day seem to be having limited success but overall fail to address the underlying problem that our courts are over-worked. Additionally, as the government has just committed $150 million for a new courts precinct it is unlikely that any of the more expensive fixes will be employed soon.

With this in mind, it would make sense that an easy, cheap solution would be to change the jurisdictional limits and shift a lot of the smaller litigation away from the Magistrate’s Court towards the ACAT.

Shifting the Buck

The biggest problem with this approach is that the ACAT is also overworked and in fact overworked to the point of not being fit for purpose. The ACAT is designed to resolve disputes quickly, simply and inexpensively. For those who have dealt with the ACAT, this is often simply not the case. Reasonably simple cases such as return of residential bond cases often take months, yet alone the more complex issues dealt with by ACAT such as reviewing large development application or decisions relating to the discipline of the legal profession.

The involvement of lawyers probably contributes to the back-log but at the end of the day there are real stakes on the line and the Tribunal still deals with issues in a manner mostly corresponding to the Courts such as following precedent and applying legislation making it still largely inscrutable to the average member of the public. The jurisdiction of ACAT stretches far beyond returns of bonds and it is not uncommon for multi-million dollar developments to be subjected to ACAT’s jurisdiction and with that amount of money you can guarantee that both sides will have lawyers and they will raise every possible point in favour of their client, much against the simple, inexpensive model originally envisaged.

The Impact on Business

The impact on small business should not be understated. Some of the toughest times for a small business is when they are dealing with recalcitrant debtors. Waiting 6-12 months to get paid, or not paid at all, can really put the squeeze on small businesses. Even businesses that can afford to absorb that debt still have to take on that burden; whether through reshuffling finances, allocating staff resources to recover the debt or ultimately hiring outsiders to recover that debt on their behalf.

This final step usually involves lawyers. Once lawyers get involved, very few creditors ever recover 100% of their outlay. If they are lucky, a simple quick process such as a statutory demand can be a cheap way to recover debts but the problem with this mechanism is that if the debtor raises a “genuine dispute” then Statutory Demands will usually fail. “Genuine disputes” are simple enough to raise and are often red herrings not actually deterring from whether the debt is payable. The reasoning being is that Statutory Demands are not meant to resolve disputes.

If a dispute is raised then the courts will usually need to become involved and when they do, at least there is the probability that if a creditor is successful in proving their debt that they will recover around 60-80% of the legal costs they have outlaid. Recovering 60-80% makes it commercially viable to outlay $8-10,000 in legal costs to pursue a debt of $20,000. Of course people are free to pursue their debts without lawyers, but in the courts this is usually at their own peril, especially if the debtor “lawyers up”.

This is where the real problem becomes apparent. The increased jurisdiction of ACAT hasn’t corresponded with a re-visiting of the other rules, including the practice that ACAT generally doesn’t award costs. ACAT has the ability to award costs in instances where one party has acted in such a way that causes unreasonable delay or obstruction but in practice if a losing party can prove that it had a case to argue, even if wrong, then they’ll almost never face a costs order.

This drastically changes the commercial considerations faced by small businesses. After 15 December 2016 a small business will need to assess whether they are willing to incur $10,000 in costs to pursue a $15,000 or $20,000 debt, when previously this would have been a no-brainer due to the 60-80% costs recovery.

I’ve heard it defended that this approach will encourage settlement. But generally speaking, if the debt is truly owing then this does not encourage settlement but instead just makes it harder to recover debts against those parties willing to take advantage of the system against small businesses simply trying to play by the rules.


To accept the argument that real-term jurisdiction hasn’t increased since 1997 is a valid point, but utilising the Reserve Bank calculators show that the new limit should be closer to $15,000 rather than $25,000; and this difference makes all the difference to a small business.