Is mediation a method for resolving disputes? The Victorian
Supreme Court says, "No" – At least for the
purposes of the Victorian Building and Construction Industry
Security of Payment Act.
In a decision handed down just last month, Justice Vickery
determined that a clause in a construction contract which provided
for mediation (or indeed, any other non-binding dispute resolution
procedure), was not a valid method of resolving disputes under the
contract for the purpose of section 10A of the Building and
Construction Industry Security of Payment Act 2000 (Vic) (the
This somewhat surprising decision is likely to have a
significant impact on the security of payment landscape in
Victoria, as it opens the door to the adjudication of claims for
variations other than those previously agreed by the parties, a
process that was not widely envisaged (and indeed, actively sought
to be avoided by parliament) prior to this determination.
In the case of SSC Plenty Road v Construction Engineering (Aust)
& Anor  VSC 631, SSC Plenty Road engaged Construction
Engineering to design and construct a shopping centre in Reservoir
under a contract worth approximately $35 million. Relevantly, the
Contract contained the following cascading procedure for resolving
senior executives of the parties were required to meet and try
and resolve the dispute
if the conference was unsuccessful, the parties were required
if the mediation was unsuccessful, the parties were free to
rely on their rights at law.
In July 2015, Construction Engineering made a claim under the
Act for payment for alleged variations to the work. SSC Plenty Road
disputed Construction Engineering's entitlement to these
variations and claimed that they were not "claimable
variations" for the purposes of the Act as, relevantly, the
Contract was greater than $5,000,000 and contained a method of
resolving disputes (indeed, the contract explicitly provided,
"The parties acknowledge and agree that the process set out in
[the dispute clause] is a method for resolving disputes under the
Contract for the purposes of section 10A(3)(d) of the SOP Act"
In upholding the decision of the adjudicator (who disagreed with
SSC Plenty's argument and allowed the claim for disputed
variations), Justice Vickery relied on a previous decision, Branlin
Pty Ltd v Totaro  VSC 492 (which distinguished between a
method of "resolving disputes" and a method which,
"merely provides an opportunity for the parties to negotiate a
resolution of their differences"), and decided that the clause
in question was not a valid method of resolving disputes as it did
not contain mandatory steps which would result in the production of
a binding decision by a third party appointed for the resolution of
While this decision ought to bring the Victorian Act more in
line with the legislation operating in other states, it seems to
fly in the face of the object of the Victorian Act (e.g., the
second reading speech provided, "Disputed variations on large
contracts, initiated by building owners and big contractors will be
exempt from the scheme"). It is too early to know whether an
appeal against this decision will be lodged, but for the
foreseeable future, principals and large contractors should take
care in drafting dispute resolutions clauses so that they can have
certainty in relation to claims made under the Act.
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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