In November last year, the Victorian Supreme Court handed down a judgment which held that mediation was not 'a method for resolving disputes' for the purposes of section 10A(3)(d)(ii) of the Building and Construction Industry Security of Payment Act 2002 (Vic), so as to exclude disputed variation claim from being claimed and adjudicated under the Victorian Security of Payment Act (see my earlier alert here).

By way of brief recap, the dispute resolution provisions of the contract in question included a compulsory meeting following notification of a dispute, and failing resolution at that meeting, mandatory mediation. The consequence of Vickery J's decision last November was that for contracts which do not provide a binding means of resolving disputes beyond mediation, then disputed variations could be claimed and adjudicated under the Victorian Security of Payment Act.

That decision has recently been confirmed by the Court of Appeal, which concluded that a 'method for resolving disputes' requires a method that will result in an actual resolution of the dispute between the parties rather than just offering a forum for the discussion of the controversies between them, which may or may not lead to their resolution. Mediation, it was found, did not meet that requirement.

Importantly the Court held that the jurisdiction of the adjudicator reveals the purpose of the Act in that the Act provides for the making of claims, for responses to them, and in the case of dispute, their adjudication by an independent third party. The Court held that the exception in section 10A(3)(d)(ii) should be construed in such a way that contemplates an alternative means of securing the certainty and finality of a binding amount.

The Victorian Supreme Court of Appeal also separately confirmed that an adjudicator's functions in determining the amount of a progress payment under section 23 of the Victorian Security of Payment Act was not limited to the contract pricing stipulated by the Superintendent. That is, an adjudicator's assessment is made under the legislation with regard to the matters in subsection 23(2) of the Victorian Security of Payment Act and may be different to that of the Superintendent.

Implications

The position is now fairly certain in Victoria that construction contracts that do not require binding arbitration or expert determination of disputes will not include 'a method for resolving disputes' within the meaning of section 10A(3)(d)(ii) of the Act so as to avoid variation claims being claimed and adjudicated under the Act.