By Ziv Ben-Arie, Partner.
SSC Plenty Road v Construction Engineering (Aust) Pty Ltd  VSCA 119
The Victorian Court of Appeal has recently examined whether mediation under a construction contract satisfies the requirements of the Victorian Building and Construction Industry (Security of Payment) Act 2002 as being a method for resolving a dispute.
This case involves a construction contract entered into in late 2013 where SSC was the principal and engaged Construction Engineering (Aust) Pty Ltd as the head contractor to design and construct a shopping centre in Victoria.
A dispute arose regarding a claim for variations under the contract which proceeded to adjudication under the Act.
Their Honours, Santamaria, Beach and McLeish JA said:
[at 9] “Section 10A of the Act provides … Where the parties agree that the work has been done, but do not agree that the doing of the work constitutes a variation of the contract, the variation is generally claimable in the case of a contract where the consideration exceeds $5,000,000 and the contract ‘does not provide a method of resolving disputes under the contract’.”
[at 54] “By itself, the expression ‘dispute resolution’ may be understood to be confined to methods that result in the determination (by a third party) of a dispute. The phrase ‘alternative dispute resolution’ is a broader term, which is commonly understood to include mediation, as well as arbitration. However, that is not the phrase used in the statute. The language used in the statute refers to a ‘method of resolving disputes under the contract’. In our opinion, the meaning of ‘method of resolving disputes’ requires a method that will result in an actual resolution of the dispute, rather than just offering a forum for the discussion of the controversies between the parties, which may or may not lead to their resolution. The word used is ‘resolving’, not ‘addressing’.”
A construction contract that provides for mediation under its dispute resolution mechanism is insufficient to exclude claims for variations under Security of Payment regime in Victoria. Parties ought to review their existing dispute resolution clauses and consider how appropriate they are to being a final method of resolving disputes and if it is necessary, have them adjusted to take into account this recent Court of Appeal decision.
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