Assuming your dispute has just arisen, you have five basic options:
1. Informal dispute resolution
2. Security of payment
3. The contractual process
4. Alternative dispute resolution
5. Urgent court application
These processes are not mutually exclusive. That is, you may be able to run multiple processes at the same time.
Informal dispute resolution
There is nothing to prevent you from contacting the other party to discuss the dispute. You can make a settlement offer at any time, and you can also make suggestions about different ways the dispute can be resolved.
Most disputes, at least small ones, are resolved through negotiation and without the need for any formal process. The greatest benefit of an informal process (like an unsolicited settlement offer) is that it is quick and cheap in comparison with the alternatives. The greatest disadvantage is that it is not guaranteed to produce a result.
Security of payment
The security of payment legislation gives contractors a statutory right to receive progress payments for the performance of construction work or the supply of related goods or services.
In some states:
- contractors can automatically become entitled to payment if the principal does not respond to a payment claim within the prescribed period (typically 10 business days); and
- contractors have a right to have a payment claim ‘adjudicated’ by a private adjudicator if the principal responds to the claim within the required time frame, but indicates that they propose to pay less than the amount claimed.
Payments made under the security of payment legislation are interim only. If the legislation results in a contractor receiving more than they would be entitled under the contract, the principal can make a claim against the contractor to ‘claw back’ the difference.
However, even though a contractor’s entitlements under the security of payment legislation are interim only, it is not uncommon for applications under the security of payment legislation to result in a final resolution of the claim. This is because either:
- where a payment is made under security of payment legislation, the amount involved may not be sufficient to justify litigation; and
- often, a requirement (or likely requirement) to pay money under the legislation may be enough to result in the parties being able to reach a final agreement through negotiation.
The second scenario above is a classic illustration of two dispute resolution processes (security of payment legislation and an informal process) being run concurrently to result in a final resolution of a claim.
Keep in mind that a security of payment remedy may not be available in all instances. This will depend on a number of factors, including the location of the project (as the law differs between States), the nature of the project (not all project are covered), the nature of the claim (not all claims can be pursued) and the availability of a ‘reference date’. You can read more about security of payment here.
The contractual process
AS 4000 prescribes a 3 step process for resolving a dispute:
- a notice of dispute;
- a conference between the parties; and
Clause 42.1 sets out the requirements for a notice of dispute. The notice is important because it sets out the parameters of the dispute that may ultimately be referred to arbitration.
Within 14 days of receiving a notice of dispute, the parties are required (by clause 42.1) to confer at least once in an effort to resolve the dispute or agree on a method for doing so. The parties are required to meet in good faith, with each of them being represented by a person authorised to resolve the dispute on their behalf.
If the parties are unable to resolve the dispute or agree on an alternative process within 28 days of the notice of dispute being served, either party may refer the dispute to arbitration. Arbitration is very similar to a court process, except that the adjudicator is privately appointed (and not a judge). You can read more about arbitration here.
This process is designed to ensure that, if the parties are unable to resolve a dispute through discussion and negotiation, there is a process (arbitration) that will ultimately produce a binding outcome.
Alternative dispute resolution
The problem with traditional dispute resolution processes, and particularly arbitration and litigation, is that they are incredibly time-consuming and expensive. As a result, parties often look for alternative ways for their disputes to be determined.
Common alternatives are:
- This is effectively a negotiation facilitated by a neutral third party. The mediator’s role is not to make a decision. Rather, their role is to encourage dialogue between the parties and to try to find a solution ultimately by agreement. Many courts will require the parties to attend mediation at a relatively early stage in the proceedings.
- Expert determination. Sometimes the issues between the parties are fairly narrow, and often of a technical nature. For example, the dispute might be limited to programming issues (such as disputes arising from delays, liquidated damages and/or extension of time claims), or to questions about the value of certain work that has been performed. In these cases, the parties may refer the issues to an independent technical expert for determination. These types of determinations can be binding or non-binding, depending on the parties’ preference. Expert determination can sometimes provide a faster way to resolution, depending on the issues involved.
- Dispute resolution board. Some contracts, and generally contracts for larger projects, will contemplate a dispute resolution board – comprised of people appointed by both parties, as well as one or more independent members. These boards are typically formed at the beginning of the project, and their purpose is to attempt to reach agreement on contentious issues that arise during the course of the project. The idea behind dispute resolution boards is early intervention, essentially to encourage resolution of issues at site level, and diminish time and money spent on resolving disputes.
Urgent court applications
Sometimes, urgent court intervention is required (such as an injunction). Where this is the case, the procedure in AS 4000 does not prevent a party from approaching the court – and the court may be the only avenue for a party to obtain relief.
Which approach is best?
As you may have gathered from the above, there is no ‘one-size-fits-all’ approach. Regardless of the nature of your dispute, it is important to keep in mind that dispute resolution is a process. Choosing the right process (or the right combination of processes) is absolutely critical to ensuring the best possible result.