Vic: Variation Claims and Excluded Amounts
The Victorian Act contains unique differences to similar Acts in all other States and Territories. The Act fails to allow adjudication of many payment disputes covered in the rest of Australia.
Time frame in which to make a claim
Unless the construction contract provides for a longer period, a payment claim must be made within 3 months after the construction work to which the claim relates was last carried out or the related goods and services were last supplied. This contrasts to 6 months in SA and 12 months under other similar Acts.
Other jurisdictions generally permit adjudication on claims for variations. However, In Victoria, a variation claim must fit within one of two classes of variation. The wording if the Act is complex* albeit summarised below:
- The First Class is a variation under a contract where the claimant and the respondent agree they are not in dispute over the variation. Specifically, they agree:
- the work has been carried out or the goods and services provided (work); and
- the scope of work has been carried out; and
- the work constitutes a variation; and
- the claimant is entitled to be paid an amount for the work which constituted a variation; and
- the value of the amount or the method of valuing the amount; and f. the time for payment of that amount. [Refer section 10A(2) of the Act].
- The Second Class of variation is for work under a contract and it is agreed that the work was directed by an authorised person. In order for the payment dispute to be adjudicated, it must relate to one or more of the following :
- whether the work is a variation to contract; and/or
- whether the person undertaking the work is entitled to be paid; and/or
- the amount owing; and/or
- the method of valuing the amount owing; and/or
- the time for payment of the amount. [Refer section 10A(3) of the Act].
If the contract does not provide a method of resolving disputes, the above applies without further complexity. However, where a contract contains a method of resolving disputes and either of the following two points are applicable, the dispute can't be adjudicated:
- at the time the contract was entered, the value of the contract exceeded $5,000,000;
- at the time the contract was entered, the value of the contract exceeded $150,000 and the claim for variation(s) exceeds 10% of the contract value. [Refer section 10A(4) of the Act].
* The Victorian Supreme Court is not impressed with these provisions '...takes several readings to digest the steps required to apply the provision, and several more steps, combined with a respectable prowess in the science of numbers, to apply it to the case at hand. Although the confounding formula described in s 10A on a close reading is tolerably precise, it fails in the critical task of communicating the legislative stipulations in a ‘user friendly’ and readily comprehensible fashion to its intended audience...' Branlin Pty Ltd v Tony Totaro and others  VSC 492.
In order for a construction contract to provide a method for resolving disputes, three processes are required:
- a process which could be described as a ‘method’ of dispute resolution;
- a process which is capable of resulting in a binding resolution of the dispute; and
- a process which the contract makes it a binding obligation for the parties to enter upon and participate in.
Therefore a voluntary mediation process would not qualify as a dispute resolution clause under the Act.
Notwithstanding any of the above an adjudicator, in determining a payment claim, must not take into account:
- latent conditions;
- time-related costs;
- changes in regulatory requirements;
- any amount claimed for damages for breach of the construction contract or for any other claim for damages arising under or in connection with the contract;
- any amount in relation to a claim arising at law other than under the construction contract;
- any amount of a class prescribed by the regulations as an excluded amount [No class is prescribed at the moment].
THE ALTERNATIVE - PRIVATE ADJUDICATION
Parties drafting a contract with a contract price exceeding $150,000 should give consideration to whether they wish to have variation disputes or some of them decided in arbitration or by expert determination instead of adjudication. What is better will depend upon the circumstances of the particular contract. Having some variation claims decided in adjudication and some by arbitration or expert determination may have peculiar consequences.
Adjudicate Today has available adjudicators to conduct an expert determination. However we call expert determination a 'private adjudication' It is not an adjudication under the Act and the Act has no application. It is a private arrangement between the parties and the adjudicator. If requested, Adjudicate Today can nominate an adjudicator for a private adjudication. The private adjudication could be under an expert determination clause in the contract or pursuant to an ad hoc agreement.
Further information on Private Adjudication.