The Building and Construction Industry Security of Payment (Amendment) Bill 2006 (Victoria) has been published, containing the long-awaited proposed reform of the Victorian adjudication system.

Since it was introduced by the 2002 Act, adjudication in Victoria has been slow to take off, largely because of the provision at section 2(1)(b) whereby an adjudication loser can avoid having to pay up by providing security and commencing litigation and arbitration. There is little point in a claimant commencing adjudication if the principal can so easily prevent the money that is determined to be due from reaching the claimant.  The key and welcome change in the new Bill is to repeal this provision .

But the Bill is a long one, and proposes a number of other changes, including the following:

• The amendments include a lengthy definitions of a “claimable variation” and an “excluded amount”.  Excluded amounts are those:

• relating to a variation other than a claimable variation;
• relating to latent conditions, time-related costs, changes in regulatory requirements;
• which are in the nature of damages for breach of contract or otherwise;
• arising at law other than under the construction contract (i.e. in particular quantum meruit claims; and
• anything else that is prescribed by the regulation.

These exclusions will cut out all many entitlements (including the delay damages claims that are adjudicable in NSW; see Coordinated Construction v Hargreaves), and because of the very restricted definition of claimable variations, it seems that it may be very easy for a principal to characterise any variation as non-claimable (in particular, by the simple expedient of denying that it was authorised).

• The Bill proposes to remove the parties’ right to agree on the identity of the adjudicator.  Thus even if the both parties have agreed that they want the adjudication handed by a particular adjudicator (because the dispute is within that person’s special expertise, and both parties have confidence in his judgment and impartiality) they are required instead to submit to the jurisdiction of another adjudicator to be chosen by an ANA.
• If the loser under an adjudication decision for more than $100,000 wishes, he can delay payment to the claimant (and perhaps get a wholesale or partial reversal of the decision) by instituting a review adjudication before another ANA-nominated adjudicator on the ground that the first adjudicated amount included an excluded amount.  The provisions relating to excluded amounts are such a minefield that such grounds will be relatively easy to advance.

It remains to be seen whether the package – if it goes through the Victorian Parliament unamended – will get adjudication properly off the ground in Victoria, or whether (as some practitioners are suggesting) the adjudication process will remain largely grounded there. Certainly, the legislation looks well packed with jurisdictional traps that foreshadow a good deal of litigation in the courts.