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Resolving contractual disputes through mediation

The Residential Building Work Contracts and Dispute Resolution Act 2016 (‘the Act’) introduced a government-operated mediation process that can be commenced by an owner or builder. The purpose of a mediation procedure is to enable parties to have access to a quick and cost-effective mechanism to assist them to resolve contractual disputes.

In this article

  • Mediation under the Act 
  • Commencing the mediation
  • Mediation process and powers of the mediator
  • Evidence obtained during mediation
  • Mediation under HIA Contracts

Mediation under the Act

Disputes about residential building contracts, the performance of residential building work under a contract, or compliance with the Act in relation to the building contract, can be mediated using the Act’s mediation procedure. While this does not cover the full range of disputes that builders and owners may be involved in, these areas do cover a broad range of issues that members face with their contracts and clients. 

Before commencing this mediation process, it is important to understand the way that it works and the role and power of the Director of Building Control (‘the Director’ at the Department of Justice). It is also possible to appoint a mediator or alternative dispute resolution professional to conduct a mediation separate to the process outlined in the Act. There is no legal requirement that building disputes must use the government mediation process. 

Commencing the mediation

Either a builder or owner can serve a dispute notice with the Director. The notice must specify the grounds of dispute, which must fall within one of the three areas noted above. 

The Director then has 10 working days to either accept or reject the notice of dispute. If the parties are already engaged in court proceedings or the adjudication process under the Act, the Director must reject the notice. The Director may reject the notice if the person lodging it has not made reasonable attempts to resolve the dispute, if the dispute notice does not contain grounds of the dispute, or if it is vexatious or frivolous. Therefore, it is suggested that a party should not seek to serve a dispute notice until they have attempted to first negotiate with the other party to resolve the dispute. 

When a dispute notice is accepted by the Director, a mediation panel must be convened within two business days. 

The Director can require that the owner, builder or any other person who has relevant information provide that evidence to the Director. They can also identify other people that they consider should be party to the mediation and request that they join. 

Mediation process and powers of the mediator

The mediation panel can impose conditions that must be satisfied before the mediation can proceed and can give directions to the parties to assist them to resolve the dispute. The Director may direct a mediation panel to consider the Guide to Standards and Tolerances when exercising its functions. 

Under the Act, the Director has the power to approve or refuse to register a settlement that has been reached by parties to a dispute. While there are some specified circumstances of when the Director may refuse to register a settlement agreement – for example where the agreement was entered into as a result of unconscionable conduct or was not entered into in good faith – these are not the only circumstances under which the agreement may not be registered. The Director has discretion to accept or reject any agreements. It should be noted, however, that the parties can still proceed with their settlement and it may be enforceable even if the Director refuses to register the settlement. 

When an agreement is reached by the parties and registered by the Director, the parties and the mediation panel must sign a document that outlines the terms agreed. This is a binding document which can be enforced in court. 

When an agreement is reached and registered by the Director but is not documented and signed within 20 business days of the mediation panel being convened, the mediation panel can no longer assist the parties and the Director must be notified. 

Evidence obtained during mediations

No evidence or admissions made during mediation proceedings can be used in any court or tribunal proceedings, unless the parties to the mediation consent to its disclosure and use in those proceedings, or agree to waive these non-admission provisions. 

Note that this does not apply to any documents created in order to enforce any agreements reached, for example settlement agreements prepared as part of the mediation process. 

Mediation under HIA Contracts

HIA building contracts include a mediation clause that can be used before action is taken under the Act, or as an alternative to this. This clause provides that in the event of a dispute between owner and builder, either party can give the other party written notice of this. The parties must meet within 10 working days to attempt to resolve the dispute. If this attempt fails, they must meet with a mediator nominated by the organization specified in the contract. 

Note that the mediation procedure outlined in the contract does not prevent any party from making a mediation or work completion claim under the Act. It merely presents an alternative dispute resolution process that the parties can use. 

HIA has a non-exhaustive list of mediators that can be provided upon request. None are affiliated with HIA – the list has been developed to assist members to source a mediation professional. All people on the list are either based in or willing to travel to Tasmania to provide mediation services and all have their own fee structure and arrangement. 

To find out more, contact HIA's Contracts and Compliance team

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