Like groceries, fuel and insurance, the cost of going to Court is rapidly rising. Lawyers, barristers, filing fees and experts all come at a price, but that’s not the only cost.
The distraction from ‘business as usual’, lost time, and the sometimes years of associated stress, make litigation unattractive for many in the construction industry. Even a win in Court is often hollow, with difficulty enforcing a judgment against a company that may have been bled dry by the process. This, combined with persistently high levels of insolvency in the industry, has driven the popularity of alternative dispute resolution (ADR).
Recent changes to the AS4000 contract, a foundational contract for literally thousands of construction projects in Australia each year, reflect the industry’s appetite to choose how disputes are resolved, often removing Courts from the equation altogether.
The options
There is no ‘one size fits all’ method for resolving disputes, but four options have gained traction in Australian construction in recent years.
- Adjudication: Since the introduction of the Building and Construction Industry Security of Payment Act 1999 (NSW) this statutory process has grown steadily in popularity. It’s quick, relatively inexpensive and conducted entirely in writing. Rules of evidence don’t apply, there’s no sitting in a witness box or face-to-face confrontation, and it can be effective at securing cash flow. However, its tendency to favour contractors can often have a nuclear effect on client relationships, and the strict timeframes can trip up first timers.
- Mediation: A confidential negotiation, facilitated by an impartial mediator and with a focus on resolution, mediations are popular if there’s a hope of preserving the relationship, or if difficult personalities would benefit from the early intervention of a trained third-party mediator. Most Courts will require parties to attempt mediation before being allowed a trial date, so lawyers will commonly recommend mediation at an early stage.
- Expert Determination: Adopted as the default ADR process in standard GC21 Government contracts in NSW, expert determination has grown in popularity since. It allows technical disputes to be decided by an independent third-party expert, often with the benefit of detailed evidence and submissions.
- Arbitration: The most formal ADR method, arbitration resembles Court but is privately determined by an arbitrator with more flexible procedures than a courtroom. It is popular on international or cross-jurisdictional projects, or if confidentiality is paramount, but costs can rival those of litigation.
A natural fit
It’s no surprise that the construction industry is a natural fit for ADR. Disputes can be technically complex, cash flow is often paramount to project success, and certain Courts (particularly lower level Courts like the Local Court) are ill-equipped to handle the timely resolution of these disputes.
Recent changes to AS4000 (the latest edition being AS4000:2025) recognised this, giving contracting parties options to decide how best to resolve disputes in the context of each project.
The former ‘only arbitration’ clause now includes five ADR avenues that parties can choose from:
- Traditional pathway: Negotiation → Arbitration or Litigation
- Mediation pathway: Negotiation → Mediation → Arbitration or Litigation
- Expert determination pathway: Negotiation → Expert Determination → Arbitration or Litigation
- Long way: Negotiation → Mediation → Expert Determination → Arbitration or Litigation
- Prevention pathway: Negotiation → Dispute Avoidance Board → Arbitration or Litigation.
Looking ahead
From legislation, on-the-ground experience, and industry standards, the construction sector is moving disputes out of the Court room whenever possible. The AS4000:2025 recognises that one size does not fit all, and that giving parties ownership of the dispute process can lead to better outcomes.
Understanding the options available, reviewing dispute resolution clauses before signing, and seeking legal advice early are key ways to stay out of the Court room.
This article was co-authored with contributions from Charlotte Coakes-Jenkins, Paralegal.
Further information / assistance regarding the issues raised in this article is available from the author, Sarah Hammond, or your usual contact at Moray & Agnew.
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