In Alphington Developments Pty Ltd v Amcor Pty Ltd [2025] VSCA 48, the Victorian Court of Appeal considered whether the contractual machinery for certification of works to provide for payment under a contract had failed. Further, the Court outlined the circumstances in which the Court may step in and provide an alternative for determination of the amount for payment.

Background

Alphington Developments (referred to in the judgment as Glenvill) had purchased a paper mill in Alphington from Amcor to build a housing development. The contract provided a mechanism whereby Amcor would compensate Glenvill for the cost of dealing with unidentified contamination (UC) found on the site, following certain contractual requirements.

Once work commenced, significantly more UC was discovered on site than anticipated making it difficult to comply with the contractual process. Accordingly, the parties agreed to abandon the process of having a consultant value the UC as it was uncovered. Instead, the parties decided to retrospectively assess the remediation costs after the works were complete.

Decision

At trial Glenvill unsuccessfully argued, among other things, that there had been a failure in the contractual machinery of the contract by reason of the changes made to it, requesting the Court step in and impose a mechanism for determination of payments under the contract to be made. However, the Court of Appeal allowed Glenvill’s appeal (Lloyd JA dissenting on this point).

Walker and Whelan JJA found that the parties had substantially altered the contractual process, changing it from a prospective to a retrospective method of assessing remediation costs for the UC. By reason of the course of conduct chosen by the parties the Court concluded the machinery for determination of the amount for payment had been effectively abandoned, but the underlying obligation to pay the remediation costs remained.

The Court confirmed that if the contractual machinery that failed was not essential to the main purpose of the contract, the Court will generally step in and provide alternative machinery. In this regard, the Court noted that if the amount to be determined is a ‘fair’, ‘reasonable’ or ‘market’ value to be ascertained by applying objective standards, the machinery used to determine the amount is likely to be non-essential. If the machinery is non-essential and has failed or the contract part performed, the Court may provide alternative machinery to determine the amount to be paid.

As the parties had agreed that the Court was to resolve all disputes, the Court concluded that the role of the consultant had become redundant in relation to the UC determination process and in the circumstances the Court was permitted to provide an alternative mechanism to determine Amcor’s liability to pay the remediation costs. Walker and Whelan JJA emphasised any mechanism needed to provide a final resolution for all unresolved amounts, whether they had been disputed or not, as the entire machinery had failed.

Their Honours therefore concluded that the appropriate mechanism was for the Court to determine:

• the works that were necessary to remediate the UC; and
• the costs Glenvill properly and reasonably incurred in carrying out those works.

Having determined the mechanism, the Court of Appeal remitted the decision to the Supreme Court to review the evidence and make the determination.

Amcor has sought special leave to appeal in the High Court.

The full judgment can be read here.