On 23 September 2020, the Attorney General Minister Quigley introduced the Building and Construction Industry (Security of Payment) Bill 2002 (WA) (the Bill) into Parliament.

If the Bill is adopted, it will replace the Construction Contracts Act 2004 (WA) (the CCA) and provide a new Act for securing payment under construction contracts in the building and construction industry in Western Australia. It will also provide a more harmonised national approach to security of payment disputes.

The CCA will continue to operate for construction contracts entered into before the commencement of the new Act.

The key features of the Bill are summarised below.

Item Description
1 Statutory payment claim process
  • Claimants have a statutory right to issue payment claims and enforce payment through court (for a statutory debt) or adjudication.
  • Respondents must issue a payment schedule within 15 business days after the payment claim is made.
  • Only a claimant can apply for adjudication of a payment claim.
2 Home building work

The Act will only apply to home building work where:

  • the principal is not an individual
  • the work is for multiple dwellings or for the purposes of a residential development business of the principal
  • the value of the contract exceeds $500,000
  • the contract is between a head contractor and a subcontractor, or other head contractor
3 Maximum payment period

The maximum payment period under the CCA has been reduced from 42 days to:

  • 20 business days after a payment claim is made by a principal to a head contractor;
  • 25 business days after a payment claim is made by a subcontractor;
  • For home building work – the date under the contract or if the contract does not provide any date, 10 business days after a payment claim is made.
4 Notice based time bars Notice based time bars terms under a construction contract will have no effect if they are declared unfair by an adjudicator, the court, an arbitrator or expert appointed by the parties. Time bars will be unfair if compliance is not reasonably possible or would be unreasonably onerous, taking into account:

  • When the party required to give notice would reasonably have become aware of the relevant event, having regard to the last day for notice to be given
  • When and how the notice was required to be given
  • The relative bargaining power of each party in entering into the contract
  • The irrebuttable presumption that the parties have read and understood the contract
  • The rebuttable presumption that the party required to give notice possesses the commercial and technical competence of a reasonably competent contractor
  • Whether the matters set out in the notice are final and binding
5 Pay-when-paid provisions

The pay – when – paid prohibition under the CCA will be broadened to prohibit terms in a construction that make:

  • Liability to pay an amount owing;
  • The due date for payment of an amount owing;
  • The making of a claim for an amount owing; and
  • The release of retention money or of a performance bond, contingent or dependent on the operation of another contract.
6 Time for bringing an adjudication application The time period for bringing an adjudication application is reduced from 90 business days to 20 business days.
7 Frivolous or complex claims An adjudicator may decide that an adjudication application is frivolous or vexatious, or too complex for a fair determination to be made within the time available. In those circumstances, the adjudicator must determine that no amount is payable and give reasons.
8 Adjudication process An adjudicator may call a conference of the parties, arrange for an inspection or testing to be carried out, or obtain an expert report.
9 Adjudication reviews Either party can apply for review of an adjudication determination in certain circumstances. That review is undertaken by another adjudicator (the ‘review adjudicator’). This process appears to allow a merits review of the original determination.
10 Christmas period The Christmas period exclusion has been expanded from any day that falls between 22 December to 10 January (inclusive).
11 Recourse to performance security affected A party to a construction will only be entitled to have recourse to performance security under the contract if it gives the other party five business days’ written notice of its intention to call on the security.
12 Deemed trust schemes A trust scheme has been introduced where retention monies are held on trust by the party to a construction party who retains the money and that party must ensure the money is paid into a trust account and only withdrawn in limited circumstances.
13 Registered adjudicator scheme The bill provides for certain conditions of authorisation and a code of practice for ANA’s and a registration scheme for adjudicators.
14 Model construction contracts The Building Commissioner may publish model construction contracts.
15 Building service contractors The bill establishes offences for registered building service contractors:

  • entering into a construction contract that is not in writing or does not contain certain mandatory information; or
  • contract variations not in writing.

Building service contractors without appropriate registration will not be entitled to issue a statutory payment claim under the Act.

Takeaways

When the Bill is passed the WA legislative regime dealing with payment disputes in the building and construction industry will be more consistent with the ‘east coast’ SOP model. The Bill introduces some interesting new protections for contractors working under unfair notice-based time bars and a new adjudication review process.

The Bill is currently in the WA Legislative Council and expected to commence in 2021. Morrissey Law & Advisory will keep you updated on further developments.

For more information on how this may affect you or if you require any assistance, please do not hesitate to contact Morrissey Law + Advisory.

Morrissey Law + Advisory communications are only intended to provide commentary and general information as at the date of publication. They are for reference purposes only, do not constitute legal advice and should not be relied upon as such. Formal legal advice should always be obtained about particular transactions, contracts or matters of interest before taking any action based on this communication. Authors and contributors may not be admitted in all State and Territories.