The Building and Construction Industry (Security of Payment) Bill 2020 (WA) (Bill) was recently introduced to Parliament. The Bill, if adopted, will provide a new Act for securing payments under construction contracts, replacing the Construction Contracts Act 2004 (WA) (CCA). The Bill will bring the Western Australian security for payment regime into line with the regimes in place on the East Coast of Australia
The Bill will apply to new construction contracts executed after the legislation commences. Contracts already in place will remain regulated by the CCA. The Bill departs from the CCA in a number of significant ways.
Narrowing ‘mining exemption’
Under the CCA, many construction contracts for mining works and related good and services were not eligible to utilise the adjudication procedures to resolve payment disputes. The Bill narrows the CCA ‘mining exemption’ by removing ‘fabricating or assembling items of plant used for extracting or processing oil, natural gas or any derivative of natural gas, or any mineral bearing or other substance’ from the list of excepted activities. The result is a broader application of the security for payment provisions to the mining and resources industry.
Payment claims and schedules
The Bill provides claimants with a statutory right to issue payment claims and to receive progress payments (independent of the underlying contract between the parties). After receiving a payment claim, the respondent has 15 business days to pay the claim in full or issue a payment schedule setting out its reasons for paying less than the amount of the payment claim.
If a payment schedule is not given, the respondent becomes liable to pay the full amount of the payment claim.
Maximum payment periods
The maximum period for payment of payment claims (currently 42 days under the CCA) is:
- 20 business days after a payment claim is made in the case of payment to be made by a principal to a head contractor; and
- 30 business days after a payment claim is made in the case of payment to be made to a subcontractor.
Time to initiate adjudication:
The adjudication process is largely similar to the process under the CCA. However, the applicant will now have 20 business days to apply for adjudication (reduced from 90 business days). The respondent will then have 10 business days to provide a response to that application.
The respondent will be prohibited from submitting a response to the adjudication application if the respondent did not provide the claimant with a payment schedule. The respondent is also prohibited from raising additional issues in its response if those issues were not addressed in its payment schedule.
Review of adjudication determinations
Any review of an adjudication determination will be conducted by a senior adjudicator instead of the State Administrative Tribunal.
Either party has broad rights for review where the adjudicated amount differs from the amount in the payment claim or schedule (as the case may be) by an amount to be specified by the regulations. In the case of a claimant, this includes where the adjudicator determined that no amount was payable.
A respondent who has not provided a payment schedule has no right of review.
A party wishing to apply for a review must do so within 5 business days of the original adjudication decision (previously 28 days on application to SAT). The respondent may not apply for a review unless it has paid the adjudicated amount in a trust account for the benefit of the claimant.
In conducting the review, the senior adjudicator must not consider any reasons that were not raised by either party in the original adjudication. However, a party is allowed to provide submissions.
The senior adjudicator must make a determination within 10 business days.
Notice-based time-bar provisions
Most construction disputes involve arguments as to whether a claimant has provided notice of its claims (variations, extensions of time etc) within the time required by the contract. Courts generally strictly enforce these notice of claim provisions regardless of how harsh those provisions are.
The Bill proposes to empower an adjudicator, court or arbitrator to declare notice of claim provisions void if it considers those provisions are unfair in the circumstances. A provision may be deemed unfair if compliance with the provision is not reasonably possible or would be unreasonably onerous. The claimant will bear the onus of proof in arguing that the provision is unfair.
A party to a construction contract will only be entitled to have recourse to performance security if the party gives written notice of their intention to have such recourse. The notice must be given at least five business days in advance, identify the relevant provisions of the contract relied upon and the circumstances that entitle the party to that recourse.
Deemed trust schemes
In respect of construction contracts exceeding $20,000 in value, the principal will be required to establish a retention money trust account to hold funds as security for the contractor’s performance.
How can we help?
We are experienced in dealing with the CCA and security for payment legislation. We can help you navigate these new legislative amendments and provide practical advice. Please get in touch if you would like further detail regarding the proposed changes and how they might affect your business.