Some good news for construction contractors in WA (but admittedly not the best for principals) – getting paid will now be easier under new Security of Payment laws.
After much prolonged hype about the security of payment changes in Western Australia, the Western Australian Parliament has finally passed the Building and Construction (Security of Payment) Bill 2021 (WA).
The new Building and Construction Industry (Security of Payment) Act 2021 (SOP Act) will apply to all new construction contracts entered into after a proclamation is declared commencing the operative provisions on the SOP Act.
The old Construction Contracts Act 2004 (CCA) will still apply to contracts entered into before then, so you need to ensure that your team is fully aware of which regime applies to each contract.
The move brings the WA security of payment laws more in line with other Australian States like Queensland and New South Wales, and provides better protections for contractors to ensure they’re paid on time.
The SOP Act provides more effective avenues to recover payment for the following reasons:
- payment claims take the spotlight;
- judgment debts for the non-issuing of payment schedules; and
- time bars can be declared void.
Payment claims take the spotlight
Thankfully there is now a statutory entitlement to issue payment claims, so we can say goodbye to “implied payment claim” clauses.
The main benefit here is that there is no need to decipher whether the contract amends or excludes the previous implied terms in the CCA. Instead the right to issue payment claims is a given right provided that the requirements of the SOP Act are met.
It is now as simple as this:
- A contractor who has entered into a construction contract to perform works is entitled to a progress payment;
- Anyone who is entitled to a progress payment, is entitled to issue a payment claim.
However there is one caveat that was not previously in the CCA: contractors must issue payment claims within 6 months after the construction work to which the payment claim relates was last carried out.
The form requirements for payment claims are similar to New South Wales, requiring that payment claims:
- be in writing in the approved form (if any);
- indicate the amount of the progress payment that the claimant claims is payable by the respondent (the claimed amount);
- describe the items and quantities of construction work, or related goods and services, to which the progress payment relates;
- state that it is made under the SOP Act; and
- include any other information required by the regulations.
Judgement debts for the non-issuing of payment schedules
A major leverage point included in the SOP Act that’s not contained in the CCA is the ability to recover claimed amounts as a judgment debt when the respondent fails to issue a payment schedule.
Previously, if respondents actively ignored claims there was no ready ability to march off to court.
Now, parties will need to respond to payment claims or otherwise risk exposing themselves to liability for the whole claimed amount as a debt due and owing.
Time bars can be declared void
There is nothing worse than having a claim that would otherwise be valid being denied due to unreasonable time bars for variation and EOT claims.
The SOP Act now attempts to resolve this issue by allowing adjudicators to declare time bars void if compliance with the time bar:
- is not reasonably possible; or
- would be unreasonably onerous.
This drastically departs from the principal-favoured provisions that were previously contained in the CCA. That said, given the general reluctance of Courts to depart from commercial terms agreed to by parties, it will be interesting to see how often an adjudicator is prepared to make the necessary findings to actually use this section.
Power to the claimant
There are also additional rights for claimants to enforce against respondents, including:
- the right to suspend works; and
- the right to issue a lien over unfixed plant and materials.
However in what many think a controversial move, one of the more significant protections for claimants is that it is now an offence for a respondent to be “intimidating or threatening” to claimants, which includes indirectly threatening a claimant in relation to their entitlement to progress payments.
Of course in the land of commercial reality this is a common issue – claimants are reluctant to press claims against principals who tend to then find ways to simply avoid making any payments at all until a resolution is reached. Again it will be interesting to see how this provision plays out in practice, and what is considered “intimidating or threatening”.
The SOP Act now also prevents down-the-chain adjudications as previously allowed in the CCA. Adjudication applications can only be brought up the chain. For example, principals can no longer lodge adjudication applications against head contractors; only the head contractor could initiate the adjudication.
What do these changes mean for you?
For any existing projects you’re already working on, nothing should change. You should carry on with the project as before and the CCA will continue to apply for that contract.
However, for any new jobs coming up, the new SOP Act may apply. You should also get careful advice if you are working on multi-stage developments or larger projects with multiple components, so that you are sure which act applies to that ongoing work. Depending on how that work is documented you might find that the same project is governed by both acts at different stages.
For national contractors, it will likely be the case that a couple of simple changes can be made to template payment claims to ensure that they are valid under the SOP Act.
If you need a hand with updating your contract documents or understanding the impacts of the new changes for your projects, get in touch with us and we’d be happy to help.
Batch Mewing wish to acknowledge Tayla Jansen’s assistance in the research and preparation for this article.