Changes imminent for construction industry Western Australia launches new Security
01 July 2021
01 July 2021
On 22 June 2021 the Western Australian Parliament passed the Building and Construction (Security of Payment) Bill 2021 (WA). Royal Assent was given on 25 June 2021, making the Bill an Act. The Act overhauls security of payment legislation in WA.
The Act will supersede the existing CCA and in doing so will:
The Act brings Western Australia closer in line with what is typically referred to as the "East Coast Model", being security of payment legislation in place in New South Wales, Queensland, Victoria, South Australia, Tasmania and the ACT. The Act includes a number of new concepts not seen in other jurisdictions.
Key changes introduced by the new Act include:
The Act sets due dates for payment of construction work, depending on the parties involved.
The due dates require a principal to make payment to a head contractor within 20 business days after a payment claim is made. A contractor is required to make payment to a sub-contractor within 25 business days after a payment claim is made.
A respondent is entitled to provide a response (referred to as a payment schedule) to a payment claim. The delivery of a payment schedule is significant as:
Under the CCA, the term "construction work" did not include fabricating or assembling any plant that was to be used for extracting or processing oil, natural gas or any other mineral bearing substance. This exclusion meant that most construction work on large mining and oil and gas projects in WA was not covered by the CCA.
The new Act narrows the "mining exclusion", with the result that mining and energy companies will need to consider the Act when considering new developments.
Contractual clauses that requires a party to give notice or exercise a right within a fixed time-frame are common in construction contracts. These "time bar" clauses are usually enforced, even where the outcome can be seen as harsh. The giving of notices in the form required is therefore a key feature of the administration of construction contracts.
The new Act contains provisions that allow a decision-maker (such as an adjudicator, a court, an arbitrator or an expert) to declare a time bar "unfair" and therefore of no effect. The party alleging that a notice-based time bar is "unfair" bears the onus of proof.
The prohibition on unfair time bar provisions is new and is not a feature of security of payment legislation in other Australian jurisdictions. Contractors and principals should review any new construction contracts in light of this prohibition.
The Act states that a party is not entitled to have recourse to a performance security unless it gives the other party five business days' written notice of its intention to have recourse to the security. The rationale behind this requirement is to give contractors the ability to rectify any default. Though it will also give contractors forewarning of the demand and potentially provide contractors with the time needed to seek injunctive relief in Court to prevent the demand on the performance security.
Retention money refers to funds payable to a contractor for having performed construction work, but which is held as security until works are complete.
The Act introduces a trust scheme that requires retention money to be placed into a dedicated trust account which can only be accessed in limited circumstances.
The introduction of a trust account will provide increased protection for contractors, though will increase the cost of administering construction contracts.
A requirement to place retention money into a trust account.
The operative provisions of the Act will come into force soon and in light of this:
Mining and energy companies should review any new developments to consider whether the Act will apply and update their contracts and policies accordingly.
Author: Matthew Blycha, Partner.