Changes to Construction Contracts in WA are finally upon us!

Change has arrived

After five years of legislative reviews at Federal and State levels, industry consultation and set-backs to the Parliamentary agenda thanks to COVID-19 and a State Election, Western Australia has finally passed long-gestating changes to the laws governing construction contracts and security of payment for contractors in the construction industry.

On 25 June 2021, the Building and Construction Industry (Security of Payment) Act (New Act) received Royal Assent in Western Australia. After commencement the new Act will serve to:

• replace the ongoing operation of the Construction Contracts Act 2004; and
• amend the Building Services (Registration) Act 2011 and the Building Services (Complaint Resolution Administration) Act 2011.

The purpose of the New Act was for Western Australia to draw closer to harmonisation with security of payment legislation across Australia, adopting the "East Coast" model for payment claims and adjudications. However, the New Act goes further by introducing new protections for contractors that are much greater those legislated anywhere else in Australia.

Highlights - What you need to know!

More than giving us a more complicated legislated name to work with (the BCISOPA doesn't quite roll off the tongue like the CCA), key changes arising from the New Act include:

• Narrowing types of "construction contracts" - the New Act does not apply to "low value" home building contracts and construction performed as a condition of a loan agreement.
• Narrowing the "mining exclusion" - construction works now include fabrication and assembly of plant for drilling / extracting / processing of oil / natural gas / mineral substances.
• Reducing Due Dates for Payment - principals are liable to pay head contractors within 20 business days after and payment claim and contractors are must pay subcontractors within 25 business days.
• Narrowing Payment Claims to "up-stream" claims - Payment Claims can only be made for "progress payments", meaning "down-stream" claims are no longer protected by security of payment laws.
• Streamlining the "rapid" adjudication - deadlines to make applications are shorter and the right to respond is significantly restricted by a new "Payment Schedule" system.
• Prohibition on "Unfair Notice-Based Time Bars" - Courts and adjudications can now declare contractual time-bars as unfair and void if they are not reasonably possible or unreasonably onerous - a new prohibition that is not replicated anywhere else in Australia!
• New rights and restrictions on performance security and retention moneys - a new trust scheme is introduced, requiring the beneficiary of the retention to set up a trust account, with new rights and penalties arising. Recourse to performance security is also restricted by new notice provisions.

What you need to do!

With commencement of the New Act ever-imminent, it is vital that businesses in the construction industry:

1. Consider whether your contracts / services fall within the definitions under the New Act.
2. Review your contracts to ensure that you will not be in breach of any new statutory prohibitions.
3. Update your payment terms and procedures for making and/or responding to payment claims.
4. For principals / head contractors - ensure you are ready for the new trust scheme for retention moneys.
5. Review your standard notice provisions and consider - are they unfair?

More Information

Back in 2020, when the draft legislation was first circulated to the industry, HFW had a Two-Part series, highlighting the important changes that were proposed.

Remarkably, no changes have been made since the New Act was in draft form, so I encourage you to revisit HFW's articles for more information on the changes under the New Act.

The links are set out below.

Part 1 - Changes to Adjudications in WA

Part 2 - Changes to Construction Contracts in WA

If you have any specific questions about the New Act and wish to discuss what the changes mean for your business, please do not hesitate to contact myself and the HFW construction team.