The Bill dismisses the present WA security of payment regime in favour of one that operates in the East Coast States. The Bill sources from recommendations to the Commonwealth by the Murray Review in 2017 as well as the Fiocco Report commissioned by the WA government.
Efforts to achieve these reforms has progressed with speed, via by the appointment of Adjudicate Today as a Prescribed Appointer (renowned in the east coast as an Authorised Nominating Authority) in accordance with the standing Construction Contracts Act (CCA). Contracts created after the bill is in effect will be completed in accordance with the new provisions; while contracts cultivated prior to commencement will continue under regulation from CCA.
The Bill presents measures to enhance fairness in contracting, including the voiding of unreasonable time-bars and a wider barring of ‘paid-when-paid’ provisions, and mandating that specific contracts will be in writing and adhere to minimum standards.
In keeping with security of payment laws in other Australian states and territories, anyone who completes or intends to execute construction work or to provide related goods and services will maintain the right to be paid and to designate a monthly claim for payment, or with greater frequency if designated in the contract.
A payment claim can consist of a progress claim, final payment claim, single claim or milestone payment. A payment claim can solicit the return of performance security held back in accordance with the construction contract (e.g., bank guarantee or retention money), or the substituting of retention money for other performance security.
In a situation in which a party to a construction contract is entitled to compensation (the claimant), submits a pay claim, the party getting the claim (the respondent) will be mandated to either pay the claim in total in a designated timeframe, or supply a payment schedule in 15 business days specifying reasons for not giving compensation.
Progress payment claims can be submitted by the claimant up to 6 months following the day the works were executed or goods and services provided.
The timespan for claim payment will rely on the claimants’ position in the contractual chain. Claims sent down from head contractors to principals and owners must now be paid within 20 business days of the claim (or any shorter interval in the contract); claims lodged by subcontractors to head contracts paid in 30 business days (or any shorter interval in the contract); and claims involving specific styles of residential works in the period outlined in the contract, or 10 business days, if there is no predetermined interval in the contract.
If a respondent does not supply a pay schedule in 15 business days and render payment, the claimant will have the right to choose to refer the issue for quick adjudication, or recover the money claimed as a debt in court.
The rapid adjudication procedures will be more in line consistent with those established in other Australian states and territories and will be known to parties who do business across Australia.
Claimants must apply for adjudication within 20 business days of getting the payment schedule. If no pay is made by the due date, claimants must supply the respondent with an additional chance to supply a pay schedule in 5 business days, before the application for adjudication can be submitted.
Respondents who do not submit a pay schedule won’t be entitled to submit an adjudication response, but respondents that do submit a pay schedule will be limited to only the justifications for withholding payment outlined in the pay schedule. This will guarantee that claimants are totally cognisant of all of the justifications for withholding payment before seeking out quick adjudication.
Once the adjudication application is rendered the registered adjudicator (appointed by the parties, or an authorised authority) can render a decision in as few as 10 business days, if no adjudication response is supplied or allowed, or in 10 business days if a correct adjudication response is supplied.
Any pay to be supplied, including the return of performance security, binds on the parties and can be enforced in court. Claimants and respondents will be held liable in equitable shares for the registered adjudicator’s fees, unless decided otherwise. Neither party is entitled to legal costs as delivered by the other.
The Bill presents an adjudication review mechanism for some varieties of decisions. Reviews will be completed by a senior adjudicator in accordance with the application of one of the parties within 5 business days of the initial adjudication finding.
The Bill also presents a novel deemed retention trust scheme in WA. This scheme will lessen the risks to builders, subcontractors and suppliers in instances where their immediate contractual counterpart on a project is rendered insolvent by ring-fencing retention money to guarantee its availability to distribute to general creditors. Often retention money can stand as a symbol of a business’s whole profit margin on a project.
In an instance in which a party to the construction contract is withholding retention money or cash security (the trustee), they will be obligated to store these monies in a dedicated trust account at an approved bank to benefit the party who supplied the money (the beneficiary). Trustees will have the alternative of creating a single trust account, or several trust accounts for each beneficiary or project.
The trustee only can withdraw the funds from the trust account to the extent they are contractually entitled to do so, like if they must repair defective works. The cash can’t be withdrawn to pay other debts of the trustee (such as business overheads, wages, etc.) or invested. Unless otherwise agreed, the trustee will be able to receive any interest earned on the funds contained in the trust account to cover extra book-keeping or administrative fees. Trustees will be necessitated to keep account records and provide them for inspection on reasonable notice as made by the beneficiary.