Changes to the Construction Contracts Act 2004 (WA) will significantly impact the position of principals/head contractors to construction contracts.
On 22 September 2016, the West Australian Government introduced the Construction Contracts Amendment Bill 2016 (WA) to State Parliament. According to the relevant ministers' media release, the Bill is intended to improve the position of subcontractors under the Construction Contracts Act 2004 (WA), by amending some of the time periods under the Act, allowing adjudication of previously rejected or disputed claims and providing a faster and more efficient enforcement process.
Measurement of time limits
The Bill changes the measurement of time limits under the Act from "days" to "business days". For instance, the time for lodging a response to an adjudication application under section 27(1) and the time for an adjudicator to determine or dismiss the application under section 31(2) have been changed from "14 days" to "10 business days". This will alleviate the annual difficulty which was caused by the need to respond to or make determinations in adjudication applications served shortly before Christmas.
Time to pay payment claims
The Bill reduces the maximum time allowable under a construction contract for the payment of payment claims from 50 days to 30 days. Note that the amended time is still measured in days, not business days.
Time to make application for adjudication
The Bill significantly extends the time under section 26(1) of the Act for the making of an adjudication application from 28 days to 90 business days. This is a very significant increase from 4 weeks to 18 weeks or more. Given that one of the core purposes of the Act is the speedy resolution of payment disputes, it is difficult to see how such a significant increase is justified. It also makes the principal's position through the term of the contract less certain.
Adjudication of previously rejected or disputed claims
By far the most significant amendment effected by the Bill is the amendment of the definition of "payment claim" to allow for previously made claims, rejected or not, to be recycled. Coupled with the new section 6(2), the amended Act now allows previously made claims, even if they have been rejected, to be recycled as many times as the claimant wants. This ability makes any time limit on making a claim effectively meaningless. Now, if a claimant misses the 18 week time limit for making an adjudication application in respect of a rejected claim, it can simply make the claim again and it will have a further 18 weeks from the claim again being rejected to make the application.
There is no limit on how many times this can be done. The only limit on this is that a payment dispute will not arise in respect of matters included in a payment claim that have been the subject of an application for adjudication that was dismissed or determined under section 31(2).
Enforcement of adjudication determinations
Under section 43 of the Act, a determination could be enforced in the same manner as an order or judgment of the Court, but only where leave was given by the Court. That required the exercise of a discretion by the Court.
The Bill simplifies this position by allowing a party that is entitled to be paid an amount pursuant to a determination to file a copy of the determination (certified by the Building Commissioner) and an affidavit as to the amount not paid pursuant to the determination. Once this is done the determination is taken to be an order of the court and can be enforced accordingly.
Commencement and transition to new provisions
The Bill will commence on 15 December 2016, except in respect of the reduction in the time to pay a payment claim. The new 30 day payment claim limit applies to contracts that are entered into after 3 April 2017.
Any time under sections 26(1) (applying for adjudication), 28(1) (appointment of adjudicator) or 29(2)(b) (authorisation of disqualified adjudicator) that expires before 15 December 2016, but is extended by section 8, 10 or 11 of the Bill, may be done within the extended period.
A notice under section 42(1) (suspension of contractor obligations) purportedly made on or after 15 December 2016 but before 1 January 2017, but not in compliance with section 42(2)(d), is taken to be as valid and effective as it would have been had the Bill not amended the Act.
The Bill introduces significant changes to the Construction Contracts Act 2004 (WA). The biggest change is to allow for the adjudication of previously rejected or disputed payment claims. Coupled with the extension of the time to make an application for adjudication, the changes significantly impact the position of principals/head contractors to construction contracts.
Whereas previously, principals could have some level of certainty that once the 28 days for making an adjudication application had expired, they would not be subjected to an adjudication application, that will no longer be the case. Principals, or contractors who retain subcontractors, are now exposed to adjudication applications for an indefinite period, potentially even years after the project was completed.
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.