WA Introduces New Building and Construction Industry (Security of Payment) Bill 2020

The Building and Construction Industry (Security of Payment) Bill 2020 (WA) (the Bill) was introduced into the WA Parliament on 23 September 2020 by Mr J.R. Quigley MLA (the Minister for Commerce).  The stated purpose of the Bill is to provide better payment protections to contractors working in the WA building and construction industry to "ensure they get paid on time, every time". 

The Bill delivers on the Government’s election commitment to provide better protections to subcontractors and suppliers working in the WA building and construction industry. In his second reading speech the Minister stated:

The Bill also implements many of the remaining recommendations made by Associate Professor of Law John Fiocco in his report to the Government – Final Report to the Minister for Commerce: Security of Payment Reform in the WA Building and Construction Industry (delivered October 2018).

Overview

To achieve its purpose the Bill proposes reform across three key areas, as follows:

• Making the new security of payment laws more consistent with those in other Australian states and territories, including the best practice recommendations from the Commonwealth Governments’ national review in 2017 – Review of Security of Payment Laws: Building Trust and Harmony (delivered December 2017).
• The better protection of cash retention and security in the event of an insolvency through a deemed trust scheme that will apply across the contracting chain.
• The expansion of the powers of the Building Services Board (the Board) to take action against building service providers who fail to pay court and adjudication debts and exclude those with a history of financial failure from the building industry.

Some of the more notable changes proposed by the Bill include:

• Providing for unfair time-bars to be rendered void and changing in maximum time for payment of payment claims – the current maximum allowable period for payment being 42 days.  The Bill will reduce the maximum allowable time for payment, which will vary in accordance with the claimant’s position in the contracting chain.  For example, claims from head contractors to principals/owners will now need to be paid within 20 business days of the claim (or any lesser period in the contract); claims by subcontractors to head contracts paid within 30 business days (or any lesser period in the contract);
• The rapid adjudication process will be amended to be more consistent with similar processes applying in the eastern States, and include the concept of payment schedules. If a respondent fails to provide a payment schedule, they will not be entitled to provide an adjudication response. If a respondent provides a payment schedule, the adjudication response will be limited only to the reasons for withholding payment set out in the payment schedule. This will encourage respondents to consider and articulate their reasons for withholding payment at an early stage; and
• The introduction of a deemed retention trust scheme. The scheme will apply across the supply chain in WA whenever cash retention or security is withheld under a construction contract, despite any term in a contract to the contrary.

New security of payment laws to speed up cash flow to contractors: The Bill in Parts 2 (Construction contracts and right to progress payments), 3 (Procedure for obtaining progress payments), 5 (Nominating authorities, adjudicators and review adjudicators) and 6 (Miscellaneous) introduces new security of payment laws into WA to ensure that those who carry out construction work can get paid, and any disputes can be resolved quickly and inexpensively so works can continue. 

Retention trust scheme to protect retention monies in insolvency: The Bill in Part 4 introduces a new deemed retention trust scheme into WA - a scheme that is aimed at reducing the risks to builders, subcontractors and suppliers where their immediate contractual counterpart on a project becomes insolvent by "ring-fencing" retention money to ensure it is not available for distribution to general creditors. This is proposed to be achieved through deeming, by force of law, retention money to be held on trust from the moment it is held or withheld as a performance security under a construction contract.

Strengthening WA’s building services legislation: The Bill in Part 7 proposes to enhance the powers of the Board to manage the commercial conduct and behaviour of registered building service providers under the Building Services (Registration) Act 2011 (WA), providing better protection to the industry and consumers against incompetent and predatory operators.

With respect to insolvency events and phoenixing, the Board will have the power to exclude an individual, non-corporate body or corporate body as from registration where an "insolvency event" has occurred. This will enable the Board to target problematic "phoenixing" behaviour where it is brought to its attention. The power may be exercised by the Board at the point in time of an application for the grant or renewal of building contractor registration, or in relation to a building service contractor who is already registered, through the issuance of a "show cause" notice.

In the case of an unpaid building service debts and other offence penalties, failure by a building service provider to pay a "building service debt", being an unsatisfied court judgement debt or adjudication determination, will under the Bill also be a disciplinary matter for which the Board can take action against the provider. Further, applicants for the grant or renewal of registration will also need to demonstrate to the satisfaction of the Board that they do not, at the time of making the application, have a building service debt. The maximum fine penalty for the offences of obstruction or failing to comply with directions of an authorised officer under the Building Services (Complaint Resolution and Administration) Act 2011 (WA) is to be increased to $25,000 to reduce the incentive for deliberate obstruction of investigations into other offences under the Bill.

The Bill is currently at second reading stage in the WA Legislative Assembly and in his speech, the Minister emphasised:

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Building and Construction Industry (Security of Payment) Bill 2020 (WA), second reading speech and explanatory memorandum available from TimeBase's LawOne Service.

Brief Explanatory Statement - Building and Construction Industry (Security of Payment) Bill 2020 (WA) – Exposure Draft (WA Government Department of Mines, Industry Regulation Building and Energy)

Final Report – Security of Payment Reform in the WA Building and Construction Industry (Department of Mines, Industry Regulation Building and Energy)

Review of Security of Payment Laws (Australian Government - Attorney General's Report)