WA Introduces Building Industry Security of Payment Legislation

The Building and Construction Industry (Security of Payment) Bill 2021 (WA) ("the Bill") was introduced into the Western Australian Legislative Assembly on 25 May 2021 by the Minister for Commerce Amber-Jade Sanderson ("the Minister").

The Bill was originally introduced as the Building and Construction Industry (Security of Payment) Bill 2020 (WA) ("the 2020 Bill") on 23 September 2020 into the Legislative Assembly. It passed the lower house, however lapsed as Parliament was prorogued on 7 December 2020. 

The Bill mirrors the 2020 Bill with the exception of some technical drafting changes and consequential amendments. The 2020 Bill was discussed in an earlier Timebase article.

The purpose of the Bill is to propose better payment protections for contractors working in WA’s building and construction industry to ensure timely payment for their services.

In her second reading speech, the Minister comments that the Bill recognises:

Background

The purpose of the Bill is to propose better payment protections for contractors working in WA’s building and construction industry to ensure timely payment for their services.

If passed, the Bill would amend the:

• Building Services (Complaint Resolution and Administration) Act 2011 (WA)
• Building Services (Registration) Act 2011 (WA)
• Construction Contracts Act 2004 (WA) ("the CCA")
• Procurement Act 2020 (WA)

The amendments proposed by the Bill seek to implement many of the recommendations made by barrister and Adjunct Associate Professor of Law John Fiocco in his report to the Government on the question of security payment. The Security of Payment Reform in the WA Building and Construction Industry Final Report ("the Report") was presented to the Minister for Commerce in October 2018. The Report was the culmination of a six month consultation process and included recommendations for reform to improve protections for subcontractors.

Key Reforms Proposed

The Bill proposes reform in three key areas to achieve its purpose.

Firstly, the Bill seeks to introduce new security of payment laws that are more consistent with those in other Australian states and territories, including some of the best practice recommendations from the Federal Government National Review conducted in 2017.

These amendments aim to speed up cash flow to contractors and improve dispute resolution processes to be more timely and inexpensive. These improvements would allow for faster return to work when disputes occur. The new laws would apply only to construction contracts entered in WA after its commencement. The existing security of payment laws under the CCA, would continue to apply to any contracts entered into prior to the commencement of the new laws.

Secondly, the Bill proposes a new retention trust scheme to protect retention monies in case of insolvency. The new trust scheme seeks to reduce the risks to builders, subcontractors and suppliers if the immediate contractual counterpart on a project becomes insolvent. The scheme would do so by "ring-fencing" the retention money. This would stop distribution of the money to general creditors. The amendments would require the retention money to be held on trust from the moment it is held or withheld as performance security under a construction contract.

Finally, the Bill provides for key amendments that seek to expand the powers of the Building Services Board ("the Board"). The Board's new powers would allow it to take action against building service providers who fail to pay court and adjudication debts. These powers would also allow the Board to exclude those with a history of financial failure from holding a registration.

In her second reading speech, the Minister says that these amendments would enhance the powers of the Board to manage the commercial conduct and behaviour of registered building service providers. The amendments to be made to the Building Services (Registration) Act 2011 (WA) would improve current measures to better protect the industry and consumers against incompetent and predatory operators.

With respect to "insolvency events and phoenixing" the Board would have the power to exclude an individual, non-corporate body or corporate body from registration where an ‘insolvency event’ has occurred. This will enable the Board to target problematic "phoenixing" behaviour brought to its attention. Such 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.

Additionally, the Bill also proposes changes to unpaid building service debts and other offence penalties. The failure by a building service provider to pay a "building service debt", if they were unsatisfied with a court judgement debt or adjudication determination. The matter would also be considered to be disciplinary in nature, for which the Board can take action against the provider.

Further, applicants for the grant or renewal of registration would also need to demonstrate, to the satisfaction of the Board, that they do not have a building service debt at the time of application. The maximum fine penalty for the offences of obstruction or failing to comply with directions of an authorised officer under the Building Services (Registration) Act 2011 (WA) will also been increased to $25,000 to reduce the incentive for deliberate obstruction of investigations into other offences under the Bill.

The reintroduced Bill has passed the Legislative Assembly and is yet to pass the Legislative Council.

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Building and Construction Industry (Security of Payment) Bill 2021 (WA) and explanatory materials available on TimeBase's LawOne Service.

Final Report to the Minister for Commerce Security of Payment Reform in the WA Building and Construction Industry (Western Australian Department of Mines, Industry Regulation and Safety, October 2018)

Review of Security of Payment Laws Building Trust and Harmony (Australian Government Department of Jobs and Small Business, December 2017)