The Building and Construction (Security of Payment) Act 2021 (WA) is here: are you SOPA ready?

By Dalitso Banda

12 September 2022

The Building and Construction (Security of Payment) Act 2021 (WA) (SOPA) recently came into effect, bringing several significant changes of which parties to construction contracts should be aware.

The SOPA will be implemented in three phases. Phase one, which commenced on 1 August 2022, introduced new security of payment laws and changes to the adjudication regime.

Who is affected by the SOPA?

The application of the SOPA is complex. Before the introduction of the SOPA, the Construction Contracts Act 2004 (WA) (CCA), which is now named the Construction Contracts (Former Provisions) Act 2004 (WA), applied to all “construction contracts”. The term “construction contracts” was broadly defined and meant that, other than an exclusion in relation to contracts for works associated with mining, oil and gas, the CCA applied to the great majority of contracts entered into in the Western Australian residential, commercial, civil construction industries¹.

The contracts to which the SOPA applies are similar to those set out in the CCA. However, its application has been broadened in some respects and limited in others. For example, the SOPA applies to:

• contracts for fabrication of mining, oil and gas plant and equipment (excluding watercraft) which would previously have been excluded under the CCA²; and
• some contracts for home building work³.

The SOPA incorporates a number of other inclusions and exclusions, meaning that parties entering into contracts after 1 August 2022 will need to consider the type of work their contract relates to, and the relationship between the parties to the contract, in order to determine whether the SOPA applies.

A new adjudication regime

Based on the ‘East Coast’ model, the SOPA brings with it a number of changes. Some of the most critical changes are set out below.

The content of payment claims and responses under the SOPA will be governed by much stricter rules

• Parties making a payment claim must include certain information in the claim document, along with a statement that the claim is made under the SOPA. A failure to include the required information, or the statement that the claim is made under the act, will mean a claim is not a valid “payment claim” for the purpose of the SOPA cannot be adjudicated using the statutory recovery mechanism⁴.
• Parties receiving a payment claim must provide a response, in the form of a payment schedule, within 15 business days after the claim is made⁵. A failure to provide a valid payment schedule within the 15-business day period:
  • will mean that a respondent is deemed to be liable for the whole amount of the claim⁶; and
  • may lead to a respondent being prevented from responding to an application for adjudication⁷, or having limited scope to argue that the payment should be withheld⁸.

A claimant may choose to issue court proceedings, rather than to adjudicate a payment dispute

• A claimant may commence debt recovery proceedings in court, and a respondent will not be entitled to make a cross claim or raise a defence⁹, if:
  • a respondent responded to a payment claim by giving a payment schedule within the 15-business day period, and the schedule indicated that there was an amount payable, but the respondent did not pay the scheduled amount in full by the due date; or
  • a respondent failed to give a payment schedule within the 15-business day period, and failed to pay the full amount of the payment claim by the due date.

Adjudications will progress much more quickly

• An adjudication determination will be provided a maximum of 60 to 70 business days after the date of the rejection or non-payment of a claim (unless the parties agree to extend the time for the adjudicator’s determination) compared to the ~110-business day period under the CCA.

In certain cases, adjudicator’s decisions will be subject to a review process

• A claimant may apply for a review of an adjudicator’s determination if the amount awarded to the claimant is more than $200,000 lower than the amount claimed in the payment claim¹⁰.
• A respondent may apply for a review of an adjudicator’s determination if the amount awarded to the claimant is more than $200,000 higher than the amount stated to be payable in the respondent’s payment schedule.

What does this mean for my business?

You need to get advice about whether your contracts come within the SOPA regime.

If you are party to a contract to which the SOPA applies, and you consider that disputes are likely to arise in relation to a claim you are required to submit or respond to, you need to be aware of these requirements, and to ensure your contracts and payment claims, or payment schedules (as the case may be) meet the minimum content requirements set out in the SOPA.

The consequences of failing to do so are serious, and the SOPA sets out that a failure to adequately define the parties’ respective entitlements and obligations in the construction contract will lead to determination of disputes in accordance with the terms set out in legislation, rather than the terms of the contract¹¹.

Moreover, failure to include the minimum prescribed content in a payment claim will impede on a claimant’s ability to pursue payment under the SOPA¹². Failure to provide a timely and detailed payment schedule will lead to a respondent being liable for amounts claimed and may prevent it from being entitled to respond to an adjudication application or court proceedings¹³.

This new process, with serious consequences for non-compliance, means that in order to ensure timely and enforceable cash flow, parties will need to be attuned to which category their contracts fall into and whether or not the SOPA applies. Whether you are a principal, a contractor or a subcontractor, now is the time to be reviewing your contracts and processes to ensure they are SOPA compliant.

If you need assistance, or would like further information about how the SOPA will affect your business, Bennett – Litigation and Commercial Law’s knowledgeable and approachable team is able to assist.

For more information, please contact the authors:
Dalitso Banda | Principal
Briony Whyte | Solicitor

1. Construction Contracts Act 2004 (WA), s 4.
2. SOPA, ss 5–6.
3. Building and Construction (Security of Payment) Act 2021, s 10 (‘SOPA’).
4. SOPA, s 24.
5. SOPA, s 25(1).
6. SOPA, s 26.
7. SOPA, s 34(1).
8. SOPA, ss 27(3), 34(3).
9. SOPA, s 27(3).
10. SOPA, s 32(b)(i).
11. See e.g., SOPA, s 21.
12. SOPA s 24, Jemzone Pty Ltd v Trytan Pty Ltd (2002) 42 ACSR 42, [41], [45]–[46]. Cases relating to issues arising out of the Victorian and NSW legislation are likely to be persuasive in deciding disputes as to the construction of the SOPA 
13. SOPA, ss 25–27.

Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.