With a Western Australian security of payment regime set to undergo a root and branch overhaul, it is time to ask yourself: Am I SOPA ready?
When the Construction Contracts Act commenced, it was immediately distinguishable from its Eastern States analogues by its name – it did not include the phrase “security of payment” in the title. Dig deeper, and the differences were even more stark. The most fundamental difference being that the WA Act left the agreed contractual regime in place (with limited exceptions) and bolted a rapid adjudication process on to that regime. By contrast, corresponding legislation in each of the Eastern States created a separate payment regime that effectively ran alongside the contractual regime and it was this separate regime that ran into the rapid adjudication process.
This week (on 22 June 2021), amendments to the WA regime as set out in the Building and Construction Industry (Security of Payment) Bill 2021 were passed by both houses of WA Parliament and is currently awaiting formal assent by Governor.
Although the amendments to the WA regime contain some nuances and the transition will not be immediate on existing contracts (See below), the WA legislation will follow the Eastern States model – meaning that principals, builders and subcontractors will now have to adjust.
For example, contractors and subcontractors should be ready for the payment schedule regime should they be contemplating an adjudication application, and they will need to ensure that all boxes are ticked in that regard or the application might fail over a lack of not meeting the formal requirements. Conversely, principals and head contractors need to get ready to respond to the full extent they can when payment claims are made to ensure that they comply with the provisions of the Act specifying how payment claims are to be responded to.
Based on the Eastern States’ experience, while there are general prohibitions on contracting out, it should be possible for the parties to align the new SOPA payment regime requirements into the contract requirements so that the two work neatly together and not against one another. As a minimum, we recommend that parties start preparing checklists for contract administrators (or amending any checklists that are already in existence) in readiness for the likely changes.
There are aspects of the new regime which are worthy of note such as the power granted to adjudicators to override time bar provisions, which also may impact contractual drafting and may not just be a matter dealt within adjudications. For example, it might be possible to couch time bars in a similar way that parties currently deal with liquidated damages regimes in an attempt to avoid those regimes being deemed penalties.
While the administration of Pindan seems to have caused a minor hiccup in the introduction of the new legislation, its introduction is imminent and affected parties should be prepared.
WA Construction Law Toolbox
The building and construction industry in Australia operates within a complex regime of written and unwritten laws. Moreover, written laws can vary between states significantly.
We have created a toolbox comprising a brief overview of the written and unwritten laws in which the building and construction industry operates in Western Australia.Go to WA Construction Law Toolbox
Register for SOPA Seminars
We will be running seminars on the new legislation so let us know if you are interested by completing the form below, or contacting David Marsh at email@example.com or Karen Cogoli at firstname.lastname@example.org. We note that there are transitional provisions that apply to contracts entered into before the commencement of the new SOPA regime, which we will cover in our seminars.