Construction Contracts Act 2004 (WA)
Found in: Blog
Found in: Blog
The Construction Contracts Act 2004 (WA) (CCA) is designed to ensure the prompt flow of payments to contractors, subcontractors and suppliers in the building and construction industry.
It provides for rapid adjudication of payment disputes, so as to ensure contractors and those further down the contracting chain get timely payment. Certain terms are also prohibited from being included in construction contracts and certain terms are implied into contracts if they are not already dealt with in the contract.
The object of the adjudication process is to determine the dispute fairly and as quickly, informally and inexpensively as possible, to keep money flowing in the contracting chain.
The CCA applies to all ‘construction contracts’ which are contracts to carry out ‘construction work’ or provide related on site services in WA. The CCA applies even if the construction contract was not in writing.
‘Construction work’ is broadly defined in section 4 of the CCA and includes such things as civil works and reclamation of land. Significantly, it also includes certain forms of preparatory work and the supply of goods and professional services related to construction work.
While originally the CCA excluded from the definition of construction work the construction of any plant for extracting or processing oil, natural gas or other minerals, the definition now only excludes ‘fabricating or assembling items of plant used for extracting or processing oil, natural gas or any derivative of natural gas, or any mineral bearing or other substance.’ (see, s.4(3)(c)). This means that the CCA now covers contracts for civil works in constructing an oil & gas or mining plant.
However, drilling for the purposes of discovering or extracting oil or natural gas, and constructing a shaft, pit or quarry or drilling for the purposes of discovering or extracting mineral bearing substances, remains excluded for the operation of the CCA.
A ‘payment claim’ means a claim made under a construction contract:
Recent amendments to the CCA changed the definition of ‘payment claim’. A ‘payment claim’ now includes a payment claim that includes matters covered by a previous payment claim. This allows the previously prohibited ‘recycling’ of payment claims. This means that if a contractor does not make an adjudication application within the time limit, it does not lose the right to have that payment claim adjudicated – it can issue a fresh payment claim for the same works. Once an adjudication application is made however, and that payment claim is determined, the payment claim cannot be recycled any further.
Before applying for adjudication under the CCA, it is important to ensure that the payment process set out in the construction contract is followed.
The provisions in Schedule 1 Division 4 of the CCA will be implied into a construction contract that does not have written provisions about how a party is to make a claim to another party for payment.
If the construction contract is silent as to timing, the CCA provides that a payment claim can be made at any time after the contractor has performed any of its obligations.
Similarly, if a construction contract does not set out how a payment claim should be responded to, the provisions in Schedule 1 Division 5 of the CCA will be implied into the construction contract.
Division 5 states that if a party that receives a payment claim believes that the claim should be rejected or disputes that whole or part of the claim, the party must within 14 days of receiving the claim, give the claimant a notice of dispute.
A payment dispute arises if:
After a payment dispute arises, the party seeking payment has 90 business days to lodge an application. Importantly, a business day means a day other than a Saturday, Sunday or public holiday or a day in the period beginning on 25 December in a year and ending on 7 January in the following year.
In the case of a ‘recycled’ payment claim, the party seeking payment has 90 business days to make an application for adjudication from the latest time the claim was disputed or not paid.
To make an application for adjudication, a party must:
In the event the parties agree on an adjudicator, the application for adjudication is served directly on that adjudicator.
If the contract does not specify an adjudicator, the application must be made to a ‘prescribed appointor’. The prescribed appointors are listed in regulation 11 of the Construction Contracts Regulations 2004 and include, amongst others, The Australian Institute of Building, the Australian Institute of Project Management and The Australian Institute of Quantity Surveyors. Once served with an application, the appointor will appoint, within 5 days after being served, a registered adjudicator to adjudicate the payment dispute.
The written application must contain certain minimum details and it is common practice to include in the supporting submissions the following information:
The applicant’s position may be supported by statutory declarations of lay witnesses (e.g. employees) that are familiar with the underlying facts and issues pertaining to the application. It may also be supported by expert opinion.
A party who has been served with an adjudication application must respond to it within 10 business days after service, by preparing and serving a written response on the other parties and adjudicator.
It is good practice to serve the response in a manner that can be tracked. This also applies for service of adjudication applications.
If a response is not received in the stipulated timeframe, the adjudication process continues, and the adjudicator will make a determination of the dispute in the absence of information from the respondent.
Like the application for adjudication, the response must also contain minimum information. The responsive submissions may include arguments that:
The respondent’s response may also supported by statutory declarations of lay witnesses and expert opinion.
An appointed adjudicator must, within 10 business days after the date of the service of the response or 10 business days after the last date on which a response was required to be served:
The adjudicator may, with the consent or the parties, extend the time for making a determination.
The adjudicator may also request a party to make further written submissions or provide additional information or documentation and may set a deadline for doing so.
The adjudicator’s decision must:
If the adjudicator dismisses the application, he or she must give reasons for doing so and communicate the decision and reasons in writing to the parties.
The parties are jointly and severally liable to pay the costs of the adjudication; however, as between themselves, the parties are liable to pay those costs in equal shares. In order for an adjudication application to be heard, the adjudicator may require one or more parties to pay a deposit or security for the costs of the adjudication.
The adjudicator has discretion to make a costs award against a party in some circumstances. However, this is exceptional and the usual outcome is that each party will bear its own costs of making or responding to an adjudication application.
The determination of an adjudicator is binding on the parties to the construction contract under which the payment dispute arose. This is the case even where separate proceedings relating to the payment dispute have been commenced before an arbitrator or court.
There are only limited circumstances where a determination of an adjudicator on an adjudication can be appealed or reviewed.
There are avenues to enforce an adjudicator’s determination. If a determination requires the principal to pay the contractor an amount the contractor may give the principal notice of its intention to suspend the performance of its obligations.
A party entitled to be paid an amount under a determination may also enforce the determination through the courts. Once the determination is filed with the relevant court, the determination will be taken to be an order of the court.
While an adjudicator’s decision is only an interim decision which is subject to the outcome of more formal dispute resolution processes such as litigation or arbitration, an adjudication determination can have a significant bearing on the final resolution of a dispute. Not only does the third party adjudicator give a considered and independent view on the claim, the determination also determines who controls the money in dispute in the interim.
Common practical features that emerge in the adjudication process are:
In 2018, the State Government of WA released a report on security of payment reform titled Security of Payment Reform in the WA Building and Construction Industry by John Fiocco. The Fiocco Report made a number of recommendations and supports the view that WA adopt a security of payment model akin to that of the East Coast.
The Attorney-General, John Quigley, previously indicated that a bill would be submitted to parliament in 2020, which would adopt the recommendations contained in the Fiocco Report. An exposure draft bill was recently released, and it remains to be seen what changes will ultimately be made.
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