Overview of WA's new Security of Payment legislation

What electrical contractors need to know about the Building and Construction Industry (Security of Payment) Act WA (“SOPA”)

SOPA covers construction contracts for construction work (as defined) and related goods and services. Some mining, and accounting, financial and legal services are excluded from the operation of the SOPA.

Contract dateRelevant Act
Construction contracts entered before 1 August 2022Construction Contracts Act
Construction contracts entered on or after 1 August 2022SOPA

The SOPA does not contain implied terms but contains a rapid adjudication process for disputed payment claims as well as prohibitions on ‘pay when paid’ provisions and contracting out of the SOPA.

Provisions relating to retention money on trust and swapping retention monies for bank guarantees shall take effect from February 2023 and February 2024 respectively.

  • Some construction contracts must now be in writing and must contain mandatory information.
  • SOPA prohibits threats or intimidation in relation to entitlements under the SOPA which is now an offence.
  • Some adjudication determinations can be reviewed under the SOPA but there are limitations and there is a limited right to suspend work.

Stage I deals with the right to payment; prohibition of certain terms; right to suspend work and the entitlement to statutory liens. 

Stage II deals with retention trust schemes (Phase 1) and new regulatory powers.

Stage III deals with retention of trust schemes (Phase 2) and fairer contracting practices.  

Key changes taking effect 1 August 2022

SOPA contains a statutory payment claim process, summarised as follows: 

StepsSummary
Step 1*
  • Entitlement to a progress payment 
  • Making a payment claim 
  • Respond to a payment claim (by filing a Payment Schedule)
Step 2
  • Adjudication application by the claimant 
  • Adjudication response by the respondent and 
  • Adjudication determination by the adjudicator
Step 3
  • Limited right of review
  • Enforcement

*Notes on Step 1: The construction contract may determine when, what and how claims are made and how amounts are calculated. The statutory payment claim under the SOPA sits alongside the contractual rights to make a claim. If you want to use SOPA, you must make a statutory payment claim under the SOPA. A statutory right to a progress payment under the SOPA can be made once a month irrespective of what the contract says. Progress payments can be claimed more frequently if the contract allows for it. There’s a six-month limitation within which to make a statutory payment claim but claims can be ‘recycled’.  

So, what can be claimed in a payment claim?

Amounts for work and variations performed, delay costs (if entitled under the contract), interest and release of security or retention.  

What cannot be claimed in a payment claim?

Claims for misleading and deceptive conduct, loss or damage caused by a breach of contract, or claims in equity, or nonmonetary claims such as extension of time. A claim can only be made under the SOPA if the claimant is registered if registration is required under the Building Services Registration Act 2011.

A statutory payment claim must:

  • be in writing (no prescribed form has been developed yet)
  • indicate the amount claimed
  • give a description of the items services or quantities provided
  • be endorsed as a claim under the SOPA (no need to sign the claim)

If you wish to rely on invoices as statutory payment claims, the invoices must comply with these requirements

The SOPA does not apply to home-building work where the contract is directly with the homeowner if the amount is for less than $500,000. There are certain exceptions, however. In this event, the same requirements for a statutory payment claim apply, and a notice must be given that it is a claim under the SOPA.

When must a payment claim be paid?

Type of payment/claimTimeframe
If it’s a payment to a head contractorWithin 20 business days after the claim
If it’s payment to a subcontractorWithin 25 business days after the claim
If it’s a claim for home-building workWithin 10 business days after the claim

Responding to a Payment Claim 

Pay the payment claim in full or, if you disagree with the payment claim, issue a Payment Schedule. The Payment Schedule must:

  • be in writing;
  • identify the payment claim;
  • identify the amount to be paid (called the Scheduled Amount);
  • give reasons why you’re not paying the full claimed amount; and 
  • be filed within 15 business days of receiving the payment claim.

If the Payment Schedule does not comply with these requirements, the full amount of the payment claim is payable, and the claimant is entitled to:

  • a summary judgement in Court or apply for an adjudication determination to recover the moneys owing;
  • suspend work (subject to notice); or 
  • a lien over unfixed material.

The Adjudication Process

If a Payment Schedule is issued but not paid, or the Scheduled Amount is less than the payment claim, the adjudication application must be made within 20 business days of the due date of the payment claim or Scheduled Payment.

If the respondent does not respond to a payment claim with Payment Schedule, however, the process is slightly different. In this event, once the due date for the progress payment has passed, within 20 business days, the claimant must first give written notice to the respondent. This written notice must set out the claimant’s intention to apply for adjudication of the payment claim. Following this written notice, the claimant must give the respondent a second opportunity to provide a Payment Schedule, lasting 5 business days after receiving the claimant’s notice. If the respondent is granted this second opportunity to provide a Payment Schedule and fails to do so within 5 business days, the adjudication application must be made within 20 business days of this time. 

Enforcement 

Get a certified copy of the determination, then apply to the relevant Court for the determination to be entered as a Court judgement and then enforce it as a Court judgement.

AmountCourt Jurisdiction
Determinations up to $75,000Magistrates Court
Determinations between $75,000 and $750,000District Court
Determinations exceeding $750,000Supreme Court

A claimant could suspend work to encourage payment provided the notice is issued under the SOPA and the claimant must wait a minimum of two business days before work is suspended. The claimant must recommence work within three business days of receipt of payment.

Appeals and Reviews

There is no right of appeal against a determination but a limited right of a review. The review must be requested within five business days of the determination and a copy provided to the other party within one business day. 

The claimant may request a review if:

  • The determination had a lack of jurisdiction, and the claim exceeds $50,000; or
  • If the amount claimed and the amount determined differs by $200,000.

A respondent may request a review if:

  • there is a $200,000 difference between Scheduled Amount and the determination amount, but the respondent must pay the determination amount into trust before the review can proceed.

A response to the review must be filed within 10 business days the review application. A review is not a rehearing but a ‘peer review’ and the determination on review can be confirmed, quashed or a replacement determination issued.

Key takeaways

Some construction contracts (exceeding $20,000) must be in writing and must include mandatory information. Some “time-bar” notices are regulated by the SOPA and could be declared unfair if compliance is not reasonably possible or unreasonably onerous.

The party alleging unfairness bears the onus of proof. It can be challenged in Court or in an adjudication application. Time bars have no effect if determined to be unfair.

In determining fairness, various factors are considered such as:

  • when notices were required, 
  • when the parties became aware of the issues, 
  • the bargaining positions of the parties 
  • the presumptions are that the parties understood the terms of the contract and are competent and 
  • whether it leads to final and binding outcome.

Factors will be determined on a case-by-case basis and related contracts must not be considered.

It is an offence under the SOPA to threaten or intimidate a person in relation to entitlements under the SOPA and a penalty of up to $50,000 may be imposed.

SOPA operates from 1 August 2022 and statutory payment claims must be made within due dates. It’s a rapid decision-making process regulating Payment Schedule requirements and there are legal implications if a Payment Schedule has not been filed.

Template documents

Building and Energy have provided a range of User Guides, Templates and Forms - click here to view.

Building and Energy seminars

Building and Energy have provided an online training session that can be viewed at any time - click here to view.

Building and Energy are running face-to-face seminars in a range of regional locations between September and October 2022 - click here to register. Metro seminars will be announced at a later date.

Any questions?

ECA Legal are here to help with any questions you have. Email ecalegal@ecawa.org.au or phone (08) 6241 6129.

Disclaimer: This summary is a guide only and is not legal advice. For further information, call ECA Legal on (08) 6241 6129 or email ecalegal@ecawa.org.au