Reform to the Construction Contracts Act 2004 (WA) remains pending

The Building and Construction Industry (Security of Payment) Bill 2020 (WA) (Bill) was introduced into the WA Parliament on 23 September 2020.

The Bill sought to amend the current Construction Contracts Act 2004 (WA)(CCA) with a security of payment regime that has similarities to the security of payment regimes in the eastern States.

Legislative reform of WA's security of payment regime is now effectively on hold, after the Governor of WA prorogued parliament in December 2020, to pave way for the upcoming WA State election. The Bill will therefore need to be reintroduced to the WA Parliament in the next session of Parliament.

One of the notable features of the Bill was that it made provision for unfair noticed-based time bar provisions to be declared void in a particular case.

Notice-based time bar provisions are, of course, a commonplace feature of construction contracts.  Principals and/or head contractors often impose time-bars down the contractual chain, requiring contractors and or subcontractors to comply with onerous notice requirements as a condition precedent to their entitlement to make various claims under the construction contact, such as, variation, EOT, and delay cost claims.

CMA Assets Pty Ltd v John Holland Pty Ltd [No 6][2015] WASC 217 represented the high water-mark for strict enforceability of time-bars against contractors and subcontractors. In the case, the Supreme Court of WA upheld a strict time bar on CMA's claim for an EOT, even though John Holland caused the relevant delay, generally had knowledge of the delay, and the Court acknowledged that the time bar provision was harsh and weighted in favour of John Holland. The Supreme Court, in this regard, noted that the parties had chosen to contract on the basis of the harsh time bar provision.

The Bill allows for a notice-based time bar provision to be declared unfair, if compliance with the provision is not reasonably possible, or would be unreasonably onerous. A time bar provision that is declared unfair has no effect in the case of the particular entitlement subject of the proceedings in which it was been declared unfair, but continues to have effect in other circumstances or challenges arising under the same or a related contract.

The matters that a decision making must take into account in determining whether a notice-based time bar provision is unfair, are as follows:

• when the party required to give notice would reasonably have become aware of the relevant event or circumstance, having regard to the last day on which notice could have been given;
• when and how notice was required to be given;
• the relative bargaining power of each party in entering into the construction contract;
• the irrebuttable presumption that the parties have read and understood the terms of the construction contract;
• the rebuttable presumption that the party required to give notice possesses the commercial and technical competence of a reasonably competent contractor; and
• if compliance with the provision is alleged to be unreasonably onerous  whether the matters set out in the notice are final and binding.

This will go some way in providing relief to contractors and subcontractors who may otherwise "lose" their contractual entitlements for failing to strictly comply with onerous notice-based time bar provisions.

In the long run, it would be desirable if this incentivises principals to negotiate and allow inclusion of notice-based time bar provisions which are reasonable and proportionate, rather than unfair and onerous. Only time will tell.

If you have any queries regarding this article or would like to speak to one of our specialist building and construction lawyers please reach out on (08) 6188 3340 or email hello@pragma.law.