Recent WA Court of Appeal case: Principals and main contractors on construction projects: the perils of cutting it too close when issuing a payment schedule under the WA Security of Payment Act

Are you a principal or main contractor in the construction industry, and has your business received a payment claim under the Building and Construction Industry (Security of Payment) Act 2021 (WA) (SoP Act) from a contractor or subcontractor? If planning to issue a payment schedule, don’t cut it too close! There are critical timeframes within which a payment schedule should be served. Act conservatively, and allow enough of a time “buffer”, don’t wait till the eleventh hour to issue a payment schedule.

That is the moral of the story from a recent WA Court of Appeal decision, Co-operative Bulk Handling Ltd v Martinus Rail Pty Ltd [2026] WASCA 82. This case illustrates the drastic consequences if a principal “cuts it too close” and does not allow a time buffer when it wishes to serve a payment schedule to a disputed payment claim.

It would be easy to get lost in the finer and complex details of computing or counting days in the WA Court of Appeal decision. Below we explore the final technical details. However, the drastic consequences of not acting conservatively and allowing a buffer are well-illustrated in this case:

• a principal, no doubt well-resourced internally and externally with legal functions – ended up having to cough up in excess of $22 million (the claimed amount in the payment claim); and
• a case centering on legal technicalities around computation of time, had to wind its way through the Supreme Court of WA, through a first-instance Judge, and the Court of Appeal, – no doubt this would have been an expensive exercise, with attendant distraction of all involved from productive business activities.

The finer technical details and the case

Under the SoP Act, a contractor can give a payment claim to its principal for a progress payment due under the construction contract. The principal has the opportunity under the legislation, to dispute a payment claim within 15 business days after a payment claim is made (or any earlier time required by the construction contract), by giving the contractor a payment schedule indicating the amount of payment (if any) which the principal proposes to make, that is, indicating the scheduled amount.

If a principal disputes the payment claim, failing to serve a payment schedule within time can have significant negative consequences. A respondent principal may become liable to pay the full amount claimed as a statutory debt. Accordingly, being aware that there can be uncertainty, depending on the circumstances, about when a payment claim is “made”, and in any event taking a conservative approach and allowing a sufficient time “buffer”, is critical risk management posture for respondent principals.

The WA Court of Appeal decision in CBH v Martinus turned on when a payment claim for over $22 million was given by a contractor (Martinus) to its principal (CBH), and, when did the 15 business days after this expire, for serving a payment schedule. At first instance, it was held that the period of 15 business days had expired before the principal served its payment schedule on the contractor. As a result, the principal was liable to the contractor under the SoP Act for a debt of over $22 million. The principal appealed.

Martinus served a payment claim on CBH by email at approximately 4:35 pm on Saturday, 31 August 2024. The relevant construction contract contained a notice clause providing that communications sent outside business hours or on a non-business day were deemed to be received at 9:00 am on the next business day. CBH served its payment schedule on 24 September 2024.

The case turned on a single question: when did the statutory clock begin running?

• If time commenced on Saturday when the email reached CBH’s nominated email address, the payment schedule was late.
• If the contractual deeming clause applied, time commenced on Monday, making the payment schedule valid.

The WA Court of Appeal decision

The WA Court of Appeal held that the payment claim was “made” when it became capable of being retrieved by CBH at its designated email address.

In doing so, the Court of Appeal undertook a detailed exercise in statutory interpretation and the interaction of relevant provisions of the SoP Act, regulations to SoP Act, and the Electronic Transactions Act 2011 (WA) (ETA), namely:

• section 22(2) of the SoP Act;
• regulation 23(d) of the Building and Construction Industry (Security of Payment) Regulations 2022 (WA) (SoP Regs); and
• section 14 of the ETA.

The Court of Appeal explained that the statutory regime adopts an objective test. The relevant question on the facts was not when the email was opened or read, but when it becomes capable of retrieval by the recipient. Because the payment claim reached CBH’s nominated email address on Saturday afternoon, the statutory response period began running immediately.

The Court of Appeal opined that the conclusion reached gives effect to the policy aim of the SoP Act to ensure that there is an expedited procedure for making payment claims, for responding to those payment claims, and certainty about the operation of the SoP Act and the SoP Regs.

CBH had argued that the contractual notice clause postponed receipt until the following Monday.

The Court of Appeal rejected that argument.

While section 14 of the ETA allows parties to make agreements about electronic communications, the SoP Regs incorporate only the statutory rules governing electronic receipt - not any contractual modification of those rules.

Allowing contractual deeming provisions to alter the commencement of statutory timeframes would undermine the consistency and certainty intended by the SoP Act.

Accordingly, the contractual notice clause could not delay the commencement of the statutory period.

Practical lessons

The decision highlights several practical lessons for principals, main contractors, and their contract administrators, when faced with the receipt of a disputed payment claim up the contracting chain:

• be aware that, depending on the terms of the specific construction contract, including contractual notice provisions, there can be uncertainty as to when a payment claim is “made”.
• be aware that, depending on the terms of the specific construction contract, including contractual notice provisions, there can be uncertainty as to when a payment claim is “made”.
• do not assume that contractual notice provisions will postpone the time when the clock starts ticking for the timeframe to serve a payment schedule; and avoid cutting it close - act conservatively, and allow a sufficient time “buffer” to serve a payment schedule.

The Bottom Line

The practical lesson for respondent principals is simple: when in receipt of a payment claim that is disputed, don’t leave the service of payment schedules until the eleventh hour. Principals and their contract administrators should actively monitor nominated email addresses, identify statutory deadlines conservatively, and allow a sufficient buffer when preparing and serving payment schedules. As this case demonstrates, leaving it to the eleventh hour can have dire financial consequences.

If your construction business seeks to make a payment claim, has received a payment claim, or are uncertain about your obligations under the SoP Act, obtaining legal advice early can help avoid costly mistakes.

Legal advice is always recommended if you’re unsure.

For more, contact Aaron McDonald (Director), Dirk Branford (Director) and Eu-Ming Teng (Special Counsel) at Pragma Lawyers on aaron@pragma.law, dirk@pragma.law or eu-min@pragma.law.