Review of the Western Australian Construction Contracts Act 2004 Submission to the Building Commission Civil Contractors Federation (WA Branch) Submission to the Australian Government by the Civil Contractors Federation (WA Branch)
1 Submission to the Building Commission November 2014. Introduction Thank you for the opportunity to contribute to this review of the Construction Contracts Act 2004 (CCA). CCF WA has consulted widely with members on the issues raised in the discussion paper. Our members comprise civil construction companies of all sizes, from small family-owned businesses to mid-tier contractors employing hundreds of staff. Some of the members we spoke to had experience from both sides of the process, as applicant and respondent. Most members that we consulted support the CCA and believe it plays an important role in helping to quickly resolve payment disputes. However all members believed the Act could be improved. Awareness of the Act Adjudications under the CCA appear to have plateaued over the past few years at fewer than 200 per year. CCF WA believes there may be still limited awareness by some contractors of their rights to claim disputed payments under the CCA. Those contractors that are aware of the legislation may be wary of using it due to concerns about damaging relationships with long-term clients. These issues can be addressed through campaigns to educate and inform contractors about their rights and the benefits of the CCA.
2 Scope of the Act There were varying views from members about the scope of matters that can be adjudicated under the CCA. The majority of members consulted felt that the existing regime works well and did not support any move to limit the scope of matters that could be adjudicated. A number of members, however, strongly believe that the intent of the Act section 25 provides that adjudications can be applied for if a payment dispute arises under a construction contract is to ensure security of payments, not to resolve contractual disputes over issues such as extensions of time and disruption delays. They believe the CCA should not be used to undermine the existing dispute resolution and arbitration processes, which are specified in all contracts. This is especially the case where an adjudicator may not have the legal experience or training to review complex contractual issues. Members suggest this issue could be resolved by limiting adjudications to payment disputes over actual work done, i.e. as signed off by the superintendent. This would ensure that applicants could receive some payment to keep the money flowing, but the primacy of the contract could still be retained. The issues outlined above highlight that there is some confusion and concern about how adjudication fits in with other existing dispute resolution processes. Definition of payment dispute arises The definition in s6(a) of the Act does not take into account the commercial realities often faced by contractors waiting for payment. Some principals routinely pay between 15 and 30 days after payment is due, and we sometimes hear anecdotal evidence of principals offering subcontractors take it or leave it 90 day payment terms. In such circumstances the 28-day application period can be of limited use. While the intent of the Act is to keep the money flowing, it should not put in place unnecessary or artificial impediments to businesses that are genuinely owed money.
3 There has also been some comment that greater clarity is needed about the events that can trigger a payment dispute. Such clarity would avoid much of the disagreement that currently takes place over when the dispute arose. We also note that allowing applications for adjudication on any contract within 28 days of practical completion (see below) would also remove the existing uncertainty around the timing of disputes over progress payments. Adjudications involving progress payments As it was framed primarily with one-off disputes in mind, the CCA does not adequately deal with adjudications over progress payments, which on a typical civil works program are the most likely source of a dispute. Many members believe the requirement to apply for adjudication within 28 days of the dispute arising is unnecessarily restrictive and may not reflect the commercial realities faced by contractors on projects involving progress payments. Some contractors may be reluctant to begin an adjudication process over a disputed claim for progress payment. It would be more equitable to allow applications for any dispute related to a project to be lodged within 28 days of practical completion of the project. The 28 day limitation on applications is especially restrictive where a progress payment is involved and contractors may be hesitant to make an application in the middle of the contract, where it could be seen as unduly adversarial. A number of members believe this problem could be addressed by allowing applications for adjudication over contracted works to be submitted within 28 days of practical completion. This would reflect the reality that contractors are more likely to pursue payments aggressively when the project is completed. One member related a situation in which it won an adjudication over a progress payment, only for the principal to deduct the adjudicated sum from a subsequent progress payment. The contractor was forced to pursue a series of adjudications (with all the related costs) to seek redress. CCF WA proposes that if a determination is made in relation to a claim for progress payment, then that determination should be final and the respondent should not
4 be allowed to adjust any progress payments if those adjustments have the effect of reversing a previous determination in favour of the applicant. Response period The 14 day limit for a written response to an application for adjudication is generally acceptable. However it may be unfair to the respondent when: An application is lodged just before or during the Christmas/New Year closedown period a practice commonly referred to as ambush claims. The 14 day period contains one or more public holidays, e.g. Easter/Anzac Day. These issues could be avoided by Allowing 10 business days for a response Treating the Christmas/New Year period (including any business days between Christmas Day and New Year s Day) as non-business days. Time extensions for determinations The current requirement for both parties to agree to an adjudicator s request for a time extension may restrict the adjudicator s ability to make a sound determination. CCF WA recommends that the Act should provide that in complex adjudications, an adjudicator may unilaterally extend the determination period by seven days. Any further extensions should require the agreement of both parties. Previous adjudications There was evidence from members that principals have included in tender documents questions about contractors previous adjudication history i.e. whether the contractor has
5 previously made an application under the CCA. The Act should forbid this practice. Counter claims Members reported that unsuccessful parties to an adjudication have used spurious counter claims as justification for ignoring a court order to pay the amount of the determination. A number of members commented that a successful determination did not guarantee payment and that the Act needed more teeth in the area of enforcing court orders. Dismissal for complexity The CCA does give adjudicators the discretion to dismiss an application without making a determination if it is not possible to fairly make a determination because of the complexity of the matter. This provision seems to be rarely used, possibly because there is no definition or guidance for adjudicators on what constitutes complexity, or because adjudicators are reluctant to apply self-imposed limits on their jurisdiction. CCF supports the retention of a complexity ground for dismissal and believes greater clarity is needed around when it should be used. Adjudicators acting informally Section 32 provides that an adjudicator must act informally and is not bound by the rules of evidence and may inform himself or herself in any way he or she thinks fit. CCF WA was told of an applicant being phoned by an adjudicator for clarification over an issue. The applicant in question felt that such an informal approach was not fair to the respondent, who may not have had the chance to put forward their point of view. In the interests of natural justice and the right to be heard, CCF WA believes adjudicators should communicate in writing whenever possible, with communications circulated to all parties.
6 Withdrawal by mutual consent clause The CCA currently does not explicitly allow for withdrawal of an adjudication with the consent of both parties, although there is evidence that this happens informally. The Act should be made clearer in this respect by the addition of a clause outlining the procedure for withdrawal my mutual consent. Costs Greater clarity is needed about costs of adjudications. Section 34 refers to costs in relation to an adjudication while s44 refers to costs of adjudications, which could be confusing. The Act needs to be clearer that in cases of frivolous or vexatious conduct the adjudicator should also have the ability to determine that the offending party must also pay more than half or all of the adjudication costs. Resources work exemption The current exemptions from the CCA granted to resources-related construction work are inequitable. A company suffering financial loss as a result of a contract to undertake construction of a mine site or LNG plant should have the same access to the CCA as any other company. We believe the CCA should apply equally to all construction work in WA. For more information please contact: Andy Graham Policy Manager Civil Contractors Federation WA agraham@ccfwa.com.au
7 About CCF The Civil Contractors Federation is the member-based body representing the Australian civil construction industry. providing assistance and expertise in contractor development and industry issues. Nationally, we represent around 1500 civil contractors and more than 700 suppliers to industry. CCF WA members are involved in a variety of projects and activities including the development and maintenance of civil or horizontal infrastructure such as roads, bridges, railways, sewer, water and drainage pipelines, dams, wharves, and commercial and housing land development.
CCF WA BRANCH 70 Verde Drive Jandakot WA 6164 P: (08) 9414 1486 E: ccfwa@ccfwa.com.au www.ccfwa.com.au