WA Court of Appeal reinforces strict timeframe to respond to SOPA payment claim

Contractual agreements can't defer when a SOPA claim is made 7 min read

In Co-Operative Bulk Handling v Martinus Rail, the Western Australian Court of Appeal confirmed that the time an emailed payment claim is made or given under the Building and Construction (Security of Payment) Act 2021 (WA) (SOPA) is governed exclusively by legislation, and can't be modified by contractual agreement. The decision has significant implications for principals administering construction contracts in WA, as they can't rely on contractual notice provisions in calculating timeframes for responding to SOPA payment claims. In this Insight, we explain the decision and its lessons.

Key takeaways

• The time an emailed payment claim is 'made' or 'given' under SOPA is determined in accordance with regulation 23(d) of the Building and Construction Industry (Security of Payment) Regulations 2022 (WA) (the SOP Regulations), which refers to section 14 of the Electronic Transactions Act 2011 (WA) (the ETA).
• The effect of these statutory rules is that a payment claim is 'made' or 'given' when the electronic communication becomes capable of being retrieved at the email address the recipient has designated.
• Contractual agreements can't defer the time of receipt of a document required under SOPA to a later point. Therefore, a provision in a construction contract that a notice received on the weekend is deemed to be received at 9am the next business day can't alter the 15-day statutory period to respond to a SOPA payment claim.
• It is critical that company employees monitor emails carefully for payment claims.

Who in your organisation needs to know about this?

• Legal practitioners, contract administrators and commercial teams involved with contracts under SOPA.
• Legal practitioners providing advice regarding SOPA payment claims.

Background

CBH (the principal) entered into a contract with Martinus (the contractor) to construct a rail siding and infrastructure at Broomehill, WA.¹

On Saturday, 31 August 2024, an employee of the contractor emailed to the principal's representative a payment claim made under SOPA for approximately $22.6 million.² The principal's representative opened and read the email on Monday, 2 September 2024.³

The principal responded on Tuesday, 24 September 2024, issuing the contractor with a payment schedule claiming approximately $5.4 million, in effect rejecting the contractor's payment claim in full.⁴

Under s25(1) of SOPA, a principal has 15 business days to respond to a payment claim after it's made.

The key issue in this case was whether the principal had issued its payment schedule in response to the contractor’s payment claim within the prescribed 15 business days.⁵ This issue turned on when the time period commenced—ie when the emailed payment claim was taken to have been made for the purposes of SOPA.⁶

Relevant provisions and key arguments

• (SOPA)
  • Section 22(2) provides that a payment claim is 'made' when it is 'given'.
  • Section 113(4), concerned with service, provides that regulations may prescribe when a document is taken to have been given.
  • Regulation 23(d) of the SOP Regulations provides that when a document is sent by email, it is taken to have been given when it is 'taken to be received … in accordance with' s14 of the ETA.
• (ETA) Section 14(1)(a) of the ETA provides that 'unless otherwise agreed', the time of receipt of an electronic communication is when it becomes capable of being retrieved at a designated electronic address.
• (Contract) Clause 47.4 of the parties' contract stated that communications received after 5pm on a business day or a non-business day were taken to be received at 9am the next business day.⁷

The principal contended that the SOP Regulations and s14 of the ETA govern the time at which a payment claim is made or given.⁸ It argued that the phrase 'unless otherwise agreed' in s14 of the ETA allows parties to agree the time of receipt of an electronic communication.⁹ On that basis, clause 47.4 of the parties' contract applied, with the result that the payment claim was taken to have been made on Monday, 2 September 2024.¹⁰ Accordingly, the 15-business day period expired on Tuesday, 24 September 2024.¹¹ Notably, Monday, 23 September 2024 was a public holiday in WA.¹² Therefore, the payment schedule was served within time.¹³

The contractor argued that power to make regulations under SOPA couldn't be used to extend the statutory 15-business day period for providing a payment schedule.¹⁴ Therefore, the SOP Regulations shouldn't be construed as permitting parties to agree an alternative time of receipt of an electronic communication.¹⁵ On that basis, the payment claim was made on Saturday, 31 August 2024 and the 15-business day period expired on Friday, 20 September 2024, rendering the payment schedule out of time and entitling the contractor to be paid the full amount of the payment claim.¹⁶

The trial judge agreed with the contractor, finding that the principal served its payment schedule after the 15 business days had expired, and therefore owed it over $22 million.¹⁷ The principal appealed.

The decision

The Court of Appeal upheld the trial judge’s decision.¹⁸

It first examined the other provisions in regulation 23 of the SOP Regulations, which stipulate the time of service for documents in different circumstances, such as when a document is delivered personally or sent by post.¹⁹ The court observed that the context these other provisions provided strongly suggested that:

• the aim of regulation 23 of the SOP Regulations was to provide that a document is received when it is under the recipient's control, and the recipient should have been aware of this;²⁰ and
• in that context, the reference in regulation 23(d) of the SOP Regulations to s14 of the ETA only intended to apply the statutory rules in the ETA about the time of receipt (ie for electronic communications being when it was capable of being retrieved), and not to permit the operation of a contractual agreement about the time of receipt.²¹

The critical phrase in regulation 23 of the SOP Regulations is the stipulation that a document sent by email to a person is taken to have been given when the email 'is taken to be received by the person in accordance with the [ETA] section 14'.²² The Court of Appeal focused on the words 'in accordance with', finding that, in this case, the phrase means 'in accordance with the legal effect' of s14 of the ETA.²³

The words 'unless otherwise agreed' in the chapeau of s14 of the ETA contemplate that parties can reach an agreement about the time of receipt of an email.²⁴ However, such an agreement has legal effect by reason of contract rather than s14 and, as such, is an exception to the statutory rules provided for in s14.²⁵ Because regulation 23 of the SOP Regulations only applies the prescribed statutory rules in s14(1)(a) and (b) of the ETA about the time of receipt, it does not apply any separate contractual agreement.²⁶

The Court of Appeal commented (obiter) that it did not see any legal difficulty if the SOP Regulations were to deem emails received on non-business days to be received the next business day.²⁷ However, they do not currently do so.²⁸

The outcome of the case was that the payment claim was made on Saturday, 31 August 2024 and the 15-business day period expired on Friday, 20 September 2024. Accordingly, the principal’s payment schedule issued on Tuesday, 24 September 2024 was out of time,²⁹ leaving it liable to pay the contractor approximately $22 million.

Practical implications for those dealing with SOPA

The case highlights SOPA's underlying purpose in ensuring certainty and expedition in the payment claims process. From a practical perspective, the following lessons apply:

• For the purposes of SOPA, an emailed payment claim is made when the email becomes capable of being retrieved by the recipient at its nominated email address.
• Contractual notice provisions can't modify the time when a SOPA payment claim is taken to have been made or given. Accordingly, even if a contract includes after‑hours or weekend deeming provisions, the 15-business day period under SOPA for an emailed payment claim runs from when the payment claim is capable of being retrieved at the email address the recipient has designated.
• It is critical that company employees monitor emails carefully for payment claims.
• The time period for responding to a payment claim with a payment schedule must be carefully calculated, especially if a payment claim is not seen immediately. Involve your legal team in this process early.
• There are strict consequences for non-compliance. Failure to issue a payment schedule within 15 business days will render the response out of time, exposing principals to liability for the full claimed amount.
• Although it wasn't a focus of the reasoning, it is worth noting that if the email is sent to another address that the recipient hasn't designated, the time of receipt is when the email becomes both capable of being retrieved by the recipient at that address, and the recipient is aware it has been sent to that address.