Western Australian ruling limits contractual control over timing of emailed payment claims

Perth-based David Ulbrick and Uma Radhakrishnan of Pinsent Masons, who specialise in construction dispute resolution, said the judgment issued by the Western Australian Court of Appeal highlights how payment claims emailed by contractors out of normal business hours can ‘start the clock’ on the timeframe principals have to issue a payment schedule in response.

The ruling was in a dispute betweem Co‑operative Bulk Handling Ltd (CBH) and Martinus Rail Pty Ltd and in it the court confirmed that statutory rules governing electronic communications prevail over contractual deeming clauses.

Contractor Martinus had issued CBH with a AUS$22 million (US$15.4m) payment claim by email late on a Saturday. The contract between them had rules about payment timing, as does the Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOP Act).

Although the email was not opened by CBH until the following Monday, before the relevant contract deemed that it was received, the Court of Appeal held that in fact time started to run from when the claim was made on the Saturday for the purpose the SOP Act.

A payment schedule is a means by which principals can assess payment claims made by contractors. Under the SOP Act, principals have 15 business days from the point of receiving a payment claim to give contractors a payment schedule – if they fail to do so within that timescale, principals are deemed liable for the full amount claimed. In this case the Court of Appeal said that CBH’s payment schedule was served out of time under the SOP Act.

CBH had argued that the time of receipt should be determined by the deeming provision in the relevant contract which provided that notices sent on non-business days or outside of normal business hours were deemed to have been received at the commencement of the next business day. The Court of Appeal rejected CBH’s argument and held that the time of receipt was to be determined by regulation 23(d) of the Building and Construction Industry (Security of Payment) Regulations 2022 (WA), which refers to when an electronic communication is received “in accordance with” section 14 of the Electronic Transactions Act 2011 (WA).

On the basis of the broader statutory setting, the Court of Appeal held that this meant that time started running for the purposes of giving a payment schedule from the time the email was delivered. It found that the email was capable of being retrieved at CBH’s nominated address and that CBH had been notified of the email’s arrival on the Saturday, even though the email was not opened until the Monday.

Critically, according to Ulbrick and Radhakrishnan, the court found that this statutory framework does not permit any contractual agreement as to timing that would have the effect of extending the time, even by one day. That was so despite the fact that section 14 of the Electronic Transactions Act contemplates that parties may “otherwise agree” on when electronic communications are received, the court held that this qualification is not picked up by the regulations for the purposes of the SOP Act. As a result, it held that contractual deeming provisions, such as those postponing receipt until the next business day, cannot alter when a payment claim is “given” for the purposes of the SOP Act.

Ulbrick said: “By favouring a bright-line rule based on when communications are capable of retrieval, the court emphasised the legislation’s objective of certainty and speed in progress payment disputes. Allowing contractual provisions to defer the commencement of statutory timeframes would undermine that purpose and potentially extend response periods beyond those intended by parliament.” 

“Despite the court eschewing the influence of jurisprudence from the east coast Australian jurisdictions on its decision, the practical reality is that the decision brings the situation in Western Australia into conformity with the east coast jurisdictions where the focus has long been on the time that the communication was capable of retrieval.”  

Radhakrishnan added: “For the construction industry, the implications are immediate. Emails sent outside business hours may still trigger the 15-business-day period for providing a payment schedule, and the failure to respond within time can expose principals to liability for the full claimed amount. The case serves as a reminder that, under Western Australia’s security of payment legislation, statutory timing rules prevail over contractual arrangements, and parties must be prepared to respond to claims as soon as they are capable of being received.”