WA Supreme Court Clarifies When Statutory Implied Terms Apply Under the CCA

The Supreme Court of Western Australia has delivered one of the few decisions to shed light on when provisions contained in Schedule 1 to the Construction Contracts Act 2004 (WA) (CCA) will be implied into a construction contract.

Unlike the East Coast security of payment regimes, statutory provisions under the CCA regulating matters such as:

• the making of claims for payment (s 16),
• responding to claims for payment (s 17), and
• the time for payment (s 18)

only apply if the construction contract is silent on those matters.
Where silence exists, the relevant terms contained in the corresponding Division of Schedule 1 are implied.

Background: Total Eden Pty Ltd v Charteris [2018] WASC 80

In Total Eden Pty Ltd v Charteris [2018] WASC 80, the WA Supreme Court clarified the limits of when Schedule 1 terms are implied.

Key facts

• The contract did include a term dealing with the time for payment of a payment claim.
• The contract did not include a written provision about how or when the contractor must “respond” to a payment claim, as required by s 17 of the CCA (i.e., disputation or rejection).
• The adjudicator concluded that all Division 5 provisions of Schedule 1 should be implied, including clause 7(3), which prescribes the time for payment of a claim.

Adjudicator’s approach

The adjudicator implied the entire Division 5 into the contract, resulting in new, statutory payment timing obligations that conflicted with the parties’ written agreement.

The Supreme Court’s Findings

The WA Supreme Court held that the adjudicator erred, quashed the entire determination, and confirmed the following principles:

1. Only terms addressing matters missing from the contract may be implied

The CCA does not permit the wholesale implication of a full Division of Schedule 1.

Instead, the Court held that:

• Only the specific terms that address matters not dealt with in the written contract may be implied.
• This may result in a “bifurcation” of Schedule 1, where only isolated provisions are implied rather than the entire Division.

2. Wholesale implication creates inconsistency

Implying all of Division 5 created an internal inconsistency with the contract’s existing payment terms.

Clause 7(3) of Division 5 could not be implied because:

• the contract already had an operative payment term, and
• the implied clause conflicted with that negotiated provision.

3. Adjudicators must avoid overriding the parties’ agreed terms

The Court concluded the adjudicator incorrectly implied clause 7(3), and therefore made a jurisdictional error, invalidating the whole determination.

Practical Implications for WA Contracting Parties

Contracting parties should ensure that their construction contracts:

• expressly address
  • how payment claims are made,
  • how payment claims are responded to,
  • the time for payment,
  • dispute processes, and
  • any other procedural requirements contemplated by the CCA.
• avoid gaps that may trigger the implication of Schedule 1 provisions, even partially.

Key Takeaways

• Only missing subject-matter provisions may be implied, not an entire Division.
• Implied terms cannot conflict with written terms.
• Adjudicators cannot expand a contract beyond what is necessary to fill legislative gaps.
• Careful drafting is essential to prevent unintended statutory terms from being implied.

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We at Chamberlains understand the emotional and financial stress that come with litigation. Should you require further information about how costs can be recoverable in matters before the Federal Court and Federal Circuit Court, please do not hesitate to contact our office for a consultation with our construction law team.