The
“sudden death” payment regime imposed by the Construction Contracts Act does
not require claims and schedules to be in one document, but multiple documents
must be cross-referenced to provide the full story.
Failure to explain the extent of its dispute
over the value and quality of work done on a central Wellington apartment
building cost the building owner $49,000; the amount immediately payable on a
payment claim upheld in a Construction Contracts Act adjudication.
The Construction Contracts Act 2002 sets
out a structured procedure to clarify payments due and to protect contractors’
cashflow. It is designed to limit
frivolous allegations of bad workmanship intended to force a renegotiation of
the contract price under threats of lower payment or no payment at all. Payment is due on issue of a “payment claim”
specifying what is due, when and why.
Unless a “payment schedule” is issued in response explaining why and when
a different amount is due the terms of the “payment claim” become a debt immediately
enforceable. Any claimed set-off or
counter claim is set aside to be sorted out later.
The High Court was told Manchester
Industrial Holdings Ltd employed Bussell Construction Ltd to carry out
renovations and to complete some required earthquake strengthening at its Eva
Street flats in Wellington. It was a
loose oral arrangement. There was no
fixed price. Bussell was to be paid
monthly for time incurred and materials used.
Differences arose. After paying
the first five invoices totalling some $103,000, Manchester Industrial fired
Bussell from the job in April 2013 hiring another firm to complete the work. In the following months, Bussell sent further
invoices claiming a further $49,000. The
amount due was queried, but nothing happened for some 15 months when Bussell
issued a “payment claim” for the $49,000 previously invoiced. Evidence was given that Manchester Industrial
responded immediately with an email stated to be a “payment schedule” with the
amount due being zero. This email included
a complaint that Bussell had failed to respond to its earlier request for some
clarification of how the amount due was calculated and also included adverse
comments about Bussell’s standard of workmanship and performance on the
job. A Construction Act adjudicator
ruled this email was not a valid “payment schedule”. Payment was now due immediately. The High Court agreed.
Justice Dobson ruled the “payment
schedule” email alone did not amount to a valid response. The claimant must be adequately informed as to
the nature and extent of the dispute over payment. More detail was required. This can be achieved by cross-reference to
earlier correspondence, His Honour said, though in this case nothing in earlier
correspondence provides information about alleged overcharging or of amounts
spent on supposedly remediating Bussell’s prior work.
Manchester
Industrial Holdings v. Hazelton – High Court (18.02.16)
16.031