The
“pay now, argue later” regime imposed by the Construction Contracts Act applies
equally to new builds, repairs and renovations.
Living in Waharoa,
Jonathon McRae was ordered to pay the disputed price payable for renovations to
flooring at his home, despite his allegations the job was not done
properly. Failure to respond to a
Construction Contracts Act payment claim meant the full price had to be paid
upfront with any claim for damages to follow later.
The Act is designed to
stop frivolous objections to contract performance being used to stall on making
any payment. If a customer does not promptly
respond in detail and in writing to a contractor’s formal payment claim then
the amount claimed is a proved debt due.
The High Court was told
Mr McRae had Floorman Waikato sand and coat the floors of his 123 square metre Waharoa
home. The final price was dependent on
whether a solvent based or water based coating would be used. Mr McRae was not happy with the outcome,
refusing to pay the $7072 bill. When
sued, he said a claim for a small amount like this should be heard in the
Disputes Tribunal and it was a gross injustice that the “pay now, argue later”
rules in the Construction Contracts Act should be applied to residential
renovations.
Justice Davison said a
2015 amendment to the Construction Contracts Act removed many of the
distinctions between residential and commercial contracts. The Act applies to repairs and restorations –
commercial or residential.
The $7072 Construction
Act payment claim sent to Mr McRae by Floorman Waikato included the required
statutory notice setting out customers’ rights if they dispute the amount
claimed. Mr McRae had twenty working
days to respond in writing setting out how much he was willing to pay, and
why. The statutory notice also warns of
the consequences of doing nothing; any unpaid amount is treated as an
undisputed debt.
Floorman
Waikato Ltd v. McRae – High Court (22.05.17)
17.051