Intended to be New Zealand’s tallest residential apartment building, towering 190 metres above Auckland’s CBD, Seascape is mothballed while Chinese developer Shundi goes toe-to-toe with Chinese company China Construction, disputing liability for construction delays.
Shundi Customs Ltd challenges an arbitration ruling requiring it pay some $33 million. China Construction’s legal action to put Shundi into liquidation for non-payment was suspended when the High Court ruled China Construction had first to comply with its contractual obligations to finalise a performance guarantee from its Shanghai-based parent.
The court was told their 2017 Seascape construction contract was signed before design was finalised and before any building consent was obtained. While intended to become a fixed price contract, construction to date has continued on a cost plus margin basis.
Work stopped after the August 2024 arbitration ruling.
Shundi claims the arbitrator mis-interpreted the contract.
China Construction says the arbitrator got it right.
It claims Shundi is not only reneging on compensation due for current delays, but bizarrely is attempting to get financial compensation now for potential construction claims by China Construction which might, or might not, be disallowed in the future.
The general rule in construction law is: ‘pay now, argue later.’ Applying this rule would see China Construction successful in winding up Shundi for non-payment.
Courts have qualified this rule where the debtor refusing to pay does have potentially valid grounds for non-payment and if later successful at the ‘argue later’ stage runs the risk of not recovering money paid over earlier because the recipient is now insolvent.
Shundi claims any payment it makes now is at risk.
It is possible China Construction’s parent company might cut it loose, simply abandoning China Construction to its fate, Shundi said. This would prejudice any rights by Shundi to later recover $33 million if now paid across.
The High Court was told Shundi has made progress payments for construction to date totalling some $300 million.
Shundi says China Construction New Zealand Ltd did not promptly get a performance guarantee signed off by its parent company, as required by their 2017 contract.
A guarantee belatedly provided is inadequate, Shundi says. To be enforceable under Chinese law, it must first be registered with the State Administration of Foreign Exchange in China, it says.
Justice Blanchard ruled China Construction could not enforce payment of the arbitrator’s $33 million ruling until the guarantee’s required State registration was complete.
Shundi Customs Ltd v. China Construction New Zealand Ltd – High Court (11.11.24)
25.030