General complaints of poor workmanship are insufficient without some estimate of remediation costs as Northpower found to its cost in a ‘pay now, argue later’ Construction Contracts Act claim; ordered to pay Tauranga engineering sub-contractor Veloce Ltd $270,000 for disputed undergrounding work, part of a Coromandel fibre rollout.
Northpower claims Veloce is owed nothing, alleging a raft of construction faults will cost more than $270,000 to repair.
Infrastructure company Northpower Ltd is head contractor in a Powerco project building a fibre network across Coromandel peninsular. It farmed out part of the project to civil engineers Veloce.
The District Court was told of multiple complaints about Veloce’s work: trenches not on the correct layline or the correct depth; ducts not properly aligned; and manholes not in the correct location.
Powerco advised Northpower of the rework required. Northpower forwarded these emails to Veloce.
When Northpower stopped paying Veloce invoices, legal formalities in the Construction Contracts Act came into play.
The Act is intended to protect sub-contractors’ cash flow, curbing a common commercial practice of head contractors refusing to pay any part of a sub-contractor’s invoice while disputing some minor component of the work done.
The Act imposes a sequential dance for payment disputes: sub-contractors submit an invoice labelled as a ‘Construction Contracts Act payment claim;’ the head contractor counters with a ‘payment schedule’ identifying how much it is willing to pay and an explanation for the difference.
Failure to respond promptly, or properly, means the payment claim is payable immediately without deduction: pay now, argue later.
There had been no valid payment schedule response by Northpower after it received the disputed $270,000 payment claim, Judge Davey ruled.
Northpower merely forwarded to Veloce Powerco’s schedule of required re-work and baldly stated that Northpower owed Veloce nothing.
When Veloce made no progress on the work demanded, Northpower fired it from the job.
Veloce claims some of the work demanded amounts to a variation of the original contract.
Judge Davey ruled Northpower was liable to pay Veloce’s $269,500 invoice immediately.
For a valid ‘payment schedule’ response, Northpower should have quantified what was in dispute. It was not enough to simply state that cost of making good all the disputed workmanship would exceed the invoiced payment claimed.
Sufficient detail is required for a contractor to identify how much is in dispute, Judge Davey ruled.
Veloce Ltd v. Northpower Ltd – District Court (13.04.26)
26.135