The decision is notable for the fact that the court dismissed the appellant’s argument that if the payer had not understood the payment claim in issue, it could have obtained clarification by using the framework contained in the Act being a reference to an observation made by the Court of Appeal in George Developments Ltd v Canam Construction Ltd. The court noted that it is not apparent from that passage in the judgment what part of the “framework” the Court had in mind as there is nothing in the Part 2 procedure expressly providing for a payer to obtain clarification, or for the running of the strict time period for providing a payment schedule to be suspended while clarification is sought. Rather, the court observed that a payer who has not been provided with sufficient information to understand the manner in which a claim has been calculated cannot reasonably be required to provide a payment schedule which complies with the obligation to indicate the reasons for any difference between the amount claimed and the amount the payer considers ought to be paid.
In the result, the court dismissed the appeal agreeing with the conclusion of Woolford J that the invoice was not a valid payment claim under the Act, that the respondents were therefore not required to submit a payment schedule, and that section 23 of the Act was not engaged.
The case provides a salutary lesson for parties seeking to enforce payment for claimed amounts by way of summary judgment on the basis of failure on the part of the payer to provide a valid payment schedule in response within the mandated time, or to pay the claimed amount by the due date for payment (ie on the basis of default liability under sections 22 and 23). While each such case falls for determination on its particular facts, what is almost certain is that the payee will face an argument that its payment claim was defective in some substantive way and therefore invalid in terms of section 20 of the Act and/or that any response to the payment claim was in fact a valid payment schedule in terms of section 21 which will then need to be heard and determined by the court.
Because of that almost inevitable outcome, in many cases the payee asserting entitlement to payment of the claimed amount on the basis of default liability will instead refer the matter to adjudication in the first instance to flesh out any such arguments and (hopefully) to obtain a determination in its favour that it can then enforce, if need be, as a debt due in the District Court together with the actual and reasonable costs of recovery.
The efficacy of that approach was confirmed by the Court in Redhill Development (NZ) Ltd and Ors v Green and Anor HC AK CIV-2009-404-3784 5 August 2009 at [42] – [51]. The obvious advantages being that the issue will be considered quickly and cost effectively in the private and confidential context of an adjudication and, either a readily enforceable determination obtained, or any deficiencies in the claimant’s case will be identified that may then be made good for the purpose of any subsequent litigation. It is clear from the High Court judgment that the payee considered referring the matter to adjudication by BDT but in the end, it elected to proceed with summary judgment proceedings for reasons that are not so readily apparent.
Court of Appeal confirms the conventional operation of extension of time provisions - CONT...
About the Author
John is a professional arbitrator, adjudicator and mediator based in Auckland, New Zealand. He has been appointed in more than 1,160 building, construction and infrastructure disputes over the past 26 years relating to residential, commercial and industrial construction projects, power stations, gas fields, manufacturing and processing plants, stadiums, hotels, land subdivisions, roading, railways, wharves, marinas, drainage, wastewater treatment plants, recycling plants, mining, services, and utilities, involving domestic and internationally based parties, complex technical and legal matters, and sums in dispute exceeding $100M.
John is the founder and a Director of the Building Disputes Tribunal (BDT), the nationwide, specialist dispute resolution service provider for the building and construction industry in New Zealand and an Authorised Nominating Authority under the Construction Contracts Act 2002. He is also the founder and a Director of the New Zealand Dispute Resolution Centre (NZDRC); the New Zealand International Arbitration Centre (NZIAC); the New Zealand Family Dispute Resolution Centre (FDR Centre); the BuildSafe Security of Payment Scheme - BuildSafe®. He is a Principal Arbitrator, Adjudicator, Mediator, Expert Determiner and Early Neutral Evaluator for BDT, NZDRC and NZIAC.
To request the appointment of John Green for adjudication, arbitration or mediation please contact the Registrar:
www.buildingdisputestribunal.co.nz
John Green