-the intended beneficiaries of the trust. Wrongly classified The hardest outcome fell to the subbies whose retentions had been deducted but, due to the computer error, had not been transferred to the Retention Account. They fell victim to section 18FA (b) of the Act which provides that retention accounts can be used “solely to discharge obligations to the subcontractors from whose payments these funds were deducted”. Calculated but not transferred retentions This category refers to the 80 subbies for whom Buyer Created Tax Invoices (BCTIs) recording the payment due and the amount to be retained had been created for June but had not been paid (in default of Ebert’s legal obligation). The Court’s finding in relation to them was that they had no claim because: “where no payments were made, obviously nothing could be said to have been withheld from those payments and, obviously, no monies were paid into the Retention Account”. Uncalculated and not transferred retentions This refers to the 70 subbies for whom Ebert had not completed its reconciliation process for July 2018 when it went into receivership. The Court ruled out their claims on the basis that in respect of the services provided that month, “the intention to create a trust is absent” as were the necessary steps to create “retention money”. Released but not paid retentions This affected four subbies. Their retentions had been reconciled and transferred into the Retention Account and Ebert had done the calculations to “release” them but had not got around to doing that before ceasing operations. The Court found that all three “certainties” were satisfied so they were entitled to a share of the fund. Allocation method The Court ruled that the funds should be allocated to the subbies with successful claims on an equal basis with interim payments at 75% of nominal entitlement “or such other percentage as seems prudent”. It also got an undertaking from the receivers that the balance in the Retention Account would not fall below the interest accrued. This was to protect the position of the parties until the question of where the entitlement for this money lay, with Ebert or with the subcontractors – a matter the Court had left for “another day”.
ABOUT THE AUTHOR
John Mckay Partner, Auckland Litigation & Dispute Resolution