AC/JV Holdings Ltd v General Construction Group Ltd
[2023] NZHC 2212
•16 August 2023
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2023-412-079
[2023] NZHC 2212
BETWEEN AC/JV HOLDINGS LTD
Applicant
AND
GENERAL CONSTRUCTION GROUP LTD
First Respondent
PETER BERNARD DEGERHOLM
Second Respondent
Hearing: 15 August 2023 Counsel: (via VMR)
A J Peat for Applicant
A S Olney and H M Mander for First Respondent
Judgment:
16 August 2023
JUDGMENT OF CHURCHMAN J
[1] At the conclusion of the hearing of this matter on the afternoon of 15 August 2023, I granted the interim injunction sought by the applicant and indicated that my reasons for doing so would be recorded in writing and issued as soon as they are available. I now set out those reasons.
[2] On 14 August 2023, the applicant applied, without notice, for an interlocutory injunction. The application was served on a Pickwick basis on the respondents.
[3] I set the matter down for an urgent hearing at 2.15pm on 15 August 2023. Counsel for the applicant and first respondent appeared by VMR. I was advised that the second respondent abided the decision of the Court.
AC/JV HOLDINGS LTD v GENERAL CONSTRUCTION GROUP LTD [2023] NZHC 2212 [16 August 2023]
Background
[4] The late Clark Proctor (Clark) and Alistair Hey (Alistair) were involved in a number of building and development projects in Central Otago.
[5] One of their projects was a joint venture to develop a plot of land at Harvest Road, Cromwell (the land).
[6] They incorporated a company called AC/JV Holdings Ltd (AC/JV). That company was to own the land at Harvest Road with Clark and Alistair each holding a 50 per cent shareholding in that company. They were both directors.
[7] A 36-room accommodation block to house seasonal workers along with a manager’s residence was to be erected on the land. The land was owned by the local Council and part of the arrangement between AC/JV and the Council was that the accommodation block was to be completed and a Certificate of Public Use (CPU) issued before settlement of the sale of the land occurred.
[8] Alistair incorporated a construction company, General Construction Group Ltd (GCG), on 6 December 2018.
[9] It was agreed between GCG and AC/JV that GCG would carry out the construction work for the accommodation block. No formal construction agreement was entered into but a price of $4.5 million, plus GST, was agreed.
[10] Clark passed away unexpectedly on 26 June 2020. There had apparently been some disagreements between him and Alistair shortly before his death.
[11] Clark’s widow, Jacqueline Theresa Fitzgerald (Jackie), was an executor of his estate and became a director of AC/JV.
[12] As administrator of Clark’s estate, Jackie set about separating the business relationships between the estate and Alistair. The Harvest Road project was only one of a number of joint projects and business enterprises.
[13] Kevin Charles O’Neil (Kevin), a contractor of New Plymouth and a good friend of Clark’s, and Martin Fine, a commercial solicitor, were engaged to assist in resolving the affairs of Clark’s estate.
[14] Kevin went to Cromwell in July 2020 to get a better understanding of how the accommodation block was progressing.
[15] Alistair advised him that GCG had completed about two-thirds of the work on the accommodation block but had already used up the $4.5 million construction price and the balance of the works would cost $1.45 million.
[16] On 23 October 2020, Jackie sent a letter on behalf of AC/JV to GCG recording the agreed position that GCG would complete the accommodation block for
$1.45 million, plus GST. This would draw a line under all previous work, instructions, variations etc which, up to and including 18 August 2020, would be deemed to form part of any previously paid cost and not part of the $1.45 million going forward.
[17] That letter was incorporated into a NZS 3915 construction contract between AC/JV as Principal and GCG as Contractor dated 29 October 2020 (the NZS 3915 contract).
[18] At this stage there was no suggestion from Alistair (who was at that point in control of both GCG and AC/JV) that there was any outstanding payment for work that had been completed.
[19] In December 2020, Jackie and Alistair, with the assistance of their respective advisors, negotiated an agreement to resolve all of the outstanding business relationships between Alistair and Clark’s estate.
[20] The relevant parts of that agreement were that Jackie, as executor of Clark’s estate, would receive all shares in AC/JV once the Harvest Road development was complete and the Code Compliance Certificate (CCC) and/or CPU was issued. Alistair would pay a half-share of GCG’s agreed progress costs to get the accommodation block to CCC and CPU stage.
[21] Jarrod Chisholm (Jarrod), Alistair’s accountant, had been assisting him with the negotiations and on 11 December 2020, Alistair replied to an email from Jarrod recording the terms of settlement by saying, “I can confirm I agree to the below email from Jarrod.”
[22] A formal document to record the terms was drafted and provided to Jarrod and Alistair’s solicitor on 27 January 2021.
[23] After initially engaging and updating the draft of the agreement, in mid-February 2021, Alistair, through his solicitor, Mr Sycamore, advised that he did not consider the settlement agreement binding and that he required a larger payment of $2.8 million.
[24] The CPU was issued on 25 February 2021. Following that, AC/JV had 10 working days to settle the purchase of the Harvest Road property.
[25] On 8 March 2021, a further settlement agreement was entered into between Clark’s estate and Alistair.
[26] The purpose of the settlement agreement was to completely separate the affairs of the joint venture, Alistair and Clark and the companies involved. That included entering into the NZS 3195 contract with the letter discussed at [16] above incorporated into it.
[27]Alistair ceased to be director and shareholder in AC/JV on 18 March 2021.
[28] The issue of the CPU on 25 February 2021 had consequences in that it triggered the settlement of the purchase of the Harvest Road property and also meant that AC/JV could then start to use the accommodation block.
[29] Kevin was named as the Principal’s representative under the NZS 3195 contract.
[30]On 16 April 2021, GCG’s solicitors sent a letter alleging:
(a)$32,982.21 including GST worth of work had been undertaken before 18 August 2020 and remained “due and payable”; and
(b)$519,150.25 including GST of additional variations were owing.
[31] The applicant says these allegations had not previously been made and were contrary to the premise upon which the settlement agreement had been reached, namely that there was to be a fixed price of $1.45 million plus GST for the completion of the accommodation block.
[32] Neither had it been mentioned during the six months prior when Jackie had been working to tidy up Clark’s estate and separate its affairs from Alistair.
[33] Kevin, as Principal, went back on behalf of AC/JV and issued a determination on GCG’s claim. The letter of 14 May 2021 recorded that:
(a)any claim by GCG for outstanding amounts was rejected by AC/JV;
(b)it appeared GCG was referring to matters that were captured by the agreement that all prior costs had been paid; and
(c)the variation claims were rejected, unsubstantiated and unclaimable and valued at nil.
[34] GCG claimed that it had completed its construction work on 25 February 2021. It took down its hoarding/safety signage, removed the construction office/store, and left the site then.
[35] It came back the following month to do some further work but has not carried out any substantive work since that time.
[36]AC/JV got on with addressing defective work that GCG had left behind.
[37] In August 2021, there was correspondence between GCG, AC/JV and Peter Degerholm about a potential expert determination. GCG did not progress it.
[38] By letter of 22 March 2023, GCG proposed that the parties agree to arbitration or it would file High Court proceedings. On 5 April 2023, AC/JV confirmed it was willing to agree to an arbitration. However, GCG did not progress that.
[39] On 31 July 2023, GCG wrote to Mr Degerholm asserting there was a dispute over:
(a)$338,694.30 plus GST owing under the construction contract; and
(b)$341,949.92 of additional variations under the construction contract.
[40]These sums had not been raised previously.
[41] On 11 August 2023, AC/JV’s solicitors requested that GCG agreed to temporarily suspend the purported expert determination, but that request was declined.
The applicant’s arguments
[42]AC/JV contends that:
(a)the claims for $338,694.30 plus GST and $341,949.92 were raised for the first time on 31 July 2023;
(b)no supporting details were provided;
(c)they seem to be a repetition of matters from mid-2021 which the Principal had made a determination on, without a challenge;
(d)in the absence of any supporting documents being provided, resolution of any dispute will require a discovery process, together with witness statements and cross-examination; and
(e)GCG seeks to invoke a “quick fire expert determination process” some two-and-a-years after completion of the relevant works.
[43]AC/JV says that the relevant features of the NZS 3195 contract are:
(a)clause 9.2.2, which says:
Where an instruction is given by the Principal which is not in writing or is not expressly stated to be a Variation, and the Contractor considers that the Instruction involves a Variation, it shall within one Month of receiving the Instruction or as soon as practicable thereafter give written notice to the Principal to that effect. Unless the Principal by notice in writing within a reasonable time rejects the Contractor’s claim the Instruction shall be treated as if it was a Variation.
(b)clause 9.2.3, which says:
Where the Contractor considers any matter which is not described in 9.1 should be treated as a Variation, the Contractor shall within one Month of becoming aware of that matter or as soon as practicable thereafter give written notice to the Principal to that effect.
(c)clause 9.3.17, which says:
The Principal shall within 20 Working Days of the receipt of the Contractor’s valuation notify the Contractor of any different valuation giving reasons for the difference.
(d)clause 9.3.18, which says:
Unless the Principal by notice in writing within 20 Working Days of receipt of the Contractor’s valuation proposes a different valuation, giving reasons for the difference, then the Contractor’s valuation shall be the valuation of the Variation.
(e)clause 11.3.1, which stipulates that the Period of Defects Liability shall be three Months unless some other period is stated in the Special Conditions and in no case shall the Period of Defects Liability exceed 12 months;
(f)clause 11.3.1, which stipulates that when the Contractor believes that the Period of Defects Liability under cl 11.1.1 has expired and the Contractor has remedied any minor omissions or minor defects then the Contractor shall give to the Principal a provisional Defects Liability
Certificate confirming that the Period of Defects Liability has expired and there are no outstanding omissions or defects;
(g)clause 12.1.1, which provides:
The Contractor may submit to the Principal claims for payment under the contract. Unless otherwise provided in the Contract Documents such payment claims shall be submitted in respect of work carried out during periods of not less than one Month.
(h)clause 13.1.1, which provides:
No instruction, decision, valuation or certificate of the Principal shall be questioned or challenged more than three months after it has been given or more than one month after the date on which any relevant Adjudicator’s Determination is given to the parties, whichever is the later, unless notice has been given to the Principal within that time.
(i)clause 13.2.2, which deals with the referral of a dispute or difference to an expert, the relevant sentence saying:
The Expert may be appointed before work commences under the contract, or at any time during the carrying out of the Contract Works.
[44] The applicant says that these provisions, taken together, establish a regime that is intended to provide an opportunity for prompt resolution of a dispute provided that such a dispute arises either before the contract works commenced or during the time of the carrying out of the contract works or shortly thereafter.
[45] The applicant points to the time limits set out in the various provisions and says that they have not been complied with and GCG is not now in a position to advance new claims, and certainly not claims that have been articulated for the first time on 31 July 2023, without the provision of any relevant documentation.
[46] In relation to the interpretation of cl 13.2.2 of the NZS 3195 contract, the applicant relies on the decision of Eaton J in Rooney Earthmoving Ltd v Infinity Farms Ltd.1
1 Rooney Earthmoving Ltd v Infinity Farms Ltd [2022] NZHC 2078.
[47] In that decision, Eaton J considered the purpose of the expert determination process and the relationship between the purpose and the constraint on the timing of an expert appointment. At [74], he said:
… Expert determination is intended to provide a speedy, comparatively informal, and cost-effective mechanism to resolve more technical disputes between contracting parties. Those efficiencies are achieved through appointment of an independent third party to adjudicate in a field in which that adjudicator is an expert and has immediately to hand their own store of knowledge, skills and/or experience. The utility of the process is the avoidance of delays in the contract works whilst a dispute is determined.
[48] As to the effect of a lengthy delay between physical completion of contract works and an attempt to invoke the expert determination, Eaton J said:
[75] The concepts of simplicity, informality and speedy resolution do not sit comfortably with the invocation of an expert determination process many months, let alone years, after the physical contract works have been undertaken and the contractor has vacated the site. The 15 working day time limit from referral to the expert until a decision signals a degree of urgency that is consistent with a dispute resolution process taking place during the period of construction.
[49]Eaton J concluded:
[91] In my view, the phrase “carrying out Contract Works” implies the contractor is on site and engaging in physical works …
[50] The applicant says that the facts of the present case are very similar to those in Rooney Earthmoving Ltd v Infinity Farms Ltd and that in accordance with the approach taken by Eaton J in that case, this Court should make an order restraining the first respondent from proceeding with an expert determination.
[51] The applicant says that the first respondent has refused to provide details supporting the new claim, has refused to temporarily suspend the expert determination process and that the applicant will suffer irreparable harm unless the respondents are restrained from proceeding with the expert determination.
First respondent’s position
[52] Mr Olney was at a significant disadvantage in having only received the application and supporting documentation at the same time as it was filed at Court, late in the afternoon of 14 August 2023.
[53] He submitted that the Rooney Earthmoving Ltd v Infinity Farms Ltd decision was distinguishable on the basis that it was commenced by way of originating application. He also submitted that an expert had been appointed at the time when the contract was entered into so that no question of delay arose.
[54] In response to questioning from me, Mr Olney acknowledged that there were aspects of the claim that would require the provision of supporting documentation and evidence.
Legal principles applicable to interim injunctions
[55]The principles applying to the grant of an interim injunction are well-settled.
It requires the Court to find that:2
(a)there is a serious question to be tried;
(b)the balance of convenience favours the granting of the injunction; and
(c)the overall justice of the case requires it.
[56] The purpose of an interim injunction is to improve the chance of the court being able to do justice after a determination of the merits at trial.3 The basic principle is for a court to take whichever course seems likely to cause the least irremediable prejudice to one party or another.4
2 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12]; Intellihub v Genesis Energy Ltd [2020] NZCA 344 at [23]; Klissers Farmhouse Bakeries v Harvest Bakeries Ltd [1985] 2 NZLR 129 at 142; and American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL).
3 Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [31], citing National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] UKPC 16, [2009] 1 WLR 1405 at [16]–[17].
4 At [31], citing National Commercial Bank Jamaica Ltd v Olint Corp Ltd, above n 3, at [16]–[17].
[57] A serious question is one that is not frivolous or vexatious, and one where the plaintiff is able to satisfy the Court that it has a real prospect of succeeding at trial.5
[58] The essence of the latter two stages is whether the effect of refusing the injunction would be harder on a plaintiff who succeeds at trial than granting it would be on an ultimately successful defendant.6 In making this assessment, the Court should consider what is in the overall interests of justice by reference to the relative strengths of the cases, the preservation of the status quo, the uncompensable disadvantages to either party, and the adequacy of damages as a remedy.7
[59] The second stage, assessing the balance of convenience, involves balancing the risk of doing an injustice. 8 It is a broad and flexible inquiry.9 The Court must decide whether granting or refusing an injunction would, after the action itself has been tried and the issues between the parties determined, fairly allow the adjustment of the rights of the parties in a way that accords with fairness and justice.10 The question of balance of convenience arises generally only where there is doubt as to the adequacy of damages.11
[60] The third stage is the overall justice assessment. The Court of Appeal has emphasised that in every case the Judge has to stand back and ask where overall justice lies.12 Marshalling considerations under the non-exhaustive heads of serious question to be tried and balance of convenience is an aid to determining this ultimate question.13 It is essentially a check on the position that has been reached following analysis of the first two stages.14 It may involve considerations such as the public interest and the connection of the defendant to New Zealand.
5 Re Lord Cable (dec’d) [1976] 3 All ER 417 (Ch) at 431; and Hannon v Senior Trust Capital Ltd
[2023] NZHC 16 at [40].
6 Roman Catholic Bishop of the Diocese of Auckland v Boynton [2018] NZHC 2636 at [14].
7 Jacanna Holdings Ltd v Pacific Auto Carrier (NZ) Ltd [2019] NZHC 931 at [92]; and Wellington International Airport Ltd v Air New Zealand HC Wellington CIV-2007-485-1756, 30 July 2008 at [6]–[14].
8 McLaughlin v McLaughlin [2019] NZHC 2597 at [37], citing Cayne v Global Natural Resources Plc [1984] 1 All ER 225 (CA) at 237.
9 At [38].
10 Congoleum Corp Ltd v Poly-Flor Products (NZ) Ltd [1979] 2 NZLR 560 (CA) at 571.
11 American Cyanamid Co v Ethicon Ltd, above n 2, at 408–409 and 510–511.
12 Klissers Farmhouse Bakeries v Harvest Bakeries Ltd, above n 2, at 142.
13 At 142; and see NZ Baking Trades Employees’ Industrial Union v General Foods Corp (NZ) Ltd
[1985] 2 NZLR 110 (CA).
14 NZ Tax Refunds Ltd v Brooks Homes Ltd, above n 2, at [47].
[61] The overall grant of an interim injunction involves the exercise of a discretion, which is amenable to appeal on the basis that the judge has erred in law, taken account of an irrelevant matter, failed to take account of a relevant matter or is plainly wrong.15 However, the individual stages of the court’s consideration involve judicial evaluation rather than the exercise of a discretion.
Analysis
[62] I am satisfied that there is a serious question to be tried. I accept the applicant’s arguments that the Rooney Earthmoving Ltd v Infinity Farms Ltd decision dealt with a very similar factual situation and that it is authority for the proposition that an expert can only be invited to make a determination at a time when the contractor is on site and engaging in physical works.
[63] I do not accept Mr Olney’s submission that the fact that Rooney Earthmoving Ltd v Infinity Farms Ltd was commenced by way of originating application undermines the principles articulated by Eaton J in that decision.
[64] I also reject Mr Olney’s suggestion that the NZS 3915 contract could be interpreted in a way that supported the proposition that the second respondent was “appointed” at the time the contract was entered into. Clause 13.2.1 of the contract refers to the referral of any difference or dispute to the expert by written notice. The process of expert determination does not begin until that written notice is given.
[65] In terms of the balance of convenience, given the very short timeframe for resolution of a dispute by an expert, and the refusal or failure by GCG to provide any supporting material explaining its recent claims, or showing how they were calculated, the applicant is put in a very difficult, if not impossible, situation.
[66] There appears to be no urgency from GCG’s point of view given the passage of a lengthy period of time since the works were completed and the site vacated by the contractor.
15 At [13].
[67] The nature of the dispute is such that resolution will likely require extensive discovery as well as the calling of evidence in cross-examination. The subject matter is not appropriate for the sort of quick-fire process envisaged in cl 13.2 of NZS 3195.
[68] In considering the overall interests of justice, I conclude that the applicant has a strongly arguable case that the time for GCG to invoke the expert procedure has long since expired.
[69] The applicant has now filed a statement of claim which seeks resolution of the substantive dispute. The first respondent will have full opportunity to respond to that. Granting the interim injunction will not deprive the first respondent of the opportunity to ventilate its claims for further payment.
[70]This is not a case where damages would be an adequate remedy.
[71] I am satisfied that the overall justice of this case requires the issue of an interim injunction.
Outcome
[72] I make the following order: pending further order of the Court, the first respondent is restrained from proceeding with an expert determination before the second respondent, Mr Degerholm, in relation to the claims raised by it on 31 July 2023.
Churchman J
Solicitors:
Thinn & Co, Auckland for Applicant
Van Aart Sycamore for First Respondent
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