Alpine Prime Properties Limited v Haskell Construction Limited - [2019] NZHC 3223

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2019-485-465

[2019] NZHC 3223

UNDER section 290 of the Companies Act 1993

IN THE MATTER

of an application to set aside a statutory demand

BETWEEN

ALPINE PRIME PROPERTIES LIMITED

Applicant

AND

HASKELL CONSTRUCTION LIMITED

Respondent

Hearing: 25 October 2019

Appearances:

F B Collins for applicant M Freeman for respondent

Judgment:

9 December 2019

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction

[1] The applicant, Alpine Prime Properties Ltd (Alpine), applies to set aside a statutory demand dated 31 July 2019 and served on it by the respondent, Haskell Construction Ltd (Haskell), on 1 August 2019. Haskell’s demand is for payment of a debt of $133,619.06 due pursuant to an adjudication determination under s 25 of the Construction Contract Act 2002 issued on 29 July 2019.

[2]Haskell opposes the application.

ALPINE PRIME PROPERTIES LIMITED v HASKELL CONSTRUCTION LIMITED [2019] NZHC 3223
[9 December 2019]

Background

[3] Alpine is a property developer. It owns four lots in a subdivision in Ruapehu Street, Paraparaumu. Haskell is a construction company. Its director is Mr Christopher Haskell. The company was incorporated three years ago and employs about 11 staff.

[4] On 3 August 2018, Alpine and Haskell entered into a contract for the construction of a residential dwelling on one of the lots in Ruapehu Street. The contract price was about $800,000, which was to be paid in nine stages as the development progressed. Construction commenced in August 2018. By September 2018 Haskell had completed stage one (foundations and floor structure). An invoice was issued for stage one and paid by Alpine.

[5] An issue then arose concerning the introduction of structural steel members into the building design. The consented plans upon which Haskell tendered for the contract did not include steel, but these plans were based on provisional engineering designs. The structural framing then went through several revisions, with the result that steel would be required. On 10 December 2018, Haskell received the revised design including the steel.

[6] On 29 January 2019, Haskell sought to increase the contract price to accommodate the inclusion of the steel. Alpine did not accept the proposed variation to the contract price. Meanwhile, Haskell had continued with the construction works, largely completing stage two (wall and roof framing) except for the steel work.

[7] On 13 February 2019, Haskell issued a payment claim for stage two, arguing it had achieved “substantial completion” within the meaning of the construction contract. A site meeting was held on 26 February 2019. A disagreement emerged.

[8] On 18 April 2019, Alpine purported to cancel the contract pursuant to ss 362N(2)(b) and 362O(a) of the Building Act 2004, alleging substantial breaches of contract by Haskell. On 24 April 2019, Haskell purported to accept Alpine’s cancellation as though it had been made under cl 15.2.2(c) of the contract, which

allows cancellation where the parties agree the contract has become impossible to perform or is otherwise frustrated.

[9] On…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] NZHC 3223
Decision Date: 9 December 2019

CaseChat Overview and Summary

Alpine Prime Properties Limited applied to set aside a statutory demand issued by Haskell Construction Limited, which sought payment of a debt of $133,619.06 following an adjudication under the Construction Contracts Act 2002. The debt arose from a contract for the construction of a residential dwelling, which was later cancelled by Alpine. Haskell claimed that Alpine was in breach of contract, and Alpine claimed damages for breach of contract, which it believed would exceed the amount owed to Haskell. Alpine sought to avoid paying the debt pending a final determination on the merits of its claim for damages.

The court needed to decide whether Alpine could rely on its counterclaim for damages to avoid making an interim payment of the debt owed to Haskell. The legal issue was whether section 79 of the Construction Contracts Act, which restricts counterclaims and set-offs in proceedings for the recovery of a debt, applied to statutory demands under the Companies Act 1993. The court had to determine whether Alpine could set aside the statutory demand if it had a substantial counterclaim that might exceed the amount claimed.

The court held that Alpine could not rely on its counterclaim to avoid the interim payment requirement established by the Construction Contracts Act. Section 79 of the Act precluded the consideration of any counterclaim or set-off in proceedings for the recovery of a debt arising from an adjudication award. The court found that the purpose of the Act was to facilitate timely payments and resolve disputes quickly, and enforcing the adjudication award on a ‘pay now, argue later’ basis was consistent with this purpose. The court also noted that Alpine’s reliance on Kariiti Ltd v Donovan Drainage & Earthmoving Ltd was misplaced, as that case involved a different procedural context.

Alpine’s application to set aside the statutory demand was dismissed, and the court reserved costs pending further submissions from the parties. The court held that there was no scope for entertaining any counterclaim or set-off where a statutory demand was served to enforce an adjudication award under the Construction Contracts Act.

Orders