Clark v Central Lakes Homes Ltd
[2016] NZHC 1694
•25 July 2016
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2016-425-25 [2016] NZHC 1694
BETWEEN PETER JOHN CLARK
Appellant
AND
CENTRAL LAKES HOMES LIMITED Respondent
Hearing: 6 July 2016 Appearances:
H C Matthews for Appellant
T M Braun and M Brady for RespondentJudgment:
25 July 2016
JUDGMENT OF MANDER J
[1] The appellant, Mr Peter Clark, appeals the entry of summary judgment against him for a sum of money the Building Disputes Tribunal (the Tribunal) determined he owed to the respondent company, Central Lakes Homes Limited (CLH).
Background
[2] Mr Clark and CLH entered into a contract to build a residential dwelling on Mr Clark’s property situated in Queenstown. Relations between the parties irreconcilably broke down and the construction contract came to an end. The circumstances leading to the termination of the contract are in dispute. Mr Clark maintains the contract ended by way of mutual termination which included CLH’s agreement to leave the building site and allow an alternative contractor to continue construction work. CLH’s position is that Mr Clark instructed CLH to cease work, refused access to the property, and unilaterally engaged an alternative builder.
[3] CLH issued a notice under a clause of the contract advising that in the absence of Mr Clark vacating the building site CLH was permitted to terminate the
CLARK v CENTRAL LAKES HOMES LIMITED [2016] NZHC 1694 [25 July 2016]
contract. In such an event, CLH maintained it was entitled to recover certain costs, expenses and damages. The relevant clauses of the construction contract upon which it relied read as follows:
48The owner will be in breach of Contract if, without the prior written consent of the Registered Master Builder, the Owner takes possession of the building site and the Works prior to Practical Completion or prior to making payment in full of any amount due and owing to the Registered Master Builder. In such case, the Registered Master Builder may, by notice in writing, notify the Owner that it has two working days to vacate possession of the building site and Works.
49If the Owner does not vacate the building site and Works within two working days, the Registered Master Builder shall be entitled to terminate the Contract immediately. Upon termination under this clause:
(a) the owner must pay the Registered Master Builder all sums due and owing under the Contract, plus any damages, costs, expenses or loss of profit of the Registered Master Builder arising out of the termination of the Contract; and
(b) the Registered Master Builder shall have no further obligations to the Owner under the Contract.
Adjudication by the Building Disputes Tribunal
[4] The dispute was referred to the Tribunal for adjudication. CLH sought a determination that Mr Clarke was liable to pay the following sums:
(a) Work completed to the date of cancellation $39,588.80 (b) A royalty payment to Landmark Homes NZ Ltd $19,455.85 (c) Sales commission $13,752.99 (d) Loss of profit $40,317.00
[5] CLH acknowledged it had received payment of $35,163.50 from Mr Clark for work completed, however, it claimed before the Tribunal a further $49,999.99 (excluding GST), together with interest. It capped its claim in this way in order to fall within the lower claim jurisdiction of the Tribunal.
[6] The adjudicator determined Mr Clark was liable to pay CLH $62,782.66, comprising $57,499.98 for claimed losses, together with interest of $5,282.68.1
Mr Clark was further held liable to pay CLH the sum of $3,750.00, being his half
share of the adjudicator’s fees which CLH had already paid.
[7] Importantly, having regard to the issue arising on the present appeal, the adjudicator expressly held that his determination was made pursuant to s 48(1)(a) of the Construction Contracts Act 2002 (the Act).
Application for summary judgment in the District Court
[8] CLH sought to enforce the adjudicator’s determination in the District Court by applying for summary judgment. Section 59(2)(a) of the Act provides that a party who is owed an amount determined by an adjudication under s 48(1)(a) may recover the sum from the other party as a due debt in any Court.
[9] Mr Clark resisted entry of summary judgment on the basis the adjudicator’s determination had made a finding as to damages which could only have been made under s 48(1)(b), and that a determination pursuant to that provision about the parties’ rights and obligations under the construction contract was not enforceable
under s 59.2 Mr Clark further argued there were significant factual disputes at issue
between the parties which did not allow the entry of summary judgment.
[10] Judge Callaghan granted CLH’s application for summary judgment.3 The District Court held the adjudicator had made a finding of repudiation and cancellation of the contract and that, pursuant to clause 49, CLH was entitled to certain sums and damages in such an event. As a result, the adjudicator was acting under s 48(1)(a) of the Act. The fact Mr Clark continued to dispute the factual issues did not affect CLH’s entitlement to seek enforcement of the adjudicator’s
determination under s 59.
1 Central Lakes Homes Ltd v Clark BDT 2014-08568LVC50, 8 October 2014.
2 Construction Contracts Act 2002, s 58(2).
3 Central Lakes Homes Ltd v Clark [2016] NZDC 396.
The appeal
[11] Mr Clark has appealed the summary judgment on the following grounds:
(a) The determination of the adjudicator is properly classified as a determination under s 48(1)(b) which cannot be enforced under s 59 by way of summary judgment.
(b)There are significant factual disputes between the parties which require determination at a defended hearing, and the matter is therefore not suitable for summary judgment.
(c) Even if Mr Clark has no defence, the Court in the exercise of its residual discretion should not enter summary judgment against him.
[12] Each of those grounds will be examined in turn. Before doing so, it is convenient to make some observations about the adjudication scheme provided by the Act and the relevant provisions of the legislation.
Construction Contracts Act 2002
[13] One of the purposes of the Act is to provide a speedy mechanism for the resolution of disputes arising from construction contracts which enable building contractors to obtain payment and ensure some cash flow before the final resolution of issues. Section 3 of the Act provides:
3 Purpose
The purpose of this Act is to reform the law relating to construction contracts and, in particular,—
(a) to facilitate regular and timely payments between the parties to a construction contract; and
(b) to provide for the speedy resolution of disputes arising under a construction contract; and
(c) to provide remedies for the recovery of payments under a construction contract.
[14] The importance of ensuring cash flow in the building trade and ensuring a means by which payment can be secured by way of a swift and inexpensive adjudication process is balanced by the status of the adjudicator’s decision which, while binding, is not final.4 A party may submit a dispute to other dispute resolution procedures, including to a Court.5 Mallon J summarised the regime as follows:6
[9] A determination under the CCA therefore provides a mechanism by which payment of disputed amounts can be promptly required and enforced, even though the payer is able to separately contest that the payment was owing under the contract between the payer and the payee. If the payer’s position is upheld in separate proceedings, then the payee will be required to pay back the money that he or she received from the payee as a result of the CCA process. For this reason the CCA has been described as a “pay now, argue later” regime, and as giving rise to a “temporary” debt (for example Laywood v Holmes Construction Wellington Ltd [2009] NZCA 35, [2009] 2
NZLR 243 at [52]). Nevertheless, because it is a debt that may be enforced, it has been held that a statutory demand can be issued in respect of it:
Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd (2005)
18 PRNZ 97.
[15] An adjudicator’s jurisdiction is set by s 38 of the Act:
38 Jurisdiction of adjudicators
(1) An adjudicator’s jurisdiction in relation to any dispute that has been
referred to adjudication is limited to determining—
(a) the matters referred to in sections 48, 49(1)(c), and 50(1)(c);
and
(b) any other matters that are of a consequential or ancillary nature necessary to exercise or complete the exercise of the jurisdiction conferred by paragraph (a).
(2) However, the parties to an adjudication may, at any time, by written agreement, extend the jurisdiction of an adjudicator to determine any matters in addition to those mentioned in subsection (1).
[16] The provision at the heart of the present appeal is the jurisdiction provided to the adjudicator under s 48. That provision provides:
4 Laywood v Holmes Construction Wellington Ltd [2009] NZCA 35, [2009] 2 NZLR 243 at [52];
George Developments Ltd v Canam Construction Ltd [2006] 1 NZLR 177 (CA).
5 Section 26(1).
6 Gill Construction Co Ltd v Butler [2010] 2 NZLR 229 (HC).
48 Adjudicator’s determination: substance
(1) If an amount of money under the relevant construction contract is claimed in an adjudication, the adjudicator must determine—
(a) whether or not any of the parties to the adjudication are liable, or will be liable if certain conditions are met, to make a payment under that contract; and
(b) any questions in dispute about the rights and obligations of the parties under that contract.
(2) If no amount of money under the relevant construction contract is claimed in an adjudication, the adjudicator must determine any questions in dispute about the rights and obligations of the parties under that contract.
(3) If an adjudicator determines under subsection (1)(a) that a party to the adjudication is liable, or will be liable if certain conditions are met, to make a payment, the adjudicator—
(a) must also determine—
(i) the amount payable or conditionally payable; and
(ii) the date on which that amount became or becomes payable; and
(b) may determine that the liability of a party to the adjudication to make a payment depends on certain conditions being met.
(4) Despite subsections (1) and (2), an adjudicator is not required to determine a dispute that has been withdrawn in accordance with section 39.
(5) If a dispute is settled by agreement between the parties before the
adjudicator’s determination is given, the adjudicator—
(a) must terminate the adjudication proceedings; and
(b) if requested by the parties, may record the settlement in the form of a determination on agreed terms.
[17] Turning to the enforceability of an adjudicator’s determination, the Act
provides as follows:
58 Enforceability of adjudicator’s determination
(1) An adjudicator's determination under section 48(1)(a) is enforceable in accordance with section 59.
(2) An adjudicator's determination under section 48(1)(b) or (2) about the parties' rights and obligations under the construction contract is not enforceable.
(3) However, section 61 applies if the determination referred to in subsection (2) is not complied with.
59 Consequences of not complying with adjudicator’s
determination under section 48(1)(a)
(1) The consequences specified in subsection (2) apply if a party to the adjudication fails, before the close of the relevant date, to pay the whole or part of the amount determined by an adjudicator.
(2) The consequences are that the party who is owed the amount (party
A) may do all or any of the following:
(a) recover from the party who is liable to make the payment
(party B), as a debt due to party A, in any court,—
(i) the unpaid portion of the amount; and
(ii) the actual and reasonable costs of recovery awarded against party B by that court:
(b) if party A is a party who carries out construction work under a construction contract, serve notice on party B of party A’s intention to suspend the carrying out of construction work under the contract:
(c) apply for the adjudicator’s determination to be enforced by
entry as a judgment in accordance with subpart 2 of Part 4. (3) A notice referred to in subsection (2)(b) must state—
(a) the ground or grounds on which the proposed suspension is based; and
(b) that the notice is given under this Act.
(4) In any proceedings for the recovery of a debt under this section, the court must not enter judgment in favour of a party unless it is satisfied that the circumstances referred to in subsection (1) exist.
(5) In this section, relevant date means—
(a) the date that occurs 2 working days after the date on which a copy of the relevant determination is given to the parties to the adjudication under section 46(3); or
(b) if the adjudicator determines a later date under section
48(3)(a)(ii), that later date.
60 Effect of review or other proceeding on adjudicator’s
determination under section 48(1)(a)
An adjudicator’s determination under section 48(1)(a) is binding on the parties to the adjudication and continues to be of full effect even though—
(a) a party has applied for judicial review of the determination;
or
(b) any other proceeding relating to the dispute between the parties has been commenced.
61Consequence of not complying with adjudicator's determination under section 48(1)(b) or (2)
(1) If a party to an adjudication fails to comply fully with the adjudicator's determination under section 48(1)(b) or (2) about the parties' rights and obligations under the relevant construction contract, any other party to the adjudication may bring proceedings in any court to enforce that other party's rights under that contract.
(2) In any proceedings under subsection (1), the court must have regard to, but is not bound by, the adjudicator's determination.
[18] There is no dispute the contract between the parties was other than a residential construction contract.7
Decision
Was the adjudicator’s determination validly made under s 48(1)(a)?
[19] Mr Clark submitted an adjudicator only has power to determine whether any of the parties to the adjudication are, or will be, liable to make a payment under the contract.
[20] He contended CLH’s claim under cl 49 comprised two separate parts. The claim for sums due and owing under the contract were to be contrasted with a claim for damages, costs, expenses, or loss of profit arising out of the termination of the contract. Mr Clark maintained the latter part of the claim was not a right to payment of “all sums due and owing under the contract”, nor a payment “under the contract”, but was a liability imposed by common law to pay damages to compensate a non- breaching party. Mr Clark submitted this same distinction is reflected in the Act in
relation to determinations made pursuant to s 48(1)(a) and 48(1)(b).
7 The difference between the enforceability of an adjudicator’s determination depending upon whether it was made under s 48(1)(a) or 48(1)(b) was abolished by the Construction Contracts Amendment Act 2015. An adjudicator’s determination under s 48(1)(b) or (2) is now enforceable by entry as a judgment (see s 59A, as inserted by s 42 of the Construction Contracts Amendment Act 2015). The distinction between a commercial and residential construction contract has also now been extinguished.
[21] In aid of his argument, Mr Clark relied upon a decision of Associate Judge Christiansen in Van der Wal Builders & Contractors Ltd v Walker.8 The plaintiff in that case had obtained a determination from the Tribunal in its favour and applied for summary judgment pursuant to s 59. Judgment was declined on the basis there was an arguable case that no construction contract had been concluded, and therefore the adjudicator did not have jurisdiction to make a determination under the Act.
[22] The case gave rise to a second issue regarding the adjudicator’s determination that an amount of money was payable as damages for breach of contract, purportedly pursuant to s 48(1)(a). After noting the adjudicator’s limited jurisdiction under ss 38 and 48 of the Act, Associate Judge Christiansen observed the Act differentiates between determinations as to liability “to make a payment under the relevant construction contract” (s 48(1)(a)) and determinations as to “parties rights and
obligations under the relevant construction contract” (s 48(1)(b)).9 Associate Judge
Christiansen concluded:
[98] In my view, a liability to pay damages for a “breach of contract” is not a liability to “make a payment under” that contract. The differentiation between liability to pay a debt and liability for damages is a well-established one. I agree with Mr Price’s submission that for damages for breach of contract determination to come within s 48(1)(a) one would either need to treat an award of damages as being an obligation to pay money under the contract (which could not be the case) or to treat “under the contract” as meaning “arising out of”, which would be contrary to the distinction between matters “under” and “arising out of” an agreement.
[99] Therefore a claim for damages falls within the scope of a “rights and obligations determination” and is not a claim for payment under a construction contract, and as such is not a s 48(1)(a) determination, nor is it enforceable pursuant to s 59.
[23] Mr Clark submitted the circumstances in Van der Wal Builders v Walker and the present case are similar. Both involve an allegation by a builder that the owner has repudiated the contract, and both involve claims for damages for alleged lost profits which resulted in determinations which were said by the respective
adjudicators to be determinations under s 48(1)(a).
8 Van der Wal Builders & Contractors Ltd v Walker HC Auckland CIV-2011-004-083, 26 August
2011.
9 At [91]-[94].
[24] Mr Clark submitted that, as he had already paid most of CLH’s claim for “work completed”, CLH’s claim distilled to being one for damages, costs and expenses, or loss of profits, which was not a claim under the contract for completed building work. As a result, CLH’s claim falls under s 48(1)(b) because it relates to “questions and disputes about the rights and obligations of the parties” under the contract, which are not issues that can be the subject of determination under s
48(1)(a). It follows that such a determination cannot be enforced by way of s 59.
[25] Van der Wal Builders v Walker is distinguishable from the present case. Firstly, the entry of judgment was declined in that case because there was an available argument that no construction contract had been entered into between the parties. The Tribunal therefore lacked jurisdiction to make any determination under the Act. Secondly, any liability to pay damages for breach of the contract arose in the ordinary way at common law. It did not arise out of the enforcement of a term of the contract. As Associate Judge Christiansen observed, any such award was not dependent upon proof of an obligation to pay money under the contract.
[26] In the present case, CLH relies on clauses 48 and 49, as set out at [3]. These are terms agreed by the parties to the contract as a mechanism by which certain obligations on the owner of the property would trigger in the event stipulated conditions were established.
[27] Clause 48 provides that without the prior written consent of the builder, if the owner takes possession of the building site prior to practical completion or prior to making payment in full of any amount due and owing, he will be in breach of the contract. In such case the builder may, by notice in writing, notify the owner that he has two working days to vacate possession. In the absence of the owner so doing, the builder is entitled to terminate the contract immediately. Upon termination certain moneys must be paid. These include sums due and owing under the contract and, additionally, “any damages, costs, expenses or loss of profit” arising out of the termination of the contract.
[28] It is these terms of the contract upon which CLH relies as giving rise to an obligation on Mr Clark to make payment under the contract. Because the
adjudicator has determined the conditions specified in the contract have been met, the owner is liable to make payment for the items set out in cl 49.
[29] Parties enter into contractual agreements on terms upon which they may be taken to have freely agreed. This may include comprehensive terms covering potential scenarios relating to the performance of the contract and remedies available to the parties should certain events come to pass, or conditions and obligations not be met.
[30] In the present case, the contract provided for a situation where the owner does not vacate the building site and thereby prevents the builder from discharging his obligations. Upon failure by the owner to comply with a duly served notice, the builder has a right of termination which will cause the owner to be liable for various payments. These are described as being sums due and owed under the contract, damages, costs, expenses or loss of profit. However, whatever the label applied, they are payments for which an owner will become liable under the contract if the conditions which trigger the liability are met. Such liability arises independently of any common law right of action for breach of contract.
[31] This distinction between damages under the contract and damages for breach of contract has long been recognised. The authors of Keating on Construction Contracts summarised the position as follows:10
Claims under or for breach of the contract. The distinction should always be sharply observed between claims made for breach of a contract and claims made under or pursuant to the terms of the contract.11 Most sophisticated construction contracts give the contractor contractual rights to additional payment in circumstances some of which may also, or might otherwise, be breaches of contract by the employer. Such rights are usually additional to, and not in substitution for, the contractor’s common law remedy of damages for breach of contract.12 A claim under the contract will depend on the relevant term.
10 Stephen Furst and others Keating on Construction Contracts (9th ed, Sweet and Maxwell, London, 2011) at [9-001].
11 See McAlpine Humberoak v McDermott International Inc(No 1) (1992) 58 BLR 1 HKCA at 22.
12 See Modern Engineering (Bristol) Ltd v Gilbert-Ash Northern Ltd [1974] AC 689 (HL).
[32] In respect of what are described as “Claims under the express provisions of a building contract”, the learned authors continue:13
For claims under the contract it is important to focus upon the precise wording of the provisions that generate the entitlement to further time or payment… As to money claims, in most standard forms of contract the phrase “direct loss and/or expense” is used to describe the further payment that a contractor may be entitled to for relevant matters causing prolongation and disruption of the works. Such claims must consist of actual losses or expenditure incurred as a direct result of the relevant matter giving rise to the entitlement to further payment and are treated as analogous to damages covered at common law under the first limb of the rule in Hadley v Baxendale.
[33] The construction contract entered into between Mr Clark and CLH expressly provided that where the owner did not vacate the building site within two days, CLH would be entitled to terminate the contract and the owner required to pay CLH compensation. The liability of the owner for the specified items of restitution or indemnification, whether described as payments owing, damages, or expenses, arise under the contract and is an entitlement provided for by the contract itself. While analogous to damages at common law for breach of contract, the liability for payment is not dependent on proof of breach but the establishment of the stipulated conditions precedent. As such, they fall under s 48(1)(a) of the Act and their payment able to be enforced pursuant to s 59.
[34] When this distinction is recognised, the obiter comments of Associate Judge Christiansen in Van der Wal Builders v Walker are readily reconcilable. In that case there was no term of the contract which could be relied upon as is available to CLH in the present case. The Court there was concerned with a prospective liability to pay damages at common law for a contractual breach which clearly could not be categorised as a claim for payment under the construction contract, hence the distinction made by the Associate Judge between an obligation to pay money under the contract and an obligation for liability “arising out of” the contract.
[35] An adjudicator’s labelling of his or her determination as being one under s 48(1)(a) is obviously not determinative of the issue, and I have given close
consideration to whether, as Mr Clark submitted, the adjudicator’s determination was made pursuant to s 48(1)(b).
[36] Whether under s 48(1), where an amount of money is being claimed, or under s 48(2), where no money is sought, the adjudicator has jurisdiction to determine any questions in dispute about the rights and obligations of the parties under the contract. Neither an adjudicator’s determination under s 48(1)(b) or (2) about the parties rights and obligations is enforceable. It is anticipated by s 48(1) that when an amount of money is being claimed under a construction contract, the adjudicator may be required to make a determination about whether there is a liability to make a payment if certain conditions are met (s 48(1)(a)), and also determine disputed questions about rights and obligations of the parties under that contract (s 48(1)(b)). The two types of determination are not mutually exclusive.
[37] In the present case, the adjudicator’s decision considers a range of allegations by Mr Clark regarding CLH’s fulfilment of obligations under the contract, and about his contractual rights as a result of the alleged conduct by CLH. The adjudicator makes determinations about these issues which clearly are disputed questions relating to the rights and obligations of the parties and can be accurately classified as
s 48(1)(b) determinations. As a result, such findings are not enforceable.14
[38] That observation, however, does not derogate from the adjudicator’s determination made in respect of the relief sought by CLH that the preconditions under cls 48 and 49 of the contract had been established which gave rise to Mr Clark’s liability to make payments to CLH of the type specified. It is that determination made pursuant to s 48(1)(a) upon which CLH relies and seeks enforcement pursuant to s 59 by means of the entry of summary judgment as a due debt.
[39] Mr Clark, as previously noted, sought to distinguish between CLH’s claim under cl 49 for sums due and owing under the contract and amounts claimed for damages, costs, expenses or loss of profit arising out of the determination of the contract. Nothing turns on the labels used to describe the compensation for which an
owner may become liable upon the conditions of cls 48 and 49 being satisfied. While calculation of such sums will likely require assessment by the adjudicator of the proximity or nexus of the claimed losses and the termination of the contract, and about issues of quantum, s 48(3) expressly requires an adjudicator to determine the amount payable if it finds a party liable under subs (1)(a) to make payment.
[40] Mr Clark specifically put in dispute and challenged the sufficiency of the evidence of the items claimed, namely the royalty payment to Landmark Homes NZ Ltd, the sales commission and the loss of profit figure. CLH responded by identifying the evidence relied upon by the adjudicator, however, the short point is that notwithstanding Mr Clark’s continued dispute of those sums and the adequacy of the evidence upon which the adjudicator relied, they were clearly part of the determination under s 48(1)(a) of the Act, which the adjudicator was required to assess. Accordingly, the amounts so determined by the adjudicator are part of the adjudication enforceable under s 59.
Does the presence of significant factual disputes between the parties prevent the entry of summary judgment?
[41] Mr Clark submitted there were matters of significant factual and legal dispute arising from the events that preceded CLH’s purported termination of the construction contract. The presence of such issues, in his submission, rendered the matter unsuitable for summary judgment.
[42] There is no dispute as to the relevant principles governing an application for summary judgment in the District Court. A Court may give judgment against the defendant if the plaintiff satisfies the Court the defendant has no defence to a cause of action in the statement of claim.15 There is an onus on the plaintiff to satisfy the Court that the defendant has no defence. In order to do this the plaintiff needs to show there is no bona fide reasonable ground of defence available to the defendant.
In the absence of any real question to be tried which would warrant the matter proceeding to hearing, judgment can be entered. However, summary judgment will
not normally be appropriate if the case turns on a disputed fact.16
15 District Court Rules, r 12.2.
16 Pemberton v Chappell [1987] 1 NZLR 1 (CA).
[43] It is readily apparent there is a deep factual divide between the parties. Mr Clark does not accept that he refused to allow CLH access to the site. The evidence he filed in the adjudication proceeding was that disputes arose almost immediately after the contract was entered into with CLH. He maintains he served a default notice on the building company when it failed to proceed with the contract works with reasonable diligence. He alleges CLH was in breach of its obligations under the contract, which resulted in him engaging his solicitors, and that he considered he was entitled to cancel the contract. He disputes that CLH validly cancelled the contract because, in his view, they had already reached agreement to its termination, and that CLH was not ready and able to complete its obligations under the contract at the time it purported to cancel.
[44] This is but a summary of the multiple issues arising between the parties which, Mr Clark submits, prevents CLH from validly being able to obtain summary judgment in the District Court.
[45] For the purposes of this appeal CLH has not engaged with these substantive issues, nor does it seek to respond to Mr Clark’s allegations. That position has been taken because CLH, in my view correctly, is seeking to enforce the adjudicator’s determination under s 48(1)(a) of the amount of money Mr Clark is liable to pay under the contract which, pursuant to s 59 of the Act, is recoverable as a due debt.
[46] An adjudicator’s determination under s 48(1)(a) is binding on the parties to the adjudication and will continue to have full effect notwithstanding that a party may have applied for judicial review of the determination, or that another proceeding relating to the dispute between the parties has been commenced.17 As previously observed, the adjudicator’s determination is not final, and Mr Clark is free to contest the payments which the adjudicator has determined are owed under the contract. However, the determination pursuant to s 48(1)(a) remains as a debt upon which a party may sue until such time as the adjudicator’s determination is overtaken by a
contrary finding on a separate proceeding, including upon application for judicial
review.
17 Section 60.
[47] In respect of a commercial construction contract, pt 4 of the Act provides a process for a party to seek enforcement of the adjudicator’s determination by entry as a judgment.18 Entry of judgment in relation to a commercial construction contract can be opposed but only on limited specified grounds.19 As is apparent from this Court’s decision in Van der Wal Builders & Contractors v Walker, a party is not
absolutely prevented from defending an application for summary judgment based on an adjudicator’s determination under s 48(1)(a) in relation to a residential construction contract. However, as with commercial contracts, the grounds upon which entry of judgment can be opposed are limited to those in the nature of a
jurisdictional challenge. Associate Judge Christiansen held in that case:20
[75] MVDW’s position is that the defendants’ only right of challenge in the terms it has lies with an application for judicial review. I disagree. I consider that to rely upon the judgment of Miller J in Patel for that proposition is to misquote the learned Judge’s reference to recourse to judicial review. Rather, and as I noted earlier, there seems no basis upon which owners of private property pursuant to s 59 (as opposed to commercial property dealt with under ss 73 and 74) should not also enjoy the protection of a right to argue a jurisdiction challenge in cases where a builder seeks to enforce a purported construction contract. Miller J mentioned that absent the prerequisite of a construction contract between the parties “there can be no lawful adjudication” and “a determination must be unenforceable”.
[48] In the present case, no issue was taken by CLH about Mr Clark’s entitlement to raise the type of argument he did regarding the status of the determination by the adjudicator under s 48(1). However, it is clear that in the absence of this type of jurisdictional question which puts in issue whether the determination can be enforced as a debt by way of summary judgment, there can be no challenge to the findings of the adjudicator based on his or her assessment of the evidence and argument presented on the adjudication. The purpose of the Act needs to be kept in mind in terms of providing a mechanism for recovery of payments under a construction contract, and that the adjudication itself does not necessarily finally resolve matters as between the parties. The unsuccessful party is still able to separately contest a
payment determined by the adjudicator as being owed under the contract.
18 Commercial Contracts Act 2002, ss 10 and 73.
19 Section 74.
20 Van der Wal Builders v Walker & Contractors, above n 8.
[49] The effect of s 59 of the Act is to convert the adjudicator’s determination under s 48(1)(a) relating to the liability of a party for payment under the contract into an amount recoverable in a Court as a debt due to the successful party. If the findings of the adjudicator were able to be continued to be disputed the debt would be unenforceable, and the purpose of the Act frustrated. In the context of a commercial construction contract, Randerson J made the following observation,
which has equal application to a residential contract:21
[18] There is a clear statutory intention to limit the scope for challenging an adjudicator’s determination under the Act. First, there is no provision for appeals. Secondly, s 60 provides that a determination under s 48(1)(a) is binding on parties and continues to be in full effect even though a party has applied for judicial review of the determination and notwithstanding the commencement of any other proceedings relating to thedispute between the parties. Thirdly, where application is made to a District Court under s 73 of the Act for an adjudicator’s determination to be enforced by entry as a judgment, the grounds upon which entry as a judgment may be opposed are strictly limited by s 74(2).
[50] The application for summary judgment is a claim based upon the recoverability of an amount determined by an adjudicator as a payment for which a party to the contract is liable. In the event that amount remains unpaid, it will be recoverable as a debt due to the party in whose favour the determination was made. In the absence of the unsuccessful party being able to show the adjudicator did not have jurisdiction to make such a determination, a party will be unable to resist entry of judgment.
[51] For completeness, I note s 79 of the Act directs that in any proceedings for the recovery of a debt under s 59, the Court must not give effect to any counterclaim, set-off, or cross-demand raised by any party other than a set-off for a liquidated amount in respect of which judgment has been entered, or where there is no dispute between the parties in relation to a claim for that amount. It is apparent therefore that beyond challenging whether the adjudicator’s decision was truly one determining the liability of Mr Clark to make payment under the contract, and therefore capable of enforcement as a due debt by way of summary judgment, the
District Court was not able to revisit the merits of the parties respective cases.
21 Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd (2005) 2 NZCCLR 370
[52] I conclude therefore that Judge Callaghan was correct in finding it was not open to him to revisit the disputed matters between the parties upon CLH’s application for summary judgment. Once he was satisfied the determination made by the adjudicator was under s 48(1)(a) of the Act, binding on the parties to the adjudication and able to be enforced as a due debt pursuant to s 59, the Judge’s conclusion that Mr Clark had no arguable defence to the claim was inevitable.
Residual discretion
[53] As a fallback position, Mr Clark submitted I should invoke the Court’s discretion to avoid an injustice by not upholding the entry of summary judgment against Mr Clark. The Court does have a residual discretion to refuse summary judgment notwithstanding it being satisfied that a defendant has no arguable defence to the claim. However, it is a limited discretion and one only to be invoked in
exceptional cases.22
[54] Mr Clark submitted the discretion should be invoked because the disputed issues between the parties are such that opportunity should be afforded to him on the proceeding brought by CLH in the District Court, to seek discovery or make other interlocutory applications, and because of the unusual features which, in his submission, would render the entry of summary judgment oppressive. Mr Clark argued the combination of complex issues of fact and law, and the underlying disputes between the parties are such the Court cannot be satisfied he does not have a defence available to him.
[55] The response to Mr Clark’s plea is twofold. Firstly, the appeal to the Court’s discretion ignores the purpose of the Act in providing a mechanism by which payment of disputed amounts said to be owed under the contract can be recovered. The second relevant and important consideration is that Mr Clark will not be denied the chance to seek discovery and make other interlocutory applications because he has the right to have the merits of the contractual dispute finally determined by bringing his own proceeding. The adjudication process provided by the Act is not
final, and he retains the opportunity to have his position vindicated by way of a
22 Bromley Industries Ltd v Martin & Judith Fitzsimons Ltd [2009] NZCA 382, (2009) 19 PRNZ
separate proceeding if he chooses to do so. I do not consider the circumstances of the present case give rise to the rare situation where summary judgment ought not be entered.
Conclusion
[56] It follows from my findings on each of the grounds raised by Mr Clark that I am satisfied Judge Callaghan did not err in entering summary judgment on the basis of the adjudicator’s determination that Mr Clark was liable under the contract to pay CLH the amount of $62,782.66 including GST. Similarly, in entering judgment for Mr Clark’s share of the costs of the adjudication, being $3,750.00.
[57] The appeal is dismissed. I make an order directing release of the funds held by the Registrar of the Queenstown District Court to CLH which I understand represents the total amount entered by way of judgment, together with interest and costs in the sum of $111,315.23.
Costs
[58] In the event the parties are unable to agree costs, they are to exchange memoranda in the usual way and I will make a decision on the papers.
Solicitors:
Whitfield Braun Limited, Hamilton
White Fox & Jones, Christchurch
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