Cromi Investments Limited v CMP Construction Limited - [2019] NZHC 2142

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001748

[2019] NZHC 2142

UNDER section 290 of the Companies Act 1993

BETWEEN

CROMI INVESTMENTS LIMITED

Plaintiff

AND

CMP CONSTRUCTION LIMITED

Defendant

Hearing: 13 November 2018

Appearances:

J R J Knight and J Hayashi for the Applicant N Gillies and R McStay for the Respondent

Judgment:

29 August 2019

JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 29 August 2019 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules.
…………………………………
Deputy Registrar

Solicitors:

Simpson Grierson, Auckland Hesketh Henry, Auckland

CROMI INVESTMENTS LTD v CMP CONSTRUCTION LTD [2019] NZHC 2142 [29 August 2019]

Introduction

[1] This proceeding is for an order setting aside a statutory demand. It arises out of a contract for a large development involving the construction of Nexus Apartments at Vinegar Lane, Ponsonby, Auckland. The principal, Cromi Investments Limited, and its contractor, CMP Construction Ltd, have been engaged in a prolonged debate over remedial works – invariably required towards end of such a development – and the release of the second and final tranche of retention monies of $155,274.61 plus GST held by the principal under the contract. According to Cromi, CMP simply failed to attend to all the notified defects and the cost to remedy the outstanding defects is (arguably) more than the amount of the retention monies. CMP disputes Cromi’s account.

[2] The contract commenced on 15 May 2015. It incorporates the Standard Terms contained in the NZS 3915:2005 General Conditions of Contract for Building and Civil Engineers Construction, as amended by the Special Conditions of Contract. It is statutorily governed by the Construction Contracts Act 2002 (the Act).

[3] Under cl 12.3 of the contract CMP is entitled to recover the second tranche of retention monies upon completion of the remedial works and the issue of a Defects Liability Certificate. But on 1 February 2018, before CMP reached the point of issuing a Defects Liability Certificate, Cromi issued written notice under cl 11.2.3 of its intention to engage others to complete the remedial work on the basis that all the remedial work had not been completed within a reasonable time (within and after the expiry of the Period of Defects Liability). A Defects Liability Certificate was never issued. Instead, a series of communications took place between the parties over the following months. Notably:

(a)On 3 July 2018, CMP, having supposedly fulfilled its obligations for remedial work, served a document called a Final Payment Claim for the retention money of $155,274.61 plus GST (Payment Claim 33). CMP contends this was a valid Payment Claim under the Act and that Cromi failed to provide a Payment Schedule in response within the time

allowed under the Act. It also says that Payment Claim 33 was its Final Payment Claim under cl 12.4.1 of the contract and that Cromi failed to provide a Payment Schedule under cl 12.5 of the contract.

(b)On 9 July…

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 2142
Decision Date: 29 August 2019

CaseChat Overview and Summary

Cromi Investments Limited, the principal, and CMP Construction Limited, the contractor, are in dispute over the completion of remedial works and the release of the second and final tranche of retention monies held by Cromi. The dispute arose from a contract for the construction of Nexus Apartments in Ponsonby, Auckland. The core issue was whether CMP had completed all the notified defects within a reasonable time, as required by the contract, and whether Cromi's claims for the cost of incomplete remedial works were legitimate. CMP issued a statutory demand under section 289 of the Companies Act 1993 for $184,631.60, which Cromi sought to set aside under section 290.

The court first considered whether CMP's Payment Claim under the Construction Contracts Act 2002 was valid. It found that CMP's Payment Claim 33 was invalid as it failed to indicate a due date for payment, a mandatory requirement under section 20 of the Act. The court also found that CMP's claim was time-barred under the contract's terms. Next, the court examined whether there was a substantial dispute about the debt sufficient to set aside the statutory demand. It concluded that there was a genuine and substantial dispute over the cost of incomplete remedial works, as well as the legitimacy of some of Cromi's claims. Finally, the court noted that the dispute should be resolved through the contract's dispute resolution procedure rather than through the statutory demand.

The court granted Cromi's application to set aside the statutory demand, finding that the statutory demand procedure was not an appropriate means to resolve the complex dispute over the remedial works and retention monies. The court left the determination of costs to be decided by the parties or fixed by the Registrar.

Orders