Custom Street Hotel Ltd v Plus Construction NZ Ltd

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-000219 [2016] NZHC 2011

UNDER

the Arbitration Act 1996

BETWEEN

CUSTOM STREET HOTEL LIMITED Plaintiff

AND

PLUS CONSTRUCTION NZ LIMITED First Defendant

PLUS CONSTRUCTION CO LIMITED Second Defendant

Hearing:	3 August 2016
Appearances:	R B Stewart QC, I Rosic and S McMullan for Plaintiff A Barker for Defendants
Judgment:	29 August 2016

JUDGMENT OF GILBERT J

This judgment is delivered by me on 29 August 2016 at 11.30 am pursuant to r 11.5 of the High Court Rules.

..................................................... Registrar / Deputy Registrar

Counsel/Solicitors:

R B Stewart QC, Auckland

Gilbert Walker, Auckland

Andrew Barker, Barrister, Auckland

CUSTOM STREET HOTEL LTD v PLUS CONSTRUCTION NZ LTD [2016] NZHC 2011 [29 August 2016]

Contents

Introduction ..........................................................................................................[1] Background ...........................................................................................................[2] Questions of law..................................................................................................[19]

Question 1 – Did the arbitrator err in holding that Plus’s
breach must be repudiatory in nature before Plus would be
disentitled from terminating? .......................................................................[20]

Question 2 – Did the arbitrator correctly construe clause 14.3.3 of the contract and err in holding that the defendants terminated

in accordance with clause 14.3.3? ................................................................[28]

Question 3 – Did the arbitrator correctly construe clause 14.2.4 of the contract and err in holding that the difference, between a certified cost to complete the contract works and the cost to Custom Street had the contract works been completed by Plus, could not be “properly due under the contract” until the contract

works have been completed?........................................................................[40]

Question 4 – Did the arbitrator err in holding that the damages claimed by Custom Street for breach of contract cannot be “properly due under the contract” until Custom Street’s claim

is admitted or determined as to liability and quantum? ...............................[49]

Question 5 – Did the arbitrator err in holding that Custom Street cannot rely upon the amounts claimed under the indemnity clause

in the contract as amounts “properly due under the contract”?....................[54]

Result ...................................................................................................................[61]

Introduction

[1]      This is an appeal on questions of law arising out of an arbitral award of

Hon. Rodney Hansen QC dated 17 November 2015.

Background

[2]     The plaintiff, Custom Street Hotel Ltd (Custom Street), entered into a construction  contract  dated  1  November  2013  with  the  defendants,  a  Korean company, Plus Construction Co. Ltd (Plus Korea) and Plus Construction NZ Ltd (Plus NZ) (together, Plus) for the re-development of the Reserve Bank Building on Customs Street, Auckland into a 15 storey hotel.  This contract replaced an earlier construction contract entered into in December 2012 between Custom Street and Plus NZ.

[3]      The contract price was $14.45 million plus GST subject to any variations or adjustments under the contract.   The contract works were to be completed within

52 weeks.

[4]      Plus as contractor and ANZ as surety provided a performance bond for 25 per cent of the contract price, $3.6125 million, in favour of Custom Street as beneficiary. The expiry date of the bond was 31 March 2015. The bond was payable:

Upon written demand by the beneficiary stating that the contractor has failed to perform…