Dem Home Ltd v New Gate Ltd - [2023] NZHC 2709

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-000604

[2023] NZHC 2709

UNDER the Companies Act 1993

BETWEEN

DEM HOME LIMITED

Applicant

AND

NEW GATE LIMITED

Respondent

Hearing: 9 August 2023

Appearances:

K Sun for the Applicant

K Robinson for the Respondent

Judgment:

4 October 2023

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 4 October 2023 at 3.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Capstone Law Ltd, Auckland Wynyard Wood, Auckland

DEM HOME LTD v NEW GATE LTD [2023] NZHC 2709 [4 October 2023]

Introduction

[1] Dem Home Limited (Dem Home) and New Gate Limited (New Gate) were parties to a construction contract by which Dem Home engaged New Gate to build five terrace houses at Taratoa Street, Point England.

[2] Dem Home purported to cancel the contract for breaches by New Gate before construction was complete. New Gate issued a payment claim for $242,500.50 which Dem Home did not respond to. New Gate then served a statutory demand on Dem Home based on the payment claim. Dem Home applies to set aside the statutory demand because there is a substantial dispute whether the debt demanded is owing and due. New Gate opposes the application.

[3] The central issue is whether there is a substantial dispute over whether the debt is owing and due, because arguably the payment claim was not a valid payment claim under the Construction Contracts Act 2002 (CCA).

[4]There are three threads to this issue:

(a)Is it reasonably arguable that the payment claim was not a valid payment claim under the CCA because it did not comply with the formal requirements?

(b)Is it reasonably arguable that the payment claim was not a valid payment claim under the CCA because New Gate was not entitled to issue the payment claim at that point in time?

(c)Is it reasonably arguable that the payment claim was not a valid payment claim under the CCA because it was issued after Dem Home cancelled the construction contract?

Facts

[5] On 15 March 2022, Dem Home and New Gate entered into a ‘Housing, Alterations and Small Building Contract’ (NZ3902:2004) (the Contract) for the

construction of five terraced houses at Taratoa Street, Point England, for a fixed price of $2,277,000 (inc GST).

[6] Item G, s 3 of the Contract set out the basis for payment. Under the heading “Payment Claims”, option B (claims when certain work is completed) was selected. Accordingly, the parties agreed that New Gate was able to issue payment claims when certain work was completed, as follows:

Payment claims

Option B (claims when certain work is completed)

1. Substantial completion of the foundations and floor structure $ 227,700.00 (incl GST)

2. Substantial completion of all wall and roof framing $ 227,700.00 (incl GST)

3. Substantial completion of all exterior wall claddings and/or veneers, all exterior doors and windows

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: [2023] NZHC 2709
Decision Date: 4 October 2023

CaseChat Overview and Summary

Dem Home Limited (Dem Home) and New Gate Limited (New Gate) were parties to a construction contract under which Dem Home engaged New Gate to build five terrace houses at Taratoa Street, Point England. Dem Home purported to cancel the contract for breaches by New Gate before construction was complete. New Gate issued a payment claim for $242,500.50 which Dem Home did not respond to. New Gate then served a statutory demand on Dem Home based on the payment claim. Dem Home applies to set aside the statutory demand because there is a substantial dispute whether the debt demanded is owing and due. New Gate opposes the application. The central issue is whether there is a substantial dispute over whether the debt is owing and due, because arguably the payment claim was not a valid payment claim under the Construction Contracts Act 2002 (CCA). Dem Home argues that Payment Claim 2 was not a valid payment claim under the CCA because it did not comply with the formal requirements, was not issued at the correct point in time, and was issued after Dem Home cancelled the construction contract. The court found that Payment Claim 2 was a valid payment claim under the CCA because it complied with the formal requirements, and that the timing of the payment claim was a matter for a payment schedule and not a substantial dispute under the Companies Act. The court dismissed Dem Home’s application to set aside the statutory demand, and ordered that the time for complying with the statutory demand is extended. The court also ordered that New Gate is entitled to 2B costs, and its reasonable disbursements.

Orders