Haskell Construction v Ashcroft
[2020] NZHC 772
•21 April 2020
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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-593
[2020] NZHC 772
BETWEEN HASKELL CONSTRUCTION LIMITED
Plaintiff
AND
ROBERT FRANCIS ASHCROFT
First Defendant
AND
ALPINE PRIME PROPERTIES LTD
Second Defendant
Hearing: 27 February 2020 Counsel:
M Freeman for Plaintiff
F B Collins for Second Defendant (for limited purpose of abiding decision) and Third Defendant
Judgment:
21 April 2020
JUDGMENT OF GRICE J
Contents
Para No.
Introduction [1]
Grounds for judicial review [11]
Issues [17]
Judicial review [18]
Construction Contracts Act 2002 [21]
What do “rights and obligation of the parties” under the construction contract mean? [31]
The words used [37]
Implied Warranties and Statutory Remedies Under the Building Act 2004 [41]
Issue estoppel [72]
Conclusion [87]
Costs [89]
HASKELL CONSTRUCTION LIMITED v ASHCROFT [2020] NZHC 772 [21 April 2020]
Introduction
[1] In September 2018 Haskell Construction Limited (Haskell) commenced construction of an architecturally designed home for Alpine Prime Properties Limited (Alpine). They were parties to a signed construction contract for the building that was entered into in August 2018. Not long into the construction complications arose requiring further work involving structural steel framing. This work was the subject of a variation issued which added to the cost of construction. The parties disagreed on payment for the steel members. This led to Alpine purporting to cancel the contract.
[2] In February 2019 Haskell submitted a payment claim for stage two of the construction and in March gave five days’ notice that it would suspend works for non- payment. In April Alpine asserted that the contract was cancelled for breach of contract. Haskell accepted the cancellation on a without prejudice basis.
[3] The substantive dispute between the parties will be dealt with at arbitration in August 2020. The appointed arbitrator is a barrister. In the meantime the dispute has been dealt with at adjudication. Two adjudication determinations have been issued and these proceedings relate to a third adjudication claim brought by Alpine.
[4] The Construction Contracts Act 2002 (CCA) established a summary adjudication process for the determination of disputes. This was designed to provide a fast track determination process which would allow the timely determination of disputes arising in construction contracts so the construction was not delayed pending a lengthy legal process. A determination does not affect the ultimate substantive decision which will be made here at arbitration. Nevertheless, the determinations are enforceable in their terms when made.
[5] In this case two adjudication determinations have been issued. The adjudicator, Mr Hazelton, issued a determination in each the first and second adjudications on 29 May 2019. The net outcome of the adjudications was that Alpine was to pay Haskell the sum of $133,619.16 as an interim award under the contract. This amount was determined in the first adjudication.
[6] In the second adjudication the adjudicator found that Haskell was in breach of the contract. However, the adjudicator declined to change the earlier monetary result.
[7] Following the determinations Haskell issued a statutory demand under the Companies Act 1993 as a precursor to a winding up petition against Alpine for the amount determined in the first adjudication. Alpine applied to set that aside on the basis it intended to issue a third adjudication notice. It did so on 26 September 2019. Haskell responded with an objection as to jurisdiction.
[8] Mr Ashcroft, the first defendant, was appointed adjudicator for the third adjudication. He decided that he had jurisdiction to hear the third adjudication and delivered reasons for that conclusion in October 2019.
[9] Following that decision these judicial review proceedings were issued. The statutory demand proceeding has not been dealt with pending the outcome of this application. Mr Ashcroft has also indicated that in order to preserve position, he will not take any further steps to issue the third adjudication determination. Therefore, the adjudication is effectively stayed.
[10] Mr Ashcroft, the adjudicator, was present in court during the hearing. Mr Collins, for the first and second defendants, indicated on Mr Ashcroft’s behalf that he would abide the decision of this Court.
Grounds for judicial review
[11] The first cause of action is that the adjudicator has no jurisdiction to embark on a third adjudication because the dispute has already been adjudicated. The plaintiff relies on the doctrine of issue estoppel. It says that Mr Ashcroft erred in law and/or took into account irrelevant factors, and/or did not take into account relevant factors in his decision to proceed with the third adjudication.
[12] The plaintiff says that the adjudication determination is a judicial decision which is binding pro tem and can be enforced. The parties are bound by the determinations of the adjudicator until the arbitrator makes his substantive decision in
this case.1 Therefore, the plaintiff asserts that as the adjudicator has already addressed and determined the rights and obligations of the parties on termination of the contract, the third adjudication will be a re-adjudication of the same matters in the first and second adjudications. It says Alpine is merely seeking a more favourable outcome by introducing further evidence in support of its damages claims.
[13] The second cause of action pleads that the assessment of damages sought in the third adjudication is outside the scope and jurisdiction of an adjudication.
[14] The plaintiff says the remedies claimed by Alpine in the third adjudication are common law or statutory damages which are not rights, obligations or remedies under the contract. Accordingly, the claim for damages falls outside the adjudicator’s jurisdiction.
[15]The third cause of action relating to breach of natural justice was not pursued.
[16] Declarations are sought that Mr Ashcroft has no jurisdiction to hear and determine the adjudication and that the matters Alpine seeks to refer to a third adjudication are the same or substantially the same as the dispute which has already been determined in the first and second adjudication. In addition, that the damages claimed in the third adjudication are outside the scope and jurisdiction of an adjudication under s 38 and 48(1)(a) and (b) of the CCA.2
Issues
[17]The issues are whether:
(a)The matters raised in the third adjudication have already been dealt with or should have been raised in the first and second adjudication and therefore the adjudicator cannot embark on the third adjudication. This is referred to as the issue estoppel argument.
1 Body Corporate 200012 v Keene [2017] NZHC 2953 at [81]–[82].
2 Construction Contracts Act 2002, ss 38; 48(1)(a) & 48(1)(b).
(b)The adjudicator’s jurisdiction is limited to first whether the liability of the parties to the adjudication should make a payment under the contract and secondly to determine any questions and disputes about the rights and obligations of the parties under that contract. But the adjudicator does not have the jurisdiction to determine damages pursuant to a statutory remedy.
Judicial review
[18] As Mr Freeman for Haskell noted, the courts are vigilant to ensure that judicial reviews of adjudicators’ determinations do not cut across the scheme of the CCA and undermine its objectives. The Court of Appeal has warned against the courts allowing judicial review proceedings to be used to interfere with the “pay now argue later” philosophy that underlines the CCA. It said: 3
[27] The courts must be vigilant to ensure that judicial review of adjudicators’ determinations does not cut across the scheme of the CCA and undermine its objectives. But this does not mean that judicial review should be limited to instances of “jurisdictional error”. In principle, any ground of judicial review may be raised, but a plaintiff must demonstrate that the court should intervene in the particular circumstances, and that will not be easy given the purpose and scheme of the CCA. Indeed, we consider that it will be very difficult to satisfy a court that intervention is necessary. As an example, given that an important purpose of the CCA is to provide a mechanism to enable money flows to be maintained on the basis of preliminary and non- binding assessments of the merits, it is unlikely that errors of fact by adjudicators will give rise to successful applications for judicial review. In the great majority of cases where an adjudicator’s determination is to be challenged, the appropriate course will be for the parties to submit the merits of the dispute to binding resolution through arbitration or litigation (or, of course, to go to mediation).
[19] The Court in that case also noted comments made by the Court of Appeal of England and Wales in relation to a similar regime, that it was too easy in a complex case for a party dissatisfied with the decision of an adjudicator to comb through the adjudicator’s reasons and identify points to challenge under labels of “excessive jurisdiction” among others.4 The New Zealand Court of Appeal noted with reference
3 Rees v Firth [2011] NZCA 668 at [27].
4 At [29].
to the English cases, that judicial review will be available as a means to challenge adjudicators’ determinations only rarely.5
[20] I will deal with the jurisdictional argument first. The plaintiff argues that the jurisdiction of the arbitrator does not extend to determining common law or statutory damages for breach of the statutory implied warranties in a construction contract.
Construction Contracts Act 2002
[21] The approach to statutory interpretation is well settled. Recently the Court of Appeal put it as follows:6
As the issue in this case involves a question of statutory interpretation, we apply s 5(1) of the Interpretation Act 1999 which says the text of the statutory provision and its purpose will determine the correct interpretation. However, as the Supreme Court has said, even if the meaning of the text may appear plain in isolation of purpose, it is necessary to cross-check that meaning against its purpose to observe the dual requirements of s 5. When considering purpose, in addition to legislative context, the social, commercial or other objectives of the enactment may be relevant. Where the meaning of the provision is not clear, context and purpose will become essential guides to meaning.\
[22] The CCA introduced a ‘pay now, argue later’ regime which was intended to address problems that had arisen in the construction industry, particularly in relation to payments and dispute resolution.
[23]The purpose is set out in s 3 of the CCA as follows:7
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.
5 Rees v Firth, above n 5, at [31]. (Footnotes omitted).
6 Commissioner of Inland Revenue v Roberts [2019] NZCA 654 at [24]. (Footnotes omitted).
7 Construction Contracts Act 2002, s 3(a)(b)(c).
[24] The CCA seeks to achieve its purpose by two processes, one relating to payment claims and the other to adjudication. It is the latter which is under scrutiny in this case. Mallon J summarised the regime as follows:8
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.
[25] The provisions relating to what an adjudicator must determine are set out at s 48 of CCA as follows:9
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
8 Gill Construction Co Ltd v Butler [2010] 2 NZLR 229 (HC) at [9].
9 Section 48(1)–(3). (Emphasis added).
(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.
[26]The matters to be considered by the adjudicator are set out in the CCA at s 45:10
45 Adjudicator’s determination: matters to be considered
In determining a dispute, an adjudicator must consider only the following matters:
(a)the provisions of this Act;
(b)the provisions of the construction contract to which the dispute relates;
(c)the adjudication claim referred to in section 36 and the claimant’s written reply (if any) referred to in section 37A, together with all submissions (including relevant documentation) that have been made by the claimant;
(d)the respondent’s response (if any) referred to in section 37 and the respondent’s rejoinder (if any) referred to in section 37A(4)(b), together with all submissions (including relevant documentation) that have been made by the respondent;
(e)the report of the experts appointed to advise on specific issues (if any);
(f)the results of any inspection carried out by the adjudicator;
(g)any other matters that the adjudicator reasonably considers to be relevant.
[27] An adjudicator’s determination under s 48(1)(a), 48(b) or 48(2) is enforceable in accordance with s 59.11 The determination is binding on the parties to the adjudication and continues in full effect, even though a party has applied for a judicial review of the determination or any other proceedings relating to the dispute between the parties have been commenced.12
10 Section 45(a)–(g).
11 Section 58(1).
12 Section 60. The District Court has various powers to review the adjudicator’s decision which are not relevant here. See for example ss 71A; 71B; & 71C
[28] Enforcement of an adjudicator’s determination may be effected by an application to the District Court, which may enter judgment on the basis of the adjudicator’s determination.13 The Court must not give effect to any “counterclaim, set off, or cross-demanded raised by any party” in the proceedings, other than a set off of a liquidated amount if:14
(a)judgment has been entered for that amount; or
(b)there is not, in fact, any dispute between the parties in relation to the claim for the amount.
[29] Until an amendment which took effect on 1 December 2015,15 an adjudicator’s determination was only enforceable if it was made under s 48(1)(a) of the CCA. That was a determination “to make a payment under that contract”.16
[30] The 2015 amendment removed the statutory bar on the enforcement of adjudicators’ determinations on any questions in dispute about the rights and obligations of the parties under the contract under s 48(1)(b) of the CCA.17 Therefore such a determination may now be enforced by entry of judgment. Sections 58 and 59A read:18
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 enforceable in accordance with section 59A.
59AConsequence of not complying with adjudicator’s determination under section 48(1)(b) or (2)
(1)This section applies if a party against whom an adjudication determination is made fails to comply with the adjudicator’s
13 Section 74.
14 Section 79.
15 Construction Contracts Amendment Act 2015, s 41(1).
16 Section 48(1)(a); s 58(1).
17 Section 58(2).
18 Sections 58(1)-(3) and 59A.
determination under section 48(1)(b) or (2) in respect of rights and obligations under the contract.
(2)The party in whose favour the determination was made may apply for the determination to be enforced by entry as a judgment in accordance with sections 73 to 78 (but only after such date, if any, specified in the adjudicator’s determination for compliance).
What do “rights and obligation of the parties” under the construction contract mean?
[31] Mr Freeman, for Haskell, argued that while the adjudicator’s obligation was to determine “questions in dispute about the rights and obligations of the parties under that contract” under s 48(1)(b), the adjudicator could not consider any remedy in the nature of common law damages. Mr Freeman submitted that the only monetary determination available was for amounts directly payable under the contract. These fell within s 48(1)(a).19
[32] The plaintiff says that the third adjudication claim seeks a remedy outside the jurisdiction of the adjudicator. This is because the claim is in essence one seeking common law damages which has been codified as a statutory remedy for breach of implied warranties under the Building Act 2004.20
[33] Mr Freeman said that comments in the Finance and Expenditure Committee report back on the CCA at the time of the bill’s introduction supported a limitation on adjudicators’ jurisdiction to determining amounts that were “a payment under [the] contract”21. The report stated:22
…we do not agree that extending the powers of determination will improve the bill, and therefore we do not recommend extending the adjudicator’s power beyond determination involving the payment of money. We note that problems may arise with enforcing any other determination beyond the purely financial. Adjudicators under this bill are only making interim decisions that do not have a conclusive effect. Accordingly, decisions are not binding on subsequent adjudicators. As a result, the enforcement of declaratory rulings through the courts would be difficult. In addition, including enforcement as a remedy in a face track interim process is inappropriate, due to the complex decisions and considerations involved.
19 Construction Contracts Act 2002, s 48(1)(b).
20 Building Act 2004, s 362N.
21 Section 48(1)(a).
22 Construction Contracts Bill 2001 (128-2) (select committee report) at 8–9.
However, we do recommend amending cl 37, to allow an adjudicator to impose certain conditions in their determination that a party is entitled to receive payment, including a determination that liability depends on another party to the adjudication meeting any conditions imposed. This could, for example including, requiring parties to complete certain work before payment would be due and would effectively broaden the power of the adjudicator to resolve the dispute. We consider that most disputes should be capable to some degree of expression in monetary terms, and therefore this should adequately address the concerns of submitters.
[34] Following that report s 48 was enacted together with a statutory bar on the enforcement of any determination relating to the parties’ rights and obligations under s 48(1)(b). Until 2015 amendments enforcement was only permitted in relation to determinations for amounts concerning liability for “payment under [the] contract”.23
[35] The Commerce Committee reported back on the Construction Contracts Amendment Bill 2015, on the point of enforcement of adjudicator’s determinations. It said:24
… we recommend amending sub-cl 28(3) to remove the distinction between payment and other types of determinations. We consider this amendment reflects a key purpose of the bill.
[36] Clearly there was a change of heart by Parliament as to whether or not rights and obligations determinations should be enforceable and cleared the way to enforce them. I do not consider the reference to the select committee’s comments assists either way.
The words used
[37] Mr Freeman says that the adjudicator may only make a determination for the payment of money where the payment is a “payment under that contract”.25 He says that a claim for a payment akin to common law damages is not a payment under the contract, however it is described.
[38] Haskell submits that s 48(1)(b) which states the adjudicator must determine “any questions in dispute about the rights and obligations of the parties under the
23 Construction Contracts Act 2002, s 48(1)(a).
24 Construction Contracts Amendment Bill 2015 (97–2) (select committee report) at 4.
25 Section 48(1).
contract” does not give an adjudicator power to make an order for payment. It says the statutory remedy for damages for breach of the implied terms appears to codify the common law. Therefore, that remedy should be treated as a claim for common law damages and so outside the jurisdiction of the adjudicator.
[39] Mr Freeman says the only clause dealing with payments under the contract is cl 15.3 of the contract and the amount payable under this clause has been considered and determined in the earlier adjudications. The relevant construction contract is in the form of the New Zealand Standard Housing Alterations and Small Buildings Contract NZS 3902: 2004.26 Clause 15.3 provides:27
15.3 What happens on cancellation?
If this Contract is cancelled the Owner or the Builder (as the case may be) must pay to the other the amount the other is entitled to be paid under this Contract up to the date of cancellation and such other amount as is fair and reasonable in the circumstances. If the Owner and the Builder cannot agree on the amount payable they must resolve the Dispute in accordance with Section 16.
[40] Mr Freeman says the words “as is fair and reasonable in the circumstances” is not the traditional formula for common law contractual damages. That formulation is generally “reasonably foreseeable as liable to result from the breach”. The latter wording appears in the statutory remedy for damages under the Building Act.
Implied Warranties and Statutory Remedies Under the Building Act 2004
[41] It is common ground that the construction contract here is a residential building contract and the implied terms set out in the Building Act 2004 (the Act) are part of the contract they cannot be contracted out of.28
[42] The implied warranties for building work relate to the work being carried out in a proper and competent manner and in accordance with the plans and specifications in the relevant building consent.29 The materials for use in the building work must be suitable for the purpose for which they will be used and unless otherwise stated in the
26 NZS 3902: 2004/Housing, Alterations and Small Buildings Contract.
27 Housing Alteration and Small Buildings Contract, above n 27, at cl 15.3
28 Building Act 2004, s 362H.
29 Section 362I(1)(a).
contact, will be new.30 The warranty requires that the work will be carried out with reasonable care and skill and completed by the dates specified or within a reasonable time and the product will be suitable for occupation on completion of the building work.31
[43] The building work must also be fit for any stated purpose or be of such a nature and quality that might reasonably be expected to achieve the result that the owner wishes the building work to achieve, if that result is stated in the contract.32
[44]These warranties are implied into the present construction contract.33
[45] A person who has the benefit of an implied warranty for building work, is entitled to seek the remedies set out in the Act. The remedies, where the breach cannot be remedied, include:34
362NRemedies if breach of warranty cannot be remedied or breach is substantial
(1)This section applies in any case where the breach of warranty cannot be remedied or the breach is substantial.
(2)If this section applies, the client may –
(a)obtain from the building contractor damages in compensation for any reduction in value of the product of the building work below the price paid or payable by the client for that work; or
(b)cancel the contract in accordance with section 362P.
(2)In addition to the remedy in subsection (2), the client may obtain from the building contractor damages for any loss or damage to the client resulting from the breach (other than loss or damages through reduction in the value of the product of the building work) that was reasonably foreseeable as liable to result from the breach.
[46] Section 362O of the Building Act allows for cancellation in the case of a substantial breach35 while s 362P sets out the rules applying to cancellation.36
30 Section 362I(1)(b).
31 Sections 362I(1)(d) & 362I(1)(e).
32 Section 362I(1)(f).
33 Similar warranties are set out at cl 4.1.1 of the construction contract.
34 Section 362N.
35 Section 362O.
36 Section 362P.
[47] In this case, Alpine gave notice of cancellation and Haskell accepted that cancellation, without prejudice. The adjudicator in the second adjudication determination found that the contract had been cancelled. In view of Alpine’s acceptance of the cancellation for the purposes of the adjudication and the adjudicator’s finding to that effect, the s 362N remedies must be available.
[48] Therefore, given the contract is now cancelled, on the face of it Alpine would be entitled to make a claim for compensation for any reduction in the value of the product of the building work below the price paid or payable by the client for that work. In addition, the client (Alpine) “may obtain from the building contractor damages for any loss or damage to the client resulting from the breach (other than loss or damages through reduction in value of the product of the building work) that was reasonably foreseeable as liable to result from the breach”.37
[49] Mr Freeman said that those remedies for compensation for loss or damages are codified common law remedies. He says the weight of the case law indicates that the adjudicator has no jurisdiction to determine a damages claim under those statutory remedy provisions.
[50] Mr Freeman says that the position was confused by the comments of Christiansen AJ in M Van Der Wal Builders and Contractors Ltd where his Honour commented that:38
[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 a 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 not is enforceable pursuant to s 59.
37 Section 362N.
38 M Van Der Wal Builders & Contractors LTD v Walker HC Auckland CIV-2011-004-000083, 26 August 2011 at [98]–[101]. (Emphasis added).
…
[101] … Further, it not being work for which a payment could be ordered under a construction contract (rather it being a payment about a dispute of rights and obligations of the parties under that contract) the determination was not enforceable pursuant to s 59 but instead was enforceable pursuant to s 61 wherein the Court is not bound by an adjudicator’s determination.
[51] That case involved an application for summary judgment brought by the client to enforce an amount awarded in its favour by the adjudicator against the builder. The application was dismissed primarily on the grounds that it was arguable there was no construction contract in existence. However, the Judge also considered an alternative argument by the respondent builder that even if there was a construction contract the determination purported to determine that an amount was payable by way of damages for breach of contract.39 At the relevant time enforcement was limited to determinations on payments which a party was liable to pay “under” the construction contract. The Judge noted that there was a difference in enforcement between payments under a contract referred to in s 48(1)(a) and determinations of rights and obligations under s 48(1)(b).40 He said “although the Act envisages that both are to be complied with, only the former is enforceable”.41
[52] Mr Freeman submitted that the point of whether damages fell within the scope of “rights and obligations” was not squarely before the Judge. Therefore, his comments on a claim for damages falling within the scope of a “rights and obligations determination” at [99] of the judgment was not the subject of argument. Mr Freeman said the Judge was wrong in concluding that an adjudicator had jurisdiction to make an award of damages at all, not just that such a determination could not be enforced.
[53] Van Der Wal was referred to by Mander J in Clark v Central Lakes Homes Ltd.42 At [25] his Honour said:43
[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
39 M Van Der Wal Builders & Contractors LTD v Walker, above n 38, at [56].
40 At [97].
41 At [97].
42 Clark v Central Lakes Homes Ltd [2016] NZHC 1694.
43 At [25].
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.
[54] Like Van der Wal, Clark was decided on facts which arose before s 48(1)(b) was enforceable. In Clark, the High Court was considering an appeal from the entry of summary judgment for amounts based on an adjudication determination directing payments for damages for breach of contract be made to the builder under a provision in the construction contract which read:44
… all sums due and owing under the Contract, plus any damages, costs, expenses or loss of profit of the Registered Master Builder.
[55] Mander J had no difficulty in concluding that the adjudicator had jurisdiction to determine amounts under that clause despite the fact they were analogous to damages at common law for breach of contract. He was satisfied that they fell to be paid under s 48(1)(a) and were able to be enforced under s 59. He said:45
[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.
[56] The breaches in this case that Alpine point to in the third adjudication include breaches of the statutory implied terms. On 1 January 2015 Part 4A of the Building Act came into force which provided for consumer rights and remedies in relation to residential building works.46 The statutory implied warranty provisions were included in that part.
[57]The purpose of the Building Act is set out at s 3 and includes:47
44 Clark v Central Lakes Homes Ltd¸ above n 42, at [3].
45 At [39].
46 Building Act 2004, part 4A (ss 362A-362B) as inserted by the Building Amendment Act 2013, s 56.
47 Section 3(b).
(b) to promote the accountability of owners, designers, builders, and building consent authorities who have responsibilities for ensuring that building work complies with the building code.
[58] Subsequently on 1 December 2015 the amendments to the CCA came into force permitting the enforcement of rights and obligations adjudication determinations made under s 48(1)(a).
[59] In my view the decisions in Clark and Van der Wal support a conclusion that the adjudicator may make a determination for payment of amounts by way of compensation for loss or damages under the relevant statutory remedy for breach of the implied terms. In Clark Mander J found that nothing turned on the labels used. Compensation by way of damages is specifically provided for as a statutory remedy. Nothing turns on the fact that it is labelled as damages nor that the remedy adopts a formula for the measurement of damages which is based on the common law remedy.
[60] The text of the legislation and the relevant purpose support the ability of an adjudicator to not only make rights and obligations determinations for breaches of the implied warranties but also to determine that a statutory remedy applies. Such remedies include the award of damages and compensation for any reduction in value of the product of the building work, below the price paid or payable for that work, and any loss or damage to the client resulting from the breach, that was reasonably foreseeable, as liable to result from that breach.
[61] The courts have regularly stated that “a technocratic” or “formalistic” interpretation, should not be taken to the legislation.48 It would not be appropriate to place a gloss on the clear words and purpose of the legislation by preventing an adjudicator from making an award of damages under the statutory remedy for breach of an implied warranty.
[62] Further points that Mr Freeman made in support of his submission related first to the fact that adjudicators were not required to be lawyers and therefore their training and expertise would likely be limited to contractual matters not the calculation of damages. He noted many adjudicators were experts in construction matters but not
48 George Developments v Canam Construction Ltd [2006] 1 NZLR 177 (CA) at [52].
necessarily in general legal matters. Secondly, he pointed to the fact that the assessment of damages, such as loss of value, could be complicated, involving fine judgments and the assessment of evidence. Whereas adjudication hearings are designed to be summary, rarely will there be a hearing, and there is no cross- examination. He said it would be difficult for an adjudicator to determine damages in those circumstances.
[63] In relation to the first point, while an adjudicator may not be a lawyer, they are likely to have expertise and experience in construction matters and the interpretation of construction contracts. They are likely to be experienced in assessing the reduction of the value of building work below the price paid and the likely cost of poor workmanship. These issues are similar to those that will require consideration in an assessment of damages. Many adjudications involve complex issues such as the interpretation of the contract, whether payments are owing as well as the value of work completed and the price to remedy defective work.
[64] Parliament has indicated that an adjudicator should have the jurisdiction to determine whether a person’s rights and obligations under an implied warranty have been breached and if so, to determine the appropriate statutory remedy.49 The statutory remedies expressly include compensation for the reduction of value of building work below the price paid,50 as well as damages for loss resulting from the breach, that were reasonably foreseeable as liable to result from the breach.51 There is nothing in the legislation to suggest that an adjudicator should not be able to make a determination involving the assessment of amounts payable under the statutory remedies for compensation or damages relating to the breach. The client’s statutory rights cannot be limited or contracted out of in the construction contract.52 Therefore it would be anomalous if they were limited by reading in to the legislation a restriction on the ambit of the remedies available in adjudication.
49 Building Act 2004, s 362L(1).
50 Section 362D.
51 Section 362N(3).
52 Section 362L(4).
[65] The legislation also provides a framework designed to ensure that only appropriately qualified people are appointed as adjudicators where the parties do not agree on an adjudicator.
[66] The statute contemplates the setting of minimum eligibility criteria as to qualifications expertise and experience of adjudicators. This prescription has not yet been promulgated. However either the parties must agree on the adjudicator or if they cannot agree, a nominating body, chosen by the parties, or the claimant (if the parties cannot agree) must make the appointment.53 The bodies who have been nominated by the Minister to date are experts in the dispute resolution and construction areas. They include such bodies as the Arbitrators’ and Mediators’ Institute of New Zealand Inc (AMINZ), the Building Disputes Tribunal and Fairway Resolution Ltd (previously a government dispute resolution service).54
[67] In addition, the adjudicator has statutory obligations to avoid conflicts of interest and to observe natural justice.55 These have been rigorously enforced by the courts.56
[68] The parties are also entitled to representation.57 In fact, counsel advised that one of the complaints made by the building industry is that what was meant to be a quick-fire and uncomplicated determination process, has been in many cases, slowed down by the fact that most parties seek legal representation which leads to significant volumes of material and submissions which the adjudicator must consider.
[69] The adjudicator will need to be satisfied on the evidence before determining compensation or damages is payable in terms of s 362N. Whether or not the adjudicator is satisfied will be determined on the material before them. No doubt, if the adjudicator cannot be satisfied due to conflicting evidence, that will be reflected in the determination.
53 Construction Contracts Act 2002, s 33(1).
54 Section 65.
55 Section 41(c).
56 See for example Horizon Investments Ltd v Parker Construction Management (NZ) Ltd HC Wellington CIV-2007-485-332, 4 April 2007.
57 Construction Contracts Act 2002, s 38B.
[70] I do not consider the fact that the adjudicator is not required to be a lawyer nor that the assessment of damages may be complicated to be grounds to go against the clear wording and purpose of the legislation.
[71] Therefore, I dismiss the application for judicial review insofar as it relates to an allegation of an error of law by the adjudicator based on lack of jurisdiction to determine damages.
Issue estoppel
[72] The adjudicator has decided that he should embark on the third adjudication. He said he would take into account the submissions received and if he considered it appropriate in terms of liability or quantum he would submit specific questions to either party. He has agreed to not deliver the third adjudication determination pending the outcome of these proceedings.
[73] The plaintiff submits that the decision by the adjudicator to embark on a third adjudication amounts to a decision to re-adjudicate the same matters of the first and second adjudications, with the only difference being that Alpine is seeking a more favourable outcome by introducing further evidence, alleging further damages. This raises an argument that the adjudicator is estopped from continuing under the doctrine of issue estoppel.
[74] Whether issue estoppel applies to prevent an adjudication on a matter is a question of fact and circumstance. In AEP v KM Mander J observed:58
Issue estoppel requires a relatively strict analysis of commonality features as between the first occasion on which the issue was addressed and the second occasion on which a party seeks to again contest it in Court. In EBS v CAS, Dobson J observed that a case-specific form of discretionary assessment is required, which involves balancing the interests of finality against the risk of creating injustice by preventing a substantive determination on the ground that the issue has previously been rejected.
[75] CCA adjudications are designed to be speedy and flexible. Therefore, the Court will be less inclined to apply a fine analysis in terms of commonality. The
58 AEP v KM [2015] NZHC 380 at [12].
adjudicator is in the best position to decide whether issue estoppel arises. Both counsel referred to various decisions from the Court of Appeal of England and Wales dealing with a process similar to the CCA adjudication process. That Court has taken a robust approach to the matter.
[76] The approach was summarised in Harding (t/a M J Harding Contractors) v Paice & Anor by Jackson LJ:59
[53] As both counsel recognise the leading authority in relation to serial adjudications is Quietfield Ltd v Vascroft Construction Ltd [2006] EWCA Civ 1737; [2007] BLR 67. …
[54] Dyson LJ, giving the second judgment, summarised the effect of paragraph 9 (2) of Part I of the Scheme. Then he said this at paragraph 47:
“Whether dispute A is substantially the same as dispute B is a question of fact and degree. If the contractor identifies the same Relevant Event in successive applications for extensions of time, but gives different particulars of its expected effects, the differences may or may not be sufficient to lead to the conclusion that the two disputes are not substantially the same. All the more so if the particulars of expected effects are the same, but the evidence by which the contractor seeks to prove them is different.”
[55] In HG Construction Ltd v Ashwell Homes (East Anglia) Ltd [2007] EWHC 144 (TCC); [2007] BLR 175 Ramsey J stated that the extent to which a previous adjudication decision is binding will depend upon an analysis of
(a) the terms, scope and extent of the dispute now under adjudication and (b) the terms, scope and extent of the decision made by the previous adjudicator.
[56] …
[57] It is quite clear from the authorities that one does not look at the dispute or disputes referred to the first adjudicator in isolation. One must also look at what the first adjudicator actually decided. Ultimately it is what the first adjudicator decided, which determines how much or how little remains available for consideration by the second adjudicator.
[77] As is apparent from the above comments the focus should be on what was actually determined in the earlier adjudication decision. That determines how much or how little remains available for consideration by the subsequent adjudicator. The legislation under consideration by the Court of Appeal of England and Wales contained a specific provision concerning the finality of adjudication determinations. That is not material and the comments of the Court equally apply here. Any analysis
59 Harding (t/a M J Harding Contractors) v Paice & Anor [2015] EWCA Civ 1231 (1 December 2015) per Jackson LJ. (Emphasis added).
of commonality must be undertaken bearing in mind the robust and time limited process for adjudications. Unless it is clear the matters in the claim have all been uncontestably dealt with or should have been in the earlier adjudication this Court should be cautious about interfering with the adjudicator’s decision. It should not undertake a fine analysis of the issues raised in the earlier adjudication. The adjudicator, not this Court, is in the best position to undertake that analysis and reach a decision informed by the information put before him and the parties’ submissions.
[78] The reasons that Mr Ashcroft gave for his decision on jurisdiction were as follows:
·I am satisfied the subject claims were not addressed in the first adjudication. Note paragraph 166 of Mr Hazleton’s determination.
·I am satisfied the sums sought in the present proceedings were not sought in the second adjudication. Note paragraphs 10 and 27 of the [second] adjudication claim dated 18 July 2019.
·I reject the assertion by Mr Freeman that the adjudicator in the second adjudication did assess damages for breach of contract and determined the damages had not been proven.
·Mr Freeman notes that Alpine rely upon the same bases of entitlement in this adjudication as previously, namely the breach of statutory warranties, and rights arising under clause 15.3 of the contract. While that is so, the nature and timeframe of the remedies now sought is different. I am not persuaded Shiels v Blakely, or Fraser v Robertson, have relevance in these circumstances.
[79] Paragraph [166] of Mr Hazelton’s first adjudication referred to by Mr Ashcroft reads:
What payment is either party entitled to up to the date of cancellation?
[166] I note that I have not been asked to determine anything other than what payments are due at the date of cancellation. No party as asked me to determine if the contract was correctly cancelled by Alpine, or whether that cancellation amounted to a repudiation and no submissions were made on these issues. I have not been asked to assess losses resulting from such matters, rather I have been requested to confine myself to an assessment of matters owing at the date of cancellation, which is what I address.
[80] Therefore, it is clear the first adjudication did not deal with the claims now brought.
[81] In the second adjudication Alpine said it sought a determination as to breach of the implied warranties however the adjudicator did not consider those issues as the adjudication was carried out on the information that had been filed for the first adjudication which apparently did not deal with those claims.
[82] Therefore, the adjudicator determined that Haskell was in breach of contract, justifying the termination of the contract by Alpine, but noted that the scope of the submissions did not cover the relief sought by Alpine. The original adjudication had been sought by Haskell which had objected to issues of quality that Alpine had raised being dealt with as they went beyond the scope of replying to Haskell’s. Therefore, it appears from the second adjudication determination that there was no consideration of the statutory warranties or remedies.
[83] In the second adjudication determination the adjudicator noted that some of the matters raised in the second adjudication had already been dealt with and would not deal with them further.
[84] It appears that there has been no consideration in the earlier two adjudications of at least some of the claims raised in the third adjudication. The fact that the relief sought in the second adjudication referred to the statutory implied warranties is insufficient to establish the commonality required for issue estoppel to operate. The doctrine is flexible and intended to ensure that matters are not relitigated when they have already been dealt with or should have been dealt. As noted in AEP v KM, “a case-specific form of discretionary assessment is required, which involves balancing the interests of finality against the risk of creating injustice by preventing a substantive determination on the ground that the issue has previously been rejected.” 60
[85] I am not satisfied that the claims made in the third adjudication have been or should have been dealt with in the earlier adjudications. In any event the adjudicator is best placed to make that decision. There is no reason to interfere with Mr Ashcroft’s decision to embark on the adjudication. If after receiving the information and submissions he is of the view there are some matters already dealt with no doubt he will set that out in his determination as the adjudicator did in the second adjudication.
60 AEP v KM, above n 58, at [12].
[86] The ground for judicial review based on issue estoppel fails. The adjudicator did not make an error of law when he determined he was entitled to embark on the third adjudication claim.
Conclusion
[87]The application for judicial review is dismissed.
[88] Mr Ashcroft did not err in law and/or consider irrelevant factors, and/or fail to take into account relevant factors in his decision to proceed with the third adjudication. It is within the jurisdiction of the first defendant as adjudicator to consider the third adjudication claim. He has not made an error of law based on issue estoppel in deciding to embark on consideration of the third adjudication claim.
Costs
[89] Counsel agreed that the appropriate categorisation was 2b under the High Court Rules Schedule, that appears appropriate.
[90] If counsel are unable to agree on costs, any application should be made by memoranda, including submissions, within ten days of the date of issue of this judgment. Any response should be within a further ten days and any reply to the response, within a further three days.
Grice J
Solicitors:
Thomas Dewar Sziranyi Letts, Lower Hutt
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