Herbert Construction Company Limited v Alexander HC Napier Civ-2011-441-500
[2011] NZHC 1295
•21 October 2011
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2011-441-500
BETWEEN HERBERT CONSTRUCTION COMPANY LIMITED
Plaintiff
ANDPETER IAN ALEXANDER, BRIAN ERNEST ALEXANDER, MAGARET JANE MOLLIER AND MAUREEN PATRICIA WARD IN PARTNERSHIP TRADING AS THE CHRISTIE CROWN PARTNERSHIP
Defendants
Hearing: 7 October 2011 (Heard at Napier)
Counsel: D.J. O'Connor - Counsel for Plaintiff
S.J. Webster - Counsel for Defendant
Judgment: 21 October 2011 at 1:20 PM
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment of Associate Judge Gendall was delivered on 21 October 2011 at 1.20 pm under r 11.5 of the High Court Rules.
Solicitors: Lunn & Associates, Solicitors, PO Box 846, Napier 4140
Sainsbury Logan & Williams, Solicitors, PO Box 41, Napier
HERBERT CONSTRUCTION COMPANY LIMITED V PI ALEXANDER, BE ALEXANDER, MJ MOLLIER AND MP WARD IN PARTNERSHIP TRADING AS THE CHRISTIE CROWN PARTNERSHIP HC NAP CIV-
2011-441-500 21 October 2011
Introduction
[1] Before me is an application by the plaintiff, Herbert Construction Company Limited (Herbert Construction) seeking summary judgment against the defendants, who are collectively the partners trading as a partnership known as the Christie Crown Partnership, for two outstanding payment claims under a building contract. That application is opposed by the defendants.
Background
[2] The defendants, through the Christie Crown Partnership, are the registered proprietors of land situated at 93 Austin St, Onekawa (the property). It appears that an agreement was reached between the Christie Crown Partnership and an associated company Chantal Organic Wholesalers Limited for that company to move into new premises (for its foodstuff production business) to be constructed on the property. The building was to be built by Herbert Construction and it is alleged construction payments for this building which comprise the subject of the present dispute.
[3] On 11 March 2010 a construction contract in terms of the Construction
Contracts Act 2002 (―the Contract‖) was entered into by Herbert Construction as
―the Contractor‖ and an organisation described as ―Chantal Organic Wholesalers‖ (note not Chantal Organic Wholesalers Limited) as ―the Principal‖. The signatories to the Contract for the Principal were the first and fourth-named defendants, Peter Ian Alexander (Mr P Alexander) and Maureen Patricia Ward (Ms Ward). The Contract followed the New Zealand Institute of Architects Standard Conditions of Contract, and specified that it was for the construction of the new production facility and offices at the property. The appointed architect under the contract was Fat Parrott Architecture Hawkes Bay.
[4] Construction under the Contract commenced and Herbert Construction‘s previous payment claims for work completed right up to the two outstanding payment claims in question were paid satisfactorily. Under the Contract, the practical completion date specified was 19 July 2010. Extensions were agreed to this and a final completion date of 27 August 2010 was specified. Mr Savage, a manager of Chantal Organic Wholesalers Limited, deposes in this case to there being many unfinished issues in the building at the property at the time Chantal Organic
Wholesalers Limited as tenant needed to move in (as the lease of the other premises it was vacating at the time had expired). These, he deposes, have allegedly caused it lost profits in the order of $98,981.19. (All these aspects and any suggestion that matters were left unfinished are disputed however by Herbert Construction as I understand the position).
[5] On 3 December 2010, Herbert issued payment claim No 10 under the Contract for $38,896.94. On 17 December 2010, Herbert issued a further payment claim, No 11, for $4,614.91. No payment schedule was forthcoming for either from the defendants, nor was payment of these claims made.
[6] In 2011, Herbert Construction perhaps somewhat confusingly, revised its payment claims. Payment claim No 10 was revised and reissued as payment claim No 11, dated 28 June 2011, for the sum of $36,360.77. Herbert Construction then reissued payment claim No 11 (the 17 December 2010 version) as payment claim No
12. It was also dated 28 June 2011 and issued for the sum of $4,614.91. The total amount outstanding under those revised payment claims is accordingly $40,975.68.
[7] Malcolm Andrew Herbert (Mr Herbert) a director of Herbert Construction deposes that Mr P Alexander was served with those reissued payment claims. He said that by facsimile and by email a letter, statement of account and revised payment claims No 11 and No 12 were sent to Mr P Alexander. (Mr Herbert produced a ―Transmission Verification Report‖ which confirmed the number which the fax was sent to: 8439151. As produced in Mr Herbert‘s third affidavit, Mr P Alexander‘s fax number is, as per his email signature and website, (06) 843 9151). Mr Connell, a project manager at Herbert Construction, also deposes to having served the documents personally on Mr P Alexander at his offices at the property. Those documents were also sent to the appointed architect under the Contract, Fat Parrott. That is confirmed as I note later in this judgment. No payment schedule or payment was forthcoming however from the defendants for either of these revised payment claims.
[8] Mr P Alexander deposes to not recalling being served with these Herbert Construction payment claims. Mr Du Toit, the director of Fat Parrot deposes specifically however that he did receive the documents.
Summary Judgment Principles
[9] Rule 12.2(1) of the High Court Rules provides that this Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action. The principles relevant to that assessment were summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd: [2008] NZCA 187, [2010] NZAR 307 at [26]; adopted more recently by the Court of Appeal in Cockburn v CS Development No 2 Ltd [2010] NZCA 373, (2010) 24 NZTC 24,431 at [26] as follows:
The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ
183 (CA), at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3
WLR 373 (PC), at p 341; p 381. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
Counsels’ Submissions and My Decision
[10] As a preliminary point, before me Mr O‘Connor, for Herbert Construction, sought leave at the start of the hearing to produce a further (3rd) affidavit of Mr Herbert, sworn 5 October 2011. That affidavit is four paragraphs long and purports to be relevant only to issues of service. It also does not depose to any material which is contentious between the parties. Despite the opposition of the defendants, I granted leave for that affidavit to be produced.
[11] By its statement of defence to Herbert Construction‘s claim, the defendants say essentially that:
(a) The purported payment claims are defective;
(b) A valid payment schedule has already been served; and
(c) The defendants have a counterclaim/set-off which is not statute barred under the Construction Contracts Act 2002.
[12] I propose to address Herbert Construction‘s present application under those three heads. But first, it is useful here to outline a general overview of the Act at issue: the Construction Contracts Act 2002 (the Act).
[13] The purpose of the Act is set out in s 3. This 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] In considering this general purpose, the Court of Appeal in George Developments Limited v Canam Construction Limited [2006] 1 NZLR 177 (CA) stated at [31]:
The purpose provision of the Act includes the fact that the Act was ‗to facilitate regular and timely payments between the parties to a construction contract‘. The importance of such regular and timely payments is well recognised. Lord Denning (quoted in Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1973]
3 All ER 195, 214 (HL) Lord Diplock) said: ‗There must be a ‗cashflow‘ in the building trade. It is the very life blood of the enterprise‘.
[15] And, in Salem Ltd v Top End Homes Ltd (2005) 18 PRNZ 122 (CA) the
Court of Appeal again reiterated this at [11]:
The whole thrust of the Act is to ensure that disputes are dealt with promptly and payments made promptly, because of the disastrous effects that non-payment has, not only on the head contractor, but also on its employees, subcontractors, and suppliers: George Developments Ltd v Canam Construction Ltd CA244/04 12 April 2005 at [41]-[42]. It is relevant to note, for instance, that employers cannot set up counterclaims, set-offs, or cross demands as a bar to the recovery of a debt under s23 of the Act, unless the employer has a judgment in respect of its claim or there is not in fact any dispute between the parties in relation to the employer‘s claim: s79. The fundamental position under the Act is that, if a progress claim is made and the employer does not respond within the period stipulated in the construction contract or,
by default, within the time specified in the Act, the amount of the claim becomes payable forthwith.
[16] Disputes between parties under the Act must be analysed with these purposes in mind: George Developments Ltd v Canam Construction Ltd [2006] 1 NZLR 177 (CA) at [41].
[17] The payment regime established under the Act was considered by Asher J in Marsden Villas Ltd v Wooding Construction Ltd [2007] 1 NZLR 807 (HC). Asher J said at [16]-[17]:
The Act sets up a procedure whereby requests for payment are to be provided by contractors in a certain form. They must be responded to by the principal within a certain timeframe and in a certain form, failing which the amount claimed by the contractor will become due for payment and can be enforced in the Courts as a debt. At that point, if the principal has failed to provide the response within the necessary time frame, the payment claimed must be made. The substantive issues relating to the payment can still be argued at a later point and adjustments made later if it is shown that there was a set-off or other basis for reducing the contractor‘s claim. When there is a failure to pay the Act gives the contractor the right to give notice of intention to suspend work, and then if no payment is made, to suspend work. There is also a procedure set up for the adjudication of disputes.
The Act therefore has a focus on a payment procedure, the results that arise from the observance or non-observance of those procedures, and the quick resolution of disputes. The processes that it sets up are designed to side-step immediate engagement on the substantive issues such as set-off for poor workmanship which were in the past so often used as tools for unscrupulous principals and head contractors to delay payments. As far as the principal is concerned, the regime set up is ―sudden death‖. Should the principal not follow the correct procedure, it can be obliged to pay in the interim what is claimed, whatever the merits. In that way if a principal does not act in accordance with the quick procedures of the Act, that principal, rather than the contractor and sub-contractors, will have to bear the consequences of delay in terms of cashflow.
[18] Section 12 of the Act provides that parties may not contract out of the Act, except for limited grounds which are provided for in the Act and not relevant here. Section 20 provides that a contractor may serve on a payee a payment claim. Section 21 provides that the payer may respond with a payment schedule. Both outline the minimum requirements for each of those documents.
The Purported Payment Claims are Defective
[19] On this, Mr Webster for the defendants, directed me to s 20 of the Act. Section 20 provides for the formal requirements of a payment claim. Those matters of form must be adhered to in order for a claim to be valid: Foggo v R J Merrifield Ltd HC Christchurch CIV-2009-409-605, 21 September 2009, but it is well
established that mere technical quibbles will not invalidate a claim: George
Developments Ltd v Canam Construction Ltd [2006] 1 NZLR 177 (CA) at [43].
[20] Under s 20, a payment claim must be served on a payer. Section 19 defines a payer in the following way:
payer means the party to a construction contract who is liable for that payment
[21] Section 20(2) goes on to provide: (2) A payment claim must—
(a) be in writing; and
(b) contain sufficient details to identify the construction contract to which the progress payment relates; and
(c) identify the construction work and the relevant period to which the progress payment relates; and
(d) indicate a claimed amount and the due date for payment;
and
(e) indicate the manner in which the payee calculated the claimed amount; and
(f) state that it is made under this Act.
[22] In the present case, the purported payment claims No. 11 and No. 12 comprise a table setting out amounts owed. Above that table is the following:
Contract: Chantal Organic Wholesalers
To: Fat Parrot Architects
Period Claimed For: Variations
This claim is made under the Construction Contracts Act 2002
Progress Claim No 11 28 June 11
[23] Mr Webster argued initially that as the purported payment claims were not addressed to the payer, the claims are invalid. On the wording of s 20 however, there is no requirement under the Act that a payment claim must be addressed to any one particular person. In the present case it is sufficiently clear to what contract the claim relates, it is in writing, it identifies the construction work, states the claimed amount and the manner in which it is calculated and states that it is made under the Act. I am satisfied, therefore, that the claim cannot fail for want of form. Indeed, clause 14.1.1 of the Contract provides:
The Contractor is entitled to submit a Payment Claim to the Architect once a month. The Contractor must send a copy of the Payment Claim to the Principal.
[24] Both of those requirements were adhered to. Further, while the Principal named in the Contract may not be the precise payer here, service was validly effected by serving the claim on Mr P Alexander as both a signatory to the Contract as well as being a partner of the land owning partnership which was taking responsibility for payment. He is clearly a payer in at least one of those capacities. I further add, that earlier payment claims had been issued in this way by Herbert Construction. In response to those claims, no issue was taken as to form or service and payments were duly and regularly made by the defendants.
[25] The defendants‘ second ground for alleging that the payment claims are defective is their suggestion that under clause 14 of the Contract the appointed architect must first assess the contractor‘s payment claim, in order to determine whether the amounts claimed are reasonable (clause 14.2.1) before any payment is required. Under the Contract, it is then for the architect to issue to the Principal a provisional payment schedule, within five working days, and give a copy to Herbert Construction as contractor (clause 14.3.1). The Principal may then make amendments to that schedule within three working days (clause 14.5.1). The architect must then, within a further two days, issue a payment schedule (clause
14.6.1). Therefore, a payment schedule must be issued no later than 10 days after the receipt of the payment claim (clause 14.6.1). The Principal is then liable to pay within 12 working days (clause 14.7.1). Importantly, the Contract specifies, at clause 14.6.2:
For the purpose of issuing Payment Schedules the Architect will be acting as agent of the Principal.
[26] Notwithstanding the strict no-contracting out provision in s 12 of the Act, recorded above at [18], s 14 of the Act does provide a degree of latitude to parties to agree on particular requirements with regard to progress payments. Section 14 states:
14 Parties free to agree on progress payment provisions in construction contract
The parties to a construction contract are free to agree between themselves on a mechanism for determining—
(a) the number of progress payments under the contract: (b) the interval between those payments:
(c) the amount of each of those payments:
(d) the date when each of those payments becomes due.
[27] Mr Webster submitted that s 14 simply provides a mechanism for determining dates when each progress payment comes due. On these aspects, Mr Webster relied on an earlier decision of mine in Construction Service Company (Wellington) Ltd (in receivership) v Wellington Waterfront Ltd HC Wellington CIV-
2006-485-1117, 13 September 2009.
[28] In Construction Service Company the construction contract provided that if the principal elected to resume possession of the construction site early (generally because of default by the contractor) the contractor was not entitled to any further payment until completion of the contract works (presumably by another contractor). Therefore, it was argued that, the due date for payment of a particular payment claim unpaid at the time of default by the contractor under that contract should be deferred until final completion of the contract works. Sections 23 and 24 of the Act provide that a claimed amount will become a debt payable to the payee only on ―the due date of the progress payment to which the payment claim relates‖. As recorded above, s
14 allows a contract to provide for the due date. In the particular circumstances of that case, I accepted that there was some substance in the argument that the provision in the Contract providing that the due date was conditional on a future event was intended to override ss 22 and 24 of the Act, and could do so under s 14, as it was a mechanism for payments under the contract: at [84]-[85]. I do note however that this decision has been the subject of some criticism: John Ren ―The Relationship
between the Underlying Construction Contract and the Payment Claim Process under the Construction Contracts Act 2002‖ (2009) 15 NZBLQ 124 at 137-138. Further, Associate Judge Doogue in Silverpoint International Ltd v Wedding Earthmovers Ltd HC Auckland CIV-2007-404-104, 30 May 2007, considered the same provision that was at issue in Construction Service Company and recorded at [39]:
It is my opinion that the points that have been raised relating to clause 14.2.3 of the New Zealand standard form of contract do not ―trump‖ the mechanism provided in the CCA. Providing there is what purports to be a payment claim, then if no payment schedule is provided by the payer in response, the amount claimed will become payable. It is not open to the payer in proceedings for the recovery of the debt where there has been an unanswered payment claim to argue that a provision of the contract relating to abandonment of the works in the circumstances disentitled the payee from making his/her claim. I say more about the provisions of the CCA below and this part of my judgment is broadly based upon the observations I make in later sections where I consider the provisions in more detail. Determination of the issue whether abandonment of contract occurred and whether it disentitled the payee from receiving payment can only be determined in subsequent substantive proceedings brought for that purpose. They cannot be erected as a defence where the payee moves to enforce a debt under the CCA.
[29] Whatever the proper interpretation of s 14 may be relative to that particular clause in the Contract will have to wait for another day. In my view, the clause in the present case is clearly distinguishable from the clause at issue in Construction Service Company and Silverpoint International Ltd.
[30] In the present case the due date was set, but the steps along the way were not complied with. This is not a situation where the date was entirely contingent on a future event.
[31] In NCB 2000 Ltd v Hurlstone Earth Moving Ltd HC Auckland CIV-2010-
404-8096, 23 June 2011 Wylie J considered whether a validly issued payment claim was served in circumstances where the contract between the parties required that a copy be sent to the engineer and the original sent to the principal. In that case, no copy was sent to the engineer. Wylie J said at [25]:
In my view, this issue can be dealt with relatively shortly. The Construction Contracts
Act provides that a payee may serve a payment claim on the payer.[1] Section 80
provides for service. Any notice or any other document required to be served on or given to any person under the Act is sufficiently served if it is delivered to that person.[2] Parties to a construction contract cannot contract out of the Act.[3] It follows that it suffices if the serving party can show that the document came to the recipient party‘s attention.[4] Here, NCB does not suggest that the payment claim was not brought to its attention. In my view, there can be no question but that the payment claim was properly served on NCB. The fact that a copy was not served on the engineer, in addition to NCB, does not alter the fact that the payment claim was properly brought to NCB‘s attention, as the payer in terms of s 19 of the Act.
[1] Section 20(1).
[2] The Construction Contracts Regulations 2003 (SR 2003/30), reg 9.
[3] Section 12.
[4] Marsden Villas Ltd v Wooding Construction Ltd [2007] 1 NZLR 807 (HC) at [93]; West City Construction Ltd v Edney (2005) 17 PRNZ 947 (HC) at [35]; Herbert Construction Co Ltd v Toogood HC Auckland CIV 2010-441-283, 20 August 2010; cf. Hawkins Construction Ltd v Ecosse Afrique Enterprises Ltd HC Wellington CIV 2008-485-2327, 25 February 2009.
[32] I am satisfied that similar considerations apply here and a similar conclusion must follow in the present case. Notwithstanding the fact that the Contract provides for one procedure, the Act provides generally for relationships between payer and payee. Those cannot, except for a few minor exceptions, be contracted out of. From the overview of the Act I have outlined above, cash flow for builders/contractors is all important. To allow a payer to avoid paying where their agent (the architect here) has not, for whatever reason, completed their part of an agreed process in circumstances where service was otherwise effected on a payer, in my view would frustrate entirely the purpose of the Act. Therefore, the effect of s 14 in the present case must be that the contractual provisions as to time apply against the defendants, notwithstanding that the architect has not assessed Herbert‘s payment claim. Therefore under this contract, payment must be made within 17 working days of receiving Herbert Construction‘s payment claim (provisional payment schedule must be issued five working days after receipt of payment claim and payment must be either 12 working days after that date or seven working days after issue of a payment schedule – which itself must be issued no later than 10 working days after the receipt of the payment claim).
[33] The question is then, was there valid service in the present case? Mr Connell deposes to having personally served the payment claims on Mr P Alexander at his
offices at ―19 Austin Street‖. While the offices of the company Chantal Organic
Wholesalers Limited are also at 93 Austin St, I consider that this is of little moment. Mr Connell deposes to having been aware of the location he was at and he says that he met Mr P Alexander specifically ―outside on the new concrete paving between his offices and the new chillers‖. Mr Herbert deposes to having emailed and faxed the documents to Mr P Alexander as well as the architect, Mr Du Toit (who I have noted specifically deposes to having received them). Mr P Alexander, on the other hand, deposes at [15]:
I do not recall being served with those documents. I have not heard from the
Architect since the alleged service on Fat Parrot Architects Hawkes Bay Limited on
28 June 2011.
[34] Mr Webster submitted that given this direct conflict of evidence, it cannot be resolved on the affidavits and therefore, summary judgement should be declined here. In response on this aspect, Mr O‘Connor referred me to the judgment of Wylie J in NCB 2000 Ltd and the passage recorded above at [31].
[35] In the present case, I do not consider that any finding of credibility is required. Accordingly, I consider that a robust approach is warranted. Here, Mr P Alexander merely states somewhat vaguely that he ―does not recall‖ having been served with the documents. That could be entirely accurate, but that does not mean that the payment claims were not validly brought to his notice. Also, rather surprisingly perhaps, he does not in any way attempt to address the specific service evidence of Mr Connell noted at [33] above, or comment on Mr Herbert‘s direct claims that the documents were emailed and faxed to him. I accept the evidence of Mr Connell and Mr Herbert here that attempts were made to bring those documents to the attention of Mr P Alexander. In light of the fact that the service requirements under s 80 of the Act are not mandatory, any one of the methods attempted by Messrs Connell and Herbert on behalf of Herbert Construction must suffice.
A valid payment schedule has already been served
[36] In the alternative, before me Mr Webster submitted that a valid payment schedule, in terms of s 21 of the Act, had already been served. On this aspect, it seems Mr Webster referred specifically to a ―payment schedule‖ dated 24 June 2011, which was annexed to the 9 September 2011 affidavit of Mr Savage as exhibit ―D‖. That document is the invoice sent by Herbert Construction to Mr P Alexander. I
therefore take Mr Webster to refer to the response sent by him, on behalf of the defendants, to Mr O‘Connor on 1 July 2011 annexed to the 9 September 2011 affidavit of Mr Savage as exhibit ―E‖.
[37] In that letter he disputed that the invoice dated 24 June 2011 was a valid payment claim and, in the alternative, attached a payment schedule also dated 1 July
2011. The schedule however only responds to ―a payment claim and invoice dated
24 June 2011‖. It records that the claimed amount is $11,960.00 (incl GST). In response it claims that no money is payable due to the existence of a cross-claim. By contrast, the payment claims at issue in the present case were issued on 28 June
2011. The total amount claimed in those as I have noted above was $40,975.68.
[38] The Act does not prescribe the form of a payment schedule. Rather, by s 21, it details certain minimum requirements which a payment schedule must meet. Wylie J in NCB 2000 Ltd discussed at [43] the fact that s 21 only requires that the payment claim for which the payment schedule is issued in response is to be
―identified‖, and not merely ―stated‖. His Honour continued:
In my view, s 21(2)(b) should not be interpreted in a restrictive manner, given that there is no prescribed form for a payment schedule laid down in the legislation.[5]
[5] And see in relation to payment claims, George Developments Ltd v Canam Construction Ltd [2006]
1 NZLR 177 (CA) at [41]–[43], [46], [47], [56], & [68].
[39] Further, in Canam Construction Ltd v George Developments Ltd HC Auckland CIV-2004-404-3565, 10 November 2004 at [46] Associate Judge Christiansen commented that ―s 21 of the Act makes it clear any payment schedule is confined in scope to claims raised upon the payment claim‖ (the issue of a valid payment schedule was not at issue in the appeal of this decision before the Court of Appeal).
[40] While that means that some link in a payment schedule must be made, I am satisfied in the present case that no link was made here to the specific payment claims made on 28 June 2011. The amount responded to in Mr Webster‘s letter was
$11,960.00. The total amount claimed in the two claims issued on 28 June 2011 was
$40,975.68. Further, the suggested ―payment schedule‖ is stated to be in response to
the invoice dated 24 June 2011. The invoice served along with the two payment claims on 28 June 2011 in issue here was clearly dated 28 June 2011.
[41] The only other document before me which could possibly be construed as a payment schedule here is a letter sent by Mr Webster, on behalf of the defendants, to the solicitor to Herbert Construction, Mr Lunn. That letter was sent on 10 June in response to a statutory demand issued by Herbert Construction against Chantal Organic Wholesalers Limited. That statutory demand was issued in relation to recovery of payment claim No 10, issued 3 December 2010 for $38,896.22. Herbert Construction however appears to have abandoned that claim because the Principal named in the Contract is clearly ―Chantal Organic Wholesalers‖ rather than that company ―Chantal Organic Wholesalers Ltd‖. Nevertheless, Mr Webster‘s 10 June letter suggests that the statutory demand must have been issued in error and that payment claim No 10 is disputed in any event.
[42] In the alternative, Mr Webster endeavoured to argue before me that the 10
June 2011 letter was a payment schedule and that the payment claim reissued on 28
June 2011 enumerated No 11 was merely a reissue of payment claim No 10. As the payment schedule responds to payment claim No 10, and No 11 covered the same work, he contends that the payment schedule should be treated as covering payment claim No 11. Further, Mr Webster maintains that Herbert Construction is not prejudiced if that position is accepted as it was put on notice as to the dispute over payment claim No 10 and so it was axiomatic that the defendants would have exactly the same response to reissued claim No 11.
[43] In response, Mr O‘Connor submitted that that ―schedule‖ cannot be a payment schedule in reply to claims No 11 and No 12. The purported schedule was sent more than two weeks before payment claims No 11 and No 12 were issued. Mr O‘Connor explains that the letter and schedule from Mr Webster must have been only in response to the statutory demand issued in error by Herbert Construction against the company Chantal Organic Wholesalers Limited.
[44] In order for Mr Webster‘s argument to succeed, I must first be satisfied that the 10 June 2011 letter is a payment schedule. Under s 21 of the Act, a payment schedule must:
(a) be in writing; and
(b) identify the payment claim to which it relates; and
(c) indicate a scheduled amount.
[45] Where a scheduled amount is less than the claimed amount, s 21(3) provides that a payment schedule must indicate:
(a) the manner in which the payer calculated the scheduled amount; and
(b)the payer's reason or reasons for the difference between the scheduled amount and the claimed amount; and
(c) in a case where the difference is because the payer is withholding payment on any basis, the payer's reason or reasons for withholding payment.
[46] Those requirements are all cumulative and mandatory. Nevertheless, the courts have consistently reminded applicants that a technical quibble will not vitiate formal requirements under the Act. Further, I recall the comments of Wylie J above at [38] that s 21 should not be viewed in a restrictive manner in light of the fact that there is no prescribed form for a payment schedule.
[47] In light of that approach, I am satisfied in this case that Mr Webster‘s 10 June
2011 letter may be treated as a payment schedule to Herbert Construction‘s payment claim No 10. On this aspect in particular, I note the observations of Rodney Hansen J in Westnorth Labour Hire Limited v S B Properties Limited: HC Auckland CIV
2006-404-1858, 19 December 2006. In that case, his Honour considered an appeal from the District Court where it was held that a letter sent by the payer constituted a payment schedule. His Honour held at [28]–[30]:
Although the letter does not adopt the terminology of the Act, is not stated to be a payment schedule and does not specify that the scheduled amount is nil, the essential message is clear and unequivocal. Mr Mullane explains why he now doubts the accuracy of Westnorth timesheets and hence the sums he has been charged. He identifies a charge for materials that have been returned and instances of faulty workmanship which would entitle S B Properties to counterclaim. He says he will not pay the two invoices until Westnorth provides him with full particulars of what the contracted labour has done.
The relevant provisions of the New South Wales Building and Construction Industries Security of Payment Act 1999 are almost identical to the provisions of the New Zealand Act governing payment schedules. In the leading case of Multiplex Constructions Pty Limited v Luikens [2003] NSWSC 1140, the Court said at paragraph [78]:
Section 14(3) of the Act, in requiring a respondent to ―indicate‖ its reasons for withholding payment, does not require that a payment schedule give full particulars o f those reasons. The use of the word ―indicate‖ rather than ―state‖, ―specify‖ or ―set out‖, conveys an impression that some want of precision and particularity is permissible as long as the essence of ―the reason‖ for withholding payment is made known sufficiently to enable the claimant to make a decision whether or not to pursue the claim and to understand the nature of the case it will have to meet in an adjudication.
In my judgment, the letter meets these basic requirements. Westnorth was given all the information it needed to understand S B Properties‘ position, to decide whether to pursue its claim and the case it would be required to meet at adjudication. I am satisfied the Judge was right to conclude that the letter was a payment schedule which complied with s 21 of the Act.
[48] I also adopt the obiter statement of Wylie J in NCB 2000 Ltd where his Honour said at [46] that where a payment schedule does not comply with the s 21(3) requirements to provide reasons, but an earlier payment schedule had, in his view that would be sufficient. That comment was made notwithstanding Associate Judge Christiansen‘s comment in Canam Construction Limited v George Developments Limited at [60] that:
Section 21 contemplates that a payment schedule should be comprised in ―a‖ (ie a
single) document.
[49] Nevertheless, I consider that the Act requires some response to every payment claim. While s 21(1) provides that a payer may provide a payment schedule, the consequences of not providing a payment schedule are clearly outlined in s 22. That section provides:
A payer becomes liable to pay the claimed amount on the due date for the progress payment to which the payment claim relates if—
(a) a payee serves a payment claim on a payer; and
(b) the payer does not provide a payment schedule to the payee within—
(i) the time required by the relevant construction contract; or
(ii) if the contract does not provide for the matter, 20 working days after the payment claim is served.
[50] Paragraph (b) above does not, in my view, envisage anything other than a response following a payment claim. Here there was no response. Therefore, while
a response which may be defective as to form requirements may not necessarily be void, a lack of any response cannot be remedied. Therefore, the payment schedule in response to claim No 10 cannot be relied on in response to reissued claim No 11.
[51] No other document is purported to be a payment schedule. In that light, I am therefore satisfied that a valid payment schedule was not issued by the defendants to the reissued payment claims No 11 and No 12.
The defendants have a counterclaim/set-off which is not statute barred under the Construction Contracts Act 2002
[52] The defendants‘ final argument is that a counterclaim/set-off was asserted in the ―payment schedule‖ and so Herbert‘s summary judgment application is premature. However, I have found above that no valid payment schedule was issued. In addition, the defendants are barred by s 79 from asserting a counterclaim or set-off here. Therefore, this argument must fail also.
Conclusion
[53] As no proper payment schedule was provided, s 23 of the Act entitles Herbert to recover from the defendants as a debt due the unpaid portion of the payment claim along with actual and reasonable costs of recovery. I record, for the purposes of s
23(4) that I am also satisfied that the defendants have become liable to pay the claimed amount in circumstances where the time allowed by s 22(b) has expired.
[54] I am satisfied that the defendants have no arguable defence to the claim brought by Herbert Construction. Accordingly, I award summary judgment as sought to Herbert. Section 23 of the Act provides an avenue to a payee to seek costs in a situation such as the present in excess of scale: Auckland Waterproofing Ltd v TPS Consulting Ltd HC Auckland CIV-2007-404-5890, 11 December 2007. Also, I note that Herbert Construction appears to also apply here for interest. I have not heard submissions on either issue however.
[55] I direct therefore that Herbert Construction is within 10 working days of this judgment to file and serve submissions on both issues. The defendants are then to have a further 10 working days from receipt of those submissions to file submissions
in response. Those submissions are then to be referred to me and, in the absence of either party indicating they wish to be heard on the issues, I will decide those questions on the basis of the material then before the Court.
‘Associate Judge D.I. Gendall’
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