Manukau Welders 1982 Limited v Gibson O'Connor Limited HC Auckland CIV 2007-404-005608

[2008] NZHC 2575

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-404-005608

BETWEEN  MANUKAU WELDERS 1982 LIMITED Plaintiff

ANDGIBSON O'CONNOR LIMITED Defendant

Hearing:         8 April 2008

Appearances: B Rooney for Plaintiff

J W Chapman for Defendant

Judgment:      17 September 2008 at 2 pm

JUDGMENT OF ASSOCIATE JUDGE ROBINSON

This judgment was delivered by me on 17 September 2008 at 2 pm, Pursuant to Rule 540(4) of the High Court Rules

Registrar/Deputy Registrar

Date……

Solicitors:           Callaghan & Co, PO box 1434, Auckland

B Rooney, PO Box 3320, Shortland Street, Auckland

MANUKAU WELDERS 1982 LIMITED V GIBSON O'CONNOR LIMITED HC AK CIV 2007-404-005608

17 September 2008

[1]      The plaintiff brings proceedings for the recovery of $194,530.49 together with interest and costs. This is the amount the plaintiff claims the defendant owes it in terms of a contract between the plaintiff and the defendant for structural steel and erection work on the construction of Alfriston College in 2003. Of the  amount claimed, the plaintiff seeks summary judgment against the defendant for $36,647, being money retained by the defendant which the plaintiff claims to be now due and payable in terms of its contract with the defendant.

[2]      The defendant in opposing the application for summary judgment claims an equitable set off because the plaintiff did not complete work under the contract and there were variations of the contract work which have not been taken into account. The defendant also disputes the plaintiff’s calculation of interest.

Background

[3]      The defendant accepted the plaintiff’s tender to undertake structural steel work on the construction of Alfriston College under sub-contract on 16 January

2003. The contract provided for a fixed price of $1,195,000 plus GST to be paid for the work. The contract also contained the following provision for retentions:

a)        Rententions: Retentions shall be 5% for the first $400,000 with

2.5% on the balance. 50% to be released on practical completion,

20% to be released 3 months after practical completion provided there  are  no  outstanding  defects  or  uncompleted  work,  and  the

balance released at the end of the defects liability period.

[4]      The contract also contained a provision for interest at the rate of 1.25% of the average monthly interest rate as certified by a trading bank manager which is, or would be, currently payable by the plaintiff for overdraft facilities. The interest is to be compounded monthly.

[5]      In terms of the contract, the period of defect liability was fixed at three months from the date of practical completion.

[6]      On  30  June  2003,  the  defendant  sent  to  the  plaintiff  a  document  which purported to vary the contract by:

i)        Extending the period of defect liability from 3 to 12 months.

ii)Reducing the interest rate for late payment to the overdraft interest rate.

There is no evidence that the plaintiff acknowledged acceptance of these variations to the contract.

[7]      Following the commencement of the work, the plaintiff sent the defendant monthly claims  for  payment  for  work  completed  in  terms  of  the  contract.  The defendant did not pay the full amount that the plaintiff claimed. According to the plaintiff the defendant offered no explanation for the short payments.

[8]      On 9 December 2003, the plaintiff sent the defendant a claim for $177,351 exclusive of GST. The gross amount inclusive of GST was $256,221.65. That statement records current contract retentions at $40,002.17.

[9]      In a payment schedule provided by the defendant in response to the plaintiff’s claim of 9 December 2003, the defendant calculated that after the deduction of certain items and retentions, a balance of $93,467 exclusive of GST was payable. The total payable inclusive of GST was $105,150.38. According to the defendant’s payment schedule, retentions at that stage amounted to $36,647 exclusive of GST or

$41,227.88 inclusive of GST.

[10]     The plaintiff has sent two further payment claims but has not received any further payments from the defendant.

[11]     The plaintiff now claims that the full amount owing is $194,530.49. This is made up of the agreed tender price for the work described in the contract adjusted for some deletions and alterations of $999,758 plus variations claims of $202,388 less a contra-claim of $3,431 which is accepted by the plaintiff plus GST being a total of

$1,348,554.37 less gross payments made by the defendant of $1,154,023.88.

[12]     Practical completion was certified as having been achieved on 23 December

2004. Consequently, the period of defects liability whether it be three or twelve months has now expired.

[13]     The defendant accepts that it has held back an amount by way of retentions. The defendant also accepts that, whatever defects liability period applies under the contract,  that  period  has  expired.  Consequently,  any  retention  amount  is  now payable. Therefore, unless the defendant can establish a set-off, the plaintiff must be entitled to judgment for the retentions.

Case for the Defendant

[14]     The defendant claims the plaintiff has not provided sufficient information relating to its claim. However, the documents clearly establish that the plaintiff in its statement to the defendant of 9 December 2003 gave full and detailed particulars of the amount of its claim to that date. That statement clearly provided the basis for the payment  schedule  prepared  by  the  defendant  which  resulted  in  payment  of

$105,150.38 to the plaintiff in December 2003. A number of items claimed by the plaintiff in its statement to the defendant of 9 December 2003 were reduced. For a significant number of those items the defendant gave as its reasons or basis for the deductions: “details to follow – general discrepencies between tender rates and current claim rates and/or backup details provided to date”. According to the plaintiff those details have never been provided.

[15]     A summary of the amount claimed and the amount accepted as payable in terms of the payment schedule prepared by the defendant is as follows:

a)        Total amount of subcontract work claimed     $100,011.722 b)           Amount accepted as payable  $965,217

c)        Balance disputed  $ 46,505 d)       Variation claims  $188,365

e)       Variation claims accepted  $100,660 f)        Variation claims disputed  $ 87,705 g)       Total amount disputed:

i)        Disputed amount of contract work     $46,505 ii)       Disputed amount of variations           $87,705 iii)      Total of amount disputed                   $134,210

[16]     The  defendant  has  provided  some  details  of  the  amounts  in  dispute.  In particular it claims to have spent some $17,789.91 on rectifying the plaintiffs work under the contract. It also claims to be entitled to a credit because the plaintiff used a product known as Steltech steel which is a more expensive product. There is also a claim for a credit in favour of the defendant because the contract was varied to provide for only one steel bridge and the contract which formed the basis of the plaintiff’s tender was for two steel bridges.

Case for the Plaintiff

[17]     The plaintiff disputes liability for the $17,789.91 being the amount claimed by the defendant for rectifying faults in the plaintiff’s work. The plaintiff also points out that the contract was a fixed price contract. Consequently, there was no increase because the plaintiff used the more expensive product known as Steltech steel. It is also pointed out that the plaintiff’s claim set forth in its statement to the defendant of

9 December 2003 was for the value of work completed to that date. Consequently, that statement could not have included any claim for a bridge that was not yet built.

[18]     The evidence which includes the defendant’s statement clearly satisfies me that  the  defendant  had  retained  $36,647  plus  GST  as  at  December  2003.  The amounts claimed as a set-off are a fraction of the amounts the defendant claims were in dispute in terms of the payment schedule prepared by the defendant in December

2003. There are a significant number of items which are disputed for reasons which are not specified by the defendant.

[19]     In the circumstances, I am satisfied that any set-off claimed by the defendant is included in the amounts it has retained in terms of its payment schedule which are claimed to be not payable. Those amounts as I have pointed out total $134,210.

[20]     For the above reasons I am satisfied that the defendant has failed to establish a set-off that can answer the plaintiff’s claim for the retentions. The plaintiff is therefore entitled to summary judgment for the retentions which total $36,647 plus GST, making a total of $41,227.88.

[21]   The defendant claims that the time for payment of retentions and commencement of interest for money not paid was extended by special conditions which became effective in July 2003. The plaintiff does not accept that it agreed to those  special  conditions.  I  do  not  consider  it  necessary  in  this  application  for summary judgment to resolve that issue. Whether the contract was varied by the special conditions in July 2003 is a matter that is more appropriately dealt with at the hearing to determine the balance payable by the defendant to the plaintiff. There will be viva voce evidence at that hearing.

[22]     The defendant however must accept liability for payment of interest from the time calculated in accordance with the alleged variation of the agreement in July

2003 at the rate specified in that alleged variation. Consequently, the defendant has no valid defence to interest being calculated at the rate the defendant claims was settled when the contract was varied in July 2003. Pursuant to that variation, the defendant has become liable for payment of the retentions by the following instalments at the following dates:

a)        23 December 2004 $20,613.94 being 50%

b)        23 March 2005 $8,245.58 being 20%

c)        23 December 2005 $12,368.36 being 30%

[23]     I will also direct that at this stage, the defendant shall pay interest on those amounts calculated at the amounts specified by the manager of the plaintiff’s bank as being the interest rates for overdraft facilities available to the plaintiff. In terms of the contract, that interest is to compound monthly. Counsel should confer in order to settle the amount of interest payable in terms of this judgment. If they are unable to do so I will hear further from them.

[24]     The plaintiff is also entitled to costs on a 2B basis with disbursements as fixed by the registrar.

---------------------------------

Associate Judge Robinson