NCB 2000 Limited v Hurlstone Earth Moving Limited HC Auckland CIV 2010-404-008096
[2011] NZHC 585
•23 June 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-008096
UNDER s 290 of the Companies Act 1993
BETWEEN NCB 2000 LIMITED Applicant
ANDHURLSTONE EARTH MOVING LIMITED
Respondent
Hearing: 25 May 2011
Counsel: G Kohler for the Applicant
C Holmes for the Respondent
Judgment: 23 June 2011 at 12:00 PM
RESERVED JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie on 23 June 2011 at 12.00 pm
Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Distribution:
G J Kohler: [email protected]
C Holmes: [email protected]
NCB 2000 LIMITED V HURLSTONE EARTH MOVING LIMITED HC AK CIV 2010-404-008096 23 June
2011
Introduction
[1] The applicant, NCB 2000 Limited (―NCB‖) seeks to set aside a statutory
demand made under s 289 of the Companies Act 1993. The demand is dated
30 November 2010. It asserts that NCB is indebted to the respondent, Hurlstone Earth Moving Limited (―Hurlstone‖), in the sum of $121,061.65 including GST for site development works undertaken on a property at 88 Lady Ruby Drive, East Tamaki, Auckland. It refers to a payment claim made by Hurlstone dated
27 October 2010, and to a letter dated 1 November 2010. It asserts that the amount claimed by Hurlstone was due and payable by 29 November 2010.
Background Facts
[2] Hurlstone was engaged by NCB to undertake the earthworks and drainage work for a commercial development at Lady Ruby Drive, East Tamaki, Auckland. NCB was the owner of the property.
[3] No formal written contract was ever executed between the parties, but a letter confirming the contract was sent by Hurlstone to a Mr Black of NCB on
27 February 2009 (the letter is dated 2008, but it is common ground that that date is wrong). It records that Hurlstone had agreed a price of $66,166.33 for the earthworks involved in the contract. It then states that the drainage works would also be performed by Hurlstone. Two schedules were attached to the letter. The first schedule itemised the quantities involved in the excavation and in the associated earthworks. The total price for those works was the sum recorded in the letter, $66,166.33. There was a separate schedule which priced the plumbing and drainage components of the contract at $45,091.08. The letter provided that there would be a $10,000 up front payment, followed by regular progress payments on a fortnightly basis, with additional payments required within five days of materials being delivered. The letter recorded as follows:
Our agreed price allows for the various items of work as per the attached schedule. If items are not priced, we have not allowed for them.
The letter also stated that ―the agreed price‖ was based on a ―measure and value basis‖. It also stated that the conditions of contract were to be ―based on‖ the general conditions of contract NZS 3910:2003. The letter provided for execution by the parties, but it seems that this never occurred.
[4] It follows that Hurlstone’s total price to complete the scheduled works was
$111,258.14 (GST exclusive).
[5] Both parties accept that there was a degree of informality in the process that followed thereafter. Moreover, it is common ground that Hurlstone commenced work on or about 1 March 2009.
[6] Hurlstone submitted payment claims for both March and April 2009. The March payment claim included variations totalling $33,626.71. There were some deductions, resulting in an adjusted contract price of $122,770.31. The amount claimed in March 2009 by Hurlstone was $63,585.85. That sum was paid. The April progress claim sought payment of a further $30,648.93. The total amount claimed for variations had risen to $41,904.37. No adjusted contract price was given. The sum sought was paid on 29 May 2009.
[7] It follows that as at the end of May 2009, NCB had paid $94,234.78.
[8] Hurlstone issued further payment claims in August and October 2009. The payment claim issued for August 2009 sought a further $36,268.04 plus GST. Total variations were recorded at $75,293.71. The payment claim for October 2009 sought an additional $61,989.61. Variations were recorded at $135,685.69. NCB says that it did not receive the August and October claims and they were re-sent. NCB accepts that it received them in either late December 2009 or early January
2010. In the event, Mr Black responded in a letter dated 19 January 2010. The letter detailed the contract as NCB understood it, and the payments that NCB said had been made either directly or indirectly. Mr Black asserted that the adjusted contract price was $75,796.00, that $110,199.19 had been paid either directly or indirectly, and that there had been an overpayment by NCB to Hurlstone of
$34,393.19. He asserted that there was no further payment due to Hurlstone under the Construction Contracts Act.
[9] Mr Black wrote to Hurlstone again on 5 March 2010. Relevantly, he noted as follows:
(a) that the August and October claims lifted the value of variations claimed from $41,904 to $135,685;
(b)that no variations had been documented or signed off by the engineer;
(c) that there had been problems with the job both in relation to pricing and job management;
(d) that NCB was dissatisfied with the details provided by Hurlstone;
and
(e) that NCB required more detail regarding rates, quantities, hours claimed and the like.
Annexed to the letter was a detailed schedule dealing with each of the variations claimed by Hurlstone.
[10] Hurlstone says that it endeavoured to resolve issues with NCB but that its attempts were declined. It did not respond in writing until early November 2010. It then sent a further claim under the Construction Contracts Act seeking payment in the sum of $121,061.65 by 29 November 2010. The claim covered the period May to October 2009 and included 42 separate variations. It was dated 27 October
2010. The total claimed for variations was $124,822.00. The claim was accompanied by a letter from a Mr Dean Hurlstone dated 1 November 2010. Mr Hurlstone recorded that he was responding to Mr Black’s letter of 5 March
2010. The letter recorded that Hurlstone had reviewed its ―contract communication‖ and instructions. It noted that its ―original priced offer‖ was very clear, that the price was based on a ―measure and value basis‖, and that it had priced only the items of work in the schedule. He then went through Mr Black’s letter on a point by point basis. He referred to the October claim as being a ―final claim‖. He acknowledged that there had been a significant number of variations to
the contract, and asserted that this was because the scope of works had increased, and because there were items missing from the original schedule of quantities. He also asserted that the engineer, Mr Rimmer, was made aware of the variations. Each of the specific variations claimed was commented on. He then recorded that the October progress claim was ―an amended progress claim detailing totals claimed to date less previously paid claims‖.
[11] Mr Black responded by letter dated 12 November 2010. The letter referred to the property at 88 Lady Ruby Drive and to the Construction Contracts Act. Under the heading ―Payment Schedule‖ Mr Black set out plumbing and drainage works, and scheduled earthworks charged. He approved eight of the claimed variations and then itemised the payments NCB said had been made either directly or indirectly. He asserted that there had been an overpayment by NCB to Hurlstone of $26,950.99.
[12] NCB did not pay the amount sought by Hurlstone in its payment claim dated
27 October 2010.
Setting Aside a Statutory Demand
[13] NCB’s application is made pursuant to s 290 of the Companies Act 1993.
Relevantly, s 290(4) provides as follows:
290 Court may set aside statutory demand
(1) The court may, on the application of the company, set aside a statutory demand.
…
(4) The court may grant an application to set aside a statutory demand if it is satisfied that—
(a) there is a substantial dispute whether or not the debt is owing or is due; or
…
[14] It was common ground that the general principles applicable to applications under s 290(4) are well established.1 For present purposes, they can be summarised as follows:
(a) The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt claimed. The task for the Court is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(b)The mere assertion that a dispute exists is not sufficient. Material, short of proof, is required to support the claim that the debt is disputed.
(c) If such material is available, the dispute should normally be resolved other than by means of proceedings in the companies court.
(d)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly where issues of credibility arise.
[15] The onus is on NCB to show that there is arguably a genuine and substantial dispute as to the existence of the debt.2 If NCB can show that a genuine and substantial dispute as to the existence of the debt, then it would be unfair to allow that dispute to be resolved by the companies court, rather than by an action commenced in the usual way.3 What constitutes a substantial dispute is ultimately
a question of fact, to be decided on the circumstances of each case.4
NCB’s Application
[16] In its notice of originating application NCB asserted:
1 See Brookers Company and Securities Law (looseleaf ed, Brookers) vol 1 at [CA 290.02(1)].
2 Bateman Television Ltd v Coleridge Finance Co Ltd [1969] NZLR 794 (CA); Queen City
Residential Ltd v Patterson Co Partners Architects Ltd (No 2) [1995] 7 NZCLC 260, 936 (HC).
3 Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297 (CA) at 299.
4 Exchange Finance Co Ltd v Lemmington Holdings Ltd [1984] 2 NZLR 242 (CA).
(a) that Hurlstone was not entitled to serve the payment claim dated
27 October 2010 under s 20 of the Construction Contracts Act 2002;
(b)alternatively, that NCB adequately responded to the payment claim with a payment schedule in accordance with s 21 of the Act.
Initially it was asserted that there was a counterclaim, set off or cross demand by NCB which equalled or exceeded the amount claimed by Hurlstone. This argument was not however pursued at the hearing by Mr Kohler for NCB.
[17] Hurlstone responded in its notice of opposition by asserting:
(a) that its payment claim was issued in accordance with s 20 of the Act, and
(b)that NCB failed to respond with a payment schedule pursuant to s 21 of the Act.
Ms Holmes for Hurlstone said that it followed that the amount sought by Hurlstone in its payment claim was a debt due to it under ss 22(b) and 23(2)(a) of the Act which it could pursue by way of statutory demand.
The Construction Contracts Act 2002
[18] The Act is in many respects draconian, but its overall focus is clear.
[19] The purpose of the legislation is clearly set out in s 3. It seeks to reform the law relating to construction contracts and in particular, to facilitate regular and timely payments between parties to a construction contract. It also seeks to provide remedies for the recovery of payments under a construction contract. Disputes
between parties under the Act must be analysed with these purposes in mind.5
5 George Developments Ltd v Canam Construction Ltd [2006] 1 NZLR 177 (CA) at [41].
[20] The payment regime established under the Act was analysed by Asher J in
Marsden Villas Ltd v Wooding Construction Ltd.6 His Honour stated as follows:7
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.
[21] Section 20 provides for the issuance of progress claims by the payee, and s 21 provides for the payer to respond with a payment schedule. Both sections detail what must be included in a payment claim and a payment schedule respectively. Section 22 provides that a payer becomes liable to pay the claimed amount on the due date for the progress payment to which the payment claim relates if the payee serves a payment claim on the payer, and the payer does not provide a payment schedule to the payer within the time required by the relevant construction contract, or if the contract does not provide to the matter, 20 working days after the payment claim is served. Section 23 sets out the consequences which follow if the claimed amount is not paid and no payment schedule is provided under s 21. It provides that, inter alia, the payee may recover from the payer, as a debt due to the payee, in any Court, the unpaid portion of the claimed amount, and
the actual and reasonable costs of recovery awarded against the payer by that Court.
6 Marsden Villas Ltd v Wooding Construction Ltd [2007] 1 NZLR 807 (HC).
7 Ibid at [16]–[17].
Debts resulting from the operation of the statutory scheme are enforceable and in appropriate cases, they can be enforced by way of the statutory demand procedure.
Submissions/Analysis
Was there a valid payment claim?
[22] Mr Kohler argued that there was no valid payment claim by Hurlstone under s 20 of the Act. First, he submitted that the parties had agreed that NZS 3910:2003 applied. He then said that pursuant to NZS 3910:2003, the 27 October 2009 payment claim ought to have been submitted to the engineer to the contract. He referred to cl 12.1.1 in NZS 3910:2003 which provided as follows:
The contractor may submit to the engineer payment claims under the
contract…
He also referred to cl 12.1.3 which provided as follows:
The contractor shall send the original of each payment claim to the principal and a duplicate copy to the engineer.
[23] Mr Kohler noted that Mr Black in his affidavit stated that the engineer was a Mr Rimmer, and that this assertion was not disputed by Mr Corliss, who swore an affidavit for Hurlstone. Mr Kohler submitted that there is nothing to suggest that Hurlstone’s claim dated 27 October 2009, or its letter dated 1 November 2009, was sent to the engineer.
[24] Ms Holmes noted that NCB did not argue that the payment claim was not brought to its attention. She referred to NZS 3910:2003 and said that it simply required that a copy of the payment claim be made available to the engineer. She also referred me to authorities where it has been held that it suffices if the serving party can show that the document has come to the recipient’s attention.
[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.8
Section 80 provides for service. Any notice or any other document required to be
8 Section 20(1).
served on or given to any person under the Act is sufficiently served if it is delivered to that person. 9 Parties to a construction contract cannot contract out of the Act.10 It follows that it suffices if the serving party can show that the document came to the recipient party’s attention.11 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.
[26] Mr Kohler then argued that the payment claim was invalid, because it was a final payment claim but not endorsed as such. Moreover, he submitted that it was not signed, and that it was not submitted within the timeframes required by NZS 3910:2003. He argued that the contract contained various provisions detailing when a payment claim could be made. He submitted that it should have been submitted no later than two months after the expiry of the period for defects
liability, or within such further time as the engineer allowed.12 He submitted here
that the payment claim relied on was served some 12 months after the work was completed, and that it was well beyond the period within which a payment claim could be submitted.
[27] Ms Holmes submitted that the payment claim of 27 October 2010 was not a final payment claim and that in any event, the Act does not differentiate between progress payment claims and final payment claims.
[28] I am unable to accept Mr Kohler’s submissions.
[29] First, the payment claim dated 27 October cannot, in terms of
NZS 3910:2003, be the final payment claim. It was not endorsed as such and it was not signed as required by cl 12.4.1 of the general conditions of the contract. Under
9 The Construction Contracts Regulations 2003 (SR 2003/30), reg 9.
10 Section 12.
11 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.
12 NZ 3910:2003 cl 12.4.1.
cl 12.4.1 of NZS 3910:2003, a final payment claim is required to be issued after the expiry of the period of defects liability. That period commences on the date of practical completion of the contract works. Practical completion is that stage in the execution of the works where the works are complete, except for minor omissions and minor defects. Where the contract works are believed to qualify for the issue of a practical completion certificate, the contractor is required to notify the engineer accordingly; the engineer is then required to inspect the contract works within five working days and to issue a certificate of practical completion stating the date and time on which the contract works were so completed. There is nothing in the affidavits to suggest that any of these steps were taken.
[30] Secondly, s 20 in the Act provides that a payment claim may be served for each progress payment, if the contract provides for the matter, at the end of the relevant period that it is specified in, or is determined in accordance with the terms of the contract. Here, the letter which formed part of the contact, and which is dated 27 February 2009, provided for regular progress payments on a fortnightly basis. NZS 3910:2003 provide in cl 12.1.1 that the contractor could submit payment claims in respect of work carried out during periods of not less than one month. As noted above, there has been a degree of informality in the practices the parties have adopted. It cannot in my view be said that the progress claim dated
27 October 2009 was time barred. It appears to have been made in accordance with cl 12.1.1 of NZS 3910:2003.
[31] Thirdly, the Act does not differentiate between progress payment claims and final payment claims. The words ―progress payment‖ are defined to include any final payment under a contract. A payment claim is a claim referred to in s 20 of the Act. If a claim, whether final or otherwise, is made under s 20 of the Act, then the payer must respond with a payment schedule under cl 21. Otherwise the payer becomes liable to pay the claimed amount.
[32] Mr Kohler also submitted that Hurlstone, by its payment claim of
27 October 2010, had simply reissued an earlier payment claim, in respect of periods previously claimed for.
[33] That argument cannot stand either as a matter of fact or of law.
[34] First, there are differences, albeit minor differences, between the payment claims issued in August and October 2009 and the payment claim dated 27 October
2010.
[35] Secondly, the Court of Appeal in George Developments Ltd v Canam Construction Ltd, rejected a similar argument made by the appellant in that case. It observed that if the argument were accepted, it would mean that:13
A contractor could never represent a previously declined (or ignored) claim even if it wished to resubmit the claim or support it with further information.
The Court went on to note:14
Section 17(1) requires that the progress payment must be calculated by reference to certain factors however the list of factors was not exhaustive. Because s 17(1)(b) refers to "the value of the construction work carried out, or to be carried out, during that period" (emphasis added) it does not mean that a PC must only refer to work carried out in that particular period. Such a "technocratic" or "formalistic" interpretation would undercut Parliament’s intent that cash flow be maintained.
We are persuaded that the provisions of the Act and the contract did not prevent the use of a cumulative-style claim. As submitted by the respondent, and as the Associate Judge held, there is nothing in the Act to prevent such a claim.
[36] In my view, Hurlstone was entitled to issue its payment claim dated
27 October 2009, and this payment claim complied with s 20 of the Act. The claim incorporated amounts which had been included in previous payment claims. The claim and the accompanying letter also provided further information, and responded to complaints that NCB had made in January and March 2010.
Was there a valid payment schedule?
[37] I now turn to the second principle issue, namely whether NCB’s response
sent by letter dated 12 November 2010 was a payment schedule which complied with s 21 of the Act.
13 George Developments Ltd v Canam Construction Ltd [2006] 1 NZLR 177 (CA) at [35].
14 Ibid at [52]–[53]; see also Herbert v Toogood HC Auckland CIV 2010-441-283, 20 August
2010 at [39]–[41].
[38] Section 21 provides as follows:
21 Payment schedules
(1) A payer may respond to a payment claim by providing a payment schedule to the payee.
(2) A payment schedule must—
(a) be in writing; and
(b) identify the payment claim to which it relates; and
(c) indicate a scheduled amount.
(3) If the scheduled amount is less than the claimed amount, the 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.
[39] Mr Kohler argued that NCB’s letter dated 12 November 2010 was an adequate and compliant response, and further, that it should not be taken in isolation given NCB’s comprehensive response in relation to substantially the same payment claims made by Hurlstone in August and October 2009.
[40] Ms Holmes asserted that NCB’s payment scheduled was invalid because it:
(a) failed to identify the payment claim to which it related, and
(b) failed to indicate NCB’s reasons for the difference between the stated
amount and the amount claimed by Hurlstone.
She asserted that there must be substantial compliance with the requirement of s 21 if a payer is to avoid the statutory consequences otherwise imposed by the Act.
[41] The Act does not prescribe the form of a payment schedule. Rather, it details certain minimum requirements which a payment schedule must meet.
[42] Here, the letter Mr Black sent to Hurlstone dated 12 November 2010 was in writing. It complied with s 21(2)(a).
[43] The letter had the heading, ―88 Lady Ruby Drive – Construction Contracts Act 2002‖. In my judgment, it identified the payment claim to which it related. At that stage, there was only one relevant claim the letter could have been responding to. That was the claim dated 27 October 2010. The word used in s 21(2)(b) is
―identify‖. It can be contrasted with the word ―state‖ used, for example, in s 20(2)(f). The word ―identify‖ means to equate, link or associate with another person or thing. By identifying the property the subject of the construction contract, NCB did identify the payment claim to which the letter related. Any other approach would, in my judgment, be unnecessarily technical and pedantic, and it would permit what might otherwise be seen as a technical defect to frustrate the payment schedule provisions contained in s 21. I note that there is no suggestion made by Mr Corliss for Hurlstone that the letter of 12 November 2010 was not understood by Hurlstone. 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.15 The letter dated 12 November 2010 complied with
s 21(2)(b).
[44] The letter also complied with s 21(2)(c). It indicated a scheduled amount. It described itself as a payments schedule. It indicated the amounts that NCB accepted it was liable for, the amounts which NCB said had been paid either directly or indirectly, and the amount which NCB said it had overpaid.
[45] The scheduled amount detailed in Mr Black’s letter of 12 November 2010 was less than the claimed amount. The letter detailed the way in which NCB calculated the scheduled amount. Section 21(3)(a) is satisfied. Moreover, the letter indicated NCB’s reasons for withholding payment, albeit baldly. It asserted that NCB had already overpaid. In my view, s 21(3)(b) was complied with.
[46] NCB did not, in its letter of 12 November 2010, set out in detail its reasons for the difference between the scheduled amount and the amount claimed. It had
15 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].
done so when it responded to the earlier payment claims made by Hurlstone in August and October 2009. In the event that I am wrong in my finding above that the letter of 12 November 2010 complied with s 21(3)(b), I record that in my judgment, NCB is also entitled to rely on its two responses to the earlier payment schedules which were sent to Hurlstone on 19 January and on 5 March 2010.
[47] I note the observations of Christiansen AJ in Canam Construction Limited v
George Developments Limited, where he noted as follows: 16
Section 21 contemplates that a payment schedule should be comprised in
―a‖ (ie a single) document.
This observation was not expressly commented on by the Court of Appeal.17
Rather, the Court of Appeal accepted that a payment claim made by a contractor in respect of a construction contract governed by the Act was valid and enforceable, notwithstanding that the contents of the payment claim did not comply strictly with the provisions set down in s 20 of the Act.
[48] I can see no reason in principle why a degree of flexibility should be allowed in respect of payment claims, but not in respect of payment schedules.
[49] I adopt the observations of Rodney Hansen J in Westnorth Labour Hire Limited v S B Properties Limited.18 In that case, His Honour was considering an appeal from the District Court where it had been held that a letter sent by the payer constituted a payment schedule. His Honour held as follows:19
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.
16 Canam Construction Limited v George Developments Limited HC Auckland CIV 2004-404-
3565, 10 November 2004; see also Herbert Construction Ltd v Toogood HC Auckland CIV
2010-441-283, 20 August 2010.
17 [2006] 1 NZLR 177 (CA).
18 HC Auckland CIV 2006-404-1858, 19 December 2006; see also West City Construction Ltd v
Edney [2005] 17 PRNZ 947 (HC).
19 Ibid at [28]–[30].
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 of 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.
[50] It would have been preferable if the letter dated 12 November 2010 had referred to the earlier correspondence, but in the particular circumstances of this case, I am not persuaded that this was required to render the letter a complying payment schedule. Hurlstone had earlier made two payment claims which were made in respect of the same contract works and were similar to the 27 October
2010 payment claim. NCB had provided comprehensive responses to those payment claims. Inter alia, NCB sought further details from Hurlstone. Hurlstone endeavoured, albeit unsuccessfully, to discuss matters with NCB. It then delayed in providing a comprehensive written response until early November 2010. When it did respond, it did so by providing a further payment schedule, as well as Mr Hurlstone’s letter dated 1 November 2010. The letter and the payment claims were a comprehensive package. The payment claim made some adjustments to reflect matters raised by NCB in its earlier correspondence. The letter went through the points raised by NCB in some detail and sought to justify the stance taken by Hurlstone and the amounts claimed by it. In my view, it would be unrealistic, unduly mechanistic and technical to exclude reference to this earlier documentation, and require that the letter of 12 November 2010 be read in isolation.
Conclusion
[51] It follows that in my judgment, NCB filed a valid payment schedule to Hurlstone’s payment claim dated 27 October 2010. The statutory provisions on which Hurlstone relies, namely ss 22 and 23 of the Act, have no application. Rather, Hurlstone must proceed by referring the dispute either to adjudication under the Construction Contracts Act, or to mediation/arbitration in accordance with NZS 3910:2003.
[52] I allow NCB’s application and set aside the statutory demand dated
30 November 2010.
[53] NCB is entitled to its reasonable costs and disbursements. I direct that costs should be assessed on a 2B basis. I invite counsel to endeavour to agree the same. If they are unable to do so, then NCB is to file a memorandum in support of its application for costs within 10 working days of the date of this judgment. Any reply is to be filed by Hurlstone within a further five working day period. I will
then deal with costs on the papers unless I require the assistance of counsel.
Wylie J
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