Nevis Group Limited v Jackson
[2023] NZHC 186
•14 December 2023
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2023-059-097
[2023] NZHC 186
UNDER the Construction Contracts Act 2002 and the District Court Rules 2014 IN THE MATTER
of an application for summary judgment
BETWEEN
NEVIS GROUP LIMITED
Plaintiff/First Counterclaim Defendant
AND
RACHAEL MARY JACKSON
First Defendant/Counterclaim Plaintiff
RUSSELL LINTON HALL
Second Counterclaim Defendant
Hearing: 24 November 2023 Counsel:
M K Prendergast and K E Castiglione for Plaintiff B B Gresson for Defendant
No appearance required for Second Counterclaim Defendant
Judgment:
14 December 2023
JUDGMENT OF ASSOCIATE JUDGE LESTER
NEVIS GROUP LIMITED v JACKSON [2023] NZHC 186 [14 December 2023]
[1] Nevis Group Limited (Nevis) is a construction company carrying on business in the Queenstown area.
[2] In around June 2021, Rachael Jackson (Ms Jackson) instructed Nevis to carry out renovations of her property in Queenstown. The construction work was carried out between June 2021 and February 2023. There is no written contract between the parties.
[3] It is common ground that Nevis sent Ms Jackson monthly invoices for the renovation work, each payable on the 20th of the month following the work.
[4] Nevis says each of its invoices were payment claims under the Construction Contracts Act 2002 (the Act).
[5] Ms Jackson has not paid, or paid in full, Nevis’ last four invoices, with the amount outstanding being $61,106.42 calculated as follows:
Date Reference Date invoice
served on Plaintiff
Due Date Invoice Amount Payments Balance Outstanding 30/11/2022 INV-0413 14/12/2022 20/12/2022 $146,618.77 $137,550.93 $8,067.84 31/12/2022 INV-0430 13/01/2023 20/01/2023 $44,112.36 $42,756.08 $1,356.28 31/01/2023 INV-0442 15/02/2023 20/02/2023 $35,310.91 $34,050.15 $1,260.76 28/02/2023 INV-0459 10/03/2023 20/03/2023 $50,421.54 $0.00 $50,421.54 Total $61,106.42
[6] Nevis seeks summary judgment in respect of the unpaid balance of its invoices on the basis the invoices were valid payment claims to which Ms Jackson did not issue a payment schedule.
[7] It is not disputed the invoices were received or that they were accompanied by the information required by the Act. Ms Jackson disputes the invoices were valid payment claims on the basis the claims do not satisfy s 20(2)(c) of the Act, that is, they do not “identify the construction work and the relevant period to which the payment relates”, and they also do not comply with s 20(2)(e) in that they do not “indicate the manner in which the payee calculated the claimed amount”.
How payment claims are constructed in the summary judgment context
[8] The legal principles are not in dispute. Mr Gresson (counsel for Ms Jackson) accepts as accurate Mr Prendergast’s (counsel for the plaintiff) summary of the principles. I accept the principles are settled and are as recently summarised in Poly Wealth Trustee Ltd v van Vlerken as follows:1
[31] An analysis of payment claims under the CCA must be undertaken with the purpose of the legislation in mind. Those purposes include the facilitation of regular and timely payments between parties to a construction contract through a draconian “sudden death” regime, which applies if the payment procedures are not complied with. The scheme of the CCA entitles a payee to prompt payment where the amount claimed is not disputed within the statutory time period and provides resolution procedures for disputed claims.
[32] In C J Parker Construction Ltd (in liq) v Ketan, the Court of Appeal held that the validity of a payment claim will not be impeached due to purely technical deficiencies. By keeping in mind the Act’s purpose of facilitating regular and timely payments in the construction industry, a pragmatic, common-sense and contextual approach should be adopted when assessing whether a purported payment claim complies with s 20(2). In an earlier decision, namely George Developments Ltd v Canam Construction Ltd, the same Court held, following a reiteration that meritless, technical objections to payment claims will not succeed, that claims and payment schedules which
otherwise substantially comply with the requirements of the CCA will be
upheld. The “substantial compliance” test sanctions the upholding of
a payment claim (or payment schedule) which faithfully complies with the
statutory requirements in relation to most particulars of claim but fails to do
so in isolated instances, provided the fundamental tests of reasonable detailand comprehensibility are met.
(Mr Prendergast’s emphasis)
[9] Mr Prendergast stresses each case must be determined on its own facts and while acknowledging that Nevis’ invoices may not be perfect, they nonetheless substantially comply with the Act as they make it clear what Nevis was claiming for, why, and in a detailed and comprehensible manner.
[10] Mr Gresson’s submissions canvassed a number of authorities on whether a payment claim met the Act’s requirement was discussed. However, each case is determined on its own facts. This was not a commercial construction as was the case in Can Build Ltd v Kirkpatrick where the build price was nearly $2,000,000.00 plus
1 Poly Wealth Trustee Ltd v van Vlerken [2020] NZHC 634.
GST in 2013.2 What might be required in a substantial commercial construction may not necessarily be required in the renovation of a residential house.
Section 20(2)(c) of the Act
Relevant period of works
[11] While issue was originally taken with the payment claims not specifying the period for which they cover, this point was not pursued. It is clear from context that they are monthly invoices. Each invoice is issued on the last day of the month and it is common ground that the invoices have been issued monthly throughout the project. Pursuant to s 17(2) of the Act, the relevant period for a progress payment is monthly, subject to any express agreement in the contract. Again, there is no suggestion from Ms Jackson that the other billing period was agreed and given monthly invoices were provided from June 2021 to February 2023 without any apparent dispute. I am satisfied, as each invoice is dated on the last day of the month, that it is clear from the context that they covered that month, thereby satisfying s 20(2)(c) of the Act.
Why Ms Jackson is not prepared to pay
[12]In relation to the invoices set out at [5] above, Ms Jackson says in her affidavit:
[9]Despite the lack of detail or supporting information contained in Nevis’s invoices, Steve and I were prepared to pay its earlier invoices as we did not want to slow down progress with getting the work completed. However, it got to the point where the amounts charged were so much higher than estimated, and it was not at all clear how they were calculated, that we did not agree to continue paying the invoices without seeking further information as to how they were derived.
[13] Ms Jackson deducted the builder’s margin in relation to sub-trades and materials for the first three invoices.
[14] Ms Jackson’s solicitors replied to Nevis’ letter written directly to Ms Jackson calling for payment of the invoices. Ms Jackson’s solicitors reply firstly explained their view as to why the invoices were not valid payment claims and then
2 Can Build Ltd v Kirkpatrick [2015] NZHC 1161.
explained why Ms Jackson did not consider she was required to pay the outstanding amounts sought by Nevis. The explanation referred to the estimate, asserted that Ms Jackson was entitled to rely on the estimate, and accepted that “[Whilst] there have been some additional works to those stated in the quote, the amount our clients have paid to date ($562,836.58) vastly exceeds the quoted figure.” Paragraphs 10-12 of that letter provided:
10.With respect to the items where exact sums (as opposed to estimates) were provided, such as labour, Nevis is contractually bound to those sums and our clients are not liable to pay over and above what was quoted, other than to the extent variations were expressly agreed and the costs of such clearly demonstrated. In respect of the labour component alone, they have already overpaid by $79,803, which is more than the total amount ($61,106.42) said to be due.
11.With respect to the estimated items, the inaccurate estimate was misleading, or alternatively was negligent. Either way, our clients would be entitled to losses suffered as a result.
12.In the circumstances, our clients having already paid well in excess of the quote that was provided are not required to make any further payments to your client.
[15] The letter concluded by saying that Nevis had already been paid all sums due under the building agreement.
[16] An analysis of whether the payment claims comply with the Act must be undertaken with the purpose of the Act in mind.3 The purpose provision of the Act provides that it was: “to facilitate regular and timely payments between the parties to a construction contract”. 4
[17] It is also relevant: “In assessing the reality of [a] challenge” to a payment claim whether the payer has complained about the comprehensibility of previous payment claims made in the same form.5 I note here that there was no previous complaint by Ms Jackson as to the understandability of the payment claims until Nevis called for payment of its last four invoices.
3 George Developments Ltd v Canam Construction Ltd [2006] 1 NZLR 177 (CA) at [41].
4 At [41].
5 At [46].
[18] A payment claim must be sufficiently detailed and comprehensible to enable a payer to understand the basis on which the claim is made. Only then can the payer decide whether to accept it, or to put the payee on notice of a dispute, by providing a payment schedule in response which explains the payer’s reasons for disagreeing with the payment claim.6
[19] A payment claim must provide sufficient information to permit the payer to provide a payment schedule which complies with the obligation to indicate the reasons for any difference between the amount claimed and the amount the payer considers ought to be paid.7
[20] In CJ Parker Construction Ltd (in liq) v Ketan (Parker Construction), the Court identified the most basic requirement of a valid payment claim:8
A payment claim must be sufficiently detailed and comprehensible to enable a payer to understand the basis on which the claim is made. Only then can the payer decide whether to accept it or to put the payee on notice of a dispute by providing a payment schedule in response which explains the payer’s reasons for disagreeing with the claim.
(emphasis added)
[21] It is clear that whether a payment claim substantially complies with the Act is determined in context. Here, Ms Jackson’s reason for not paying the final account is known. She considered she did not have to pay the final invoice because she believed Nevis was negligent in giving its estimate or the estimate amounted to a breach of the Fair Trading Act 1986.
[22] It is clear from paragraph 9 of Ms Jackson’s affidavit set out at [12] above and her solicitors’ letter, that irrespective of the detail in the last payment claim, it was not going be paid.
[23] The unusual circumstance of this case is Ms Jackson has no complaint with the work that was completed. Her only complaint is the cost over-run. That is the context in which whether the payments claim were understandable is to be considered.
6 CJ Parker Construction Ltd (in liq) v Ketan (Parker Construction) [2017] NZCA 3 at [26].
7 At [29].
8 At [26].
Ms Jackson does not say work beyond that covered by the original estimate was completed (beyond the minor concession in her solicitors’ letter at [15]), that materials other than those originally contemplated were used, or have any other concern in respect of the work. The real basis advanced for non-payment is the cost over-run that being made clear by Ms Jackson’s solicitor’s letter referred to at [14].
[24] As each of the invoices are in the same form, it is sufficient to use the last invoice subject to this proceeding, as an example. Under the heading “Description” there are three headings, “Labour”, “Truck and Digger” and “Materials and Subcontractors”. In respect of Labour, the item is simply listed as “Labour”, quantity 356, unit price $63 to arrive at a total of $22,428.00. Labour is charged by the hour and the unit rate of $63 is consistent with that. That is the natural and ordinary understanding that would be taken from the invoice. The reference to “Truck and Digger” is self-explanatory. Below “Materials and Subcontractors”, there are listed a number of sub-trades or suppliers. The descriptions are by and large self-explanatory, for example, Advantage Plumbing, Doortech, Mitre 10 Mega, Queenstown Concrete Grinding and Queenstown Roofing et cetera. While some references may be more obscure, for example, “BMT Contracting”, the charge for that item is $95.66 which, assuming that it was not understood by Ms Jackson, would not invalidate a payment claim for $43,844.80 before GST.
[25] In my view, the invoices comply with s 20(2)(e) of the Act. The manner of calculation is evident on the face of the invoices. The elements that make up the invoices are all listed with unit price and quantity to arrive at a total to which margin and GST is added. Each component is labelled. The manner of calculation is self-evident.
[26] The payment claim communicated to Ms Jackson the amount sought and how it was made up. In the circumstances of this case, the payment claim was sufficient to enable Ms Jackson to understand the claim that was being made so that she could decide whether to accept it or to put Nevis on notice of a dispute. Given the contents of Ms Jackson’s evidence set out at [12] above and her reason for not paying as explained in her solicitors’ letter of 17 April 2023, irrespective of the detail in the payment claim, Ms Jackson on her own evidence was not going to pay the final
payment claim. Ms Jackson knew the basis upon which she was declining to pay the final invoice and she could have issued a payment schedule in response stating the reason for non-payment, was that the claim exceeded the estimate/quote provided. I am satisfied the final payment claim is a valid claim. No payment schedule having been issued, Nevis is entitled to judgment in respect of the last payment claim.
[27]As to the deduction of the builder’s margin on the first three invoices set out at
[5] above, that Ms Jackson withheld the margin showed she understood how this aspect of the payment claim was calculated and what it covered and why she was not paying it. So much follows from the fact of her specific deduction. The deduction was not a “round sum”. Any concern Ms Jackson had with the builder’s margin could have been raised by her in a payment schedule as the payment claim specifically identify the builder’s margin. I am satisfied the first three invoices in issue in this proceeding are valid payment claims as Ms Jackson understood them enough to determine what aspect of them she was prepared to pay and why she was not prepared to pay the balance.
[28] Even if I had not been satisfied the invoices were payment claims, Nevis is suing on unpaid invoices where it is not disputed that the work was carried out, or the quality of its workmanship. What then is the defence to the invoices outside an allegation of non-compliance with the formalities of the Act?
[29] A counterclaim has been filed based on Nevis having given an inaccurate estimate for the cost of the completion of the work. The estimate was just over
$300,000.00. Total invoices issued are for $421,630.05 of which $360,523.63 has been paid. In addition, Ms Jackson paid nearly $130,000.00 directly to sub-contractors and suppliers with the agreement of Nevis so as not to incur Nevis’ 10 per cent margin.
[30]Accordingly, the total paid to date in respect of the extension work is
$490,289.93. That is nearly $190,000.00 over Nevis’ original estimate.
[31] The allegation is that Nevis failed to exercise reasonable care and skill in relation to providing an estimate that proved to be unrealistic.
[32] In addition to breach of contract, there are claims under the breach of the Consumer Guarantees Act 1993 and in negligence. Ms Jackson pleads that the reasonable cost of the work would have been $396,473.88 meaning that she has overpaid $93,816.05.
[33] Nevis says that because of changes in the design and specification of the renovations, the original estimate was overtaken. That is a factual dispute that cannot be resolved in this context but assuming without deciding that what is pleaded as a counterclaim could be raised as a set-off, the concern the Court has is that Ms Jackson part paid the first three invoices subject to this claim as she “did not want to slow down progress with getting the work completed”. Clearly, by the time of receiving the invoices the subject of this proceeding, the original estimate had been well and truly exceeded. That the estimate had been exceeded was raised at a site meeting on 2 November 2022 by Ms Jackson’s partner who, in an email to Nevis, said:
Budget discussed , informed going to blow out but no indication by how much – obviously disappointing but as long as justified and clearly communicated early instead of after the fact would help – we do not have a budget of $5 million like some others !
[34] This, however, was far from advice of a fundamental concern from which Nevis could have understood payment of, in effect, the final invoice would be withheld, or indeed other payments withheld. The part payments were made in order to get the work completed. However, when the work was completed, or nearly completed, Ms Jackson refused to pay the last invoice, having succeeded in getting that work done, on the strength of part paying the prior three invoices.
[35] The test for a set-off is well established. In Grant v New Zealand Motor Corporation Ltd the Court at [12] said:9
The principle is, we think, clear. The defendant may set off a cross-claim which so affects the plaintiffs’ claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are interdependent: judgment on one cannot
9 Grant v New Zealand Motor Corporation Ltd [1989] 1 NZLR 8 (CA).
fairly be given without regard to the other; the defendant’s claim calls into question or impeaches the plaintiff’s demand. It is neither necessary, nor decisive that claim and cross-claim around out of the same contract.
(my emphasis)
[36] However, in this situation Ms Jackson on her case believing Nevis was in breach in respect of its estimate, part paid invoices so as to “not slow down progress with getting the work completed”. Having got the work largely completed, Ms Jackson then refused to pay the last invoice.
[37] Having encouraged Nevis to complete the works through part paying the first three of the invoices in issue in this proceeding, it is clear from the evidence at [12] and [14] above, Ms Jackson did not intend paying the final invoice once the work was completed. Ms Jackson did respond to the payment claim with an assertion that she did not understand the payment claim or that the claim was not payable because it exceeded the estimate, being the only ground advanced for non-payment.
[38] The Court will not allow a debtor to manufacture a set-off by continuing to trade with a creditor but keeping a complaint up their sleeve to raise when it suits them.10
[39] Accordingly, had I not been satisfied that the payment claim was valid, I would have considered Nevis entitled to judgment on its invoices simpliciter on the basis that, assuming without deciding the counterclaim raised by Ms Jackson was capable of being a set-off, it is not unjust for Nevis to seek judgment without taking into account the alleged counterclaim.
Judgment
[40] Judgment is entered for Nevis in terms of paragraphs (1)(a) and (b) of the relief sought in its statement of claim being $62,776.42. Interest as sought at paragraph (c) of the statement of claim is awarded on $61,106.42 (interest can only run on the costs
10 Auravale Industries Ltd v Shalimar Knitwear Ltd, HC Christchurch M290/99, 30 July 1999.
from the time they are awarded). Interest will run on the costs claim in paragraph 1(b) from the date of this judgment. Nevis is entitled to costs on 2B basis in terms of the District Court Scale in respect of this proceeding for those costs not covered by paragraph (b) of the above.
Associate Judge Lester
Solicitors:
Weka Legal & Real Estate Limited, Frankton (for Plaintiff) Todd & Walker, Queenstown (for First Defendant)
Russell Linton Hall
0
3
0