Sam Pemberton Civil Limited v Robertson
[2024] NZHC 272
•23 February 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-001076
[2024] NZHC 272
UNDER THE Judicial Review Procedure Act 2016 IN THE MATTER OF
An Application for Judicial Review
BETWEEN
SAM PEMBERTON CIVIL LIMITED
Applicant
AND
STUART ROBERTSON
First Respondent
GRAEME CHRISTIE
Second RespondentAND
LANDSDALE DEVELOPMENT LIMITED
Third Respondent
Hearing: 15 February 2024 Appearances:
T J Rainey, V Whitfield for the Applicant
J D McBride, N Gillies for the Respondents
Judgment:
23 February 2024
JUDGMENT OF WHATA J
This judgment was delivered by me on 23 February 2024 at 10.00am,
pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
SAM PEMBERTON CIVIL LIMITED v ROBERTSON [2024] NZHC 272 [23 February 2024]
Introduction
[1] Sam Pemberton Civil Limited (SPC) seeks to judicially review two adjudications in respect of a construction contract carried out under the auspices of the Construction Contracts Act 2002 (CCA). SPC was the contractor. Landsdale Development Limited (Landsdale) was the principal. The project was completed on 22 December 2016. In October 2022, SPC commenced an adjudication seeking to review the Engineer’s decision on the sum owing to SPC. Landsdale sought to enlarge this adjudication to include a claim to liquidated damages (LDs), but as SPC refused to consent to this, the adjudicator declined to do so. However, as part of his decision rejecting SPC’s claim, the adjudicator found that Landsdale was entitled to set off in the form of LDs in the sum of $1.09m. Landsdale then commenced, in March 2023, a second adjudication to recoup the LDs. The second adjudicator essentially adopted the findings of the first adjudicator and upheld Landsdale’s claim to LDs. Substantial costs awards were also made against SPC by both adjudicators.
[2] Multiple matters were raised in the pleadings, but the scope of the present review was helpfully narrowed in oral argument to two key issues:
(a)Whether Landsdale’s claim to LDs was time barred as it commenced its claim in March 2023, more than six years after the date of completion of the project.
(b)Whether the adjudicators failed to apply the correct threshold for costs in claims under the CCA.
Background
[3] The immediate background to the claim is helpfully set in the first adjudication determination of Mr Stuart Robertson, which is not disputed, namely as follows:1
Procurement
1 Sam Pemberton Civil Limited v Landsdale Development Limited BDT22-102480, 17 February 2023 (First Adjudicator’s Determination).
9The Project was arranged in 4 stages and for contracting purposes split into two phases. Phase 1 was the earthworks to all Stages 1 to 4, and the civil works to Stage 1 only. Phase 2 was for the balance of the civil works, being to Stages 2 to 4.
10In spring 2014 Landsdale sought tenders from various entities to undertake the Phase 1 earthworks and civil works for the Project. Landsdale highlighted the importance of completing in a timely manner, either within one earthworks season of an alternative proposal from tenderers. SPC submitted its tender on 26 November 2014 and following further exchanges of correspondence, including in relation to resolution of some tags, a programme on 9 December 2019 and a Schedule of Qualities, SPC’s tender accepted on 12 December 2014. The parties entered the construction contract in early 2015 (Contract).
11The Contract is based in NZS 3910:2013 Conditions of Contract for Building and Civil Engineering Construction, amended by the Special Conditions of the Contract.
12The Contract Works are described as earthworks in relation to Stages 1 to 4 and civil works in relation to Stage 1 only. The dispute referred to adjudication is focussed on Stage 1 (earthworks and civil works).
The Works and the claims
13Works began on Site on or about 5 January 2015 and were originally planned to take 150 working days. The progress of the Stage 1 works was substantially delayed. In addition, there were a number of Variations to the Contract Works as a whole, adding approximately
$3 million to the Contract Price.
14Stage 1(a) was completed on 29 August 2016 and Stage 1(b) on 22 December 2016. The latter of these dates results in an overall Contract duration of 495 Working days, an increase of 346 days.
15In response to SPC’s final payment claim dated 5 June 2019 seeking 270 days EOT and time-related Costs of $1,530,974.50 the Engineer issued a Progress Payment Schedule 33 (PPS 33) on 9 July 2019. This determined an EOT of 155 days and time-related Costs of $61,649.15 (excl GST). Notably, it included the Principal’s deduction of LDs of
$277,323.22 leaving SPC indebted to Landsdale in the sum of
$215,674.07.
16SPC essentially repeats its final payment claim grounds and quantum in this adjudication updated in terms of its expert quantum evidence.
17Landsdale opposes SPC’s claim and says that first, the claim is time- barred under the Contract (SPC repeatedly and materially omitted to meet its notification obligations); second, SPC’s delay analysis fails to accurately identify the critical path and is fundamentally unsound (the analysis relies on SPC’s own as-built position and unsubstantiated assumption without testing the factual basis for these. As such, it cannot be relied upon and does not reflect the actual cause of delay); third, absent a contractual WDR, the amounts claimed for
prolongation are entirely unsupported (no proper evidence to support for these, or the methodology adopted, has been provided).
18A further concern raised by Landsdale is the current litigation, relating to the Project, between SPC and its earthworks subcontractor (Newell Earthmoving). It says that litigation appears to be relevant to this adjudication, but not disclosed by SPC.
19Since the final payment schedule (PPS 33) and the Engineer’s 13 May 2019 decision on the same, Landsdale obtained it[’]s own expert delay analysis, which it says reveals the Engineer had made and over-award. Landsdale’s position in this adjudication is:
aSPC is entitled to nil EOTs and is responsible for the full 346 days delay;
bon any scenario, SPC is entitled to $nil in time-related Costs; and
cLandsdale is owed LDs of $1,373,903.80, which it can rely on by way of set-off against SPC.
(footnotes omitted)
[4] The determination addresses the issue as to jurisdiction on the LDs claimed by Landsdale. It records that SPC declined to enlarge jurisdiction by consent and that Landsdale has not initiated a separate adjudication. The adjudicator therefore finds the CCA cannot be used to enlarge jurisdiction to introduce a new dispute favourable to Landsdale. The determination also records:
31... It is limited to consequential or ancillary matters relating to the dispute referred to me by the claimant, necessary to exercise or complete the exercise of my jurisdiction confirmed by that dispute. Landsdale may nevertheless raise its LDs issue as a setoff to the claim made by SPC in this adjudication. At best, if wholly successful, that set off can extinguish to $nil but no more, SPC’s claim.
[5]The key issues in dispute are recorded as follows:2
awhether SPC is entitled to extensions of time;
bwhether Landsdale is entitled to levy liquidated damages;
cwhether SPC is entitled to time related Costs associated with the extension of time;
dinterest; and
ecosts.
2 Above n 1, at [32].
[6]The key provisions of the contract are identified as follows:3
aThe Contract price was $4,065,483 and as a measure and value a contract (SC2.1.1).
bThe Engineer to the Contract was Warren Lovegrove of CKL (SC6.1.2).
c The Engineer’s representative was Kane Beadle, of CKL (SC6.3.1). d Liquidated damages were determined at $21,369.27 per week
(10.5.1).
(footnotes omitted)
[7] The first adjudication determination also provides a brief claims history as follows (again not disputed):
Brief claims history
36By letter dated 24 June 2015 SPC gave notice of delay, indicating this arose from delays by Hamilton City Council (HCC) approving certain infrastructure works and numerous variations encountered. It offered to provide additional details of those delays (as the letter contained none). This was followed with a letter dated 31 July 2015, where SPC sought an EOT of 40 weeks, until 9 May 2016. SPC says no response was received to this request for an EOT.
37On 12 June 2018 the Engineer issued a Final Completion Certificate for Stages 1(a) and (b), pursuant to GC 11.3.1.
38On 25 June 2018 SPC submitted an EOT for 270 days (this being the entire shortfall between the Due Date for Completion to actual completion). It also sought time-related Costs of $497.33 per day, totalling $129,692.10.
39On 5 December 2018 the Engineer approved an EOT of 201 days but reduced this by 115 days. The Engineer concluded (after an allowance of 75 days EOT for wet weather) a net 155 days EOT.
40Having not received a final payment claim from SPC, on 28 March 2019 the Engineer proceeded under GC 12.5.7 and issued the Final Payment Schedule.
41SPC challenged the Engineer’s 5 December 2018 decision and on 13 May 2019 the Engineer responded providing his assessment. He again approved an EOT of 155 days with time-related Costs of
$61,649.15 (excl GST).
42On 5 June 2019 SPC submitted its final payment claim seeking:
3 Above n 1, at [35].
aan EOT of 270 days;
btime related Costs of $1,530,974.50, made up as follows: i On-site Overheads: $168,666.29; and
ii Off-site Overheads and Profit: $1,362,308.21
43On 9 July 2019 the Engineer issued PPS 33 upholding an EOT of 155 days and time-related Costs of $61,649.15 (excl GST). PPS 33 recorded a Principal’s deduction for LDs resulting in a negative scheduled amount of $215,674.07.
44After that date, claim processes under the Contract appear to have ceased, until SPC served its notice of adjudication on 20 October 2022.
(footnotes omitted)
[8] It is unnecessary to traverse the findings of the adjudicator in detail here. I simply observe that for the most part Mr Robertson preferred the evidence of Landsdale’s experts and witnesses in terms of largely attributing responsibility for delay in completion to SPC;4 finding that SPC failed to establish grounds for various variations;5 and that SPC only partially made out its claims to wet weather delay.6
[9]The adjudicator then addressed LDs, noting:
198As raised by Landsdale on receipt of the Claim, the question of the LDs is not articulated fully in the Claim. Landsdale, not unsurprisingly, wished for LDs to be dealt with comprehensively.
199As advised in my correspondence of 1 November 2022, if SPC is entitled to a greater EOT than awarded by the Engineer, then this results in a corresponding reduction in the LDs. Similarly, if my determination is less than what the Engineer previously award, LDs increase.
200Pursuant to section 38(1)(b) this is precisely the type of consequential or ancillary matter necessary to exercise or complete the exercise of the jurisdiction conferred on me. On that basis nothing more is required of SPC. However, absent bringing its own adjudication claim, the best Landsdale could achieve is to set off LDs to $nil overall in this adjudication.
201The Contract provides for LDs solely for Stage 1 at $21,369.27 per week.
4 Above n 1, at [135], [137], [142], [147], [150], [163]; compare [167] and [170].
5 Above n 1, at [181].
6 Above n 1, at [185]–[195].
202Preceding the Engineer’s 9 July 2019 PPS 33 final payment schedule, Landsdale advised LDs deductions it required pursuant to GC 12.2.4, as follows:
aStage 1(a) – 18 lots – 6.4 weeks at $10,395.86/week
= $66,533.50.
bStage 1(b) – 19 lots – 23 weeks at $10,973.40/week
= $252,388.20.
cTotal LDs of $318,921.70.
203The Engineer duly recorded the LDs deduction in PPS 33 resulting in a net scheduled amount of -$248.025.18 (incl GST).
204I have confirmed above that the appointment of the LDs as between Stages 1(a) and 1(b) is equitable, and the adjusted Due Dates for Completion (of 2 November 2015). The number of days SPC was late in completing the Stage 1 works are:
205Applied to the apportioned LDs per Stage, SPC is liable to Landsdale in the sum of $1,099,155.47:
[10]He is then dismissive of SPCs time related Cost claims, noting:
212 Even if I was satisfied with the basis and methodology of SPC’s time- related Costs claims, which I am not (refer below), SPC’s claim for time related Costs is extinguished by the available LDs.
[11]And further:
250 SPC has had three years to prepare it evidence for this adjudication. I am more than satisfied that it has failed to establish not only any loss of On- site Overheads or Off-Site Overheads and Profit, but also to any entitlement to the use of the Emden (or any other) formula to calculate such compensation for the latter.
[12]In the result, the relevant outcomes of the first determination were:7
7 At [281].
cIn substitution for the 155 days extension of time awarded by the Engineer in Final Payment Schedule 33 dated 9 July 2019 the claimant, Sam Pemberton Civil Limited, is entitled to 65 days extension of time, being 36 days pursuant to clause 10.3.1(a) of the Contract, and 29 days pursuant to clause 10.3.1(b) of the Contract.
dThe adjusted Due Date for the Completion pursuant to clause 10.2.1(b) of the Contract for the Separable Portions Stage 1(a) and Stage 1(b) is 2 November 2015.
eIn substitution for time-related Costs of $61,649.15 (plus GST) awarded by the Engineer in Final Payment Schedule 33 dated 9 July 2019 the claimant, Sam Pemberton Civil Limited, is entitled to $00.00 for time related Costs under the Contract.
fThe claimant Sam Pemberton Civil Limited, is liable to pay the respondent Landsdale Development Limited, liquidated damages of
$1,099,155.47 (inclusive of GST) solely by way of set off against any sums payable by the respondent, Landsdale Development Limited, to the claimant, Sam Pemberton Civil Limited, under the Contract arising from the determination.
[13] Mr Robertson also made orders as to costs in favour of Landsdale in the sum of $200,000. In fixing costs against SPC costs, he relevantly observes:
268However, I am satisfied that there are circumstances in this case that warrant a conclusion under sections 56(1)(b) and 57(4)(a) that SPC’s allegations and objections in relation to its extension of time claims and its purported entitlement to repayment of liquidated damages and payment of time-related costs were largely without substantial merit and that SPC has caused Landsdale to incur substantial costs unnecessarily as a result.
269The approach is not how SPC performed or under-performed on the Project, but whether the claims it brought lack substantial merit. The mere fact that an allegation or argument is not accepted will not amount to a finding that it was without substantial merit. The same is true for Landsdale ‘defence’ of those claims.
270I appreciate that SPC may consider it had a point to put forward in relation to the matters in dispute. However, in my respectful view, SPC should have known about the weakness of its case and that it was advancing claims and making allegations where the only reasonable inference from the evidence, considered as a whole, demonstrably goes against the position it adopted.
271Despite completion of the Contract Works on 22 December 2016, and nearly six years elapsing before serving its Notice of Adjudication, no meaningful improvement or substantiation for its claims has been made in the intervening period. This includes no apparent attempt to respond to Mr Williams’ initial report criticisms in 2019, within the adjudication evidence.
272Considerably more of my time was spent than was ordinarily necessary dealing with the supporting documentation to the Claim, and to the not insignificant material presented by SPC by way of Reply. There was essentially double the volume of material presented by SPC in its Reply, that it had presented in its Claim.
The second adjudication determination
[14] As Landsdale’s LDs claim was not considered by the first adjudicator, it commenced its own adjudication in receipt of and in reliance on the observations made in the first adjudication; that it was owed $1,099,155.47 by way of LDs. The matter came before Mr Graeme Christie who issued his Adjudicator’s Determination in favour of Landsdale on 22 May 2023. Multiple issues were considered by Mr Christie but given the limited scope of the present review
(as relates to costs and limitation). I will address only the reasons given on those matters.
[15] Mr Christie notes that SPC submits that Landsdale’s claim is time-barred because the claim was filed at least six years after the date of the act or omission on which the claim is based. The adjudication records that SPC contends that where the claim is in contract, the date of the act or omission will ordinarily be the date of breach, and in the case of building defects, it is well established the date of the act or omission is the date the relevant works were carried out.
[16] On that basis it is claimed that the adjudication claim is time-barred because it was not commenced within six years of the relevant act or omission, namely SPC’s failure to complete by 22 December 2016. It then records:8
37 However, as SPC acknowledges, it was only on 9 July 2019 that Landsdale sought to deduct LDs of $277,323.22 from SPCs Progress Payment Claim. Further that it was not until 10 October 2019, that Landsdale claimed that SPC was liable to it for LDs of $1,308.260.68.
[17]In responding to this claim Mr Christie observed:9
56For the majority of the cases SPC relies on in relation to assessing the act or omission are building defects cases. As Landsdale notes, SPC
8 Sam Pemberton Civil Limited v Landsdale Development Limited BDT23-032528, 22 May 2023 (Second Adjudicator’s Determination).
9 Above n 8.
has conflated LDs claims in a construction contract with building defects claims. In a contractual claim such as this, the act or omission will be the date of the relevant breach of contract.
57To determine if a breach of contract has occurred in this instance, it is necessary to determine what was the Due Date for Completion. Until that is determined it is not possible to say whether a breach has occurred. Clause 10.2.1 defines the Due Date for Completion as the period in the special conditions (3 August 2015) and “all extensions of time if any awarded under 10.3”.
58As Landsdale correctly notes, this means the definition of Due Date for Completion includes any EOTs awarded. The Due Date for Completion, as adjusted by EOTs, must therefore be known to determine the extent, if any, LDs. This would involve EOT claims being made and then determined by the Engineer. Although at Practical Completion of Stage 1, it was known that SPC was possibly in delay, the extent of that (if any) or what the adjusted Due Date for Completion was, or would be, could not be known until the Due Date for Completion was adjusted and determined by assessing and deciding any EOT claims, including if that only then affirmed the Due Date for Completion of 3 August 2016.
[18] Mr Christie also noted there is no requirement in the contract for the Principal to enforce LDs immediately after Practical Completion is achieved. He notes that to the contrary a Principal and Engineer would likely to be criticised if they attempted to enforce LDs while any outstanding EOT claim was still to be assessed and determined. This is because the Engineer must act reasonably and in good faith.
[19] He also finds that it is not surprising that Landsdale and the Engineer took no steps to oppose LDs immediately on Practical Completion of Stage 1 on the project. As Landsdale correctly notes, there is no mandatory obligation to deduct LDs immediately after the original Due Date for Completion of 3 August 2015 was passed. He finds that it is only on the receipt of the EOT claims and the process of determining the final accounts in June and July 2019 that the EOTs were assessed by the Engineer and the Due Date for Completion was determined. He says that this was the first point in time when the amount in question became due and payable.
[20] Mr Christie also concludes that even then, it was not until the first adjudication was completed that:10
10 Above n 8, at [61].
... the amount in question was revised and determined to be a different sum as due and payable i.e., the position remained uncertain until the EOTs were confirmed in the first adjudication. As a result, the relevant act or omission that started time running for Landsdale’s LD’s claim was arguably the First Adjudication determination of 17 February 2023. This is what crystallised SPC’s liability to pay LDs under clause 10.5.1. Landsdale had not sought to collect the LDs, nor did it claim interest as if the LDs had been payable from August or December 2016.
[21] Accordingly, Mr Christie found that the Landsdale claim is not time barred and thus SPC does not have a valid defence pursuant to the Limitation Act 2010,11 to the claim for LDs by Landsdale.
[22] Mr Christie also noted, in the alternative, that time ran from the final account stage when EOTs were assessed and the sum payable as LDs were set by the Engineer and Landsdale. These events in July 2019 are the trigger for the claim for LDs and they are all within the primary period of six years before the Notice of Adjudication of 2 March 2023. Accordingly, he finds that the claimed limitation defence by SPC fails as Landsdale’s Notice of Adjudication was within time of the final accounts in 2019 and or the First Adjudication determination in February 2023.12
Enforcement and arbitration
[23] Enforcement actions were commenced by Landsdale, but they have been resolved by agreement between the parties. Funds are being held in Landsdale’s solicitors’ trust account, Mr Christie’s determination has been entered as a judgment by the District Court, and the liquidation proceedings have been discontinued.
[24] SPC has also commenced arbitration proceedings. Mr Paul Heath KC has been appointed. Landsdale opposed arbitration on jurisdictional grounds, but Mr Heath has issued a ruling dismissing Landsdale’s jurisdictional objection. The parties have now effectively agreed that the Stage 1 EOT, time-related Costs, and LDs will be reheard in the arbitration.
11 Section 11.
12 Above n 8, at [66].
Scope of judicial review
[25] As stated by the Court of Appeal in Rees the CCA as a whole does not require that judicial review be limited to instances of what might be classified as jurisdictional error.13 However, the statutory context is such that a person who does not accept an adjudicator’s determination should litigate, arbitrate or mediate the underlying dispute, rather than seeking relief by way of judicial review of the determination. Such relief will only be available rarely.14 Two considerations drive this. First, one of the objectives of the CCA was to resolve cash flow problems – it reflects “a pay now argue later” philosophy.15 Second:16
[26] …. an adjudicator’s determination of rights and obligations under a construction contract is not binding in any event. A party with the benefit of such a determination must issue proceedings in order to enforce its rights and the court will be free to reach a different view from that of the adjudicator. In this type of case, it is difficult to see what point there would be in any judicial review proceedings.
[26]Furthermore:17
[27] …. In the great majority of cases where an adjudicator’s determination is challenged, the appropriate course will be for the parties to submit the merits of the dispute to binding resolution through arbitration or litigation (or, of course, to go to mediation).
The Contract
[27] Before addressing the issues raised by the review application, it is helpful to briefly outline the key clauses of the Contract in focus.
[28]The Contract provides for damages for late completion as follows:
10.5Damages for late completion
10.5.1The sum stated as liquidated damages in the Special Conditions shall be paid the Contractor to the Principal for the period between the Due Date for Completion of the Contract Works or any Separable Portion and the time of the Practical Completion. The liquidated damages for any Separable
13 Rees v Firth [2011] NZCA 668, [2012] 1 NZLR 408 at [22].
14 Above n 13.
15 Above n 13, at [25]
16 Above n 13.
17 Above n 13.
Portion shall not apply in respect of any period for which the liquidated damages are applied in respect of the whole of the Contract Works.
10.5.2If, before the time of Practical Completion of the Contract Works or any Separable Portion of which notice has been given in the Special Conditions, the Principal shall occupy or use any portion thereof under 10.7.2, the amount of any liquidated damages that would otherwise be payable in respect of the period between the Due Date for Completion and the time of Practical Completion shall be reduced by such portion as may be equitable. The amount of such proportional reduction shall be determined by the Engineer.
10.5.3The Principal may without prejudice to any other method of recovery deduct the amount of liquidated damages from any monies payable to the Contractor under the Contract and, for that purpose, give notice to the Engineer in accordance with
12.2.4 and 12.5.2 requiring the deduction. Payment or deduction of liquidated damages for late completion shall not relieve the Contractor from any of its other liabilities or obligation under the Contract.
The Due Date for Completion is also defined. Clause 10.2 provides:
10.2.1The Due Date for Completion of the Contract Works or any Separable Portion shall be calculated by adding the date of commencement of the Contract period as defined in 10.1.1:
(a)The period provided in the Special Conditions; and
(b)All extensions of time, if any, awarded under 10.3.
10.2.2The Contract Works or any Separable Portion shall be carried out to the stage of Practical Completion as defined in 10.4 by the relevant Due Date for Completion.
[30]The Contract then provides for extensions of time as follows:
10.3Extension of time
10.3.1The Engineer shall grant an extension of the time for completion of the Contract Works or for any Separable Portion if the Contractor is fairly entitled to an extension by reason of:
(a)The net effect of any Variation;
(b)Weather sufficiently inclement to interfere with the progress of the works;
(c)Any strike, lockout, or other industrial action;
(d)Loss or damage to the Contract Works or Materials;
(e)Flood, volcanic, or seismic events;
(f)Any circumstances not reasonably foreseeable by an experienced contractor at the time of tendering and not due to the fault of the Contractor; or
(g)Default by the Principal, or any other Person for whose acts or omissions the Principal is responsible, which is not a Variation.
[31] Notice of claim to an extension must be made within 20 working days after the circumstances arise which are relied upon as grounds for the extension, or as soon as practicable thereafter and multiple notices may be given where the effect of any ground for extension is of a continuing nature.18 The Engineer must determine whether the Contractor is entitled to an extension within 20 working days of the notice of claim or as soon as practicable thereafter.19
[32] Practical Completion is addressed at clause 10.4 of the Agreement. Most relevantly clause 10.4.4 states:
10.4.4 On satisfactory completion of any work required under 10.4.3 the Engineer shall issue Practical Completion Certificate stating the date and time at which the Contract Works or Separable Portion were so completed.
[33] A Final Completion Certificate is then issued when the defects notification period has expired and when the Contract has remedied all minor omissions and defects.20
[34] Payments to the Contractor are governed by Section 12 of the Contract. This section provides for:
(a)A process of payment claims by the Contractor.21
18 Clause 10.3.2 – Clause 10.3.3
19 Clause 10.3.4.
20 Clause 11.3.1.
21 Clause 12.1
(b)Assessment of claims by the Engineer and the issuance of a “Progress Payment Schedule” in response to each payment claim not later than 12 days after service of a payment claim.22
(c)A timely process for notification by the Principal of any amendments or deductions the Principal intends to make from the sum certified by the Engineer,23 and a corresponding process for amendment and substitution of the Progress Payment Schedule by the Engineer.24
(d)Failure by the Principal to notify the Engineer of Contractor that it requires amendments of deductions does not prevent the Principal from requiring any amendments or deductions from subsequent Payment Schedules.25
(e)A process for retention of monies.26
(f)A final payment claim process, requiring the Contractor to submit a final account of all of the Contractor’s payment claims to the Engineer not later than one month after the issue of the Final Completion Certificate.27
(g)Where the final payment claim is intended to be a payment claim under the CCA, the Contractor must state that it is made under that Act.28
(h)The submission of the final payment claim is conclusive evidence that the Contactor has no outstanding claim against the Principal other than as contained therein, except for any item which has been referred to arbitration under s 13 or for adjudication.29
22 Clause 12.2
23 Clause 12.2.4
24 Clause 12.2.5
25 Clause 12.2.9
26 Clause 12.3.
27 Clause 12.4.1.
28 Clause 12.4.2(e)
29 Clause 12.4.3.
(i)A Principal shall not be liable to the Contractor for any matter connected the Contract unless it is contained in within the final payment claim but this does not preclude correction of any clerical or accounting error.30
(j)Assessment by the Engineer of the final payment claim and issuance of a Final Payment Schedule within 20 working days of the final payment claim.31
(k)A timely process for notification by the Principal of any amendments or deductions that it intends to make from the sum certified by the Engineer and corresponding process for amendment and substitution of the Final Payment Schedule by the Engineer.32
[35]The effect of the final payment schedule is recorded at Clause 12.6. It states:
12.6.1Upon the issue of the Final Payment Schedule the Principal shall cease to be liable to the Contractor in respect of any of the Principal’s obligations under the Contract, except for the Principal’s obligations:
(a)To pay the scheduled amount shown as payable in the Final Payment Schedule;
(b)To pay any retention monies under 12.3 which are or become payable;
(c)To pay any monies which are to become payable under Section 13;
(d)To pay interest which is or becomes payable under 12.7; and
(e)To pay any scheduled amounts shown in any Payment Schedule provided prior to the provision of the Final Payment Schedule but unpaid at that time.
[36] Clause 12.7.1 then provides for interest payable by the Principal including compounding Monthly interest:
30 Clause 12.4.3.
31 Clause 12.5.1.
32 Clause 12.5.3.
(a)on all scheduled amounts shown as payable in any Payment Schedule and remaining unpaid after the expiry of the time provided for payment.33
(b)on unreasonable deductions of any amount from any Contractor’s payment claim or final payment claim “from the date on which it would have been payable if the unreasonable deduction had not occurred down to the payment.”34
[37]Disputes are governed by Section 13. It provides (among other things):
(a)A fixed period (3 months) for challenging an Engineer’s decision and an Adjudicator’s decision (1 month).35
(b)For timely Engineer’s review and decision process.36
(c)For timely mediation and arbitration processes.37
(d)The arbitration may “open up, review, and revise any decision, opinion, instruction, direction, or valuation of the Engineer or any Payment Schedule”.38
[38] As can be seen from the above, the Contract provides a comprehensive and interlocking framework for claims by the Contractor and the Principal, including in respect of LDs, the payment claims, together with provision for interest payments, review and dispute resolution mechanisms. It is within this comprehensive regime that the assessment of a limitation falls to be considered.
33 Clause 12.7.1
34 Clause 12.7.3
35 Clause 13.1.1
36 See clause 13.2.
37 See clauses 13.3 and 13.4.
38 Clause 13.4.4
Time barred?
[39] Mr Rainey for SPC submits that Mr Christie made an error of law when he determined that the “act or omission” for the purpose of s 11 of the Limitation Act 2010 (the Act) was the date of the First Determination or the Final Account stage. He says the “act or omission” giving rise to Landsdale’s claim for LDs could only have been those acts or omissions of SPC that caused delay to the works.
[40]Mr Rainey elaborates:
(a)The Act resolved issues of latency and uncertainty as regards money claims by fixing the start of applicable limitation periods as the date of the act or omission on which the claim is based.39
(b)The Law Commission recommendations, which presaged the Act noted:40
In relation to contract, it will usually be the date of breach and thus correspondence with the present rule as to the date of accrual.
(c)The date of the “act or omission” will ordinarily be the date of breach. It “occurs on a particular day”41 and “no question of extension can logically arise when the starting point is measured from the day of the occurrence of the act or omission.”42
(d)The date of the “act or omission” corresponds with the Limitation Act 1950 rule as to the date of accrual and in contract the cause of action is complete upon breach – without the need for actual loss or damage.43
39 Citing Beca Carter Hollings & Ferner Ltd v Wellington City Council [2022] NZCA 624.
40 Law Commission Limitation Defences in Civil Proceedings (NZLC R6 1988) at 169.
41 Citing Tipping J in Johnson v Watson [2003] 1 NZLR 626 at 8, dealing with s91 of the Building Act 1991.
42 Above n 41.
43 Citing Geye v South [2010] NZCA 207, [2010] 3 NZLR 271; and Inicio Ltd v Tower Insurance Ltd [2020] NZHC 90.
(e)The act or omission that gave rise to LDs in this case was SPC’s failure to complete the works by the due date (3 August 2015), and only those acts or omissions which caused delay between 3 August 2015 (Due Date) and 22 December 2016 (the last date of practical completion).
(f)It follows the last date on which any claim for LDs could be based was 22 December 2016, so the last date for any claim by Landsdale was 22 December 2022.
[41] Mr Rainey thus contends that Mr Christie’s approach that the First Determination is the start date since this is “what crystallised SPC’s liability to pay under clause 10.5.1” was flawed because he effectively adopted the accrual approach that the Act sought to depart from. He says that Limitation time periods are not at large until a party initiates a dispute resolution process.
[42] Mr McBride submits that SPC is, in effect, seeking to appeal Mr Christie’s reasoning and his application of relevant principles to the facts. All of these matters will be live issues in the arbitration before Mr Heath KC. In any event, he contends that:
(a)SPC conflates limitation periods for building defect claims with claims for EOTs/LDs/TRCs – the former relate to physical damage and are often founded in tort, whereas the latter are breach of contract claims for the economic consequences of later delivery.
(b)SPC ignores the implications of its approach for its own position. Namely, if the cause of the delay occurred in the 2015-mid-2016 period its own claim would have been time barred.
(c)Common sense dictates that any final claim to LDs runs from the determination of any EOT findings, given that EOT and LDs are inversely proportionate – the extent of one bears directly on the extent
of the other – that occurs either on the Engineer’s issue of PPS 33 on 9 July 2019 or at the First adjudication.
(d)Moreover, limitation issues under NZS 3910 are complex difficult issues that have caused the industry significant frustration as to what exactly they are required to do and by when. They loom large in the impending arbitration and that is the better forum to have them ventilated.
Assessment
[43] The present claim presents a difficult issue of process for the Court. As the Court of Appeal made plain in Rees, this Court should be slow to interfere with the adjudicative processes laid down in the CCA and instead the parties should be encouraged to arbitrate matters. Added to this, the issues involved engage matters significant to the construction industry as a whole. This reinforces the importance of allowing the arbitration to unfold to a conclusion, where key arguments of fact, industry practice and law can be more fully ventilated, without precluding further consideration by the Court on genuine issues of law. Conversely, a definitive ruling by me on the issue of limitation will set the frame for the arbitration and pre-empt the arbitrator’s full consideration of the issue. Against this, I acknowledge a party is entitled to come to this Court to have errors of law corrected, especially where such errors have a significant effect on a party, whether monetary or otherwise.
[44] Overall, I have come to the view that I should decline to review Mr Christie’s decision. First, I consider, on the information before me, Mr Christie’s assessment of the limitation issue was not wrong – my reasons follow below. Second, I consider that judicial review is not the proper forum for resolution of what is a very complex and significant issue to the construction industry as a whole. The preferable course, consistent with both the scheme of the CCA and the Contract, is for the arbitration to address all matters, including limitation. Third, I am concerned at how matters have unfolded to date. SPC appears to have taken an inordinately long time to bring their claims to a head and then opposed Landsdale’s request to have their counter claim heard within time (even on SPC’s limitation argument) as part of the first adjudication.
I am also concerned (though without having heard argument on this point) that the first adjudicator’s refusal to consider Landsdale’s counterclaim was itself in error, bearing in mind the adjudicator was empowered to hear “any other matters that are of a consequential or ancillary nature”.44 Relevantly, a counterclaim is an “ancillary claim” for the purposes of the Limitation Act 2010.45 Given that the CCA expressly incorporates the Limitation Act,46 a consistent approach to the concept “ancillary” is to be expected.
[45] Accordingly, in accordance with the policy directive laid down in Rees, in the absence of a clear error by Mr Christie, the proper course is to allow the parties to resolve the full merits in the arbitration proceedings. I therefore decline the application for review of the second adjudication. I turn now to explain my position in relation to the limitation issue.
[46]Section 11 of the Limitation Act states:
(1)It is a defence to a money claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based (the claim’s primary period).
(2)However, subsection (3) applies to a money claim instead of subsection (1) (whether or not a defence to the claim has been raised or established under subsection (1)) if—
(a) the claimant has late knowledge of the claim, and so the claim has a late knowledge date (see section 14); and
(b) the claim is made after its primary period.
(3)It is a defence to a money claim to which this subsection applies if the defendant proves that the date on which the claim is filed is at least—
(a) 3 years after the late knowledge date (the claim’s late knowledge
period); or
(b) 15 years after the date of the act or omission on which the claim is based (the claim’s longstop period).
44 Construction Contracts Act 2002, Section 38.
45 Section 4.
46 Section 71.
[47] In focus are the words “the date of the act or omission on which the claim is based.” These words replaced the phrase “the date which the cause of action accrues” used in the 1950 Act. The purpose of this change was to create a more clearly identifiable date for the start of the limitation period and to promote certainty and finality in litigation. 47 The Law Commission recommended this wording because the date should be “objective and ascertainable”, and the “last date of an event under the control of the defendant.”48 It also said:49
169 In most cases the date of the “act or omission” will be clear. It refers to the conduct of the defendant of which the claimant complains. In relation to contract, it will usually be the date of breach and thus correspond with the present rule as to date of accrual.
[48] In its (brief) description of “the date of accrual”, the Law Commission had this to say:50
…. According to Halsbury that phrase means –
When there is in existence a person who can sue and another who can be sued, and when there are present all the facts which are material to be proved to entitle the plaintiff to succeed …
However, the facts required to be proved may differ depending on the nature of the legal claims made. Thus, the claim for breach of contract accrues on the date of breach, irrespective of whether the breach caused actual loss.
[49] This approach was endorsed by the Court of Appeal in Gedye v South in the context of a claim based on breach of warranty as to compliance with the building regulations.51 The facts of that case are illustrative of the importance of identifying the precise basis for the claim. In that case it was argued that the action was time barred because the underlying building defects occurred more than 10 years prior to the commencement of proceedings and thus barred by s91(2) of Building Act 1991. That section stated:
47 See Kerry Logistics (Oceania) Ltd v Vienna Group Ltd (In Liq) [2023] NZCA 536 at [16] and Beca Carter Hollings & Ferne Ltd v Wellington City Council [2022] NZCA 624 at [151].
48 Te Aka Matua o te Ture | Law Commission Limitation Defences in Civil Cases: Update Report for the Law Commission (NZLC MP16, 2007) at [146].
49 Above n 40.
50 Above n 40, at [42]
51 Gedye v South, above n 43, at [44]
Civil proceedings [relating to any building work] may not be brought against any person 10 years or more after the date of the act or omission on which the proceedings are based.
[50] The Court rejected that argument, finding that the claim is based on the act of warranting, not the underlying faulty building work.52
[51] Coming to the present case, the claim by Landsdale is based on the operation of the Contract as it relates to LDs. They are defined in the Contract as the sum stated as LDs in the Special Conditions “for the period between the Due Date for Completion of the Contract Works or any Separable Portion and the time of the Practical Completion.” At first blush, this would appear to link the claim to the date of the acts or omissions causing late completion.
[52] But as Mr Christie observes, the definition of LDs is tied to the definition of “Due Date” and this date is dependent on any determination in relation to EOTs. In this regard, clauses 12 and 13 of the Contract provide a detailed scheme for making claims in respect of EOTs and deductions. Claims must be made within specified timeframes, as must an Engineer’s decision. The Principal or Contractor then have 1 month to challenge that determination and then 3 months to challenge an Adjudicator’s decision. A necessary corollary of this is twofold – first that the “Due Date” and LDs cannot not be fixed until these processes are completed, and second, the right to commence a claim or counterclaim is expressly provided for by the parties. To the extent that limitation applies, it must sensibly accord with these provisions. To hold otherwise would cut across the clear intentions of the parties under the Contract.
[53] In this regard, I do not think the building defect cases provide an appropriate analogy for CCA cases. As Mr Rainey notes, in the building defect cases any “act or omission” simply refers to the act of breach. Based on that reasoning, the last possible date for breach is practical completion. There is some support to Mr Rainey’s submission from academic writing. The authors of Construction Law, cited by Mr Rainey, noted for example:53
52 At [48]
53 Julian Bailey Construction Law (3rd ed, London Publishing Partnership, London, 2020) at 1204.
(ii) Circumstances in which liquidated damages are payable
13.132 In construction and engineering contracts, the trigger for an owner’s entitlement to recover liquidated damages may simply be the passing of the contract date for completion.
[54] But as those authors also observe the parties may agree on an alternative approach:54
A common alternative to this is a contractual provision to the effect that either or both of the following must occur before an obligation to pay liquidated damages accrues, viz (a) the contract administrator has issued a certificate to the effect that the contractor is late in the performance of its works, that is the date for the completion of the works has passed, and (b) the owner has subsequently issued a certificate (or other notice) to the contractor that it intends to claim or deduct liquidated damages in respect of a known or readily identifiable period.
Taking either or both these steps may represent a condition precedent to the imposition or deduction of liquidated damages. Even if a contract administrator has not issued a certificate as to when the contractor ought to have completed its works, it may be open to an arbitrator or a court to determine the point at which completion ought to have been achieved, and therefore the point in time from which liquidated damages are to be calculated. Liquidated damages do not accrue before the contract date for completion, and are usually incapable of being deducted before that date, even if the late completion of the project appears inevitable before the contract date for completion has passed.
(footnotes omitted)
[55] Two authorities cited by Mr McBride, Henry Boot Construction Ltd v Alstom Combined Cycles Ltd 55 and Grove Developments Ltd v S&T (UK) Ltd 56 support the basic proposition that the construction contract provides the framework for assessing when liability for breach under it arises.
[56] Therefore, I have come to the view on the limited argument before me, that the “act or omission” on which the claim is based is the date on which the right to and the correlative obligation to pay LDs crystallises, namely the date of any Engineer’s decision fixing the “Due Date” or the date of any corresponding Adjudicator’s determination. Approaching it this way also provides the type of certainty the changes to the Limitation Act were designed to achieve. Clear fixed dates against which a
54 Above n 54, at 1204–1205.
55 Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] EWCA Civ 814
56 Grove Developments Ltd v S&T (UK) Ltd [2018] EWHC 123
money claim must be commenced. By contrast, on Mr Rainey’s approach, the date of the “act or omission” causing the delay cannot be known until after the abovementioned final determinations are made, by which time, as this case illustrates, a party may be time barred, or alternatively affixed against the Practical Completion date, with any quantification of such damages still unknown pending the resolution of the same claims processes.
[57] In the result, I am not satisfied that Mr Christie erred in his assessment. Moreover, for reasons already expressed, I do not consider that this proceeding is the appropriate forum to resolve with finality the limitation issue. Rather that issue is better resolved in the context of the impending arbitration.
Costs claim
[58] SPC submits that ss 6 and 57 of the CCA limit the ambit of factors an adjudicator may take into account when determining costs. The factors are those that go to bad faith or claims without substantial merit. The default position is that the parties to the adjudication must meet their own costs and expenses unless the Adjudicator considers that one of the parties has caused the other to incur costs unnecessarily by either bad faith or making allegations that are without substantive merit.
[59]Costs were awarded as follows:
(a)First adjudication - $200,000.00 of Landsdale’s costs (out of
$399,816.05 incurred) and $68,169.88 of the adjudicator’s costs.
(b)Second adjudication - $40,250.00 of Landsdale’s costs and $18,753.05 of the adjudicator’s costs.
[60] In relation to the first adjudication, SPC submits that Mr Robertson gave insufficient reasons and was wrong to find that SPC should have known about the weaknesses of its case from the outset, especially as it relied on an independent expert, Mr El Chikhani, who provided an extensive and detailed written report concluding that SPC was entitled to an extension of time of 346 days and an entitlement to time-
related costs of $1,884,071.54. Notably this witness was not impeached for lack of credibility, qualifications or bias. A simple finding that Landsdale’s witness’s evidence was preferred is not enough.
[61] SPC also submits that Mr Robertson’s findings that SPC’s evidence was woefully inadequate in relation to time related costs appears to come from the incorrect starting point that SPC needed to prove direct or actual loss, when all it needed to do was to show that it was entitled to reasonable compensation. SPC adds that independent expert evidence was provided to show this, and it was not enough to simply prefer different evidence. Furthermore, time related costs was only a small part of the overall claim, and any costs award should have been tailored to reflect this. SPC also submits that the adjudicator’s other criticisms, for example those concerning their inadequate reply evidence, neglects to reflect the time pressures they were operating under, having only five working days to respond to more than 300 pages of expert evidence.
[62] In relation to the second determination, Mr Christie is said to have erred in finding that SPC’s claims were without substantial merit, and wrongly placed undue significance on a contestable estoppel point.
[63] Landsdale responds that the high threshold for review of substantive decisions extends to decisions on costs,57 and that the scope is limited to only intervening in an adjudicator’s costs award. It also says that Mr Robertson gave detailed reasons for his costs award, including reference to the threshold test for costs, and providing cogent reasons for an award. The following context is also highlighted:
(a)SPC’s claims for EOTs of 346 days was rejected (awarding only 65 days)
(b)SPC’s claim that it was not liable for a single days’ delay was not credible.
57 Citing Ace Structural v Green [2019] NZHC 1558 at [17]–[18].
(c)SPC’s claims were criticised in the following terms (among others) “falls well short”, “lacks all credibility”, omits to address the evidence required” and “woefully inadequate”.
(d)SPC’s expert evidence was fundamentally flawed, having failed to undertake an independent critical path assessment and appears to have been largely reliant on SPC’s instruction and the factual material supplied by it – hence SPC “should have known about the weaknesses of its case”.
(e)Contrary to SPC’s claims otherwise, the time related costs part of their claim was not a small part of its overall case.
(f)Mr Robertsons comments about inadequacy of reply was accurate – SPC was caught out by Landsdale’s evidence and tried to plug gaps and backfill obvious deficiencies.
[64] In relation to the second determination as to cost by Mr Christie, SPC was given a clear warning that advancing its arguments risked a costs award, especially given the first determination was binding on him.
Assessment
[65] Both adjudicators found that SPC’s claims were “without substantial merit”. It is common ground that this is a proper basis for awarding costs.58 SPC essentially contends that both adjudicators were wrong to make these findings. But this is not an appeal. This is a judicial review proceeding. The adjudicators must be shown to have erred in law, had regard to irrelevant considerations, failed to have regard to relevant considerations, acted unreasonably or unfairly. At most, SPC’s claim rests on satisfying me that the adjudicators applied the wrong legal threshold for costs. With respect to the care and diligence of SPC’s submissions, it has fallen well short of doing so.
58 See Construction and Contracts Act 2002, sections 56 and 57.
[66] First, in relation to the first adjudication, Mr Robertson provides detailed reasons for awarding costs, including most importantly:
(a)By specific reference to the threshold requirements and applicable authorities;
(b)Findings that:
(i)SPC’s allegations and objections in relation to its extension of time claims and purported entitlement to repayment of LDs and payment of time related costs were largely without substantial merit,59 and in this regard -
(ii)“SPC should have known about the weaknesses of its case” and that it was advancing claims that “demonstrably goes against the position it adopted.60
(iii)No meaningful improvement or substantiation of its claims has been made since the completion of the Contract Works in 2016.61
(iv)SPC’s reply was essentially double the volume of material it had presented in its Claim.62
(v)There was an absence of evidence in reply SPC’s key expert, and this was supplemented by another witness whose evidence was “wanting to say the least.”63
[67] These findings provide ample basis for the conclusion that SPC’s claim lacked substantial merit and thus met the test for costs. Nothing presented to me has shown those findings to be wrong or without proper foundation. Moreover, the substantive
59 Above n 1, at [268].
60 At [270].
61 At [271].
62 At [272].
63 At [273].
decision catalogues numerous reasons in relation to a number of the key subject matter headings, for rejecting SPC’s claims. This was plainly not a case of a finely balanced outcome. For example, the determination refers:
(a)On the key EOT issue, Mr William’s evidence for Landsdale is preferred, noting that none of his criticisms were addressed in Mr El Chikhani’s evidence for SPC.64
(b)SPC ‘s earthworks claims were not accepted, “on the contrary, the evidence of Landsdale confirms that not only was there sufficient (conditioned) cut material to complete Stage 1, that material was going elsewhere on the Site.”65
(c)SPC’s explanations for delay in commencing drainage works “makes no sense”.66
(d)The key omission by SPC is establishing a critical path impact caused by Waikato Express Way works.67
(e)The variation claims are largely shown to be unproven or inapplicable.68
(f)The total recovery with the Variations in respect of Onsite Overheads, (which represent an 80% increase in the Contract Price), make “no commercial sense” and “flies in the face of Mr El Chikhani’s evidence” and it “lacks all credibility.”69
(g)SPC’s evidence is “woefully inadequate” in relation to Off-site Overheads and Profit.70
64 At [108].
65 At [135].
66 At [147].
67 At [150].
68 At [180]–[182].
69 At [226]–[229].
70 At [243].
(h)SPC has had three years to prepare it’s evidence for this adjudication and Mr Robertson was “more than satisfied that it has failed to establish
… any entitlement to the use of the Emden (or any other) formula to calculate compensation” for Offsite Overheads.71
[68] Mr Christie’s cost determination similarly refers to the relevant criteria for costs and applicable authorities. There can be no doubt he turned his mind to the correct threshold test – namely whether SPC’s contentions were without substantial merit. His reasons for making an award are cogent on their face, and again, nothing has been put to me to suggest error. In this regard I consider the reasons speak for themselves and need only be repeated here:72
164 I appreciate that SPC may think it had a point to put forward in relation to the matters in dispute. However, in my view, and for the reasons outlined by Landsdale, SPC should have known about the weakness of its case. It was advancing claims and making allegations about the enforceability of the LDs which it had not questioned at the outset when it had [t]he opportunity to do so. This includes in the First Adjudication, hence issue estoppel having been found to apply. There is merit in Landsdale’s submission that this adjudication should not have been necessary, or if it was, that it was made more complicated, prolonged and expensive, by SPC seeking to take all the points it did. As a result, the only reasonable inference from the evidence went against the position SPC adopted; more so when SPC had acknowledged that the first adjudicator concluded that SPC was liable to pay Landsdale LDs of $1,099,155.47 (inclusive of GST) by way of set-off against any sums payable by Landsdale to SPC under the Contract arising from the determination.
Result
[69] The application for judicial review is declined on both live grounds, namely in relation to limitation and costs.
Costs
[70] My current view is that Landsdale is entitled to 2B costs and reasonable disbursements. Second counsel is approved – while the issues in the end were discrete, there were numerous live claims up until the oral hearing. Unless the parties wish to
71 At [250].
72 Above n 8.
be heard further on costs, which I discourage, there shall be an order accordingly with quantum to be fixed by the Registrar.
Whata J
Solicitors/Counsel:
Gallie Miles, Te AwamutuForty Eight Shortland Chambers, Auckland Hesketh Henry, Auckland
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