Watts & Hughes Construction Ltd v Complete Siteworks Company Ltd - [2014] NZCA 564

IN THE COURT OF APPEAL OF NEW ZEALAND

CA444/2014
[2014] NZCA 564

BETWEEN	WATTS & HUGHES CONSTRUCTION LIMITED Appellant
AND	COMPLETE SITEWORKS COMPANY LIMITED Respondent

Hearing:	11 November 2014
Court:	Wild, Simon France and Asher JJ
Counsel:	G J Kohler QC and R E Catley for Appellant C L Bryant and G J Luen for Respondent
Judgment:	26 November 2014 at 3.30 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellant is to pay the respondent’s actual and reasonable costs of the appeal with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Wild J)

Introduction

This appeal is against a judgment of Associate Judge Smith delivered on 31 July 2014 refusing an application to set aside a statutory demand the respondent (Siteworks) had issued to the appellant (Watts & Hughes).[1] The Associate Judge ordered Watts & Hughes to pay Siteworks $306,077.23 within seven days of the judgment, failing which Siteworks could apply to put Watts & Hughes into liquidation.
[1]Watts & Hughes Construction Ltd v Complete Siteworks Co Ltd [2014] NZHC 1797 [High Court judgment].
The statutory demand and the sum ordered to be paid arise from non-payment by Watts & Hughes of a progress payment claim made by Siteworks under a construction subcontract agreement (the subcontract).
There is no real dispute as to what happened. Counsel agree that the core legal issue for decision is: what does cl 5, and in particular cl 5(b), of the subcontract mean?
In addition to his interpretation argument on cl 5(b), Mr Kohler QC advanced for Watts & Hughes two further arguments. Neither of these had been put to the Associate Judge in the High Court, but both were points included in the Notice of Appeal. We deal with these points in [39] to [47] below.

The Construction Contracts Act 2002 and the subcontract

P D Sloan (Sloan) contracted with Watts & Hughes as head contractor to build a supermarket in Ferrymead in Christchurch.
On 30 July 2013 Watts & Hughes subcontracted the construction of the supermarket carpark to Siteworks. The subcontract comprised the Master Builders standard form of subcontract agreement (SC1/June 2003) which incorporated the “full intent and meaning” of the Head Contract (the New Zealand Standard “Conditions of Contract for Building and Civil Engineering Construction” NZS3910:2003).
Section 12 of the Construction Contracts Act 2002 (the Act) provides: “This Act has effect despite any provision to the contrary in any agreement or contract.” The parties thus accept the subcontract was governed by the Act.
However, s 14 of the Act provides that the parties to a construction contract “are free to agree between themselves on” the progress payment provisions in the contract. The subcontract contains such provisions. They are at the heart of this appeal. As Mr Kohler accepted, the default provisions, ss 16–18 of the Act, are accordingly displaced by the progress payment provisions in the subcontract.
Sub-part 3 of pt 2 of the Act contains ss 19–24 which stipulate the procedure for making and responding to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] NZCA 564
Decision Date: 26 November 2014 at 3.30 pm

CaseChat Overview and Summary

Watts & Hughes Construction Ltd appealed against a decision of the High Court that dismissed their application to set aside a statutory demand issued by Complete Siteworks Company Ltd. The statutory demand arose from Watts & Hughes’ failure to pay a progress payment claim made by Siteworks under their subcontract agreement. The Court of Appeal dismissed the appeal and held that the statutory demand should not be set aside. Watts & Hughes argued that clause 5(b) of the subcontract allowed them to treat Siteworks’ late progress payment claim as received on the next monthly due date, without needing to communicate this election to Siteworks. However, the Court held that clause 5(b) did not automatically deem a late progress claim to have been received on the next monthly date, and Watts & Hughes was required to communicate any election it made under clause 5(b) to Siteworks. As Watts & Hughes failed to communicate any election by the last day on which it could have served a Payment Schedule, it became liable to pay the progress claim. The Court also rejected Watts & Hughes’ argument that Siteworks’ actions in digging up some of the metal it had laid on the carpark debarred it from making its progress claim. The Court held that Watts & Hughes needed to bring any counterclaim in respect of damage done as a separate claim, and it could not advance this matter as a reason for setting aside a statutory demand. The Court of Appeal ordered Watts & Hughes to pay Siteworks’ actual and reasonable costs of the appeal.

Orders