A decision on Payment Claims under the new Construction Contracts Act 2002.
This month I wish to cover the decision of TUF Panel Construction Limited v RE Capon.
TUF agreed to prepare concrete panels for the defendant. TUF commenced the construction of the panels in accordance with the contract. Two payments were made by the defendant to the TUF. Invoices for the progress payments were prepared on TUF’s letterhead and sent to the defendant at Newco Construction Limited.
Then on 15 September 2003, TUF served formal payment claims on the defendant under the Act. The defendant responded in writing on 16 September 2003, raising concerns about the contractual arrangements and sought accounts as agreed on a cost plus basis for both sides. The defendant never made payment of the amounts owing in the Payment Claims. Summary Judgment proceedings were brought in accordance with the Act.
The two separate Payment Claims were served on the defendant on 15 September 2003. The Court held that the sole reply from the defendant did not mention a “schedule account”. It did not identify the Payment Claim to which it related and did not indicate a “scheduled amount”. It did not attempt to meet the requirements of Section 21(3) of the Act. It did not purport to be a payment “schedule” under the Act and it was not. It was therefore held that no payment schedule had ever been provided.
The Court went onto hold that in the absence of a payment schedule being served within the time provided, the defendant was liable to pay the amounts. Section 22 of the Act makes a payer liable to pay the amount claimed in a payment claim, if the payer does not provide a payment schedule in response within 20 working days from the date payment claim has been served.
In response, the defendant raised a number of defences which were as follows:
The plaintiff has issued proceedings against the wrong defendant.
The Court concluded that in fact the defendant was the correct defendant as he had signed the acceptance of tender document rather than his company. Further, the two payment claims were addressed to the defendant not his company. The fact that the first response to these payment claims of 16 September did not question whether the right party was being sued was also a crucial factor to the Court.
The correct defendant has a set-off or counter claim that equals or exceeds the amount of the plaintiff’s claim.
The Court held that except in certain situations which did not apply here, s79 of the Act excluded counterclaims, set-offs or cross-demands acting as a defence to making payment of payment claims.
The Payment Claims by the plaintiff do not comply with the Act.
It was held by the Court: that the payment claims were in writing, they identified the construction contracts to which the progress payment related, they identified the construction work as being manufacture of tilt panels they showed the relevant period, they showed the claimed amount and the due date for payment, they indicated the manner in which the payee calculated the claim by reference to the number of metres by the square metre rate and the percentage of work done, due credit was given for variations to the contract in relation to wages and a deduction of the two previous payments, the payment claim forms were ones that had been approved by the NZ Sub-Contractors Federation, and they specifically stated that they were made under the Construction Contracts Act 2002.
Summary Judgment is inappropriate in the context of a building dispute.
The Court held that previous authority to the effect that summary judgment proceedings are inappropriate in the context of a construction dispute has been overtaken and can be put aside. The Act has set up a new regime whereby summary judgment will be fully appropriate for situations where a payment claim has been served and no payment schedule is forthcoming from the payer.
This decision shows the power of the new Act where payment claims are served on a payer in the appropriate form. A payer must respond in the manner stipulated under the Act, otherwise the amount claimed in the payment claim becomes due and owing. The payee will then be able to summary judgment on the basis of this payment claim.