Construction Contracts Act 2002 – Are resubmitted invoices capable of being payment claims?

November 3, 2016

I wish to review the September 2016 decision of Auckland Electrical Solutions Limited v The Warrington Group Limited.  This was a claim that started as a summary judgment application in the District Court where summary judgment was declined.  It ended up before Justice Downs in the High Court.

Factual background. 

The Appellant (Auckland Electrical) sent a series of invoices to the Respondent (the Warrington Group Limited) between 30 April 2015 and 30 June 2015.  Whilst receipt of these invoices was not disputed by the Respondent, it did dispute whether these invoices contained the notation “This invoice is tendered under the Construction Contracts Act 2002”.

Subsequently, the Appellant engaged a debt collection company who in turn arranged for the service of a statutory demand upon the Respondent on or about 3 August 2015 seeking payment of the sum of $21,159.83.  A week or so later this debt collection company then emailed the Respondent with a set of five invoices which did reference the Construction Contracts Act 2002.

In response to the statutory demand and email sent, the Respondent paid the sum of $12,500 on 14 August 2015.  On 20 August 2015 a meeting took place as between the Respondent and the debt collection company with a view to resolving the dispute over the outstanding amount.  At that meeting the Respondent was given another copy of the invoices emailed previously to it.

The Appellant argued in the District Court that the Appellant had been served with complying payment claims, failed to respond in the form of a payment schedule and thus the remaining amount of the invoices/payment claims was a debt that was due and owing.  Conversely the Respondent argued that it had paid most of the invoices submitted but was not required to meet the balance because the underlying works were defective.  The Respondent also argued section 79 of the Construction Contracts Act 2002 had no application because the enactment had not been complied with.

In the District Court, Judge Lovell Smith ruled that in relation to service of the April, May and June invoices, there was a factual dispute as to whether these invoices contained the necessary reference to the Construction Contracts Act 2002, which could not be resolved without cross-examination of the deponents.  Accordingly it was deemed that summary judgment at least in respect of these invoices was completely inappropriate.

The High Court then went onto consider the alternative argument put by the Appellant which was that the re-service of the invoices as fresh payment claims in August by the debt collection company, amounted to service of payment claims.  The Appellant contended that the invoices when served in August 2015 did contain the reference to the Construction Contracts Act 2002 and in this way did amount to payment claims as at that point in time.

The High Court disagreed with this submission.  The Court considered whether the fresh payment claims complied with section 20 and noted that no “due date for payment” was included which was required by Section 20(2)(d).  The words “net 20” were used though and so this non-compliance was not deemed fatal as it was not an unreasonable assumption to assume this meant payment was due on the 20th of the month following the invoice.

However, notwithstanding the implication that payment was due on the 20th of the month following, the debt collection company served these invoices with an associated demand for payment.  Nothing was said or done at the meeting to change that impression, or alter the demand.  Furthermore the debt collection company’s email of 11 August 2015 which contained the invoices, implied that time had already passed for serving a payment schedule.  Nothing was said or done at the meeting to correct that impression.

The Court ruled that on the evidence available, the resubmission of the invoices did not amount to submission of fresh payment claims, as the Appellant appeared to be relying upon the original invoices as tendered and liable for payment immediately.  Accordingly the Appeal also failed on this ground.  

This decision is authority for the premise that were fresh invoices/payment claims are reissued, then the timeframe for responding to them ought to be start running again from date of resubmission, and the issuer needs to act consistently with this. 

 

NOTE: This article is not intended to be legal advice (nor a substitute for legal advice).  No responsibility or liability is accepted by Legal Vision to anyone who relies on the information contained in this article.