Floorman Waikato Limited v Jonathan McRae
In this month’s article I wish to review the May 2017 decision of Floorman Waikato Limited v Jonathan McRae.
Floorman Waikato Limited (F) was engaged by Mr McRae (M) to sand and coat his floors. F said that different options and pricing for flooring were discussed and said that he could not determine which option was best until he had seen the condition of the floor (solvent based polyurethane costing $5,535 and water based polyurethane costing $6,150). M said that the different options and prices were not explained to him, and he was told that it would cost him no more than $5,500. On this basis, M told F to go ahead with the work.
On completion, F and M inspected the floors, and although he did not communicate it at the time, M was dissatisfied with the overall quality of the job.
Shortly after the final inspection, M received an invoice for the total amount of $7,072.50 ($6,150.00 plus GST of $922.50). At the back of the invoice, information regarding payment claims and payment schedules were attached, which M did not read. There was further dispute surrounding whether/when F and M had contact after the invoice was issued. F’s solicitors demanded payment for which M replied saying that he would pay a portion of the invoice as he was dissatisfied with the quality of work.
In the District Court, Judge Ingram declined the application for summary judgment on two bases: that M had a defence to the claim as it was arguable that there was no contract between F and M; and further, that there were concerns surrounding the application of the Construction Contracts Act 2002 (CCA). Judge Ingram commented that the work undertaken by F, namely sanding and polishing was not a construction job and therefore did not fall within the ambit of the CCA.
F raised three issues to determine on appeal, namely:
- Is it reasonably arguable that there was no construction contract?
- Whether floor sanding is within the jurisdiction of the CCA?
- Is it appropriate for the court to exercise discretion to decline entering summary judgment if there is no defence to the Acts ‘pay now, argue later’ statutory regime?
Did the Judge err in finding that there was no concluded contract?
The High Court held that since both the parties had agreed for the work to be carried out, a contract existed between them. This was affirmed through M instructing and engaging F to undertake the work. Although the price for the work was not decided at the time the contract was entered into, this made no difference in determining whether there was a contract between the parties, as the price would depend on the material chosen thereafter.
Did the Act apply to the work in question?
The High Court agreed with F that the CCA did apply to the works undertaken by F. There was nothing in the CCA to suggest that it only applied to jobs of new work, or to jobs over a certain worth, or to jobs involving professional tradespeople.
Did Mr McRae have another defence to the claim?
M submitted a variety of other defences to the claim, including that F’s payment claim was not sufficiently itemised in terms of differentiating between the different materials used and labour costs. Section 20 of the CCA requires a payment claim to indicate the manner in which the payee calculated the claimed amount. In this case, F had calculated the invoice amount based on m2, which constituted an adequate calculation method.
Another issue raised by M was that he was never told that the payment schedule must be in writing. F’s payment claim contained all of the necessary information along with the words ‘please refer to the attached notice, (form 1 of the Construction Contracts Regulation 2003)’. M acknowledged that he did not read the notice. If he had, he would have seen the requirements of a payment schedule.
Did the judge err in exercising his discretion not to award summary judgment?
The High Court considered that Judge Ingram was plainly wrong by taking irrelevant matters into account, namely that the CCA should not apply to residential renovations. This view was contrary to the legislative intention which provides that the CCA applies to both residential and commercial construction contracts.
The purpose of the CCA is to ensure that people who perform construction works are not frustrated in recovering payment for their work done. It provides that where a claim is issued and no steps are taken by the party from whom the payment is sought, the payment claim amount is recoverable as a debt due and owing.
The appeal was allowed, and judgment was granted in favour of F in the sum of $6872.50 plus District Court costs.
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.