9.05.2018

FORM COUNTS UNDER THE CONSTRUCTION CONTRACTS ACT –Auckland Electrical Solutions Ltd v The Warrington Group Ltd [2016] NZHC 2245

The Importance of form when issuing a payment claim

This case highlights the importance of form when issuing a payment claim and the effect of an inadequately formed payment claim on a summary judgement application for outstanding sums.

From July 2014 to August 2015, The Warrington Group Limited (Warrington) engaged Auckland Electrical Solutions Ltd (AES) to carry out electrical work for a construction project.  AES sent invoices totalling $83,599.57.  Payment by Warrington and credit notes in favour of Warrington left $8,659.83 outstanding.  AES claimed the invoices were payment claims and sought summary judgement in the District Court under the Construction Contacts Act 2002 (the Act) for the outstanding amount and associated costs.

The District Court declined summary judgement, citing a factual dispute and credibility issues that gave rise to an arguable defence.  In particular, there was a dispute over whether the AES invoices contained the required reference to the Act (the affidavit presented by AES annexed invoices that did reference the Act, while the affidavit presented by Warrington annexed invoices that did not) and the credibility of the witnesses (who claim that reference to the Act was or was not included in the invoices).  AES appealed the decision to the High Court.

The High Court dismissed the appeal, stating that genuine credibility issues (which would or may go to the existence of a defence) are an impediment to summary judgement.  While a robust factual assessment on the papers is possible in summary judgement, in this instance it is not possible to make an assessment on whether the invoices contained the reference to the Act (required by s20(2)(d) of the Act) without cross-examination.

During the appeal, AES further argued that, regardless of whether the initial invoices contained the appropriate reference to the Act, the subsequent copies emailed to Warrington months later did. Therefore, AES argued that those invoices constituted fresh payment claims.

The Court ruled that, while a party may resubmit prior claims by repeating them in subsequent payments claims, whether there has been a subsequent payment claim is a question of fact.  In this instance the re-served notices contained their original dates, an unclear due date for payment (though this was not fatal), and they were served with a demand for immediate payment (implying that the time for service of a payment claim had passed).  In those circumstances, the evidence implies that the invoices were provided as copies of the payment claim rather than as a fresh payment claim.

The appeal was dismissed.  The case illustrates the importance and value of getting the form of a payment claim (and schedule) right.  Surprisingly, many contracting parties still fall short of these simple requirements, which may render their claim/schedule invalid under the Act.

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