Those in the construction industry will be familiar with the “sudden death” regime set out in the Construction Contracts Act 2002 (CCA). If a valid payment claim is issued and no payment schedule is received within the applicable timeframe, the amount claimed becomes a due debt.
The recent case of Nicholls Group Projects Ltd v Plan Design Build Homes Ltd [2022) NZHC 56 reiterates the importance of issuing of a payment schedule on time.
In this case, Plan Design Ltd (Plan Design) agreed to provide labourers for a building project managed by the Nicholls Group Project Ltd (Nicholls Group) (contract).
Plan Design issued four invoices for work it completed as payment claims under the CCA totalling $96,707.87. These were based on the contractually agreed price of $65 per hour for 5 builders. Nicholls Group did not provide a payment schedule in response. Plan Design then issued a statutory demand on the basis that the debt was due.
Nicholls Group applied to have the demand set aside on the grounds that the payment claims issued by Plan Design were invalid.
Nicholls Group’s primary argument was that Plan Design’s payment claims did not set out enough detail. This was important because Nicholls Group claimed Plan Design had only supplied inexperienced apprentices (with one LBP to supervise them), rather than the experienced builders it said were required under the contract. Nicholls Group believed that the apprentices should have been charged at different rates, but it could not tell how many had been on site from the payment claims.
Plan Design denied that the contract distinguished between builders and apprentices, as both were able to complete the work. It was therefore entitled to charge the same rate of $65 per hour for both. They said the builders’ qualifications were irrelevant and did not need to be included in the payment claims.
The court agreed with Plan Design that the payment claims were sufficiently detailed. Once it received the payment claims Nicholls Group had sufficient detail to understand how the payment claims had been calculated and to provide a payment schedule in response. Nicholls Group could have entered the amount owing in the schedule as “nil” or based it on an estimate of the number of experienced builders on site.
As an aside, the court noted Nicholls Group’s concerns about how the term “builder” should be interpreted represented a genuine and substantial dispute between it and Plan Design, which otherwise might have been sufficient to allow the statutory demand to be set aside. However, the “sudden death” regime of the CCA meant that it could only do so if the payment claims were invalid, and they were not.
If you are unfamiliar with the CCA’s sudden-death regime or are unsure about any aspect of it, get in touch with our dispute resolution team who can help you navigate the process.
If you have any questions please get in touch with our dispute resolution experts.