WINSLOW PROPERTIES LIMITED V WOODING CONSTRUCTION LIMITED HC AK CIV 2006-404-004969 [2007] NZHC 277 (4 April 2007)
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2006-404-004969
BETWEEN WINSLOW PROPERTIES LIMITED
Appellant
AND WOODING CONSTRUCTION LIMITED
Respondent
Hearing: 4 April 2007
Appearances: Mrs H P Holland for Appellant
Mr D Hurd for Respondent
Judgment: 4 April 2007
JUDGMENT OF VENNING J
This Judgment was delivered by me on 4 April 2007 at 4.00pm pursuant to Rules 540(4) of the High Court
Court Rules.
Registrar:
Dated……………….
Solicitors: Knight Coldicutt McMahon Butterworth, Auckland
Hazelton Law, Wellington
Copy to: D Hurd, Auckland
WINSLOW PROPERTIES LIMITED V WOODING CONSTRUCTION LIMITED HC AK CIV 2006-404- 004969 4 April 2007
Introduction
[1] The appellant seeks leave to appeal the decision of Cooper J dismissing an appeal from a summary judgment entered in the District Court at Auckland on 21 July 2006.
Background
[2] The respondent is a contractor. The appellant is a property owner. The appellant
and respondent were parties to a construction contract made on 21 July 2004. It was made in the standard form NZS: 3910:1998. Brannigan Project Management Limited (Brannigan) was the engineer under the contract.
[3] On 1 February 2006 the respondent posted a payment claim to Brannigan.
Attached to the payment claim was a letter dated 31 January 2006 and a monthly progress claim summary setting out the amounts due. The letter and accompanying material were received by Brannigan on 3 February 2006.
[4] On 24 February 2006 the respondent received a faxed payment schedule payment from Brannigan putting in dispute the respondent's payment claim. The payment schedule indicated nothing was owing to the respondent.
[5] The respondent sought summary judgment in the District Court in the sum of
$111,790.59, together with interest and costs.
[6] Three defences were raised in the District Court although the appellant did
not file any evidence in opposition:
· First, the appellant claimed that the payment claim had not indicated the due date
for payment and was in breach of s 20(2)(d) of the Construction Contracts Act
2002 (the Act).
· Next, it was argued that the payment claim failed to state that it was a payment
claim made under the Act; and
· Finally, the appellant argued it had served the respondent with a payment
schedule in accordance with s 21 of the Act within the time prescribed for that
under s 22(b)(ii) of the Act.
[7] The District Court Judge rejected the arguments relying on the decision of
Marsden Villas Ltd v Wooding Construction Ltd (HC Auckland, CIV 2006-404-
002136, 25 May 2006, Asher J).
The High Court decision
[8] The appeal before Cooper J was advanced on three grounds, two of which
had been the subject of argument in the District Court and one new ground. The
appellant repeated its arguments that no payment claim had been made and
that, in any event the payment schedule had been issued in time. The new ground was an
argument that because the respondent's claim had been served on Brannigan and not
on the appellant it was invalid. Cooper J had little difficulty in rejecting that new
ground of appeal. He also rejected the rehearsal of the arguments presented in the
District Court on the remaining points. He considered the argument that no payment
claim had been made to be "devoid of any merit". Cooper J then independently
came to the same view as Asher J did in the Marsden Villas case that the parties
intended that the contractor's claims for payment and payment certificates issued
under the standard form of contract should be treated as payment claims and
payment schedules within the meaning of the Act.
The grounds of appeal
[9] The appellant now seeks leave to appeal to the Court of Appeal. It seeks to
pursue two grounds of appeal:
· That the finding the payment claim was properly served by the contractor on the
principal by way of service on Brannigan was wrong; and
· That the finding that the payment schedule was served out of time, being within
time in terms of the default statutory period but outside the period provided in
the contract for responses to payment claims, was also wrong.
[10] In the course of her written submissions Mrs Holland sought to refer to
further evidence as to steps the parties had taken subsequent to the judgment but
after discussion she accepted that that evidence could not be relevant to the
determination of whether leave ought to be granted or not. She did not pursue the
admission of further evidence for the purposes of this application.
Principles
[11] The principles are not in dispute. They were settled in Waller v Hider [1998]
The appeal must raise some question of law or fact capable of bona fide and
serious argument in a case involving some interest, public or private, of
sufficient importance to outweigh the cost and delay of the further appeal: Rutherfurd v Waite [1923] GLR 34; Cuff v Broadlands Finance Ltd [1987] 2 NZLR 343 at pp 346 347. In the latter case the Court also remarked that in
the end the guiding principle must be the requirements of justice.
p 413
In addition the Court went on to observe:
The scarce time and resources of the High Court and of this Court are not to
be wasted, nor additional expense for an unsuccessful client incurred without
realistic hope of benefit.
Upon a second appeal this Court is not engaged in the general correction of
error. Its primary function is then to clarify the law and to determine whether
it has been properly construed and applied by the Court below. It is not every
alleged error of law that is of such importance, either generally or to the
parties, as to justify further pursuit of litigation which has already been twice
considered and ruled upon by a Court.
Decision
Is the argument that service of payment claims on the engineer is not effective service capable of bona fide or serious argument?
[12] This argument was raised for the first time on the appeal before Cooper J. As Cooper J
observed it is inconsistent with the appellant's conduct throughout the course of the contract and with the other grounds of appeal the appellant pursued in the High Court.
[13] Nevertheless Mrs Holland submitted that s 20 of the Act required the payee to serve
a payment claim on "the payer" and "payer" was defined in s 19 to mean the party to a construction contract so that the payment claim had to be served on the payer, the contracting party. She submitted that service on Brannigan was insufficient.
[14] The submission does not, however, deal with the terms of the contract made
between the parties at cl 15.1.2 which provide:
Any document which is to be served upon the Principal, the Contractor or
the Engineer under the contract shall be sufficiently served if it is handed to
that Person, or to their appointed representative, or delivered to their address
as stated in the Contract Documents or as subsequently advised in writing.
Except for a notice given to the Principal under 13.3 or 14.3.3 every notice
to the Principal shall be sufficiently given if it is given to the Engineer.
[15] The parties had contractually agreed that where a notice was required to be
given to the appellant it would be sufficiently given if given to Brannigan. As
Cooper J observed that is not a contracting out of the Act.
[16] I accept Mr Hurd's submission that in addition to the plain words of the
contract, the parties' previous conduct precludes any serious or bona fide argument
on this point. All previous payment claims had been sent to Brannigan and were
responded to with payment schedules and then payment. In George Developments
Limited v Canam Construction Limited (CA244/04, 12 April 2005) in dealing with
an objection to the validity of the payment claim the Court observed:
George had never raised any problems with previous payment claims that
were of the same form as PC-15.
[17] Further, the payment schedules on behalf of the appellant were in each case
issued by the engineer. Section 21 provides for a "payer" to respond to a payment
claim by providing a payment schedule. If Mrs Holland's argument was correct then
the payment schedules issued on behalf of the appellant under s 21 would have to
have been issued by the appellant rather than Brannigan. There cannot be one
interpretation that applies to s 20 and another that applies to s 21. It is clear that
absent any contractual agreement to the contrary (and there may now be in the new
form of contract a different process prescribed) then a payment claim under s 20
could be served on a properly authorised agent, particularly where the contract
provided for that as it does in this case. The first point is simply not capable
of bona fide and serious argument.
Is the time period for service for the payment schedule in a contract of this kind the
20 working days default provision under s 22(b)(ii) or is it governed by the contract?
[18] Section 22 of the Act reads:
22 Liability for paying claimed amount
A payer becomes liable to pay the claimed amount on the due date for the
progress payment to which the payment claim relates if--
(a) a payee serves a payment claim on a payer; and
(b) the payer does not provide a payment schedule to the payee within--
(i) the time required by the relevant construction contract; or
(ii) if the contract does not provide for the matter, 20 working
days after the payment claim is served.
[19] The relevant clause of the contract, cl 12.2.1 provided:
Within 10 Working Days after the receipt of the Contractor's claim the
Engineer shall issue a progress payment certificate for a sum comprising the
value of the Contractor's claim amended as necessary under 12.3, less
previous payments certified, and less any other deductions which are
required by the terms of the contract or by law. The certificate shall show
details of any amendments and deductions.
[20] Although the contract was made in the old form NZS 3910:1998 it referred to
the general conditions of contract as including the Construction Contracts Act 2002.
The effect of a similar provision was considered by Asher J in Marsden. In that case
Asher J held:
· It was unsurprising the words "payment certificate" were used in the standard
form contract instead of "payment schedule" as the wording in the standard form
contract pre-dated the Act.
· The technical requirements for a payment schedule under the Act are similar to
those for a payment certificate under the Contract;
· In the Canam case which concerned a similar contract, the Court proceeded on
the basis that the combined effect of the specific conditions of contract and the
Act was that a mechanism existed for periodic claims to be made which had to be
responded to in a timely manner.
· If the contractual provisions did not apply for the purposes of the Act there
would need to be two responses to each claim, that was contrary to the conduct
of the parties.
[21] Asher J concluded the parties had unequivocally adopted the provisions of the contract by their actions in that case.
[22] Kerr DCJ followed the reasoning of Asher J in Marsden. Cooper J independently came to the same conclusion. As Cooper J observed it is only by reading the contract on the basis that the parties agreed the contractor's claims for payment under cl 12.1.1 and payment certificates under cl 12.2 should be treated as payment claims and payment schedules within the meaning of the Act that the parties' intention can be given effect to and the contract read in a sensible, commercial way.
[23] During the course of submission Mrs Holland accepted that the nature of the
payment certificate under cl 12.2.1 and a payment claim under the provisions of
subpart 3 of the Act were the same and that it was the potential effect or consequence
of them which was draconian.
[24] Further, in the present case, the parties dealt with the payment claims on the
basis they were claims under the Act but that cl 12.2.1 applied. In the letter with the
claim dated 31 January 2006 the respondent stated:
In accordance with the terms and conditions of our contract and the
provisions of the Construction Contracts Act 2002 we anticipate the issue of
your corresponding payment schedule within 10 Working Days of receipt of
this payment claim. ...
[25] While I acknowledge there is an argument on this second point, I have to
observe that it does not seem to be an argument with any particular merit.
Exercise of the discretion
[26] Both grounds of appeal sought to be advanced relate to the interpretation of a
private contract between the parties. While the contract incorporates the standard
form condition of contracts NZS 3910:1998, that standard form of contract has been
supplanted, (since August 2003), by a new standard form of contract directly
intended to apply and incorporate the provisions of the Act. There will be limited
precedent value to other parties if leave were granted.
[27] I conclude that the first argument proposed to be raised is not capable of bona
fide and serious argument. It is inconsistent with the second argument. I accept that
the second argument proposed to be raised is capable of argument. But that
argument has been considered by the High Court on two separate occasions now and
rejected.
[28] The approach of the High Court (Asher J in Marsden and Cooper J in this
case) on the second point is, in my judgment consistent with the approach of the
Court of Appeal to the interpretation and application of the Act, namely that
technical quibbles as to payment claims will not be entertained: George
Developments Ltd v Canam Construction Ltd (supra).
[29] The issue is one of construction of the Act and the provisions of the now
outdated standard form contract. It is essentially a dispute between two commercial
entities.
[30] The availability of a fairly arguable issue is not sufficient by itself to warrant
the grant of leave: Fitzroy Engineering Group Ltd v Technix Group Ltd (CA38/04,
31 August 2004).
[31] As a matter of discretion I am unable to accept that the limited prospects of
success that the appellant may have on the second point are sufficient to justify the
appeal which will inevitably lead to further delays and additional costs in relation to
this construction dispute. The interests of finality are important particularly in this
area of law. An express purpose of the Act is:
(a) to facilitate regular and timely payments between the parties to a
construction contract.
There has already been considerable delay. The relevant payment claim is dated 1
February 2006. The judgment of the District Court was delivered 21 July 2006. The
appeal judgment was delivered 14 December 2006.
Result
[32] I decline the application for leave to appeal.
Costs
[33] Costs to the respondent on a 2B basis together with disbursements as fixed by
the Registrar.
Venning J