The recent High Court decision of Welsh v Gunac South Auckland Ltd serves as a timely reminder as to the power of the Construction Contracts Act 2002 (CCA), and that to be a “residential occupier” as under the CCA, you need to prove your occupation of the premises.
For a payment claim to be enforceable, it first needs to satisfy all criteria specified in section 20 (2) of the CCA. In particular, the payment claim must:
• be in writing,
• sufficiently identify the construction contract to which the payment claim relates,
• identify the work performed and the relevant time period in which it was performed,
• indicate a claimed amount and the due date for payment,
• indicate the manner in which the payee calculated the claimed amount, and
• state that the payment claim is made under the CCA.
Furthermore, if a payment claim is served on a residential occupier, then section 20 (3) of the CCA stipulates that the claim must be accompanied by a written form outlining the process for responding to the claim, and an explanation of the consequences of not responding to and/or not paying the claimed amount.
By way of background, in Welsh v Gunac South Auckland Ltd, the defendant was employed to remove cladding from the Welsh’s dwelling and install waterproof membranes. The parties agreed that the defendant would charge for the work at an hourly rate of $46 per person, plus materials and GST.
Interim invoices were to be issued as the work progressed, and payment would fall due on the 20th day of the month following the date of the invoice.
The defendant duly carried out the work contracted for, and periodic invoices were rendered in February, March and April 2006. The work was completed in May 2006, but the Welshs failed to pay the amounts set out in the payment claims/invoices.
When the case was first heard in the Manukau District Court, Gunac was successful in its application for summary judgment for $58,837.39 against the Welshs.
On appeal, the presiding High Court judge had to consider whether the first payment claim issued by Gunac was invalid because it failed to state that it was a payment claim made under the CCA and, further, whether all three invoices were defective by reason of the claimed failure of Gunac to serve upon the Welshs, who alleged they were residential occupiers, the information required by s 20 (3) of the Act.
In making his decision on the first point, Justice Allan opined that the requirement to state that the payment claim is made under the CCA is mandatory.
Although other elements of s 20 (2) can be open to interpretation, the specific wording used in s 20 (2) (f) asserts that “a payment claim must state that it is made under this Act”.
Therefore, without compliance with s 20 (2) (f), Gunac could not rely upon it for the purposes of making a claim pursuant to the provisions of the CCA. Accordingly, the Welshs succeeded on this part of the appeal.
However, the Welshs could not satisfy the judge that they were “residential occupiers” as defined by the CCA. Although they were the original owners of the property, the Welshs had transferred the property to their company well before Gunac was employed to carry out work on the house.
The Welshs could provide no evidence as to whether they were living in, or intended to live in the home, and all correspondence with them in relation to this matter went to the registered office of their company, not to the address of the property in question.
With the appeal succeeding in part, judgment was given to Gunac for the second and third payment claims served on the Welshs, both of which complied with all components stipulated in s 20 (2).
The lessons to be taken from this case are two-fold — first, construction professionals should ensure the payment claims they serve are statute compliant and, if not, they should be amended based on the criteria listed more fully above to ensure compliance.
The benefits of being able to bring proceedings in court for unpaid payment claims under the CCA are numerous; including that counter-claims by the payer are statute barred by s 79 of the CCA, and that actual solicitor-client costs are recoverable, as opposed to scale costs in other types of proceedings.
The second lesson is that for any unpaid payment claim that results in court proceedings being commenced, it is vital that a cause of action based on contract is pleaded in the alternative.
In the event that the CCA claim fails, a simple contract-based claim may be able to recover monies due to the payee.
In this decision, Gunac’s lawyer failed to plead in the alternative, and the result is that Gunac will have to bring a separate claim against the Welshs in contract, to attempt to recover the monies due from its first payment claim.