The CCA 2002 — Payment Schedules need to indicate how the scheduled amount was arrived at

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Timothy Bates of Auckland law firm Legal Vision.

This claim ended up in the High Court as a result of judicial review proceedings issued by Manchester Industrial Holdings Ltd alleging errors of law had been made by the adjudicator.

 

Facts

Manchester entered into an oral contract to complete earthquake strengthening/renovation work at a block of flats located in Eva Street, Central Wellington.

Bussell was to carry out this work on a “charge up” basis, with invoices presented on a monthly basis. Bussell carried out the physical works between late 2012 and early 2013.  $103,000 was paid by Manchester to Bussell for the works before payment issues arose.

Issues were raised with the contents of the invoices, yet these questions were not resolved. On April 1, 2013, Bussell issued an invoice seeking $27,499.05. On April 6, 2013, Manchester terminated the building contract and engaged a new builder.

On April 13, 2013, Bussell issued another invoice seeking payment of $16,942.64. The very next day on April 14, 2013, Manchester sent an email disputing its obligation to make payment. The email set out the following:

The work had been defective.

It asked for particulars of charges.

It asked for details of work which was allocated to charges.

No timely response was received. However, some 15 months later on July 31, 2014, Bussell issued a payment claim seeking the sum of $40,648.15 plus GST.

On August 1, 2014, Manchester sent an email disputing the payment claim, and set out the following:

The payment claim was not accepted.

The payment claim was disputed as previously outlined.

The matters raised in previous years’ correspondence had not been addressed.

The payment schedule was zero.  

It had a clearly documented repair schedule of sub-standard work completed by Bussell.

It thought this matter had settled.

At adjudication it was held that whilst Bussell had presented a valid payment claim, the email response by Manchester did not amount to a payment schedule so as to relieve it of the statutory obligation under the CCA to pay the amount claimed.

The High Court held in the first instance that the payment claim was a valid payment claim pursuant to section 20 of the CCA. The payment claim, together with its annexures, had adequately described the project and fully outlined the various construction work that the charges related to.

The court was not willing to add an additional layer of detail to be required within a payment claim, as this would have gone beyond what was prescribed by section 20.

However, the court found that the Manchester email of August 1, 2014 was not sufficient to constitute a payment schedule.

The court concluded that the email did not contain sufficient details as to the reasons for Manchester’s refusal to pay the amount set out in the payment claim. It was absent of any calculations to show how any alleged counterclaims reduced the payment claim to a nil balance owing.

Further, the High Court found that in some instances a payment schedule can be considered to comprise more than one document. However, in this instance the April 14, 2013 email was not sufficiently referenced in the subsequent August 1, 2014 email to be considered part of the later email.

The court further found though that had it felt compelled to consider both email communications as comprising a payment schedule, sufficient details as to how Manchester arrived at its nil amount were still not provided.

The adjudicator’s decision was ultimately upheld. Manchester was required to make payment of the full amount of the adjudicator’s determination, together with costs.

This decision shows how important it is both within payment claims and payment schedules alike, to provide proper calculations as to how figures are arrived at, so as to satisfy the requirements of the CCA.

 

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 or Building Today to anyone who relies on the information contained in this article.