By Laressa Mills, senior associate, and Liam Kampen, summer clerk, at Dentons Kensington Swan
In Templeton Kingsland Ltd vs. Dominion Constructors Ltd, the contractor served a statutory demand following the principal’s payment of just over $320,000 in response to a payment claim of nearly $6 million. The principal provided a payment schedule, but the contractor argued it was not valid. The Court’s reasoning for setting the demand aside serves as a reminder to all who prepare and receive payment schedules under the Construction Contracts Act 2002 (Act).
The contractor agreed to construct an apartment complex in Auckland. The form of contract was NZS3910:2013 with amendments.
In payment claim #50, the contractor sought nearly $6 million. Prior to that, the contractor had claimed more than $52 million and been paid $47 million.
The engineer to the contract issued a provisional payment schedule for about $320,000 attaching an ‘advice note’ that recorded the full details of the certification, and later a final payment schedule again with the advice note and a summary table.
The contractor argued the payment schedule was invalid because it did not comply with the Act. The Court was asked to consider whether the reasons, including those in the advice note and summary table, for the principal’s deductions for variations complied with the Act.
Under the Act, if a valid payment schedule to a payment claim is not provided within time, the principal becomes liable to pay the claimed amount and the contractor may recover the unpaid portion as a debt due.
The contractor issued a statutory demand for a portion of the unpaid portion (roughly $1.5 million) and the principal applied to set it aside.
Preparing payment schedules
The judgment contains a number of useful reminders, including that:
- It was not an issue that reasons for the deductions were attached and set out in the advice note and summary table.
- Reference to notices or other correspondence as a reason may be sufficient so long as the parties have a common understanding about the meaning of those references.
- A payment schedule does not become invalid if an incorrect reason is given.
Disclaimer: This article is not a substitute for specific professional advice on any matter. No warrant or guarantee whatsoever is given as to the accuracy of any information contained in the article, nor is any liability accepted for any actions taken based on this information.
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