Effective payment claims and summary judgment

24 January 2017

Commentary , Construction Disputes

A recent High Court decision (Auckland Electrical Solutions Ltd v The Warrington Group Ltd [2016] NZHC 2245) has illustrated the importance of using the correct form for payment claims made under section 20 of the Construction Contracts Act (“the Act”), particularly when seeking summary judgment for unpaid claims.

Factual Background

The Warrington Group Ltd (Warrington) engaged Auckland Electrical Solutions Ltd (AES) to provide electrical services on a construction project between July 2014 and August 2015. AES sent invoices to Warrington totaling $83,599.57 for these services. Warrington omitted to pay five of these invoices issued between 30 April 2015 to 30 June 2015 (“the original invoices”), leaving an outstanding sum of $8,659.83.

AES sought summary judgment in the District Court for the sum of the original invoices as payment claims under the Act, and associated costs. The District Court declined summary judgment due to a factual dispute as to whether the original invoices correctly referenced the Act. AES appealed to the High Court.

The High Court Decision

In the summary judgment application there was conflicting affidavit evidence over the particular invoices that had been served, and whether these invoices in fact referred to the Act as required.  The deponent for AES claimed that the invoices did reference the Act in accordance with section 20(2)(f), and exhibited copies of the invoices including such references. The deponent for Warrington contended the invoices did not contain any such references, and exhibited copies of the invoices excluding any references.

Predictably, the High Court ruled that it could not make a factual assessment on the papers alone as to whether the original invoices complied with the s20(2)(f). Cross-examination of both witnesses would be required to determine which witness was giving genuine evidence, and whether the original invoices contained reference to the Act.

AES also claimed that irrespective of whether the original invoices contained references to the Act, copies of these invoices emailed to Warrington in August 2015 (“the re-served invoices”) did. AES argued that these re-served invoices were fresh payment claims from the original invoices.

However the Court ruled that the evidence tendered did not support AES’s claim that the re-served invoices were fresh and valid payment claims under the Act. The re-served invoices contained the dates of the original invoices (April, May and June 2015), and did not provide clear due dates for payment in accordance with section 20(2)(d) of the Act. The re-served invoices were also accompanied by a demand for immediate payment, despite provision in section 22(b)(ii) of the Act allowing  Warrington to file a payment schedule within 20 working days after receipt of the invoices. The evidence therefore indicated AES was relying on these invoices as ones already tendered and liable for immediate payment.

Although AES had raised the point that the case should be approached in accordance with the purpose of the Act to facilitate regular and timely payments between parties to a construction contract (George Developments Ltd v Canam Construction Ltd [2006] 1 NZLR 177, (2005) 18 PRNZ 84 (CA) at [41]), the Court ruled that the evidence did not support AES’s contention that the August invoices were fresh payment claims under the Act.

Conclusion

Like so many cases decided under the Act, Warrington is yet another example of the importance of strictly adhering to the formal requirements of the Act.  Parties generally have one chance to get it right when submitting payment claims, as illustrated in the failure of the claimant in Warrington to cure the earlier defects by resubmitting the earlier claims.