On 19 May 2015, the Contractor Magazine published this article outlining a contractor’s struggle to receive payment from its developer principal. That struggle included disputes in the High Court, in the Court of Appeal and in arbitration. The ultimate outcome was that the contractor recovered only a fraction of the debt owed to it.
The article, which was edited by Civil Contractors New Zealand’s executive officer Malcolm Abernethy and solicitors Kensington Swan, includes lessons that all contractors should take on board when assessing the risks of contracting with a particular developer. Those lessons include:
- Research the identity and history of the developer and the developer’s directors. The Companies Office website provides valuable information.
- Find out who owns the construction site and what mortgages are in place.
- Early and correct use of the Construction Contracts Act 2002 payment system is essential.
- Consider alternative payment structures when negotiating. These could include a tripartite agreement with the financier or the use of an escrow agent.
- Ensure the contract defines who is responsible for council consents and ensure that these are in place prior to the commencement of work.
- Ensure that payment claims are expressed ‘Less previously paid’, not ‘Less previously certified’.