Three Valuable Lessons From a Contractor’s Ill-fated Court Proceeding

Following termination of its construction contract, C.J Parker Construction Ltd issued a payment claim which the client responded to by email but never paid. Two years later, C.J Parker commenced a court proceeding to recover the claimed amount. The proceeding failed and C.J Parker was left to cover not only its own legal expenses, but also the client’s court costs. One week after the court’s decision, C.J Parker was placed into liquidation. C.J Parker’s sad demise and the relevant High Court decision C.J Parker Construction Ltd v Ketan [2015] NZHC 2421 provide three basic but valuable lessons for contractors.

Lesson 1: Do not commence work without an agreed contract price and sufficient contract documentation

C.J Parker agreed to perform construction work without executing a written agreement. Instead, it relied on:

  • a proposed price estimate
  • a proposed schedule of materials; and
  • a draft contract (which was unsigned and did not specify the owner, the contract price, the margin or the payment process).

As a result, the court determined that there was no proven contract price for the work, nor were there any proven rates or prices in the contract, nor were there any proven variations. It is important to remember that, although the law will recognise oral contracts, such contracts always come with significant risk. A written contract is always a better option (and where a residential contract is valued at over $30,000, the contract must now be in writing).

Lesson 2: Ensure that payment claims indicate how amount was calculated

C.J Parker’s payment claim failed to indicate how it had calculated the claimed amount. This was largely due to the fact that there was no proven contract price or rates. In addition, the payment claim:

  • did not provide sufficient detail about the works and materials upon which the claim was based; and
  • did not include a breakdown of hourly rates.

As a result, the court determined that C.J Parker’s payment claim did not comply with the Construction Contracts Act.

Lesson 3: Do not apply for summary judgment unless you have a very strong case

Notwithstanding the weaknesses of C.J Parker’s position, it applied for summary judgment in the High Court. Summary judgment is essentially a ‘fast-track’ court procedure that will only succeed where the court is satisfied that ‘the defendant has no defence’ to a claim. This is a high threshold, which C.J Parker has now learned  – albeit the hard way.

One thought on “Three Valuable Lessons From a Contractor’s Ill-fated Court Proceeding

  1. Pingback: Just another non-compliant payment claim | SITE VISIT

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