The recent case of South Pacific Fire Protection South Island Alarms Ltd v Safe NZ Ltd serves as a refresher to those familiar with the Construction Contracts Act 2002 payment processes and a good introduction to consultants who will soon fall within the acts purview (from 1 September 2016).
The case concerned South Pacific applying to have Safe placed into liquidation after Safe failed to pay its debts to them. To determine whether there was a seriously arguable dispute the judge had to assess the validity of a number of invoices issued by South Pacific to Safe. It was argued that the invoices were valid payment claims, the non-payment of which created a debt due under the CCA and negated the assertion that there was a dispute.
Associate Judge Matthews set out several settled principles around the CCA payment processes. This included the finding in SOL Trustees Ltd v Giles Civil Ltd (where the Court of Appeal approved a passage from the judgment of Asher J in Marsden Villas Ltd v Wooding Construction Ltd). The passage states that ‘…As far as the principal is concerned, the regime set up is “sudden death”. Should the principal not follow the correct procedure, it can be obliged to pay in the interim what is claimed, whatever the merits.’ This is a clear expression of the adage ‘pay now, argue later.’
Secondly, Matthews AJ set out that the court will not allow mere technical issues lacking any substantial basis to defeat the payments regime, as expressed in CMP Construction Ltd v Aluminium Technology Ltd.
The Judge then analysed each of the 15 invoices in question. He found that among the invoices most did not comply with the Act as they failed to state the period to which the payment relates, failed to give an indication of the method of calculation, failed to identify the construction work undertaken, or failed to state the correct date for payment.
Of the 15 invoices only two were found to be compliant, meaning Safe had an arguable case that it had a defence to all but the sums claimed in those valid invoices.
This case serves as a timely reminder to ensure the procedural requirements of the CCA are observed, to remove any doubt that you will receive the protection of the Act.