CCA Form 1.pdf CCA Handbook Related Services (authorised ... · CCA Handbook Related Services...
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CCA Handbook Related Services (authorised extract for CCH conference).pdf CCA_Form_1.pdf Outline of suggested payment mechanisms for related services contracts 1.1.pdf
Transcript of CCA Form 1.pdf CCA Handbook Related Services (authorised ... · CCA Handbook Related Services...
CCA Handbook Related Services (authorised extract for CCH conference).pdf
CCA_Form_1.pdf
Outline of suggested payment mechanisms for related services contracts 1.1.pdf
CCA HandbookMaking the Construction Contracts Act work
Peter Degerholm
Wellington, 2016
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Chapter 1.4
Extending the Act to industry professionals
What has changed?
A small but significant amendment to the definition of construction work s6(1A) extends the Act to cover the work performed by architects, engineers, and quantity
surveyors, collectively defined as related services. s5
For every new or renewed contract from 1 September 2016 a professional services provider will receive the cash flow benefits of the Act, including the right to serve fee invoices as payment claims, suspend work and enforce payment when payment claims are overdue, and to refer fee disputes to adjudication for prompt settlement. They will also be exposed to the risk that their clients may refer disputes to adjudication that would not otherwise be cost effective to address. The Government policy position was stated as follows:
[From 1 September 2016] the scope of the Act will be widened to include construction-related services, such as the work that is done by architects, by engineers, and by quantity surveyors. Parties to contracts for the performance of these services will be able to access the payment and dispute resolution processes in the Act. This amendment will be of particular benefit to consumers to help them hold architects, engineers, and quantity surveyors to account for their work. It will also benefit those designers and quantity surveyors, enabling them to use the payment provisions of the Act to ensure they are properly paid for their services in a timely manner.25
Professional associations expressed concern about the implications of this change. They said the ‘rough and ready’ adjudication process designed for cash flow-type construction disputes may not be suitable for disputes between industry professionals and their clients, or that professional indemnity policies may be compromised when respondents are forced into adjudication without their insurer’s involvement.
These valid concerns have been addressed to some extent through significant changes to the adjudication process. However, there is work to be done to modify terms of engagement and professional indemnity insurance claim processes, and to prepare adjudicators to deal with the type of disputes likely to be referred.
Background to the changeParliament clearly intended to extend the Act to cover the work carried out by engineers, architects, and quantity surveyors (see page 14), reversing the intentional exclusion of related services from the definition of construction work under the principal Act:
25 Extract from Hon. Dr Nick Smith, Minister for Building and Housing, third reading speech, 20 October 2015.
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The Select Committee chose to exclude design, surveying and quantity surveying services from the NZ Bill despite the recommendations by the majority of submitters … This may yet prove to be a detrimental omission.26
Incorporating related services into the ActThe Act will now cover, almost without exception, the professional services provided by engineers, architects and designers, and quantity surveyors in relation to building and construction work.
The amendment is achieved by a new subsection 6(1A), which extends the definition of construction work to cover the work of industry professionals:
(1A) Construction work includes–(a) design or engineering work carried out in New Zealand in respect of work of the
kind referred to in subsection (1)(a) to (d) and (f ):(b) quantity surveying work carried out in New Zealand in respect of work of the kind
referred to in subsection (1)(a) to (g).
The insertion is supported by a definition of ‘related services’ in section 5 that collectively describes the design, engineering, and quantity surveying services now covered by the Act:
‘related services’ means construction work of the kind referred to in section 6(1A).
Further changes in section 5 extend the definition of ‘construction site’ by inserting a definition of ‘premises’ to clarify that related services is covered by the Act where work relates to a proposed project, whether or not the actual construction work proceeds:
construction site means—(b) in relation to related services, the land or premises that are the subject of the contract premises, in relation to related services, includes intended premises.
What are related services?Related services apply to the work being performed, rather than the title or qualifications of the person performing the work. For example, although the definition does not refer to an architect, architecture is clearly captured by ‘design’, and a project manager who certifies payments may be caught by the Act as that is quantity surveying work.
Related services also includes preliminary design, estimating, or feasibility studies on specific projects even where the physical construction does not proceed.
Quantity surveying work covers all work described as construction work under section 6(1), whereas design and engineering work excludes the construction-related cleaning, painting or decorating defined in section 6(1):
(e) the external or internal cleaning of buildings and structures, so far as it is carried out in the course of the construction, erection, alteration, repair, restoration, or extension:
(g) the painting or decorating of the internal or external surfaces of any building or structure.
26 G. Bayley & T. Kennedy-Grant (2003). A guide to the Construction Contracts Act. p. 40. Auckland: Rawlinsons Media.
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CCA HANDBOOK: Making the Construction Contracts Act work
There is no clear rationale for excluding design relating to cleaning and painting work particularly as a poorly specified exterior paint system may have weathertightness or durability implications. Although there will undoubtedly be grey areas in the bound-aries of related services, engineers, designers, and quantity surveyors should assume that their professional services fall within the expanded definition of construction work, and are caught by the Act.
Why the Act has been extended to related servicesA Ministry report (August 2013)27 provides insight into the underlying policy:
16 Contracts for the supply of design work, engineering work and quantity surveying are not currently covered by the Act. This means these kinds of contracts are not regulated by the payment provisions in the Act and, if disputes arise, the adjudication process is not available as an option.
17 To increase the dispute resolution options for consumers [emphasis added], the Government proposes to extend the scope of the Act to include contracts for design, engineering and quantity surveying work. This will also mean the default payment provisions in the Act will apply to contracts for those services (most contracts for these services already contain specific provisions about payment, the default provisions only apply if a contract is silent on the matter of payment).
18 Extending the scope of the Act will benefit both people who provide design, engineering and quantity surveying services and their customers. Initially people who provide construction-related services may incur some costs to bring their systems and processes into line with the provisions of the Act. This cost will not be significant and will be mitigated by education and guidance provided by the Ministry.
The Select Committee was unmoved by objections from architects and engineers, stating in its December 2013 report:
InterpretationWe recommend amending the definition of “construction site” in clause 5 of the bill as it relates to “related services” to include land where work is planned but has not yet begun. This amendment would apply to land and premises that were subject to the contract. We consider this is necessary to ensure that the design, engineering, and quantity surveying work is covered under the Act. [emphasis added]
andMeaning of construction workWe recommend amending this clause to add operations that are critical for the completion of, or preparatory to, the scope of design, engineering, and quantity surveying work. These “related services” directly affect the quality of building work, and it would benefit consumers if they were covered by the legislation [emphasis added].
We did not agree with the contention that extending the meaning of construction work would unfairly open up to adjudication persons who were not party to a construction contract. Under the Act any dispute that requires adjudication would be between the parties to the construction contract.28
The reference to ‘consumers’ suggests an overriding policy objective of protecting homeowners, but no rationale is given for extending the Act to the commercial sector.
27 Ministry of Business, Innovation and Employment (2013). Background report to the Commerce Select Committee on the Construction Contracts Amendment Bill. Wellington: Author.
28 Construction Contracts Amendment Bill, Government Bill as reported from the Commerce Committee, December 2013.
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Unsurprisingly, there were strong objections from engineers and designers who insist-ed that there was no problem to be fixed.
Who is affected by the change?As the hierarchy of contracts and subcontracts for professional services corresponds to those for physical construction work, it is not only contracts between owners and consultants that will be caught by the Act. Engineers, designers, and quantity surveyors may be employed by owners, contractors, subcontractors, or by other engineers, designers, and quantity surveyors. Almost without exception a construction contract will exist wherever a payee is engaged by a payer to carry out engineering, design or quantity surveying services (see Figure 1).
Industry viewsFollowing are the key issues raised by organisations representing architects and engineers in Select Committee submissions:
n design, engineering, and quantity surveying work should be defined to clarify roles such as certifier or administrator, and clarify when services such as feasibility studies, comparison of options, advisory services, or design reports are covered
n the confidentiality of adjudicators’ determinations will result in wide variances in outcomes as they have no precedent value
n the current terms of professional indemnity policies conflict with the time limits for an adjudication response, and an insured professional responding to a surprise adjudication risks prejudicing the insurer’s interests
n the expected inability of insurers to respond within adjudication time frames may make it difficult for professionals to maintain insurance cover, and compromise the availability of professional indemnity insurance to many firms.
n the majority of design work is done before a building contractor is appoint ed: designers do not form part of the contractual payment chain, their contractual arrangements deal adequately with payment issues, and differences are almost invariably resolved through discussion and agreement
n design-related disputes are fundamentally different: there may be many acceptable outcomes under a design brief and a designer is required to exercise reasonable skill and care in a ‘trusted advisor’ relationship, whereas a builder must comply with what is drawn and specified
n disputes regarding design services are likely to rely on expert witness opinions about reasonable standard of work or care, which may not be achievable within the statutory time frames
n the ‘interim binding’ nature of adjudication that is designed for cash flow is unsuitable for design disputes, and it may not be possible to unwind the outcome of ‘rights and obligations’ disputes that are overturned after being complied with (see Enforcing ‘rights and obligations’ determinations, page 28).
The building and insurance industries were given nine months to make any necessary adjustments to practice and procedures. Engineers, designers, and quantity surveyors will need to revisit their professional and commercial practices. Those engaging
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CCA HANDBOOK: Making the Construction Contracts Act work
professionals will need to adjust their accounts payable processes to ensure the issue of timely and compliant payment schedules, and the industry must engage with insurers so that genuine issues relating to adjudication are identified and properly addressed.
Is there a problem to be fixed?Any statutory intervention carries the risk of unintended consequences, such as increased litigation, liability issues, inappropriate transfer of risk, or unforeseen increases in the cost of professional services or insurances.
United Kingdom consultants covered by corresponding legislation have been exposed to adjudication since 1999. Since 2000, the Adjudi cation Reporting Centre in Glasgow has been monitoring trends. In the years covered by its reports, three to seven percent of all disputes referred to adjudication in any year were between consultants and employers or contractors (see Figure 4).29 In 2012, the only year in which the role of referring parties was identified, approximately half of the disputes were initiated by consultants, pre sumably to settle fee disputes, with the remainder by clients holding them to account for their services.
These statistics justify industry concern that a client’s ability to refer professional services disputes to adjudication will impact on liability and insurance, but also show that professionals are using adjudication to resolve fee and payment disputes. Rather than reinventing the wheel, New Zealand professionals and their insurers may learn from the United Kingdom experience.
Are engineering, design, and quantity surveying adequately defined?The lack of definition of the terms ‘engineer’, ‘designer’ and ‘quantity surveyor’ suggests that all services ordinarily provided by a quantity surveyor, designer, or engineer in relation to construction work will be caught by the Act, but there is no requirement for the person to be professionally qualified.
The courts can be expected to apply the ordinary meaning of the words in the context of common industry practice30 to ascertain whether the work is design, engineering, or quantity surveying, and to look to section 6 of the Act to ascertain whether it is being carried out in respect of construction work. Debate will continue particularly in areas of potential uncertainty, such as:
n whether certain work is ‘engineering’ merely because it is being carried out by a person who is an engineer or by an engineering consultancy
n whether an architect or project manager who only certifies payments is carrying out quantity surveying work
29 Glasgow Caledonian University Adjudication Reporting Centre, Adjudication Reports 1 to 12.30 Section 5(1) of the Interpretation Act 1999 states ‘The meaning of an enactment must be ascertained from its text
and in the light of its purpose’. For example the Collins Concise Dictionary defines engineering as ‘the profession of applying scientific principles to the design, construction, and maintenance of …’
Figure 4: Disputes involving consultants — UK 2000–2012 (Adjudication Reporting Centre)
2000 ‘01 ‘04 ‘05 ‘07 ‘08 ‘11 ‘12
Survey year
8%
6%
4%
2%
0%
% o
f al
l rep
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d ad
judi
catio
ns
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n whether a dispute with a painting specifier can be adjudicatedn whether the role of the Engineer under NZS 3910 is ‘engineering’n whether the Act applies to an architect who is not the designer, but is engaged
only for observations and inspectionsn whether the Act applies to a quantity surveyor who certifies draw down valuations
on behalf of a financial institutionn whether ‘project management’ services are covered.
These and other questions will eventually be determined by the courts, which are expected to adopt a pragmatic approach, and to look at the nature of the services rather than the title or qualifications of the person.
A speculative view suggests that design work carried out for a proposed building project is construction work whether or not the project proceeds, but preparing generic design details is not. A stand-alone commission to design and specify a window cleaning system is subject to the Act, as the work relates to construction work under section 6(1)(c), but a commission to specify the method of construction cleaning is not. The courts have established, for example, that the design of a yacht fit-out is not covered, as boat-building work is not construction work.31 The Engineer to the contract would only be covered where the scope of services includes engineering, design or quantity surveying work.
There will inevitably be challenges to adjudicator appointments and enforcement of determinations until the scope of related services is fully clarified by the courts.
Is adjudication suitable for related services disputes?Disputes between professionals and their clients are more likely to arise in relation to a breach of the professional’s contractual duty to exercise reasonable care and skill, and may require more time than the strict periods provided for cash flow-type disputes. The duty of adjudicators to consider requests and allow extra time for a response has been clarified and should address this issue.
An adjudicator now has an explicit duty to consider a respondent’s request for additional time to submit a response; s37 and wide discretion to extend time such as where it is appropriate to allow the respondent time to carry out investigations or obtain expert evidence, and the parties remain free to agree upon any longer time frame for the proceedings.
Availability and suitability of adjudicators for related services disputesWhen the principal Act was passed in 2002 some main contractors were concerned that they would be swamped with notices of adjudication from subcontractors as issues could be referred to adjudication at relatively low cost. That did not happen, possibly because of the risk of damage to commercial relationships and because adjudication is readily available if they cannot settle their differences.
Authorised nominating authorities will need to identify those adjudicators on their lists who are suitably qualified and experienced to adjudicate in related services disputes. Many will already be familiar with the commercial arrangements between industry
31 For example, Gulf Harbour Investments Ltd v Y Gulf Harbour Ltd (High Court, Auckland CIV 2006-404-386, 16 March 2006, Christiansen AJ) established that boat building work was not ‘construction work’.
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CCA HANDBOOK: Making the Construction Contracts Act work
professionals and their clients, and some will have experience in dealing with claims and complaints against professionals, or disputes between professionals and their clients. However, adjudicators may need specific training to deal with the greater technical and procedural complexity that can be expected in some related services disputes.
If industry associations are correct in asserting that there is no undercurrent of unresolved disputes between professionals and their clients, then there will be little work for would-be adjudicators.
Enforcing ‘rights and obligations’ determinationsA rights and obligations determination may result in work being done or costs incurred that cannot be undone or recovered in the event that the determination is overturned. For example, an adjudicator’s determination requiring a designer to redesign defective work that is to be demolished and rebuilt will be enforceable in court. However, if an arbitrator or judge later decides that the original design was satisfactory, and consequently that the redesign, demolition and reconstruction was not necessary, actions will have been taken that cannot be undone, and costs have been incurred that are not recoverable. The same concern exists that a payment made to a claimant will not be recoverable if the determination is later overturned and the claimant has become insolvent.
There is also the practical issue of how to enforce a dispute about rights and obligations. This concern may be addressed in part by claimants taking care to seek in their notice of adjudication an answer that is, if favourable, likely to be enforceable, and in part by adjudicators in the way they express that answer.
The role of insurers in adjudicationThe insurance industry is currently working through the issues, but it is self-evident that there is conflict between adjudication and the interests of professional indemnity insurers and their normal claims processes. An insured party would normally be required by the policy conditions to notify their insurer or broker of a claim or likely claim, such as receipt of a notice of adjudication.
Although it is common practice to align the limit of liability under an agreement for professional services with the amount of professional liability cover, the professional indemnity policy has no relevance to a dispute under the contract, and the insurer is not a party to any proceedings.
Policy conditions generally require the insured party to notify the insurer before taking any steps to defend a claim, as doing so may prejudice the insurer’s interests. However, missing the adjudicator’s response deadline while waiting for the insurer’s instructions would also not be in the insurer’s interests. As an insured party must always act as the prudent insured party, and defend fully and adequately any claim brought against it, taking steps such as serving an adjudication response rather than waiting for the insurer’s instructions would appear to be the proper path to follow. This will undoubtedly be clarified by the relevant insurers.
Adjudicators may consider, but should not be expected to allow extra time for response solely to allow a related services provider to comply with insurance policy requirements. However, a claimant may well agree to an extended timeline.
As the insurer is not a party to the dispute it is not bound by an adjudicator’s determination, and will deal with the matter in accordance with the policy conditions.
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Where an adjudicator determines that a related services provider is liable for payment, that amount may be payable by the provider as an enforceable debt due within as little as two working days.
Clients who refer matters to adjudication should be mindful of the temporary finality of adjudication, and that an unsuccessful respondent (possibly through their insurer) is likely to refer the matter to mediation or arbitration to obtain a final answer.
Although professional indemnity insurers are not subject to the Act they must provide insurance products that meet their customers’ needs. Policy conditions and claim processes will need to be adjusted to avoid the risk that an insured party who is forced to respond in order to comply with statutory time limits does not compromise their insurance.
Sharing confidential information with the insurerIt may be necessary for terms of engagement for professional services to include a limited waiver of the statutory confidentiality of adjudication proceedings to allow an insured party to share otherwise confidential information with its insurer.
This may be in the form of an acknowledgement that the related services provider may disclose information relating to adjudication proceedings with its insurer for the purposes of complying with the requirements of the insurance policy and claims made under that policy.32
Limitations on adjudicators’ jurisdictionAn adjudicator has jurisdiction to determine a dispute ‘under the contract ’33 but does not have the right to determine matters of general liability. The adjudicator will focus on the terms of the contract under which the professional was engaged, and may need to determine matters such as:
n whether the matter in dispute is ‘under’ the contractn whether it is a claim for general damages arising out of the contract, over which
the adjudicator does not have jurisdictionn the contractual limitations of liability.
As industry-standard terms of engagement stand, claims for general damages within the pre-agreed limit and which are not in the nature of indirect or consequential cost or loss of profit, are claims under the contract which may be referred to adjudication. An adjudicator determining a dispute may only consider limitations under a professional indemnity insurance policy to the extent that those limitations form part of the contract.
Payment issuesThe right to serve fee accounts as payment claimsRelated services providers who have suffered from poor payments, unresolved fee disputes, or bad debts are expected to appreciate the benefits of payment claims.
32 Section 68(2)(a) does not prevent a waiver of confidentiality being given in advance of a dispute arising. This contrasts with section 56(3) which provides that an agreement regarding the apportionment of costs and expenses is only binding if made after the dispute arose.
33 Section 5 states ‘dispute means a dispute or difference that arises under a construction contract’.
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CCA HANDBOOK: Making the Construction Contracts Act work
A payment claim is more likely to be paid fairly and on time than an ordinary tax invoice (see Chapter 2). However, some practitioners will be reluctant to change their invoice format, and in particular to include the prescribed notice that must now accompany every payment claim.
The same dilemma was faced by building contractors in the residential sector who were required to include a corresponding notice with a payment claim served on a residential occupier. Despite initial reluctance most adjusted their invoices to comply with the Act, s20 forewarning their clients that the notice is a mandatory requirement for any payment claim, whereas others only served payment claims as the first step in debt collection when a tax invoice was overdue.
Issuing payment schedulesThose engaging related services providers will need to have processes to ensure that any fee accounts that are served as payment claims, are processed and responded to by the relevant due date (see Chapter 2).
Effect of ‘pay-when / if-paid’ clausesIt is not uncommon for consultants to carry out work on a ‘no-win, no-fee’ basis under which they will only be engaged and paid if the project proceeds. While it may be argued that such arrangements are ‘pay-if-paid’ conditional payment provisions of the type outlawed by the Act, s13(2) it is more likely that genuine speculative work that is in the nature of a tender or proposal would comply and this should be set out clearly in the related documentation.
Effective date and transitional issuesThe Act applies to related services for new contracts from 1 September 2016. Where continuing contracts are renewed, the Act will only apply to the services provided from that date onwards.
There will be transitional issues. For example, a contract between a principal and lead consultant entered into before 1 September 2016 will not be covered by the Act, but subcontracts between consultant and subconsultants on that project entered into on or after 1 September 2016 will be. However, the parties may agree that the Act will apply to a related services contract entered into prior to that date. s11A(2)
Unless the effective date fits with the renewal date of professional indemnity policies, interim adjustments or early renewal may be required for existing policies.
Current commercial practiceTable 4 provides a snapshot of the current content of related services contracts, comparing relevant features of standard terms of engagement for the following organisations:
n Conditions of Contract for Consultancy Services 2009 (CCCS)34
34 ‘Conditions of Contract for Consultancy Services 2009’ developed jointly by Auckland Region Contracts Group (ARCG), NZ Transport Agency (NZTA), the Association of Consulting Engineers New Zealand Inc. (ACENZ) and agreed by the Institution of Professional Engineers New Zealand Inc. (IPENZ) and Ingenium. This document is under review as at March 2016.
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Table 4: Comparison of industry association standard terms of engagement (as at December 2015)
CONDITION CCCS NZIA NZIQS ADNZ
Liability
Liability for reasonably foreseeable damages etc. caused directly by breach of agreement
Yes Yes Yes N/A**
Limitation of liability (whether in contract, tort or otherwise)
6 x fee, min $200K, max $2m*
Lesser of 5 x fee or $250K
5 x fee, maximum $250K
$250K
Liability for indirect, consequential, loss of profit
No No No N/A
Proportional liability Yes Yes Yes N/A
Liability period 6 years6 years from completion
6 years from completion
N/A
Liability to subsequent owner N/A No N/A N/A
Principal indemnity N/A Yes N/A Yes
Personal liability exclusion N/A Yes N/A N/A
Consumer Guarantees Act exclusion for business
N/A Yes Yes N/A
Insurance
Professional indemnity insuranceAs per liability
limit*$250K for 6 years
$250K for 6 years
$250K
Payment
Payment frequency
Refers to separate appendix
N/A Monthly N/A
Payment due dateLater of 10 working
days or 20th of month
20 calendar days
Within a fortnight
Payment schedule due date N/A N/A N/A
Joint liability of Principal’s agents Yes N/A N/A
Interest on late payments Yes YesYes (to be specified
in Schedule)
Suspend work for late payment Yes N/AYes (in breach of any
obligation)
Dispute resolution
Dispute resolution mechanism
Good faith negotiation, mediation,
arbitration if not settled within a reasonable time
Good faith negotiation, mediation,
arbitration or court if not settled in 30
working days
Discussion, mediation, arbitration
Good faith discussion and communication, mediation, arbitration
if not resolved in 21 days
Right to suspend work in event of dispute
N/A Yes N/A N/A
Waiver of confidentiality in adjudication between related services provider and their insurer
No No No No
* Subject to amendment in Special Conditions**N/A indicates not addressed in the contract document
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CCA HANDBOOK: Making the Construction Contracts Act work
n New Zealand Institute of Architects Inc. (NZIA) – Agreement for Architects Services (AAS) 2013 1st Edition Standard Form – Agreement for Architects Services (AAS) 2013 2nd Edition Short Form
n New Zealand Institute of Quantity Surveyors Inc. (NZIQS) – Conditions of Engagement May 2013 – Short Form Agreement June 2013
n Architectural Designers New Zealand Inc. (ADNZ) – Agreement for Provision of Architectural Services 2011.
These terms of engagement generally cover the following matters:n proportionate liability for reasonably foreseeable general damagesn exclusion of liability for claims for indirect or consequential cost or loss of profitn liability limited to an agreed amount (being a maximum dollar amount or
multiple of the fee up to a stated cap) and period of six yearsn liability backed by professional indemnity insurance of an equivalent amountn corresponding increase in professional indemnity insurance cover at the
principal’s expense where liability limit is increasedn liability linked to the amount of professional indemnity insurancen stepped dispute resolution mechanism from negotiation through to mediation
and arbitration without strict time limits.
Modifications required to comply with the Amendment ActAs they stand, all terms of engagement would rely substantially on the default payment provisions of the Act, and should be modified to address the:
n right to progress paymentsn interval or frequency of such progress paymentsn due date for issue of payment schedulesn due date for payment of payment claims.
Consideration should also be given to including adjudication as a dispute resolution option. When drafting any amendments, care must be taken that the changes do not have the effect of contracting out of the Act. At the time of writing all forms of contract are under review, and the relevant organisations are expected to issue practice notes accordingly.
What must be done before 1 September 2016The industry must:
• align insurance policies and claims processes with adjudication• update standard terms of engagement.
Individual businesses must:• determine whether and how to serve payment claims• establish processes to review and respond to payment claims received from
consultants and subconsultants• revisit risk management policy and procedures to minimise the risk of matters
being referred to adjudication.
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First published 2016Published by Writes Hill Press LtdPO Box 23032, Wellington 6140www.writeshillpress.co.nz
© Copyright: Peter Degerholm, 2016
Calderglen AssociatesPO Box 835, Wanaka 9343www.calderglen.co.nz
All rights reserved. Except for any fair dealing for the purposes of private study, research, or review as permitted under the New Zealand Copyright Act 1994, no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recorded or otherwise, without the prior written permission of the publisher.
National Library of New Zealand Cataloguing-in-Publication Data
Degerholm, Peter, 1954-
CCA handbook: making the Construction Contracts Act work / Peter Degerholm.
ISBN 978-0-9922603-5-4
1. New Zealand. Construction Contracts Act 2002. 2. Construction contracts—New Zealand. 3. Construction industry—Law and legislation—New Zealand. I. Title.
343.93078624—dc 23
Cover design and graphics: Jane Byrne — Little Gem Design www.littlegemdesign.co.nz
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Form 1: Information that must accompany all payment claims
Construction Contracts Amendment Regulations 2015
Section 20, Construction Contracts Act 2002
Important notice
What is this?
This notice is attached to a claim for a payment (a payment claim) under the Construction Contracts Act 2002 (the Act).
The person who sent this payment claim (the claimant) is claiming to be entitled to a payment for, or in relation to, the construction
work carried out to date under a construction contract.
Whether that person is entitled to a payment, and how much they are entitled to, will depend on whether you have a construction
contract and what you have agreed between yourselves about payments. If you haven’t agreed on payments, there are default provisions
in the Act.
What should I do with this payment claim?
You can either—
pay the amount claimed in the payment claim (in full) on or before the due date for payment; or
if you dispute the payment claim, send the claimant a written payment schedule that complies with section 21 of the Act (a
payment schedule) stating the amount you are prepared to pay instead (which could be nothing).
The due date for a payment is the date agreed between you and the claimant. That due date must be set out in the payment claim. If
you haven’t agreed on a due date, then the Act says that a payment is due within 20 working days after the payment claim is served on
you. (For the purposes of the Act, a working day is any day other than a Saturday, a Sunday, a public holiday, or any day from 24 December
to 5 January.)
When do I have to act?
You should act promptly. Otherwise, you may lose the right to object.
What if I do nothing?
If you don’t pay the amount claimed by the due date for payment or send a payment schedule indicating what you will pay instead, the
claimant can go to court to recover the unpaid amount from you as a debt owed. In addition, the court may decide that you have to pay
the claimant’s costs for bringing the court case.
Can I say that I will not pay, or pay less than, the claimed amount?
Yes, by sending a written payment schedule.
Note: If you do not send a written payment schedule, the claimant can bring court proceedings against you or refer the matter to
adjudication (or both).
How do I say I will not pay, or pay less than, the claimed amount?
To say that you will pay nothing or indicate what you will pay instead, you must send the claimant a written payment schedule.
You must indicate the amount that you are prepared to pay, which could be nothing. This amount is called the scheduled amount.
If the scheduled amount is less than the claimed amount, you must explain in the payment schedule—
how you calculated the scheduled amount; and
why the scheduled amount is less than the claimed amount; and
your reason or reasons for not paying the full amount claimed.
Note: The written payment schedule must also state which payment claim the payment schedule relates to.
Note: If you state in the payment schedule that you will pay less than the claimed amount or pay nothing at all, the claimant may refer
the dispute about how much is owing for adjudication.
How long do I have?
You must send a payment schedule by the date agreed in the contract or, if no date was agreed, within 20 working days after the payment
claim was served on you.
If I say I will pay another amount instead, when do I have to pay it?
You must still pay the scheduled amount by the due date for payment.
What if I don’t pay the scheduled amount when I say I will?
If you send a payment schedule but do not pay the scheduled amount by the due date, the claimant can go to court to recover the unpaid
amount from you as a debt owed or refer the matter to adjudication (or both).
Note: A court may also require you to pay the claimant’s costs.
Advice
Important: If there is anything in this notice that you do not understand or if you want advice about what to do, you should consult a
lawyer immediately.
APPENDIX
Suggested payment mechanisms for related services contracts
1. Terms of payment
1.1 Unless otherwise provided in Special Conditions consultant entitled to progress
payments for the Services monthly.
1.2 Claims for progress payment may at consultant’s option be served as payment claims
where the Services are subject to the CCA.
1.3 Each tax invoice or payment claim shall be due and payable on the 20th of the month
following the month in which the Services are performed or at other timing in Special
Conditions (due date for payment).
2. Disputed claims
2.1 Where client wishes to dispute or withhold part or all of the amount claimed in any tax
invoice or payment claim (claimed amount) client shall notify consultant in writing
(payment schedule) of:
a. The part or parts of the invoice that are disputed or amounts withheld;
b. The reason or reasons for disputing or withholding any amounts;
c. The undisputed amount that client proposes to pay (scheduled amount); and
d. How client has calculated the scheduled amount.
2.2 Any payment schedule in response to a payment claim must be provided to consultant
in writing on or before the due date for payment.
2.3 Client shall subject to 2.4 pay consultant the scheduled amount not later than the due
date for payment.
2.4 Where the scheduled amount differs from the claimed amount consultant shall
immediately and as a prerequisite to payment provide a tax invoice for an amount
equal to the scheduled amount. Provision of such tax invoice is for the purposes of
compliance with the Goods and Services Tax Act 1985 only, and does not otherwise
affect the payment claim to which it relates.
3. Consequences of late payment
3.1 If by the due date for payment client has not paid part or all of either the amount
claimed in a tax invoice or payment claim, or the scheduled amount in a payment
schedule issued in accordance with clause 2 (the relevant overdue amount):
a. Client shall be liable for interest on the relevant overdue amount at [rate] from
the due date for payment (subject to 2.4) to the date of actual payment;
b. Client shall be liable to consultant for the actual and reasonable costs incurred
in recovering the relevant overdue amount; and
c. Where the claim has been served as a payment claim under the CCA, consultant
may, after giving 5 Working Days written notice, suspend provision of the
Services under that Act until the relevant overdue amount has been paid in full.
4. Dispute resolution
[Add the following to existing dispute resolution provisions]
4.1 Where the Services are subject to the CCA nothing in this section affects the parties’
right to refer any dispute to adjudication under that Act.
