Direct Payment Agreements and s292 – Ebert Construction v Sanson

There is growing acceptance across the construction industry, particularly among financiers and owners, that payments need to flow down the contract chain to those actually doing the work.  This has seen a growth in construction contracts requiring head contractors to prove payment of their subcontractors, if cashflow is to continue; and in financiers also requiring proof of such payment.  Similarly, head contractors are seeking direct payment obligations from project financiers to protect themselves against developer default.

The difficulty with these arrangements is that, in the event of insolvency, preferring one subcontractor over other unsecured creditors (for the obvious reason that they are needed on site), thereby diverting those payments out of the creditor pool, runs the risk of being voidable insolvent transactions in terms of s292 of the Companies Act 1993.

The recent decision of the Court of Appeal in Ebert Construction v Sanson clarifies that position.  The attached article was published in the September edition of LawTalk and has been submitted to the International Bar Association’s publication Construction Law International.


America’s Cup 2017 – New Development for Auckland?

Following the success of Team New Zealand’s America’s Cup challenge in Bermuda last month, there has been rather a lot of comment in the press over where the next Cup defence should be held, what will be needed, and who will pay for it.

Back in 1995, we were confronted with the same questions.  The erstwhile Auckland Regional Services Trust came to the rescue, and Auckland’s Viaduct Basin has seen the benefit since.

Here is an article I drafted for the latest edition of the New Zealand Law Society’s magazine, Law Talk, discussing that development –  LT 909 Americas Cup 2017


AMINZ Arbitration Rules approved by Council

After more years and considerably more work than anticipated, on 22 June 2017 the AMINZ Council approved the AMINZ Arbitration Rules.

The Rules are intended for both domestic and international arbitrations, and they therefore tread a fine line between offering clarity, flexibility and apparent simplicity while addressing some of the more complex issues high value international arbitration requires.  To that end, the drafting committee has been ruthless in monitoring international trends in arbitration rules and adopting those concepts which seemed to us to be most relevant.  There have been a number of rules published since this project started (notably, the LCIA, SIAC and ICC); we have assessed each to consider how and to what extent they contain procedures which may be of benefit.

We hope that the new Rules will find favour, providing a New Zealand version of what is state of the art internationally while being user friendly.  An Emergency Arbitrator Protocol has also been provided for those wanting interim measures and/or preliminary orders without adopting the Rules and, of course, avoiding recourse to the High Court.

A PDF is available online, and hard copies will be published later in the year.


Arbitrator appointment notices under clause 1 – a word of warning!

Where parties are unable to agree on the appointment of their arbitrator, or there is default in complying with the agreed procedure, clause 1(4) of the Second Schedule to the Arbitration Act 1996 provides:

… any party may, by written communication delivered to every such party, arbitrator or third party, specify the details of that person’s default and propose that, if that default is not remedied within the period specified in the communication (being not less than 7 days after the date on which the communication is received by all of the persons to whom it is delivered), a person named in the communication shall be appointed …

The normal practice is, once there is clear disagreement over the appointment of an arbitrator (usually within a time period specified in the agreement to arbitrate) either party may try to pre-empt further disagreement by naming their preferred arbitrator and giving the other party not less than seven days to respond.

In Body Corporate 200012 v Naylor Love Construction Limited Justice Muir was not convinced that there was in fact any disagreement or default, and he was not minded to follow the longstanding reasoning established by Justice Hansen in Hitex Plastering Ltd v Santa Barbara Homes Ltd [2002] 3 NZLR 695.  Interestingly, both parties issued notices against each other in the Naylor Love case – one proposing retired Justice Rodney Hansen QC and the other a Mr Walton, none other than the author of this post.

Regrettably, we both missed out on the appointment when the parties settled on Mr Tómas Kennedy-Grant QC.

Such is life!


Related Services under the Construction Contracts Act 2002

The definition of construction work under section 6 of the Construction Contracts Act 2002 has, with effect from 1 September 2016, been extended to include related services, which are defined in the new subsection (1A) as including:

(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)

For architects, engineers and quantity surveyors, the protections for progress payments under the Act now apply.  Similarly, the provisions relating to adjudicating disputes under their appointment agreements also apply.


Court of Appeal considers payment claims, again …

On 3 February 2017, the Court of Appeal released its decision in the case of CJ Parker Construction Ltd (in liq) v Ketan [2017] NZCA 3.

Observing that the consequences for not complying with the scheme under section 23 of the Construction Contracts Act 2002 may be draconian, Justice Toogood observed that “a pragmatic, common sense and contextual approach” was required when considering the validity of a payment claim in terms of section 20.  More critically, the Court of Appeal has perhaps thrown a lifeline to owners who are unable to provide a valid payment schedule for an amount less than claimed, if the payment claim itself provides insufficient information.


Retentions Regime under the Construction Contracts Act clarified

The Construction Contracts Amendment Act 2015 introduced a new regime for the holding of retentions in the new Part 2, Subpart 2A of the Act (sections 18A to 18I of the Act).  There has been some uncertainty as to how the new regime will apply.  The requirement for retentions to be held on trust applies to commercial construction contracts over a yet to be determined value from 31 March 2017.  It has now been clarified that the new regime will only apply to contracts entered into or renewed from 31 March 2017.


John Walton named in LawFuel Top 10 Mediators and Who’s Who Legal

LawFuel has released its list of the Top 10 Mediators for 2016.

Great to be on the list (with such esteemed company – 5 from Bankside Chambers).  Mediation is such an important tool for dispute resolution and for dispute avoidance in long term commercial contracts  where productive working relationships are important.

As I write this, the 2016 Edition of Who’s Who Legal Construction has landed on my desk, and I am also named as one of the world’s leading construction law practitioners. Quite a day!


LawTalk article – Construction Contracts Amendment Act 2015

A revised version of my article on the Construction Contracts Amendment Act 2015 has been published in the 2 June 2016 edition of Law Talk, the New Zealand Law Society’s magazine.

To read the article online, click here.


Construction Contracts Amendment Act 2015 – four new regimes

When the Construction Contracts Amendment Act 2015 come into force on 1 December 2015, many could be forgiven for assuming that all the revisions took effect from that date.  Nothing could be further from the case.

Edit – a revised version of this paper was published in the 2 June 2016 edition of the New Zealand Law Society magazine, LawTalk.  Click here to read the online version.