Pedestal Limited v City Build Construction Limited [2014] NZHC 1783 (5 August 2014)

Last Updated: 10 September 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-000337 [2014] NZHC 1783

BETWEEN	PEDESTAL LIMITED Plaintiff
AND	CITY BUILD CONSTRUCTION LIMITED Defendant

Hearing:	15 April 2014
Appearances:	J D Turner for the Applicant D M Hughes and A Stuart for the Respondent
Judgment:	5 August 2014

_{JUDGMENT OF ASSOCIATE JUDGE SARGISSON}

This judgment was delivered by me on 5 August 2014 at 4.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date.......................................}

Solicitors:

McVeagh Fleming, Auckland

Kensington Swan, Auckland

_{Case officer: Lena Wong}

PEDESTAL LIMITED v CITY BUILD CONSTRUCTION LIMITED [2014] NZHC 1783 [5 August 2014]

Introduction

[1] Pedestal Ltd applies for an order under s 290 of the Companies Act 1993 setting aside a statutory demand. City Build Ltd served the demand on Pedestal on

5 February 2014, claiming Pedestal owes it $244,477.12 on a payment claim by virtue of ss 22 and 23 of the Construction Contracts Act 2002 for work undertaken on a building in Takapuna. City Build delivered the payment claim for that amount (Payment Claim 11) on 16 December 2013 as its final claim.

[2] Under the Construction Contracts Act 2002 (the Act), if a payment claim is served on a party to a construction contract and payment of the lesser of the claimed amount or the amount scheduled in a payment schedule is not made within the time allowed in the contract or otherwise within 20 working days, the claimant is entitled to recover the amount of the claim as a debt due.¹

[3] Pedestal has not paid any part of the claimed amount. It asserts it is entitled to an order setting aside the demand under s 290 of the Companies Act 1993 on the basis that it has responded to City Build’s payment claim by providing a valid payment schedule in response that was within the “indeterminate” time the contract allowed, or on the alternative basis that the payment claim is invalid. Additionally, it claims that it has an available set-off for liquidated damages which should be applied in reduction of the amount due should the Court find that the payment claim is valid and that it did not provide a valid payment schedule.

[4] City Build opposes the application.

[5] The time for compliance with the statutory demand has been extended by interim order pending determination of the application.

Background

[6] Consideration of the issues that arise for determination necessitates that I

_{refer in some detail to the factual background. I begin with the construction contract.}

¹ Construction Contracts Act 2002, s 23.

The contract

[7] Pedestal engaged City Build to undertake the refurbishment of a commercial building in Hurstmere Road, Takapuna, for $1,064,000 excluding GST. The parties’ contract, entered into on 24 October 2012, is a construction contract within the meaning of the Act. The contract provides for a practical completion date of March 2013 and allows Pedestal to call on City Build to pay liquidated damages for late completion of $1,100 per day subject to any agreed extension of the completion date.

[8] The general conditions of the contract are the New Zealand Institute of Architects Standard Conditions Contract (SCC: 2011). These conditions relevantly provide for:

(a) A complex progress payment regime. This is based on monthly payment claims and a final payment claim, pursuant to authority given under the Act to parties to a construction contract.

(b) The due dates for payment of monthly payment claims. In the case of the final payment claim, the due date is calculated from the date of the final payment schedule that the architect is required to deliver in response to the claim. This contrasts with prior monthly schedules, the due date for which is 17 working days after the date of the delivery of the relevant payment claim.

(c) The provision of payment schedules. In the first instance these are provided by the architect in provisional form as the mechanism for giving notice to the contractor and the principal of the amounts the architect has certified for payment (the scheduled amount). They are also the mechanism for giving the principal the opportunity to require amendments and deductions to the certified amounts. In such a case, the architect is required to provide the contractor with a further payment schedule, and the reduced amount becomes the new scheduled amount for payment, leaving any remaining amounts to be

determined by adjudication, court action or other means of dispute resolution.

[9] The general conditions also require the principal to ensure that an architect is appointed throughout the contract to represent the principal and to impartially administer the contract. It is the architect’s responsibility to issue the payment schedules and to certify the scheduled amounts in provisional payment schedules, and to consult with the principal about any challenges and changes to the payment claims.

Extension to May 2013

[10] City Build did not complete the refurbishment work within the time allowed in the contract, and the architect Pedestal had appointed, Mr Greg O’Connell, allowed an extension of the date for practical completion to

16 May 2013. Practical completion was not achieved until 30 September 2013.

Payment Claim 10 and payment schedule in response

[11] Throughout the period that the contract works were undertaken

City Build sent monthly payment claims to Pedestal. On 27 September 2013

City Build served Payment Claim 10. The claim was for $83,928.66 for “work to

31 August 2013”. Though a requirement under the contract, the claim omitted any statement that it was “made under the Construction Contracts Act 2002”. The omission was of no moment. The architect and Pedestal treated it as a claim made under the Act. On 1 October 2013 the architect responded to it in accordance with the procedure set out in r 14 of the contract, by sending a provisional payment schedule to Pedestal and City Build. In the schedule he certified most but not all of the components of the claim as, he says, there were still outstanding works and remedial works to be completed. On 2 October Pedestal’s lawyers requested amendments, including a deduction to the amount of the claim to provide for liquidated damages for late completion. After considering the request, on 3 October the architect issued an amended payment schedule which asserted that City Build was indebted to Pedestal for $67,871.34 and effectively reversed the claims the

provisional payment schedule allowed. This was principally because he allowed the claimed deduction for liquidated damages of $151,800. These were calculated at the rate of $1,100 per day for 138 days, from 16 May to 30 September 2013 – the time from the final date of the granted extension to the date of actual completion. The architect also took into account the release of 40% of the retentions, the costs of rectifying certain defective work, and several disputed variations.

Payment Claim 11 and request for extension of time

[12] On 16 December 2013 City Build served its Payment Claim 11 plus a covering letter, having raised no dispute about the amended payment schedule for Payment Claim 10.

[13] The new claim, made under the final claim provisions in r 15 of the contract, indicates that it is a “final account” and a payment claim under the Act. It is for

$244,477.12 for “work to 30 November 2013”, which includes $74,689 for variations (as opposed to $33,960 claimed for variations in Payment Claim 10) plus

$61,452 for costs relating to the extension of time claim, but it is otherwise for substantially the same amounts as claimed in Payment Claim 10, and excludes the liquidated damages that the architect imposed in the payment schedule for Payment Claim 10. The claim states that the due date for payment as 14 January 2014, while the covering letter states the due date for payment as 17 working days from

16 December 2013.² However, as will be further discussed below, neither of these

dates is the correct due date for payment. The claim does not mention the due date for payment as it is specified in the contract; if that were the case it would have said “10 Working Days after the issuance of a final Payment Schedule”. It does not mention the time limit for delivery of the provisional payment schedules, and is not required to under the Act or the contract.

[14] At the same time as City Build delivered Payment Claim 11, it made a written request for the extension of time to cover the period between 16 May and

_{30 September 2013.}

² The definition of working day in the contract excludes weekends, public holidays and

24 December to 5 January. The date that is 17 working days from 16 December 2013 by my calculation is 21 January 2014.

Response to final payment claim / request for extension

[15] The architect’s response to the final payment claim and the extension request

took several forms:

(a) On 23 December he sent an email to City Build indicating aspects of the claim that without further information from City Build he could not fully assess or certify. These included the release of 100% of retentions, and claims for several variations. He also pointed out items requiring attention or remediation at City Build’s expense. He invited City Build to “adjust [its] claim accordingly”.

(b) On 10 January 2013 he wrote declining the claim for an extension of time on the basis that no written request had been made within the time allowed for such requests under the contract.

(c) On 12 February 2014 he provided City Build with a document he called “Provisional Payment Schedule 11” which he believed to be in time under the contract. The schedule contains his assertion first made on 3 October 2013 that City Build owes Pedestal $67,871.34.

(d) On 19 February he provided a document he termed the “finalised provisional payment schedule”, having consulted with Pedestal which did not seek any changes to the scheduled amount in the provisional schedule of 12 February. It repeats his assertion of 3 October 2013 that City Build owes Pedestal $67,871.34.

(e) He followed up the payment schedule of 19 February by subsequently issuing monthly provisional payment schedules, the first being on

19 March. This was in purported compliance with the requirement in r 15.2.5 of the contract to provide monthly schedules when a provisional payment schedule is issued under r 15.2.4 in response to the final payment claim, “pending the time when the final payment schedule can be issued”.

[16] Pedestal’s lawyers also responded to the payment claim on

23 December 2013 by writing to City Build’s lawyers. Their essential message was that Pedestal owed City Build nothing as it was City Build that was liable to Pedestal for some thousands of dollars, and that City Build should anticipate that it would receive a payment schedule to that effect. They referred first to settlement discussions the parties were apparently engaged in. They then discussed the final payment claim and the request for an extension. In essence they relayed Pedestal’s unwillingness to immediately agree to an extension for practical completion. They further noted that the final payment claim and the claim for the extension “must now be considered” by the architect and “prior to the issuance of a provisional final payment schedule”. This was an obvious reference to the provisions of r 15.2.4 of the contract. Additionally they pointed out (as r 15.1.3 of the contract provides) that the time for payment of a final payment claim is “10 Working Days after the issuance of a final Payment Schedule” and “not 17 working days from 16 December as set out in the final Payment Claim”. They also touched upon outstanding aspects of defective work.

The statutory demand

[17] There was no immediate response from City Build or its lawyers until

5 February 2014 when City Build’s lawyers arranged service of its statutory demand on Pedestal. On 19 February City Build filed and served its application to set aside the demand.

[18] On 7 and 10 February Pedestal, through its lawyers, repeated its message that it was the party that was owed money. They wrote to City Build’s lawyers about the final payment claim, raising again various challenges to the claim. Additionally:

(a) On 14 February it invoked the disputes procedure under r 17 of the contract. It also gave notice of the dispute to City Build and to the architect, whose task it was to identify the areas in dispute and to issue a direction as to the process to resolve them.

(b) On 19 February it filed its application for an order to set aside the demand.

[19] The parties have agreed to submit their dispute to adjudication under the Act. In the meantime Pedestal wants the statutory demand set aside. City Build opposes this course as it wishes to be paid on its final claim, pending the outcome of adjudication. Its position, counsel submits, is that it firmly believes a payment schedule has not been provided within the time allowed, but it also fully accepts that if it is wrong about that, it would have to concede there is a dispute as contemplated by the s 290(4)(a) of the Companies Act that should properly be determined in all its facets by an adjudication under the Act or the Court in the ordinary way.

Issues

[20] In determining whether to set aside the statutory demand, there are two overarching issues that have been raised for determination. The first issue is whether or not there is a substantial dispute that the payment of City Build’s final payment claim is owing or due. For the purpose of determining this issue, the following questions arise:

(a) As Payment Claim 11 omits to state the relevant period to which the amount claimed relates and does not correctly state the due date for payment, does that mean it is an invalid claim?

(b) Does the contract provide the time for providing a provisional payment schedule in response to a final payment claim, or does the default time limit in s 22 of the Act apply – whichever is the case, was the architect’s provisional payment schedule of 12 February in time or too late?

(c) If too late, is it open to Pedestal to assert that other documents constitute a provisional payment schedule and were in time – such documents being the payment schedule for Payment Claim 10, and the communications of 23 December and 10 January?

[21] Question (a) is subject to an objection which I disallow for reasons I come to presently.

[22] The second issue is does Pedestal have a set-off of $151,800 that it is entitled to rely upon for the purpose of setting aside the demand, or is such reliance barred by s 79 of the Act?

[23] For the purpose analysing these issues, I begin with the relevant provisions of the Companies Act, the Construction Contracts Act and related legal principles.

Relevant statutory and legal principles

Companies Act 1993

[24] Pedestal relies on the grounds set out in 290(4) of the Companies Act in support of its application under. Section 290(4) states:

(4) The Court may grant an application to set aside a statutory demand if it is satisfied that—

(a) There is a substantial dispute whether or not the debt is owing or is due; or

(b) The company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c) The demand ought to be set aside on other grounds.

[25] The Court’s approach to an application for an order to set aside a statutory demand based on s 290(4) is well understood. The onus is on the applicant to demonstrate grounds for a dispute. The applicant must show a fairly arguable basis on which it is not liable for the amount claimed. Once that position is demonstrated, the statutory demand should be set aside and the dispute resolved, if necessary, by other proceedings in the normal way.

[26] Where a dispute is relied upon, the Court of Appeal has noted that the assessment to be made by the Court is whether there is a genuine and substantial

dispute and that it is not the task of the Court to resolve the dispute.³ If the applicant can show that there is such a dispute, the dispute should be resolved in the usual way and not by the Companies Court or by liquidation.

[27] When a matter is to be determined pursuant to s 290(4)(b), the Court’s approach is as set out in Covington Railways Ltd v Uni-Accommodation Ltd where the Court said:⁴

Where a company which is the subject of a liquidation application is indisputably in debt to the applicant creditor, it may nonetheless be able to show that it has a claim against the applicant which reduces the net balance owing to the creditor or even off-sets it altogether. Where there are liquidated sums due each way, that is simply an arithmetical exercise. It is more difficult if, on the applicant’s side, there is an indisputable liquidated sum, but the other party’s claim is for an unliquidated sum with liability and/or quantum in dispute. Then, in order to impeach the statutory demand and overcome the presumption in s287(a) that the company is unable to pay its debts when it has failed to comply with the demand, it must be able to do more than merely assert that there is an available set-off. It must be able to point to evidence before the Court showing that it has a real basis for the claimed set-off and that accordingly, the applicant’s claim to be a creditor is, to the extent of the set-off, seriously in doubt. In the words of Buckley LJ in Bryanston Finance Ltd v De Vries (No.2) [1976] Ch 63, 78, it must show that there are “clear and persuasive grounds” for the set-off claim. Where this can be done, the party who has issued the statutory demand against the company will be shown to be using the statutory demand and liquidation procedures improperly because there is a “genuine and substantial dispute” about the net amount of the company’s indebtedness (Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297, 299). The dispute should then be resolved in the ordinary way – except as to any undisputed balance – rather than upon the hearing of a liquidation application.

[28] Where, as here, the application to set aside the demand gives rise to an argument about a set-off under a construction contract, s 290(4)(b) may be trumped by the operation of s 79 of the Construction Contracts Act to which I turn presently.

Construction Contracts Act

[29] The present dispute, as with other disputes between parties to a construction contract, must be approached with the purpose of the Act in mind.⁵ The purpose of

_{the Act is set out in s 3. The Act reforms the law relating to construction contracts for}

³ _{Industrial Group Ltd v Bakker [2011] NZCA 142; (2011) 20 PRNZ 413 at [24].}

⁴ _{Covington Railways Ltd v Uni-Accommodation Ltd [2011] 1 NZLR 272 (CA) at [11].}

⁵ Subsequent references to “the Act” in this judgment are references to the Construction Contracts Act 2002. When reference is made to the Companies Act 1993, the name of that Act is stated in full.

the purpose of facilitating regular and timely payments between parties to a construction contract, and provides remedies for the recovery of payments that are due.

[30] Justice Asher in Marsden Villas Ltd v Wooding Construction Ltd pertinently stated:⁶

The Act therefore has a focus on a payment procedure, the results that arise from the observance or non-observance of those procedures, and the quick resolution of disputes. The processes that it sets up are designed to side-step immediate engagement on the substantive issues such as set-off for poor workmanship which were in the past so often used as tools for unscrupulous principals and head contractors to delay payments. 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. In that way if a principal does not act in accordance with the quick procedures of the Act, that principal, rather than the contractor and sub-contractors, will have to bear the consequences of delay in terms of cashflow.

[31] The Court of Appeal in George Developments Ltd v Canam Construction Ltd

similarly stated:⁷

Cash flow was intended to be protected by the Act and it is to be interpreted so as to achieve its object of speeding up payments.

[32] Relevantly, s 14 gives contracting parties the freedom to agree on a contractual mechanism for the contractor (the payee) to make regular payment claims for progress payments which may also include due dates for payment under the contract,⁸ and the times for the principal to respond with payment schedules. Such schedules are the statutory and contractual mechanism that the principal (the payer) must use should it wish to halt the imposition of “deemed” liability under the Act and the contract for immediate payment of disputed payment claims despite the existence of disputes.

[33] Section 20 deals with payment claims. Materially, subss (1) and (2) provide:

_{20 Payment claims}

⁶ _{Marsden Villas Ltd v Wooding Construction Ltd [2006] NZHC 569; [2007] 1 NZLR 807 (HC) at [17].}

⁷ _{George Developments Ltd v Canam Construction Ltd [2005] NZCA 84; [2006] 1 NZLR 177 (CA) at [55].}

⁸ If the parties do not specify a due date for payment, the default position in s 18 of the Act applies and provides that a progress payment is due 20 working days after the payment claim is served under s 20.

(1) A payee may serve a payment claim on the payer for each progress payment,—

(a) if the contract provides for the matter, at the end of the relevant period that is specified in, or is determined in accordance with the terms of, the contract; or

(b) if the contract does not provide for the matter, at the end of the relevant period referred to in section 17(2).

(2) A payment claim must—

(a) be in writing; and

(b) contain sufficient details to identify the construction contract to which the progress payment relates; and

(c) identify the construction work and the relevant period to which the progress payment relates; and

(d) indicate a claimed amount and the due date for payment; and

(e) indicate the manner in which the payee calculated the claimed amount;

and

(f) state that it is made under this Act.

[34] Section 21 sets out the requirements for payment schedules. It provides:

21 Payment Schedules

(1) A payer may respond to a payment claim by providing a payment schedule to the payee.

(2) A payment schedule must—

(a) be in writing; and

(b) identify the payment claim to which it relates; and

(c) indicate a scheduled amount.

(3) If the scheduled amount is less than the claimed amount, the payment schedule must indicate —

(a) the manner in which the payer calculated the scheduled amount; and

(b) the payer's reason or reasons for the difference between the scheduled amount and the claimed amount; and

(c) in a case where the difference is because the payer is withholding payment on any basis, the payer's reason or reasons for withholding payment.

[35] Section 22 deals with the consequences of failing to provide a payment

schedule within the time limit prescribed by the parties’ construction contract or, if

the contract fails to prescribe a time, within the default time limit of

20 working days after the payment claim is served:

22 Liability for paying claimed amount

A payer becomes liable to pay the claimed amount on the due date for the progress payment to which the payment claim relates if—

(a) a payee serves a payment claim on a payer; and

(b) the payer does not provide a payment schedule to the payee within—

(i) the time required by the relevant construction contract; or

(ii) if the contract does not provide for the matter,

20 working days after the payment claim is served.

[36] Section 23 allows recovery of an amount that becomes payable under s 22 as a debt in any court together with the “actual and reasonable costs of recovery” awarded against the payer by the court. Service of a statutory demand has been held to be a proceeding for recovery of a debt under s 23.⁹ The same consequences apply under s 24, though s 24 only concerns cases where a payment schedule has been provided.

[37] Section 79 of the Act restricts the parties’ ability to raise a counterclaim or

set-off in opposition to a payment claim under s 23. It states:

79 Proceedings for recovery of debt not affected by counter-claim, set-off, or cross-demand

In any proceedings for the recovery of a debt under section 23 or section 24 or section 59, the court must not give effect to any counterclaim, set-off, or cross-demand raised by any party to those proceedings other than a set-off of a liquidated amount if—

(a) judgment has been entered for that amount; or

(b) there is not in fact any dispute between the parties in relation to the claim for that amount.

[38] Of particular importance is the authoritative ruling of the Court of Appeal in Laywood v Holmes Construction Wellington Ltd¹⁰ which holds that s 79 prevails over s 290(4)(b) of the Companies Act and prohibits the court from giving effect to any counterclaim, set-off or cross demand. The Court recognised the tension between the

_{two provisions. Under the latter, the Court may set aside a statutory demand if}

⁹ _{Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd (2005) 18 PRNZ 97 (HC).}

¹⁰ Laywood v Holmes Construction Wellington Ltd [2009] NZCA 35; [2009] 2 NZLR 243.

satisfied that the amount claimed in the set-off is less than the amount in the statutory demand. Following Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd the Court of Appeal accepted that s 79 prevails due to the fact that s 79 concerns recovery of specific types of debt under a specific type of contract, whereas s 290 relates to the recovery of debts generally. As Randerson J notes, s 79 simply requires that the set-off may not be given effect in the contractor’s recovery proceeding, but the set-off may still be pursued in a separate proceeding.

[39] Subsections (1) and (2) of s 25 make clear that the parties to a construction contract retain the right to pursue disputed amounts under the regime through adjudication, even though the dispute is the subject of proceedings between the same parties in a court or tribunal:

25 Right to refer disputes to adjudication

(1) Any party to a construction contract—

(a) has the right to refer a dispute to adjudication; and

(b) may exercise that right even though the dispute is the subject of proceedings between the same parties in a court or tribunal.

(2) An example of a dispute is a disagreement between the parties to a construction contract about whether or not an amount is payable under the contract (for example, a progress payment) or the reasons given for non-payment of that amount.

[40] I turn them to consider the issues for determination with these provisions and principles in mind.

Discussion

Given that Payment Claim 11 omits to state the relevant period to which amount claimed relates and does not correctly state the date for payment, is it is an invalid claim?

[41] I am satisfied that the claim is not invalid by reason of the omission and the error Pedestal has raised. My reasons may be stated briefly, but I pause momentarily to mention an objection counsel for City Build made to this submission. Counsel for City Build is quite right that there is no apparent basis in Pedestal’s application for challenging the validity of the payment claim. The application relies on grounds that lack particulars and essentially do no more than reproduce the provisions of s 290(4).

[42] However, the validity of the payment claim was a matter that City Build itself recognised the need to address, as its own grounds of opposition demonstrate, and it makes no claim. The obligation to include or indicate certain matters in payment claims (including the omitted matters) is both a statutory requirement under s 20(2)(d) and a contractual requirement under r 15.1.3. City Build makes no claim to be prejudiced by the belated reference to invalidity, and nor could it reasonably do so. In these circumstances I prefer to deal with Pedestal’s submission on its merits.

[43] Counsel for Pedestal submits that the final payment claim is invalid as it breaches two requirements of r 15.1.3 of the contract (and essentially the same requirements in s 20(2)). The first breach is that the claim does not identify “the relevant period” in which the construction work claimed for was undertaken as it identifies the completion date but not the commencement date for the various works it lists and claims for. Additionally, the covering letter simply says it is for “work completed ... to 30th November 2013”, by way of repeating the completion date indicated in the claim. The second breach is that the claim does not indicate correctly that the due date for payment is “10 Working Days after the date of the Final Payment Schedule” as set out in r 15.1.3(d). It states incorrectly that the total amount is due on 14 January 2014 and the covering letter states that the “due date for payment of this claim is 17 working days from the 16th December 2013”.

[44] Pedestal has the onus however of showing that the omissions are not simply technical omissions that have caused City Build no prejudice. In respect to the due date, counsel for City Build points to decisions of the Court that are apposite and are to the effect that minor errors in a payment claim, such as an error in the due date, should not be allowed to frustrate a subcontractor’s entitlement to payment under the Act.

[45] I accept the approach of Associate Judge Faire in CMP Construction Ltd v

Aluminium Technology Ltd where he states:¹¹

[27] Although s 20(2)(d) of the Construction Contracts Act 2002 requires that a payment claim indicates the due date for payment, [counsel] drew attention to decisions of the court that have held that minor errors in a payment claim, such as an error in the due date, should

¹¹ CMP Construction Ltd v Aluminium Technology Ltd [2013] NZHC 2481.

not be allowed to frustrate a subcontractor’s entitlement to payment under the Construction

Contracts Act 2002. Such errors are regarded as mere technical quibbles.

[28] [Counsel] drew attention to the fact that there is no evidence that the applicant has been misled by the error. He referred me to the two decisions where the courts have disregarded

an error in the due date for payment as being a ground for holding that the payment claim was invalid.¹¹

[29] I conclude that there is nothing in this case that would justify my concluding that an error in the payment date should invalidate the payment claim.

[46] There is nothing in the evidence that seriously suggests that prejudice of any kind is a real possibility because Payment Claim 11 did not reproduce the provisions of the contract that state the due date for payment. Pedestal’s proposition that the omission to include in the payment claim the words that “the due date for payment is

10 Working Days after the date of the Final Payment Schedule” is fatal may be superficially attractive because timing is crucial in certain respects under the statutory payment regime (whether or not modified by contract). However the argument does not bear scrutiny, as:

(a) It is established authority that quibbles about technical deficiencies are not enough to invalidate payment claims.¹² The deficiencies that Pedestal relies on are just that – and the complaint a technical quibble.

(b) Even if the payment claim intended the omitted words, they would not have alerted Pedestal to the need to take steps to avoid the consequences of a failure of not providing a payment schedule on time. Those consequences are prescribed by the Act. Pedestal would still be confronted with the need to acquaint itself with the agreed provisions of contract that govern the requirements for timely payment schedules (which are after all agreed provisions), and with the related default provisions of the Act.

(c) Had Pedestal been concerned about the omission that it now seeks to rely on, it would no doubt have said so in the grounds of its

¹² George Developments Ltd v Canam Construction Ltd, above n 7.

application, as would the architect in the provisional payment schedule that he issued on 12 February.

(d) It is clear that Pedestal’s real concern is not about the omitted words.

Rather, it is about the possibility that it has been caught out by its own failure to meet the relevant time limit for issuing the provisional payment schedule that is required under r 15.2.4 of the contract. That is where the real argument lies.

[47] I am also satisfied that there is no evidence of prejudice of disadvantage emanating from the omission to identify the beginning as well as the end of the period covering the work claimed for. The claim identifies each category of the work allegedly completed by 30 November 2011. Pedestal does not claim it was taken by surprise by these categories, or that it could not tell what work has been done under each category over the period of the contract, or what part of that work it had already paid for.

[48] I do not accept Pedestal’s argument. I am satisfied that City Build’s omissions to include correct advice in the final payment claim as to when payment was due in compliance with r 15.1.3, and to state the commencement of the period the claim covers do not invalidate the payment claim.

[49] I turn next to Pedestal’s alternative arguments. I proceed on the basis that

Payment Claim 11 is a valid claim.

Does the contract provide the time for providing a provisional payment schedule in response to a final payment claim, or does the default time limit in s 22 of the Act apply – whichever is the case, was the architect’s provisional payment schedule of

12 February in time or too late?

[50] The central point at issue is whether for the purpose of s 22(b)(i), r 15.2.4 of the contract makes provision for “the time required” within which a provisional payment schedule must be delivered in response to the final payment claim.

[51] Counsel for City Build submits that there are two possibilities. The first is that r 15.2.4 provides that the provisional payment schedule is to be delivered one month after delivery of the final payment claim if the architect is unable to issue the provisional final payment schedule within that time. The second is that the rule omits any such provision, with the result that the time allowed for providing the provisional payment schedule is determined by the default provision in s 22(b)(ii), and is 20 working days after delivery of the final payment claim.

[52] Counsel submits in either case the provisional payment schedule on

12 February was delivered too late, and therefore that payment of the entire claimed amount became due on 16 January (a month after the claim was served), or

23 January 2014 at the latest.¹³ As payment was not made, the consequences in s 23

follow. Counsel also relies on Ainsworth v Collinson, where Associate Judge Gendall, as he then was, found in dealing with identical provisions that “on a generous view” the payer must provide a provisional final payment schedule within one month from the receipt of the final payment claim, or instead, a provisional payment schedule within 20 working days of such receipt.¹⁴

[53] Counsel for Pedestal argues that r 15.2.4 does not provide a finite allowable time within which a provisional payment schedule may be delivered in response to a final payment claim, but rather prescribes a process that is intended to give the architect however long it takes to assess all amounts claimed. He submits that this is the reason why the contract stipulates payment is due within 10 working days after the issue of the final payment schedule, and why r 15.2.4 does not fix a time for delivery of the provisional payment schedule. The process, he submits, is subject to built-in safeguards by allowing the parties to resort to the contract’s disputes procedure under r 17 in the event of undue delay. In this sense, he submits, “the time required” for delivery of the provisional payment schedule might be described as “indeterminate” but the time is nevertheless provided for. Counsel submits

_{additionally that the decision in Ainsworth v Collinson is wrong.}

13. 23 January 2014 is 20 working days after 16 December 2013, the date of service of the final payment claim.

¹⁴ Ainsworth & Collinson Ltd v Edmunds HC Napier CIV-2009-441-348, 7 October 2009 at [43].

[54] Analysis of the contractual intention of r 15.2.4 is assisted by reading the rule together with r 15.2.5:

15.2.4. Should the issue of the provisional Final Payment Schedule take longer than 1 month, the Architect must issue a certificate in the form of a provisional Payment Schedule for all amounts due under the Contract which can be certified at that time and the process under Section 14 rules 14.3 to 14.7 will apply. The provisional Payment Schedule must be accompanied by a statement setting out the reasons why the provisional final Payment Schedule cannot be issued.

15.2.5 The Architect must continue to issue further provisional Payment Schedules at monthly intervals until the provisional Final Payment Schedule is issued.

(Emphasis added).

[55] These rules provide alternative processes for the initial scheduled response to the final payment claim, prior to delivery of the final payment schedule. Under r 15.2.4 the initial schedule is to be either a provisional Final Payment Schedule or a provisional Payment Schedule, as a pre-requisite to the issue of a provisional final payment schedule (dealt with under r 15.2.4).

[56] If the first of the two processes is adopted:

(a) The architect is to complete an assessment (required by r 15.2.1) of the amounts claimed in the final payment claim. The architect must then prepare the provisional final payment schedule to certify the amounts claimed.

(b) Delivery of the provisional final payment schedule is required within one month of receipt of the final payment claim.

[57] The second process however allows for the eventuality that the assessment cannot in fact be completed within the time required for the first process, by permitting the architect to issue a provisional payment schedule in place of the provisional final payment schedule. In such a case the architect is required by r 15.2.5 to issue further provisional payment schedules at monthly intervals until able to issue the provisional final payment schedule – in which case the process applicable to all prior payment claims prescribed by rr 14.3 to 14.7 applies.

[58] Counsel agree the intent of the two processes is generally non-contentious. There is however a material point of difference between counsel: it is whether r 15.2.4 specifies by when, in the event the architect is unable to issue a provisional final payment schedule within the one month time limit, he or she must issue the first provisional payment schedule. Additionally, whether s 22 of the Act requires that the relevant rule in the contract must state when (in an definitive sense), or whether compliance allows that “the time required” may be an indeterminate time.

[59] As counsel both appeared to recognise at the hearing, the matter is one of contractual interpretation and is not free of difficulty. Realistically, neither counsel suggests that the contractual intent of r 15.2.4 is that the time limit of 5 working days after receipt of a payment claim as set out in r 14.3 is applicable. If it was, it would mean in practice that the architect would have to decide within 5 working days of receiving the payment claim whether it was feasible to complete the task of assessment within a month. That would force on the architect the need to make an arbitrary decision on the matter that may not reflect the reality of the task involved. I do not think that intention is to be readily inferred.

[60] I am satisfied that on an objective reading, the purport of r 15.2.4 is this:

(a) The architect has one month after receiving the final payment claim to endeavour to complete the assessment required and issue the provisional final payment schedule

(b) Failing this, he or she must issue a certificate in the form of a provisional payment schedule, for all amounts due under the contract which can be certified at that time (being the one month point).

[61] It would be pointless to require certification of all amounts due at the one month point, if the intention were that delivery of the certificate should be free of the same time constraint and withheld indefinitely. There would be no sense in requiring certification in the form of the provisional payment schedule at the one month point if only to allow the architect (as counsel for Pedestal submits) to withhold the schedule for an indeterminate time.

[62] Such an approach to the interpretation of r 15.2.4 would also run counter to the obvious purpose of the r 15.2.5 (that the architect is to conduct an ongoing assessment of the components of the final payment claim, to enable monthly certification of scheduled amounts for payment). That would allow the indefinite stalling of the start of the monthly provisional payment schedules as contemplated by r 15.2.5, and then defeat the intent that there be monthly payments of assessed and certified amounts. I do not think that can be the contractual intent of these rules, or that it would be consistent with the legislative intent which the parties must be taken to have had in mind they entered into the contract (in terms of protecting cash flow and maintaining payments).

[63] I see no merit in counsel for Pedestal’s argument that the obvious difficulties with the approach he espouses are answered by the availability of the disputes procedure under r 17 of the contract.

[64] For these reasons, I am satisfied that as a matter of contractual interpretation that the time required within which the initial provisional payment schedule had to be issued in response to the final payment claim under r 15.2.4 was one month after receipt. Additionally, I am satisfied that there is no room to interpret s 22 as permitting a construction contract to allow an “indeterminate” time. To that extent I agree with Ainsworth v Collinson. Parliament did not intend that the contract could leave the time “indeterminate” by, for instance, allowing a “reasonable time”.

[65] I acknowledge that there remains however at least one unanswered question, and it concerns the import of r 14.7.3, which states:

14.7.2 In the event of an unreasonable delay in the issue of a Payment Schedule for any claim which is later the subject of a Payment Schedule, the contractor will be entitled to interest on the amount owing as set out in rule 14.7.2, from the date on which it would have been payable if the delay had not occurred, to the date of payment.

[66] Materially, “Payment Schedule” is defined in the contract as including any

such schedule, including a provisional payment schedule.

[67] If the contractual intention of this provision is to allow an extension of time or an “elastic” time for issuing a provisional payment schedule, then the provision would be contrary to and trumped by the Act – in which case the contract must be interpreted as if it is of no effect by virtue of s 12 of the Act¹⁵. Either the one month period in r 15.4.5 would stand (if my findings are correct) or the default period in s 23 (b)(ii) would apply. Either way, the provisional payment schedule of

12 February was too late.

[68] I am satisfied that such a schedule had to be issued (and not merely prepared) one month from the receipt of the final payment claim. Allowing for a clear calendar month, the schedule had to be issued by 16 January 2014.

[69] I turn then to Pedestal’s alternate claim that other documents issued to City Build before 16 January 2014 constituted a legitimate payment schedule for the final payment claim.

Did Pedestal issue to City Build before 16 January 2014 documents constituting a legitimate provisional payment schedule for the final payment claim?

[70] Counsel for Pedestal relies on certain correspondence as constituting a legitimate payment schedule for the final payment claim. These are the letter Pedestal’s lawyers sent to City Build’s lawyers on 23 December 2014, the email that the architect sent to City Build that same day, and the architect’s further letter of

10 January 2014.

[71] In essence Pedestal’s submission is twofold. First, the components of this correspondence, if individually not sufficient to constitute a payment schedule, collectively constitute a composite and legitimate payment schedule in response to the final payment claim. Any doubt about this, counsel says, fades when the correspondence is viewed collectively with the payment schedule for Payment Claim 10, as a major component of the final payment claim is merely a duplicate of

_{that claim, which has been countered substantially by the payment schedule}

15. Section 12 provides that the Act has effect despite any provision to the contrary in any agreement or contract.

delivered in response to that claim; and because the other major component (the extension of time claim) is clearly disputed.

[72] The second submission is that even though the correspondence does not, at first glance, state the “scheduled amount” (as required by s 21 of the Act and r 14.4 of the contract) it does contain the clear message needed to comply with the minimum requirements of the Act and r 14.4 of the contract. Pedestal did therefore issue a payment schedule in response to the final payment claim before the time limit of 16 January 2014.

[73] As counsel for Pedestal points out, there is no prescribed form for a payment schedule.¹⁶ And there is nothing in s 21 or r 14.1, as he also points out, that says a payment schedule must be comprised in one document. A payment schedule may take the form of a letter, even if the letter does not strictly adopt the terminology of the Act and does not specify that what the scheduled amount is, or that it is “nil”. It will be sufficient if the essential message is clear and unequivocally consistent with the requirements of s 21.¹⁷ An unduly technical approach to the fulfilment of the

requirements for payment schedules is not warranted.¹⁸

[74] Justice Hansen’s observation in Westnorth Labour Hire Ltd v S B Properties Ltd, that even where a document does not adopt the terminology of the Act it will be valid where the essential message is “clear and unequivocal”, is apposite.¹⁹ In that case, His Honour declined to treat a disputed payment schedule as invalid. Though the letter did not state it was a payment schedule or specify that the scheduled amount was nil, it conveyed the essential message that the amount the principal was willing to pay was nil and the reasons for that position. It identified changes for materials returned, instances of faulty workmanship and indicated there would be no

payment until the contractor provided full particulars of what work had been done.

[75] The essential message of a payment schedule must be the precise nature of the monetary dispute between the parties, which is otherwise known as the scheduled

¹⁶ _{NCB 2000 Ltd v Hurlstone Earthmoving Ltd CIV-2010-404-8096, 23 June 2011 at [41].}

¹⁷ _{Westnorth Labour Hire Ltd v S B Properties Ltd HC Auckland CIV-2006-404-1858..}

¹⁸ _{NCB 2000 Limited v Hurlstone Earthmoving Limited, above n 16, at [50].}

¹⁹ Westnorth Labour Hire Ltd v S B Properties Ltd, above n 17, at [28].

amount. Justice Venning in West City Construction Ltd v Edney described the purpose of a payment schedule in the following way:²⁰

[44] The purpose of the payment claim and payment schedule provisions of the Act is to enable a contractor to make a claim for work done in an identified sum and, in the event the employer disputes the claim, the employer has the ability to challenge the claim by formally referring to it but importantly in doing so is required to specify how much the payer says is actually payable. The legislation is designed to ensure the parties identify the difference between them, and to identify what is in issue between the parties in monetary terms so that the parties are adequately advised as to the extent of the difference.

[45] It is not sufficient to refer in some general way to a formula of the nature referred to by the respondent in this case. That is not the intent of the legislation.

[76] Bearing these principles in mind, I accept, in general terms, counsel for Pedestal’s submission that several documents taken individually or cumulatively may constitute a valid payment schedule. I do not however accept his primary submission that the particular correspondence relied upon can be viewed as a legitimate payment schedule to the final payment claim. My reasons can be stated briefly.

[77] First, I begin with Payment Claim 10. The thrust of counsel’s argument is that as the final payment claim is just a re-issue of the prior payment claim albeit with some additions, it has been substantially dealt with by the payment schedule for Payment Claim 10. Rule 15.1.2 of the contract notably provides that no further payment claims may be issued after the service of the final payment claim, Payment Claim 11. There is nothing in the Act or the contract that prevents a contractor from effectively resubmitting prior progress payment claims by repeating them in

subsequent monthly claims,²¹ or that prevents the principal from reiterating the same

response in the next payment schedule if it still holds its former concerns. Because the effect of resubmission reactivates the claim, the principal cannot simply sit on its hands if it wishes to avoid the statutory consequences of not responding to a payment claim.

[78] The second reason relates to Pedestal’s lawyer’s letter of 23 December 2013. Before turning to this reason, I put to one side the unanswered question whether

²⁰ _{West City Construction Ltd v Edney HC Auckland CIV-2005-404-1066, 24 August 2005.}

²¹ George Developments Ltd v Canam Construction Ltd, above n 7.

because of the particular contractual regime the parties have adopted, the provisional payment schedule must be the certificate of the architect.²² It is not necessary to answer this question because the letter cannot properly be characterised as a payment schedule for another reason. To characterise the contents of the letter as such would be to ignore the fact that it was written to provide clarification of settlement terms, and not as a purported payment schedule.

[79] In this last respect, the letter makes clear that Pedestal proceeded on the basis that the architect’s response under r 15.2.4 was to be its payment schedule response. It advises that the final payment claim and the claim for the extension of time “must now be considered” by the architect “and prior to the issuance of a provisional final payment schedule”. Had the lawyers intended their letter to convey the message that it was one or other of the two kinds of provisional payment schedule permitted under r 15.2.4, or that it was somehow a separate response under s 22, they could have said that in place of the contrary message the letter conveyed – and no doubt they would have. Instead, their message was clear that the architect had yet to do what was needed to complete a provisional payment schedule.

[80] I therefore reject the submission that Pedestal’s lawyer’s letter of

23 December is a payment schedule or a part of a composite schedule.

[81] The third reason is the architect’s own communications of 23 December and

10 January cannot be construed as being the provisional payment schedule. Not only do they suffer from omissions (most notably, they omit to state a scheduled amount or convey the essential message of what was in issue in monetary terms), it is clear the architect did not intend them to be the payment schedule response. The

23 December email was essentially raising concerns about various aspects of the final claim and seeking information. The 10 January letter simply declines the claim for an extension of time only and deals with no other matters. Tellingly, the

_{architect’s own evidence makes no suggestion that he issued these communications}

²² This appears to be inferred by the approach that the Court adopted in Marsden Villas Ltd v Wooding Construction Ltd [200] 1NZLR 807, at [81]. The Court inferred that if the parties had intended that there could be two possible responses to each payment claim (one for the contract from the architect, and one for the Act from the principal), the contract would have provided for this.

intending them to be taken as the provisional payment schedule. Rather, in his evidence he makes clear his understanding was that the payment schedule response was not subject to a strict time limit. Consistent with that understanding, he states that it was on 12 February 2014 that he issued the payment schedule response. Materially, in his evidence he says:

There is no strict time frame on when the provisional payment schedule has to be issued under the contract in response to a final payment claim, but it is clear that I have to assess it on the month after receipt, and I did so and corresponded to City Build seeking information.

I have not received any response to my email dated 23 December from City Build. No further response was received following my advice to City Build on 10 January

2014, that the claim for extension of time and alleged prolongation costs had been declined.

On 12 February 2014 I issued a provisional payment schedule in respect of the final

payment claim to City Build and Pedestal...

On 17 February Pedestal advised me no amendments or deductions were required from the provisional payment schedule dated 12 February 2014, and so on 19

February 2014 I issued a “finalised provisional payment schedule” as required by

the contract to City Build...

[82] It would be stretching the reality of the situation to now attempt to construe communications that the architect sent to City Build prior to 12 February as something that he clearly intended the 12 February communication to be.

[83] I accept the communications that Pedestal wishes to rely upon must have left

City Build in no doubt that the claim for extension of time for the period 16 May to

30 September was disputed and that Pedestal indicated it considered it retained the contractual right to liquidated damages for delay. Similarly City Build would have known that Pedestal disputed certain variations and claims for defective works. In these circumstances, when it received these communications, City Build could not but have anticipated that if the overall dispute was not settled it was going to receive a provisional payment schedule. It appears clear enough that it hoped it would not do so until after 16 or 23 January. But in my view that is where the matter was left by Pedestal until 12 February.

[84] I am therefore led to the only tenable conclusion – that there was no payment schedule, provisional or otherwise, issued before the 1 month time limit. Harsh as it may seem, particularly when City Build seemingly deliberately failed to respond to

the architect’s queries and Pedestal’s lawyer’s letters, such is the effect of the statutory regime and of the contractual mechanism the regime authorises. Unless Pedestal can establish an entitlement to rely on its claimed set off, it is liable to pay the full amount claimed now and must leave its argument until later (whether through the disputes procedure that the parties are presently engaged in or such other avenues as may be open to it to challenge the final payment claim).

[85] Given the findings I have reached to this point, I conclude that the provisions in r 14.7, which deal with the time when the principal must pay the scheduled amount shown in the provisional payment schedule, apply. That time is set out in r 14.7.1 as follows:

...within 12 working days of the date of the provisional Payment Schedule, or if one has been issued, within 7 working days of the date of the Payment Schedule, whichever is the earlier.

[86] The entire amount of Payment Claim 11 is therefore due, subject only to any available set-off. I turn then to that question.

Does Pedestal have a set-off of $151,800 that it is able to rely on for the purpose of its application to set aside the statutory demand?

[87] Counsel for Pedestal submits that in the event I find that a provisional payment schedule has not been issued on time for the purpose of r 15.2.4 then I should find that Pedestal may rely on a set-off for liquidated damages which, he submits, it is unarguably entitled to. It follows, he submits, that the amount of the liability that may be enforced by the statutory demand is extinguished by the amount of Pedestal’s contractual entitlement to liquidated damages for delay.²³

[88] A proceeding based on an application for an order to set aside a statutory demand is a proceeding for the recovery of a debt under s 23.²⁴ The court may not therefore give effect to a counterclaim within the contemplation of s 290(4) of the

_{Companies Act unless it is a set-off that comes within the terms of s 79. To permit}

²³ In payment claim 10, City Build claimed $82,081.12. In payment schedule 10 Pedestal deducted

$151,800.00 and released only 40% of the retentions. Consequently, Pedestal claims that City

_{Build owes it $67,871.34. It is in respect of this amount that Pedestal claims it has a set-off.}

²⁴ Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd, above n 5, at [19] and [20].

an unproven set-off to be raised as a means of avoiding payment of an established debt would be inconsistent with the purpose of the Act, which contemplates quick resolution of disputes and payment of due debts.²⁵

[89] A s 79 claim to a set-off against the amount of the statutory demand can only be taken into account if:²⁶

(a) The amount of the set-off is a liquidated amount; and

(b) Judgment has been entered for that amount or there is not in fact any dispute in relation to the claim for that amount.

[90] There is no dispute that the amount Pedestal claims as a set-off satisfies the first requirement. It is a liquidated amount. As it has no judgment for the set-off, the question remains whether or not the parties are in genuine dispute over its entitlement to the set-off.

[91] The issue of liquidated damages (for the daily penalties allowed under

Specific Conditions of Contract for failing to achieve practical completion on

16 May 2013 and not until 30 September 2013) first arose in Payment Schedule 10. At the time City Build raised no dispute about the amended payment schedule. Counsel for Pedestal submits the parties cannot be in dispute as to the quantum of liquidated damages, as the parties contractually agreed on the amount of daily penalty fees for late completion, and because City Build took no issue with the set- off at that time. The particular contract provision states:

14.10.1 If the Contractor does not achieve Practical Completion of the Contract Works ... within the time stated in the Specific Conditions as adjusted for extensions of time, the Principal is entitled to deduct liquidated damages at the rate stated in the Specific Conditions. The liquidated damages will run from the due date for Practical Completion of the Contract Works ... to the actual date of Practical Completion of the Contract Works, or Separate Section.

²⁵ _{At [32].}

²⁶ At [22].

[92] Counsel for City Build submits to the contrary that the parties are in dispute for the purposes of s 79. He submits that the evidence is that in April 2013 the architect and City Build agreed there would be no liquidated damages and that accordingly, there is a dispute. Reference is necessary to the factual evidence before the Court. The minutes of the meeting held between the parties and the architect on

26 March record that after the first date for practical completion had passed, City Build issued a revised construction programme with a final completion date of

20 May. On 5 April the architect issued a certificate of extension of time to 16 May. This was then confirmed in the minutes of the meeting held on 11 April. The following day City Build and the architect exchanged emails, where City Build asserted that it never confirmed that it was on track to completion by 16 May, and where the architect disputed this fact.

[93] On 13 April City Build sent the following email to the architect:

Can you please confirm if you intend to pursue any penalties under the contract or is it still your intention to work with us in good faith to achieve final completion.

[94] The architect responded as follows:

We have no intention to pursue penalties. The Extension of Time & revised practical completion date is a necessary formality.

We are simply trying to facilitate completion in as timely a manner as possible, and are under additional pressure to do so due to the tenant requirements.

[95] City Build argues that it understood this statement as Pedestal, via the architect, waiving its contractual right to pursue liquidated damages for late completion beyond 16 May, which is the reason City Build did not apply for further extensions of time. The architect, on the other hand, deposes that his understanding was that Pedestal were not going to pursue liquidated damages for the period

15 March to 16 May, namely the period between the two formal completion dates. The question is whether the architect’s email, on behalf of Pedestal, constituted a waiver of liquidated damages for late completion.

[96] The answer to that question turns on what each party understood the other to mean in relation to the period for which penalties would not be pursued. It is arguable that in the context of disputing the extension to 16 May as being too short, the architect’s assurance of Pedestal’s intention to continue working in good faith and that the extension is a only a formality gave City Build the understanding that Pedestal waived its right to pursue penalties for completion after 16 May. It is also arguable that Pedestal would not have intended to grant an open-ended extension.

[97] On the material before me, I cannot determine this issue. I am therefore satisfied that there is a dispute in fact between the parties in relation to Pedestal’s claim for liquidated damages, and as such, I am prevented from finding that Pedestal has a set-off for the purpose of dealing with its application to set aside City Build’s statutory demand.

Result

[98] For the reasons I have discussed, I decline Pedestal’s application for an order to set aside City Build’s statutory demand. I consider however that Pedestal should have time to satisfy the demand, and I extend time for compliance to the expiry of

15 working days from the date of this judgment.

[99] Failing compliance, pursuant to s 290(3) of the Companies Act, City Build may proceed with an action for liquidation. In so ordering, I do not wish to be seen as expressing any view on the merits of such an application. I simply observe that the Court, in exercising discretion to set aside a statutory demand under s 290, decides whether it is just to allow the statutory demand to stand so that non-

compliance will give rise to a presumption of inability to pay debts.²⁷ In that context,

the Court however does not exercise discretion whether a liquidation order should be made.²⁸ As the Court of Appeal in Laywood v Holmes Construction observed obiter

_{different considerations arise in a proceeding for an application to set aside a}

²⁷ Volcanic Investments Ltd v Dempsey & Wood Civil Contractors Ltd (2005) 18 PRNZ 97 (HC) at

_{[13], [19] and [20].}

²⁸ At [13].

statutory demand on the one hand and an adjudication of an order to wind up a company on the other, but it expressed no opinion on the point.²⁹

[100] Additionally, as noted in 239 Queen Street Developments Ltd v Watts & Hughes Construction Ltd³⁰ by Associate Judge Bell in citing the observation in Laywood, claims of a set-off that could be raised on liquidation should be heeded and not be brushed aside by an immediate order for liquidation.³¹ Upon production of further evidence as to its claims for damages for delay, it is conceivable that Pedestal may be able to defend itself in liquidation proceedings if they are filed. This judgment does not purport to deal with that question.

Costs

[101] Costs are reserved. If the parties cannot agree on costs, any party seeking costs is to file and serve a memorandum within 8 working days of the date of this judgment. Any memorandum in opposition is to be filed and served within a further

_{8 working days.}

_{Associate Judge Sargisson}

²⁹ _{Laywood v Holmes Construction Wellington Ltd [2009] NZCA 35; [2009] 2 NZLR 243 (CA) at [61] and [65].}

³⁰ _{239 Queen Street Developments Ltd v Watts & Hughes Construction Ltd [2012] NZHC 1791.}

³¹ At [24].