Auckland Electrical Solutions Limited v The Warrington Group Limited [2016] NZHC 2245 (22 September 2016)

Last Updated: 27 September 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-001649 [2016] NZHC 2245

IN THE MATTER	of an appeal against a decision of the District Court
BETWEEN	AUCKLAND ELECTRICAL SOLUTIONS LIMITED Appellant
AND	THE WARRINGTON GROUP LIMITED Respondent

Hearing:	21 September 2016
Counsel:	N Tabb for Appellant S Gazley for Respondent
Judgment:	22 September 2016

_{JUDGMENT OF DOWNS J}

This judgment was delivered by me on Thursday, 22 September 2016 at 4 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel: N Tabb, Auckland.

Steindle Williams Legal, Auckland.

AUCKLAND ELECTRICAL SOLUTIONS LTD v THE WARRINGTON GROUP LTD [2016] NZHC 2245 [22

September 2016]

Background

[1] The respondent engaged the appellant to provide electrical work on a single project from July 2014 until August 2015. The appellant sent the respondent invoices totalling $83,599.57. The respondent paid $62,214.39 but declined to pay five invoices issued within the period 30 April 2015 to 30 June 2015. Credit notes in the respondent’s favour and further payment by the respondent of $12,500 left

$8,659.83 outstanding.

[2] The appellant sought summary judgment of that sum on the basis the invoices constituted payment claims pursuant to the Construction Contracts Act 2002. It sought related debt collection costs of $4,428.86. The District Court declined summary judgment. This is an appeal against that determination.

[3] In the Court below, Judge Lovell-Smith comprehensively set out the facts, law, and arguments.¹ But the Judge’s actual analysis was brief:

[57] The plaintiff’s invoices annexed to the affidavits of John Campbell and Stephen Mettam all contain reference to the Act, whereas in those annexed to David O’Connell’s affidavit, there is no such reference.

[58] The invoices also lack detail in the areas outlined by the respondent. [59] These are significant credibility issues and in my view the respondent

^{has an arguable defence.}

[60] Furthermore, the respondent has raised issues about the standard of the work which should also be explored more fully.

[61] The application for summary judgment is therefore declined. Given the amount involved, these proceedings are remitted back to the Disputes Tribunal.

[62] The respondent is entitled to costs on a Category 2 basis to be filed by the Registrar.

_{[4] Such is the background to this appeal.}²

¹ _{Auckland Electrical Solutions Ltd v Warrington Group Ltd [2016] NZDC 5565.}

2. District Courts Act, s 75 and Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.

Something more about the facts

[5] Mr Steven Mettam, the director of the appellant, has sworn an affidavit attaching what he says are the invoices sent to the respondent between 30 April 2015 and 30 June 2015. Materially, these invoices all contain the notation: “This invoice is tendered under the Construction Contracts Act 2002”.

[6] Mr David O’Connell, a director of the respondent, has sworn an affidavit annexing what he says are the invoices received from the appellant in this period. Materially, these invoices do not contain the notation above. This point has significance because as observed above, the appellant’s application for summary judgment was brought on the basis the invoices constituted payment claims under the Construction Contracts Act. And s 20(2)(f) of that Act provides such a claim must state it is made under the Act.

[7] The appellant instructed a debt collector, Law Debt Collection Ltd. On

3 August 2015, it sent the respondent a statutory demand for $21,159.83.

[8] On 11 August 2015, Mr John Campbell of Law Debt Collection Ltd sent an email to the respondent attaching the five invoices. It is common ground this set of invoices did refer to the Construction Contracts Act. The invoices did not provide a due date for payment other, on the appellant’s argument, by reference to the phrase: “Net 20”.

[9] Mr Campbell’s email informed the respondent:

(a) It had not filed a payment schedule as required by the Act, and implying the period for doing so had passed.

(b) The outstanding monies “must be paid immediately” to the offices of

Law Debt Collection or its bank account.

[10] On 14 August 2015 the respondent paid the appellant $12,500.00.

[11] On 20 August 2015 Mr Mettam met with Mr O’Connell and a second director of the respondent at the offices of Law Debt Collection Ltd, with a view to resolving the dispute. Mr Campbell was also present. His affidavit records that at that meeting, the respondent’s directors were “asked why they had not paid the outstanding invoices and apart from a bare assertion of a dispute they were not able to give any reasons for not paying the invoices”. Mr Campbell gave the directors another copy of the five invoices identical to those sent by email nine days earlier.

[12] As will be apparent, the appellant’s position is that the respondent had no reason not to pay and gave none.

[13] The respondent’s position is that it has paid most of the invoices submitted by the appellant but not paid the balance because the underlying works were defective or of poor quality. Recognising s 79 of the Construction Contracts Act precludes this very type of argument, the respondent’s position on appeal was that enactment had not been complied with so that summary judgment was unavailable.

[14] Events subsequent to the August meeting need not be recorded here. It is sufficient to observe common sense did not prevail: a modest dispute which should have been resolved in the Disputes Tribunal—if not settled outright—resulted in summary judgment proceedings in the District Court and this appeal when that application was dismissed.

Why the appeal must be dismissed

Service of the original invoices in April, May and June

[15] Summary judgment is available against a defendant only if the plaintiff satisfies the Court the defendant has no defence to the cause of action.³

Unsurprisingly, genuine credibility contests, meaning those which would or may go to the existence of a defence, are an impediment to summary judgment.⁴ This is

_{because on such applications, the evidence is in written form only.}

³ _{District Court Rules, r 12.2.}

⁴ Andrew Beck (ed) McGechan on Procedure (online looseleaf edition, Westlaw) at [HR12.2.03].

[16] Against this background, Judge Lovell-Smith was unquestionably correct to dismiss the summary judgment application insofar as it relied upon original service of the April, May and June invoices. If Mr Mettam is correct, the invoices did contain reference to the Construction Contracts Act as required by that enactment. But if Mr O’Connell is correct, the original invoices did not. Moreover, there are two possibilities in relation to their evidence. The first, and happy possibility, is that one of the men is mistaken. The second, unhappy possibility is that one of the men has been other than candid in order to “win”. These stark choices, which could only be resolved through cross-examination at trial, serve to highlight the unsuitability of this aspect of the claim to summary judgment.

[17] I record Ms Tabb’s submission summary judgment does not preclude robust

factual assessment on the papers, a point emphasised by the Court of Appeal:⁵

[26] The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[18] But here, it is not possible to make the assessment without cross-examination. And in any event, it would procedurally unfair to do otherwise in light of the implications of preferring one deponent’s evidence over the other; see [16] above.

[19] Materially, the respondent sought a direction in advance of the hearing for the original invoices annexed to Mr O’Connell’s affidavit to be placed before me at the hearing—obviously for my inspection. Katz J made such an order on 12 September

2016. Unfortunately, the District Court was not able to comply with that direction. The point is that this is not a case in which the respondent was seeking to rely only upon copies of documents in circumstances in which those copies might have been

_{manipulated to advance its cause.}

⁵ Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307.

The August re-service of the invoices as a fresh payment claim under the Act

[20] The remaining aspect of the claim must be dealt with wholly afresh,⁶ because the Judge’s reasons in relation to this aspect are open to a number of different interpretations, a difficulty compounded by their brevity. The appellant did not seek to persuade me from approaching the case in this way, albeit it made no concession the Judge had erred.

[21] The appellant contends that irrespective of whether the original invoices satisfied the s 20(2)(f) requirement to refer to the Act, those emailed to the defendant on 11 August and provided again in person on 20 August, did so. So, the appellant contends this sequence constituted service of payment claims in terms of s 20 of the Act. It says that because the respondent never responded with a payment schedule, the outstanding portion became a debt due to the appellant in terms of s 23 of the Act, and hence one amenable to enforcement by way of summary judgment.

[22] I disagree. While the law is clear a party may resubmit prior claims by repeating them in subsequent payment claims,⁷ whether there has been a subsequent payment claim turns on the facts. And here, the facts are against the appellant. I am far from satisfied there is no available defence. Indeed, it is almost certain the August sequence did not give rise to a valid payment claim under the Act.

[23] The re-served invoices contained their original dates, being dates in April, May, and June 2015. Section 20(2)(d) of the Act requires a payment claim to identify “the due date for payment”. The only reference to a due date is a notation on each invoice of “Net 20”. There was no evidence before me as to what significance, if any, this phrase has in the building industry. But it is not an unreasonable assumption this means payment was due on the 20^th of the month following the invoice, and there is support for that in the evidence: the appellant paid several invoices a month or so after they were tendered. It is here the appellant’s

_{problems arise:}

⁶ As noted above, this is an appeal by way of rehearing, and hence there is a broad discretion to reconsider a lower Court’s decision. However, because of the difficulties identified at [20] above, by “wholly afresh”, I mean just that.

⁷ Sol Trustees Ltd v Giles Civil Ltd [2014] NZHC 1813.

(a) Notwithstanding the implication payment was due on the 20^th of the following month, these invoices were served with an associated demand for immediate payment in the 11 August email. Nothing was said or done at the 20 August meeting to countermand that.

(b) More importantly, even though the Act provides time for the respondent to file a payment schedule (within 20 working days) after service of a payment claim,⁸ Mr Campbell’s email of 11 August implied that time had already passed. Again, nothing was said or done at the 20 August meeting to correct that impression.

[24] Consequently, there is significant dissonance between the appellant’s submission the invoices constituted fresh payment claims under the Act,⁹ and the available evidence, which implies the appellant was relying upon the invoices as ones already tendered and liable for immediate payment.

[25] The case law to the effect an error in relation to the due date will not necessarily vitiate a payment claim is distinguishable,¹⁰ as here the invoices’ dates were inconsistent with the actions of the appellant in seeking immediate payment. And importantly, the appellant implied the time for filing a payment schedule had passed when, if the payment claims were freshly issued, it had not.

[26] In short, the evidence implies the invoices were provided as copies of an antecedent payment claim rather than a fresh one, which under the Act would have given rise to a further 20 working day period for a payment schedule.

[27] The appellant submitted the case should be approached in accordance with

the Act’s purpose firmly in mind. As to that, the Court of Appeal has observed:¹¹

The purpose provision of the Act includes the fact that the Act was ‘to

_{facilitate regular and timely payments between the parties to a construction}

⁸ _{Constructions Contracts Act 2002, s 22(b)(ii).}

⁹ Given the acute factual dispute about whether the original invoices contained reference to the

_{Act, the appellant had to rely on the subsequent invoices being fresh claims to succeed.}

¹⁰ CMP Construction Ltd v Aluminium Technology Ltd [2013] NZHC 2481 and Pedestal Ltd v City

_{Build Construction Ltd [2014] NZHC 1783, [2014] NZCCLR 32.}

11. George Developments Ltd v Canam Construction Ltd [2005] NZCA 84; [2006] 1 NZLR 177, (2005) 18 PRNZ 84 (CA) at [41].

contract’. The importance of such regular and timely payments is well recognised....

[28] To similar effect is Salem Ltd v Top End Homes Ltd, in which the Court of

Appeal said:¹²

The whole thrust of the Act is to ensure that disputes are dealt with promptly and payments made promptly, because of the disastrous effects that nonpayment has, not only on the head contractor, but also on its employees, subcontractors, and suppliers....

[29] All of this is correct, and nothing in this judgment is intended to suggest otherwise. But the difficulty for the appellant remains: the evidence does not support its thesis the August sequence was a fresh payment claim under the Act. Square peg, round hole.

[30] This aspect of the claim for summary judgment must also fail.

Conclusion

[31] The appeal is dismissed.

[32] At the request of the parties, I reserve the issue of costs. I will rule if necessary. However, I invite them to reach agreement and remind them of my observations at [14].

...................................

_{Downs J}

¹² Salem Ltd v Top End Homes Ltd [2005] NZCA 375; (2005) 18 PRNZ 122 (CA) at [11].