Page 102 - Build 161

Departments/Legal
By Karen Shaw, Senior Associate, Harkness Henry, Hamilton
Claim size doesn’t matter
A recent High Court decision has clari ed that the Construction Contracts Act 2002 does apply to residential renovations involving homeowners.
THE ABSENCE of agreement on a price does not mean that a construction contract does not exist. Furthermore, the fact that the costs of recovery may be disproportionate to the amount claimed is not a good reason for declining summary judgment.
These were two reasons why the High Court recently overturned a District Court Judge’s decision to refuse a contractor summary judgment in Floorman Waikato Ltd v McRae.
Judge found no agreement on price
The contractor, Floorman, issued a payment claim for the sum of $6,150 plus GST. The respondent, Mr McRae, failed to provide a payment schedule in response. Mr McRae was unhappy with the job, which involved sanding and coating wooden floors at his property. When its invoice went unpaid – except for a small payment of $200 – Floorman issued summary judgment proceedings in the District Court.
The District Court Judge declined to grant Floorman summary judgment because he found Floorman and Mr McRae were not
in agreement on the price for the work. It was arguable, therefore, that there was no concluded contract. The District Court Judge had other issues with the claim:
● He said he had ‘serious concerns’ about whether the Construction Contracts Act 2002 (CCA) applied to the works and observed that Mr McRae was mysti ed as to why the Act applied. Mr McRae relied on arguments under the Fair Trading Act 1986 and the Consumer Guarantees Act 1993. The Judge said, ‘If the plainti is right, the practical a ect is for a defendant who has got nothing to do with the construction industry and he has never heard of the Construction Contracts Act 2002, can be handed a bill after the job has been done together with a sheet of paper saying that it is a claim under the Construction Contracts Act 2002 and requiring the matter to be dealt with under the provisions of an Act which they have never heard of. That, seems to me, is fundamentally unfair ...’
● The Judge also explained why he would not have exercised the discretion to
award summary judgment. He considered the size of the claim made it dispro- portionate to use the CCA. He said, ‘It seems to me that the invocation of the Construction Contracts Act 2002 in circumstances where the claim is well within the Disputes Tribunal jurisdiction is inappropriate if the contract involves a lay person and he has no prior knowl- edge of the provisions which operate in the Construction Contracts Act 2002 in relation to payment disputes about workmanship and the like.’
There was a construction contract
In the High Court, Justice Davidson did not agree that it was reasonably arguable that there was no construction contract. He said the evidence showed Mr McRae instructed Floorman to go ahead and perform the work sanding and apply a polyurethane coating to the oor. It did not matter that there was no agreement on price because the parties had agreed that would be determined by the ooring product that Mr McRae decided to use.
100 — August/September 2017 — Build 161