Legal bites

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This digest of industry-related legal issues will bring you up to speed with some of what is happening in the industry.

THERE ARE USEFUL LESSONS from recent changes to the Construction Contracts Act, a High Court decision and a high profile class action.

Expanded definition of construction work

The definition of construction work under the Construction Contracts Act 2002 has now expanded to include design, engineering and quantity surveying services. From 1 September 2016, persons carrying out these services have been entitled to utilise the payment procedures set out in the Act.

Any persons carrying out this type of work should review their terms and conditions of trade and payment systems to comply with the Act and take advantage of the fast-track payment procedure.

Follow process when appointing adjudicator

A High Court decision earlier this year illustrates the importance of correctly following the appointment process for an adjudicator under the Construction Contracts Act.

In this case, New Zealand Fire Sprinkler Protection Limited (NZ Fire) sought judicial review of an adjudicator’s decision. The adjudicator had ordered it to pay $107,314 to the other party, AFS Total Fire Protection Limited (AFS).

The Courts do not readily intervene in adjudicators’ determinations because of concerns that this might cut across the scheme of the Act and undermine its objectives. Despite the reasonably high threshold for judicial review, however, the Court decided that, in this case, there were both procedural failures and a jurisdictional error.

Agree on adjudicator

AFS emailed NZ Fire that it had appointed an adjudicator, Mr Blind. That step did not comply with section 33(1)(a) of the Act, which required AFS to seek NZ Fire’s agreement on the adjudicator’s appointment.

Also, Mr Blind had been a director of certain companies of which AFS was a shareholder. Under section 35(3) of the Act, an adjudicator is required to disclose any conflict of interest. Mr Blind did not do this.

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Natural justice

NZ Fire also argued that the adjudication process had failed to comply with the requirements of natural justice under section 41 of the Act. It was not given any timetable to provide information to the adjudicator, and it did not receive AFS’s supporting documents. Also, Mr Blind proceeded with the adjudication despite his knowing that NZ Fire’s director was overseas but wanted to participate.

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Abuse of process

The High Court was satisfied that NZ Fire had no opportunity to be heard before the adjudicator made the decision in AFS’s favour. Mr Blind also failed to give any reasons for his decision.

The High Court found that there was no dispute requiring adjudication and the process was an abuse of process. NZ Fire had previously issued a statutory demand that AFS had failed to comply with.

After NZ Fire commenced liquidation proceedings, it had reached a settlement agreement with AFS, and eventually, the liquidation proceedings were discontinued. The High Court noted that although the settlement agreement between the parties had not expressly recorded it was in settlement of all issues between the parties, that was the effect of the settlement. The Court found that the purported invocation of an adjudication process was an abuse of process.

Green light to representative action

The High Court has given permission for a representative class action to proceed against James Hardie. This follows the Supreme Court’s decision not to strike out proceedings against Carter Holt Harvey.

There is now further time for persons affected by James Hardie products to opt in to the proceeding. Thousands of properties were built with Harditex and Titanboard in the 1990s and early 2000s. This proceeding may offer a final remedy for leaky claimants that are otherwise out of time.

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This article is not intended as legal advice. For further information, contact your legal advisor or Harkness Henry on (07) 838 2399.

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