New CCA case further vindicates Act

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Marsden Villas Ltd v Wooding Construction Ltd is an interesting case under the Act because it considers in depth whether the construction company, Wooding Construction, was entitled to suspend works. Marsden Villas entered into a construction contract whereby it commissioned Wooding Construction to build 30 apartments in Paihia. 

The contract took longer than was anticipated to complete, and significant disputes arose between the parties. Wooding Construction had gone over time in terms of completion of the contract, but it had submitted various extension of time claims to Marsden Villas. 

These claims were disputed by Marsden Villas and have become subject to the adjudication process. The facts in this case turn on one progress claim, namely 29. This progress claim was dated February 27, 2006, and the sum of approximately $3m was claimed. 

A payment schedule was served by Marsden Villas on March 15, 2006. On March 30, 2006, Wooding Construction gave Marsden Villas notice of its intention to suspend work, relying upon the Act. It was on the basis that Payment Claim 29 had not been responded to and/or paid, and indicated that work would stop in five working days if payment was not made. 

On April 7, 2006, Wooding Construction gave notice that it had suspended construction work from that date, and all work ceased. Wooding Construction also gave an alternative basis for suspension of works being non-payment of Payment Claim 26. 

The issues to be resolved by the court were as follows: 

1 Did Wooding serve a valid payment claim in terms of the Act? 

2 Did Marsden serve its responding payment schedule within the relevant period of time? 

3 Was Wooding entitled to suspend works? In relation to 1, it was argued that the payment claim was not valid for two reasons. First, that it covered a period of work of less than one month and therefore breached the specific contractual term to the effect that progress claims would not cover a period of less than a month. 

The court ruled that the meaning of such a clause was that progress claims ought to be made on a monthly basis rather than a weekly or bi-weekly basis. So the payment claim was valid in this regard. It was also argued by Marsden Villas that Progress Claim 29 was invalid as a payment claim as it included within it previously unclaimed progress claims, in particular Progress Claim 26. 

Again the court ruled against this argument and said that this did not make a payment claim invalid. Accordingly, the court ruled in favour of it being a valid payment claim. As regards 2, it was argued that the Payment Schedule was served upon Wooding by Marsden within the relevant time period prescribed by the Act, namely 20 working days. 

However, the actual contract specifi ed 10 working days, and this was held to be the enforceable time period by the court. Signifi cant in the court’s fi nding in this regard was the fact that there had been an unequivocal adoption by the parties of the provisions of clause 12 in the contract as to the sending and response to the payment claim. 

So the 10 working day period was applied. In short, it was ruled that a valid payment claim had been served and not responded to within the due time in accordance with the contract wording. Thus Progress Claim 29 was a debt due and owing by Marsden Villas. The final issue for the court to determine was whether Wooding was entitled to suspend work. 

It was argued by Marsden Villas that even if they failed to serve their Payment Schedule within the prescribed period, so long as it was served prior to expiration of the Notice of Intention to Suspend Works being five working days, then works could not validly be suspended. However, the court was not impressed with this argument and, instead, concluded that the only way suspension of work could be avoided after a Notice of Intention to suspend works had been served, would be to pay the claimed amount in full. 

Accordingly, it was ruled that Wooding Construction was entitled to judgment for the full amount claimed in Progress Claim 29 less the amount that had already been paid. It was also ruled that the suspension was valid, and that the suspension could only be lifted once Progress Claim 29 had been paid in its entirety. 

This case is another good example of the Act working in practice.