Christchurch firm wins after ripping up carpark over debt

CSC's director believed Watts & Hughes had chosen to treat the claim as received by the due date. Photo / Thinkstock

A Court of Appeal win for a Christchurch company which dug up a carpark over a $300,000 payment reinforces the importance of clear communication in arrangements with subcontractors, says one of the country's leading law firms.

Otherwise, says Chapman Tripp, a court can take the matter out of the parties' hands.

Complete Siteworks Company was a subcontractor in a Christchurch supermarket carpark project and between July 2013 and January 2014 issued four late payment claims to head contractor Watts & Hughes.

While Watts & Hughes had the discretion under the subcontract to treat these claims as if they had been received the following month, it dealt with them as if they had been submitted by the due date.

However, the next payment claim in February 2014 was also late and while Watts & Hughes again could treat it as if it had come in the following month, it did not tell CSC it intended to do this.

CSC's director believed Watts & Hughes had chosen to treat the claim as received by the due date.

When he did not receive a payment schedule or payment by late March, he instructed lawyers to serve a statutory demand on Watts & Hughes for $306,077.

CSC also entered the site and dug up parts of the carpark.

Watts & Hughes, on the other hand, said it had elected to treat the payment claim as being received during March and therefore no payment schedule or payment was due until late April.

The head contractor applied for the High Court at Wellington to set aside the demand.

But Associate Judge Warwick Smith concluded that Watts & Hughes was required to communicate its decision on the payment claim and that it had not done so.

"The result of that finding is that the amount of payment claim No6 did become due and owing by Watts & Hughes to CSC on 27 March 2014, and Watts & Hughes had no arguable defence to the statutory demand. The application to set aside the statutory demand is accordingly refused," the judge said.

The head contractor then took the matter to the Court of Appeal, arguing the payment claim was invalid because it was late.

The Court of Appeal, last year, rejected this.

Watts & Hughes also argued that because CSC dug up part of the carpark it could not submit a claim because it had undone the work. However, that argument was also rejected.

In its commentary on the case, released last week, law firm Chapman Tripp said the judgment confirmed parties must clearly communicate the choices they make in contractual elections.

"Otherwise, the court may take the matter out of the electing party's hands," the firm said.