Several design disciplines, including landscape design, have been governed by the Construction Contracts Act 2002 (“CCA”) since 2016, when the definition of “Construction Works” within the Act was expanded. The CCA provides significant protections, risks and benefits for industry operators (as well as clients) in all residential and commercial projects. This article outlines the key aspects of the CCA that landscapers and landscape designers should be aware of.
Landscaping and the CCA
Landscaping has been included within the definition of “Construction Works” in the CCA since its enactment.
On 1 September 2016, amendments were made to the CCA, including expansion of the definition of “Construction Works” to include design work which is relevant to construction. Architecture, interior design, spatial design, and landscape design are just a few of the design disciplines subject to the CCA as a result.
It is important for landscapers and landscape designers to be aware of the mechanisms available and the protections, risks and benefits applicable to them under the CCA.
What does the CCA do?
The CCA applies to all construction contracts in New Zealand, whether the contract is residential or commercial, written or oral. It aims to protect industry operators and consumers from unfair contractual provisions and dishonoured contractual obligations, by:
- Providing a framework to facilitate regular and timely payment;
- Prescribing a process to resolve disputes efficiently and economically; and
- Providing remedies for the recovery of outstanding payments.
The 2016 amendments also saw a prohibition on conditional payment provisions, whereby payment is conditional on the payer first being paid by a third party (often referred to as “pay when paid” clauses). This change, among others, was sparked by issues of subcontractor oppression and stifled cash flow within the construction industry, which saw many small businesses and sole operators go out of business.
Crucially, parties cannot contract out of the CCA, ensuring its effectiveness in this context.
Frameworks, Processes and Remedies Provided by the CCA
Payment Claim/Payment Schedule Framework
Parties can agree on their own payment terms for the number of payments, payment intervals and amounts for payment. If the parties do not elect to specify these details, the default provisions of the CCA will apply.
The CCA provides a Payment Claim/Payment Schedule system, which is useful in obtaining payment from disinclined parties, provided that the prescribed process is followed.
A Payment Claim may be issued where works have been undertaken. It will be valid for the purposes of the CCA only if it:
- Is in writing;
- Identifies the relevant construction project;
- Identifies the relevant work undertaken for that construction project;
- Indicates the claimed amount and due date for payment;
- Indicates the manner in which that amount was calculated; and
- States that it is a payment claim made pursuant to the CCA.
Upon receipt of a valid Payment Claim, the recipient may elect to respond via a Payment Schedule, which must be done within 20 working days. A Payment Schedule will be valid for the purposes of the CCA only if it:
- Is in writing;
- Identifies the Payment Claim to which it relates;
- Indicates the amount the client is willing to pay;
- Identifies reasons for the difference in amount, if the amount that the client is willing to pay is different to the claimed amount; and
- Identifies reasons for the lesser amount, if the amount that the client is willing to pay is less than the claimed amount.
If a Payment Schedule is issued, any amount that the recipient is willing to pay is due by the date specified on the Payment Claim (unless the parties have an alternative arrangement).
If a Payment Schedule is not issued, the client is liable to pay the claimed amount in full by the date specified on the Payment Claim.
Any dispute arising from a landscape design contract (including invoice disputes and payment defaults) can be referred to the adjudication process under the Act. Adjudication is a relatively quick and inexpensive dispute resolution process. Either party may apply for adjudication. An adjudicator will review the evidence and information set forth by the opposing parties and make a decision regarding the rights and obligations between the parties involved.
The adjudication process is final and cannot be appealed by the parties through the courts. The only avenue for parties to overturn an adjudication determination is judicial review. Judicial review can be lengthy and expensive, and is therefore relatively rare in this context.
Remedies for Non-payment
In some cases, an adjudicator can approve the issue of a charging order in respect of the construction site, which will prevent the debtor from dealing with or disposing of the relevant property until the debt against the property is paid in full.
The CCA also provides remedies in the event of non-payment following the adjudication process. An application can be made to the District Court for the adjudicator’s determination to be entered as a judgment.
Important Steps for Landscapers and Landscape Designers
Because the CCA applies to all landscape design projects, it is crucial for landscapers and landscape designers to be aware of the risks and implications of non-compliance.
Landscapers and landscape designers should not only be aware of the contents of the CCA, but also actively implement its mechanisms. Key ways that the CCA can be used to benefit the landscape business are:
- Ensuring clear, practical contracts are in place which adhere to the form and content required by the CCA (written and signed by all parties);
- Using a CCA-compliant Payment Claim template when invoicing;
- Making swift use of the adjudication process for problematic disputes which are unlikely to be otherwise resolved; and
- Exercising the right to access the remedies provided by the CCA in the event of non-payment.