Section 21 (3) of the Construction Contracts Act 2002.
(3) If the scheduled amount is less than the claimed amount, the payment schedule must indicate—
(a) the manner in which the payer calculated the scheduled amount; and
(b) the payer’s reason or reasons for the difference between the scheduled amount and the claimed amount; and
(c) in a case where the difference is because the payer is withholding payment on any basis, the payer’s reason or reasons for withholding payment.
Case Law references
Under “Analysis” Van Bohemen J in [Spotless v Fletcher CIV 2020-404-000572 [2020] NZHC 194] refers…
[56] [This] confirm[s] that the primary focus is on ensuring that payees are paid what they claim unless the payer complies with the requirements of s 21. The purpose is to ensure that principal contractors cannot starve subcontractors of the cash flow they need to keep their business going by delay or by advancing unclear or imprecise reasons for delaying payment. As Harrison J said in Metalcraft Industries Ltd v Christie:
The specific purpose of the payment schedule is to give the contractor full and unequivocal
notice of all areas of difference or dispute to enable it to properly assess its future options.
[58] As Matthews AJ said in Seating Systems Ltd v Kidson Construction Ltd:
[28] … The three requirements for a payment schedule set out in s 21(3) … are directed at creating a clear position which may lead to the payee accepting the payment in full settlement (because it accepts the calculation and the reasons for it) or to the payee determining that the issues must be referred to a dispute resolution process. This part of a payment schedule is therefore of considerable importance.
[59] If that was all that had been said about s 21(3), Mr Price would have a strong foundation for basis for his position that a payment schedule must set out with some precision how a scheduled amount was calculated and the reasons for paying less than the amount claimed. However, Matthews AJ went on to say:
Nonetheless if the essence of the reasons for withholding payment is made known sufficiently to enable the payee to make a decision on whether or not to pursue a claim and to understand the nature of the case it will have to meet if the matter proceeds to adjudication, that is sufficient.
[61] …
The requirement is to indicate the reason or reasons for the deduction. How that is done may vary according to the circumstances of the contract and the practice of the parties, provided that the reason or reasons are adequately indicated.
A concise CCA meaning of Indicate
Indicate - express your point briefly, with sufficient clarity to convey understanding.
Indicate >> point out, show or express briefly. [Merriam-Webster]
Elucidate >> to give a clarifying explanation [Merriam-Webster]
By Matthew Ensoll
Life Member NZIQS. Reg.QS.
Editor New Zealand Building Economist.