BuildLaw, Issue 17: Special Edition Winter 2013

Welcome to BuildLaw®: Special Edition Winter 2013. We have decided to publish a special edition of BuildLaw this winter to highlight the key issue of legislative reform in respect of those statutory regimes which first, seek to lay down basic construction standards and then, applying those standards, to control and supervise new construction and second, to provide procedures for recovering payment for construction work and resolving disputes arising out of construction contracts.

In March 2012, Parliament passed the Building Amendment Act 2012. The central aim was to restructure the building consenting system in New Zealand by wholesale amendment of the Building Act 2004.
In January of this year, Parliament introduced the Construction Contracts Amendment Bill to update and amend the Construction Contracts Act 2002. The Bill has now been referred to the Commerce Select Committee and submissions to the Select Committee on the Bill need to be received by 25 July 2013.

BDT advocated strongly for reform and is supportive of many of the changes that are in the Amendment Bill.
 
MBIE has recently indicated that the government may be receptive to introducing legislation directed at minimising the incidence and impact of insolvency on contractors, and in particular to address the unconscionable abuse of the retentions regime. BDT is supportive of any such initiative and will be making comprehensive submissions on the Bill including advocating for further amendments that will result in a better functioning and fairer building and construction industry.
 
To promote discussion around the issue and encourage considered submissions to be made for the purpose of legislative reform, I have attached my presentation notes to a recent specialist trades conference on the subject of security of payment and retentions.
 
I trust you find these two articles interesting and thought provoking.

CLICK HERE TO DOWNLOAD A PDF VERSION OF THIS SPECIAL EDITION OF BuildLaw
 
We welcome any comment/input from readers in relation to the Construction Contracts Amendment Bill before Tuesday 23 July 2013.
 
THE STATE, THE BUILDING CODE AND THE COURTS:
PREVENTION OR CURE?
SECURITY OF PAYMENT - RETENTIONS
WE CAN’T FIX THE PAST – CAN WE FIX THE FUTURE?
Philip Britton has kindly submitted an updated and amended version of his comprehensive and erudite paper based on a talk he gave to the New Zealand Society of Construction Law in Auckland on 1st May 2012. The  topic  of  Philip’s most enjoyable presentation was the ‘The State, the Courts and Construction Standards: Prevention or Cure?’ being an analysis of the state’s and  the  courts'  respective  roles  in  developing construction standards, the  difficult policy and legal issues underlying the law of  construction  defects,  and  contrasting  recent  experience  in  England  and  Wales  with  the  position  in New Zealand.
 
The paper’s title obviously poses a false dichotomy: the ideal approach should attempt to deliver ‘prevention’, but must also offer some form of ‘cure’.  No ‘front-end’ building control system can ever guarantee 100% compliance with its standards: even a lawyer who reads only the Law Reports already knows this.  Accepting, therefore, that a degree of non-compliance will always be a fact of life, the ‘back-end’ remedies which are available to affected owners remain an important aspect of the legal framework concerned with construction quality.  As for these, what lessons seem to emerge from the primary comparison in the paper, between New Zealand and England & Wales? ... 

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In 2012 there were 6140 construction related enterprise deaths (that’s companies not individuals). It was much the same in 2011 but it was down from a 10 year high in 2010 of 7528. That’s extraordinary when you put it in context – if we had a row of people representing that number of companies, one director from each, that row would run from Sky City to the bridge.

This year on Waitangi Day we saw arguably the largest single failure of any construction enterprise in New Zealand when Mainzeal was placed in receivership with a loss tipped to be in the order of $100M.

The flow on effect for subcontractors and suppliers will be significant and the consequences devastating for the owners of these businesses, their families, their employees, and their creditors.

Many of these subcontractors will have operated well and profitably for many years, but put bluntly, the collapse of Mainzeal is likely to leave most of the company’s subcontractors absolutely screwed with the retentions regime at the root of much of the carnage.

What’s happening – what is going wrong? …

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An Authorised Nominating Authority
under section 65 of the Construction Contracts Act 2002