Property problems: Adjudication, not court, for contract claim

Q. I am a builder who employs a carpenter and an apprentice. About two months ago my brother recommended me to a friend of his (Mr A), who wanted some renovation work done to his offices in Parnell.

Because it was for a friend of my brother, I didn't think I'd need to get anything in writing. I agreed with Mr A that I would be paid for my actual costs plus an additional 15 per cent for my overheads and profit.

The renovation work took about four weeks and at the end of it I put in my account for the work.

However, Mr A is now refusing to pay me. He says the account is too high for the work I did.

He also says that he only leases the office and if anyone has to pay me it should be the landlord, who is getting the benefit of the renovations.

I need to be paid urgently so I can pay my employees and pay my other bills.

My wife says I should take Mr A to court to get my money.

Is that what I should do?

A. Because your agreement with Mr A involves you doing construction work in New Zealand, the Construction Contracts Act 2002 applies to you.

The act applies to every construction contract that relates to carrying out construction work in New Zealand and which is entered into, or renewed, on or after April 1, 2003 (which your contract was).

The act applies to both written and oral contracts, as well as contracts that are partly written and partly oral.

So, although it is easier to prove what the terms of the contract are if they are recorded in writing, the fact that your agreement with Mr A was oral does not prevent the act applying to your situation. The benefit of the act applying to you is that it sets out a procedure called "adjudication" for resolving disputes.

Adjudication is intended to be a fast-track process for resolving disputes about matters such as payment, and is intended to be done in a much tighter and faster timeframe than taking disputes to court.

You would be entitled to refer your dispute with Mr A to adjudication.

The act sets out a procedure for doing this, which starts with you serving a written notice of adjudication on Mr A.

It also sets out for you what you must put in the notice, and provides a process for selecting an adjudicator who will decide on your dispute.

Mr A cannot delay things, for example, by refusing to agree on an adjudicator, as the act provides for how an adjudicator is to be appointed if you cannot agree.

The act is very specific about how you serve your notice and what you include, so you may be best to see a lawyer who can make sure you do this properly.

Next, you submit a written adjudication claim, which will essentially be everything you rely on in support of your claim for payment.

This must be done within five working days of the adjudicator's appointment being confirmed. Mr A then has five working days (able to be extended by your agreement or by the adjudicator) to respond to the claim.

You may also then have the opportunity to reply to what Mr A has said.

Under the act the adjudicator then has between 20 and 30 working days to issue a decision (again able to be extended by agreement).

This means that in a relatively short space of time (say, one month) you will have a decision from the adjudicator.

In terms of the merits of your claim, you would need to provide evidence (for example, a statement from yourself and any other evidence such as invoices of actual costs) that the agreement with Mr A was that he would pay you for your actual costs plus 15 per cent.

There is nothing unusual in this type of arrangement, and if Mr A has agreed to pay you on this basis he cannot now refuse to pay simply because your costs are higher than he may have originally thought. That is the risk that he took in entering into this sort of contract with you.

If you can show that Mr A agreed to pay you on this basis then he will be the one obliged to pay you.

It is irrelevant to your claim against Mr A that his landlord may be the one getting the benefit from the renovations, if you contracted only with Mr A.

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