Supplementary Order Paper No 52

  • released 11 March 2015, superseded 22 September 2015

Explanatory note

This Supplementary Order Paper (SOP) amends the Construction Contracts Amendment Bill—

  • to make provision for retentions (being money withheld by one party to a construction contract from money payable to another party to the contract as security for the performance of obligations under the contract) to be held on trust; and

  • to make other minor and technical changes.

Clause 2 is revised to provide that the commencement date of the new provisions in relation to retentions is 31 March 2016 and to change the coming into force date for the rest of the Bill to 1 July 2015.

Clause 4 is amended to make amendments to section 4 of the Construction Contracts Act 2002 (the principal Act) that are consequential to other changes in this SOP and clause 8B of the Bill.

Clause 5 is amended to make minor amendments that are consequential to other changes in this SOP and clause 16A of the Bill.

Clause 7 is revised to change the date when the principal Act will apply to contracts for design, engineering, and quantity surveying work (ie, related services) to 31 March 2016 and to remove from section 9 of the principal Act the reference to section 10, which is repealed by clause 8 of the Bill.

Clause 8A(2) is revised to replace new section 11(b)(iv). Section 11(b) of the principal Act lists provisions of a construction contract to which the principal Act does not apply. New section 11(b)(iv) currently refers to property management. The revised new section 11(b)(iv) refers generally to all services for the operation or management of a property that are not construction work and do not relate to construction work.

New clause 8AB amends section 13 of the principal Act. Section 13 makes conditional payment provisions in construction contracts ineffective. New clause 8AB defines a conditional payment provision to include any provision in a construction contract that makes the payment of retention money conditional on anything other than the performance of party B’s obligations under the contract.

New clauses 8AC, 8AD, 8BA, and 8BB make minor changes that are consequential to other changes in this SOP and clause 8B of the Bill.

New clause 8BC inserts new subpart 2A of Part 2 to—

  • define retention money:

  • require a party who withholds retention money to hold that money on trust:

  • provide that the trust only ends when—

    • retention money is paid; or

    • the party to whom the money is payable agrees to give up their claim, or

    • the money ceases to be payable by law:

  • make provision for proper accounting of retention money:

  • make provision in relation to the investment of retention money and interest payable on retention money:

  • prohibit provisions designed to delay payment of retention money:

  • provide that any provision in a construction contract is void that is designed to avoid the application of the provisions in the Bill relating to retentions.

Clause 8C, which amends section 19 of the principal Act, is replaced. The amendment clarifies that subpart 3 of Part 2 of the principal Act only applies to payment claims in relation to payments to which the contractor is entitled and expands the scope of the payment claims provisions to cover any type of payment under a construction contract for, or in relation to, construction work carried out by the contractor.

Clause 9 is amended and new clauses 9B to 9D inserted to make amendments that are consequential to the change to clause 8C (above) and to make an amendment to section 20 of the principal Act similar to that made by clause 9A of the Bill.

New clause 10A is inserted to replace section 25(2) of the principal Act to revise the example of a dispute in relation to a construction contract to include a disagreement as to whether or not there has been a breach of a term of the contract (including a term implied into the contract under the Building Act 2004 or any other enactment).

New clause 13AA is inserted to make a minor amendment that is consequential on clause 16A of the Bill.

New clause 13B is inserted, clause 14 is replaced, and clause 14A is amended. These clauses relate to the appointment of adjudicators. The main change is that, in order to be appointed as an adjudicator, a person who has been requested to act as an adjudicator must now serve a notice of acceptance within 2 working days of receiving the request. The changes also clarify that any conflict of interest issues that a prospective adjudicator may have must also be resolved within that period of 2 working days.

New clause 17A is inserted to make minor amendments to section 45 of the principal Act that are consequential to clause 16A.

New clause 24A is inserted to replace section 66(1)(a) to make a minor consequential amendment and to allow a claimant in an adjudication essentially to restart an adjudication where a prospective adjudicator has indicated that he or she is unwilling or unable to act as adjudicator.

New clause 24B is inserted to amend section 71 of the principal Act to clarify that the additional rule for limitation periods contained in section 393(2) of the Building Act 2004 applies in relation to adjudications.

Clause 29, which amends section 74 of the principal Act (which sets out the grounds on which a defendant may oppose the enforcement of an adjudicator’s determination as a judgment), is amended to clarify that the new ground of change in circumstance inserted by clause 29(2) applies only where the adjudicator’s determination is a determination about the rights and obligations of the parties under the contract (and not a determination about whether or not any of the parties are required to make a payment under the contract).

New section 82(2), inserted by clause 30B, is amended to clarify that the list of matters in new section 82(2)(a) to (i) that may be covered by regulations prescribing the form of a notice of acceptance is not exhaustive.

The Schedule is amended to correct a minor cross-referencing error and make consequential amendments as a result of the amendment to clause 2 (above).

Departmental disclosure statement

The Ministry of Business, Innovation, and Employment is required to prepare a disclosure statement to assist with the scrutiny of this Supplementary Order Paper. The disclosure statement provides access to information about any material policy changes to the Bill and identifies any new significant or unusual legislative features of the Bill as amended.

A copy of the statement can be found at &subtype=government&year=2015&no=52& .

Regulatory impact statement

The Ministry of Business, Innovation, and Employment produced a regulatory impact statement on 21 November 2014 to help inform the new policy decisions taken by the Government relating to the contents of this SOP.

A copy of this regulatory impact statement can be found at—

The Honourable Minister, in Committee, to propose the amendments shown in the following document.