Supplementary Order Paper No 106

Explanatory note

This Supplementary Order Paper (SOP) amends the Construction Contracts Amendment Bill (and replaces SOP No 52)—

  • to make provision in the Construction Contracts Act 2002 (the principal Act) 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 change the commencement date for the Bill and to provide that—

  • most of the amendments in the Bill will come into force on 1 December 2015; and

  • the amendments applying the principal Act to contracts for related services will come into force on 1 September 2016; and

  • the amendments relating to retentions will come into force on 31 March 2017.

Part 1Amendments to preliminary provisions

Clause 4 is amended to make amendments to section 4 of the principal Act to update the overview section to reflect changes made in this SOP and to make other minor changes.

Clause 5 is amended to reflect changes made in this SOP.

Clause 7 is revised to delete the transitional and savings provisions (which are being relocated to new clauses 8AB and 8AC).

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.

Clause 8AB is inserted to insert a new section 11A, which provides saving provisions for existing contracts in relation to the amendments in this Bill that come into force on 1 December 2015.

Clause 8AC is inserted to amend new section 11A (inserted by clause 8AB) to provide saving provisions for existing contracts in relation to the amendments in this Bill that come into force on 1 September 2016.

Part 2Amendments to principal provisions

Payments

New clause 8AD amends section 13 of the principal Act. Section 13 makes conditional payment provisions in construction contracts ineffective. This amendment 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 the payee’s obligations under the contract.

New clauses 8AE, 8AF, 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 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 and to make an amendment to section 20 of the principal Act similar to that made by clause 9A of the Bill.

Adjudication of disputes

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 11A is inserted to amend section 27 of the principal Act to delete a reference to section 61, which is being repealed.

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

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

New clause 24A 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.

Review and enforcement of adjudicator’s determination

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).

Part 3Amendments to miscellaneous provisions

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, which contained transitional and savings provisions, is deleted consequential to the insertion of new section 11A by new clause 8AB, which contains savings provisions in relation to this Bill.

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 http://legislation.govt.nz/disclosure.aspx?type=sop &subtype=government&year=2015&no=106&

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—

  • http://www.dbh.govt.nz/construction-contracts-act

  • http://www.treasury.govt.nz/publications/informationreleases/ris

The Honourable Dr Nick Smith, in Committee, to propose the amendments shown in the following document.