Background – coming back to an unfortunate sight
The respondents, who were the trustees of a home about to undergo construction work, entered into a contract with VDAC in April 2018. The contract tasked VDAC with undertaking building work on a garage.
VDAC undertook the work while the trustees were overseas. In that time, VDAC issued eight payment claims in respect of the work.[2] The trustees did not pay three of these. VDAC consequently suspended works, five months into the job.
Upon returning to New Zealand, the trustees were shocked to see the state of the garage roof. An independent consultant confirmed that the roof had multiple elements of poor workmanship.[3] However, VDAC was still concerned at the lack of payment. It cancelled the contract in November that year.
Proceedings – was the work poor or just incomplete?
The District Court
VDAC commenced proceedings in the District Court against the trustees for the outstanding claims. The trustees issued a counterclaim for overcharging and remedial work. The District Court found in favour of VDAC. In the District Court’s view, the trustees omitting to pay the claims constituted a breach of the contract. As for the state of the roof, it reflected the fact that VDAC had not yet completed the works. It did not suggest poor workmanship. The District Court found that VDAC would have finished the work had the trustees paid.
The High Court
The High Court disagreed. VDAC was under a contractual duty to carry out work with reasonable care and skill. This had not changed just because it cancelled the contract. Under the Contract and Commercial Law Act 2017,[4] contractual duties survive cancellation. The High Court also highlighted a crucial aspect of the background: as the dispute had emerged, VDAC had stated it did not need to do remedial works. This would become relevant as the Court of Appeal considered leave to appeal.
Leave to appeal denied – doctrine of temporary disconformity?
VDAC sought leave to appeal at the Court of Appeal. It argued that leaving the matter unresolved would have ramifications for the construction industry. Whether the works were done poorly, or had not been finished, left open a key aspect of construction law – an apparent doctrine called “temporary disconformity”.
This doctrine states that a breach of a construction contract only arises at the time of completion. Until that time, a builder is able to remedy any temporarily non-conforming work.[5] The degree to which the doctrine is law is unclear. Despite courts applying the doctrine in New Zealand, case law in England has largely rejected it.[6]
The Court accepted that the existence of the doctrine was an important legal question. However, it could not find how it would apply to the present facts. VDAC was not going to return to finish the roof. It had cancelled the contract and was looking to move on. The Court emphasised the importance of this fact on the application of the doctrine. The temporary disconformity doctrine could not apply where a builder has made it clear that it does not intend to rectify the substandard work.
Finally, the Court said the matter was not worth another hearing. The work commenced in 2018. Any further hearing would only delay the resolution of the matter. The damages at the heart of the dispute were relatively small and could not justify yet more court time.
References
[1] Van den Anker Construction Limited v Wilson McKay Trustee Company Limited [2024] NZCA 654.
[2] The contract was excluded under the Construction Contracts Act 2002 regime as the claims were not “progress payments”.
[3] For a full list of the errors, see Wilson McKay Trustee Company Limited v Van Den Anker Construction Limited [2023] NZHC 3475 at [27].
[5] Citing Oxborough v North Harbour Builders Ltd [2002] 1 NZLR 145 (CA); and Yu v T & P Developments Ltd [2003] 1 NZLR 363 (CA).
[6] Lintest Builders Ltd v Roberts (1980) 13 BLR 38; Guiness plc v CMD Property Developments Ltd (1995) 76 BLR 40; and William Tompkinson & Sons Ltd v The Parochial Council of St Michael (1990) 6 Const LJ 319.
