The nature of payment problems in the new zealand construction industy.pdf

Proceedings could be used as a last resort to recover

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proceedings could be used as a last resort to recover payments from project owners and debtors. Conclusions This paper has analysed liquidators’ reports and construction payment dispute cases filed in the High Court, to determine the nature of payment losses and delays in the New Zealand construction industry. In addition it reviewed some of the strategies used to deal with delays and losses by parties in construction contracts. The results reveal that a significant percentage of construction companies went into liquidation within the period of analyses. This caused losses and delays to their trade creditors. For example, 37% of general construction companies owed between $100,000 and $500,000 while another 30% owed less than $100,000. More than 50% of construction trade service companies owed less than $100,000 whilst 55% of property developers owed less than $10,000. The study has shown that above 75% of trade creditors are unable to be paid fully by the three categories of construction companies after liquidation proceedings. Liquidation proceedings take an average 18 months before being finalised. The magnitude of losses experienced by trade creditors vary widely depending on the category of construction companies that are being liquidated. It could be concluded that liquidation of companies most often result in payment losses and delays and there seems to be little security for payment losses in insolvencies. The above conclusions are corroborated by the results obtained from the investigation of payment disputes heard in the High Courts. The results provide further evidence that payment delays and losses are prevalent within the industry. Disputes relating to progress and final payments account for 80% of the High Court cases analysed. The study found that upon Court decisions, only 40% of the cases are successful in which case the claimants recovered all the money in dispute, while the remaining cases are either partially successful or unsuccessful. Disputes mainly emanated from provisions in legal and contractual instruments such as those outlined in the CCA and other standard conditions of contracts in New Zealand. Therefore as well as providing protection from delays and losses, some of the procedural requirements in these documents may become sources of disputes that could also cause delays and losses to the parties in dispute. Finally the study reveals that several strategies for securing payments are being used within the New Zealand construction industry. Some of these include: the placing of charging orders and registering caveatable interest over properties, lodging bankruptcy and liquidation proceedings, holding money in trust account, direct payment by sureties. Further investigations into the success of these strategies would be useful in future research studies.
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  • Fall '19
  • The Land, Australasian Journal of Construction Economics and Building

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