Security of final account payments: the case of New Zealand

Abstract

[Abstract]: Little is known about final account disputes. In this exposure study, 20 cases out of a total of 57 have been studied in order to seek a first time understanding of the nature of final account payments, causes that hinder settlement, and to unearth possible improvement strategies. It is found that the number of court cases on final accounts have increased significantly since the introduction of the Construction Contracts Act (CCA) in 2003. These cases have been mainly with private clients with most judgements in favour of contractors and subcontractors. Whilst the monetary values of most disputes are not exceedingly high, the time delays are, suggesting the need to examine alternative dispute resolution methods currently not available through standard form contracts such as conciliation. Workmanship issues and cross claims feature more frequently as the main reasons for disputes. Issues connected with a lack of understanding of CCA also featured prominently. In an attempt to understand the root causes, initial investigations revealed the presence of generic causes such as ‘contractual incompetence’ and ‘opportunistic behaviour’ which seems to substantially hinder the resolution of these disputes not least ‘technical incompetence’ and ‘managerial incompetence’. It is expected that understanding the relevance of such generic categories coupled with broad trends on court decisions including reasons hindering early settlement would help ease problems connected with final accounts. Industry initiatives through client and contractors’ federations may be useful too. Further studies are necessary to gain a greater understanding of the issues impacting on final accounts in order to minimise the incidence of final account problems in courts.