New Zealand: Upcoming changes to the Construction Contracts Act

Brief Counsel

Download: 2015 PUB BC Upcoming changes to the Construction Contracts Act - 28 Oct.pdf

A PDF reader is required to read this file.
Download the free Adobe Acrobat reader here

The Construction Contracts Amendment Act 2015, to come into force progressively from 1 December this year, will result in significant change across the whole construction sector.

We tell you what you need to know.

Key changes and timeline

​All adjudicator determinations – on rights and obligations as well as on payment disputes – enforceable in court  ​1 December 2015
​Design, engineering and quantity surveying (QS) work brought within the Construction Contracts Act 2002 (CCA) ​1 September 2016
​Retention money to be held in trust ​31 March 2017

The changes are not retrospective so, subject to narrow exceptions, will not apply to:

  • construction contracts entered into before 1 December 2015, or
  • design, engineering and QS agreements entered into before 1 September 2016.

Enforceability of adjudicator determinations on rights and obligations

Currently only payment dispute determinations of an adjudicator under the CCA are enforceable in court. From 1 December, enforceability will be extended to rights and obligations determinations also.

The courts have no overriding discretion to refuse to enter judgment and can only refuse to enter it on very narrow grounds. These are:

  • the amount payable has been paid
  • there was in fact no construction contract
  • a condition imposed by the adjudicator has not been met
  • due to a change in circumstance, not caused by the respondent, it is not possible to comply with the determination, and
  • the date (if any) specified in the adjudication for compliance has not yet passed.

Typical rights and obligations determinations might include:

  • whether work is within scope or a variation
  • contract interpretation disputes
  • whether work is defective, creating an obligation on the contractor to rectify it
  • extension of time claims (as opposed to time related cost claims or downstream liquidated damages claims)
  • whether time is at large
  • rights to suspend or terminate a contract
  • assignment rights
  • issues regarding bonds
  • entitlement to a Practical Completion Certificate or Final Completion Certificate
  • ownership of plant, equipment and materials
  • damages claims for breach of contract, and
  • in relation to design, engineering and QS consultants, contractual claims for damages for breach of requirements of reasonable care and skill.

Chapman Tripp comments

Construction disputes can be complex, often with large amounts of money at stake and requiring the participation of experts and insurers.

Whether a "quick and dirty" binding adjudication process is appropriate in these circumstances – certainly on large construction projects – is questionable, noting that as a general rule a respondent has only five working days after receipt of the claim or appointment of the adjudicator (whichever is later) to prepare and submit its response to the claim.

The new legislation provides that an adjudicator must allow a respondent additional time to prepare and submit its response to a claim upon request if this is considered justified having regard to the size or complexity of the claim or because the claim has been served with undue haste giving the respondent insufficient time to respond.

We welcome this flexibility to grant additional time but wonder how fully or generously it will be used, given that the normal position is only five working days and the clear intent of the CCA that resolution of disputes should be speedy.

Assuming adjudication timeframes remain very tight, it is reasonable to ask whether the full effect of this change has been properly explored and understood. Money claims are easier to unwind after any subsequent arbitration or court proceedings than claims relating to rights and obligations. How, for example, could a "quick and dirty" determination which allowed a contractor to terminate a contract be un-wound if the decision were later overturned through arbitration or at court?

Design, engineering and QS work pulled into the CCA

This change has been achieved by extending the definition of "construction work" to include design, engineering and QS work.

So design, engineering and QS consultants will get the benefit of the payment protections under the CCA, but will also be subject to the adjudication process either as claimants or respondents.

Chapman Tripp comments

Claims against consultants where terms of engagement typically require the exercise of reasonable skill and care will necessarily involve a degree of judgement.

They will also often involve matters of technical complexity, requiring the use of specialist independent experts (often drawn from a small and heavily committed local pool, or from overseas).

In many cases timing will also be an issue for other reasons – for example, in disputes relating to structural design completed years ago, it will be hard to locate all of the relevant information and people.

All these challenges are compounded by the short adjudication process. How can a defendant served with a complex claim hope to mount an appropriate response in a short timeframe?

Almost invariably, professional indemnity insurance will be involved, meaning that the insurer's interests and requirements will need to be observed. This can be time consuming and cumbersome:

  • the insured must notify the insurer of the claim (or circumstance)
  • the notification passes through a broker, and may involve multiple layers of insurance and reinsurance
  • issues of cover/ policy response can be contentious (e.g. policy exclusions)
  • decision is required on who has conduct of the claim (including the choice of lawyers and experts), and
  • the insured cannot take steps which may prejudice the insurer.

Some significant work will be required from insurers and brokers to ensure that claims can be notified and managed quickly enough to enable effective responses to claims under the CCA which may be covered under professional indemnity policies.

Obligation to hold retention money on trust

The retention trust regime will only apply to commercial construction contracts (not to residential contracts with the home owner) where the retention money is above a "de minimis" amount, to be determined by regulation.

In New South Wales, the threshold for a construction project is where the head contract is valued at AUD20,000,000 or more. The language used in the Act suggests that the threshold will be much lower in New Zealand.

Retention money will be required to be held on trust by the payer.

The Ministry of Business, Innovation and Employment (MBIE) says all trustees must:

  • act honestly and in good faith
  • act for the benefit of the beneficiaries or to further the purposes of the trust (not for their own benefit), and
  • manage the trust with care and skill.

MBIE warns that breach of these obligations, which may implicate directors personally, will give rise to significant penalties, including potential criminal sanctions in serious cases.

Retention money can be held on trust in the form of cash or other "liquid assets" that are readily converted into cash. It does not have to be paid into a separate trust account and can be commingled with other money.

The retention money can be used by the payer only to remedy defects in the payee's work. It cannot be used for working capital – MBIE says this is the main driver for the retentions regime – nor is it available to creditors of the payer.

The date for payment of the retention money to the payee cannot be later than the date on which the payee has fulfilled its obligations under contract. Where payment is late, default interest will apply.

The payer may invest the retention money and retain interest earned, but it is liable to make good any loss to the retention money if the investment is unsuccessful.

Proper accounting records must be kept and made available for inspection.

Chapman Tripp comments

The retentions trust regime throws up some difficult questions and challenges:

  • where the payer draws down on a loan facility in order to make a progress payment to the payee, does the payer need to draw the gross payment amount down and place the retention money portion in a separate account? MBIE suggests that this is not the intent, but this view is hard to reconcile with the wording of the legislation
  • will the retentions system lead to more payment milestone regimes as an alternative to retentions i.e. payment based on the completion of milestones such as X% of the contract price is payable upon practical completion
  • will it lead to higher levels of bonding (for instance, the principal requiring a larger performance bond instead of contracting for retentions)
  • from the payee's perspective, which money is mine? This is the tracing problem – particularly where trust money is commingled with other money in the same account, including money held on trust for other payees. How is particular trust money to be identified, especially when there isn't enough to go around
  • is the payer only required to hold in trust the net amount of retentions i.e. the difference between the retentions held by it and retentions held against it, and
  • are retentions receivable by the payer a "liquid asset" (noting that receipt will generally be conditional on future events, including the quality of works performed and the solvency of the payer)? This seems doubtful, especially if those receivable retentions are not readily convertible into cash until some point in the future.

All of which raises the question of what the true practical and financial cost to industry will be from the new regime.

Preparing for change

Chapman Tripp will be running presentations on the key changes to the CCA soon.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions