Contributed by: Matt Kersey, Polly Pope, Anna Crosbie, Michael Taylor and Michelle Mau
Published on: November 16, 2018
The High Court has given greater clarity this week as to legal obligations relating to retention sums in construction contracts. The Construction Contracts Act 2002 requires that, for construction contracts entered into after 31 March 2017, all retention money must be held on trust. However, the practical implications of this obligation have been seen as somewhat uncertain.
In July 2018, receivers were appointed by the Bank of New Zealand to Ebert Construction Limited. At that time, Ebert had a retentions account for retentions covered by the Act with a balance of $3.7 million. However, it owed $9.3 million in subcontractor retentions. The receivers applied to the Court for directions as to how the funds held in the retentions account (Fund) should be distributed.
The main points arising from the judgment are:
Partner, Restructuring and Insolvency
Partner, Property and Construction
Senior Associate, Litigation
Property and Construction