Due Process a column by Geoff Hardy
When and how can you suspend work? T
Geoff Hardy has 46 years’ experience as a commercial lawyer and is a partner in the Auckland firm “Martelli McKegg”. He guarantees personal attention to new clients at competitive rates. His phone number is (09) 379 0700 and email geoff@ martellimckegg.co.nz.
This article is not intended to be relied upon as legal advice.
here are three situations where you might want to suspend work. The first is where you badly need to take a break or it is overwhelmingly in your interests to do so. Examples of that would be where a competitor poaches your senior staff, you suffer a serious illness, the Christmas holidays arrive, you are offered a project in Dubai that will set you up for life, or you win Lotto. The second situation is where you simply cannot continue because a third party has intervened or some natural event has occurred – for example where some critical components aren’t delivered, or your plant and machinery breaks down or is destroyed in a fire, or you get a lawyer’s letter saying the design you are manufacturing to is someone else’s intellectual property. The third situation is where your customer is in default – such as by not paying you, not issuing directions, or not giving you access to install your product. It might surprise you to learn that in none of those situations do you have an automatic right to suspend work. Under your joinery contract you have undertaken to work diligently and conscientiously until the project is completed, and unless the contract lets you off the hook, you have to see it through to the end. If you plan to take a holiday midproject, you need to have made that clear at the outset. If you win an all-expenses-paid, two-month trip to the World Cup, that’s too bad, unless you can arrange cover for yourself. And the most surprising thing of all, is that if your customer is well overdue in payment and has no reasonable excuse, the law still requires you to keep
JOINERS Magazine March 2022 page 74
honouring your obligations regardless. That is, unless prior payment is a precondition to you starting or continuing work. Or, the customer’s default is so bad that you can actually cancel the joinery contract (assuming you want to). If you don’t have those rights, then the theory is that you have a process under the contract or under the general law for recovering your payment – whether that be mediation, arbitration, adjudication, the Disputes Tribunals, or the Courts – and in the meantime you have to keep working. Fortunately there are four exceptions to the rule: 1. If the contract is “frustrated” (which means it become impossible to perform – such as where the building you are making the joinery for disappears into the sea) then the law gives you a get-outof-jail card. However this situation is very rare. 2. Most sophisticated contracts allow you to suspend work in “force majeure” situations where you are held up by things beyond your control like earthquakes, volcanic eruptions, tsunamis, floods, wildfires, states of emergency, riots, strikes or lockouts. However to do so you need to have a written joinery contract that contains a force majeure clause. 3. Regardless of your contract, the Construction Contracts Act allows you to suspend work if you have given your customer a valid payment claim, and the customer either hasn’t given you a valid payment schedule in time, or
hasn’t paid what the payment schedule said would be paid. But there are a few traps to look out for here. First, there aren’t many tradesmen who manage to satisfy all the criteria for a valid payment claim under the Act. Secondly, even if you have, you then have to give the customer a special written notice and allow five working days for the notice to be complied with, before you can suspend. Thirdly, as soon as you do get paid you have to resume work immediately – not when it suits you. 4. However the best option of all is to use a joinery contract that allows you to suspend work in situations where it would be unfair to make you behave like a saint when your client is behaving like a sinner. If you are required to sign up to one of the NZ Standards or NZ Institute of Architects contracts, they do give you some suspension rights, but they are not as favourable to you as they might be. Under the NZS contracts you can suspend work for non-payment or for some other persistent, flagrant or wilful default, but you have to give a written warning and allow the customer time to comply. Under the NZIA contracts you can suspend work if you have not been paid or you have not been provided with security for payment, but there is a similar requirement to allow time to remedy the default. However the biggest obstacle is that you are prohibited from suspending work during a dispute, and there are very few construction projects where an alleged default is not disputed.
