Appeal court sees no tension between exclusion from recoverable costs and other terms
New Zealand’s Supreme Court has ruled that reconsidering the Court of Appeal’s assessment – based on an orthodox examination of the evidence, including the pertinent features of the parties’ particular contractual arrangements – would not serve the interests of justice.
In DHC Assets Limited v Arnerich, [2025] NZSC 120, the applicant was a construction company. A construction contract required the applicant to construct a commercial building for the respondent’s company, Vaco Investments (Lincoln Rd).
The construction contract comprised seven documents, including the contract performance agreement (CPA).
Clause 4.4 of the CPA included in the original contract price all preliminary and general (P&G) costs and expenses arising from any changes. The clause also prevented any further allowances.
The contract provided a different approach for certain variations requested by ASB Bank Ltd, the building’s intended principal tenant.
Multiple variations during construction delayed the project’s completion and made the applicant incur time-related costs. Vaco went into voluntary liquidation on 1 July 2014.
The applicant, an unpaid creditor, claimed over $1m plus interest from Vaco, which could not pay the applicant’s award arising from a Construction Contracts Act 2002 adjudication or further sums the applicant sought.
The applicant commenced proceedings against the respondent under s 301 of the Companies Act 1993. New Zealand’s High Court partly granted the applicant’s claim.
New Zealand’s Court of Appeal partly granted the respondent’s appeal and returned the matter to the High Court for a further hearing.
The High Court issued an order requiring the respondent to pay the applicant a sum of about $1.1m, including time-related P&G costs, with the respondent liable for those amounts under s 301 of the Companies Act.
The appeal court allowed the respondent’s appeal of the High Court’s order for Vaco to pay the applicant time-related costs.
The appeal court considered clause 4.4 clear and acknowledged that certain variations were compensable. However, the appeal court held that some costs associated with even those variations were not recoverable.
The appeal court determined that the applicant prepared the CPA in an effort to ensure that Vaco would accept its tender. Specifically, the applicant chose:
The appeal court added that the respondent did not agree to Vaco assuming responsibility for P&G costs not actually recovered from ASB.
The applicant applied for leave to appeal the appeal court’s decision regarding time-related P&G costs. The applicant argued that its proposed appeal asserted two general questions of importance:
The applicant also alleged a miscarriage of justice.
The Supreme Court of New Zealand dismissed the application for leave to appeal and ordered the applicant to pay the respondent’s costs of $2,500.
First, the Supreme Court accepted that it might address the first proposed appeal ground in the future. However, the Supreme Court did not consider the present matter appropriate for tackling that issue.
Regarding the second proposed appeal ground, the Supreme Court noted that the appeal court perceived no tension between an exclusion from the scope of recoverable costs and the construction contract’s other provisions.
Lastly, the Supreme Court ruled that reconsidering the appeal court’s assessment would not serve the interests of justice. The Supreme Court saw no question of general or public importance, no issue of commercial significance, and no apparent miscarriage of justice in the civil context.
