Lane Neave Solicitor, Carlos Smith-Diaz, picked up second prize in the New Zealand Society of Construction Law essay competition.
The announcement was made at the SCL (NZ) Conference on 23 July 2019 at Eden Park in Auckland.
Essay: Where are my Retentions? Insights from the Ebert Construction Insolvency and Practical Advice for Subcontractors
The withholding of sums payable under a construction contract in the form of retentions is a commonplace practice in the New Zealand construction industry. Since 31 March 2017, the use of retentions has been regulated by the Construction Contracts Act 2002 (CCA). Retentions are now generally required to be held on trust.
The recent demise of Ebert Construction Limited has presented the Courts with the opportunity to provide valuable guidance on the operation of the Act. Ebert’s predicament has also exposed some major weaknesses in the protection offered by the Act to parties seeking to recover retentions.
This paper will begin by reviewing the framework for the regulation of retentions in New Zealand, with a particular focus on the insights to be gained from the Ebert insolvency saga. The difficulties and uncertainties with the CCA’s regime for regulating retentions will then be explored. Finally, this paper will consider the options available to parties seeking to recover retentions, including a consideration of whether a failure to hold retentions on trust could lead to a breach of the duties owed by directors under the Companies Act 1993.