New edition of ‘CCCS’ released

One of the most commonly used standard form consultancy agreements in New Zealand, the Conditions of Contract for Consultancy Services (commonly known as ‘CCCS’ and previously referred to as ‘IPENZ CCCS’), has recently been updated and is available for use.

It has been some 8 years since the last release of CCCS (third edition), with a number of relevant changes to the construction landscape in New Zealand in the intervening period having driven the more substantive amendments in this fourth edition. These include:

  1. changes in legislation, specifically the enactments of the Health and Safety at Work Act 2015 (HSWA) and Limitation Act 2010, and amendments to the Construction Contracts Act 2002 (CCA);
  2. the wider of use of ‘BIM’ (Building Information Modelling) in the design and delivery of construction and infrastructure projects; and
  3. the release of new and revised standard form construction contracts to the market, most notably NZS3910 and 3916:2013.

Key changes

Some of the more significant amendments are summarised below:[1]

Health and Safety (cls 2.10 & 3.8): the parties’ contractual obligations concerning health and safety have been aligned to the scope of duties imposed by the HSWA. For example, a new definition of ‘designer’ has been included which will apply to a consultant tasked with carrying out the design of plant, substances or structures. Under the HSWA specific obligations are imposed on a designer to ensure the plant, substances and structures are designed without risks to the health and safety of persons.

It is important to remember that, despite these amended provisions, nothing in the agreement will reduce the parties’ respective obligations pursuant to the HSWA. You can read further about the changes brought about by the Health and Safety at Work Act 2015 here.

Payment (cl 5): as a result of recent amendments to the Construction Contracts Act 2002 (CCA), consultants carrying out design, engineering and quantity surveying work (pursuant to contracts entered into or renewed after 1 September 2016) are now subject to the CCA’s default payment process and adjudication regime.

You can read further about recent amendments to the CCA here.

While parties cannot contract out of the CCA, the fourth edition confirms the statutory position that the provisions of the CCA shall apply in circumstances where a payment claim has been issued in accordance with the CCA. The fourth edition also provides the consultant with a default monthly progress payment entitlement (albeit the parties can agree otherwise) with payment due on the 20th of the month following issue of a GST invoice (again, unless agreed otherwise). The consultant now also has a contractual right to suspend in circumstances of a payment default (cl 11.5).

Proactive project management (cls 2.13 and 7): the fourth edition incorporates an ‘early warning’ regime, in line with similar advance notification provisions introduced in the 2013 releases of NZS3910 and 3916 and reflecting an industry trend towards early warning systems and real-time project management (see for example the FIDIC forms). In particular, the consultant must notify the client as soon as it becomes aware, or should reasonably have become aware, of a direction or circumstance which could impact the provision of the services and whether it considers that direction or circumstance involves a variation. Within a further 15 working days, the consultant must provide details of the time and cost impact, as well as recommendations on how to proceed (cl 2.13).

The client is now afforded 15 working days, instead of 10 working days under the third edition, to respond to the consultant stating whether it considers a variation has arisen (cl 7.1). It is now compulsory for the client to give reasons for its decision although the agreement is silent on the implications of a failure by the Client to do so.

In the third edition of CCCS, the consequences of the consultant’s failure to warn of a possible variation were not expressed. Under the fourth edition, consistent with NZS3910 and 3916 the impact of a failure by the consultant to comply with its obligation to notify is expressly to be taken into account when valuing any resultant variation (cl 7.1). The consultant’s failure to notify of a circumstance, even if the consultant was not aware of that circumstance but should reasonably have become aware of it, could therefore result in a reduction in the Consultant’s entitlement to a variation.

Intellectual Property (cl 9): the intellectual property (IP) provisions have been made more favourable to the consultant. For example, while new IP is still jointly owned by the parties (cl 9.1), the fourth edition now makes the client’s rights in relation to new IP (or any licence in respect of pre-existing IP) conditional upon payment for the services for which the IP was produced (cl 9.3).

The fourth edition has also expanded the relevant IP definitions to incorporate ‘models’ and ‘software’, reflecting the adoption and wider use of BIM on projects in New Zealand.

Other new provisions / changes to CCCS of note

  • The liability exclusion provision is now mutual so that neither party is liable to the other for indirect, consequential, special loss, or loss of profit. Formerly this provision applied to protect only the consultant. However, this exclusion still does not contain any industry standard carve-outs, such as in respect of third party claims for personal injury or property damage and/or intellectual property breaches. This exclusion (and other provisions in the liability clause more generally) also provides greater liability protection, for the consultant in particular, against losses that would otherwise be recoverable at law.
  • Rates or prices included in the agreement can now expressly be used (but do not have to be used) to value variations (cl 7.2). This approach goes some way to achieving alignment with the equivalent provisions in NZS3910 and 3916 except that under NZS3910 and 3916 the use of applicable rates and prices is largely mandated rather than optional.
  • The consultant now has an obligation to upload any new geotechnical factual information to the New Zealand Geotechnical Database collected in the course of providing its services in certain circumstances (cl 9.8). As a repository for new and existing geotechnical information, this database builds on the Canterbury Geotechnical Database that was developed for the Christchurch rebuild following the Canterbury earthquakes.
  • More detail has been included concerning the application of the Consumer Guarantees Act 1993 to make it clear when the Act will apply and when it is contracted out of (cls 12.2 & 12.3). Certain provisions of the Fair Trading Act 1986 (FTA) prohibiting misleading conduct (section 9), unsubstantiated representations (section 12A) and false and misleading representations (section 13) are also expressly contracted out of under the fourth edition, except if such conduct or representations were intentional (cl 12.3). While these provisions mutually apply, having regard to the flow and nature of advice and services provided under the agreement, and the potential for FTA claims to arise, practically it is likely that consultants are the greater beneficiaries of the provisions.

Our observations

Given the largely cosmetic nature of most of the changes, and the underlying risk profile remaining largely unaltered, we expect the fourth edition of CCCS will be adopted quickly in the market.

Overall, the changes in the fourth edition seem to benefit the consultant more than the client. For more complex projects, we anticipate that principals/developers will continue to seek amendment to the underlying risk profile to reflect their preferred legal and commercial positions. For instance, some provisions within CCCS still provide more favourable risk and liability positions to consultants than otherwise exist at law, and we anticipate that these types of provisions will be the subject of amendment and negotiation between the parties.

By achieving greater alignment with NZS3910 and 3916, this form provides a better platform for contractors to accept a transfer or novation of consultants.

If you would like to discuss any of the changes please contact your MinterEllisonRuddWatts advisor.

Footnotes

[1] The Short Form Model Conditions of Engagement (SFA) have also been updated and similar changes are reflected therein (we have not specifically commented on the SFA).

Who can help

Janine Stewart

Partner - Construction

Janine is a specialist construction, property and projects lawyer who acts on the full spectrum of construction projects and property disputes. She has particular experience in claims under the Public Works Act 1981 (for land acquisition relating to development) and mid-project and post-project phases of construction. Janine is known for her pragmatic approach, adopting either litigation and/or dispute resolution to achieve a commercially-effective outcome for her clients.

Janine also has significant experience in landlord and tenant obligations and contentious rent review disputes. She regularly appears in various dispute forums.

Named Young Private Practice Lawyer of the Year at the 2015 New Zealand Law Awards and up and coming in 2016 Chambers directory, Janine is actively engaged in thought leadership on issues impacting the property and construction industry.  Janine regularly contributes to a number of publications and presents widely on complex construction and property issues.

Janine lectures ‘Law for Construction” in the Masters of Project Management programme at AUT University, is a member of the New Zealand Society of Construction Law and a member of the Building Advisory Panel to MBIE.

Janine Stewart

Partner


Construction
Auckland

P: +64 9 353 9922
M: +64 21 784 808
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Mark Crosbie

Partner - Construction

Mark is highly-regarded for his specialist legal work in all aspects of property, construction and development projects. His legal experience spans more than 20 years and includes high-end strategic advice about commercial and construction issues, including funding, procurement, development, legislative and regulatory compliance, and construction of large infrastructure projects.

He has extensive industry experience in construction, health and aging, ports and agriculture. Mark has a formidable track record of achievement in infrastructure and development projects that include roading arrangements, hospital and medical premises and associated amenities, airport and port developments, quarries, regional parks, utilities – electricity schemes, water treatment and waste water projects, education assets, and social housing projects.

Mark acts for owners, developers, contractors, consultants, tenants, investors and financier businesses, both domestically and internationally, on all aspects of property, construction and development projects. Mark has extensive experience in property transactions with particular expertise in real estate finance transactions and in the acquisition and sale of commercial property, property development and corporate sales programmes.

Mark’s strong projects and development background encompasses project planning, procurement and implementation expertise and he has advised on shopping centres, city precinct redevelopment, commercial head office developments, corporate campuses, harbour and seabed developments, coastal land, unit title developments and re-developments, and property refurbishments.

Mark Crosbie

Partner


Construction
Auckland

P: +64 9 353 9968
M: +64 21 633 131
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Sarah Sinclair

Partner - Construction and Infrastructure

Sarah is a highly-regarded construction and infrastructure specialist.  She has extensive experience acting for both Government and private sector clients in large-scale, complex infrastructure projects.   She is known for providing commercially pragmatic, strategic advice on infrastructure funding models, procurement strategies and contracting structures.

Sarah has extensive experience in combining the commercial components of a project with a deep understanding of procurement processes, particularly in pathfinder projects.  Sarah leads MinterEllisonRuddWatts’ roles on the City Rail Link project (CRL) and the Anchor Projects in Christchurch, meaning she is adept at conceptualising strategy and navigating challenges inherent in projects carried out in the public eye.  Sarah also has particular expertise in Public Private Partnerships (PPPs), having acted for sponsors, banks or sub-contractors on all PPPs closed or brought to market in New Zealand to date.

Sarah has been on the Board of Infrastructure New Zealand since 2012 and is an officer of the International Construction Projects Committee of the International Bar Association.  She is also a Board member of MinterEllisonRuddWatts.

Sarah Sinclair

Partner


Construction and Infrastructure
Auckland

P: +64 9 353 9984
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Stephen Price

Partner - Construction

Stephen is a highly-regarded construction disputes lawyer, and leads MinterEllisonRuddWatts Construction Division in New Zealand.

Stephen’s expertise is in resolving large scale construction contract disputes particularly regarding claims for variations, delays/disruption, and the like, as well as defective works claims. He is very experienced in bringing and defending adjudications under the Construction Contracts Act 2002. He appears regularly in the New Zealand Courts at all levels (including the appellate Courts) and arbitrations, as well as in dispute resolution processes such as mediation and Dispute Resolution Boards.

Stephen’s team is also one of the largest “leaky building” specialist teams in the country, representing parties involved in all aspects of such claims (plaintiff owners and bodies corporate at one end of the spectrum, and builders, subcontractors, consultants, product manufacturers and the Council at the other).

Stephen is named by the Chambers Directory as one of five ranked lawyers in the New Zealand construction field, and by the Asia Pacific Directory as a recommended lawyer (in which MinterEllisonRuddWatts is ranked as tier 1 in Real Estate and Construction). He has previously lectured on Construction Law for the AUT Masters of Construction Management degree, and now lectures on Construction Law for the AUT Law School Masters of Laws degree.

Stephen Price

Partner


Construction
Auckland

P: +64 9 353 9961
M: +64 21 521 244
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Jennifer Wilson

Special Counsel - Construction

Jennifer is an experienced general litigation lawyer who advises her clients on large and small-scale corporate-commercial litigation matters. Her expertise includes legal analysis and advice on construction contracts and building disputes. She also advises on intellectual property issues including copyright and software licences, competition and Commerce Commission investigations and health and ageing.

Jennifer regularly undertakes high profile litigation work. Recently she advised an American software company on jurisdictional, contractual and intellectual property matters relating to a software licence agreement, heard in the High Court during an eight-week trial. Another key matter was advising a leading New Zealand bank in a major Commerce Commission investigation, alleging price fixing and anti-competitive behaviour by major New Zealand banks and card schemes.

Jennifer had a previous career as a registered general nurse, specialising in intensive care. During this time she worked in the Australian, British and New Zealand healthcare systems. This healthcare experience coupled with her legal experience means she can offer clients a unique and pragmatic approach to healthcare and ageing issues within a legal context.

Jennifer Wilson

Special Counsel


Construction
Auckland

P: +64 9 353 9894
M: +64 27 558 5862
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Philip Bremer

Special Counsel - Construction

Philip is an experienced litigation lawyer in our construction division. His experience encompasses a broad range of legal and commercial areas.

Philip has more than 25 years’ experience in construction litigation and weathertightness related claims, the resolution of commercial and residential property related actions, trade practices (competition and fair trading), the resolution of large multi-party high value defective building disputes, company compliance governance shareholder and solvency issues, the resolution of partnership and joint venture disputes, and general legal disputes in contract, tort and equity.

Prior to joining MinterEllisonRuddWatts, Philip was a Partner at a specialist litigation and dispute resolution law firm.

Philip Bremer

Special Counsel


Construction
Wellington

P: +64 4 498 5033
M: +64 27 567 5217
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Thomas Kelly

Special Counsel - Construction

Thomas is a highly experienced construction, projects and commercial lawyer. He provides front-end contractual and procurement advice to businesses including some of New Zealand’s largest organisations.

Prior to joining MinterEllisonRuddWatts, Thomas worked for another top tier New Zealand law firm and in a number of in-house legal roles in New Zealand and the UK.

His experience spans a wide range of industry sectors and types of work, including construction, major projects, infrastructure, property development, procurement of goods and services, ITC and intellectual property, consumer promotions, events and sponsorship, and film and television.

Thomas Kelly

Special Counsel


Construction
Auckland

P: +64 9 353 9809
M: +64 21 030 4941
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Iain Stephenson

Senior Associate - Construction

Iain is a Senior Associate in our Construction team and advises clients on both non-contentious and contentious residential property, commercial property and construction matters, having been involved in some of the more significant infrastructure and housing projects in New Zealand in recent times. Iain has significant experience in defective and non-compliant building disputes including acting in the largest residential and commercial defective building proceedings in New Zealand.

Iain is an expert in the management and governance of apartment buildings and multi-unit developments, including for new builds, existing builds, refurbishments, remedial works and, post-project defects and governance disputes.

Iain Stephenson

Senior Associate


Construction
Auckland

P: +64 9 353 9896
M: +64 21 031 4142
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James Dow

Senior Associate - Banking and Finance

James is a member of both our Banking and Construction teams. He has a projects, construction and general commercial background with extensive experience in the infrastructure and energy sectors both in New Zealand and the United Kingdom.

James has advised extensively on project documents and bankability issues and has an in-depth knowledge of the interface between different aspects of project procurement, construction and operation.

James’ experience has seen him act for a range of clients including sponsors, borrowers, lenders, operators and contractors in connection with a wide variety of complex projects, PPPs, acquisitions and divestments. James also has extensive general commercial experience having drafted and negotiated a wide range of commercial agreements from complex long-term arrangements through to standard form agreements.

James Dow

Senior Associate


Banking and Finance
Auckland

P: +64 9 353 9901
M: +64 27 201 9364
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Julia Batchelor-Smith

Senior Associate - Construction

A specialist property disputes resolution lawyer, Julia provides expert legal advice and dispute resolution services in all aspects of construction and commercial property. She advises clients on both contentious and non-contentious aspects of construction and commercial property matters, including construction contracts, acquisitions, divestments, leasing issues, due diligence, joint venture development arrangements and adjudication disputes under the Construction Contracts Act 2002.

Julia has particular expertise in weathertightness issues. She represents the full spectrum of affected parties (including bodies corporate and owners, developers, builders and contractors) in mediation, Court and the Weathertight Homes Tribunal.

Julia has also written extensively on strategies to achieve work/life balance, effective practice management and gender diversity. She is the author of Balancing Work and Life: A Practical Guide for Lawyers published by Lexis Nexis (2015) and regularly comments in the media on diversity in the legal profession and the full spectrum of issues impacting the working parent. Julia is a sought-after speaker, having addressed the Ministry of Business, Innovation and Employment (MBIE), Universities, legal associations, private and public companies, and industry bodies.

Julia Batchelor-Smith

Senior Associate


Construction
Auckland

P: +64 9 353 9930
M: +64 21 299 1094
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John Morrison

Senior Associate - Construction

John is a specialist construction litigation lawyer and provides advice to various commercial clients in this area. This work includes commercial and residential construction issues. John also has extensive experience in “leaky building” claims and has represented clients in mediations, Court and the Weathertight Homes Tribunal.

John Morrison

Senior Associate


Construction
Auckland

P: +64 9 353 9806
M: +64 21 183 9705
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Riaia Donald

Senior Associate - Construction

Riaia is a specialist construction and property dispute resolution lawyer, having worked in this area of law since 2009. She has particular experience in construction contract disputes (particularly regarding claims for variations, extension of time and defective works) and in bringing and defending adjudications under the Construction Contracts Act 2002 and High Court proceedings for such disputes. Riaia also has experience in arbitrations for commercial property and lease disputes, in particular landlord and tenant obligations and rent review disputes.

Riaia Donald

Senior Associate


Construction
Auckland

P: +64 9 353 9865
M: +64 21 152 8928
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