Navigating construction disputes

Civil Litigation & Dispute Resolution
Construction
Oct 01 2026

Construction disputes and dispute resolution

Construction disputes are an unavoidable aspect of the building and infrastructure sector in New Zealand. Construction projects are inherently complex, involving multiple parties, technical designs, tight timeframes, significant financial exposure, and evolving site conditions. Even well-planned and well-managed projects can experience disagreements that, if left unresolved, can escalate into formal disputes with serious commercial consequences.

Holland Beckett regularly advises developers, homeowners, builders, contractors, subcontractors and consultants across the full construction spectrum. We assist clients to avoid disputes where possible, resolve them efficiently when they arise, and protect their legal and commercial positions throughout the project lifecycle.

What are construction disputes?

Construction disputes are disagreements arising under a construction contract as defined by the Construction Contracts Act 2002 (CCA). These disputes can range from relatively minor issues, such as defective workmanship or disputed progress invoices, through to high-value claims involving unagreed variations, delay and disruption costs, defective design, or responsibility for extensive remedial works.

Construction disputes typically fall into two broad categories:

  • Payment disputes – including late or non-payment, underpayment, variation claims, re-measurement issues, delay and disruption costs, contra charges, and final account disputes.
  • Defect disputes – relating to the quality of design or construction work. Defects may not become apparent until months or years after completion and can raise complex questions regarding liability, remedial solutions and cost allocation.

Construction disputes are often highly factual, reliant on contemporaneous project records, and technically complex. They frequently involve multiple parties and overlapping claims and counterclaims, which can significantly increase complexity, cost and risk.

Why early dispute resolution matters

Unresolved construction disputes can quickly stall or derail a project. Cashflow may be disrupted, work may be suspended, project relationships may deteriorate, and management time may be diverted away from delivery toward dispute management.

Early and effective dispute resolution is critical. Addressing issues promptly can:

  • Reduce delay and project disruption.
  • Limit legal and expert costs.
  • Preserve commercial relationships.
  • Maintain cashflow.
  • Protect project margins.

In many cases, disputes can be resolved at an early stage through negotiation or structured discussions, provided the underlying issues are identified and addressed before parties become entrenched in their positions.

Payment disputes and the construction contracts act 2002

Payment disputes are the most common source of construction conflict. To address chronic payment delays in the industry, the Construction Contracts Act 2002 introduced a statutory payment regime designed to ensure cash continues to flow through the construction chain.

The CCA allows parties carrying out construction work to issue compliant payment claims, which trigger strict response deadlines. Payers wishing to dispute a payment claim must issue a payment schedule setting out the amount they propose to pay and the reasons for any reductions or withholding of payment.

Where a payer fails to issue a payment schedule within the required timeframe, they may become liable to pay the full claimed amount. The Act also provides for statutory adjudication – a rapid, enforceable dispute resolution process designed to resolve payment disputes quickly and keep projects moving.

Strict compliance with the CCA is essential. Missed deadlines or non-compliant documentation can significantly weaken a party’s position or expose them to enforcement action. Early legal advice often proves decisive in payment disputes.

Dispute resolution clauses – following the contract

Most construction contracts contain dispute resolution clauses that prescribe how disputes must be managed. Many of these clauses are multi-tiered, requiring disputes to pass through sequential steps such as negotiation, referral to an engineer, expert determination or mediation before arbitration or court proceedings can be commenced.

Some contractual steps are optional, while others operate as mandatory conditions precedent. Failure to comply with mandatory dispute resolution steps can result in proceedings being delayed or stayed, jurisdictional challenges, and increased cost and uncertainty.

Standard form contracts commonly used in New Zealand – including NZS 3910 – and international contracts such as FIDIC include detailed dispute resolution pathways. Understanding and complying with these provisions is essential to preserving contractual rights and avoiding unnecessary procedural disputes.

Dispute resolution options available

A wide range of dispute resolution options are available for construction disputes in New Zealand. Some processes can be initiated unilaterally, while others require agreement between the parties. Selecting the appropriate process depends on factors such as value, urgency, complexity, technical issues and contractual requirements.

Adjudication

Adjudication is the dispute resolution process prescribed by the CCA. It is designed to be fast and cost-effective, typically resulting in a binding and enforceable determination within weeks. Adjudication is particularly suited to payment disputes and is commonly used during live projects to maintain cashflow.

Mediation

Mediation is a confidential and consensual process in which an independent mediator assists the parties to reach a negotiated settlement. Mediation is flexible, cost-effective, and can preserve commercial relationships in what is often a relatively small and interconnected industry.

Arbitration

Arbitration is a private, binding dispute resolution process governed by the Arbitration Act 1996. It allows parties to appoint specialist decision-makers and tailor the procedure to the dispute. Arbitration is often suitable for technically complex or high-value disputes where confidentiality is important.

Court Proceedings

Court proceedings remain available through the Disputes Tribunal (claims up to $30,000), the District Court (claims up to $350,000) and the High Court. Litigation is generally slower and more expensive than alternative processes and is often a last resort once other methods have failed.

Expert Determination and Engineer’s Decisions

Some disputes, particularly technical valuation or design issues, may be well suited to expert determination or referral to the engineer under the contract, where required. These processes can offer speed and technical expertise, though their binding nature depends on the contract.

Dispute avoidance and live project management

The most effective construction dispute strategy is prevention. Careful contract drafting, appropriate risk allocation, clear communication and diligent contract administration all play a critical role.

Best practice includes maintaining clear and detailed project records, issuing timely notices, addressing issues as they arise, and seeking advice early. On large or complex projects, parties increasingly use dispute boards or dispute resolution advisors to provide real-time assistance and resolve issues before they escalate.

How we help

We provide commercially focused legal advice across all stages of construction disputes, including contract drafting and review, payment claims, dispute avoidance strategies, adjudication, mediation, arbitration and litigation. We understand the commercial realities of the construction sector and work closely with our clients to achieve efficient outcomes that protect cashflow, minimise disruption and allow projects to progress.

If you are involved in a construction dispute, experiencing payment issues, or want advice on managing dispute risk under your construction contracts, our dispute resolution team can help. Please contact us to discuss how we can support your project and protect your position.

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