Developer battles Fletcher Building’s PlaceMakers over materials, alleged delays

A $335,000 debt has sparked court action and a bankruptcy application.

A property developer has failed in court action against Fletcher Building’s PlaceMakers after a dispute which led to a subsidiary of the NZX and ASX-listed Australasian manufacturer putting caveats over titles to three properties.

Srinivas Prasad Sappa sued Fletcher Building’s Fletcher Distribution.

That entity traded as PlaceMakers New Lynn and the action followed his development business, Sappa Homes, opening a trade account with the Auckland store.

Sappa gave guarantees for his company, which was carrying out four developments in Auckland and one in Queenstown.

Associate Judge Dale Lester heard the case this month and delivered a decision on September 15, ruling Sappa had failed in his action so Fletcher Distribution was entitled to costs.

Sappa alleged PlaceMakers supplied out-of-specification materials to his properties and also that it was late delivering those. That created delays and additional costs on those developments.

He also complained that PlaceMakers put caveats over three properties owned by his family trust, which caused delays in raising finance that he would have used to meet his company’s indebtedness to PlaceMakers.

“The presence of the caveats frustrated lenders with whom he had arranged finance, causing him to incur finance costs, holding costs and further contributing to the delay of the developments,” Judge Lester’s decision said.

PlaceMakers in turn applied to strike out his application and said it already had a default judgment against him under his guarantee for $335,000. It also wanted him adjudicated bankrupt, but that application went on hold while the High Court case was heard.

The decision said he had paid part of the amount owed to PlaceMakers but his argument in court did not detail how losses arose. They were said to be from delays supplying materials and also the wrong materials.

Due to clauses set out in documents, the judge said PlaceMakers didn’t owe Sappa’s company a general duty of care. There was no basis for finding PlaceMakers owed him that on the supply of material or delivery times.

On the caveats on titles, the decision said Sappa had signed a document. That allowed PlaceMakers to secure amounts payable to it by them placing a registrable mortgage over any land owned now or in the future by the guarantor.

Sappa had not explained how the Fletcher business lodging caveats was not authorised by that document.

In addition, he said he wasn’t given notice about those caveats but the decision said there was no obligation for him to be given that.

“Indeed, the giving of prior notice would undermine the purpose of the right to caveat as an unscrupulous guarantor could transfer properties before a caveat was lodged,” the judge noted.

Sappa said the covenants being registered put him in breach of the terms of his mortgage with his bank.

“At the risk of being blunt, that is not a matter for PlaceMakers,” the judge noted.

Associate Judge Lester could find no arguable cause of action in Sappa’s statement of claim and it was struck out.

PlaceMakers had been successful and was entitled to costs, so the judge asked for a memorandum to be filed within five working days of delivering the decision.

Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.