Fletcher fights Commercial Bay subbie in multi-million dollar lawsuit

Fletcher is involved in a dispute with a subcontractor. Photo / File

Fletcher Building is in the middle of a High Court payment stoush with a subcontractor which threatened to cease work on the Commercial Bay precinct.

A results judgment of Justice Mary Peters dated April 30 said Downer company Spotless Services, which has so far received about $49 million for its work on the Precinct Properties project, is disputing liquidated damages and other charges Fletcher tried to impose on it.

The case was heard in the High Court at Auckland during the lockdown.

According to the judgment, Spotless was working on air conditioning and ventilation for the PwC office tower when it disagreed with Fletcher's decision to impose contra payments on it. Because Fletcher's payment schedule was invalid, it said it had the right to stop works.

While the country has been in lockdown since March 25, Spotless was doing some essential work, namely safety checks, during alert level 4.

However on April 14, ahead of the move to level 3 in which more construction activity could take place, it gave notice that it would not resume work because of the issues it had with Fletcher's payment schedule.

Fletcher went to court on April 17 asking it to force Spotless to continue work.

Payment issues

For the month of January 2020, Spotless had claimed $2 million for its work on the 41-storey office tower. It was its 44th invoice for the job.

However, Fletcher rejected $1.3 million of the claim and, on top of that, included contra charges of $4.1 million. Prior to that, it had only charged contra charges of $29,000.

For these charges, Fletcher said that Spotless should refer to communications through its centralised correspondence programme Aconex. But there is no correspondence to break down the claim, the judgment says.

However, Fletcher's lawyer said that the reasons for the claim were well known to Spotless and produced a letter which suggested that Spotless knew about it.

Spotless also claimed that, under its contract with Fletcher, it is entitled to an acceleration payment if Fletcher wants to expedite works. Fletcher said Spotless was just saying that to put pressure on it to pay.

At the early stage of the case, the judge said there was a case to be argued, and that it would be unfair if Spotless quit the site at this stage.

"Delay also affects other subcontractors, who require Spotless to complete its work before they can progress, and affects tenants, both of the tower and retail development," the judge said.

She said Spotless must continue working, but ordered that Fletcher first put $2 million in a separate account until the parties resolve the dispute.

Costs increase

Today Precinct said construction had re-commenced at Commercial Bay with completion targeted for next month.

The NZX-listed office developer said the total project cost had increased by $20 million or 2.5 percent due to delays and dispute settlements.

"It is anticipated that there will be a further increase in the total project cost due to impacts associated with covid-19, including support for retailers. The total increase is not yet known. However, it is not expected to materially affect the project's return metrics."

- BusinessDesk