Fletcher's Commercial Bay payment fight continues

Commercial Bay opened for the first time last week. Photo / Alex Burton

Two big firms working on Precinct Properties' $1 billion Commercial Bay continued their High Court scrap today over liquidated damages payments.

Principal contractor Fletcher Building is fighting with Downer-owned Spotless over the interpretation of their contract.

Justice Gerald van Bohemen was told the case, over a standard form contract governed by the Construction Contracts Act, will set a precedent due to its widespread use.

Fletcher's lawyer Anne Callinan said the dispute over payment schedules would impact other construction firms including in the residential sector where the contracts are also used.

Spotless has been working on air conditioning and ventilation for the yet to be opened PwC office tower at Auckland's Commercial Bay and has received more than $49 million for its work under a fixed-rice contract.

During the lockdown, Spotless took issue with Fletcher's payment schedule, saying Fletcher was charging too much in liquidated damages, so it had the right to stop works.

After an urgent hearing, Justice Mary Peters said on April 30 that while Spotless should get back on site, $2 million should be set aside and held by a third party.

The parties returned to court today, with Fletcher seeking a declaration that the Spotless notice to stop work was invalid. The effect of the ruling would be that Fletcher gets its money back.

Holistic approach

Callinan, a partner at Simpson Grierson, said that the company was passing on liquidated damages charged by Precinct to Spotless because the delays were the air conditioning firm's fault. She pointed out that the work was being done very quickly but was following the procedures set out in the contract.

Fletcher's evidence said notices of delays were given in May 2019 and January 2020, which it said let Spotless know it would have to pay liquidated damages.

Spotless claims that the notices for the work were not detailed enough. However, Fletcher said that while they may not make sense without context, they would have made sense to Spotless.

"The effect of this really is the cashflow issue. Spotless is not going to get the cashflow it needs for work it has done in January, because Fletcher's position is that the deductions are allowed by the contract and that's how the act works," Callinan said.

Spotless wasn't expecting multi-million dollar contra charges to be deducted from its payments, according to its affadavit. The company's lawyer, MinterEllisonRuddWatts partner Stephen Price, is expected to outline its case next, with the hearing scheduled to end this afternoon.