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America's Cup hangover lands Hartner in court

By Campbell McIlroy

Friday 9th June 2000

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ON THE WATERFRONT: Princes Wharf development praised but subcontractors hurting
Subcontractors behind Auckland's much-praised waterfront development are engaged in a tangle of disputes with head contractor Hartner Construction.

Many cashflow-poor "subbies" at the bottom of the property food chain have hit the wall waiting to be paid months after they finished work or scrapping over the fine print of contracts.

Others are hurting following the collapse of the head contractor on other projects, Goodall ABL.

But the subcontractors' problems are not necessarily under Hartner's control - the firm itself is hamstrung by strict "pay when paid" clauses and time lags caused by processing hundreds of variations to plans.

A search of publicly available court records showed three cases involving Hartner and subcontractors have been filed at the High Court at Auckland. One has since been withdrawn and Hartner is vigorously opposing the others.

"We dispute these claims and won't be blackmailed into paying what we don't owe," Hartner finance director Mike McQuarrie said.

But for two subcontractors, Alotech Walls and Ceilings and Accord Ceilings and Partitions, it is already too late, as delays in payments have led to their demise.

Hartner was the head contractor on Shed 20, Shed 21 and the Hilton Hotel development on Princes Wharf as well as the Watermark Plaza (now the Sebel suite hotel) and the Old City Markets refurbishment.

Hartner is thought to be the country's fourth-largest construction company.

Former Alotech director Jack Lockhart said his company went into receivership on May 18 as it had been owed money since October last year and it was impossible to keep funding new work.

He said the banks did not care about "pay-when-paid" clauses, a common arrangement

which allowed head contractors to delay paying their subcontractors until the client, usually a developer, finally paid up.

Struggling subcontractors have also been crippled by hundreds of variations to the original plans, which must be carried out at their own cost until approved by the head contractor.

Mr McQuarrie said he did not agree with the morality of "pay when paid" clauses but without that protection Hartner itself would be liable to collapse.

Variations to plans did pose a problem as they could not be costed until they had been completed and took a long time to vet and approve, he said.

The slow process has already landed the company in court on a number of occasions.

An application to have the company put into liquidation by Boral Building Products NZ had since been withdrawn, another was from the defunct Alotech which was hoping to recover some of its costs.

The third was from United Decorating and Painting which claims it is owed over $1 million.

Managing director Mohammed Ayub said he intended to issue winding up proceedings against Hartner but Hartner said it had fired United Decorating and Painting for non-performance and and claimed it was now suing Mr Ayub to recover the costs of completing his work.

Another subcontractor, IBS, is in arbitration with Hartner for about $300,000 worth of work.

Goodall ABL, head contractor on The Quays apartment development, went into receivership in early March owing about $20 million.

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