Link Construction Limited Placed in Liquidation

Media Release

7 November 2003

Link Construction Limited Placed in Liquidation

Liquidators McDonald Vague have been appointed to Link Construction Limited, the major sub-contractor to Fletchers during the construction of Auckland District Health Board's new hospital in Grafton.

Link was placed in liquidation on 28 October 2003. The hospital, which was already completed and operational, is unaffected. The sole director of Link Construction Limited is Robert Arthur King.

Liquidator Graeme McDonald says that after an initial review of the Link file, there are a number of issues to be discussed with Fletchers, and a number of matters in dispute for up to $1million. Mr McDonald stressed it was early days and he hoped issues could be resolved through discussion rather than legal action.

"The most significant issue on the table is a "re-measure", which was requested by Fletchers at the conclusion of construction. A "re-measure" is a re-measuring and reassessment of the finished construction work, as completed by the contractor (Link Construction Limited). Fletchers deducted a sum from the agreed contract price after the re-measure, and this is strongly disputed by Link.

"The second area of dispute is variations which Link Construction believe are valid but have yet to be approved by Fletchers. Further, there are issues involving labour brought to Auckland by Fletchers which Fletchers say was to meet completion deadlines. Fletchers have deducted the cost of such labour from the amount due to Link Construction. These deductions are strongly disputed by Link Construction. There are other deductions which are also disputed.

"Additionally, retentions are owed amounting to $100,000 and these are due in October 2004. (Retentions are moneys held back by Fletchers for maintenance and rectification.)

"Link Construction's sole director has advised McDonald Vague that the company was solvent prior to the non-payment or deductions by Fletchers. There is in my view a case to answer for deductions made, but it is early days yet and we are hopeful of resolution of these issues outside the Courts."

Mr McDonald said that Link Construction's position was worsened by the fact it had, in good faith, paid some of its contractors based upon the original contract price agreed rather than the re-measure by Fletchers.

Mr McDonald commented that the Construction Contracts Act 2002 did not apply to Link Construction's contract with Fletchers, because the contract was signed before the Act came into effect. "This piece of legislation would have meant the issues between Fletchers and Link Construction may have been resolved through adjudication and liquidation may not have been necessary."

Mr McDonald said he did not expect a domino effect with insolvencies occurring widely with other contractors as a result of the Link Construction Limited liquidation.

"Creditors appear to be spread widely," he said. "As is typical in all construction insolvencies there are some disputes with Link Construction's creditors on amounts they have claimed. I expect to sort out these issues within the next couple of months."

A meeting of Link Construction creditors will be held on Monday 10th November at 10am, at the Institute of Chartered Accountants of New Zealand, Ohinerau Street, Remuera. Reports will be posted on www.mvp.co.nz (McDonald Vague's website).

McDonald Vague was established in 1989 as New Zealand's first specialised insolvency practice. It remains one of the largest national practices focused solely on insolvency and business recovery in New Zealand. It is a veteran of many construction insolvencies.

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