Archive | Hartner Group

Securities Commission rules out statutory manager for Hartner

Directors file debt compromise schemes

The Securities Commission said today it would not recommend the affairs of Hartner Construction Ltd be turned over to a statutory manager, in place of the receiver and liquidator already appointed.

“The commission does not consider that the law about the appointment of statutory managers applies to Hartner Construction,” commission chief executive John Farrell said.

The commission met in Auckland last Thursday, 31 May, to hear submissions from individuals and organisations recommending Hartner be placed in statutory management, and also met Hartner’s receiver, liquidator, and representatives of the Companies Office and Serious Fraud Office.

“Representatives from the office of the Official Assignee and the Registrar of Companies have informed us that there are a number of matters in respect of Hartner Construction which they intend to investigate. These matters relate to concerns expressed by those making submissions to the commission.”

Meanwhile Hartner directors Wayne and Gaile Hartner have filed debt compromise schemes with the High Court, under part XV of the Insolvency Act.

Creditors have been called to a single meeting on both proposals at the Institute of Chartered Accountants in Ohinerau St, Remuera, at 11am next Wednesday, 13 June. Jeff Meltzer is provisional trustee for both schemes.

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Hartner Construction in receivership

Bulk of outstanding $21m tied up in disputes

Hartner Construction Ltd has been placed in receivership after facing the threat of collapse for 18 months.

The privately owned company grew during the 90s to become New Zealand’s fourth largest construction business, but in the run-up to the millennium its cranes started wearing Multiplex colours as the big West Australian competitor entered the New Zealand market to take the most prominent jobs around Auckland, such as Metropolis, Chancery, and the Spencer on Byron hotel in Takapuna.

Hartner won most of the work on Princes Wharf, the first four sheds containing apartments, cafes and bars in the Kitchener Group redevelopment project, held on to win the Hilton Hotel project at the end of the wharf but lost the most luxurious of the apartment sheds, on the western side beside the hotel, which went to upstart Goodall ABL.

John Greenwood, who brought the Southland ABL name to Auckland by buying the Goodall business and putting the two together, is back selling real estate, promoting coastal property for Bayleys. His Goodall ABL operation collapsed last March, a victim of trying to win market share on no margin, with a maximum guaranteed price contract in place. ABL Construction, minus Mr Greenwood, continued the job.

Struggle through wind down from boom

Hartner Construction, meanwhile, hung in, though it also relied on continuing forward business to stay afloat.

Trouble with that policy was, Auckland, and in particular the Viaduct Basin, had a construction boom leading up to the America’s Cup contest, with no sustainable construction industry to keep companies busy afterwards.

The apartment boom has faded, although a handful of projects remain on the books. Added to Hartner’s problems, its move to Pacific Islands business was hit by the Fiji coup, at a time when the company was looking at a second timeshare contract on Viti Levu.

Still, for the moment Hartner has a future. Hartner Construction and Hartner Group have been placed in receivership, run by a team at PricewaterhouseCoopers, not in liquidation. Another company in the group holds Mr Hartner’s interest in the Excell public services business which he bought from Manukau City Council with Eric Watson.

About 12 projects left

Hartner has been winding down for the past 12 to 18 months, but has about 12 projects still running. John Waller, of PricewaterhouseCoopers, said Princes Wharf was the biggest, but tonight he was still trying to quantify the various jobs.

Hundreds of subcontractors are involved — Mr Waller was unable to say how many. He was also unable to say how big Hartner’s debt was.

“A lot of the debt relates to jobs in dispute and pay-if-paid — $13 million of jobs in dispute, including $8 million with pay-if-paid clauses, and another $8 million of debt.”

Princes Wharf in final stages

Kitchener Group managing director David Henderson said the Princes Wharf project of 297 apartments, some commercial space and the hotel was in its final stages, with Hartner completing the hotel fitout.

Bad vibes between developer and builder have been evident for months, with the inevitable construction industry disputes over quality and completion at final payment times.

Mr Henderson said Hartner had tried to enforce a $3.5 million claim for payment in the High Court in September, but was unsuccessful.

“The Hilton Hotel has already been substantially completed. We will be working very closely with all interested parties to ensure construction continues as scheduled,” he said.

Mr Waller also said talks would be held, in his case to see that Hartner can keep working.

That won’t be easy. The liquidator of a large subcontractor, Alotech Walls & Ceilings, has a High Court hearing scheduled in a fortnight, seeking Hartner’s liquidation.

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Hartner in liquidation

Alotech gets what it wanted months ago, now unopposed

Hartner Construction Ltd was placed in liquidation in the High Court at Auckland this morning, a move unopposed by the company or its receivers.

The company was the high-profile head contractor for five of the six sheds on Princes Wharf, including the Hilton Hotel which is nearing completion but excluding the expensive apartments in shed 24 on the other side of the wharf at its far end.

The liquidation application was by the receivers and liquidators of Alotech Walls & Ceilings Ltd, on a claim for $1.3 million.

Alotech was trying to collect from Hartner, then to have it wound up, early last year but its claim was disputed. Hartner claimed that instead of Alotech being owed money by Hartner, Alotech owed Hartner money.

While Alotech’s lawyers were kept from pursuing liquidation at a hearing, Hartner went into receivership on 1 February, with John Waller and a team of accountants at PricewaterhouseCoopers placed in charge of the company’s assets by the National Bank, which was owed $8.5 million.

The timing of that appointment maximised the money available to pay the bank, and also maximised the amount coming in from subcontractors.

A liquidator has a wider interest than a receiver, whose task is to act in the interests of the secured creditor calling the receiver in.

The appointment of the official assignee in Auckland as liquidator today will date back to the time Alotech lodged its application last year, predating the receivership appointment in effect.
Hartner Construction in receivership
Hartner lqiuidation move under way

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Hartner liquidation move under way

Attempt by Hartner lawman to suppress court outcome fails

Hartner Construction Ltd and the group’s receivers have agreed not to oppose an application for leave by a creditor to wind the company up — but fought publication of this fact in a High Court hearing on Thursday.

The fight ended unsuccessfully: Justice Rod Hansen gave the order allowing the creditor leave to apply to put Hartner into liquidation and the application was to be filed within hours. The judge rejected any notion that a gagging order on the application should run for the next week.

The hearing was held at the same time as unsecured creditors were being told in a separate meeting at the Tamaki Yacht Club by receiver John Waller their chances of a return from the group’s collapse were minimal.

One reason for that is the timing of the receivership appointment — 1 February — which has cost subcontractors millions of dollars.

The attempt by Alotech Walls & Ceilings Ltd (itself in receivership and in liquidation) to wind up Hartner has been one of several running battles the Auckland construction head contractor has had over the past year in a bid to stay afloat.

Alotech is claiming $1.3 million, but Hartner claims a full hearing would show Alotech owed it money.

Receivers hadn’t had time to consider this, says lawyer

In court, Hartner’s lawyer, Michael Fisher, said the receivers had not had time since their appointment to assess the Alotech claim and decide whether to oppose it or not.

This conveniently ignores the fact that the PricewaterhouseCoopers team of insolvency practitioners went to Hartner’s office in Onehunga on 17 December, more than six weeks before the receivership appointment was formalised.

Mr Fisher surprised Justice Rod Hansen by saying the High Court Rules prohibited any publication on liquidation in the seven days after filing those proceedings.

Justice Hansen: “What the rules say is, it may not be advertised within seven days. The rules do not say there shall be a total gagging order about liquidation proceedings having been filed, do they?”

In his order declining the application for a gag, the judge said he was not persuaded “that any significant prejudice to Hartner in receivership or its creditors will ensue if the fact of the making of this order and the circumstances surrounding it are made known.

“On the other hand, I consider there is the potential for considerable damage if publication of this information was suppressed.”

Hartner still looking for work

Mr Fisher wanted the silence — about a case which has been well publicised over a long period, about a company now in the hands of outsiders because of its insolvency, and which was still advertising its candidacy for the 277 Broadway tender on Monday — because, “at the moment, the company is a going concern in that there are construction projects going on.”

Publication of this application, which was only for leave to apply for Hartner’s liquidation, “may undermine the confidence of the people they are trying to gain confidence of.”

Hartner’s Monday advertisement to subcontractors pricing the 277 contract bore the construction company’s name, without mentioning it was in receivership. Mr Fisher in his courtroom presentation also gave no indication that this company was actively seeking forward contracts, not just tidying up the mess it is already in.

Receiver versus liquidator

A central point of difference between receivership and liquidation is that a receiver is appointed by a secured creditor, in this case the National Bank, owed $8.5 million, and acts in the interests of that creditor, whereas a liquidator is required to act in the interests of all creditors.

Alotech’s liquidators may be able to find supporters to force the Hartner liquidation application through the court, though this will take time if Hartner’s receivers can be convinced the company’s defence is real and claim against Alotech s strong.

A liquidator eventually appointed to Hartner might also try to recover money paid over in transactions from the end of last year. But would a penniless liquidator have a chance of recovering money paid by a receiver to a bank on its debenture? Most unlikely.

Receivership timing

The 1 February appointment of the receivers was crucial to the bank recouping the maximum return.

By that date, the developer had collected as much as possible for December from clients. Under most contracts, the builder will get paid 10 days after certification. On the Princes Wharf contract, where Kitchener Group is the developer, certification was mid-month and the developer was paying Kitchener on the 25th if possible.

By that time, as well, all the subcontractors would have submitted their claims and the head contractor would know the claims it is going to make for the next month.

Once the subcontractors file their claims, they become an asset of the head contractor. Two days earlier, these subcontractors’ claims wouldn’t have been in, and wouldn’t have been a Hartner asset.

At the first creditors’ meeting, the debtors’ ledger was put at only $¾ million and January’s work was put at $4½-5 million. Hartner was pushing subcontractors to up their work rate, which would take the contract closer to completion, but also improve its own position financially against that of the subcontractors.

The next step is for the receivers to invoice for January. Defects — and perhaps last-minute vandalism by enraged subcontractors — mean not all that money will flow in. But they’re still likely to collect at least half, which means the bank ends up about $2½ million better off than if it appointed the receivers two days earlier.

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Hartner debt-compromise schemes deferred

Creditors appoint committee to look into family trusts

Creditors of insolvent builder Wayne Hartner and his wife, Gaile, will resume consideration of a debt-compromise proposal by the couple of 29 June.

The Hartners proposed separate schemes of arrangement under part XV of the Insolvency Act, which were considered by creditors at a combined meeting today at the Institute of Chartered Accountants in Remuera.

But the proposal — a return of 43c in the dollar, though the actual amount of personal debt hasn’t been pinned down yet — wasn’t put to the vote because of amendments suggested at the meeting.

Karen Mason, a partner of provisional trustee Jeff Meltzer, said after the meeting the creditors had appointed a committee to look behind the four family trusts where the Hartners had placed their assets. “The Hartners have guaranteed total transparency to the creditors,” she said.

Hartner Construction Ltd was the high-profile head contractor on most of the Princes Wharf development when the group collapsed. The company was placed in receivership on 1 February and in liquidation on 22 March. Its prime bank debt was $8.5 million but subcontractors have claimed they’re owed many millions more.

Recent stories: Hartner in receivership
Hartner in liquidation
Securities Commission rules out statutory manager

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