Rot crisis pushes builder to brink

By ANNE GIBSON and ANDREW LAXON

The leaky building crisis has driven a major Auckland building company to the brink of liquidation.

North Shore-based Akita Construction - which has an annual turnover of about $30 million - this week begged creditors not to take legal action over unpaid bills of $2.3 million.

It has asked them to wait until next year for their money.

Director Mark Dixon blamed the company's financial problems on developers withholding payments, partly because of nervousness over the leaky building crisis.

Yesterday's news came as:

* The Government retreated from its earlier advice to home owners to "see a lawyer" and said it would set up a cheap mediation service.

* Councils predicted they would have to pick up the work of private building certifiers, who face losing their insurance cover.

* Christchurch lawyer Grant Cameron, who won compensation for Cave Creek and Lake Alice victims, said he was considering a legal consortium to represent thousands of affected home owners in negotiations with the Government.

Akita Construction's 199 creditors are being asked to accept having money drip-fed in thirds from the end of this month to the end of April.

If they do not agree, they have been told, Akita will be liquidated and they will get between 20c and 30c for every dollar owed.

Insolvency expert Jeff Meltzer, of Meltzer Mason Heath, has been appointed to run the scheme, which creditors will vote on at 11am next Wednesday at the Ellerslie Convention Centre.

Some of the worst affected are Auckland Civil, which Akita lists as being owed $198,497, Auckland Paving Services, $111,648, The Fence & Gate Shop, $94,000, Sumich Plumbing, $81,000, Placemakers, $68,000 and Commercial Carpet, $65,000.

Akita has built some of the largest multi-density housing projects in New Zealand, including Oyster Cove villas at Gulf Harbour on the Whangaparaoa Peninsula.

But Akita director David Weir accused developer Rick Martin's Cornerstone Group of withholding money as "retentions" in case units there leaked.

Mr Weir said this project and one other which he refused to name had resulted in Akita's cash-flow crisis and inability to pay bills.

Mr Martin confirmed yesterday that he withheld $100,000 on the Oyster Cove project because of fears it might leak.

"I don't want to be bitten on the arse by a whole lot of angry residents," he said.

But he said he was not responsible for Akita's financial woes, as the company was months late in submitting a final bill for the job.

Mr Weir said yesterday that his firm had a proud record of building quality houses, offices and factories and an excellent relationship with its subcontractors and suppliers.

"This is gut-wrenching for us.

"There's going to be a major issue between developers and clients not releasing retentions on the possibility that something might leak."

After the death of Akita director Brian Purdy, fellow directors last month formed a new company, Akita Group, which is building the Manuka Cove housing development for Taradale Properties in Glenfield, the 70-unit Bay Palms multi-density development at Browns Bay and the Smales commercial development at Botany Downs.

Mr Weir said Akita Group was not affected by Akita Construction's financial problems.

But Building Subcontractors Federation chief Peter Degerholm, who represents 5000 companies and 18 trade associations, was scathing about the rearrangements at Akita, which took place on September 25.

He asked how the death of a shareholder would result in the need to form a new company.

"I would be most disturbed if the company is seeking to avoid liability," Mr Degerholm said.

"We're reaching a watershed in New Zealand and if the Government and the building industry don't step in radically and quickly and begin to resolve the leaky buildings crisis, many more people will suffer."

* If you have information about leaking buildings,
email the Herald or fax (09) 373-6421.

Further reading
Feature: Leaky buildings

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