Wednesday 30th October 2019
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Evidence sworn in court details how Fletcher Building’s relationship with its partners on the $300 million Christchurch justice precinct soured as the project ran over time and budget.
Fletcher is being sued by utilities contractor Electrix, which says while it was paid $21 million for its work, it should get another $7.5 million for the job it did.
The NZX-listed builder is countersuing, saying it overpaid Electrix by about $8 million. Fletcher claims Electrix misrepresented the job it could do.
Despite opposition from Fletcher, Justice Matthew Palmer granted BusinessDesk access to witnesses’ briefs of evidence to enable reporting on the case, which started earlier this month.
Electrix says the parties never agreed on a subcontract price but it should have got $28.8 million on the basis of quantum meruit, the legal doctrine which says you should get paid for what the job is worth.
Fletcher says there was a partly oral and partly written agreement that the electrical work could be done for $15 million plus GST. The project for the Ministry of Justice was one of several that contributed to nearly $1 billion of losses for Fletcher's Building + Interiors unit over an 18-month period.
Documents before the High Court at Auckland show how Electrix scrambled to find contractors for the project, was pressured by Fletcher’s managers, and how Beca left the project two years before it was completed.
According to the evidence from Electrix, Beca - which was subcontracting for Opus International - was removed from the project after it insisted on clinging to its original electrical designs.
Electrix says since the electrical design was rejected by the ministry, “it was obvious to all involved that the parties were operating in a situation of considerable uncertainty.”
Evidence sworn by Electrix manager Phillip Werrett says pressure from Fletcher to have more men on site was “relentless.” The company claims that once liquidated damages were being levied in February 2017, Fletcher pressured it to have more manpower even if workers stood idle at times.
“No matter how many people we had on-site — and in mid-2017 we had up to 75 —[Fletcher] always wanted more, even though they could not always be used efficiently due to unavailable workfaces or constraints on site,” Werrett says in his brief.
The evidence says to meet client inspection and public opening dates, Fletcher regularly requested Electrix install temporary lights so that areas looked finished.
“This was incredibly wasteful and inefficient. Electrix would have to source temporary lights, install and then later remove them, with the associated need to rip out and then re-install ceilings or wall,” Werrett’s brief says.
“Dedicating resources to temporary lighting meant those same resources were not installing permanent lighting or completing other permanent works. The situation was ridiculous,” his brief says. He also claimed the building was not water-tight, making it difficult to do electrical work in.
Werrett’s evidence was that Fletcher staff were pretty unhappy by the time the project reached practical competition in 2017 and, given they knew their company’s high-rise construction unit known as Building + Interiors was being disestablished, “their interest and commitment to the project was non-existent.”
Fletcher's Simon Chambers, who was the overall manager for the project, says its demands were not unreasonable and “they do not become unreasonable just because Electrix had capability issues.”
“My strong feeling is that Electrix has not delivered their services well or efficiently,” his evidence adds.
This was reiterated by Fletcher executive Jeff Wilson who said in his brief, “I would close by saying that Electrix significantly oversold their capability and under-delivered in engineering solutions.”
Fletcher says that the end claim of Electrix of almost $30 million is “so wholly out of any reasonable expectations that it has been misled and been denied the timely opportunity to secure a better outcome.” The evidence of the defence points out that Electrix executives missed key progress meetings and that the sticking point was growing mistrust between the parties.
Justice Palmer said the briefs of evidence and opening statements for the case should be made public because the trial had already started and “open justice today means providing access to information unless there are good reasons not to do so.”
However, he stressed readers needed to be made aware that the written evidence could be supplemented or altered and retracted at the hearing.
The court allowed the parties to redact some information so the contract price and liquidated damages held by the ministry have been kept secret.
The case is continuing in the High Court at Auckland as Fletcher’s witnesses are still giving evidence. Closing is anticipated near the end of the week.
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