Fletcher construction ordered to pay $7.5 million to utilities contractor over Christchurch justice precinct project

Wednesday, 6 May 2020

The High Court has ordered Fletcher Construction to pay $7.5 million to utility contractor Electrix, for work carried out on Christchurch's Justice Precinct.

The High Court has orderd NZX-listed Fletcher Construction to pay a utilities subcontractor $7.5 million for work done on a new justice and emergency services precinct in Christchurch.

Despite the fact there was no contract between Fletcher and contractor Electrix, the money was awarded under a law that says you should pay what a job is worth, or 'the reasonable cost of services', called quantum meruit.

The four-week trial took place in October last year, and High Court Judge Justice Matthew Palmer issued a ruling on Wednesday May 6, finding in favour of the plaintiff.

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Fletcher had paid Electrix $21.6m excluding GST for the work done on the precinct, on the basis of letters of intent. The two parties never had a formal contract and detailed design for the electrical work was never completed.

As a result the project suffered from 'bad management, delays, disruption and constant time pressure'.

The Justice and Emergency Services Precinct building at the centre of the dispute between Fletcher Construction and utilities contractor Electrix.

Electrix sued Fletcher for $7m plus interest, and the builder filed a counterclaim for $7m, saying it had paid the company too much.

Fletcher was also ordered to pay GST and 5 per cent interest per annum to Electrix.

The project was commissioned by the government in 2011 after the Christchurch earthquakes. The Christchurch Justice and Emergency Services Precinct building was the largest multi-agency government co-location project in the country and involved five levels with different floor plans.

It was the first major building project completed after the quakes and the Ministry of Justice was the principal for the government.

Fletcher and the ministry agreed on a guaranteed maximum price of just under $16m for the electrical work and overall project price of $240m. It was due to be completed in December 2016, but was not completed until February 2019.

In October 2014, Fletcher named Electrix as its preferred contractor. A contract was envisaged but work commenced on the basis of a letter of intent.

Detailed designs of the electrical work was undertaken by Opus International and its subcontractor Beca.

However, on October 23, 2014, the ministry rejected the design proposals and the subsequent redesign did not go well, with Beca clinging to the original designs and eventually being dismissed by Fletcher.

Electrix was asked to complete the designs but declined. However, it continued to work with Opus on a new design. This was never completed and the project was mired in delays as the designs continued to be updated.

Internal emails from Fletcher submitted as evidence showed that the design process was managed badly, and testimony from Electrix manager Phillip Werrett in 2016 showed that Electrix had been substantially held up by approvals from Fletcher Construction or Opus.

Detailed design of the electrical work was never completed the scope of the works changed throughout the project.

Werrett testified that Fletcher Construction wanted 'to remain in a constant state of acceleration to reach an unrealistic practical date', and that Fletcher’s senior building services manager Jeff Wilson insisted on unsuccessful and “incredibly expensive” electrical systems and made other bad decisions.

“The whole process was a shambles”, Werrett told the court.

Testimony from Electrix staff confirmed the disorganised nature of the project. The construction manager on site for Electrix Shane Anketell identified that beyond incomplete design and bad management, Wilson had turned off layers for electrical containment in the modelling software that was used to choreograph spatial clashes between the work of different subcontractors.

Wilson's superior Gemma Collins said in an internal email that doing so was 'ludicrous' and was evidence of concern among Fletcher's senior management that this might cause problems.

Among a number of other concerns sited by Anketell was that Fletcher's required Electrix to present finished-looking rooms and areas for ministry inspection when it was not logical to do so.

Electrix “routinely” had to install, uninstall and reinstall materials as a consequence of problems in sequencing with other subcontractors. A “massive amount”, “at least 20 per cent of the installation”, was reworked by Electrix, he told the court.

The relationship deteriorated over 2017 and Fletcher began to withhold payments to Electrix.

Electrix issued 42 payment claims over the life of the project, until the end of May 2018, totalling nearly $29m. Fletcher Construction paid Electrix exactly $21.6m overall.

The relationship was handled by lawyers from December 2017 and Electrix made its payment claim in May 2018.

Works on the project continued through to February 2019.