Fletcher Construction was ordered to pay contractor Electrix an extra $7.4 million dollars, the consequences of Fletcher’s mismanagement of its government contract to design and build Christchurch’s CBD Justice precinct.
The High Court was told of chronic mismanagement with design work barely keeping pace with construction, work completed out of sequence and supposedly finished work being ripped out and later reinstated. Electrix claimed it was underpaid seven million dollars; Fletcher said it had paid seven million too much and was due a refund.
In 2014 Fletcher Construction signed a $240 million contract to design and build the Justice precinct, the first major rebuild in Christchurch’s earthquake damaged business district. It nominated French-owned Electrix Ltd as preferred contractor for electrical services. Evidence was given that electrical design at this point was still a work-in-progress with Opus International and Beca contracted to draw up the electrical works. Beca was later fired from the project. Opus and Electrix were left to muddle through, both responding to ever-changing demands from Fletcher. Fletcher was under pressure. Daily penalties fell due if the project was late. It did run over time, with Fletchers incurring what were described as ‘substantial penalties.’
Electrix told the High Court that detailed design of the project’s electrical works was never completed. Scope changed throughout the project. Electrix described the whole process as a shambles. Ceilings and walls were closed up before services were installed, later reopened and then rebuilt. Areas were wired, then had wiring removed only to later be rewired.
At project conclusion Electrix and Fletcher were at loggerheads over what was due. Justice Palmer ruled there was never any contract between Fletcher and Electrix. They expected to reach agreement at some point, but never did. Work proceeded on ever changing letters of intent. With no contract agreed, Electrix was entitled to payment on ‘quantum meruit;’ legal jargon for payment ‘as much as deserved.’ Electrix gets compensation for the reasonable cost of services provided, Justice Palmer ruled. The key issue was extra compensation for cost blowouts beyond the $21.6 million payout envisaged by successive letters of intent. Justice Palmer accepted expert evidence that 13 per cent of the cost blowout was caused by scope creep initiated by Fletcher, 27 per cent due to Fletcher’s delays and 60 per cent directly caused by Fletcher’s project mismanagement. Payment of an extra $7.4 million was ordered.
Electrix Ltd v. Fletcher Construction Company Ltd – High Court (6.05.20)
20.073