Monadelphous and WICET go head to head

Monadelphous holds a 50% interest in MMM, an unincorporated joint venture between itself and Malaysia’s Muhibbah construction.

MMM entered into two contracts for the construction of the approach jetty and ship berth, and shiploader, associated with Gladstone’s WICET.

According to Monadelphous, work under the contracts is complete and MMM has been granted practical completion.

Monadelphous said in a press release on Monday: “MMM has to date received successful adjudication from the Building and Construction Industry Payment Agency (a Queensland statutory agency designed to facilitate the adjudication of payments in the construction industry by expert adjudicators) for payments relating to the contracts totalling approximately $90 million. The company expects further claims to be lodged with BCIPA in the near future as it expects that WICET will, as has previously occurred, reject future submitted progress claims.

“WICET has filed a claim relating to the MMM contracts in the Supreme Court of Queensland totalling approximately $130m (net of the proceeds of bank guarantees) plus general damages, interest and costs, in which it seeks to recover monies, the majority of which include those paid to MMM under BCIPA and variations previously approved by WICET. The claim names the MMM joint venture parties as defendants, along with each of the respective parent companies.

“Monadelphous rejects WICET’s position as outlined in the claim and will vigorously defend the proceedings. Further, it will pursue a counterclaim through MMM in excess of $200 million to recover costs associated with changes in scope and nature of the works required to be completed, and the value of bank guarantees drawn down. Monadelphous considers that MMM has good grounds for making such claims.

“Monadelphous prides itself on its trusted and long-term business relationships. Over the last 25 years Monadelphous has never instituted legal proceedings against a customer, nor has any customer previously filed a similar claim against the company.”

Monadelphous managing director Rob Velletri said the company had a proud track record of delivering solutions for customers.

“We are very confident that we have met our customer’s requirements, which is something our 4,500 employees have been consistently doing for the past quarter of a century,” he said.

“Despite our best efforts to resolve all outstanding issues with WICET, and considering that we have previously received successful adjudication from BCIPA in respect of many of these issues, we believe WICET’s actions in filing such a claim are unwarranted.

“This is an unusual and non-preferred situation for Monadelphous given our traditional partnership approach with clients, but we are confident of our position and we will stand our ground, supported by a strong balance sheet.”

In a detailed rebuttal to Monadelphous’ interpretation of events, WICET posted its own press statement. It said that:

“WICET today confirmed that it has instigated proceedings in the Supreme Court of Queensland for recovery of amounts paid on account to MMM.

“Whilst MMM has been granted Practical Completion under the contracts, WICET has not certified Final Completion. MMM has ongoing obligations under both contracts to rectify any defects encountered by WICET during the defects liability periods.

“WICET regrets having to commence legal proceedings in order to recover moneys owed by MMM. The four other major contract packages for construction of the Terminal have been finalised to the satisfaction of WICET and its contractors without resorting to the Courts.

“Unfortunately, MMM has previously chosen a litigious path for resolution of its claims. MMM has launched three BCIPA adjudication applications since June 2014 in which it claimed additional payments of $440m (approximately double the original contract sums) and was subsequently only awarded $81m (or 18% of the claims made by MMM).

“WICET has paid the amounts awarded to MMM under the BCIPA adjudications (and all amounts previously certified as owing by WICET). However, payments made pursuant to BCIPA adjudications are interim only and WICET is now exercising its rights to seek a final determination of the adjudicated claims in its Supreme Court proceedings.

“Throughout the course of the contracts, MMM’s claims have been difficult to validate. This issue was recognised by the Adjudicator in the most recent BCIPA award: ‘I accept [WICET’s] comments that the payment claim was both confused and confusing. The payment claim could not be understood at a rudimentary level …The documentation in support of each claim is hard to understand, and in some cases the documentation is incorrect or incomplete, or both.’

“Consistent with the findings of the Adjudicators, WICET has been unable to properly assess MMM’s claims as MMM has failed to provide evidence and substantiation in support of its claims. In fact since October last year, despite repeated requests, MMM has continually refused to provide additional information in support of its claims. WICET has recently been forced to apply to the Courts (at significant expense) to prompt this request. 

“WICET also confirms that it has called on bank guarantees issued by MMM amounting to approximately $38m. MMM has made a number of unsuccessful attempts in the Courts to prevent WICET exercising its contractual rights to call on these guarantees.

“MMM first commenced Supreme Court proceedings in October 2014 to prevent WICET calling on the bank guarantees. Judgment was given in WICET’s favour in December 2014 after MMM lost its case in Queensland’s highest Court, the Court of Appeal.

“MMM then commenced new proceedings to recover approximately $32m of the bank guarantee proceeds. However, in a judgement issued on Friday 12 June 2015 (during suspension of trading of Monadelphous shares), the Supreme Court rejected MMM’s claim with confirmation that WICET is entitled to retain the proceeds of the guarantees. Monadelphous failed to acknowledge this decision in its 15 June 2015 statement to the market despite being aware of the outcome.

“WICET has also encountered difficulties resolving claims by Sinostruct, a Monadelphous Group company which provided fabrication works at the WICET Terminal. On Friday 12 June 2015, WICET called on bank guarantees of approximately $6.9m to recover monies owed to WICET under its contract with Sinostruct. These guarantees were issued by Monadelphous. Monadelphous also failed to note this in its subsequent release to the market.

“WICET will continue to manage the project construction schedule and costs closely in accordance with contract entitlements. The recent milestone of loading the first ship before 30 April 2015 was significant by its achievement within the forecast timeframe.”