Construction said to be worth €48m done without contract

 

A HIGH COURT judge has described as “rather astonishing” the carrying out of construction and other works with an alleged value of €48 million at a major development at Baldoyle in Dublin without any formal contract having been signed.

It seemed there was no formal contract agreed between Pierse Contracting and Gannon Homes in relation to the work. The basis for works of such value arose from a one-page letter from Gannon’s quantity surveyor, Mr Justice Peter Kelly said yesterday when admitting the dispute to the Commercial Court.

James Doherty, for Pierse, agreed that “extraordinary feature” had led to a dispute as to the basis for the claim, but he rejected assertions by Brian O’Moore, for Gannon, that the €48 million figure was “wildly exaggerated”.

The case relates to a Gannon Homes development at Clongriffin, Grange Road, Baldoyle, which included a hotel, supermarkets, town square, residences, offices and car parks.

In an affidavit, Pierse director Michael O’Reilly said his company had worked on various other Gannon developments and was approached about the Clongriffin development in February 2005. He said “no standard forms of conditions of contract were discussed or agreed at any time”.

A letter of August 24th, 2005, from Mulcahy McDonagh Partnership, Gannon’s quantity surveyor on the development, instructed Pierse to begin work and also purported to confirm a contract price of €86 million plus VAT, Mr O’Reilly said. The letter referred to Pierse’s programme of works but did not define the scope of works. That lack of definition put a question mark over whether there was a contract in being.

The letter was produced at a time when the viability of the Baldoyle development was under consideration, Mr O’Reilly added. Because negotiations were being conducted under time pressures and were concentrated on trying to find a price consistent with Gannon’s budget, “relatively little” attention was paid to the scope of the works to be undertaken.

There were now major disputes over whether works done by Pierse were part of the original scope of works, he said. Mechanical and electrical installation works had been costed at €5 million by Mulcahy McDonagh, but ultimately cost €7.5 million. Pierse had paid a sub-contactor the extra amount, but Gannon refused to pay Pierse and there were many more such examples, he added.

Mr O’Reilly said €48 million was owed to Pierse arising from the increased scope of works, damages for breach of contract, extension of time and associated prolongation costs, disruption costs and acceleration costs for works carried out to ensure Gannon would get tax relief.

Mr Justice Kelly said the court would first address the issue of whether there was a claim in contract. He made directions for the exchange of legal documents in that regard and adjourned the case for further directions to April.