News

Contract dispute persists in court

A BITTER contract dispute between AJ Lucas and Gladstone Area Water Board continues to simmer.

The issue became public in May when truck drivers and earthmovers complained they had not been paid for work done under Lucas on the Curtis Island Sewerage and Water Infrastructure Project.

In recent months, the issue has played out in Brisbane Supreme Court where Gladstone Area Water Board and Lucas have been going head-to-head.

There is still disagreement between Lucas and GAWB about money owed between the parties. Lucas said it was committed to paying the subcontractors.

"Lucas is finalising all third-party creditor accounts as expeditiously as possible," a representative said.

The following is AJ Lucas' complete response to questions from the Observer;

 Q1/ Does AJ Lucas still have outstanding payments for sub contractors on that project? How much?

Lucas is finalizing all third party creditor accounts as expeditiously as possible. This has been difficult as some subcontractor accounts have been complicated by a number of factors such as intervening insolvency, a third party Garnishee Order (to re-direct any payment), sub-subcontractor charges (also re-directing any payments due) and related claims or matters in dispute under the Head Contract defecting or rejecting work values claimed in relation to the third party project creditors' works.

Q2/ Is there a legal process underway to resolve this issue?

  

The parties under the Head Contract have entered into a formal Deed incorporating an expedited dispute resolution process to settle the final account before an expert panel.  This process has commenced and is expected to take some time to conclude.

Further, Lucas has obtained a judgment debt of $2.5 million as against GAWB which Lucas  would apply immediately to discharge third party project creditors if it could.  However, GAWB has obtained a temporary Stay Order preventing payment of that judgment sum on the premise that Lucas could not repay the sum if it was paid. Lucas is demanding that GAWB make the payment. Notwithstanding the stay application by GAWB filed in Court, Lucas has made direct overtures to GAWB in an attempt to receive such funds so that third party project creditors can be paid as a priority. These settlement discussions are not assured of success.

Importantly, GAWB insists that the disputes between it and Lucas are separate and distinct from any sums owed to Lucas' third party project creditors. Conversely, Lucas insists that the disputes and issues complained of by GAWB directly concern the third party project creditors' works and as such the issues are directly linked.

Q3/ If AJ Lucas still owes money (and I am not sure if it does), can AJ Lucas guarantee that all payments will be made?

Lucas will meet its trading creditor commitments in the ordinary course of business.

At present Lucas and GAWB each insist the other owes it  a substantial sum of money. From Lucas' point of view if the expert panel finds in its favour  then all third party project creditors would be paid their respective monies due and Lucas would recover its project costs; however, GAWB has either denied the entitlement and/ or value of that relevant construction work.

Once again GAWB insists that the disputes between it and Lucas are separate and distinct from any sums owed to Lucas' third party project creditors. Conversely, Lucas insists that the disputes and issues complained of by GAWB directly concern the third party project creditors' works and as such the issues are directly linked.

  

The following comments came from GAWB Chief Executive Jim Grayson yesterday;

"We (ie GAWB and GRC) have been in Court with Lucas over various matters in recent months, including seeking to compel compliance by AJ Lucas with their commitment to pay creditors the $8m that was paid 'on account' by GAWB and GRC in June pending the resolution of the substantive matters in dispute.  For clarity, this proceeding was finalised in August, and as a result of it we are satisfied that adequate proof has been supplied evidencing these payments by Lucas to its creditors. The other issues in Court relate to matters that are associated with the substantive issues in dispute that are to be resolved by an expert determination panel - it is not appropriate for me to make further reference to them as they are ongoing.

In relation to the questions posed by your first e-mail:

  • We have previously said that there was an accelerated dispute resolution process that was agreed by the parties that is being pursued.  This involved claims by AJ Lucas against GAWB/GRC and also claims by GAWB/GRC against AJ Lucas.  We are significantly progressed in this process and my current hope would be for the outcomes of this process to be finalised in November. We have the ability and desire to achieve this, but this hope of course is dependent upon both parties' desire and ability to have the dispute resolved in the shortest reasonable period.
  • In the legal proceedings that GAWB/GRC instituted to compel compliance by AJ Lucas with its obligations to creditors (arising from GAWB's/GRC's payment on account of $8m) affidavit material was filed by AJ Lucas advising that only two (2) creditors to which these obligations attached remain unpaid due to disputes (Brisbane Supreme Court of Queensland Proceeding 5767/12, Doc. 11, para 19 and 59 Affidavit of Peter Thomas - re creditors still owed money). Of those creditors I am aware that one itself is in Liquidation with debts relating to project related activities and non-project related activities.
  • Question 4 - McCosker are progressing works on site at present, with some key milestones nearing completion.

For clarity none of GAWB/GRC's claims both from and against Lucas in any way affects the legal responsibility that AJ Lucas has to pay creditors as and when these debts are due for payment.  Any suggestion of a linkage of both matters by representatives of Lucas (as I understood occurred historically) is incorrect."

 

The Dispute

- The dispute between Lucas and GAWB has left several small subcontractors in turmoil, most of them truck drivers and earthmovers.

- One significant Gladstone-based civil works company, which was owed millions of dollars by Lucas, has been forced into liquidation.

 - The Curtis Island Sewerage and Water Infrastructure Project involves laying pipes from the mainland to the LNG projects on Curtis Island. The project is ultimately paid for by the LNG proponents. Gladstone Regional Council placed the project in GAWB's hands. GAWB subcontracted AJ Lucas, which in turn subcontracted several smaller operators to do the work. The dispute started when it became apparent subcontractors at the bottom of the chain were not being paid on time by Lucas.

Topics:  gladstone area water board




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