Thomson Geer advises Pro-invest Australian Hospitality to defeat $6.1m claim

Thomson Geer is pleased to have successfully acted for hotel investment firm Pro-invest Australian Hospitality Opportunity (ST) Pty Ltd (as trustee) in defending a Supreme Court of Queensland proceeding commenced by contractor Built Qld Pty Ltd.

The Brisbane Construction team, led by partner Andrew Kelly, substantially defeated Built’s claim for over $6.1 million, with the Court finding that Built was only entitled to around $400,000. The Court also found that Pro-invest was entitled to retain liquidated damages of over $1.5 million and entitled to over $740,000 for defective works carried out by Built.

On 29 April 2015, Pro-invest and Built entered into a contract for the design and construction of a hotel located at 186-184 Wharf Street, Spring Hill. During construction, Built claimed that a series of directions issued by Pro-invest constituted a variation to the air conditioning system required to be installed under the Contract (Mechanical Services System). Pro-invest disputed that the directions amounted to a variation and contended that the notice required Built to comply with its obligations under the Contract and install an air conditioning system in accordance with the contractual requirements.

Built commenced proceedings against Pro-invest in respect of the certified unpaid amounts, variations, provisional sums, preliminaries and the return of liquidated damages previously set off by Pro-invest. Pro-invest brought a counterclaim against Built in respect of defective works, additional liquidated damages and alleged lost wages.

The most significant issue in dispute between the parties was in relation to the Mechanical Services System. Built contended that on the proper construction of the Contract, the Mechanical Services System installed by them was not required to provide for “mode control” (as opposed to temperature control) in each individual room.   Built argued that Pro-invest’s notices that the installation of the Mechanical Service System be changed was a direction to undertake a variation within the meaning of the Contract. Overall, in respect of the Mechanical Services System, Built claimed that Pro-invest was liable to pay over $2.2 million in relation to alleged variation works and delay damages.

Pro-invest argued that the Contract required the Mechanical Services System to meet the performance requirements of the tender drawings and specifications. A key requirement of the tender drawings and specifications was that the Mechanical Services System be capable of mode control and not temperature control.  This meant that each guest could choose heating or cooling, independently from other guests.

Following a complex four week trial, her Honour Justice Williams found that Built’s installation of the Mechanical Services System was to include mode control so that there was independent heating and cooling capabilities in individual guest rooms. Accordingly, the notice issued by Pro-invest was a valid notice to rectify defective work and not a direction to undertake a variation. Built was also required to rectify the defective Mechanical Services System at its own cost and was not entitled to the costs of carrying out that work, nor an extension of time, delay damages or the return of any liquidated damages set-off by Pro-invest.

Partner Andrew Kelly said, “We are very pleased to have been able to achieve this great result for the team at Pro-invest, by successfully defending this $6.1 million claim, which resulted in Pro-invest being able to retain liquidated damages of over $1.5 million and an entitlement to over $740,000 for defective works”.

The Thomson Geer team was led by Andrew, supported by associate Samuel Speechly and lawyer Sam Lenz.

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