Developer 'never signed contract' for €48m property plan
Published 02/02/2010 | 05:00
THE director of a major contracting firm that is suing developer Gerry Gannon's flagship firm for €48m has claimed that there was no formal contract signed before major construction works began.
Mr Gannon, the director of Gannon Homes, has been named as one of the Anglo 'golden circle' and is one of the biggest landowners in Dublin.
Yesterday Mr Justice Peter Kelly said it was "rather astonishing" that the alleged €48m works -- said to include construction costs on a major housing and commercial development -- commenced without any formal contract having been signed.
Judge Kelly, the head of Ireland's Commercial Court, said that it seemed there was no formal contract agreed between Pierse Contracting and Gannon Homes and the basis for works of such value arose from a single one-page letter from Mr Gannon's quantity surveyor.
The judge made the remarks when admitting the dispute between the two builders to the Commercial Court. The court was told there was a dispute between the parties as to the €48m figure.
The case relates to a Gannon Homes development at Clongriffin, Grange Road, Baldoyle, Dublin, which included a hotel, supermarkets, town square, residences, offices and car parks.
Pierse director Michael O'Reilly said his firm was approached about the Clongriffin development in February 2005. He said "no standard forms of conditions of contract were discussed or agreed" concerning that development.
A letter of August 24, 2005, from Mulcahy McDonagh Partnership (MMP), Gannon's quantity surveyor on the development, instructed Pierse to commence work and also purported to confirm a contract price of €86m-plus VAT, he said.
The letter referred to Pierse's programme of works but did not define the scope of works. That lack of definition placed a question mark over whether there was a contract, he said. That letter was produced at a time when the viability of the Baldoyle development was under consideration, added Mr O'Reilly.
Certain parts of the development qualified for tax relief and Gannon's "overriding priority" was to get those parts completed to qualify for tax relief by the end of July 2006, he said.
The dispute arose 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 €5m by MMP but ultimately cost €7.5m.
Pierse had paid a sub-contractor the extra amount but Gannon Homes refused to pay Pierse and there were many more such examples, he added.
Mr O'Reilly said €48m was owed to Pierse arising from the increased scope of works and resulting costs, and acceleration costs for works carried out to ensure Gannon would get tax relief.
The case was adjourned until April.