CPB fights $39m Ichthys claim

CPB Contractors has failed in its application for an injunction against engineering group JKC Australia, which is claiming $39.2 million of liquidated damages related to work on the Ichthys LNG project.

JKC employed CPB in 2012 as a sub-contractor to construct onshore buildings associated with the Darwin-based project.

The terms of the contract were amended several times, as the $US37 billion project experienced a series of delays.

CPB was granted extensions of time in 2014 and the minimum value of the sub-contract was increased to $261 million in 2016.

Despite these amendments, CPB has submitted at least eight extension of time claims, half of which have been rejected by JKC.

In February this year, JKC wrote to CPB specifying the agreed completion dates, incorporating extensions granted to CPB, and stating that none of them had been achieved.

As a result, it said CPB was liable to pay liquidated damages of $39.2 million.

In subsequent correspondence, CPB said JKC should either withdraw its demand for payment or provide an undertaking it would not pursue payment,including via bank guarantees.

When this was rejected, CPB applied to the Supreme Court of WA for an injunction blocking JKC from calling on the bank guarantees.

CPB claimed JKC was not entitled to have recourse to the bank guarantees unless it had been established that the amount demanded was objectively payable; i.e. authoritatively established by agreement or determination by an arbitrator or court.

JKC told the Supreme Court the proceedings should be stayed and the parties referred to arbitration because the dispute between the parties was the subject of an arbitration agreement.

In a ruling handed down yesterday, Justice Rene Le Miere dismissed CPB's application for an interlocutory injunction.

“CPB has not made out a prima facie case that JKC is not entitled to call on the bank guarantees and in any event the balance of convenience favours the refusal of an interlocutory injunction,” Justice Le Miere’s judgement stated.

This dispute is one of several related to the Ichthys project.

CPB’s parent company, CIMIC Group, halted work on a $550 million power station at Ichthys early this year after taking over engineering company UGL, which was already in dispute with JKC.

Separately, Laing O’Rourke walked off the project this year after a pay dispute with its supplier, Kawasaki Heavy Industries.

As head contractor, JKC is ultimately responsible for delivering the completed project to its client, Japanese group Inpex.