Observation wheel constructor vows to fight court writ

August 26, 2014

Carolyn Webb

Reporter for The Age

Dads Star on Father's Day

The construction company being sued for $6 million by the owner of the troubled Melbourne Star Observation Wheel has vowed to vigorously contest claims it failed to hand over proceeds of an insurance claim.

In a statement, Melbourne based Alfasi Steel Constructions says owner Sanoyas Rides Corporation agreed that only $1.5 million that Sanoyas paid Alfasi was an advance that was repayable from the eventual insurance payout from a mishap in November 2011 as the $100 million wheel was being reconstructed.

The incident happened as Alfasi was preparing to install a section of the large rim. Segments broke away from a temporary truss, falling on, and damaging, a completed spoke. The wheel then spun out of control, causing further damage.

The tourist attraction in Harbour Town shopping centre at Docklands, had closed in January 2009 after just 40 days of operation after cracks were found in the structure. A series of setbacks meant the wheel wasn’t re-opened until December 2013, causing financial disaster for many retailers.

Earlier this year the wheel suffered software problems and recently neighbours complained about noise from overnight maintenance works.

Japanese based Sanoyas has launched Victorian Supreme Court action seeking to $6 million compensation from Alfasi for breach of contract, damages and breach of trust.

Sanoyas claims that the reconstruction contract required that Alfasi maintain insurance for the full replacement value of the contractual works, for the benefit of Sanoyas.

Sanoyas claims that in January this year, Alfasi was paid about $6.7 million by the insurer under its contract works insurance policy on account of consultancy costs, advance payments and other claims by Alfasi arising from the insurance payment.

Sanoyas, in turn, says it has paid Alfasi $6.089 million in consultancy costs and advance payments, and that Alfasi is liable to to remit the sum owing.

Sanoyas claims that “in breach of the terms of the reconstruction contract, the consultancy costs agreement and the advance payments agreement, and in breach of trust, Alfasi has refused or failed to remit any of the insurance payment to Sanoyas”.

But Alfasi will argue that it agreed with Sanoyas’s Japanese representatives that only $1.5 million paid to it by Sanoyas was an advance payment which would be repayable, “depending on the outcome of Alfasi’s insurance claim”.

Alfasi says the remainder of the money Sanoyas paid it was for Alfasi’s work to dismantle and rebuild the wheel, “because Sanoyas’ original design was inadequate and caused the wheel to fail in January 2009”.

The Alfasi statement says: “After having supported the project for over seven years, despite all the setbacks, Alfasi is disappointed that it is now being sued and says it will contest the claim vigorously to uphold and enforce what it agreed with Sanoyas’ Japanese representatives at the time, and to recover the money that is still outstanding to it from Sanoyas.”

An Alfasi spokesman said he was not able to say at present how much money Sanoyas allegedly owes Alfasi.

Source : The Age

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