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Galway City Council to pay €1.5 million in legal costs over Eyre Square row

A local councillor has told TheJournal.ie that the redevelopment became a gravy train for legal advisors after the council ended up in the Supreme Court and arbitration.

GALWAY CITY COUNCIL has raked up a €1.5 million bill in legal fees over a row with the original company contracted to carry out work as part of the Eyre Square Enhancement Scheme.

The official estimated figure has been made public for the first time after the Oireachtas Public Accounts Committee asked the Department of the Environment, Community and Local Government to provide a note on the issues raised in the development of the project.

Speaking to TheJournal.ie today, local councillor Padraig Conneely said the redevelopment of Eyre Square was a “disaster from start to finish”.

“It was a gravy train for legal advisors  due to mismanagement by the city council,” he said. “They overspent to the tune of €10 million, as well as paying €1.5 million to advisors.”

Galway City Council’s plan to develop Eyre Square was approved by Government in May 2001 and over the next five years a total of €4.572 million was given towards the project.

Although the Department gave no further grants toward the project, it is estimated that the redevelopment cost in excess of €15 million.

Samuel Kingston Construction Ltd (SKCL) was appointed by the council to carry out the planned works by August 2005. The contract was valued at €6.36 million and a completion bond of almost €1 million was put in place by the building firm.

Although it was understood that many of the delays which occurred during the process were “not necessarily the responsibility of the contractor”, the council became concerned about the pace of work. Two notices were served on SKCL in September 2004 and February 2005.

On 27 June 2005, SKCL abandoned the site without notice and with just 70 per cent of the work complete. The council had already paid the company €3.73 million.

Arbitration and court hearings

Another company – which had originally tendered for the contract – were brought on board to finish the work. A contract fee of €4.8 million was paid to SIAC Construction and Eyre Square was formally re-opened in May 2006.

The council pursued SKCL for breach of contract and made a claim on the completion bond of almost €1 million.

However, SKCL argued that it was forced to quit the project after the council withdrew all sums paid to the company. It told arbitrators that the move by the council left the firm insolvent.

Both the arbitrator and the High Court agreed that the “premature” actions of the council left the contractor with no option but to withdraw from the site.

The court found that the contract had a further five months to run and, if negotiations were continued, an agreement may have been possible.

Following those judgements, the council brought the case to the Supreme Court who set the arbitrator’s ruling aside because of a failure to hear from an expert witness retained by the council.

The Supreme Court ruled that arbitration would have to proceed before a new arbitrator.

After the long legal process, SKCL and the council agreed to withdraw all claims and counter claims. The council dropped its claim against the €1 million bond, while SKCL agreed to pay €150,000 as a discharge of liability.

No admission of liability was made by either party. SKCL is no longer trading and the council is dubious as to how much of the €150,000 award will be recovered.

Calls for investigations

Fine Gael’s Conneely had called for a full investigation into the matter but the PAC chairman John McGuinness noted that the comptroller and auditor general does not audit the accounts of city councils.

“It is likely that this matter is outside our remit and we cannot follow up on expenditure by local authorities,” he said at a committee meeting last year.

However, he said this is a matter that he has raised on a number of occasions.

A total of €5 billion per annum is given directly from the Exchequer to local authorities and it is high time for reform in that area to bring such matters within the remit of the Comptroller and Auditor General.

Conneely also told TheJournal.ie that the councils need to be aware that they are dealing with taxpayer’s money.

“There is no control of local authority – how they operate, the way they spend or how they pass the buck to legal advisors,” he said. “There is no common sense, no business acumen and no management applied to the work they do.

“There were gigantic errors made on this project which could have been avoided with a proper management structure. Now, €1.5 million has been paid on something that should have bee resolved but the council were unable and unwilling to do so.”

The document laid out by Geraldine Tallon, the Secretary General at the Department of Environment, has been published by the PAC on its website.

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