Robertson said Corrections had tried to negotiate with Decmil.
"Before coming to the decision to terminate the contract, we attempted to negotiate an end to the agreement with significant concessions offered to Decmil to find a solution that was workable to both parties. This was unsuccessful. Decmil and Corrections had agreed to arbitration in order to settle matters in dispute," he said.
Corrections had paid New Zealand subcontractors for their works. Decmil had not paid them "and we will be seeking to recover this money," Robertson said.
Decmil NZ remained liable for the extra costs Corrections was now bearing to finish the project under new arrangements, he said.
The two parties had agreed to an arbitration process where Corrections would seek to recover costs but it was at that point that Decmil NZ placed itself into liquidation, Robertson said.
The dispute dates back to 2017 when Corrections contracted Decmil to deliver three modular prisoner accommodation units with a total of 366 beds at Rolleston and Tongariro prisons, in response to a rapid and unexpected increase in the prison population.
In 2018, the contract was varied: an additional five units was to be built at Christchurch Men's Prison, Christchurch Women's Prison and Rimutaka Prison, Robertson said.
"As part of the termination, Decmil was required to demobilise at all five prison sites in the programme," he said.
The Chinese modular prisons have all been shipped here and Corrections has them.
"All of the modular components constructed offshore have been delivered and are owned by Corrections, and are either on sites as part of work in progress, or are in New Zealand storage facilities," Robertson said.
"When the Covid-19 alert level reduces, we will continue establishing scopes of work required to complete the programme and develop new delivery arrangements. We will continue to source and appoint new lead construction contractors. Across all modular sites we are primarily looking to utilise existing partners and the existing supply chain as much as possible to complete the modular works," Robertson said.
The modular build programme remained critically important in ensuring Corrections had safe and secure places for prisoners and for our staff, he said.
Because matters related to the termination of the Decmil contract are the subject of formal dispute, Corrections would not be commenting further.
The liquidator said Corrections terminating the contract and not paying outstanding invoices caused Decmil to become insolvent and led to his appointment. Preliminary investigations indicated Decmil had a strong claim against Corrections for amounts that remain owed, McVeigh wrote.
"Further, we believe that Corrections does not have a contractual right to demand payment of the performance guarantees and doing so will prejudice all creditors of the company. We need to resist the payment of the performance bonds because any amounts paid to Corrections under the bonds will reduce the amount available to pay ordinary unsecured creditors who have provided services to the company in good faith," McVeigh of Perth said.
He also cited a potential power imbalance.
"I am very concerned by the actions of the Department of Corrections to attempt to improve its position at the expense of ordinary unsecured creditors and I have therefore instructed my solicitors to apply to the High Court of New Zealand for an interim injunction to prevent the performance bonds from being paid," McVeigh said.
"I am considering the negotiations that took place prior to my appointment, however my preliminary view is that Correction's actions to demand payment of the performance bonds may mean that the dispute cannot be resolved through arbitration and that court proceedings may be necessary," he said.
"It is likely that I will need to conduct a court examination of various individuals to better understand the circumstances surrounding termination of the contract," McVeigh said.
