Massive spike in legal disputes in the construction industry following Carillion's liquidation

The fall-out from the implosion of Carillion earlier this year continues with a spike in High Court disputes within the construction industry.

Finance firm Advisory have listed 397 construction related disputes heard in the Technology and Construction Court in the past year, up from 311 in 2015/16.

Tom Lowe writing for the Building magazine website said: “The fastest rise in disputes occurred in 2017/18 in the wake of the collapse of Carillion, the contractor which built the Rolls Building the new home of the T&C Court on London’s Fetter Lane.

“Accuracy said Carillion’s collapse had made developers more scrupulous in their approach to contract management and dispute resolution, resulting in the number of claims going up.”

Accuracy partner Hervé de Trogoff said: “Project owners and developers are in a post-Carillion world – the days of taking the long view and relaxing contractual or commercial postures are over. That’s driving a long-term rise in disputes reaching litigation.”

Tom Lowe said that following Carillion’s implosion last January nervous developers were no longer prepared to overlook claims on one job in order to recover them on future schemes – in case some firms went bust in the mean time.

Hervé de Trogoff said: “A few years ago, some limited cost over-runs might have been accepted, in the knowledge that they would balance out over the long-term on other projects. Now, taking account of the tighter contractual pressures applied to contractors or suppliers, there’s a risk that there may not be a long-term.”

“The weakening of these relationships mean it is now a much easier decision to litigate against a contractor and work with one of its competitors on the next project.”

Meanwhile Aaron Morby of Construction Enquirer has reported that Carillion liquidators are close to clawing back around £510m from asset sales, insurance and debt recoveries.

He said: “But none of the vast recovery pot is likely to find its way to subcontractors given that total Carillion liabilities after its collapse in January 2018 stood at around £7bn. Of the 81 companies in liquidation around 20 companies should show a surplus, which will be distributed to secured creditors.

David Chapman, Official Receiver at the Insolvency Service, revealed the extent of recoveries to co-chairs of the parliamentary inquiry into the contractor’s collapse. Liquidators are starting to wind down their work with just 15 insolvency specialists now working on the case.

“So far PwC has received nearly £53m in fees associated with the liquidation. In the final reckoning on redundancies, 16% of the Carillion workforce had to be made redundant while 84% of jobs were saved, the large majority of which were transfers to new contractors.”

He said the Financial Reporting Council also updated the select committee on the progress of four investigations – two relating to auditing and two relating to possible miscounduct of directors. It said a decision on whether to take enforcement action on auditing matters would be made before the end of this year, with a decision on directors’ conduct taken by March 2020.

Around 16% of the Carillion workforce were made redundant while 84% of jobs were saved, the large majority of which were transfers to new contractors.

For the full stories visit https://www.building.co.uk/news/number-of-high-court-disputes-jumps-again/5103162.article on the construction legal disputes and https://www.constructionenquirer.com/2019/11/13/carillion-liquidator-to-clawback-510m/ on the Carillion clawback story.

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com