Contractor Payment Dispute

H&J was approached by the Administrators of a construction company in 2016 in relation to a claim arising from a construction contract for substantial refurbishment works to an expansive, luxury residential property in London.  The Employer / Developer was a company incorporated in Jersey to act as an SPV for a high net worth individual to hold and develop the property.  

It appeared from documents obtained by H&J that the Employer had intentionally chosen to progress the works with a contractor that would be stretched by the project.  The Employer thereafter overburdened the Contractor with a huge number of variations to both the scope and design of the works, while causing extensive delays by failing to provide important information to the Contractor.  In combination with the Project Manager, the Employer consistently undervalued the Contractor’s monthly payment applications and ultimately drove it into insolvency.  The Employer terminated the contract and replaced the Contractor, while refusing to pay it the sums due under the contract for the works done prior to termination.

Given the numerous areas of dispute in this matter, various expert reports were required in order to progress the claims - including in relation to delay and quantum / valuation of works carried out.  These were not costs which the Administrators / the insolvent estate were able to fund, and in light of that and the substantial adverse costs risk in proceeding against the Employer, the Administrators were unable to pursue the claims.

The claims were therefore assigned to H&J in 2017 in order to de-risk the Administrators and for the claims against the Employer to be properly funded and pursued.  

Following the assignment, H&J set about instructing experts to produce the necessary reports and engaged in pre-action correspondence with the Employer.  Having set out the Contractor’s position robustly and thoroughly, the claim was referred by H&J to Adjudication.  As is unfortunately relatively common with Adjudications - which are intended to be (and by their nature are) very rough and ready dispute resolution procedures - the Adjudicator determined the dispute in favour of the Employer on the basis of an erroneous point of law.  The basis of the decision was surprising to all parties, as it was inconsistent with the parties’ respective positions and patently wrong in law.  

H&J therefore regrouped, obtained further evidence and submissions to counter the Adjudicator’s novel and untenable determination, and issued litigation to finally determine the dispute.  Following the commencement of litigation, the Employer promptly attended a number of without prejudice meetings and a settlement was ultimately reached with payment of substantial sums being made by the Employer to H&J.