That well worn adage cashflow is king is reinforced during difficult economic times, yet no matter how vigilant a supplier is, there is always a risk of the purchaser’s insolvency once the goods are supplied.

No doubt a cautious supplier will already be taking the usual steps to mitigate a possible bad debt including checking the purchaser’s creditworthiness, instigating credit insurance (if possible), and ensuring terms and conditions are strict when it comes to payment. What else can a supplier do short of turning away business? A retention of title clause incorporated into terms of trading could be the answer.

A ROT clause is commonly referred to as a Romalpa clause, which is the reference to the famous twentieth century case Aluminium Industrie Vaassen B.V. v. Romalpa Aluminium [1976] 1 W.L.R. 676. The case was an important decision as it introduced the concept of ‘extended reservation of title’ into English law, and although the past few decades has seen an attrition of the principles laid down, it nevertheless continues to have far reaching effects in commercial law.

History

The concept of reservation of title in English law has been about since the late nineteenth century. In the House of Lords case of McEntire v Crossley [1895] AC 457, Lord Herschell LC said that: “…the parties have in terms expressed their intention and said that the property shall not pass till the full purchase-money is paid.”

Fast forward 81 years later and the concept of retaining the title of goods until payment was made, has been ‘merely’ re-stated by the Romolpa case; it is therefore surprising that the seemingly welcoming ground laid down by McEntire, the ROT clause was virtually unknown and allowed a buyer to do what it wished to do with the goods, as if they were its own.

Aluminium Industrie Vaassen was a dutch company that supplied aluminium foil to the English company, Romalpa Aluminium. After receiving large quantities of aluminium foil, Romalpa became insolvent and went into liquidation, still owing a large sum to Aluminium Industrie Vaassen, who then sought to rely on its Clause 13: “The ownership of the material to be delivered by A.I.V. will only be transferred to purchaser when he has met all that is owing to A.I.V., no matter on what grounds.”

A significant quantity and value of the foil remained untouched and still in Romalpa’s possession, and Aluminium Industrie Vaassen successfully argued that its Clause 13 enabled it to take back into its possession the unsold foil. The Court held that: “In order to give effect to the obvious purpose of cl 13, that clause was to be construed as conferring on the defendants a power to sell unmixed foil and also as imposing on them an obligation to account to the plaintiffs for the proceeds of sale unless and until all moneys owing from the defendants to the plaintiffs had been paid. Although, so far as sub-purchasers were concerned, the defendants sold the unmixed foil as principals, so far as the plaintiffs were concerned, the foil was the plaintiffs’ property which the defendants were selling as agents for the plaintiffs to whom, by virtue of their fiduciary relationship as agents and bailees, they remained fully accountable. It followed therefore that the plaintiffs were entitled to trace the proceeds of sale of the unmixed foil and to recover them in priority to the secured and unsecured creditors.”

Passing of Title

In construction and engineering contracts, there are many different parties involved and the goods could have passed to many buyers before the original seller encounters a problem – just think of a sub-sub-contractor. It can be a difficult task to decide who actually owns the goods, and ownership will often pass at quite an early stage – and before goods are paid for.

Unless otherwise stated in a contract, for the sale of goods, title passes from the seller to the purchaser when the parties intend it to pass (section 17 Sale of Goods Act 1979), which is normally upon delivery.

Many construction contracts will be for the supply of labour and materials and hence, will be governed by the Supply of Goods and Services Act 1982, under which title again passes when the parties intend it to pass.

Upholding the Romalpa Clause today

The Romalpa clause will only bite providing it is written into the contract. A seller cannot reclaim its goods simply because it has not received payment, even if the goods have not been sold-on or used. Standard terms of sale are therefore critical.

Subject to certain criteria being met, the courts will uphold a valid Romalpa clause providing it can be demonstrated that an agreement has been properly made between the seller and purchaser – and the normal rules for an agreement is as appropriate here. In other words, there must be a clear offer and acceptance, and that no counter-offer has been made prior to performance, including where the purchaser has acknowledged the order, but then refers to its own terms and conditions; but terms on an invoice will be too late.

There are many types of Romalpa clause, including:

1. Simple or reservation of title clauses
2. Debt clauses
3. Charge clauses
4. Mixed or processed clauses

Simple or reservation of title clauses aim to preserve the seller’s title to the unpaid goods: “Until the purchase price is paid in full, title of the goods remains with the seller.” However, insolvency practitioners could claim that the goods, if remaining on the premises, have been paid for, whilst those goods already shipped out are the subject of the seller’s claims. To avoid this, the seller should have a unique identification mark on the goods.

A debt clause such as “until the price and all other sums owing by the purchaser to the seller are paid in full, title in the goods remains with the seller”, is known as an all money clause, and such clauses have received approval from the courts. There is no need for the seller to identify the goods, as it remains the owner if any debt owed to it by the purchaser is unpaid.

Charge clauses will generally fail: “Until the price is paid in full, the seller remains owner of the goods and any proceeds of their sale.” This is because the courts consider such clauses create a form of charge or security over the goods, of which must be formally registered at Companies House, whilst registration must be within 21 days of the creation of the charge, which is at the time of each and every delivery.

Mixed or processed goods clauses are rarely effective in court: “The Seller shall have ownership of the whole of the goods until payment is made in full where the goods are mixed with or incorporated in other goods before the price is paid”. This is where goods that have been supplied have been incorporated into a larger component or, fixed to premises, and hence such goods cannot easily be separated.

So ROT clauses remains good in the twentieth first century, but with caveats.

© Michael Gerard Consulting Limited
July 2010

You may consider that securing a decent commission in these times where the construction industry is in deep recession is the hard bit. Of course managing the work and successfully delivering the project is also extremely demanding. Now it comes to the easy part; raising an invoice and receiving payment! Snag is, the debtor fails to pay. How do you then secure monies when a debtor, for whatever reason, has decided it is not paying?

No doubt you have properly drafted Terms and Conditions in place – well done. It covers important aspects such as payment periods, final date for payment and interest on late monies received. But what you now need is guidance on how to secure the outstanding monies from the client with speed and at minimal cost.

Having made several attempts via telephone to persuade the debtor to settle the debt, you should then write. The letter should set out the facts including how the debt was incurred, when payment should have been made and the consequences of failing to pay. In addition, copies of the relevant paperwork should also accompany the letter including the invoice.

If payment is still not received, a Letter Before Action is forwarded. This should be succinct as possible and set out the steps which may be taken if payment is not received by a set dead line; however, do not threaten anything if you do not intend to follow it up.

If payment continues to elude, you will have to start tightening those thumb screws – and you have several options – although at this stage, it is wise to make credit enquiries of the debtor, to ensure you will not throw good money after bad.

Letter of Claim
Associated with the Pre-Action Protocol (“the Protocol”) of the Civil Procedure Rules (“CPR”), it is good practice to formally set out your claim, copy all relevant documents and request that the debtor sets out the reason for non payment and provide evidence.

This letter does not have to refer to litigation, but is nonetheless on record as following the procedure required under the CPR. It will also make a good reference when instigating any future proceedings, whether through the courts or some other form of tribunal.

Statutory Demand
If the debt is not contested and is over £750, a statutory demand is an inexpensive and extremely effective tool to persuade the debtor to settle the debt.

A statutory demand can be issued directly by the creditor and it costs little to serve. However, you must ensure that you do everything that is reasonable to bring the demand to the debtor’s attention, ideally personal service. Once issued, you can follow it up 21 days later with a bankruptcy (individual) or winding up (company) petition.

There is nothing else that concentrates the mind of the debtor more than the threat of being wound up. And in most cases, a petition is never needed.

Statutory Adjudication
If the debtor disputes the sum, under section 104(2) of the Housing Grants, Construction and Regeneration Act (“HGCRA”), you are entitled to refer the dispute to adjudication.

All professionals associated with the construction industry should be familiar with adjudication under the HGCRA, and could potentially serve as an excellent and perhaps economical way to settle a dispute (albeit temporarily), but most importantly to be able to secure the outstanding monies.

Third Party Collection
A third party, such as a solicitor or debt collection agency could be an option for your company. Some solicitors specialise in debt collection and can issue powerful letters.

If using an agency, make sure that they are registered with the Credit Services Association (“CSA”) and this can be checked simply by visiting the CSA website.

Using a third party for debt collection can, in some instances, reap rewards and be relatively cost effective (debt collection agencies will typically charge 8% – 10% of the monies secured). However, you must ensure that you have an element of control of how contact is made as anything other than being professional yet firm, could have the reverse effect and permanently sour relations. Remember that it is you who is instructing and paying the third party, not the other way round.

Mediation
Over the past 10 years or so, the mediation of construction disputes have grown enormously, not least because of the requirement to seek alternative methods of resolving disputes under the Protocol.

Mediation however will only work if both parties genuinely wish to settle a dispute and where the debtor is just looking for excuses to avoid payment, such a process will be fruitless.

In addition, unless the debtor is prepared to agree that any agreement reached at the conclusion of the mediation is binding, any agreement reached in the mediation can be subsequently reneged upon.

Court
The more ‘traditional’ way of settling disputes and obtaining a judgement, which can then be enforced by bailiffs, or for debts over £600 which are registered at the High Court, can be enforced by Enforcement Officers as they have a higher success rate than bailiffs.

Either the threat of court proceedings or actually issuing a Claim Form is sometimes all that is needed to get a debtor to pay up, especially where there is no real defence – or even applying for summary judgement (below).

If you do obtain a judgement, this could affect the debtors’ modus operandi, as the judgement is registered on the Register of Judgments, Orders and Fines. Banks, building societies and credit companies will use the information on the Register and could adversely affect business relationships with the debtors’ suppliers or potential customers.

Summary Judgement
You can only apply for once a Claim Form has been served and the defendant has returned its acknowledgement of service or defence. Such an application under CPR 24 can be a cost effective and speedy process. However, the key to a successful application is to persuade the court that the defendant has no real prospect of success.

If the Debtor is from the European Union
If the debtor is overseas but based in the European Union, there are now ways you can recover debts from a party which resides in a different member state from your practice, known as a ‘cross-border’ claim.

The European Order for Payment (“EOP”) procedure is a relatively simple and quick process to recover uncontested debts in a cross border claim. The procedure, introduced in 2008 (and created under Regulation 1896/2006 of December 2006), operates on the basis of standard forms and processes across all EU member states, and does not require the use of solicitors. If you were to receive an order for an uncontested debt in your favour, this is then automatically enforceable in every EU country.

There is also now a European Small Claims Procedure (“ESCP”), effective as from January 2009, and is a procedure for where claims do not exceed €2,000.

Leaflet EX725 from the HMCS website explains the processes in greater detail both the EOP and ESCP.

An European Enforcement Order (EEO), is the method for enforcement of your uncontested judgement in the EU.

© Michael P. Gerard MSc, PGDipLaw, PGDipBar, FCIOB, MCIArb, MAE

Author background

Michael is a Barrister, Chartered Builder, Registered Adjudicator & Accredited Expert in quantum and planning matters. He is Managing Director of Michael Gerard & Co www.michael-gerard.co.uk, a company of chartered building consultants and quantity surveyors who provide a specialised service in the areas of construction law, quantum, programming, business recovery and insolvency support to the construction industry.

Just paid your supplier for goods and/or services but now want to stop the cheque because you have suddenly realised it is not conducive to your cash flow or perhaps you have found a defect? Think again!

It is very dangerous to stop a cheque unless the payer is absolutely sure it can prove the supplier or contractor is at fault and is not entitled to any of the amount shown on the cheque. This is because, technically, there is no defence to stopping a cheque. Once the cheque has been signed and handed over, then a legally binding contract has been entered into and the payer has to honour the debt.

When a cheque is issued as consideration for goods and/or services, a separate contract is entered into between the seller and purchaser to the contract that was previously entered into for the supply of the goods and/or services. Hence when a cheque is returned unpaid, the seller may elect to bring a claim either under the supply contract or, the separate contract entered into when the cheque was issued to the seller. If the seller elects to bring a claim under the cheque contract, this is referred to as the Cheque Rule.

The foundation for this cause of action is in the basis that cheques are a bill of exchange, being construed as the equivalent to instalments of cash, albeit deferred, and as such are unconditional promises to pay based upon the presentation of the cheque. If the cheque is stopped or is returned unpaid for whatever reason, a good cause of action arises.

The Cheque Rule applies to payments made by:

1. Direct debit
2. Cheques and bills of exchange
3. Letter of credit
4. Performance bonds.

There are exceptions to the rule, for instance where the customer has received absolutely nothing in exchange for their payment, or where the contract was illegal, or the cheque was obtained in a fraudulent way.

However, it is a brave payer that issues and then stops a cheque, especially with the prospect of a Part 24 judgement application looming over ones head!

© Michael Gerard Consulting Limited
May 2010

On 1 October 2009 the 50th update to Civil Procedure Rules came into effect. One of the key changes is to Part 35. There are 4 main changes:

• Definition of an expert
• Guidance on the use of single joint experts
• A new declaration of awareness and a revised Statement of Truth
• Clarification of what written questions can be put to an expert witness

Definition of an expert
The definition is now harmonised between civil and criminal proceedings.

Guidance on the use of single joint experts
Guidance has been provided on the use of single joint experts in small and fast track litigation cases, where if the court allows an expert, that will normally only be a single joint expert.

A new declaration of awareness and a revised Statement of Truth
The Statement of Truth has now been revised and experts must make a clear distinction between the facts within their own knowledge and facts that are not. The facts within their own knowledge must be confirmed to be true. The new declaration of awareness requires the expert to include a statement confirming that they are aware of the Civil Procedure Rules, Practice Directions and the Protocols.
The new declaration of awareness and revised Statement of Truth has been introduced as a result of many experts having failed to comply with the existing rules and protocols. This key change in will mean that instructing solicitors will now look for evidence that an expert has a full understanding of Part 35 of the CPR, Practice Directions and Protocols. It is also likely that if cases go to court, experts could be cross-examined in relation to their knowledge of Part 35 of CPR.

Clarification of what written questions can be put to an expert witness
Written questions must be proportionate and appropriate. For example, there must be no cross examination or attacks on the expert’s integrity.

Conclusion
Experts must ensure that they are fully conversant of the Civil Procedure Rules, Practice Directions and the Protocols and in the preparation of the report, the expert have complied with them.

These changes emphasise the primary duties of an expert:

• Assist the court.
• Not be a ‘hired gun’ or advocate.
• Give unbiased evidence of opinion on matters within the expert’s expertise, based upon all of the facts, regardless of what party it may be helpful to, or indeed unhelpful to.

It is therefore paramount that solicitors only instruct those experts that fully understand the rules, and those experts must in turn be able to demonstrate to their instructing source that they are aware of these rules.

The following is the new format for the declaration of awareness and Statement of Truth:

I, [FULL NAME OF EXPERT], DECLARE THAT :-

1. I understand that my duty in providing written reports and giving evidence is to help the Court, and that this duty overrides any obligation to the party by whom I am engaged or the person who has paid or is liable to pay me. I confirm that I have complied and will continue to comply with my duty.

2. I confirm that I have not entered into any arrangement where the amount or payment of my fees is in any way dependent on the outcome of the case.

3. I know of no conflict of interest of any kind, other than any which I have disclosed in my report.

4. I do not consider that any interest which I have disclosed affects my suitability as an expert witness on any issues on which I have given evidence.

5. I will advise the party by whom I am instructed if, between the date of my report and the trial, there is any change in circumstances which affect my answers to points 3 and 4 above.

6. I have shown the sources of all information I have used.

7. I have exercised reasonable care and skill in order to be accurate and complete in preparing this report.

8. I have endeavoured to include in my report those matters, of which I have knowledge or of which I have been made aware, that might adversely affect the validity of my opinion. I have clearly stated any qualifications to my opinion.

9. I have not, without forming an independent view, included or excluded anything which has been suggested to me by others, including my instructing lawyers.

10. I will notify those instructing me immediately and confirm in writing if, for any reason, my existing report requires any correction or qualification.

11. I understand that;

11.1 my report will form the evidence to be given under oath or affirmation;

11.2 questions may be put to me in writing for the purposes of clarifying my report and that my answers shall be treated as part of my report and covered by my statement of truth;

11.3 the court may at any stage direct a discussion to take place between experts for the purpose of identifying and discussing the expert issues in the proceedings, where possible reaching an agreed opinion on those issues and identifying what action, if any, may be taken to resolve any of the outstanding issues between the parties;

11.4 the court may direct that following a discussion between the experts that a statement should be prepared showing those issues which are agreed, and those issues which are not agreed, together with a summary of the reasons for disagreeing;

11.5 I may be required to att end court to be cross-examined on my report by a cross-examiner assisted by an expert;

11.6 I am likely to be the subject of public adverse criticism by the judge if the Court concludes that I have not taken reasonable care in trying to meet the standards set out above.

12. I have read Part 35 of the Civil Procedure Rules and the accompanying practice direction including the “Protocol for Instruction of Experts to give Evidence in Civil Claims” and I have complied with their requirements.

13. I am aware of the practice direction on pre-action conduct. I have acted in accordance with the Code of Practice for Experts.

STATEMENT OF TRUTH
I confirm that I have made clear which facts and matters referred to in this report are within my own knowledge and which are not. Those that are within my own knowledge I confirm to be true. The opinions I have expressed represent my true and complete professional opinions on the matters to which they refer.

© Michael Gerard Consulting Limited
August 2008

With the building industry in the grip of the economic downturn, casualties are inevitable. Michael Gerard advocates that as creditors look towards the insolvency practitioner, a debtor may view insolvency as an opportunity…

During times of economic hardship, there will always be some services and sectors that thrive. Unfortunately, in regards to the construction industry, the sector that is currently experiencing a boom time perhaps more than any other is the one dealing with insolvency. As more and more companies operating in the building market struggle to stay afloat, insolvency practitioners are experiencing an abundance of insolvency-related instructions arising from the beleaguered construction industry.
For investors in the industry, this can be highly frustrating. However, by taking time out to investigate the form of contract and researching the appropriate terms and conditions appertaining to the contractor’s insolvency, the recovery of debts can be maximised.

Once an insolvency practitioner begins to investigate a claim, first and foremost, they should dedicate some time to investigating what particular forms of contract the various projects are under. They will need to become familiar with the relevant clauses appertaining to insolvency and thoroughly examine set-off claims. Doing this sort of background preparation can be time consuming, but will pay handsome dividends in the long run.

For the purposes of this article, the contracts referred to will be those that have been executed using the Joint Contract Tribunal (JCT) Intermediate Form of Contract 2005 edition (IFC 2005). This is commonly-used form of contract used by the construction industry when a contractor is undertaking works for an agreed lump sum.

Terminating employment, but not the contract

The IFC 2005 contains a useful definition of insolvency in section 8. By this definition, if a contractor is insolvent, under clause 8.5.1 as the employer, you can give notice to the contractor to terminate their employment under the contract. However, it is important to note that the employer can only give notice providing the works have not achieved practical completion. It is also important to realise that, in issuing the notification, it is the contractor’s employment that is terminated, not the contract, which remains in place.

Although, more often than not, it is the employer who will terminate the employment of a contractor, it is good practice for the insolvency practitioner to inform the employer of the contractor’s insolvency as soon as possible. Doing this has two purposes: it satisfies clause 8.5.2 of the IFC and also enables the insolvency practitioner who is overseeing the insolvent contractor’s affairs to make initial beneficial offers post the insolvency. These could include completing the works or assisting with procurement information, all of which will minimise set-off against monies owed.

Completing the works

If as an employer you have has terminated the contractor’s employment, you then have the option whether to complete the works or not. If you decide not to complete, then clause 8.8.1 requires you to notify the contractor in writing within six months from the date of termination. In addition, you are required to send a statement of account within a reasonable period of issuing such notice. This statement is extremely important to the insolvency practitioner, as it provides the employer’s view of the monies due or owed. However, before this statement is accepted, it should be examined by a quantity surveyor. This part of the process can sometimes be omitted which is an error. Without a proper examination from a suitably qualified professional, the accepted statement may be misleading or even incorrect, as often only the trained and experienced eye can detect anomalies.

Where an employer elects to complete a project, under clause 8.7.4, an account will still be due (set out in a certificate) but only within a reasonable time after completion of the works and the making good of any defects. It is therefore vitally important that the insolvency practitioner is aware of all incomplete projects at the time of the insolvency and that the progress and completion of such projects is carefully monitored henceforth.

Statement of accounts

Experience shows that employers can sometimes be reluctant to issue a statement of the account; this is because the valid cost of completing a project is often not enough to completely set-off against the insolvent company’s account. However, as an essential part of the process, the insolvency practitioner will need to ensure that employers, or their agents obtain the relevant proof of cost, so that the documentation can then be checked by an experienced and qualified quantity surveyor.
By examining all of the insolvent contractor’s contracts, abstracting the pertinent information relating to time, progress and payment rules, together with engaging appropriately qualified and experienced contractual professionals to assist in the examination of the costings, the insolvency practitioner can ensure that returns for creditors can be made to their fullest and that the best outcome in a difficult situation is achieved.
Despite some tentative whispers of recovery, things look unpromising for those allied to the construction industry for the foreseeable future. Development investment is floundering and projects at any current stage of development are increasingly facing stagnation. As the nature of our economy has always been cyclical - and will continue to be so - even when the economic tide turns for the better, the issue of insolvency is one that won’t go away. So it pays to be prepared for the worst a situation can be: ensure that the proper process is followed, that paper work is in order and qualified professionals are sought for this complicated matter. Being open with information and helping the correct people get the figures they need very much works for everyone’s benefit in the long term.

© Michael P. Gerard

Author background

Michael Gerard is a barrister, chartered builder, registered adjudicator and accredited expert in quantum and planning matters. He is also the Managing Director of Michael Gerard & Co (www.michael-gerard.co.uk), a company of chartered building consultants and quantity surveyors who provide a specialised service in the areas of construction law, quantum, programming, business recovery and insolvency support to the construction industry.

With the building industry in the grip of the economic downturn, casualties are inevitable, but whilst the creditors look towards the insolvency practitioner to realise as much of the book debts as possible, a debtor may view insolvency as an opportunity. Michael Gerard advocates taking time out to investigate the form of contract and researching the appropriate terms and conditions appertaining to the contractor’s insolvency.

During times of economic hardship there will always be some services and sectors that thrive. One sector that is currently experiencing a boom time is the construction industry but paradoxically it also has to deal with insolvency. As more and more companies operating in the building market struggle to stay afloat, insolvency practitioners are experiencing an abundance of insolvency related instructions arising from this beleaguered industry.

Do your homework to reap the dividends
Once an insolvency practitioner begins to investigate a claim, first and foremost, they should dedicate some time to investigating what particular forms of contract the various projects are under. They will need to become familiar with the relevant clauses appertaining to insolvency and thoroughly examine set-off claims. Doing this sort of background preparation can be time consuming but will pay handsome dividends in the long run.

For the purposes of this article, the contracts referred to will be those that have been executed using the Joint Contract Tribunal (JCT) Intermediate Form of Contract 2005 edition (IFC 2005). This is commonly used when a contractor is undertaking works for an agreed lump sum.

Terminating employment, but not the contract
The IFC 2005 contains a useful definition of insolvency in section 8. By this definition, if a contractor is insolvent, under clause 8.5.1, as the employer, you can give notice to the contractor to terminate their employment under the contract. However, it is important to note that the employer can only give notice providing the works have not achieved practical completion. It is also important to realise that, in issuing the notification, it is the contractor’s employment that is terminated, and not the contract which actually remains in place.

However, more often than not it is the employer who will terminate the employment of a contractor. It is good practice for the insolvency practitioner to inform the employer of the contractor’s insolvency as soon as possible. Doing this has two purposes: it satisfies clause 8.5.2, and also enables the insolvency practitioner who is overseeing the insolvent contractor’s affairs to make initial beneficial offers post the insolvency. These could include completing the works or assisting with procurement information, all of which will minimise set-off against monies owed.

Completing the works
If, the employer has terminated the contractor’s employment, they then have the option whether to complete the works or not. If they decide not to complete, then clause 8.8.1 requires them to notify the contractor in writing within six months from the date of termination. In addition, they are required to send a statement of account within a reasonable period of issuing such notice. This statement is extremely important to the insolvency practitioner, as it provides the employer’s view of the monies due or owed. However, before this statement is accepted, it should be examined by a quantity surveyor.

This part of the process can sometimes be omitted which is an error. Without a proper examination from a suitably qualified professional, the accepted statement may be misleading or even incorrect, as often only the trained and experienced eye can detect anomalies.

Where an employer elects to complete the project, under clause 8.7.4, an account will still be due (set out in a certificate), but only within a reasonable time after completion of the works and the making good of any defects. It is therefore vitally important that the insolvency practitioner is aware of all incomplete projects at the time of the insolvency and that the progress and completion of such projects is carefully monitored.

Statement of accounts
Experience shows that employers can sometimes be reluctant to issue a statement of the accounts; this is because the valid cost of completing a project is often not enough to completely set-off against the insolvent company’s account. However, as an essential part of the process, the insolvency practitioner will need to ensure that employers or their agents obtain the relevant proof of cost, so that the documentation can then be checked by an experienced and qualified quantity surveyor.

By examining all of the insolvent contractor’s contracts, abstracting the pertinent information relating to time, progress and payment rules, together with engaging appropriately qualified and experienced contractual professionals to assist in the examination of the costings, the insolvency practitioner can ensure that returns for creditors will be maximised and that the best outcome in a difficult situation is achieved.

Despite some tentative whispers of recovery, things look unpromising for those allied to the construction industry for the foreseeable future. As the nature of our economy has always been cyclical and will continue to be so, even when the economic tide turns, the issue of insolvency is one that won’t go away. It pays to be prepared, so ensure that the proper process is followed using qualified professionals. Be open with information and help them get the figures – this will be to everyone’s benefit in the long term.

Michael Gerard is a barrister, chartered builder, registered adjudicator and accredited expert in quantum and planning matters. He is also the Managing Director of Michael Gerard & Co (www.michael-gerard.co.uk), a company of chartered building consultants and quantity surveyors who provide a specialised service in the areas of construction law, quantum, programming, business recovery and insolvency support to the construction industry.