Settlement reached for sub-contractor in £1million construction claim

Construction solicitors at Holmes & Hills advised and represented a large specialist ceilings and partitions sub-contractor in a payment dispute worth £1 million, relating to the sub-contractor's involvement in works to fit out a central London hotel. 

Background to the construction claim

The hotel was large with an internal works contract valued at approximately £8 million. At the commencement of works, there was a regular sub-contract between the main contractor and the sub-contractor (client of Holmes & Hills Solicitors). Mid-way through the project the main contractor got into financial difficulties, at which point the employer stepped in and agreed to make some payments directly to the sub-contractor.

It was at this point that a tri-party agreement was drafted to provide for (albeit poorly) the employer making direct payments to the sub-contractor. The tri-party agreement did not however refer to the insolvency of the main contractor. Holmes & Hills was not involved with the client at this point and neither drafted nor advised on the agreement. The employer was an over-seas consortium which, within its group, owned the hotel brand which occupied the building being renovated.

Following the main contractor going into insolvency, the employer attempted to avoid making payment direct to the sub-contractor, arguing that on the language of the tri-party agreement and in the exact circumstances, the employer was not obliged to make any payments. It was at this point the client engaged Holmes & Hills and a claim was brought under the tri-party agreement.

Extensive settlement discussions took place between the sub-contractor and the employer. These discussions highlighted that the employer's argument was not whether any obligations existed and payment due, but rather the value. The employer argued additional sums were being claimed for which were not covered by the language of the tri-party agreement.

The case was settled at the pre-action stage with the help and guidance of Sam Bawden, with the employer making a significant payment to the sub-contractor. Despite works coming to a close early due to the main contractor’s insolvency, the works were eventually completed by another contractor and the hotel opened to the public.