Something might turn up…

Now this is a word of warning for those of a nervous disposition……don’t read this! Why?

Well I could be writing about anyone you know in construction right now…..

I read the article The Eye Test in last Fridays ‘building’ magazine, page 42/43 if you happen to get a paper copy, or here’s the link if you subscribe.

It’s a message for all company directors out there, don’t take risks at the expense of the support of your creditors.

The gist of the case was about a property company continuing to trade beyond the point any reasonable person would, on the blind belief ‘that something might turn up’ and the consequences this had.

The thing is it really is quite a difficult call to make, as if you are certain you’ve got a deal that will make you a fortune, and you’ve got all your eggs in that basket, and bang! All of a sudden things don’t quite fall into place. Suddenly you could be in a very cold and lonely place! And who wouldn’t think…..something might turn up……..as invariably if you put the effort in, make a few calls, ask a few favours ………..it does. But be warned it might not, and there are consequences…..

The judgment in the case itself is a message to company directors, but the key principles apply to anyone involved in running a business these days when they get to that point of no return.

So the messages from the article that came out to me were:

• Look after you creditors and their interests – surprising that to some people you might think
• Monitor your cash flow intensely, identify any irregularities that highlight the company cannot make its payments by the due dates – basic common sense isn’t it?
• Investigate all available options for putting the company back on track – and don’t delay in doing so, it takes time
• Hold regular board meetings, and keep notes of why you have decided to act in that way, what facts did you have that made you take a particular decision – you’ll never remember in time to come.
• Consider the need to keep all stakeholders in the business informed at the appropriate times – everyone has an interest in keeping the business alive
• Don’t place orders for work when there is no prospect of you paying for that work – common sense again!
• Don’t put personal or any other interests before those of the company – difficult one to judge but don’t go for short term greed

And………….don’t continue to trade on the basis that ‘something might turn up’…..

For anyone interested to read more on this, the case is Roberts vs Frohlich and if you do read it, it has some great insights into the way or industry works with developers and contractors jostling in the formation of contracts. It also has around paragraph 43 a great quote from the letter of intent and the problems of naming individuals in any such letter. Fancy naming the Chairman of an organization as the only person you could negotiate commercial matters with!

Couldn’t resist this one either……….there’s also a Spanner in the works too!

Adjudication Injustice

Now here’s a thing, I started a discussion recently on Linkedin about an adjudication issue we had crop up with a client of ours.

The issue was that we had successfully defended a claim against our client. We beat them fair and square as the saying goes. Now I’m not one to boast about our achievements (maybe I should!) but I saw it as all in a days work and how we go about doing things: Give the client the service they want (tell them how it is, mind you!) pay your dues and let’s work together on the next project. Just be professional about things, you know?

So here’s the issue: As I say, we defended the referral notice successfully with the adjudicator ruling in our client’s favour. He also decided that the other side should pay all of his fees too. Here comes the justice part: The other side (being advised by a reputable claims consultancy business I’ll add) have decided that they will not pay the adjudicator’s fees. Basically they don’t like the justice that has been served on them. So guess what… Yes, you guessed it… The adjudicator is signed up on the basis of joint and several liability. So our client has to pay the fees in full and then spend more money trying to get that money back too! Now to me that’s not really justice for our client. He has, quite rightly, defended a claim made against him; it’s been ruled that he’s right, and now because the other side don’t like the result for something they started, our client picks up that tab too! He’ll never get his money from the subcontractor as I fear they will not be around. As the theme of the comments made make… That’s life and the way of adjudication! Suck it up and get on with it!

If you want to read all of the comments or participate in the discussion (have you ever come across the situation where the other side refuses to pay the adjudicators fees?) you’ll have to join the Contract Risks Management Group – Construction Industry on Linkedin. Or otherwise you can post your comments here!