We sought an update on the dispute over unpaid monies following the collapse of ISG, with Hill Dickinson continuing their group action in hopes of getting the Ministry of Justice (MoJ) to engage constructively.

In the January issue of SpecFinish we published that FIS CEO Iain McIlwee had spoken openly to the BBC about millions of pounds being owed to companies following the collapse of ISG last year.

The BBC investigation concerns the failure of Project Bank Accounts (PBAs) used by the Ministry of Justice (MoJ) on prison upgrades. Around 40 companies are owed money for work they completed and say PBAs – meant to protect suppliers by holding ring-fenced funds – should have ensured payment. However, administrators EY-Parthenon said the accounts had only “nominal funds,” suggesting the MoJ may never have paid the money in. Iain said FIS is helping affected firms coordinate legal action with law firm Hill Dickinson.

Sarah Emerson, Partner at Hill Dickinson, explained they were engaged in pre-action correspondence with the MoJ on behalf of seven firms who worked on the projects. She said: “Our clients were small companies who felt let down and could not understand what had happened to the money they were owed.

“They were told this was a positive thing because PBAs would protect them from an insolvency event. “They are set up as a trust mechanism which means funds are ring-fenced. That means money in those PBAs legally belongs to those that are due to be paid.” Sarah also commented that Hill Dickinson could take the MoJ to court over the dispute.

Latest update from Hill Dickinson
We asked Sarah for the latest update on this important issue. She explained that their proposed group action has now been picked up by several major UK publications and is generating significant interest across the construction industry. We hope this growing visibility will continue to apply pressure on both the MoJ (and perhaps Ernst & Young, the administrators of ISG Construction Limited), to engage with us constructively. She said: “We received a further letter from the MoJ, which reiterates its position that it holds no contractual or fiduciary obligation to make payments directly to ISG’s subcontractors, whether under the Partnering Contract, the associated PBAs, or otherwise.

“The MoJ maintains that all sums properly due to ISG prior to the contractor’s administration have already been paid into the relevant PBAs, that no further payments are due, and that it continues to assert its right to equitable set off arising from the anticipated costs of completing the projects following ISG’s insolvency. The MoJ also states that any claims for outstanding sums, whether interim payments, accrued works, or retention, should be directed to the Joint Administrators.”

Sarah concluded by saying: “We are now in the process of liaising with our client group regarding the settling of a detailed response to the MoJ’s most recent letter rebutting these presumptions and will be providing the MoJ with an update on the increased quantum of the claim which has arisen due the expansion of our client group and subcontractors providing us with details of the sums owed to them.”

Iain McIlwee added: “At FIS, we believe it is vital to press this for the group directly involved, but also for the good of the wider supply chain. Promises were made and broken around the protection that PBAs would provide, and ultimately again the wrong people are paying the price. We need to operate in a sector where the specialists are not always left carrying the can for the
mistakes and incompetencies of others.

This case is about injustice, but it is also about change. Insolvencies have battered this sector, and Government has done little to protect us. If they want a productive, forward thinking and collaborative sector, it is vital that they lead by example when operating as a client. This is not that!”

You can read the full article on the BBC website by visiting: www.bbc.co.uk/news/ articles/c4gwz8gg6plo