Shortly after the official start of the collapse of Carillion Plc on 15th January 2018, when the main company and five group companies were placed into liquidation by the company directors, the phone started ringing and questions were being asked by concerned subcontractors about the impact of this move on projects in Ireland. A review of one subcontractors file and the usual gaps that exist have raised some interesting questions about the impact of the now enacted and commenced Construction Contracts Act on any outstanding payments to subcontractors in this type of scenario.
Background
On the 22nd July 2016, the InspiredSpaces Consortium was awarded a Contract by the National Development Finance Agency for the construction of a 5 school PPP bundle. InspiredSpaces is a joint venture (50/50) between Carillion and an investment company called Dutch Infrastructure Fund. InspiredSpaces was originally set up in 2004, as a Carillion joint venture consortium vehicle to carry out collaboration projects across a number of industry sectors. InspiredSpaces is described on its website as a Carillion company but is itself a limited company registered in England and Wales.
Sammon Contracting Limited, a Kildare based contractor, were subsequently appointed by the consortium to facilitate the construction of the schools bundle. What is not clear yet forms an important aspect of consideration from the Acts perspective, is the contractual relationship between InspiredSpaces and Sammon Contracting and if there is any intermediary between the two entities. It has been noted in one article available online that Carillion Construction Limited were contracted by the InspiredSpaces consortium with Sammon Contracting subcontracting from Carillion Construction Limited. This relationship quandary in itself would appear to have an important and interesting ramification under the Construction Contracts Act particularly when it comes to any paid when paid provisions.
Paid When Paid
I have previously written about the ineffective nature of paid when paid clauses in Irish construction contracts arising out of a provision in the Construction Contracts Act under Section 3(5). There are however some exclusions as outlined under Section 3(6). Were a party to a construction contract relies upon the payment of another party who is not a party to the contract and that party has a receiver appointed then the contracting party are entitled to rely upon a paid when paid clause down the supply chain. There is one main requirement in that the reliance upon a paid when paid clause in itself requires that there is a paid when paid clause in the contract between the parties in the first instance. To use the present scenario as an example, for Sammon Contracting to rely upon a paid when paid clause with their subcontractors, InspiredSpaces or Carillion Construction Limited would have to have a receiver appointed and Sammon Contracting would need to have a paid when paid provision within their subcontracts with their subcontractors.
Where further questions arise is in respect to the current legal standing of InspiredSpaces and Carillion Construction Limited. Carillion Construction Limited are listed as one of the, now sixteen, Carillion group companies that were placed into compulsory liquidation with a further company currently placed in voluntary liquidation. In respect to this company, the reliance upon a paid with paid clause in any subcontract would therefore appear to have a basis for effect. InspiredSpaces however is not a company listed as having had a receiver appointed and therefore any paid when paid clause would still appear to be ineffective under the Construction Contracts Act.
Given the origins of the Construction Contracts Act in Ireland, the Carillion collapse has provided the Irish Construction industry with a first real glimpse into the available options and protections that are offered and available under the Act in its truest sense. It has clearly highlighted the necessity and importance for all contractors to have knowledge and sight of those involved in the full contractual chain both above and below their heads as it goes to the heart of their risk and ability to recoup through the payment and adjudication provisions of the Construction Contracts Act.
Keith Kelliher is an Accredited Adjudicator, who has completed the Diploma in Adjudication in University College Dublin, specifically on the Construction Contracts Act 2013, and has represented Main Contractors and Sub-Contractors in payment disputes for over 19 years in the Irish construction industry. Contact Keith at kkelliher@adjudicator.ie for any assistance with the requirements of the ACT. This article is a commentary piece and does not constitute nor should it be relied upon as legal or professional advice.
Background
On the 22nd July 2016, the InspiredSpaces Consortium was awarded a Contract by the National Development Finance Agency for the construction of a 5 school PPP bundle. InspiredSpaces is a joint venture (50/50) between Carillion and an investment company called Dutch Infrastructure Fund. InspiredSpaces was originally set up in 2004, as a Carillion joint venture consortium vehicle to carry out collaboration projects across a number of industry sectors. InspiredSpaces is described on its website as a Carillion company but is itself a limited company registered in England and Wales.
Sammon Contracting Limited, a Kildare based contractor, were subsequently appointed by the consortium to facilitate the construction of the schools bundle. What is not clear yet forms an important aspect of consideration from the Acts perspective, is the contractual relationship between InspiredSpaces and Sammon Contracting and if there is any intermediary between the two entities. It has been noted in one article available online that Carillion Construction Limited were contracted by the InspiredSpaces consortium with Sammon Contracting subcontracting from Carillion Construction Limited. This relationship quandary in itself would appear to have an important and interesting ramification under the Construction Contracts Act particularly when it comes to any paid when paid provisions.
Paid When Paid
I have previously written about the ineffective nature of paid when paid clauses in Irish construction contracts arising out of a provision in the Construction Contracts Act under Section 3(5). There are however some exclusions as outlined under Section 3(6). Were a party to a construction contract relies upon the payment of another party who is not a party to the contract and that party has a receiver appointed then the contracting party are entitled to rely upon a paid when paid clause down the supply chain. There is one main requirement in that the reliance upon a paid when paid clause in itself requires that there is a paid when paid clause in the contract between the parties in the first instance. To use the present scenario as an example, for Sammon Contracting to rely upon a paid when paid clause with their subcontractors, InspiredSpaces or Carillion Construction Limited would have to have a receiver appointed and Sammon Contracting would need to have a paid when paid provision within their subcontracts with their subcontractors.
Where further questions arise is in respect to the current legal standing of InspiredSpaces and Carillion Construction Limited. Carillion Construction Limited are listed as one of the, now sixteen, Carillion group companies that were placed into compulsory liquidation with a further company currently placed in voluntary liquidation. In respect to this company, the reliance upon a paid with paid clause in any subcontract would therefore appear to have a basis for effect. InspiredSpaces however is not a company listed as having had a receiver appointed and therefore any paid when paid clause would still appear to be ineffective under the Construction Contracts Act.
Given the origins of the Construction Contracts Act in Ireland, the Carillion collapse has provided the Irish Construction industry with a first real glimpse into the available options and protections that are offered and available under the Act in its truest sense. It has clearly highlighted the necessity and importance for all contractors to have knowledge and sight of those involved in the full contractual chain both above and below their heads as it goes to the heart of their risk and ability to recoup through the payment and adjudication provisions of the Construction Contracts Act.
Keith Kelliher is an Accredited Adjudicator, who has completed the Diploma in Adjudication in University College Dublin, specifically on the Construction Contracts Act 2013, and has represented Main Contractors and Sub-Contractors in payment disputes for over 19 years in the Irish construction industry. Contact Keith at kkelliher@adjudicator.ie for any assistance with the requirements of the ACT. This article is a commentary piece and does not constitute nor should it be relied upon as legal or professional advice.
RSS Feed