The Supreme Court of Spain has recognized it its Judgment dated September 5th, 2012, the lack of consent in a work contract on which one of the parties applied for the bankruptcy proceedings 10 days after such contract was entered by both parties.

The parties entered into a contract for execution of work by virtue of which the company that few days later applied for the insolvency proceedings, was committed to carry out the works of a building under construction.

Once the bankruptcy proceeding was started, each party issued a claim within the insolvency proceeding.

In an opinion by Judge Roth issued on March 30, 2017, the Court of Appeals for the Third Circuit held that two suppliers who had sold electrical materials to a bankrupt contractor had violated the automatic stay by asserting a construction lien against the owner of the development where the contractor had installed the materials supplied.

In New South Wales (NSW), unlike in Victoria, claimants in liquidation have been able to make claims under Security of Payments Acts (SOPA). This has been recently reaffirmed in the case of Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In Liquidation) [2019] NSWCA 11 (Seymour), where the court doubled-down on this position and further explained why the NSW position differs from the position taken by the Victorian Court of Appeal in the infamous Faade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd [2016] VSCA 247 (Faade).

When creditors are left holding the bag after providing valuable goods or services to a company that files for bankruptcy relief, they often feel misused and that an injustice has occurred. After all, they are legitimately owed money for their work or their product, and the debtor has in effect been unjustly enriched because it received something for nothing. Unsecured creditors do not have recourse to collateral, and typically have to wait in line to receive cents on the dollar.

On 15 January 2018, Carillion, the UK’s second-largest builder and one of the Government’s largest contractors, was placed into compulsory liquidation and the Official Receiver was appointed as liquidator, with Michael John Andrew Jervis, David James Kelly, David Christian Chubb, Peter Dickens, David Matthew Hammond and Russell Downs of PwC being appointed as special managers to assist in the wind down of the business and realisation of its assets.

At the beginning of a new year it is customary to consider what the year ahead may bring. 2019 promises to be eventful not least with the UK's (planned) exit from the EU on 29 March 2019. Here's what to look out for in the next 12 months…

Brexit

Carillion, the UK’s second largest construction company, entered compulsory liquidation on 15 January 2018, with estimated debts of £1.5bn and a pension deficient of c£800m, following three profit warnings in 2017. The company employs 20,000 people in the UK and 43,000 people worldwide. It is thought that some 30,000 companies may be affected by the liquidation.

On 16 January 2015, Justice Beech, of the Supreme Court of Western Australia, handed down his decision in the matters of Hamersley HMS Pty Ltd v Davis [2015] WASC 14 and Hamersley Iron Pty Ltd v James [2015] WASC 10 (the Hamersley Decisions). In both matters, Hamersley sought to set aside determinations made by an adjudicator pursuant to the Construction Contracts Act 2004 (WA) (CCA) and Forge Group Construction Pty Ltd (In Liq) (Receivers and Managers Appointed) (Forge) sought leave to enforce the determinations.

Insurers and insureds do not bear the risk of a contractor becoming insolvent when undertaking insured repair work. The insurer’s only obligation is to pay its appointed contractor and not any subcontractors engaged by that party.

Background

In the current economic climate, contactor insolvency is an increasing concern for all participants in the construction industry. 

The issue is currently receiving close attention from the NSW Government who commissioned an independent report following a spate of contractor insolvency events in 2012 (including Reed Constructions Australia Pty Ltd, St Hilliers Construction Pty Ltd, Southern Cross Constructions (NSW) Pty Ltd and Hastie Group Limited).