Contractor denied £10m payout after business collapse ended contract

A defunct contractor has lost a drawn-out court battle after pushing for a multimillion-pound payout when a contract ended prematurely.

Shaylor Group went into administration in 2019, during a construction job for Valescure Property. It claimed that its work had been undervalued by Valescure and pushed for more than double the £9.01m it was paid.

Last week, Mr Justice Kerr warned that granting the increase, which would have inflated Shaylor’s payout to £20.3m, could amount to an “unlawful windfall” for the former contractor.

Shaylor was working on an £18.7m job to build 157 apartments for developer Valescure Property Ltd in Birmingham’s Jewellery Quarter. But the contractor entered administration during the works in 2019, meaning it was only entitled to money to cover the work it had already done.

Documents from the High Court confirm the works were “not close to being complete at this stage”, but Shaylor claimed its work so far was worth £20.3m. Valescure valued the work at £9.4m, in a statement sent to Shaylor in 2019.

An initial adjudication in 2022 found Shaylor was not owed any money, but in September that year, a second adjudicator then found that Shaylor was owed an additional £356,008.

Three months later, Valescure was wound up and went into liquidation.

Shaylor took the case to the High Court, arguing that the adjudicators had “miscalculated the amount due”, in particular misinterpreting the contractual provisions concerning payments if contracts ended prematurely.

The Official Receiver warned that Valescure did not have any available assets to pay either the £9.4m or the £20m, after it had gone into liquidation.

But Shaylor moved forward with the case itself to “prove the debt” owed to it during its liquidation process.

In his judgement in the case last week (4 April), Kerr ruled that Valescure was not liable for the £20.3m claimed by Shaylor.

Much of that decision was based on Valescure’s own liquidation process.

That meant it did not have enough funds to argue the case, even though Shaylor’s representatives argued it had the ability to launch legal proceedings.

In April 2020, meanwhile, Valescure passed the project onto another developer, Grainger PLC, which finished the job.

Justice Kerr found Valescure would “surely have argued vigorously” against some of the adjudicators’ decisions if it had access to enough funds.

In particular, the first adjudicator found that Valescure had not issued a statement of accounts with all the monies it owed within three months of the end of the job – as required by the contract.

Instead, Justice Kerr found Grainger PLC became the employer and had to issue the statement of accounts three months after the work finished – and that it had not reached that stage yet.

The second adjudicator found that, although Valescure sold the site to Grainger PLC, Grainger’s expenses and losses from the job would not be taken into account when determining how much Grainger or Valescure owed Shaylor.

“Those challenges would have had, in my judgement, a reasonable chance of success,” Justice Kerr said.

“I do not think this is an appropriate case for the exercise of my discretion to grant the declarations sought,” he added. “To do so could bestow an unlawful windfall on the claimant.”

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