Friday, January 9, 2009

Cash disputes soar as credit crunch bites

The number of court disputes between contractors and developers is starting to rise as cash rows flare-up across the industry.

Cases heard at the Technology and Construction Court have been declining in recent years as firms looked to use Alternative Dispute Resolution and mediation to sort out disagreements.

But a survey by law firm McGrigors LLP shows case numbers are on the rise again as contractors are no longer worried about losing future work from developers if they start a court fight with them.

During the third quarter of 2008 there were 32 construction cases filed at the Technology and Construction Court compared to just 28 in the previous quarter of 2008 and 29 in Q3 2007.

McGrigor partner Stuart Nash said a lot of the new disputes were between contractors and developers with contractors complaining they have been underpaid.


Cash disputes soar as credit crunch bites


Nash said: "When a developer tells a contractor that they will not pay the full bill for work as they feel the contract has not been properly fulfilled the tendency has been for the contractor to accept that through gritted teeth.

"They reasoned that there was no point in getting into an acrimonious court dispute with a client that should be their future source of work. The credit crunch has changed all that.

“With the slowdown in the construction sector contractors worry that there might not be a 'next project' from that client so they have less of a motivation to make concessions over their bill. The contractors figure that if there isn’t going to be any guarantee of repeat business why shouldn’t they try to force their client to pay in full?”

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