Exclusive: Subcontractor MPG says dispute with Galliford Try has forced it to seek a company voluntary arrangement

Athletes' village

Source: Alamy

A £2m payment dispute between main contractor Galliford Try and subcontractor MPG resulting from delays on construction of the London 2012 athletes’ village has forced the specialist to the brink of insolvency.

MPG - which turned over £46.3m in the year to 31 December 2011 - is working with accountant MHA MacIntyre Hudson to implement a company voluntary arrangement (CVA) as it is unable to pay its debts as and when they fall due.

A CVA would give MPG some protection from creditors and allow it to continue to trade.MPG told Building the “protracted dispute with Galliford Try since the start of the year” was the “dominant” reason for it filing for a CVA.

Galliford Try was ordered to pay a sum - understood to be around £350,000 - to MPG by an adjudicator this month, but MPG said it received correspondence from Galliford Try last week saying it “refused to pay this”. MPG will seek to enforce the adjudication decision in court and the firm is considering further proceedings to recoup the full £2m it estimates it is owed.

An MPG spokesperson said: “We are not surprised by Galliford Try’s reaction.”

Galliford Try is understood to be involved in a number of pay disputes with subcontractors on the athletes’ village job.

The disputes relate to delays on the final two plots of the village, N13 and N26, which together are worth £80m and contained 423 units, according to construction data company Barbour ABI.

In April, Building revealed that Galliford Try at the time faced legal action from three subcontractors resulting from problems on the job, including MPG, that could amount to more than £11m.

MPG’s creditors will vote on accepting the CVA proposal at a meeting on 4 December. If they reject it this could force MPG into administration

MPG owes £10.2m to various parties, including £2.3m to trade creditors and £1.4m in retentions, according to a proposals report drawn up by MPG and MHA MacIntyre Hudson.

A CVA, a legal agreement with a company’s creditors on a schedule to repay debts, would buy MPG time to generate the cash to pay its creditors, who would be paid in dividends once sufficient funds are brought in.

MPG expects these dividends to be at least 32p in the pound, a figure the report says will rise should their claim against Galliford Try be successful.

The report explains the athletes’ village dispute is one of two factors behind seeking a CVA.

The other factor is “further claims and monies withheld on projects in West Sussex and Hertfordshire”.

Several firms have gone bust on the athletes’ village project, including contractor P Elliott and subcontractors United AG and Trent Concrete.

Galliford Try declined to comment.

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