Suppliers fight to recover materials supplied to collapsed modular company

Contractors at Caledonian Modular’s 279-room aparthotel in Canary Wharf are desperately trying to salvage materials they claim they supplied to the bankrupt business, but which were never paid for.

A number of companies have said Building News they were locked in a process of recovering goods sent to the off-site construction specialist before he went into administration.

Caledonian Modular announced in March 2021 that he had been awarded a contract for the 21-storey One Charter Street building, backed by Canary Wharf Group and designed by HTA architects.

However, Caledonian, which produced serviced apartments for the hotel at its Newark factory, collapsed into administration in March.

A report from the directors of Alvarez & Marsal in April set out details of £11.2million owed to unsecured trade creditors and warned there was unlikely to be money to pay these bills.

But some companies think their best way to cut losses from their Caledonian relationships is to source products they think they’re entitled to.

A source working on the Canary Wharf project claimed to have visited Caledonian’s Newark plant since administrators were called in and were “stunned” by the amount of unused material.

“We had been supplying it for eight to nine months, but hardly anything seemed to have been moved,” they said. “I requested the reimbursement of the material of 10 unpaid invoices.”

The source said they had a ‘retention of title’ clause in their contract (see box) which meant that no goods belonged to Caledonian until paid for in full. However, attempts to prove ownership of specific items had proven complex, they added, as some shipments had been paid for and discussions were ongoing.

“If we are unsuccessful, I will consider contacting a lawyer,” they added.

Another source said NC they had had a lengthy correspondence with the trustees over items relating to the Canary Wharf Hotel, which they believed had a right to recover.

“We are asked for proof of title, but we have a supply and fit contract, so any material relating to it is clearly ours,” they claimed. “We won’t see any of the money owed to us, so the only hope we have is to be appointed to complete our work. The materials are only used for this work.

A third source said NC they were aware of various pending material recovery requests.

Building solutions company JRL bought the assets, records and goodwill of Caledonian Modular from the trustees for £6.25million in early April.

Alvarez & Marsal and Canary Wharf Group declined to comment. JRL has also been contacted for comment.

Who owns the material when a contractor collapses?

Trowers & Hamlins partner Edward Henley says in a article on the law firm’s website that “most supply contracts contain a ‘retention of title’ clause, which provides that title to the goods does not pass to the contractor until payment has been made to the supplier”.

The explainer, published in late 2020, adds: “The position without such a clause is that title passes on delivery.”

He goes on to further clarify the situation.

“If the goods have been incorporated into the works, the ‘retention of title’ clause will be largely ineffective and the supplier will only have a rank of unsecured creditor in the insolvency of the contractor.

“However, things get more complicated when the goods are on site and have not been incorporated into the work. In these circumstances, the ‘retention of title’ clause can offer legal assistance to the supplier.”

With the increase in off-site fabrication of elements of construction projects, some suppliers believe that the definition of when certain materials are considered to be incorporated into the work may be more difficult to pin down.

Michael J. Chiaramonte