Former ISG employees launch legal action over redundancies

More than two thirds of ISG’s former staff are pursuing legal claims against over the way they were made redundant, according to administrators.

In their latest update on the administration of eight ISG firms (see box below), published on Wednesday (30 April), EY’s Timothy Graham and Alan Hudson said they were dealing with 1,650  lodged in the Employment Tribunal.

The administrators said they had made 2,400 staff redundant from the £2.2bn-turnover firm, through multiple rounds.

More than one person can bring a singular claim against an employer, so the total number of staff in the Employment Tribunal cases could be higher than 1,650.

The protective award claims – all concerning staff consultations prior to redundancy – are currently being addressed, and Graham and Hudson said EY was “providing necessary consents and updates to the tribunals”.

Elsewhere in the report, administrators revealed that when they came on board, the eight firms had a total of 723 projects.

Of these, practical completion had been reached on 539 schemes with a retention balance outstanding, while 184 were either in progress or at preconstruction stage.

So far, the administrators have spent 10,469 hours on the administration process – but Graham and Hudson warned that the process could still “take some years”.

In particular, they pointed to the “inherently complex” processing of claims from ISG’s debtors, as it could see “significant contractual counterclaims” come in.

So far, the administrators have recovered around £19.2m owed to ISG in retention payments and trade debtors, “which has exceeded the total directors’ estimated realisable value”, they said.

Administrators hope to recoup more money via “a number” of legal claims with “significant individual values”, the majority of which were ongoing at the time of the firm’s collapse.

They also highlighted an undisclosed number of claims where they believe “the counterparty has taken an opportunistic and unjustified position to try to avoid further payments” to ISG on contracts that were live at the time of the contractor’s demise.

“Adjudication/litigation is now likely to be required,” Graham and Hudson added.

The administrators said they had retained “key individuals” from the ISG group on a consultancy basis to help prepare documentation involved in any legal actions.

When they collapsed, the eight firms being administered by EY were also owed £252.2m by other ISG group entities, “located both within the UK and overseas, which are now in local insolvency processes, resulting in nil recoveries”, the report said.

An additional £4.5m is owed “by a combination of the ultimate parent company Cathexis UK Holdings IV Limited and wider group companies including Yondr Group Limited”, according to the administrators.

Graham and Hudson also confirmed that they “continue to receive claims” from a mass of trade creditors.

They added: “[We have] estimated that non-preferential, unsecured claims will be in the region of £885m,” confirming an amount first identified in November.

These creditors include the supply chain and former employees, as well as some debts to HMRC, for example around corporation tax.

The administrators also reiterated that they do not expect the unsecured creditors to receive anything from the administration process.

Besides the eight firms for which EY is the administrator, Construction News revealed last week that 11 other firms in the ISG family went straight into liquidation.

Azets – which was appointed as liquidator to those 11 firms – is yet to publish detailed documents on the liquidation process.