Gee Construction told by subcontractor 'no guarantee until we get paid'

Subcontractor Capital Roofing has won a payment battle with main contractor Gee Construction after refusing to hand over its guarantee until outstanding monies were paid out.

Capital was installing roofing on a refurbishment of Upminster station, where Capital had a £60,000 subcontract with Gee. It had installed a roofing system from manufacturer Icopal which had been prepared according to a specification drawn up by the client, Transport for London.

“While we were working on the project our money payment was slow,” said Terry Peck, managing director. "But once we left it got worse. There was still £30,000 outstanding at that stage and it was always a case of being told ‘your money is coming next week’ or ‘coming in two weeks’.

“Transport for London phoned me and asked why we wouldn’t release the guarantee on our work. I said ‘yes you can have it if you pay the outstanding money’. They [TfL] went mental, and must have got on to Gee.”

Capital Roofing had previous instigated court proceedings against Gee to recover the outstanding monies.

There had been some progress on that front and an element had already been paid. On top of that, just before going into court, Gee offered a further £12,000 of the sum still outstanding.

However that left an outstanding £4,000 to clear the decks completely.

“The final step was completed when they paid it over in exchange for the guarantee that TfL was in need of,” says Peck.

“As we didn’t trust Gee, we asked for the money to be paid directly into our bank account but they wouldn’t do that, insisting on handing it over instead in the form of a cheque.

“We still wouldn’t part with the guarantee even then, insisting on waiting until the cheque was cleared before completing our side of the bargain.

“When Gee asked us to do the second stage, worth another £50,000, we said no,” Peck added.

Peck founded Capital 40 years ago and turnover has risen to £5m a year. His company currently has 40 employees.

His general rule, when working for any building construction company is to take out credit insurance from Astradius.

“Gee didn’t have any credit insurance cover from Astradius so we knew we were taking a gamble right from the start,” says Peck, “but we needed some work.”

Keeping clear of such financial pitfalls is getting harder.

“The big worry for us is that more and more building companies are losing their credit insurance cover,” he explained.

No-one at Gee Construction has been available to comment.