The directors of failed contractor Ikon Construction have blamed an ongoing HSE and criminal investigation into a death on one of its sites as a major factor behind its collapse.
In statements within the administrator’s proposals, the firm’s directors said a primary cause of its insolvency was the “adverse publicity” around the investigation into a death on a site in Bristol city centre.
In March 22-year old Luke Allen died from his injuries after falling through a roof while working for a subcontractor of Ikon’s.
Ikon collapsed towards the end of May, calling in FRP Advisory to oversee administration proceedings.
The police and Health and Safety Executive investigation into Mr Allen’s death has focused on Ikon in its role as main contractor, according to the administrator’s report.
The directors said the uncertainty caused by the probe had prevented the company from securing performance bonds from clients on contracts totalling £25m, meaning it could no longer progress with these contracts.
Performance bonds are used by clients to insure themselves against the risk of a contractor failing to fulfil contractual obligations.
Ikon’s directors, Peter Hargreaves and Stephen Chant, stated to FRP that losses of £1.5m in the year to 31 March 2018 had also contributed to the insolvency.
The administrator attributed these losses to several poorly priced residential projects, losses on a large commercial contract, and mismanagement of some contracts by senior project staff.
Ikon owed £9.85m to 546 trade creditors when it collapsed at the end of May. This included £2.5m in unpaid retentions to suppliers.
The administrator has estimated that unsecured creditors will receive 18p for every £1 owed.
Ikon’s largest creditor was the £2.3m-turnover groundworks firm Nick Brown Ltd, which was owed more than £727,820.
The second-largest creditor was German software firm STS Solution Gmbh, owed £382,000, followed by insurance firm Tokio Marine, owed £306,000.
RV Services SW was owed £186,114 but went into liquidation in January this year, itself owing £640,000.
FRP noted that, in the event that the HSE imposes a fine on Ikon following its investigation, the HSE will be placed as an unsecured creditor.
A number of former Ikon suppliers claimed the company had paid some creditors ahead of others in the lead-up to the insolvency, according to the report.
It is against insolvency law to preference payments ahead of an administration, and the administrator said it was now investigating who the company paid in the run-up to its collapse.
Just three weeks before the insolvency of Ikon, Mr Hargreaves and Mr Chant started a new business called Spec Projects Ltd.
A number of former Ikon contracts for client Glenmore have now been novated to the newly formed Spec Projects.
As part of the agreement, Spec Projects agreed to pay the administrator £120,000 to take over the work in what is called a ‘side agreement’.
The report also revealed that Spec Projects had struck a deal with the administrator to buy all of Ikon’s plant and machinery for £115,000, and its office furniture for £500.
Allegations had been made that the directors had a portfolio of luxury cars paid for with company funds. However, the administrator said it had been provided documentation that indicated these were paid for by the directors.
Ikon Construction was created in 2001 and saw turnover increase from £9.4m for the year to March 2014 to £45.9m for the year to March 2018.
Ikon was fined £145,000 in August 2017 for health and safety breaches during the construction of nine timber-frame town houses in Somerset.
FRP Advisory joint administrator Andrew Sheridan said: “Our focus now is on maximising realisations in respect of the company’s contractual debtors, work in progress and retentions, and other assets to maximise the return for creditors who will receive a dividend.
”Our investigation work continues and we have been pleased with the assistance and interaction we have had with many of the company’s creditors throughout the process to date. Our next formal report will provide a more comprehensive update on our progress.”
Mr Hargreaves and Mr Chant have all been contacted by CN.