EXCLUSIVE by DOUGLAS SHEPHERD
A group of 15 former employees of a Borders building company which crashed into administration late last year are taking the firm to an employment tribunal in a bid to claim over £100,000 in so-called protective awards.
The trade union representing workers who lost their jobs at long-established Galashiels builders Murray & Burrell is basing the case on the alleged failure of the company's management to consult prior to the appointment of an administrator.
Meanwhile it has been revealed that claims from ordinary creditors, estimated at £800,000 in November 2016 has now climbed to almost £2 million which means previous indications that all creditors would be paid in full may have to be scaled back once a final reckoning is reached. It now also seems unlikely that any funds will be returned to shareholders.
The information is contained in a progress report to creditors from administrator Richard Gardiner which sets out a series of developments since his appointment last November.
Mr Gardiner reports: "The sale of the company's plant, equipment, motor vehicles and stock realised more than my agent had anticipated and debtor collection to date has far exceeded my own expectations with further amounts still to be collected."
The sale of the yard from which the company traded has been completed for £167,000. Mr Gardiner anticipates the sale of the firm's development site at Craigpark Court, Galashiels will change hands for £540,000. Proceeds from the sale will go towards paying secured creditor Assetz Capital Ltd, the business which holds a bond and floating charge over all Murray & Burrell's assets, and which was owed £727,000 at the end of May 2017.
Mr Gardiner's report also shows employee claims will be in the region of £34,000 for arrears and holiday pay and £187,000 for notice/redundancy pay.
He adds: "However, in February 2017 I received notification that 15 of the employees, acting through their union, are seeking protection awards against the company for what they claim was a failure to consult. Having discussed the matter with the directors and legal agents, the decision was taken to vigorously defend the claims and a hearing date is awaited from the Employment Tribunal. It is estimated that if the Tribunal were to make the awards in full these would amount to some £109,000."
The report shows the sale of the company yard for £167,000 was to the Trustees of the Alexander Kemp Pension Scheme. Mr Gardiner explains that Mr Kemp is a former director of Murray & Burrell and the husband of Sally Kemp who is a director of the firm.
A number of asseys remain to be released, including a development site at Buckholm Corner, Galashiels which has been valued at £750,000 to £1 million. That valuation has been challenged by the firm's directors who also have an interest as representatives of the two major ordinary creditors, ASM Developments (owed £564,000) and Waukrigg Developments (£231,000).
"This land had been on the market with another agent prior to administration, but there had been little interest", writes Mr Gardiner. "From discussions with various agents it would seem that there is currently little interest for plots of this size in the Borders area".
D M Hall, the agents who valued the Buckholm Corner site have agreed to 'revisit' their assessment prior to fully placing the property on the market. The directors have also suggested the possible appointment of a joint marketing agent to reach out to potential purchasers from overseas.
Mr Gardiner also explains that following a review of old planning applications in the Borders area on which no development has commenced, Scottish Borders Council had indicated an intention to remove this land from their Development Plan.
"As the intention is to sell the land for development I instructed my property agents to lodge a defence and this has been submitted to the council in order to preserve the value in the land", he states.
There has also been little interest in a site at Lilliesleaf valued at between £200,000 and £275,000.
The development of nine houses on Craigpark Court land had commenced prior to administration. Two properties had been completed, one of them having already been sold and the second being used as a furnished show house.
This site was subject to "an onerous Section 75 planning obligation" (developer contributions) which could potentially put off prospective buyers or lead to reduced offers.
"The purchaser (of Craigpark Court) ius a provider of social housing and is thus usually exempt from Section 75 obligations".
In a section of the report entitled Prospects for Creditors, Mr Gardiner says: "My staff continue to receive and log claims from (ordinary) creditors. Ordinary claims are currently projected to be in the region of £1,996,000 but I would stress that, to date, no formal adjudication has been carried out on any claims and this is merely an indicator based on the creditor list provided by the company and claims received to date".
The estimated financial position of the firm included within the administrator's proposals published in January suggested that, based on the asset values provided by the directors at the time, a dividend of 100p in the pound would be available to creditors.
But according to the new report: "The level of dividend will depend on the final sales values that can be achieved for the various land and properties and, whilst I still anticipate that a substantial dividend could be available to ordinary creditors, I am unable to provide an estimate of the timing or quantum of such dividend until such time as the outcome of asset realisations is known. However, creditors should be aware that the assets remaining to be sold are likely to take some considerable time to sell".
In a message to shareholders, Mr Gardiner says the anticipated surplus in the estimated financial position of the company included with the January proposals indicated that there might be funds to be returned to shareholders.
He warns: "However, this now seems unlikely given the potential lower returns from the sale of assets, the costs of the administration and interest accruing on creditors' claims".
A note headed Directors' Conduct, the administrator says in terms of the Company Directors Disqualification Act 1986 and the insolvent companies (Report on Conduct of Directors) (Scotland) Rules 1996 he is required to prepare a report regarding the conduct of the directors who held office in the three years prior to his appointment.
"This report has been submitted but I am unable to divulge the contents of such reports", concluded Mr Gardiner.