DUBAI // A small construction firm in the Northern Emirates has become embroiled in a legal row in Britain over its failure to complete a hospital facility.
Modcon UK, a subsidiary of the Ras al Khaimah-based Modcon FZ, was hired to build a £2.3 million (Dh14m) day case unit at a hospital in Leicestershire.
The contract was cancelled last month by the local health authority, the NHS Leicestershire County and Rutland Primary Care Trust, which claimed the company had failed to fulfil its contractual obligations.
The trust is hoping to recoup £1.4m already paid to Modcon UK. That now seems unlikely - the subsidiary was officially wound up in the British High Court last month.
"We've hired a UK lawyer to assess whether we are liable," said Gerhard Thies, the director of both Modcon in the UAE and formerly of its British subsidiary. "We need some time to clarify this."
The planned unit is part of a much-needed upgrade to St Luke's Hospital, one of two ageing healthcare facilities in the rural town of Market Harborough, in South Leicestershire.
A contract between the trust and Modcon UK was signed in January 2010, with the unit scheduled to be fully functional by August that year.
However, delivery of the 10 prefabricated units was delayed until January 2011, owing to last-minute changes to the design.
When the units arrived, they were found to have been damaged in transit and a dispute over liability ensued. The units were not finally moved from the port to the site until March.
Then in April, Leawood Builders, the local contractor hired to install and fit out the units, walked off site complaining it had not been paid by Modcon UK.
"We still had bills which were outstanding since December," said Paul Norman, the director of the Leicester-based company.
"I've got e-mails from Modcon saying that they would pay us at the end of the week and asking us to continue working.
"They were just false promises. In April we walked off site, along with everyone else."
Mr Norman said his company was now owed £35,000 by Modcon UK.
At the end of May, the trust gave Modcon UK 14 days to resume work. On June 7 it formally terminated the contract. It now plans to tender for another contractor to take over the project and hopes to have the new unit open by January.
"The units are now secured on site and our focus remains on getting the day case unit open for the people of Market Harborough as quickly as possible," said Catherine Griffiths, the chief executive of the trust, earlier this month.
On Tuesday, the trust confirmed it was "in discussion with its legal advisers over the possibility of recouping costs incurred through Modcon UK's failure to deliver its contractual obligations".
However, the UK subsidiary, which was 95 per cent owned by Modcon FZ and five per cent by Mr Thies, was officially wound up on June 15 at the Royal Courts of Justice in London.
Mr Thies said he was willing to contest the case in court but that it might not be necessary. He said that the problems stemmed from a lack of funding.
Modcon UK had been badly hit by a demand from the trust midway through the contract for a bank guarantee of £270,000, he said.
"That damaged our cash flow from the beginning," he added. "Then we had the recession, which caused even more problems."
He said the company was being restructured and needed to reapply for a trade licence in the UAE. "We've submitted all the documents to the authorities and it will take some days until we are able to get a new licence."
He said he would aim to repay the money to Leawood Builders once the restructuring was finished. "That's the intention."
The new unit is part of a £9.5m expansion to hospitals in Market Harborough. Philip Knowles, a local councillor, said there had been a campaign to improve the hospitals for 15 to 20 years.
"This is just the latest in a catalogue of disasters," he said. "This is of deep concern to everyone in Harborough. We've a real need to get this matter resolved, and resolved quickly."