VB Contracts, a Glasgow-based Ballast subcontractor, asked the DTI to launch an inquiry into the activities of directors at Nedam and its UK arm before Ballast went into administration in October with nearly £160m of debts.
But the DTI wrote to VB this week saying that it had no right of jurisdiction over the Dutch parent.
The letter said: "So far as Nedam is concerned, the Secretary of State's powers to carry out enquiries under the Companies Acts can only be exercised against companies incorporated in Great Britain or which have at any time traded in Great Britain. [The owning of shares in a subsidiary is not trading]."
It added that even if the DTI could investigate Nedam, the inquiries would be ineffective as all its records were in Holland.
VB director Kenny Walters was outraged at the decision. VB is owed £470,000 for work on the £50m East Lothian schools project.
He said: "I feel let down by the DTI. Given the information we now know – that is, lawyers being asked to advise Ballast on insolvency as early as August [two months prior to administration] – there was clearly a suspicion that the company might not survive."
It emerged this week that lawyer Taylor Wessing had been advising Ballast on insolvency issues from August until it went into administration.
On 11 September, a Ballast statement approved by Nedam reassured contractors that the UK arm was financially secure.
Many subcontractors remained on sites because of this reassurance, even though they had not been paid for months. They now believe that they were misled by Ballast, and were left further out of pocket as a result.
Lawyers have said that even if Ballast had been receiving insolvency advice, this did not necessarily mean that it believed it was going to fail. A legal source said: "Just because an insolvency adviser comes on board that doesn't mean it is an undertaker coming to bury you."
But creditors are demanding action against either Ballast or Nedam. The DTI has said it is the responsibility of the administrator to investigate the UK firm. At a creditors' meeting this week, Nick Edwards, who is in charge of administrator Deloitte & Touche's report, agreed to investigate the directors' actions.
Subcontractors were angered by news at the creditors' meeting that confirmed they are unlikely to retrieve any money.
Jerry Hallahan, managing director of Pectel Contract Services, is one of five creditors appointed to a committee to advise Deloitte. He said: "We have all accepted there isn't anything in the pot for us. But somebody's got to be held accountable. We want to chase the directors [Ballast] and shadow directors [Nedam]."
Most creditors seem to blame the directors of Nedam rather than Ballast.
At the meeting, Ballast's former head of personnel Doug Gillan said that from mid-August he was told to report to the Dutch rather than UK board.He said: "Everything I was agreeing to, such as letters reassuring refinancing [came from Nedam]. They are responsible."
In a separate move, Ballast subcontractors CWS and Gret Brook who worked on the £89m Tower Hamlets schools project have warned investment bank Babcock & Brown, the scheme's equity owner, they will seize equipment today.
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