East London theatre receives disputed £1.1m bond from insurer Aviva and prepares to take action over 10-years worth of interest

hackney empire

Hackney Empire has won its long-running construction bond dispute with Aviva.

The east London theatre is now pursuing the insurer in court for 10-years of interest on the £1.1m surety bond at the centre of the dispute.

The victory for Hackney Empire came when the Supreme Court last month rejected a bid by Aviva to appeal the High Court’s September 2011 ruling that Aviva was liable to pay out on a £1.1m surety bond.

This followed a long legal dispute, with Aviva appealing the original High Court ruling in the Court of Appeal late last year, which was dismissed in December. The insurer then applied to have its case heard in the Supreme Court, but last month that application was rejected.

Aviva has now paid over the disputed £1.1m surety bond to the Hackney Empire. The theatre is now pursuing the insurer for 10-years of interest on the bond, which its claims amounts to around £800k.

That case was heard in the Technology and Construction Court last Friday (12 April), with a decision expected on the amount of interest to be paid expected in the coming weeks.

Hackney Empire’s victory will come as a relief to the many contractors and clients that rely on bonds for security on projects. The long-running case concerned Aviva’s refusal to pay up when the Hackney Empire’s contractor and project manager Sunley Turriff Construction (STC) went into administration in 2003 despite it having agreed a £1.1m bond with the contractor.

STC was carrying out an £11m refurbishment on the Victorian theatre, which was backed with £1.1m donation from Lord Sugar as well as funding from the Heritage Lottery Foundation and the Arts Council.

STC had agreed to complete works by 2 September 2002 but the date was revised several times as the contractor - whose turnover averaged £100m - suffered diminishing margins.

Work halted when 80 workers walked off site after hearing STC had gone into administration. In September 2011, Mr Justice Edwards Stuart rejected Aviva’s main defence that payments made by Hackney Empire of £750,000 to the contractor to help with cashflow problems in the months before it failed had invalidated the bond.

Hackney Empire and Aviva were unavailable to comment.