Somerset based Stacey went into administration with the loss of 60 jobs last week.
It was main contractor on a £3.5m mixed-use scheme for Keyworker Homes (NW) Ltd on the former Newton Abbott Hospital site.
Main works were finished on the site but Stacey was due to rectify a string of defects on the job following a dispute with the client over build quality.
The Enquirer understands that Keyworker Homes paid Stacey £600,000 in the last two months to carry out the remedial work.
But Keyworker claimed a string of subcontractors on the site have not been paid leaving the developer having to foot the bill again for repairs.
Keyworker said: “This is a most unfortunate situation.
“We have paid Stacey Construction all amounts due under our contract including in excess of £600,000 in the last 8 weeks alone.
“We had made an agreement with Stacey whereby we would support them financially provided defective works were rectified; we do not know why the firm has not paid suppliers.
“We will have to rectify and complete works ourselves now at considerable cost but over and above we feel deeply saddened that workers employed on our development by Stacey’s have not been paid.
“Many suppliers and local businesses are now contacting us directly but having paid Stacey’s there is nothing we can do to assist.
“Our only hope is that the administrator can trace the money we have recently paid and pass this onto the creditors where it belongs”
Stacey is now in the hands of London-based corporate recovery specialist Moorfields.
Nick O’Reilly, joint administrator, said: “We will now be seeking to sell the property assets and goodwill of the firm to pay creditors. That includes outstanding monies owed.”