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stevewlaw, Attorney
Category: Business Law
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UK Business Law - Directors dissolved company to escape legal

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UK Business Law - Director's dissolved company to escape legal liabilities
Situation: A UK Limited Company I will call 'developer' constructed a block of flats in 2003 having sold them 'off plan'. The 'developer' company contracted a 'builder', also a UK limited company to do the work. One of the directors was on the board of both companies. Another person was the company secretary of both companies.

A large number of problems were discovered. The company refused to remediate them in a timely manner. The NHBC eventually booted the company off the site and remediated all of the problems. The 'developer' and 'builder' companies were struck off the NHBC register. The 'developer' company was dissolved by its director in August 2008. The 'builder' company was dissolved by Companies House for not filing returns in June-2009.

We have recently uncovered some very serious structural problems with our building that may or may not be covered by our NHBC insurance which runs out next year. The defects are a result of negligent, incompetent or intentional cost-cutting by the builder to increase his profits. They all breach NHBC building standards and most of them contravene Building Regulations.

My questions are these: Do we have any legal redress against the 'developer' company directors now that the company has been dissolved? Same question in relation to the 'builder' company.

If you believe we have redress in UK law I need to know what case-law exists in this area and what the time-limits are for bringing litigation against a director of a limited company in the circumstances outlined.

Alternatively just tell me the "children born out of wedlock in Victorian times" have successfully managed to evade their legal responsibilities and I'll call it quits.

stevewlaw :

In 1986, the Latent Damage Act introduced an extension to the ordinary six-year statutory limitation period. This extension is available for negligence claims for latent defects – a defect in a property, caused by a fault in design, materials or workmanship, that existed at the time construction was completed but was not apparent at the time of completion. It does not apply to personal injury claims.

Where there is a latent defect, the time limit is the later of:

  • six years from the date of accrual of the cause of action being raised; and

  • three years from the earliest date on which the potential claimant knew, or reasonably ought to have known, material facts necessary to bring an action alleging negligence

subject to an overall limit of fifteen years from the accrual of damage.

In other words, the Latent Damage Act introduces an element of 'discoverability' which provides for a further period of three years from the discovery of the latent defect, and yet still provides some element of certainty to construction contractors with the creation of a final claim date of fifteen years from the accrual of damage.

However, the Latent Damage Act is of limited application to some construction claims. Many construction contracts restrict the scope of liability to the types of liability that are expressly set out in the original contract - such restrictions are introduced through what are sometimes called 'exclusive remedy' or 'entire agreement' clauses – and do not include liability for negligence, other than for negligence causing death or personal injury as this cannot be excluded under English law. In these cases, the Latent Damages Act will not apply.

stevewlaw :

Good evening. While not an expert in UK law, the common law is nearly universal. However, I did some checking online for UK law relating to latent defect claims and delays in discovery of defects. It appears that you may be well within the statute of limitations. This is what I've found so far on this issue:

stevewlaw :

Now for the more important issue, that of the ability to sue dissolved corporations. Here is where you may have a real problem.

stevewlaw :

The companies have been dissolved for over 3 years now.

stevewlaw :

I have not been able to find an answer to this online. In the US, you may sue a dissolved corporation for up to 2 years following the dissolution of the company, depending on the jurisdiction. This time period allows creditors of the company to come forward with their claims and for the company to resolve its outstanding debts before being "closed" for good. So in the UK, the law is probably somewhat similar and you potentially have a real issue here. Depending on the amount of money needed for correction of the latent defects, it may be worth looking into with a local barrister or solicitor. I wish you the best of luck. If you have any other questions, please don't hesitate to ask. My name is Steve.

Customer: replied 4 years ago.

I was aware of the Latent Damage Act - it does not apply because our building was constructed in 2003 - we are "out of time".


The question was in relation to malfeasant directors dissolving a limited company to escape liability. The two individuals have a history of forming and dissolving limited companies every 3 to 5 years and leaving a trail of unpaid suppliers and poor construction work in their wake.


The "question" is the fact that they dissolved these companies several years before we discovered the defects mean the [bast*rds] have managed to get away with it. Yes or No please.

It is my understanding that the latent damage act may provide you with a timely ability to state a claim. The act provides that you may file your claim within 3 years from when you knew or should have known of the latent defect. I have the impression that you discovered this latent defect within the last 3 years so I believe you are good. The question is whether or not you can sue a dissolved UK corporation. There i believe that you may be out of luck, unless you can find some way to "pierce the corporate veil" and sue the owners of the corporation individually, such as an under capitalized corporation, or a corporation that was not following corporate formalities. If you cannot pierce the corporate veil, then it appears you are out of luck.
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