UK: ‘Homes From Hell’ Construction Companies Wound Up In The Public Interest

Last Updated: 3 May 2013
Article by Bircham Dyson Bell

The construction sector accounts for nearly 10% of the UK economy and the Government frequently emphasises the important role the sector will play in achieving economic growth. However, it is in deep recession; it shrank by 9% last year and the Construction Skills Network's deputy chairman recently told the BBC 4 Today programme that 'we don't see construction getting back to 2007 levels until 2022.'

As a result, construction companies may be finding themselves in financial difficulty and some may be facing insolvency. The case of Corvin Construction Limited in the Matter of the Insolvency Act 1986 concerns the winding-up of six construction companies and judgment was handed down on 21 December 2012.

The facts of the case are rather extreme, but it nevertheless illustrates that where the court concludes that it is the in the public interest to wind up a company they will do so and in reaching this conclusion may look beyond whether the company has failed to pay its debts when they fall due, considering its wider commercial practices, illegal and legal.

The Secretary of State issued petitions seeking the winding-up of six construction companies, all linked with members of the same Hungarian family. These were issued under the Insolvency Act s.124A, on the basis that the companies were unable to pay their debts as they fell due and that it was expedient in the public interest and just and equitable for them to be wound up. In particular, it was contended that there had been a lack of commercial probity, including the making of misleading statements to the public, a number of complaints about workmanship, the filing of false accounts, the control of two of the companies by an undischarged bankrupt and the companies' lack of co-operation with the Insolvency Service's investigation into their activities. Two out of the six companies, Corvin Construction Limited (Corvin) and Radial Services (London) Limited (Radial), defended the petitions and the Chancery Court had todetermine whether these two companies should be wound up.

The Insolvency Service's pre hearing investigation revealed a litany of evidence demonstrating poor commercial behaviour and a lack of transparency on behalf of the two companies and those connected to them. Of particular note was that:

  • a total of thirty live or dissolved companies were found to have been involved, all of whom were connected with the same family, by the name of Tas;
  • as at the date of the investigator's statement all but one of the companies had filed dormant accounts for the previous three financial years;
  • the television programme aptly named 'New Homes from Hell' had revealed a number of alleged building disasters involving Radial and other connected companies;
  • the companies had taken wording and photographs from other websites and used them on their own.

In addition, the Court pointed out that Mr Kornel Tas, the Director of Radial and Mr Leslie Tas, the Director of Corvin, used exactly the same wording to defend their companies' filing histories in their witness statements.

Kornel Tas, when responding to allegations of poor workmanship and reliability by giving evidence to the court on the day, commented 'no builder is perfect'.

Radial and Corvin offered undertakings to the Court as sufficient to protect the public interest, and so requested the court to dismiss or stand over the petitions, with permission to restore them, pending further investigations by the Secretary of State. Counsel on behalf of the two companies emphasised that the Court should not be used in the role of a debt collector and also relied upon the fact that the companies has ceased trading a number of years ago.

Alison Forster QC (sitting as Deputy Judge of the Chancery Division) commented on the 'general picture of pervasive abrogation of responsibility and absence of transparency and probity', the 'dereliction of statutory duty' on behalf of the company directors, and the 'protracted, evasive response to regulation'. In reaching its conclusion the court noted that part of its function in exercising jurisdiction to wind up companies in the public interest was to assist in the maintenance of minimum standards of commercial behaviour and probity. In doing so, the protection of the public from inevitable loss, regardless of whether it derived from unlawful activity, was a matter to which the court should have regard.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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