Dispute with Builder - Seeking Opinions on 'Phoenix' Company and Director Liability

[Apep]

Hi all,

I'm looking for some opinions on a difficult situation we're in with a builder and would appreciate any insights.

Background

We hired a local limited company ("Company A") to build a garden office for a total contract price of around £25,000.

The Key Events

1. The Contract & The Breach: The written contract explicitly stated the office would be built on a "fully insulated with a concrete finish" base. Partway through the build, the company changed this to a timber base without any formal contract variation. We raised concerns but were told to trust their expertise.


2. The Expert Witness Report: The work was clearly substandard, with issues like patio flooding and damp in the new structure. We commissioned an independent RICS Chartered Surveyor to produce an expert witness report. The report was damning, concluding:

1. The timber base is "entirely defective" with a predicted lifespan of "less than five years".
2. The roof has no detectable fall and will result in ponding.
3. The overall structure does not comply with Building Regulations.
4. Estimated remediation cost is £10,000 - £12,000 + VAT

3. The "Phoenix" Company: While the dispute was ongoing, we noticed the directors had set up a new limited company ("Company B") with an extremely similar name.

1. Company B operates from the same premises, uses the same phone numbers, and has the same branding as Company A.
2. Their Facebook page history shows they simply changed the name of the original page to the new company name.
3. Evidence take over of Google reviews
4. Redownloading our original contract and invoices from emails provides us with Company B branded documents with new business numbers etc.

4. The Directors' Conduct:

• We have a recorded phone call where a director assured us the timber base they installed would last "30 to 60 years".
• We have voice notes where we were assured there would be no issues even in 20 years time
• We were instructed to, and did, pay the ~£20,000 for the project directly into one of the director's personal bank accounts, not a business account.

The Pre-Action Process:

• We sent a formal Letter Before Claim to Company A, Company B, and both directors personally.
• After this, we discovered they had applied to have Company A struck off from Companies House without informing us. We successfully objected, and the strike-off has been suspended.
• Both directors have since formally resigned from Company A (the original company).
• Their final response to us was to reject formal mediation (due to cost) and suggest an informal chat in a coffee shop to resolve the matter.

Our Proposed Strategy & Question

Our goal is to recover the costs to demolish and rebuild the structure correctly (new quotes are as high as £35k) or remediation costs (~£15K). Our intended strategy is to issue a single court claim against all four parties:

Company A (The Original)
Company B (The "Phoenix")
Director 1 (Personally)
Director 2 (Personally)

We believe we have claims under Breach of Contract, Consumer Rights Act, Misrepresentation Act, CPUT Regulations, and the Insolvency Act (for transactions defrauding potential creditors).

My question to the forum is: Based on these facts, does our strategy of pursuing all four parties seem like the most effective way to maximise our chances of a successful financial recovery? Are there any other angles or risks we should be considering? i.e. Should we claim only against the companies/new company? They've effectively made the original company judgement proof.

Summary of Key Evidence:

• Written contract vs. photos of the actual build.
• A RICS Expert Witness Report.
• Recorded conversations containing clear misrepresentations.
• Bank statements showing payments to a personal account.
• Official Companies House records (strike-off application, director resignations).
• Screenshots of the company website and social media accounts proving the link between the two companies.
• Letter from Company B admitting it's formation "...was simply to have a name change into a group company and was set up while your job was going on through our old company"
• A full correspondence trail showing their refusal to engage in formal mediation.

Thanks in advance for any opinions or advice you can offer.

[atticus]

Thank you for the detailed background. This has been really helpful.

Unfortunately, you do not have a situation to which the "phoenix" provisions of sections 216 and 217 Insolvency Act 1986 apply.

Those provisions apply where Company X has gone into insolvent liquidation, the directors form company Y that is given a name similar to that of company X, you contract with Company Y - the second company. That is a massively simplified explanation. If company Y then fails in its contractual obligations to you, the directors can be held personally liable to you for the obligations of company Y, the 'phoenix'.

Here you contracted with the first company, A, and not the 'phoenix' B. Also, from what you say, Also, A has not gone into insolvent liquidation.

I can suggest a way forward. This is not going to be cheap, and you may question whether it is worth it. This is to take court action to restore company A to the register, then sue it to obtain judgement. Before doing this check your home insurance cover (a) to see whether it provides legal expenses cover, and (b) whether - as some policies do - it provides cover in respect of unsatisfied civil judgements against third parties.

[Pezza54]

I don't suppose there's a chance you paid a deposit by credit card?

[Apep]

Unfortunately there was no payment by credit card, and our home insurance will not cover it in this instance.

The directors attempted to resign and voluntary strike off the company at Companies House whilst this was going on back in December 2024. We objected to the strike off successfully and currently Company A has no directors at all. However they've attempted to make Company A jugement proof by asset stripping. Obviously a lot of these digital assets can be proven to have been owned by Company A.

Another third party (customer) was also taking them to court at this time and actually won a judgement against Company A in March 2025, which they refused to pay.

It's true we contracted Company A, but it's obvious assets have been moved to Company B - "to simply have a name change" as claimed by the directors themselves, whilst our dispute was on-going.

I also take significant issue with the misrepresentation directly by the director to us, which I'm wondering if CPUT regulations may help with, even to make them personally liable, i.e. PART 3, Regulation 15:

"Offences committed by bodies of persons

15.—(1) Where an offence under these Regulations committed by a body corporate is proved—

(a)to have been committed with the consent or connivance of an officer of the body, or

(b)to be attributable to any neglect on his part,

the officer as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.

(2) In paragraph (1) a reference to an officer of a body corporate includes a reference to—

(a)a director, manager, secretary or other similar officer; and

(b)a person purporting to act as a director, manager, secretary or other similar officer."


I'm aware there might not be any "easy" route for remeidation, but I'm wondering what the easiest and most effective route might be?

[atticus]

What offence under those regulations do you think may have been committed? And how do you think having the directors convicted of such offence will help you?

[Apep]

I was hoping misleading actions. Consumer Protection (Amendment) Regulations 2014 appears to allow consumers rights to redress given misleading actions - not necessarily a conviction required? Was hoping it would be simpler than the Misrepresentation Act.

I’m obviously inexperienced trying to navigate a lot of this, so just reaching out to discover the best course of action. Sue the original company and force into insolvency and then let it all come out about the new company? Sue both companies, provide evidence of digital asset transfer, and force them to explain it? Sue all four and hope the pressure of potential personal liability forces them to settle?

I don’t know, to be honest I’ve been stressed for the last year over this, I don’t have much money for a solicitor and I’m tired and looking for any help I can get, which is much appreciated.

[atticus]

I guess you don't have any insurance backed warranty.

[Apep]

No insurance, my wife asked and they lied about having any. Unfortunately she never asked to see the paperwork. They had legal insurance they used for the other litigation going on, but their solicitor dropped them in December 2024 and stopped responding once the phoenix company issue was raised.

I think what is clear from the timeline and asset transfer is they formed the new company to avoid liability. They only created it after the disputes arose and other party legal action, and stated it was simply for a name change. They’ve left the original company without a director, in breach of the Companies Act 2006, signed a DS01 whilst in dispute as well.

The system with my contract, invoices, etc. has been transferred to the new company, along with all the other digital assets.

Is my best course of action to sue both companies as joint defendants? They will claim the new company has nothing to do with the original contract, but they will need to explain why the new company is responding to the allegations, timing of the company creation, and the asset transfer, including my details, contract, etc. Is this not a case of potential successor liability?

The original company has not yet been made insolvent, the other litigant who won their case with a judgement against them I’m assuming may have to apply for that. In which case it may come to light a breach of the insolvency act to transfer assets to avoid claims, or even potential claims such as ours.

I understand phoenix companies aren'’t illegal, but they are if used to avoid claims.

What would you genuinely suggest we do in this instance?

[atticus]

Starting to clutch at straws, take a look at the case of Contex Drouzhba v Wiseman.

NB my previous question was about insurance backed warranties.

[Apep]

The work was not completed, and no warranties were provided.

So in this instance, is appears the directors can be held personally liable, but I understand piercing the corporate veil is always difficult.

I do have voice notes directly from the director stating the longevity that is disputed by the expert witness, some from his personal phone number. He also angrily told us not to let anyone inspect the building until he was done, he had our money and we felt trapped. A lesson learnt for sure.

I appreciate this is a breach of contract with the original company, but I'm finding it a tough pill to swallow that directors of a company can mislead customers on record and when disputes arise, simply setup another company, transfer assets, and walk away from the original company without the new company or directors being liable. If that is indeed the case I shall walk away from it and try and accept it.

Honestly, am I best walking away from this, or is there more than a 50% chance of success against the new company, or directors? Everything that has happened is evidenced.
Is my best route just suing the original company and complaing to the insolvency agency? Would suing both companies as joint defendants be better?

[atticus]

On the information given you may - that is MAY - have a case against the director, but this is not yet clear. Read the Contex Drouzhba case - it is quite nuanced.

I can not yet see the beginnings of a case against the new company.

What I can see is a way for you to spend a lot of money on legal action, with uncertain prospects of getting a penny back, and a significant risk of having to pay defendants' costs.

[Apep]

Thank you for your response, I am reading the Contex Drouzha case.

I guess my immediate question is, is this not a textbook example of a Phoenix company to avoid liability? I'm failing to understand why it isn't, but appreciate my research doesn't stand up to qualifications and years of experience. Is this something the insolvency agency would decide?