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Leaks claim may not get to court

Published: 7:06PM Thursday September 26, 2002

A multi-million dollar lawsuit linked to a leaky Wellington apartment block may have to be dropped.

Residents in the Marion Square Apartments are suing for leaky building defects, but the case probably will not get to court because the company they are suing has gone into voluntary liquidation.

Once that happens, the Companies Act prevents legal claims and experts say expensive legal action is a waste of time.

"Generally speaking there is no money for the creditors, it would be unlikely in a construction company that there is any significant dividend," says insolvency expert Gerard Hulst.

The apartments were built by Ebert Construction on behalf of Ebert New Zealand Limited.

But after a series of contract disputes, Ebert NZ changed its name to Trebe New Zealand Limited. And it is Trebe that has gone into liquidation.

Building disputes consultant Geoff Bayley says it is a process that has been used more and more recently as companies try to side-step liability.

The Subcontractors Federation says the Ebert name change appears to be a classic case of a phoenix company rising from the ashes.

The federation says the change of names within the Ebert companies is misleading because creditors cannot know who they are dealing with.

And the federation has called on the Ministry of Commerce to consider legal action which sends a message to the business community that phoenix companies are unacceptable

As more leaky building claims head to court, more companies are expected to go belly up.

"I would expect there to be more companies going into liquidation as that's the easiest way to protect themselves from the actions of the creditors," Hulst says.

The Marion Apartment owners are now expected to join a long list of unsecured creditors already owed hundreds of thousands of dollars.

In the meantime, the National Party would like to see a weather-tightness tribunal formed to hear building disputes, rather than send cases through the courts.

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