Construct.law - Spring 2024
Building Liability Orders: New Guidance from the Courts
By Melanie Hardingham
What is a Building Liability Order?
A building liability order, or a BLO, is a statutory remedy introduced by the Building Safety Act 2022 (BSA). A BLO allows the Courts to extend liability incurred under the Defective Premises Act 1972, section 38 of the Building Act 1984 (not yet in force) or as a result of building safety defects from one company to another company, on a joint and several liability basis. BLOs, by their very nature, allow the Courts to pierce the corporate veil to hold an associated company (as defined by the BSA) liable for the relevant liability of another. The test for whether a company is “associated” with another is set out in section 131 of the BSA. By way of example, one company will be associated with another if it has or is entitled to acquire at least half the share capital of other company (i.e. a parent company and its subsidiary).
Prior to the introduction of BLOs, there were limited means to pursue liability for building defects or building safety risks beyond the immediate developer or contractor, especially when the liable entity was insolvent. BLOs address this issue by preventing special purpose vehicles and joint ventures from avoiding liabilities by winding up at the end of a project. A common occurrence in the developer world. This was the context in which BLOs were initially introduced. Since their inception, BLOs have been utilised by claimants and defendants in broad, and innovative, ways. For example, in the case of Willmott Dixon Construction Limited v Prater & Ors [2024] EWHC 1190 (TCC), a case also before Jefford J, a BLO was sought by one of the defendants, AECOM, against the parent companies of some of the other defendants in the event of AECOM seeking a contribution from the defendants if the case went against them.
The introduction of BLOs marked a significant development in the landscape of building safety in England and Wales and has led to an interesting and evolving body of judicial authority. However, despite being introduced some nearly three years ago now, the Courts have only recently ordered the first BLO in the case of 381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anr [2024] EWHC 3179 (TCC) below. We explore the relevant judgments below. Notably, in this case, Jefford J addressed the issues in two parts:
- The liability decision – i.e. whether there was a ‘Relevant Liability’ in accordance with section 130 of the BSA; and
- In what circumstances the BLO should be ordered.
The Liability Decision
This case concerned defects in and damage to a block of flats at St Andrews House, 381 Southwark Park Road, London (the Property). The claimants included a residents’ right to manage company and various leasehold owners of the flats at the Property. The first defendant, Click St Andrews, was a special purpose vehicle who owned the freehold and head lease of the Property. The second defendant, Click Group Holdings, was the parent company of Click St Andrews. At the time of the hearing, Click St Andrews was in liquidation and the financial strength of Click Holdings was doubtful. The resident’s management company entered into a Freehold Purchase Agreement (FPA) with Click St Andrews in 2020 under which Click St Andrews would develop the Property by removing an existing pitched roof and erecting an additional storey consisting of three prefabricated modular units. At a high level, and in the context of BLOs, the claimants’ case was that:
- During the works, the defendants failed to provide adequate protection to keep the roof structure watertight, which led to water ingress and damage to the flats below.
- During an investigation of the damage caused by the water ingress, further defects in workmanship in the modular units that were being remediated (including structural and fire safety issues) were discovered.
- Click St Andrew’s acts, omissions and defaults amounted to, amongst other things, breaches of the FPA, and originally a breach of section 2A of the Defective Premises Act 1972 and/or breach of the covenant of quiet enjoyment of the leaseholders’ leases.
However, via a late amendment to the Particulars of Claim, the claimants further sought a BLO against Click Group Holdings, as an associated company, in respect of Click St Andrews’ liability not only under the DPA but in respect of certain building safety risks (as defined by section 130(3)(b) of the BSA).
Jefford J found that, in carrying out the works, Click St Andrews was in breach of the FPA and that these breaches gave rise to a ‘relevant liability’ for the purposes of the BSA. The relevant breach in question related to, amongst other things:
- A lack of proprietary fire-stopping such as fire collars or other methods of protection where pipes penetrated the ceiling;
- Failure to apply intumescent paint to timber joists;
- Failure to provide adequate fire-stopping between the compartment walls and the external walls.
In essence, it was found that the works carried out by Click St Andrews failed to comply with Building Regulation B3 which requires a building to be designed and constructed so that, in the event of fire, its stability will be maintained for a reasonable period and so that the spread of fire is inhibited.ody corporate actions give rise to a relevant liability. The Court was satisfied, in this case, that the structural and fire safety issues in issue gave rise to a building safety risk but that a further hearing was required to consider whether to make the BLO. The Court found that there was no basis for any finding of breach in relation to the DPA.
Interestingly, in her decision, Jefford J identified that the BSA says little about the procedure to be adopted by a party wishing to seek a BLO. Her honour observed that the BSA does not require a party to make a claim for a BLO within existing proceedings. Thus where it is contemplated that a BLO will be sought against a particular associated company, it is sensible for the BLO to be heard as part of the ‘main proceedings’ but that does not preclude a subsequent claim for a BLO against some other associated company. We have now received further guidance on procedure from the Courts in the latest BLO related case of BDW Trading Ltd v Ardmore Construction Ltd and other companies [2025] EWHC 434 (TCC). Whilst the Court was asked to decide two applications for information orders under section 132 of the BSA, the Court commented that there was nothing in section 130 that made it a precondition to the making of a BLO that the relevant liability of the original body corporate has already been established; thereby paving the way for parties to obtain BLOs ahead of the determination of the original body corporate’s liability, effectively granting them on an indemnifying basis providing that the original body corporate actions give rise to a relevant liability.
The Application for a BLO
Having determined that there was a relevant liability for the purposes of the application for a BLO, the Court turned to the question of whether: (a) Click Group Holdings is an associated company of Click St Andrews within the meaning of s131 of the BSA; and
(b) it would be just and equitable to grant the BLO as required by s130(1) of the BSA. Turning to the first point, Click Group Holdings was the holding company of Click St Andrews. Click Group Holdings was essentially the grandparent company of Click St Andrews as it held all the shares of Click Above Limited, which in turn wholly owned Click St Andrews. The Court found that Click Group Holdings was an associated company as the corporate structure enabled Click Group Holdings to secure that Click St Andrews conducted its affairs in accordance with its wishes. It was therefore indirectly controlled by Click Group Holdings. The controlling and directing mind for both companies were the same person, a Mr Emmett. The Court then turned to the second point as to whether it would be just and equitable to grant the BLO. In doing so, the Court gave consideration to the FTT’s decision on this issue in the recent case of Triathlon Homes LLP and Stratford Village Development Partnership [2024] UKFTT 26 (PC) (Triathlon). At the time of delivering the judgment, this was the only case that had considered what amounts to ‘just and equitable’. The Triathlon case noted that this is a discretionary power that should be exercised by having regard to the purpose of the BSA albeit that in this case the FTT was concerned with a remediation contribution order. The same approach was adopted by Jefford J who noted the Court should have regard to both the purposes of the BSA and to all relevant factors. In terms of the purposes of the BSA, Jefford J drew on paragraph 266 of the Triathlon decision, which reads as follows:
"The obvious purpose behind the association provisions is to ensure that where a development has been carried out by a thinly capitalized or insolvent development company, a wealthy parent company or other wealthy entity which is caught by the association provisions cannot evade responsibility for meeting the cost of remedy in the relevant defects by hiding behind the separate personality of the development company. It seems to us that the situation of SVDP with its relatively precarious financial position and its dependence for financial support upon Get Living, its wealthy parent company, constitutes precisely the sort of circumstances at which these provisions are targeted."
Jefford J found that the development had been carried out by a thinly capitalized development company, which was dependent on inter-company or inter-group loans for its financial wellbeing. The question therefore turned on whether Click Group Holdings needed to be a wealthy parent company as one of the requirements for “just and equitable” as it appeared that Click Group Holdings had no real assets. However, the Court was persuaded that the emphasis should be on the financial position of Click St Andrews rather than Click Group Holdings. In doing so, the claimant relied on paragraph 255 in the decision of Triathlon, which suggests the source or extent of the parent company’s assets would carry little weight for the purposes of determining whether it is just and equitable, and reads as follows:
"The increase in value of Get Living's investment in East Village is not a matter to which we give great weight, although to the extent that it is relevant at all it is obviously a point in favour of making an order. It is common ground that Get Living has the resources to enable it to comply with any order the tribunal may make, but even if there had been doubt about that we think it would be an unusual case in which the source or extent of a respondent's assets or liabilities will carry much weight when deciding whether it is just and equitable to order it to bear the cost of remediation."
Jefford J agreed with this interpretation and found that it was just and equitable to make the BLO. As such, the BLO was granted against Click Group Holdings in respect of the relevant liability of Click St Andrews. One further interesting argument, which in this instance the Court dismissed in making its finding on just and equitable, was that the leaseholders had a contractual arrangement with, inter alia, Click Group Holdings, which they had not enforced. In this instance the later entity had given a guarantee to the management company under the FPA but this was not available to the leaseholder per se and the BLO gave the leaseholder a direct route against Click Group Holdings. Whether, for example, in other instances the presence of guarantees militates against the ordering of BLO remains to be seen. With each BLO related case going before the Court and as parties push the boundaries, the parameters of when and in what circumstances the Court will award BLOs becomes clearer. More decisions to follow later this year!
Alumni • Legal Notices • Accessibility • Privacy Notice • Fraudulent or 'scam' communication • Complaints Procedure • Pricing Information
© Charles Russell Speechlys 2025. Solicitors Regulation Authority number 420625.