Building Liability Orders: earlier, wider, and with real bite

Facts

The decision concerned an application brought by developer Crest Nicholson for BLOs within ongoing proceedings relating to fire safety defects at a Portsmouth development designed and built by main contractor Ardmore.

An adjudicator had previously decided that Ardmore Construction Limited (ACL), the relevant Ardmore company involved in the works, breached its duty under the Defective Premises Act 1972 (DPA 1972). It awarded that ACL pay Crest Nicholson the sum of c. £14.9m. ACL entered into administration and did not pay.

Under section 130 of the Building Safety Act 2022 (BSA 2022), the Court may, if it considers it just and equitable, impose a “relevant liability” of one company onto its associated company or companies, on a joint and several basis.

“Relevant liability” is defined at s.130(6) as a liability that is incurred under the DPA 1972, under s.38 the Building Act 1984, or as a result of a building safety risk.

Crest Nicholson sought BLOs against ACL and seven of its associated companies in the wider Ardmore group, which would make them jointly and severally liable for any liability of ACL under the DPA 1972 (based on the adjudicator’s award) or as a result of a building safety risk. It also sought an order specifically to make those companies liable for the sums awarded by the adjudicator’s decision.

Key takeaways

The TCC reached the following conclusions:

• An adjudicator’s decision can constitute a ‘relevant liability’ for the purposes of section 130(3) of the BSA 2022.

This resolves the uncertainty around whether adjudicator’s decisions are capable of giving rise to a relevant liability, and is a significant endorsement of adjudication as a route into BLO applications. It also reaffirms the decision in BDW v Ardmore that DPA 1972 claims fall within an adjudicator’s jurisdiction.

• ‘Anticipatory’ BLOs can be granted pre-trial and attach to associated companies before underlying liability is fully determined.

The Court confirmed it can make forward-looking BLOs before the underlying liability had been finally determined, provided it is “just and equitable” to do so. The Court suggested that any adjustments to relevant liability granted through an anticipatory RCO (by way of relative factual blameworthiness, for instance) would be a matter left to trial.

• The timing of BLO applications is to be a matter of case management.

The court confirmed it would decide the application based on the facts available at the time it is heard, though when such an application ought to be determined is ultimately a matter of case management.

• Factors relevant to the ‘just and equitable’ test are wide, and at the court’s discretion.

The Court confirmed the factors it may consider are broad. Notably, the conduct of the Ardmore group companies and their beneficial individual owners (including their failure to engage with the claims despite their awareness of them, and ringfencing ACL’s liabilities from the wider group) was relevant. However, the financial position of the companies against which a BLO is to be made (and the effect of such a BLO on that position) carries little weight.

• Complex corporate structures, including the use of SPVs, cannot shield liability.

BLOs can attach liability across associated entities on a joint and several basis. The wide ranging nature of this liability across multiple associated companies, some not involved directly in the original works, reinforces the BSA’s intention to prevent liability being avoided through group structuring.

Lessons learnt

This decision highlights the strong strategic value of BLOs. It allows claimant parties in building safety claims to act much earlier and decisively against defendants by using adjudication and anticipatory BLOs to establish liability earlier on.

The case reinforces the Court’s overall interpretation of the BSA 2022 as being one where developers are expected to fund remediation of building safety defects in the first instance, usually through Remediation Orders (ROs) or Remediation Contribution Orders (RCOs). BLOs provide a means for developers to pursue contributions from parties with a degree of responsibility to the defects, including main contractors. In turn, main contractors will no doubt be using BLOs to pass on liability to their own supply chains.

The decision will be welcomed by developers, particularly those party to the government’s Developer Remediation Contract, who are likely to use BLOs to pursue contributions from main contractor group entities, including where the original counterparty is insolvent.

However, developers may in turn face increased exposure across their own group structures from freeholders, building owners, and other stakeholders with the backing to bring BLO applications.

BLOs are emerging as a powerful tactical tool rather than a last-resort remedy. Parties facing potential building safety claims should consider group-wide exposure at an early stage, particularly where contractual or statutory adjudication remains available.

For further information, please contact Blaise Joubert or Simon Lewis.