From Relevant Liabilities, Associated Companies and the need to be Just and Equitable; In the realm of building safety and liability, the introduction of Building Liability Orders ("BLOs") through the Building Safety Act 2022, has marked a significant shift.
What is a BLO?
A BLO is a legal mechanism designed to address the challenges posed by Special Purpose Vehicles ("SPVs") and group companies and to try to ensure liability for historic building defects remain with those responsible. BLOs can remove the long-established principle of separate legal personality, imposing joint and several liability on associated companies to the original entity, aiding in the recovery of damages.
Key Developments from the Court
1. Willmott Dixon v Prater and others [2024] EWHC 1190 (TCC)
Willmott Dixon brought claims against its supply chain arising from fire safety defects. One of those defenders, AECOM, sought a BLO against another, Prater, as it feared restricting within the Prater group would leave the original defender unable to meet any judgment. The court rejected an application for a stay (pause of the action), providing guidance that a BLO does not need to be brought simultaneously with the primary claim. If a BLO is claimed before the main claim is decided, it is generally appropriate for the associated company to be a party to the main litigation. The court also emphasised that the only valid defence to a BLO claim is to demonstrate that ordering a BLO would not be just and equitable.
2. 381 Southwark Park Roads RTM Company Ltd & Ors v Click St Andrews Ltd & Anor [2024] EWHC 3179 (TCC)
In this landmark case, the court awarded a BLO for the first time, based on the relevant liability of Click St Andrews, the freeholder, being extended to its associated company, Click Group Holdings. The court emphasised that a building safety risk does not need immediate rectification to qualify as a relevant liability. Click Group Holdings argued it was not just and equitable to grant the order. However, the court found that the association between the companies and the principle of relevant liability justified the award of the BLO. The court also noted that considering whether the award would be just and equitable, ensures fairness in extending liabilities to associated companies, even if they were not directly involved in the original claim.
3. BDW Trading Ltd v Ardmore Construction Ltd & Ors [2025] EWHC 434 (TCC)
This decision primarily addresses information orders under section 132 of the 2022 Act. However, the judge passed comment in relation to section 130, noting it does not require the relevant liability of the original entity to be established before a building liability order can be made. As a result, BLOs can be sought on an indemnity basis, meaning that any relevant liability of the original entity concerning the specified building, will also apply to the associated company.
Key Principles
The introduction of BLOs has reduced the risk for those seeking damages where an SPV has been created for a project, particularly where the SPV has been wound up or is insolvent, by allowing a claim to be sought against its associated companies. The key principles of BLOs that can be taken from the three judgements above include:
- Relevant Liability: BLOs can be applied to liabilities arising under the Defective Premises Act 1972, the Building Safety Act 2022, or as a result of building safety risks. This principle ensures that liabilities are appropriately extended to related entities.
- Associated Company: BLOs impose joint and several liability on associated companies, ensuring that relevant liabilities are extended to related entities. This principle addresses the challenges posed by SPVs and prevents developers from escaping liability.
- Just and Equitable: The Court may issue a BLO if it deems it just and equitable. This principle ensures fairness in extending liabilities to associated companies.
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