Building Liability Orders: Where companies associated with a building contractor or developer can be made liable for building defects

This legal update was co-authored by David Sawtell of 39 Essex Chambers.

The High Court has delivered an important ruling on Building Liability Orders (“BLOs”) and their case management by the court under the Building Safety Act 2022 (“the BSA”).

AECOM Infrastructure & Environment UK Ltd (“AECOM”) brought claims for BLOs against various companies within the Lindner Group (“the Lindner Companies”) in the Technology and Construction Court whilst the main case was also proceeding in that court. The Lindner Companies applied to stay the BLO claims until the main claim was determined. In her ruling of Friday 22 March 2024, Mrs Justice Jefford dismissed the application for the stay.

Mrs Justice Jefford held that Judgment in the main claim between AECOM and the Lindner Companies did not have to be delivered before AECOM’s claims for BLOs could proceed further. She acknowledged that BLOs are a “relatively new creation”, on which there has been scarce guidance since their introduction under the BSA. In this case, however, she held that it would be sensible for the main claim and the claim for BLOs to proceed together. A full transcript of the ruling has yet to be made available.

Judgment in the main action is awaited for further commentary on BLOs in what already appears to be an influential case in the property litigation and construction sector.

BLOs

The creation of BLOs under the BSA marked a watershed moment in the law governing the construction and development industry: they empower the High Court to extend a building contractor or developer’s liability for defective construction work to “associated” companies, such as a parent or sister company. This allows other companies in the same group to be held jointly and severally liable when judgment is made in building defect claims against builders and developers to help ensure that claimants secure proper redress. A BLO is available as an enforcement remedy where a claim is brought under the Defective Premises Act 1972, section 38 of the Building Act 1984 (if it is brought into force) or, more generally, on the basis of any other liability arising from a building safety risk.

BLOs were established to prevent certain contractors and developers from evading civil liability for defective works through subsidiaries, shell companies, joint ventures and special purpose vehicles with few assets. All too often, such construction and development companies are wound up upon a project’s completion or are left under-capitalised, partly to avoid the risk of long-term liability. Effectively therefore, BLOs allow the High Court to ‘pierce the corporate veil’ by imposing liability on companies elsewhere within a developer/contractor group that had no involvement with the original build project. A BLO should only be made where it is ‘just and equitable’ to do so, but the recent decision of  Triathlon Homes LLP v Stratford Village Development Partnership, Get Living Plc and East Village Management Limited [2024] UKFTT 26 (PC), where the same test was applied in the context of a remediation contribution order, shows that the courts may well adopt a similar approach to the pro-leaseholder approach of the First-tier Tribunal in some BSA claims.

In a number of decisions in the last few months, the First-tier Tribunal has already demonstrated that it is well placed to deal efficiently with remediation orders and remediation contribution orders as part of the protections for leaseholders under the BSA. The fact that parties to claims for BLOs in High Court proceedings may be required to play a role in the full trial of the main action, with substantial cost and time implications, is greatly welcomed, not least as this could encourage claims to be settled before reaching the final hearing.

The case between AECOM and the Lindner Companies therefore provides a helpful indication of the approach of the High Court towards BLOs, which are likely to be an important part of building defect claims in the High Court going forwards. For more information on BLOs and the BSA 2022 generally, please read our legal update prepared by Joanna Osborne and Megan Harding of the Property and Trusts Litigation Team.

For an analysis of the ‘just and equitable’ test as applied in the Triathlon v Get Living decision, please read this blog written by David Sawtell and Ruth Keating of 39 Essex Chambers.

Joanna Osborne and David Sawtell of 39 Essex Chambers collaborate on Building Safety Act issues.

 

If you would like to discuss this decision in more detail or would like advice regarding any of the issues raised, please contact Joanna Osborne, or any member of our Property and Trusts Litigation team.

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