Building Liability Orders – New Guidance from the TCC
Background
The Building Safety Act 2022 (“BSA”) received Royal Assent on 28 April 2022. It was introduced following the Grenfell Tower fire on 14th June 2017 and introduces a regime overseen by a new Building Safety Regulator, with particular emphasis on “higher-risk buildings”.
s. 130 of the BSA introduces a new right to apply for a building liability order. Building liability orders were introduced to address the risk of certain developers escaping civil liability for safety defects because they carried out projects through subsidiaries, shell companies or special purpose vehicles (SPVs) with very few assets. Such entities are often wound up once the development is completed, resulting in the developer group having no long-term civil liability.
The High Court may make a building liability order to extend the specific liabilities of one body corporate to any of its associates and make them jointly and severally liable. In effect, this enables the Court to pierce the corporate veil.
A building liability order may be made in relation to any “relevant liability”, whether arising before or after section 130 came into force. A “relevant liability” is defined in section 130(3) of the BSA 2022, as a liability incurred:
- Under the Defective Premises Act 1972 (DPA 1972).
- Under section 38 of the Building Act 1984 (BA 1984) (when it is fully in force).
- Resulting from a “building safety risk”. Section 130(6) of the BSA 2022 defines “building safety risk” as a:
“… risk to the safety of people in or about the building arising from the spread of fire or structural failure.”
The scope of a building liability order is not limited to residential property or matters relating to cladding.
The court will make a building liability order if it considers it “just and equitable” to do so. There is no definition in the BSA as to what is meant by this, but it is anticipated that this is something that will develop through case law and will be a question of fact in each case.
Although building liability orders are a useful tool in the armoury of potential claimants, the Technology and Construction Court (“TCC”) has recently confirmed, in the case of Wilmott Dixon -v- Prater and others, that there is nothing to prevent a defendant applying for a building liability order against a co-defendant’s parent or a group company.
The Case
The case concerned allegations that the design and construction of the external walls at a mixed use development in Woolwich were unsuitable from a fire safety perspective. The claim was for damages of nearly £47 million against a range of Defendants, including two related companies, Prater Limited (“Prater”), who was the cladding specialist, and Lindner Exteriors Holding Limited (“Lindner”), Prater’s holding company.
AECOM Infrastructure and Environment UK, another of the Defendants (”AECOM”), had raised concerns about the financial position of Prater and Lindner due to corporate restructuring after they became aware of the main claim, so it issued an additional claim against four Lindner Group companies seeking building liability orders under section 130 of the BSA. If ordered, these would make the Lindner Group companies responsible for any liability of Prater and Lindner. The Lindner Group sought to have the additional claim stayed until after judgment in the main claim and to be heard separately from that claim, arguing that it was unjust to deal with the matter earlier and in parallel with the main claim.
The judge disagreed, finding that:
- a party seeking a building liability order was not obliged to bring its claim for such an order at the same time as the primary claim against a related company, but
- if a building liability order was claimed before the resolution of a primary claim, the correct approach would normally be to have that claim heard and dealt with at the same time as the primary claim.
The reasoning for this included that:
- the same or similar evidence will be relevant to both issues and it is not sensible for the court to review evidence for a second time.
- the BSA does not contain any preconditions to liability, so it was wrong to suggest that liability under a building liability order was dependant on a defendant’s failure to pay the primary claim (if found liable).
Comment
This is an important case, as it is the first reported case in which a defendant has sought a building liability order against companies related to another defendant to secure a contribution to any liability which it may have.
The BSA is silent on the practicalities of applying for building liability orders, but this judgment suggests that if a building liability order is sought before the outcome of the main claim, it will be appropriate to have both claims dealt with at the same time. However, whether it is just and equitable to make such an order will be fact-dependent.
The construction team at Rogers & Norton deal with a wide range of building-related disputes for both claimants and defendants. s. 130 of the BSA may prove to be a useful tool for both parties when seeking to recover damages in situations where the developer or other parties involved in the design and construction project have ceased to exist or are impecunious. For more information or to arrange an appointment with a member of our construction team, please contact us on 01603 660001, email enquiries@rogers-norton.co.uk or make an enquiry via our website.
*This article is provided for general information purposes only and does not constitute legal or any other professional advice.
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