What do we need to know about Building Liability Orders?

It has long been the case that developers will set up a company as a Special Purpose Vehicle (“SPV”) to carry out and complete a development project. When the project is completed the SPV can be dissolved, and any parent company (likely with more assets) will avoid any long term liability for defective work. Provisions set out in the Building Safety Act 2022 (the “BSA”) have been brought in to restrict this practice and to seek to ensure that developers can no longer evade their responsibility in respect of building or fire safety by entering into complex company structures.

Section 130 of the BSA came into force in 2022 and provides that the High Court may make a Building Liability Order (“BLO”) where there is a “relevant liability” in respect of a specific building.

The “relevant liability” is a liability that is incurred (1) under the Defective Premises Act 1972 or Section 38 of the Building Act 1984; or (2) as a result of a building safety risk (which is further defined as relating to fire safety or structural failure).

The effect of the BLO is that any such “relevant liability” will become a liability of an associated company eg parent or sibling company if it is “just and equitable” for the High Court to order it.

This is of considerable importance as it allows the court to “pierce the corporate veil” and disregard the separate legal entities of the companies involved which is an unusual approach for the court to take, and which is usually only taken in very limited circumstances eg in cases of fraud.

The BSA also recognises that development projects can be structured in a complex way which could make it difficult to establish which companies are related. Section 132 of the BSA therefore allows parties to apply for an “information order” (“IO”) requiring a company to give specified information or documents in relation to its associated companies. The BSA provides that an IO can only be made where the company is subject to a relevant liability under Section 130 and it is appropriate to enable the claimant to make or consider whether it should make a BLO.

How are the Courts addressing the new regime?

Some recent cases show how the courts are using the provisions relating to BLO’s under the BSA.

In Willmott Dixon Construction Limited v Prater and Ors [2024] EWHC 1190 (TCC) helpful guidance was issued by the court in respect of when BLO’s can be issued. In this case the claimant Willmott Dixon sought £47m of damages from various defendants for costs incurred in remedying fire safety defects. Prater was one of a number of co-defendants, and another co-defendant was concerned about Prater’s ability to pay (following Prater’s corporate restructuring and that of its guarantor) and sought a BLO against Prater.

The court allowed the claim to be made against a co-defendant and also provided guidance that although it is not a requirement that the party who is subject to the BLO proceedings be joined to the main proceedings, it would often be sensible from a costs/time perspective. Arguments that a BLO should only be considered after the liability has been established for the principal company under the main proceedings was rejected.

In another recent case the first BLO has now been issued. In 381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd and Anr [2024] EWHC 3179 (TCC) the claimant leaseholders won a victory against the freeholder and the rooftop developer in respect of severe flood damage. In the original hearing it was established that there was a “relevant liability” under the BSA, and then it was held at a later hearing that a BLO should be made. It is interesting to note that the BLO was made against a holding company even though it was not the direct parent company.

In a more recent case BDW Trading Ltd v Ardmore Construction Ltd [2025] EWHC 434 (TCC) the court have considered the relationship between the granting of a BLO pursuant to Section 130 and the granting of an IO pursuant to Section 132. BDW Trading Ltd had various claims against Ardmore (the contractor) in relation to fire safety and structural defects across five separate developments, and was successful in an adjudication in respect of one of the developments where the adjudication held the contractor to be liable for approx £14.5million in defects.

BDW was concerned that in the future the contractor might not have the resources to make payments in respect of the other developments and brought applications for IO’s in order to ascertain if BLO’s could be made for other associated companies. In a decision which will be positive news for some developers and contractors, the court rejected the claimant’s applications for both BLO’s and IO’s.

The court clarified that in relation to the definition of a “relevant liability” in the BSA the BLO was in respect of “any” relevant liability and it was not necessary therefore for the liability to be already established before a BLO was made; if a relevant liability was subsequently established against a principal company an associate company could still be made liable.

It is interesting to note that there was a strict interpretation of the granting of an IO. The claimant sought to rely on explanatory notes to the BSA which refer to the granting of an IO against an associated parent company rather than against the principal defendant company. The court rejected this even though this stricter interpretation of the BSA will curtail a claimant’s ability to obtain information about the various associate companies who could potentially be subject to a BLO. The court held that in this case the principal defendant company was the only party who could be subject to an IO.

This new area of law is fast developing, and it is important that developers and contractors using associated and complex company structures are aware of the provisions under the BSA and the continuing interpretation of these provisions by the courts. At Newmanor Law we will be watching this space…