Case law starts to clarify new building safety liability regime

As part of the biggest change to safety regulation in the industry for a generation, the Building Safety Act 2022 introduced building liability orders (BLOs) as one cause of action.

Historically, it has been relatively common practice for a developer to set up a subsidiary company – or special purpose vehicle (SPV) – with very few assets, specifically to carry out a certain project.

Once the development is completed, the subsidiary is then typically wound up, and any remaining assets transferred elsewhere in the business.

The prospect of enforcing any claims against such an SPV and recovering money is thus near to impossible, with the result that the corporate developer group has no long-term liability for the project in question.

The introduction of BLOs aims to address this issue and prevent a developer escaping liability for building safety defects by hiding behind complicated legal structures. Accordingly, section 130 of the 2022 Act allows the High Court to grant a BLO if it considers it 'just and equitable' to do so.

A BLO extends a company's relevant liability to any of its associated companies, such that where there are two corporate bodies they would both become jointly and severally liable in such instances.

This will effectively enable a party with a claim arising from a relevant liability to make that claim against both corporate bodies and, if successful, recover damages from either.

Section 130 of Act defines a 'relevant liability' as being incurred in one of the following scenarios:

• under the Defective Premises Act 1972 (as amended)
• under section 38 of the Building Act 1984; however, at the time of writing this has never been brought into force and, despite plans to do so under the 2022 Act, it is unknown whether or when it will take effect
• as a result of a building safety risk, which is defined in the 2022 Act as 'a risk to the safety of people in or about a building arising from the spread of fire or structural failure'; while claims under the 1972 Act are limited to dwellings, building safety risk encompasses a wide range of potential liabilities, including those relating to non-residential buildings.

The High Court has the power to make a BLO under section 130 of the 2022 Act, if as mentioned it considers this just and equitable.

However, since BLOs are a novel remedy, little is known about how the courts will apply this just and equitable test, or how in practice an application should be made.

As such, the judgment provided some welcome guidance on the following practical questions.

• At what stage in proceedings should a BLO application be made?
• Who may apply for a BLO?
• What factors might the court consider in deciding whether it is just and equitable to make a BLO?

Meanwhile, 381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anor [2024] EWHC 3179 (TCC) issued in December 2024, again went before Mrs Justice Jefford DBE. It contains the first High Court finding of a relevant liability as a result of a building safety risk and, subsequently, the first award of a BLO.

The finding of a relevant liability was important because it allowed the claimants in this case to seek a BLO against the parent company of the defendant rooftop developer's corporate group.

The application for the order was made at a consequential hearing, following which the High Court made the first known BLO, explored in more detail below.

The most recent judicial guidance was handed down in February in BDW Trading Ltd v Ardmore Construction Ltd & Ors [2025] EWHC 434 (TCC). The decision primarily addresses information orders under section 132 of the 2022 Act.

However, the judge in passing suggested that there is nothing in section 130 that 'makes it a precondition to the making of a building liability order that the relevant liability of the original body shall already have been established'.

As such, BLOs may be sought and obtained on an indemnity basis; that is, 'if this original body has any relevant liability in respect of this specified building, this associate shall also have that liability'.

AECOM applied to the High Court to grant BLOs against both English- and German-registered companies in the same corporate group as Prater and Lindner.

It alleged that, based on publicly available information, both had largely disposed of their assets, transferring them to other companies in their corporate group after the claim against them was filed.

The group argued that it would be unfair to have to deal with the BLO claim until the question of whether Prater and Lindner were liable for the defects had been resolved, or it was clear that they had insufficient assets to discharge any liability they were found to have.

The judge was to decide whether to grant a stay on the BLO claim until after the main claim regarding the defect was resolved, which would then in effect create a separate hearing.

Mrs Justice Jefford DBE rejected the application for a stay, finding the following.

• The 2022 Act does not require that a party against whom a BLO is sought also be a party to the main claim or participating in those proceedings. Indeed, it is possible for a BLO to be sought against a company that 'does not even exist at the time of the proceedings'. However, if the company did exist at the relevant time and the BLO was claimed before the resolution of a main claim, it would be 'sensible and efficient for matters to progress with the main claim and additional claim being heard together'. Any difficulties in ensuring that the defendants to the additional claim were afforded a proper and cost-effective opportunity to deal with it could normally be addressed by appropriate case management.

• BLO claims would normally raise issues that have not necessarily arisen in the main claim, but resolving them would typically involve considering much of the evidence relevant to that main claim. It would therefore be 'patently' unsatisfactory to have the court make further determinations on the basis of the evidence already covered, or hear further evidence 'some considerable time after the main hearing'.

• In response to the Lindner Group companies' submission that it would impose an undue burden on them to participate in the trial of the main claim, the judge noted that this is often the case in respect of contingent claims, such as those for a contribution or under guarantees; claims for BLOs are no different. However, it is often the case that parties against whom a contingent claim is made do wish to participate actively in the main proceedings as well, calling expert evidence and so on. Concerns about the costs of participation in the trial of the main claim can be met both by proper case management and costs orders.

• BLOs may be sought by defendants to building safety claims, and not just by claimants. This is significant because before this case most commentators thought that BLOs were remedies that could only be sought by claimants; however, this judgment confirms that defendants may also seek orders against companies associated with co-defendants, thus securing an effective contribution to any liability they may have.

In light of the above, the court declined a stay of proceedings and rejected the application.

The High Court found the defendant, a rooftop developer, had committed fire and structural safety breaches that gave rise to a building safety risk under section 130(3)(b) of the 2022 Act. However, the claim under section 2A of the 1972 Act – a new provision inserted by the later legislation – failed.

Before the 2022 Act, the 1972 Act was seldom used in the context of defects: a claim under the latter could only be brought if it related to the provision of a dwelling; that is, its original construction or conversion from another building.

The new section 2A expands this to cover claims arising out of 'any work undertaken on an existing dwelling, provided that work is done in the course of a business'.

The duty is owed both to the person for whom the work is done, and 'each person who holds or acquires an interest (whether legal or equitable) in a dwelling in the building'. The limitation period for claims under section 2A is 15 years for any project that completes on or after 28 June 2022, when the section came into force.

In 381 Southwark Park Road, the claim under section 2A failed: the judge found that it was impossible to identify anything that was done after that date that could give rise to a breach of that section.

However, she was satisfied on the basis of the expert evidence that there were fire safety breaches that 'give rise to a relevant liability for the purposes of section 130(3)(b)' of the 2022 Act.

This section refers to such a liability 'as a result of a building safety risk', as explained above.

• It made a BLO in favour of the claimants, confirming that the relevant liability of the first defendant, the freeholder, was also that of the second, its associated company.

• It confirmed, too, that the 2022 Act does not require a party to be identified in pleadings or joined into proceedings before a BLO is made. The judge further explained that the rationale for this is that it 'may not be apparent that a particular company will be pursued, and which company may be pursued may [depend] on changeable financial arrangements, or the company against whom the order is sought may not even exist at the time of the original proceedings.'

• The court, however, rejected the claimants' argument that the BLO would or should extend to liability in respect of all of their losses, whatever the breach from which these arose, holding that the relevant liability does not enable recovery of all losses arising from any liability that might be found.

The making of the first BLO is of historic significance, and marks the first judicial confirmation that such orders may be sought against associated companies that are not party to ongoing proceedings.

This reinforces the wide scope of BLOs and the power they confer on the High Court to hold developers and associated companies to account for building safety defects, where the party that originally developed, designed or constructed a building – which, as noted above, is often an SPV –has been wound up or is insolvent.