Building Liability Orders

BLOs were introduced by s130 of the Building Safety Act 2022 ("BSA 2022") to address situations where developers and contractors have insufficient funds to meet claims against them, whereby their associated companies will become the target of the "relevant liability" – this includes, among other things, for breach of duty under the Defective Premises Act 1972 and as a result of a "building safety risk".

The BSA 2022 does not set out who may apply for a BLO. Instead, it focusses on who may be the target of the same. In that regard, in summary terms, the test for whether a company should be "associated" for the purpose of a BLO is whether it controls the other by virtue of, primarily, its majority shareholding and voting rights.

A BLO will only be ordered it is "just and equitable" to do so. As the BSA 2022 does not prescribe what exactly this means (and what factors will fall for consideration), it remains to be seen how the TCC will apply this test in practice. That being said, there has been some guidance on this matter from the First Tier Tribunal in a recent case concerning a Remediation Contribution Order – see our article on Triathlon homes v Stratford Village Development Partnership and others [2024] .

Wilmott Dixon v Prater and Others

Wilmott Dixon, as claimant sought £47m of damages for the costs incurred in relation to remediating fire safety defects in the external wall of a development.

Amongst the numerous co-defendants, Prater Limited ("Prater") acted as specialist envelope sub-contractor and its guarantor was Lidner Exteriors Holding Limited ("Lidner"). After the claim was intimated against Prater, both companies underwent corporate restructuring resulting in their apparent financial deterioration (according to their accounts).

One of the co-defendants, AECOM Infrastructure & Environment UK Ltd ("AECOM"), became concerned about Prater's and Lidner's ability to meet any claim for contribution and so it issued a BLO against Lidner's associated companies.

Thus, AECOM effectively sought to utilise a BLO to claim contribution from a co-defendant – previously it had not come before the courts as to whether it should be open for a co-defendant to do so. 

The Lidner associated companies, which included three foreign jurisdiction companies and one English company, sought an urgent application for AECOM's Part 20 BLO claim to be heard separately from the main claim and to be stayed for the following reasons:

1. If the Part 20 claim was heard alongside the main claim it was argued that it would waste significant costs and cause prejudice to the non-English companies who would have wait for the conclusion of the main claim (incurring significant costs in doing so) before being able to address the issues in the BLO.

2. It was argued that under the main claim Aecom might not be held to be liable and / or the proceedings may discontinue – again, resulting in significant wasted costs for the Lidner associated companies if the claims were heard together.

3. Unless and until Lidner was: (i) held liable to the claimant; (ii) liable for contribution; (iii) unable to discharge that liability, there should be no basis for the BLO.

4. Significantly the English associated company represented to the TCC that Prater and Lidner held valid professional indemnity insurance which would answer the main claim (and in so doing, it waived confidentiality).

The Decision

Justice Jefford did not accept the Lidner associated companies arguments. Indeed, in dismissing the Lidner associated companies' application, Justice Jefford provided the following helpful guidance:

1. Whilst the BSA 2022 does not require a BLO party to be joined to the main claim (such that they can be heard separately / sequentially), it would make sense to join them to progress both claims together in the interests of time and costs where the associated company existed at the time of the project or the proceedings.

2. The BSA 2022 assumes that an associated company will not be able to challenge a liability finding in the main claim - the defence to a BLO claim is only if the test for whether it would be just and equitable to order a BLO has been satisfied or not.

3. Whilst BLOs may give rise to issues that don't arise under the main claim, they will ordinarily involve considering much of the same evidence. Given the court's policy to avoid effectively hearing the same issue twice, it will ordinarily make sense for both claims to proceed and be heard together.

4. As to any wasted costs for associated companies only involved as a result of the BLO claim, the BLO defendant's Counsel would not need to sit through the whole main claim and could simply join for the BLO element.

Takeaway

This Judgment is a helpful precedent for the use of BLOs for the purpose of contribution between co-defendants. In addition, whilst the guidance is not binding, it is helpful to understand how the courts would like BLOs to work in practice.

As BLOs are a new mechanism, we expect to see an increasing number of judgments concerning BLOs in the coming year as they progress through the TCC. No doubt there will be further guidance and commentary in that regard in due course.