How a new ruling provides fresh clarity on building liability orders

The Technology and Construction Court recently delivered a judgment concerning a Part 20 claim for a building liability order (BLO) under the Building Safety Act 2022 (BSA).

Willmott Dixon vs Prater & Others concerns allegations of unsafe or defective materials used in the design and construction of a mixed-use development. As is common in cladding claims, a multi-party claim has been brought. The defendants include the specialist envelope subcontractor and its guarantor, Prater Ltd (Prater) and Lindner Exteriors Holding Ltd (Lindner), the building services engineer, Aecom Infrastructure & Environment UK Ltd (Aecom), the architect, Sheppard Robson, and the approved inspector, AIS Surveyors Ltd. My firm is acting for Aecom.

Following intimation of the main claim, Prater and the Lindner Group underwent corporate restructuring. On behalf of Aecom, we issued an additional claim for BLOs against four Lindner Group companies, three of those based in Germany and one in the UK: none of these companies were involved in the project.

The Lindner Group companies asserted that the BLO claim should be heard separately from the main claim and stayed for various reasons, including proportionality of costs. They argued that the additional claim was contingent upon certain findings in the main claim, including whether it was “just and equitable” to make a BLO in the circumstances. If ordered, BLOs would make the Lindner Group companies responsible for any liability attributed to Prater or Lindner in the main claim.

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Aecom disagreed, given the inextricable overlap between the claims, and so it had proposed synchronising the proceedings. This would ensure the decision was binding on the additional parties and help avoid duplicative litigation. In Aecom’s view, a stay of the BLO claim would create unnecessary delay and uncertainty.

In rejecting the Lindner application, Mrs Justice Jefford referred to BLOs as being “new territory”. There was little, if any, guidance on the principles relating to BLOs and the “just and equitable” test. The purpose of BLOs is to ensure that the party to whom a liability is owed can ultimately recover monies regarding that liability. The judge noted that it was incorrect to state that a BLO may only be made where the company facing the underlying claim failed to satisfy a judgment. Further, regarding the “just and equitable” test, it may not be necessary to show some bad faith concerning the defendants’ financial positions.

Justice Jefford commented that the BSA does not require the additional party from which a BLO is sought to be party to the main claim or those proceedings. Such a party may not even have existed at the time of the project or the time of the proceedings. However, if the additional party did exist at the time, and the BLO was claimed before resolution of the main claim, then it would generally be sensible for matters in the main and additional claim to progress together.

Building liability orders broaden potential liability exposure for parties for past and future projects – associated companies, which were not directly involved [and] may not even have existed at the time could be held jointly and severally liable

The BSA assumes the additional company cannot challenge a liability finding against the original company. However, this would not prevent valid arguments concerning the “just and equitable” test, and these would be better managed where the additional company is party to the proceedings. BLO claims could raise different points from the main claim; however, resolving such issues would typically involve consideration of much of the same evidence. It would therefore be unsatisfactory for the court to consider those issues or evidence already on record more than once.

Justice Jefford also disagreed with the applicants’ submissions on likely costs incurred, since this could be handled by appropriate case/cost management. Further, the evidence relating to the BLO would be relatively narrow.

The judge therefore dismissed the application and set future directions. The applicants were ordered to pay Aecom its awarded costs.

While this was an interim application for a stay, the judgment provides some insight into how BLOs may be treated by the courts (including by reference to live underlying proceedings). This is useful for parties considering or responding to BLOs. We understand this is also the first reported case on BLOs and it is one where a defendant party, claiming contribution against co-defendants, is seeking a BLO against companies associated with those defendants.

A BLO may be imposed if certain criteria are met, including if it is “just and equitable”. The BSA does not prescribe the specific factors that a court must contemplate, so courts will probably consider the policy behind the BSA, and the evidence before it, in making future determinations.

BLOs broaden potential liability exposure for parties for past and future projects – associated companies, which were not directly involved in the original project, may not have existed at the time and may not be in the same jurisdiction, could be held jointly and severally liable. The “corporate veil” could be well and truly pierced if there are grounds for a BLO.

• Sheena Sood and Nicholas Smith of Beale & Company Solicitors and Sean Brannigan KC and Thomas Crangle of 4 Pump Court, represented the successful party, Aecom, in this case.  

Sheena Sood is the senior partner of Beale & Co; she was assisted by Kayleigh Rhodes in the writing of this article