A TCC decision last week is the first to consider the circumstances in which information orders can be obtained to assist a claimant in applying for a Building Liability Order. The court’s decision narrows the scope for such orders to be made from those envisaged in the Explanatory Notes to the Building Safety Act. The decision will be welcome news for developers and large contractor organisations, and may require claimants to consider more carefully whether the benefit to be obtained in bringing historic building safety claims outweighs the time and cost involved in establishing liability and pursuing related parties.
Building Liability Orders: an overview
Sections 130 of the Building Safety Act 2022 (the “BSA”) permits liability for construction work to be extended to associated entities such as parent or sibling companies. Ordered at the court’s discretion if it is considered “just and equitable to do so”, a Building Liability Order (“BLO”) can be made in relation to any liability arising under the Defective Premises Act 1972 (as amended), section 38 of the Building Act 1984 or any other claim arising from a “building safety risk” (a “Relevant Liability”).
The concept of an associated entity under the BSA (an “Associate”) is broad and includes companies which have been parents or siblings of the company primarily liable (the “Principal Defendant”) “at any time” since the works in question were commenced. BLOs could therefore be made in relation to projects or companies which have long since been sold or which have only been recently purchased long after construction has been completed.
Section 132 of the BSA also provides a right for certain persons to apply for information orders (a “BLIO”) requiring the disclosure of information for the purpose of enabling an applicant to consider whether to make an application for a BLO. Such orders are intended to allow claimants to obtain the information necessary to piece together any complex ownership structures and to evaluate the merits of seeking a BLO.
A recent TCC decision is the first to consider which entities a BLIO may be made against and the extent to which a Relevant Liability must be established before a court will grant a BLIO.
BDW Trading Ltd v Ardmore Construction Ltd
BDW engaged Ardmore as the design and build contractor for five developments that completed between 1999 and 2005. Following the Grenfell fire disaster, fire safety and structural defects were discovered in the five developments. BDW accepted responsibility to the building owners for these defects and claimed against Ardmore for the costs of remediating them. In relation to one of the developments, BDW successfully obtained an adjudication decision against Ardmore for the payment of £14.5 million in remediation costs (for our Law-Now relating to the enforcement of that decision please click here). In relation to the other four developments, BDW commenced court and arbitration proceedings against Ardmore. The total amount claimed in these proceedings was approximately £85 million.
Although Ardmore had paid the amount of the adjudication decision, BDW became concerned that it would not have the funds to meet similar awards or judgments made in relation to the other four developments. BDW therefore wished to consider the potential for BLOs to be obtained and brought applications for BLIOs to allow it to do so. BDW applied for BLIOs from Ardmore itself as well as other companies in the Ardmore group, including Ardmore’s ultimate holding company.
The TCC rejected BDW’s applications in their entirety. The court’s judgment comments on four significant issues noted below in relation to BLOs and BLIOs.
When can a BLO be made?
The court considered it relevant to determine the point in time at which a BLO can be made as a contextual factor for the interpretation of the BLIO regime under section 132. In the court’s view, there was nothing in section 130 which required a party to have already established a Relevant Liability against the Principal Defendant. The court noted that the description of a BLO in section 130 was an order which provided that “any” Relevant Liability of the Principal Defendant was also to be a liability of an Associate. The section therefore contemplated that a BLO could be made on an indemnity basis i.e. an order that any Relevant Liability subsequently established against a Principal Defendant would also be a liability held by an Associate.
Can BLIOs be made against Associates?
The terms of section 132 refer only to the making of a BLIO against an entity which is subject to a Relevant Liability. However, BDW relied on the Explanatory Notes to the BSA which provided examples of BLIOs being made directly against Associates rather than a Principal Defendant. The difference is important because, whilst a Principal Defendant is likely to have information about its immediate parent company, it may not have information about ownership arrangements higher up within a corporate group. The granting of BLIOs only against Principal Defendants would therefore significantly restrict the ability of claimants to obtain information about all of the Associates against whom a BLO could be made.
BDW’s reliance on the Explanatory Notes was rejected. In the court’s judgment, the wording of section 132 was clear and could not be overridden by the Explanatory Notes. In the present case, Ardmore, as the Principal Defendant, was the only entity against which a BLIO could be made.
Proving a Relevant Liability
The first condition for the granting of a BLIO under section 132 is that “it appears to the court … that the body corporate is subject to a relevant liability”. BDW contended that it was sufficient for a claimant to have been advised by competent and qualified experts and by its lawyers that a claim for a Relevant Liability could be made against the Principal Defendant. This interpretation was also supported by the Explanatory Notes.
The court rejected this interpretation, considering it did not do sufficient justice to the requirement that the relevant entity “is” subject to a Relevant Liability. This requirement could not be satisfied by showing only that the entity “might” have a Relevant Liability. At the same time, the fact that the existence of such a liability need only “appear to the court” meant that the liability did not have to be positively established by a judgment, award or agreement before a BLIO could be granted.
Where a Relevant Liability is disputed, whilst the jurisdiction to order a BLIO would still exist, the court rejected the suggestion that a merits determination should be carried out in considering whether to grant a BLIO. In the court’s judgment, section 132 was ancillary to section 130 and was not:
“a vehicle for trying or resolving building disputes … there should be no question at all of having anything like trial procedures … I am little more enamoured of the idea that, when there is an active building dispute …, the applicant should be putting its evidence before the court and inviting an assessment (albeit non-binding) on the merits. Applications under section 132 ought (in my view) to be short and uncomplicated, and I do not consider that they impose on the court any obligation to become embroiled in assessments of the merits of disputed matters. If this means that applications for information orders will be made sparingly in cases where liability is in issue, I cannot see why that is a bad thing.”
Appropriateness
The second condition for the granting of a BLIO under section 132 is that it is “appropriate to require information or documents to be provided for the purpose of enabling the application … to make, or consider whether to make, an application for a [BLO]”. Although section 132 does not address the categories of information and documentation which might be covered by a BLIO, the court noted they would include that which enabled a claimant to identify Associates as well as, “in any appropriate case”, matters concerning the financial position of the Associate (that being something which may affect a claimant’s decision to apply for a BLO).
In considering the requests made by BDW, the court noted that it would have refused many of them, either because the information and documentation sought were not within the control of Ardmore (as opposed to its parent companies) and/or because commercially sensitive information was sought which was not required for the purpose of identifying Associates or forming a view as to their financial worth.
Conclusions and implications
This is an important decision which provides significant guidance as to how the new BLO regime will work in practice. Whereas the trend of much of the caselaw interpreting the BSA has been to give a broad purposive interpretation in favour of claimant parties (as in relation to Remediation Contribution Orders, for example), the present decision will inevitably make BLOs less accessible to claimants.
The inability to obtain BLIOs against Associates directly, together with the difficulty of obtaining a BLIO whilst a Relevant Liability remains disputed, means that in most cases claimants are unlikely to be able to form an assessment of whether BLOs can be obtained, and the worth of those companies against whom BLOs might be made, until a Relevant Liability has been established against the Principal Defendant. Where the Principal Defendant does not have sufficient means to satisfy a judgment, claimants will need to weigh up the time and cost required to establish a Relevant Liability against the likelihood of obtaining BLOs against more substantial companies based on whatever public information is available to them at the time.
Even once a Relevant Liability is established, claimants may still have difficulty in unravelling complex corporate structures due to the inability to obtain BLIOs against Associates directly. It may be possible for claimants first to obtain BLOs against known Associates, before then obtaining BLIOs against those Associates – as the BLOs may mean that the Associates then have a Relevant Liability – but such a multi-stage process is bound to be time-consuming and costly.
Whilst the court’s decision is firmly grounded in the language of section 132, the contrary guidance contained in the Explanatory Notes may suggest that the Government’s intention has not been carried through into the language of the section. It remains to be seen whether the decision will be appealed or whether the Government will now consider amending section 132 to accord with the Explanatory Notes.
References:
BDW Trading Ltd v Ardmore Construction Ltd [2025] EWHC 434 (TCC)
