The “just and equitable” test for Building Liability Orders

A recent TCC decision is the first consider the “just and equitable” test for Building Liability Orders (“BLO”) under the Building Safety Act 2022 (the “BSA”). The court’s judgment provides guidance as to the application of this test and some potential limitations on the power to make BLOs.

381 Southwark Park Road RTM Company Ltd v Click St Andrews Ltd

Click St Andrews contracted with a right to manage company (the “RTM Company”) to erect an additional storey to an existing building by installing three prefabricated modular units onto its roof. Its works were guaranteed by its parent company (“Click Holdings”). Following water damage to the existing property and the discovery of fire safety and structural defects, the RTM Company along with multiple leaseholders brought a claim against Click St Andrews and Click Holdings.

The TCC found in favour of the leaseholders and RTM Company, however Click St Andrews had entered liquidation and the leaseholders did not have direct rights of action against Click Holdings. The leaseholders therefore sought a BLO against Click Holdings. BLOs can be ordered under section 130 of the BSA and have the effect of making a “relevant liability” of one company also a liability of an associated company (an “Associate”). A “relevant liability” includes liability under the Defective Premises Act 1972 and any liability as a result of a “building safety risk”.

Click St Andrews was found to have a “relevant liability” and, as Click Holdings was an Associate, the only remaining question for the court under section 130 was whether it was “just and equitable” to make a BLO against Click Holdings.

“Just and equitable”

Although there were no previous cases on the meaning of the “just and equitable” test under section 130, the court relied on a recent decision of the First Tier Tribunal (“FTT”) in Triathlon Homes dealing with a similar “just and equitable” requirement for the granting of Remediation Contribution Orders under section 124 of the BSA. For our Law-Now on that case please click here.

The court considered a number of specific issues relevant to the “just and equitable” test as follows:

• Agreeing with the FTT in Triathlon, the court considered that Click Holdings lack of assets was of little relevance when determining whether it was just and equitable to make a BLO. 
• The court accepted that questions of fairness could arise if the Associate was not a party to the proceedings against the original defendant. In such scenarios, the Associate might wish to raise other arguments on liability that were not raised in the initial trial. However, this concern was inapplicable in this case, as Click Holdings had participated in the trial and had a sufficient opportunity to make submissions.
• There was no necessity to plead the identity of the Associate ahead of time. While it might be sensible to join the Associate to the original proceedings, it was not a prerequisite for seeking a BLO.
• The court also appeared to accept that existing contractual arrangements were relevant. In this case, the court found that the contractual arrangements were in favour of granting a BLO, as the leaseholders did not have any contractual recourse against Click Holdings. 

The court also rejected an argument that once the conditions for a BLO were satisfied, a BLO could be granted in relation to any liability of the original defendant, not only the “relevant liability” established in the original proceedings. This was referred to as the "gateway" argument.

Conclusions and implications

This is the first case to consider the granting of a BLO and provides guidance as to the application of the “just and equitable” test. Although mostly consistent with the FTT’s decision in Triathlon, the suggestion that existing contractual relationships may be relevant to the test appears to be at tension with the approach taken in Triathlon. In that case, the FTT considered that, “Parliament did not intend that the availability of other claims or potential claims should either disqualify an applicant from making a claim for a remediation contribution order or delay the making of that claim." The Triathlon decision is presently on appeal and more guidance as to the “just and equitable” test may therefore emerge from the Court of Appeal’s judgement expected later this year.

The court’s acknowledgement of the fairness issues which can arise where an Associate is not involved in proceedings against the principal defendant has the potential to cause difficulty in future cases. Another recent TCC decision has upheld a limited interpretation of the “information order” provisions of the BSA designed to support the granting of BLOs (for our Law-Now on that case, please click here). This decision has made it more difficult for claimants to obtain information about Associates in advance of establishing a “relevant liability” against a principal defendant. This, in turn, may make it impractical for claimants in certain cases to include Associates within proceedings against principal defendants, leading to fairness objections when information orders and BLOs are sought against Associates at a later stage.

References:

Triathlon Homes LLP v Stratford Village Development Partnership [2024] UKFTT 26 (PC)

381 Southwark Park Road RTM Company Ltd v Click St Andrews Ltd [2024] EWHC 3569 (TCC)