Building liability order

Building liability orders (BLOs) were introduced as a result of the Grenfell tragedy and as part of the Building Safety Act, 2022, in part 5, section 130. They are a mechanism that allows recovery rights relating to a building to extend beyond that of a subsidiary company (sometimes referred to as a special purpose vehicle) to its associated companies.

The background to building liability orders (BLOs) is that sometimes as a means of securitisation for property based financial products in development and construction separate legal entities are set up for the specific purpose of isolating risk. The risks and liabilities, legal and financial are as such then held by the separate entity or SPV, as opposed to the parent company or developer. In such circumstances and in the case of building safety, as was displayed during the Grenfell Tower Inquiry, allocating responsibility can become extremely complex and the BLOs aim allocate responsibility back to a parent company even where strictly speaking liability might be held by a separate entity.

Section 130, Part 5 of the Building Safety Act, 2022 states that

1. The High Court may make a building liability order if it considers it just and equitable to do so.
2. A “building liability order” is an order providing that any relevant liability (or any relevant liability of a specified description) of a body corporate (“the original body”) relating to a specified building is also
   1. a liability of a specified body corporate, or
   2. a joint and several liability of two or more specified bodies corporate.
3. In this section “relevant liability” means a liability (whether arising before or after commencement) that is incurred
   1. under the Defective Premises Act 1972 or section 38 of the Building Act 1984, or
   2. as a result of a building safety risk.
4. A body corporate may be specified only if it is, or has at any time in the relevant period been, associated with the original body.
5. A building liability order
   1. may be made in respect of a liability of a body corporate that has been dissolved (including where dissolution occurred before commencement);
   2. continues to have effect even if the body corporate is dissolved after the making of the order.

On March 21, 2024, the first judgement on a building liability order (BLO) was published in the form of the proceedings of Willmott Dixon v Prater. In this case one party brought claim against a range of defendants, all of which denied liability. It was alleged that, after being notified of the claim, some of the other parties moved assets to related companies, meaning that if a judgement was brought against them, it could not be satisfied. The court rejected the request for a BLO but noted that the the application would be determined within the main proceedings, ie instead of two related proceedings. The

• A BLO does not need to be brought at the same time as the primary claim against a related company.
• However, if a BLO was claimed before the main claim was decided, the correct approach would usually be to hear and deal with the BLO at the same time as the main claim.
• While BLOs could raise separate issues to those in the main claim, resolving them would consider much of the same evidence. It therefore would not be sensible for the Court to deal with those after the main claim as it may have to review the issues more than once or require further evidence on the same or similar issues.
• Although BLOs are contingent on the underlying liability, such contingent claims are frequently seen in litigation, for example, claims for contributions or claims under guarantees.
• A failure to pay the underlying claim was not a pre-condition to entitlement to a BLO under the BSA.

The related companies sought an order that the claim for the BLOs was to be heard separately and to be stayed until the main claim was resolved, arguing it was unfair to deal with this until the liability of Lindner and Prater was determined.

The final section of this article is based on the Construction News article 'Willmott Dixon v Prater: guidance on building liability orders', dated July 19, 2024.

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