This is the first judgment regarding whether Building Liability Orders (BLOs) can be made prior to the relevant liability being established and whether they can be made on the basis of an adjudication.
Background
Ardmore Construction Limited (ACL) was engaged by Crest Nicholson Regeneration Limited (CNR) to carry out the design and construction of 19 residential apartment buildings in 2005 (the Development). After the Grenfell tragedy in 2017, investigations were carried out into the Development to determine whether it was safe to occupy. CNR and its group companies (Crest) alleged numerous external and internal fire safety defects.
CNR commenced an adjudication in May 2025 in relation to the external defects claims against ACL (the Adjudication). The adjudicator determined that ACL was liable to pay c£14.9m for breaches of Part B of the Building Regulations and of their duties under the Defective Premises Act 1972 (DPA) (the Adjudicator's Decision). However, the day before the Adjudicator's Decision was issued, ACL went into administration.
Crest brought an application (alongside its current claim in the Technology and Construction Court (TCC) against ACL) for two BLOs against ACL's associated companies (the BLO Defendants). The first BLO related to the current proceedings against ACL and was sought in respect of any liability that ACL may ultimately be found to owe in that claim (the Anticipatory BLO). The second was sought in respect of the Adjudication making the BLO Defendants jointly and severally liable for the sum awarded in the Adjudicator's Decision (the Adjudication BLO).
Building Liability Orders
A BLO is an order pursuant to Section 130 of the Building Safety Act 2022 (BSA) which extends the liability of a company under the DPA or as the result of a building safety risk (a "relevant liability") to other associated companies, if the court considers it "just and equitable" to do so.
As there was no dispute over whether the BLO Defendants were "associates" under section 131 of the BSA, the decisions therefore turned on whether:
- an adjudicator's decision could give rise to a "relevant liability" for the purposes of section 130 of the BSA; and
- it was "just and equitable" to order the BLOs.
The Court distilled the prior case law into the following principles:
- whether it is "just and equitable" is a broad test and fact specific;
- the power is discretionary and should be exercised having regard to the purpose of the BSA and all relevant factors;
- the purpose of section 130 of the BSA is to provide the Court with powers to allow those directly responsible for defective work to be pursued through their associates;
- the Court should not seek to limit or circumscribe the statutory test by setting out an exhaustive list of factors;
- it will be sensible for the application for a BLO to be case managed within the same proceedings as the main action which will determine the relevant liability for the purposes of the BLO; and
- when the application for the BLO is heard is a matter for case management.
The Court determined that in deciding whether to order an Anticipatory BLO (assuming a finding of relevant liability against ACL), it must consider the likelihood that, after disclosure, witness statements, and expert evidence at trial, the Court would make a different decision. The greater the Court's confidence that the same order would be made following trial, the more inclined it will be to grant an Anticipatory BLO.
The decision
The Court determined that:
- an adjudicator's decision does give rise to a "relevant liability" for the purposes of section 130 of the BSA. The temporary nature of an adjudicator's decision does not mean that it does not create a liability and, in fact, that if it is not challenged in Court, then the decision will remain binding for all time. If the liability is later overturned, the BLO Defendants can claim any money back which was paid subject to the BLO in restitution. Therefore, the regime for adjudication and BLOs can operate together without any issues.
- it was just and equitable to order the Adjudication BLO specifically considering that the BLO Defendants had adequate opportunity to defend the adjudication and that any overpayment could be subsequently rectified.
When determining whether it was "just and equitable" to order the Anticipatory BLO, the Court concluded that, based on the following facts of the case (which were unlikely to change between now and the conclusion of the trial against ACL), it was "just and equitable" to order the Anticipatory BLO:
- ACL had no means to satisfy a judgment against it;
- ACL had entered administration as the result of its exposure to building safety defect liabilities;
- the Ardmore Group had been specifically structured to ringfence ACL's exposure from other companies in the group;
- there wasn't any real dispute that the Development contained building safety risks and that ACL will be liable at least partially for some of those building safety risks; and
- the Ardmore Group had been aware of the claim for some time and had the opportunity to engage with and defend the claim.
Comment
Anticipatory BLOs will prove useful in cases where the original defendant is of limited or no means, as parties may be able to pursue actions knowing that the BLO is already in place and so associated companies are on the hook, before significant costs are incurred. Finally, the decision has also broadened the impact of building safety related adjudications, making them subject to potential BLOs, providing a clear route for remediation under the BSA. This decision along with the decision in BDW Trading Ltd v Ardmore Construction Ltd [2024] EWHC 3235, where the Court ruled that claims under the DPA can be referred to adjudication, means that we are likely to see an increase in building safety disputes being adjudicated.
