Building liability orders: piercing the corporate veil and current judicial guidance

Posted: 08/01/2025

One of the most significant remedies in relation to defective premises under the Building Safety Act 2022 (BSA) was the introduction of building liability orders (BLOs). A BLO is purported to be a solution for parties in construction litigation seeking to obtain redress from a responsible party in circumstances where the relevant assets may sit elsewhere within the corporate group. 

This article provides a brief overview of the tests that need to be met to obtain a BLO, and the guidance provided on applying for BLOs via case law last year, in Willmott Dixon Construction Ltd v Prater and others [2024] EWHC 1190 (TCC) and 381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anor [2024] EWHC 3179 (TCC).

Tests to obtain a BLO

The key tests to obtain a BLO are set out in sections 130 and 131 of the Building Safety Act and can be summarised as follows:

1. identifying a specified body corporate that is associated with the original body during the relevant period;
2. establishing a relevant liability; and
3. establishing it is just and equitable to make a BLO.

For point 1, the below diagram provides a simple example of establishing association, with the arrows showing the direction of control.

• One of them controls the other - assuming A is the original body, C may be a specified body corporate. Likewise, assuming B is the original body, C may also be a specified body corporate. Assuming D is the original body, both A and B (or possibly, C) may be specified body corporates, subject to application of the control test.
• A third body corporate controls both of them – assuming A is the original body, B (or possibly, D) may be a specified body corporate (on the basis that C controls both of them). Assuming B is the original body, A (or possibly, D) may be a specified body corporate (on the basis that C controls both of them). 

This is a simple but not exhaustive example, and in theory other sister companies and parent companies higher up the chain may also be caught within the definition of an associated company. As to the control test, specific guidance is provided under section 131 on how this is established. Finally, it is important to note that applicants may not always have the relevant information on company structures to properly pursue a BLO, in which case section 132 allows a party to apply to the court for an information order to assist accordingly. 

As for establishing the relevant period, this is the period beginning from when the works were carried out to when the order is made. It would appear not to be a defence for an associated company to claim their association was only established by way of a corporate restructuring many years after the works were completed, as this would still fall within the relevant period.

On point 2 on establishing relevant liability, this is liability under the Defective Premises Act 1972 or section 38 of the Building Act 1984, or liability for a building safety risk. In brief:

• the Defective Premises Act now (following amendments by the Building Safety Act) provides a broad remedy that covers works for the development of a new dwelling or any work for an existing dwelling that results in it being unfit for habitation;
• section 38 of the Building Act 1984 has not yet been fully enacted by Parliament, but if enacted would provide a cause of action for breaches of building regulations that result in damage; and
• building safety risk is defined as a risk to the safety of people in or about the building arising from the spread of fire or structural failure. 

Regarding point 3, there is yet to be a published case where a court has determined it is just and equitable to order a BLO. Guidance may however be sought from cases relating to remediation contribution orders that also apply a just and equitable test, including Triathlon Homes LLP v Stratford Village Development Partnership & Others [2024] UKFTT 26 (PC). These cases indicate that the test will not be applied in an overly stringent manner, so as to further the objective of the BSA, in enabling recoveries to be made to avoid leaseholders having to pay for remediation. 

Judicial guidance on applying for BLOs    

This brings us to the cases of Willmott Dixon v Prater and 381 Southwark v Click, which provide judicial guidance (both cases presided over by Mrs Justice Jefford) on applying for BLOs.

Willmott Dixon v Prater provided the following key guidance:

• it is not only claimants that can apply for a BLO. A defendant can seek a BLO against companies associated with another defendant;
• an application for a stay of a claim of a BLO will not be granted on the basis that a relevant liability had yet to be established against the original body;
• conversely, a party who may seek a BLO is not obliged to do so at the same time as the primary claim against the original body. Indeed, it may not be identified who the associated body may be until after judgment of the primary claim;
• however, if a BLO were claimed before the resolution of the claim against the original body, the correct approach would be to have both the BLO and primary claim dealt with at the same time; and
• having a responding party to a BLO claim participate in the primary proceedings on liability may be relevant to deciding the just and equitable test as they are able to make submissions on the primary claim.

The court was therefore clear that whilst a BLO may be sought after judgment on the primary claim, it would be prudent to determine the BLO claim at the same time as the primary one if possible.

The case of 381 Southwark v Click provides further helpful guidance on how a BLO may be sought. This case concerned various water ingress and structural defects to a block of flats in Southwark, London that arose during the process of removing a pitched roof and constructing three additional storeys of modular units. The claimants were the ‘right to manage’ company, owned by various leaseholders, and the various leaseholders themselves. The defendants were Click St Andrews, which owned the freehold and head lease, and its parent company, Click Group Holdings. By the time of trial, Click St Andrews filed for voluntary liquidation and did not participate at trial, but Click Group Holdings did participate at trial, albeit without legal representation. 

The claimants’ particulars of claim made a primary claim against Click St Andrews for a number of breaches in contract, tort and under section 2A of the Defective Premises Act, the latter of which was the sought relevant liability for their claim for a BLO. A claim against Click Group Holdings was made in contract in respect of its role as guarantor. It appears at trial that the claimants then amended their particulars of claim so that a building safety risk became a further ground for a BLO. In both cases, the entity that the claimants sought a BLO against remained unspecified, but it was indicated in submissions that a BLO would be sought against at least Click Group Holdings. 

Mrs Justice Jefford provided the following useful guidance on seeking a BLO:

• a claim can be made to determine the relevant liability for which a BLO may eventually be sought against specified entities;
• the Building Safety Act says little about procedure in seeking a BLO but it does not require a party to make that claim within existing proceedings;
• this is illustrated by the fact that, conceivably, the circumstances in which it might be just and equitable to make such an order may not arise until after proceedings determine a relevant liability, and/or the specified entity against which an order may be sought may not exist at the time of proceedings. (This might only arise in a rare case, but the BSA allows for it);
• if, however, it is already in contemplation that an order will be sought against a particular associated company, it would be ‘sensible’ for a claim for a BLO to be part of the main proceedings; and
• at the same time, a party is not prohibited from making a subsequent claim for a BLO against another associated company. 

In that respect, 381 Southwark differs from Willmott Dixon as the entities a BLO was sought against were not specified (save for Click Group Holdings happening to be part of the proceedings on other grounds). Such entities were not part of the main proceedings that determined a relevant liability nor was a BLO ordered. The next step would be for a BLO to be applied for, with entities specified and the just and equitable test to be determined. 

This is different from Wilmott Dixon, where it appears that the entities that a BLO will be sought against are already part of the proceedings and will participate in the proceedings in respect of the primary claim, determination of a relevant liability and whether it is just and equitable to order a BLO.

Takeaways

With BLOs being fertile territory for claims, the judicial guidance provided indicates there is not necessarily a right or wrong approach on when and how a BLO claim should be pursued, but the following should be taken into account:

• if a party has contemplated a specified associated company a BLO would be sought against, it would be sensible for such a claim to be determined within the main proceedings and not subsequently;
• such a specified company is likely to be unable to resist a BLO claim against it being stayed and, save for time and costs, may in fact benefit from being part of the main proceedings to make any submissions on the determination of the primary claim and a relevant liability;
• this does not preclude an applicant from making a BLO claim against other associated companies subsequent to the main proceedings; and
• in any event, and especially if a specified associated company has not been contemplated at the time of the main proceedings, an applicant has the discretion to have the relevant liability determined in the main proceedings, but apply for a BLO against specified entities after determination of the main proceedings.

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