And away we BLO…
Following on from her finding in 381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anor [2024] EWHC 3179 (TCC) that Click St Andrews had a relevant liability to the leaseholders under section 130 of the Building Safety Act 2022 (the BSA), on 19 December 2024, Mrs Justice Jefford handed down her decision allowing the claimants’ application for a building liability order (BLO) on the basis of that relevant liability. We have obtained the transcript of that decision and, as the first BLO made by the Technology and Construction Court (TCC), it provides vital guidance on when it will be “just and equitable” to make a BLO and on certain flexibility and limits with BLOs.
Associated bodies corporate
The first step of deciding whether a company was an associated body corporate was straightforward. Jefford J considered that as Click St Andrews Limited (in liquidation) (the developer of the property) was a wholly owned subsidiary of Click Above Limited, in which Click Group Holdings Limited held all shares, Click Group Holdings controlled Click St Andrews indirectly, and was therefore an associated body corporate of Click St Andrews under section 131 of the BSA.
Just and equitable
The “principal issue” for Jefford J to consider was, therefore, whether it would be “just and equitable” to make the BLO.
The meaning of “just and equitable” in the context of the BSA was considered last year by a beefed up First Tier Tribunal (FTT) in Triathlon Homes LLP and Stratford Village Development Partnership [2024] UKFTT 26 (PC). That case concerned an application for a remediation contribution order under section 124 of the BSA which, as Jefford J noted, “provides a somewhat different jurisdiction from the jurisdiction of the High Court to make a Building Liability Order”. Nevertheless, as the FTT had considered the same words in the BSA, Jefford J took the steer given by the FTT and held that the TCC should have regard to the purpose of the BSA and to all relevant factors when deciding if it would be just and equitable to make a BLO.
Jefford J also took guidance from the FTT’s decision on what the purpose of the act was: namely, to ensure that where a development has been carried out by a thinly capitalized or insolvent development company, a wealthy associated body corporate (such as a holding company) cannot evade responsibility for meeting the cost of remedying relevant defects by hiding behind the separate legal personality of the development company.
In Jefford J’s view, when considering whether a BLO would be just and equitable, the “emphasis” should be on the financial position of the company with the relevant liability (i.e. the development company) rather than of the associated body corporate (i.e. the holding company). Accordingly, if the development company were to be in poor financial health, that would suffice, even if the holding company were also in poor health (as in the instant case).
The TCC held that it was just and equitable to make the order in this case because the development company, Click St Andrews, was:
- a special purpose vehicle;
- set up for the sole purpose of purchasing, developing, and then divesting itself of the property; and
- dependent upon inter-group and inter-company loans for survival.
Flexibility and Limits
As part of the decision, Jefford J also accorded some helpful flexibility to claimants who may wish to progress the BLO process, but who have not established the identity of the associated body corporate or the costs and losses caused by the relevant liability:
- As in her main judgment, she confirmed that it is not necessary to join the associated body corporate to the main proceedings establishing a relevant liability against the original body, or to name it in pleadings (albeit she noted that it would be sensible to do so if the identity of the associated body corporate is known). She reasoned that, at the time of the main proceedings, it may not be clear who should be named, or it may be dependent on changeable financial arrangements, or the associated body corporate may not exist at the time of the main proceedings. Such obstacles will not preclude a claimant from establishing a relevant liability in relation to which a BLO can subsequently be sought.
- In a similar vein, Jefford J also decided that in the absence of anything in the BSA requiring the Court to do so, it would not be necessary to quantify the relevant liabilities in the BLO.
In formulating the terms of the BLO, Jefford J adhered to the wording of the BSA and in so doing limited the liability of the holding company to the relevant liability of the development company only. Jefford J rejected the argument that relevant liability was a gateway to making the holding company liable for all of the development company’s liability to the leaseholders in excess of just the relevant liabilities. A claimant cannot, therefore, establish a relevant liability and then obtain a BLO for losses caused other than by a breach of the Defective Premises Act 1972 or a risk arising from spread of fire or structural failure.
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