Willmott Dixon v. Prater: Guidance from the Court on Building Liability Orders

IBB’s Andrew Olins discussed the Building Safety Act’s introduction of Building Liability Orders (‘BLOs’) in his article here.

We now have some guidance from the Court as to how it may approach BLO’s in Willmott Dixon Construction Ltd v. Prater and others. Before discussing what arose out of this judgment, it’s useful to recap on BLO’s generally:

• What is a BLO?

A BLO provides a means of extending the civil liability of one company for safety defects, to any of its associated companies to make them jointly and severally liable.

It addresses the possibility that certain developers and contractors might escape civil liability for defects because they carried out projects through subsidiaries, shell companies or special purpose vehicles which have very few assets or have since been dissolved/liquidated for one reason or another following completion of the works.

• When can a BLO be ordered?

A BLO may be ordered by the High Court in relation to a liability arising under:

1. The Defective Premises Act 1972;
2. Section 38 of the Building Act 1938 (once it is in full force); or
3. As a result of a ‘building safety risk’ (that is, a risk to the safety of people in or about the building arising from the spread of fire or structural failure).

• Against whom can a BLO be ordered?

If a company faces civil liability for a safety defect arising under one of the causes of action noted above, then that liability may extend to its ‘associated’ companies.

Pursuant to section 131 of the Building Safety Act, a company will be considered an associated company if one of them controls the other[1], or if a third body corporate controls both of them.

An associated company will, therefore, likely include parents, successors and related groups.

• Just and equitable

A Court will only make an award for a BLO if it considers that it would be just and equitable to do so, having taken into account the full factual matrix of each individual case.

The Court’s approach

In the recent case of Willmott Dixon Construction Ltd v. Prater and others [2024] EWHC 1190 (TCC), the Court dismissed an application for a stay of a claim for a BLO until after the main proceedings had concluded. It held that it was more sensible and efficient for the claim relating to the BLO and the main proceedings to be progressed together.

Arising from this judgment we now have the following guidance:

1. A party against whom a BLO is sought need not be a party to the main proceedings, nor are they required to participate in those proceedings (such a claim may not have existed at the time of the project, or the proceedings being issued). However, if that company did exist at that time and the making of an application for a BLO was contemplated, it would generally be sensible and efficient for the BLO application to progress together with the main claim. This approach does not bind a judge to determine the application for a BLO within the main proceedings and a Judge may still require a separate hearing.
2. Although BLOs may give rise to issues that don’t arise under the main claim, they will ordinarily involve considering much of the same evidence. In view of the Court’s policy to avoid hearing what is essentially the same issue(s) twice, generally speaking it will make sense for the BLO application to progress with the main claim.
3. Whilst an associated company will not be able to challenge any finding of liability against the original company, this does not prevent it from seeking to argue that the making of a BLO would not be just and equitable. These arguments would be avoided if the associated company is party to the main proceedings.
4. It was possible that it would be just and equitable to grant a BLO in instances where the original company had disposed of its assets, even if that disposal was entirely innocent and not done to asset strip the company.

A final thought

The introduction of BLOs makes it more difficult for associated companies to evade liability for safety defects.

The Building Safety Act casts a wide net in defining what is considered to be an associated company and parents, successors and related groups are all likely to be caught within this.

If an associated company falls within said net, then it may only escape liability if it manages to convince the Court that making the order would not be just and equitable.

Speak to our specialist Construction and Engineering lawyers

Our specialist team at IBB is on hand to advise on all construction and building related matters.

If you have any questions about this blog, please speak to one of our construction team on 03456 381381 or email construction@ibblaw.co.uk.

Alternatively, contact Samantha Beasley on 01895207283 or Samantha.Beasley@ibblaw.co.uk.

 

[1] Section 131(2) to (4) detail the circumstances in which a body corporate will be regarded as having control over another.