Michael Levenstein successful in landmark case awarding first Building Liability Order and Information Orders

Earlier this week, a transcript of the first (and to date, only) judgment awarding a Building Liability Order under the Building Safety Act 2022 became available. That judgment was given by Jefford J at a consequential hearing on 19 December 2024 (‘BLO Judgment’) following trial in 381 Southwark Park Road RTM Company Ltd and others v Click St Andrews Ltd and another [2024] EWHC 3179 (TCC). The trial judgment was handed down on 11 December 2024 (‘Trial Judgment’), in which the claimant leaseholders won a decisive victory against the rooftop developer and freeholder for negligently causing severe flood damage throughout their block of flats. The trial took place over three weeks in the TCC in early 2024 and turned on extensive expert evidence including fire safety compliance and structural engineering.

Building Liability Order

Although the claimants had sought a BLO as part of their pleaded claim, the Trial Judgment only went so far as to make a finding of ‘relevant liability’ for the purposes of section 130(3)(b) of the BSA 2022. It was not until the consequential hearing that a BLO was actually made against the second defendant, the holding company for the first defendant and special purpose vehicle (SPV) responsible for the development. Interestingly, the BLO Judgment makes clear that the two companies were associates even though the holding company was one removed from the SPV (ie, a ‘grandparent’ company). Also noteworthy was the judge’s analysis that it was the original body corporate’s solvency which was relevant to satisfying the ‘just and equitable’ requirement under section 130(1) (rather than the (grand)parent company’s solvency).

Information Orders

At the same hearing, Jefford J also awarded the claimants the first (and to date, only) Information Orders under section 132. The Information Orders were made against the first and second defendants at trial, in addition to a third-party subsidiary suspected of receiving assets at an undervalue. A far-reaching order was granted including full details of the consideration given in respect of share ownership in the subsidiary, the personal benefits received by the holding company’s shareholders and directors and full details of the subsidiary’s current asset and liability position. The claimants were granted liberty to apply for a further BLO against the subsidiary (which the Court joined to the proceedings on its own motion) following the deadline for compliance with the Information Orders.

Further Legal Issues Arising

While the first BLO and IOs to be awarded will be of natural interest to construction practitioners, the Trial Judgment raised a number of other interesting legal issues likely to arise in general commercial and property cases. These include whether a defaulting party may rely on a contractual clause permitting its rescission of the contract to avoid liability and the apportionment of loss and recoverability of remedial costs between a right to manage company and individual leaseholders.

The case also provides valuable guidance as to the circumstances in which a cross-undertaking may be released back to successful claimants (while they continue to benefit from a freezing injunction, even post-judgment) and the award of indemnity costs.

Future Implications

BLOs (and the IOs aimed at facilitating them) are a centrepiece of the BSA 2022 and its far-reaching efforts to hold contractors and developers liable for fire safety and other building-related risks. Their ability to pierce the corporate veil of wealthier parent or sister companies upends the widespread reliance on thinly-capitalised SPVs which are often wound up at the first sign of legal trouble. As such, BLOs are likely to signify not only a radical reform throughout the construction industry, but also a major milestone in the development of company law.

Michael Levenstein (instructed by Adam Creasey of Adam Benedict Limited) acted on behalf of the successful claimants.