Building Liability Orders under the Building Safety Act 2022 and the responsibilities of special purpose vehicles in property developments
In December 2024, the Technology and Construction Court (TCC) delivered a landmark judgment in the case of 381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anor [2024] EWHC 3179 (TCC). This case is significant as it addresses the application of Building Liability Orders (BLOs) under the Building Safety Act 2022 (BSA) and the responsibilities of special purpose vehicles (SPVs) in property developments.
Background of the Case
The dispute centered around St Andrews House, a block of flats located at 381 Southwark Park Road, London SE16. The claimants, comprising the residents' Right to Manage (RTM) company and several leasehold owners, entered into a Freehold Purchase Agreement (FPA) with the defendants in February 2020. Under this agreement, Click St Andrews Ltd, an SPV and wholly owned subsidiary of Click Group Holdings Ltd, was to remove the existing pitched roof and add an additional storey consisting of three prefabricated modular units. These units were intended to be sold upon completion.
Issues Arising During Construction
During the construction in July 2021, the removal of the pitched roof coincided with heavy rainfall, leading to significant water ingress and damage to the existing flats. Investigations revealed further defects in the modular units, including structural and fire safety concerns. The claimants alleged that the defendants failed to maintain the building's watertight integrity during construction and that the modular units were inadequately constructed.
Legal Claims and Court Findings
The claimants advanced several legal arguments, including breaches of the FPA, the covenant of quiet enjoyment, and negligence. They also invoked section 2A of the Defective Premises Act 1972 (DPA), asserting that the defendants failed to ensure the work was performed in a workmanlike manner, rendering the dwellings unfit for habitation. Additionally, they sought a BLO under section 130 of the BSA to extend liability to Click Group Holdings Ltd, the parent company.
The court found that Click St Andrews Ltd had breached the FPA by not keeping the roof structure watertight during construction, leading to water ingress and damage. The modular units exhibited fire and structural safety defects, constituting "building safety risks" under section 130(3)(b) of the BSA. These breaches also amounted to violations of the covenant of quiet enjoyment and negligence.
Building Liability Order (BLO)
Given that Click St Andrews Ltd was an SPV in liquidation, the claimants sought a BLO to hold Click Group Holdings Ltd accountable for the liabilities. The court considered the breaches related to fire and structural safety as "relevant liabilities" under section 130 of the BSA, thereby justifying the issuance of a BLO. This decision marked one of the first instances where a BLO was applied, setting a precedent for holding parent companies liable for the actions of their subsidiaries in the context of building safety.
Implications of the Judgment
This case underscores the court's willingness to "pierce the corporate veil" and hold parent companies accountable for the liabilities of their SPVs, especially concerning building safety. It highlights the importance for developers and associated companies to ensure compliance with building safety standards, as the courts may extend liabilities beyond the immediate entity responsible for construction. The judgment serves as a critical reminder of the legal obligations under the BSA and the potential reach of BLOs in enforcing building safety compliance.