English High Court judgment highlights challenges of obtaining building liability and information orders

The recent High Court case of BDW Trading Ltd v Ardmore Construction Ltd and others offers significant guidance on the practical implementation of building liability orders (BLOs) and information orders. Although it was, perhaps, not the guidance that was expected.

The Technology and Construction Court's judgment highlights that BLOs will not provide claimants with a shortcut to establishing primary liability and that information orders will not be easily granted, particularly when commercially sensitive information is being requested. 

The BSA toolkit

The Building Safety Act 2022 (BSA) introduced a comprehensive "toolkit" of measures to enable building owners, landlords, homeowners, and leaseholders to recover compensation for defective works or faulty construction products. One of the new "tools" was a BLO.

What is a BLO? 

There was concern that developers and contractors could wind up joint ventures or special purpose vehicles after practical completion, leaving them with no accountability for any defects found post completion. Through BLOs, the courts have the discretion to "pierce the corporate veil" and extend specific liabilities to parent or sibling companies on a joint and several basis. 

The criteria for a BLO is threefold: 

• Associated company. A BLO can only be made against an associated company, and includes parents or siblings of the primarily liable company “at any time” since the commencement of the works.
• Relevant liability. A BLO may be made in relation to a "relevant liability", which is defined as any liability arising under the Defective Premises Act 1972 (as amended), section 38 of the Building Act 1984, or any other claim arising from a “building safety risk".
• Just and equitable. A BLO is at the discretion of the court, and the court will only make a BLO where it is "just and equitable" to do so.

What is an information order? 

An information order is designed to help a prospective applicant for a BLO obtain the necessary information or documents to make, or decide whether to make, such an application. If granted, the order requires a specified company to provide specific information or documents about persons who are, or have been during a specified period, associated with that company.

An information order can only be made if the court believes: 

• the company is subject to a "relevant liability"; and
• it is appropriate to require the information or documents to enable the applicant to make, or consider whether to make, an application for a BLO.

What happened in BDW v Ardmore? 

BDW applied for information orders against Ardmore in search of information to support potential BLOs related to fire safety and structural defects in five developments completed between 1999 and 2005. 

The court refused BDW's applications for information orders against Ardmore and its associated companies, finding that the statutory conditions were not met and there was no established relevant liability. The court held that information orders could only be made against a company subject to a relevant liability, which it concluded BDW had not yet established. 

In respect of one development, although liability had been established in an adjudication, the adjudication award had been discharged by payment, so Ardmore was no longer subject to that liability. In respect of the other four developments, ongoing arbitration and litigation proceedings meant liability was still to be determined and therefore the "relevant liability" threshold had not been met.

The court noted that the wording of the BSA providing the test for granting an information order is that the company "is subject to a relevant liability" and cannot be construed as "might have" a relevant liability.

Regarding the information order, the court noted that BDW was seeking "highly intrusive and commercially sensitive" information related to the corporate structure, financial standing, and ongoing contracts of both Ardmore and its associates. The court determined that much of the requested information was neither within Ardmore's control nor necessary for BDW to decide whether to apply for a BLO and therefore not justified at this stage.

Osborne Clarke comment

The judgment clarifies the approach that the court will take; that the scope for obtaining information orders is relatively narrow, will largely relate to the company with primary liability (rather than associate companies) and will be difficult to obtain where liability is disputed (being the vast majority of cases). Interestingly, the court's decision appears to be contrary to the explanatory notes to the BSA, which provided examples of information orders being made directly against associates. Clarity from the court comes then at the price of lack of clarity between the court's approach and the content of explanatory notes to the BSA. 

The inability to obtain information orders directly against an associate company and the difficulty of obtaining an order while "relevant liability" is disputed means that claimants will have difficulty assessing the feasibility and value of BLOs against associates until a relevant liability is established against the company with primary liability.

It will be interesting to follow whether this decision will be appealed or revisited in future and whether the bar for establishing a relevant liability is reconsidered by the courts. In the meantime, claimants should carefully consider whether applications for BLOs are worth pursuing depending on the stage of the litigation and ensure primary liability is established prior to making an application for either a BLO or an information order.