Knowledge is power – UK Building Safety Act: information orders and building liability orders

Background

BDW, a subsidiary of Barratt Developments Plc, identified fire safety and structural defects in 5 development projects. They accepted responsibility for remedying those defects at a cost of £85 million, but had ongoing claims against the design and build contractor – Ardmore Construction Limited (“ACL”) – arguing they had caused the defects and/or seeking a contribution from them to cover the cost of those works. 

Building Liability Orders (BLOs) 

BDW were concerned that ACL would be unable to pay those costs, so considered seeking a BLO, requiring ACL’s parent company and other “associated” companies to share that liability. BLOs, pursuant to section 130 of the Building Safety Act 2022 (BSA 2022), allow the Courts to pierce the corporate veil to make “associated” entities liable for certain construction defects. This prevents developers from escaping liabilities for relevant defects where the original contracting party may have been a special purpose vehicle with limited financial standing. 

Information orders

In order to decide whether to seek a BLO, BDW applied for an “information order” under section 132 BSA 2022. 

Anyone making, or intending to make, an application for a BLO can apply for an information order, so BDW was entitled to seek such an order. 

However, the Court made it clear that BDW could only seek an information order against ACL – as the person subject to the liability - not against the “associated companies” with whom liability could be shared under a BLO. As a result, BDW’s application for an information order against companies associated with ACL failed at the first hurdle. 

Relevant Liability 

The Court then went on to consider the application for an information order against ACL. In order to make an information order, ACL had to be subject to a “relevant liability” (meaning liability under the Defective Premises Act 1972, the Building Act 1984 or as a result of a building safety risk – essentially a risk to safety of people in or about the building as a result of fire or structural collapse). 

The arbitration claim in respect of one of the five buildings had already been resolved which, the Court said, meant ACL was no longer subject to a relevant liability. The other claims were still ongoing and liability had not yet been determined. The Court had to decide whether ACL was subject to a “relevant liability” in respect of those properties. 

The Court concluded that, while there is no requirement to establish liability before seeking a BLO, the position was different in relation to information orders, given that the wording of section

132(3)(a) BSA 2022 stipulates that an information order can only be made if “it is appears to the court that the body corporate is subject to a relevant liability”.

It was not enough for BDW to argue it was likely that ACL was subject to a relevant liability for at least one of the properties in dispute on the basis of the advice they had received, or point to contingencies made for building safety liabilities in ACL group company accounts. BDW needed to demonstrate that ACL was currently liable for a building safety related claim related to the specific building for which it was considering seeking a BLO. 

It was not for the court to hear detailed evidence, or establish liability in this forum and ACL could not be compelled to provide evidence from ongoing confidential arbitration proceedings. BDW had therefore failed to satisfy the requirement that ACL was subject to a “relevant liability”, with the result that the Court was unable to grant an information order. 

Explanatory notes not relevant 

It is also worth noting that in deciding to refuse the applications, the Court also considered the explanatory notes which accompany the BSA 2022, and found that those notes relating to section 132 contradicted the wording of section 132. This is the latest of several instances where the provisions of BSA 2022 have been found to be at odds with accompanying guidance or explanatory notes and shows the complexity of what remains an emerging and evolving area of law. 

What information can be required under an information order? 

While the application was refused, the Court went on to consider the content of the information requests made by BDW, and in doing so provided some helpful guidance on the proper scope of information orders. In short, the Court indicated that information orders will only be granted in respect of information or documents: 

• which relate to companies “associated” with the company subject to the relevant liability; 
• needed to make, or consider whether to make, an application for a BLO; 
• enabling applicants to identify associates of the company; 
• setting out the financial position of the associate, unless they are already publicly available; 

The Court was clear it would not grant an information order for information: 

• already admitted or publicly available; 
• which is “commercially intrusive without sufficient justification”; 
• relating to the company subject to the relevant liability, rather than its associates; 
• which the company under the relevant liability would not be able to provide itself; and 
• which is not necessary to inform a decision whether or not to seek a BLO. 

Key takeaways 

Given that the purpose of an information order is to enable a party to decide whether to apply for a BLO in the first place, it seems strange that it is apparently necessary to effectively determine the question of liability before an information order can be made. However, the court clearly considered itself hamstrung by the seemingly clear wording of the legislation.

This decision highlights another apparently unintended consequence of the drafting of the BSA 2022 and reiterates that explanatory guidance is not determinative, with the result that the scope and application of information orders pursuant to section 132 BSA 2022 is much narrower than what may have originally been intended or perceived.

Authored by Ben Willis and Lucy Redman.