The decision confirms that the Court will use its powers to pierce the corporate veil when developers are seeking to avoid liability for building safety defects, where the party (specifically in this case a "special purpose vehicle" (SPV)) is responsible for the works and has gone insolvent.
In the case of 381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anor [2024] EWHC 3569, the Technology and Construction Court (TCC) made the first Building Liability Order (BLO) pursuant to Section 130(3)(b) of the Building Safety Act 2022 (BSA).
This decision was made on 19 December 2024, following the Technology and Construction Court (TCC) main judgment which was handed down on 12 December 2024 (a week prior).
Background of the TCC decision of 12 December 2024:
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The claimants were a right to manage company known as Southwark Park Road RTM Company Limited (RTM), together with the leasehold owners of the flats at 381 Southwark Park Road the (Property).
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The first defendant (Click St Andrews) was a SPV and was a wholly owned subsidiary of the second defendant (Click Group Holdings). Click St Andrew went into liquidation on 19 May 2023.
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The RTM and Click St Andrews entered into a Freehold Purchase Agreement (FPA) in which it was agreed that Click St Andrews would carry out various works at the Property.
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During the carrying out of the works, the claimants reported water ingress which caused significant damage to the Property. The claimants also engaged an expert who identified other defects including structural and fire safety issues.
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Amongst other things, the claimants sought a BLO pursuant to section 130 (3)(b) of the Building Safety Act 2022; namely that the breaches relating to structure and fire, did give rise to a "building safety risk". Section 62 of the BSA defines a building safety risk as "a risk to the safety of people in or about a building arising from" the spread of fire or structural failure.
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The Judge held that Click St Andrews had breached their obligations under clauses 5.2 (a), (d) and (e) of the FPA, and those breaches gave rise to a relevant liability as a result of a building safety risk.
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The finding of a relevant liability allowed the claimants to seek a BLO against the second defendant, Click Group Holdings on the basis that they were an associated company of Click St Andrews.
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The claimant's application for a BLO was heard at a subsequent hearing on 19 December 2024, in which the Court held that it was just and equitable to make a BLO in terms that the relevant liability of Click St Andrews was also the liability of Click Group Holdings.
The Judgment, amongst other things, confirms that the BSA does not require a party to be identified in the pleadings or joined into proceedings for a BLO to be made against them (although Click Groups Holdings was a party to these proceedings).
The decision also paves the way for future BLO applications as this is the first finding of a relevant liability on the basis of a building safety risk i.e. it potentially broadens the scope of potential liabilities which could hold more developers accountable for building safety defects, going forward.
