Building Liability Orders: Courts confirm wide-reaching liability of associated entities

Since the Grenfell fire in 2017, the government has overhauled the building safety regime to expand liability for dangerous defects beyond the contracting entity. Associated companies that would usually be shielded by separate corporate personality can now be held responsible.

Building Liability Orders (“BLOs”), introduced by the Building Safety Act 2022 (“BSA”), allow courts to “pierce the corporate veil” and attribute building safety liabilities to associated entities within a corporate group where it is just and equitable to do so.

Two recent cases show how the courts continue to interpret the BLO regime expansively. In Crest Nicholson v Ardmore, the court confirmed that BLOs can be made before liability is established at trial and on the basis of an adjudication decision. In Mullalley & Co v STO, the court confirmed that a non-UK entity can be subject to a BLO where it has UK subsidiaries.

This approach may materially improve recovery prospects where remediation costs have been incurred or claims are pursued against an insolvent contractor, consultant or project company within a wider group—possibly including overseas entities. It could also allow BLOs to be brought earlier than claimants previously assumed.

Background to Crest Nicholson v Ardmore: fire safety defects, insolvency and an unpaid adjudication award

Crest Nicholson v Ardmore concerned the Admiralty Quarter development in Portsmouth. Ardmore Construction Limited (“Ardmore”) was the design and build contractor. Post-Grenfell investigations identified fire safety defects.

Crest pursued Ardmore in adjudication and was awarded approximately £14.9 million for external wall defects, including breaches under the Defective Premises Act 1972 (“DPA”). Ardmore entered administration shortly before the decision, and the award remained unpaid.

Crest applied for BLOs against associated companies in the wider Ardmore group: an “anticipatory” BLO making those companies jointly liable for any relevant liability Ardmore might ultimately owe, and an “adjudication BLO” making them liable for the unpaid award.

What did the court decide?

The court granted both BLOs. In doing so, Mr Justice Constable gave important guidance on three points.

First, an anticipatory BLO can be made before liability is finally determined at trial. Claimants need not wait until proceedings conclude to bring associated companies within the liability net. The court indicated it would be more inclined to grant such an order where it has confidence the same result would follow at trial, noting it makes “good sense” for all parties to know in advance whether group liability will attach.

Second, an adjudicator’s decision can amount to a “relevant liability” under section 130 of the BSA. The court rejected the argument that adjudication decisions, being temporarily binding rather than finally determinative, could not form the basis of a BLO. The statute does not carve out any particular type of liability, and adjudication and the BLO regime can operate together. As the judgment noted: “…a conclusion that adjudication is fundamentally incompatible with the application of BLOs would deprive the construction industry of the use of one of the most important dispute resolution tools from which it has benefited significantly over the last 30 years”.

Third, the court applied the “just and equitable” test in a broad way and made it clear that the decision will be fact-sensitive in each case. Relevant factors included: Ardmore’s administration and its link to cladding claims; the group’s restructuring to ringfence liabilities; the seriousness of the building safety risks; and the unpaid adjudicator’s award.

The court noted that it may not be just and equitable to make an anticipatory BLO where the associate has had no involvement in, or opportunity to investigate, the underlying facts. However, that was not the case here: the wider Ardmore group knew of Crest’s claims and had the opportunity to contest them, but did not do so.

The judge dismissed numerous objections raised by the defendants, including:

• There was “no good reason” to make a BLO before trial. The court disagreed, noting it would help parties decide whether to invest in litigation.
• Crest’s relative profitability from the development, its status as an established developer, and the possibility it held insurance.
• The BLO would make borrowing more difficult or harm the defendants’ market position.
• Quantum remained undetermined, and Building Safety Fund payments might overlap with Crest’s claimed costs.
• Crest might be overcompensated if it adopted a cheaper remedial scheme. The judge noted this could be corrected when proceedings continue to judgment.

The court also determined that the BLO could reflect a proportion of the relevant liability that justly and equitably corresponded to each party’s relative blameworthiness.

Appeal of Crest Nicholson v Ardmore

Although the TCC refused to grant an appeal, a stay of execution and extra time to pay the £14.9 million adjudicator’s award, the Court of Appeal has granted the Ardmore companies permission to appeal. The hearing will take place before October 2027 and is expected to deliver the first appellate guidance on BLOs. In the meantime, this decision is likely to become a key authority on BLOs.

BLOs cross borders

Mullalley & Co Ltd v STO Ltd further illustrates the BLO regime’s potential reach. Mullalley had subcontracted cladding works that proved defective post-Grenfell. It settled with the building owner and then sought to recover costs from parties in the supply chain.

The UK supplier, STO Limited, had entered administration, meaning Mullalley’s claim against it was subject to the statutory moratorium. Mullalley therefore also pursued STO’s German parent company for a BLO under section 130 of the BSA. STO Germany did not defend the claim, and default judgment was entered against it, with damages to be assessed.

Mr Justice Pepperall assessed the damages payable by STO Germany pursuant to the BLO and concluded that its “just and equitable” contribution was 87.5% and entered judgment against STO Germany for £1,772,312.17, with interest and costs to follow.

Significantly, the judgment strongly indicates a judicial interest in setting aside the usual rules in respect of corporate responsibility and, instead, BLOs being made against those entities who may have actually profited from such works.  Further, geographical borders do not appear to impede the reach of BLOs as, here, the BLO extended to a non-UK parent company associated with the UK entity that has incurred a relevant liability.  

However, Mullalley v STO was a default judgment as the German parent did not participate, and the court assessed damages on the basis that liability was already established. Since this decision, two of the German-based companies subject to the BLO have sought to have the service of these claims on them set aside on a number of grounds, including that the claims were fundamentally flawed, there was no prospect of success and the relevant provisions of the BSA did not have extra-territorial effect against those companies.  However, the court dismissed those applications.

Therefore, whilst the decision is powerful evidence of the BLO regime’s potential reach, it does not provide a contested analysis of jurisdictional or enforcement issues that might arise in a defended claim against an overseas parent.

Practical implications for employers and developers

For developers and employer-side clients, these judgments support a more proactive recovery strategy:

• Map group structures early. Identify parent, subsidiary and sister companies, historic restructurings, and associated entities.
• Do not assume insolvency ends the claim. Consider whether a BLO could reach associated companies.
• Consider adjudication strategically. An unpaid award may now support a BLO application, making the award enforceable against the wider group and affecting the timing and leverage of recovery claims.
• Preserve evidence of group knowledge and restructuring. In the Ardmore case, the court focused on the group’s awareness of claims and steps taken to isolate liabilities.
• Factor BLOs into settlement dynamics. Group-wide exposure may shift the commercial balance in negotiations.
• Review contracts on live projects. Developers should still ensure robust collateral warranties, parent company guarantees, and insurance where building safety risk is material.

Conclusion

The early case law on BLOs is developing quickly, and the direction of travel is clear: courts will use the BSA’s group liability mechanism practically to support recovery for building safety defects. Crest Nicholson v Ardmore shows that BLOs can be deployed before final trial and may rest on an adjudicator’s award. Mullalley v STO shows the regime may reach overseas parents of UK subsidiaries.

For employer and developer clients, recovery strategy should be broader and earlier than before. Where remediation costs have been incurred, or where claims are pursued against insolvent or asset-poor contractors, consultants or suppliers, parties should consider not only the immediate counterparty but also the wider corporate group. BLOs will not be available in every case, but these decisions confirm their place as a central part of the building safety litigation landscape.