Sections 130 to 132 of the Building Safety Act 2022 allow the High Court to make a building liability order. Such an order extends a relevant liability of one company to another company that is, or was, associated with it. The purpose is to prevent a group from sheltering a liability in a company with no assets while the wider group continues to trade.
A relevant liability is one arising under the Defective Premises Act 1972, section 38 of the Building Act 1984 (once in force), or as a result of a building safety risk. The order can reach associated companies going back many years, and it does not require the associated company to have done anything wrong itself. Association is defined by control, so parent, subsidiary and sister companies within a group are all potentially in scope.
Firms that operate through several corporate entities, for example a trading company and a separate design company, cannot assume that liability stops at the entity that held the appointment. If one company in the group carries a relevant liability, another associated company may be ordered to meet it. The order can also support information orders under section 132, requiring disclosure of who is associated with whom.
Three points follow for cover:
In 381 Southwark Park Road RTM Company Ltd v Click St Andrews Ltd [2024] the court considered a building liability order in the context of a wider dispute, one of the first occasions the new power was examined. The jurisprudence is still developing, and firms should expect the scope of association and the meaning of a building safety risk to be tested further.
Association is assessed by reference to control under the Companies Act 2006 definitions the Act imports, so it is not limited to a simple parent and subsidiary relationship. Companies under common control, including those controlled by the same individuals, can be associated. That breadth is deliberate, because the policy aim is to stop value being moved away from the entity that carries the liability. For a construction group it means that restructuring, incorporating a new trading vehicle or dissolving an old one does not necessarily put historic building-safety liability out of reach. The safer assumption is that the whole group remains exposed and to arrange cover accordingly.
For architects, engineers and design-and-build contractors that trade through a group structure, Apex looks at how the group is arranged and which entities need to be named on the policy so that a building liability order does not fall on an uninsured company. The sector context is set out in the guides for architects, engineers and design-and-build contractors.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.