The decision in Crest Nicholson v Ardmore represents a significant development in the application of the Building Safety Act 2022 (“BSA”), in particular the Court’s approach to Building Liability Orders (“BLOs”) under section 130. It is the first detailed consideration of the “just and equitable” test in this context and only the second reported instance of the High Court granting such an order.
Background
The claim arises out of fire safety defects identified at Admiralty Quarter, a residential development in Portsmouth constructed by Ardmore Construction Ltd (“ACL”) under a design and build contract. Following post-Grenfell investigations, defects were identified in the external wall system.
Disputes concerning those defects were referred to adjudication by Crest Nicholson entities. The adjudicator concluded that ACL was in breach of both the Building Regulations and its duties under the Defective Premises Act 1972 (“DPA”), awarding approximately £14.9 million.
Although ACL participated in the adjudication, it subsequently entered administration and did not satisfy the award. Crest therefore applied for BLOs against a number of associated companies within the Ardmore group.
Application
Crest sought two forms of relief:
- an anticipatory BLO, imposing joint and several liability on associated entities in respect of any future liability of ACL arising under the DPA or in connection with building safety risks; and
- a further BLO to enforce the £14.9 million adjudication award against those same entities
It was common ground that the respondents were “associates” of ACL for the purposes of section 131 BSA.
Key Issues
The Court was required to determine:
- whether an adjudicator’s decision is capable of constituting a “relevant liability” under section 130(3) BSA;
- whether the adjudicator had jurisdiction; and
- whether it was just and equitable to grant the orders sought
The Court’s Approach
Constable J emphasised that the “just and equitable” test is inherently broad and fact-sensitive, and that the statutory discretion must be exercised in light of the purpose of the BSA. Importantly, the Court declined to define an exhaustive list of factors, confirming that each case will turn on its own circumstances.
The judgment also confirms that the Court has power to grant anticipatory BLOs, i.e. orders made before liability is finally determined. Whether such an application should be dealt with before or after the determination of underlying liability is a matter of case management, although the Court may consider the likelihood of a different outcome at trial.
Decision
The Court found in favour of Crest on all principal issues.
First, it held that an adjudicator’s decision can amount to a “relevant liability” for the purposes of section 130. Although adjudication is often described as producing interim outcomes, such decisions are binding unless successfully challenged. There was nothing in the statutory framework to suggest that adjudication and the BLO regime should operate separately.
Secondly, the adjudicator was found to have had jurisdiction. In line with earlier authority, this included jurisdiction to determine claims under the DPA. Any potential issues regarding the identity of the paying party could, in any event, be addressed through severance.
Thirdly, and most significantly, the Court concluded that it was just and equitable to grant both the anticipatory and adjudication BLOs. Relevant considerations included:
- ACL’s insolvency and inability to meet any liability;
- the fact that its financial difficulties were closely linked to building safety claims;
- the corporate structure of the Ardmore group and steps taken to isolate liabilities; and
- the degree of common control and awareness of the claims across the group
The Court also placed weight on the existence of the adjudicator’s award, which remained unpaid, and the absence of substantive engagement by the associated entities despite prior notice of the claims.
While granting the orders, the Court left open the possibility that any liability transmitted to associated entities could be adjusted at trial to reflect relative responsibility.
Implications
This decision provides important clarification on the scope of section 130 BSA. In particular, it confirms that:
- BLOs may be granted before liability is finally determined;
- adjudication decisions are capable of forming the basis of a BLO; and
- the Court will take a pragmatic approach to group structures, particularly where there is evidence of liability being contained within an insolvent entity
From a practical perspective, the judgment reinforces the increasing interaction between adjudication and building safety claims. It also underlines the risk to group companies that historic liabilities may be extended beyond the original contracting entity, particularly in circumstances where that entity is no longer able to meet its obligations.
