Michael O’Connor is a construction lawyer at Charles Russell Speechlys
The Building Safety Act 2022 (BSA) imposed new rights and obligations on the construction sector and owners of residential buildings. It also introduced new routes of recovery for parties affected by defects to residential buildings, with Remediation Contribution Orders (RCOs) and Building Liability Orders (BLOs) having the potential for the greatest impact.
“This argument could have significant implications for the construction sector”
New arguments are being heard and tested in many of the current cases being heard in the courts and First Tier Tribunal. These cases will be critical in determining how BLOs will be applied in the future and how this will impact the construction sector more broadly.
Taylor Wimpey v Galliford Try
These questions are central to the arguments being run by the Galliford Try group of companies in its defence to claims brought by Taylor Wimpey concerning alleged defects in properties at Rope Quays, Hampshire.
Taylor Wimpey has made claims against the original contractor Morrison Construction – now Galliford Try Infrastructure Ltd (GTIL) – for defective design and workmanship, but is also seeking BLOs against a number of other companies within the Galliford Try group. The effect of BLOs is that, if successful, the liabilities of GTIL would also be the liabilities of the other identified Galliford Try companies.
Part of Galliford Try’s defence to the BLO claim is that BLOs should only apply to developers and not contractors. It argues that the legislation on BLOs was designed to address the practice used in property development of using special purpose vehicles to own and manage the development on behalf of a parent company that is then wound up with no long-term liability for the development.
Galliford Try argues that GTIL does not fit the profile of entities targeted by the BSA, pointing out that GTIL is a longstanding construction company, is not a special purpose vehicle and was not used to extract or shield profits of other Galliford Try companies.
The defence argues that allowing a BLO to be made against construction companies would have profound implications for the industry – that it could expose construction companies’ parent and sister companies to liabilities simply due to their association with a construction company, which Galliford Try says is contrary to the legislative intent.
If successful, this argument could have significant implications for the construction and development sectors. It raises a fundamental question about the allocation of liability in scenarios where developers are compelled to remediate buildings at their own expense for defects that have been caused by other third parties. It would also likely create a bar to freeholders and individual leaseholders from bringing BLO claims against a contractor and/or designer and their corporate structures which were responsible for fire safety defects in circumstances where the developer is no longer in existence.
There are a raft of cases similar to the Taylor Wimpey claim against Galliford Try and these are being closely watched by industry stakeholders, legal experts and policymakers, given their potential to reshape the contours of obligations, liability and risk management for residential developments.
The scope and extent of the changes introduced by the BSA will undoubtedly lead to a substantial amount of case law seeking clarification and interpretation of the Act as to the rights and obligations it imposes.
The industry will have to grapple, understand and accommodate any new decisions, and it would not surprise me if cases are being heard 30 years from now on the interpretation the rights and obligations
of parties under the act.