A High Court ruling has denied a housebuilder access to details of a contractor’s sister companies’ assets before liability is decided in an £85m building defects case.
A judge last week ruled that three Ardmore companies do not have to surrender financial information and other documents to BDW Trading, Barratt Developments’ main trading arm, which has launched a claim over alleged building safety defects at five developments.
BDW is pursuing Ardmore Construction Ltd (ACL), the design and build contractor for the five schemes; Crown Heights in Basingstoke; Explorer Court in Plymouth; Pierhead Lock in the Isle of Dogs; Galleria in Peckham; and Citiscape in Croydon.
In December, BDW won a High Court case upholding a favourable adjudication on Crown Heights, although ACL is set to fight the case in the Court of Appeal.
Of the other four cases, two are pending arbitration and two are in the early stages of litigation in the High Court.
BDW has concluded that ACL is unable to satisfy its alleged £85m liabilities, based on its most recent financial accounts, which show net assets of £12.8m. It is therefore considering applying for a building liability order, but first applied for an information order.
Building liabilities orders were introduced in the Building Safety Act 2022 as a means to force contractors and developers to pay for their faults even if liability is technically held by a joint venture, subsidiary or sister company that is defunct or unable to pay.
If allowed by the High Court, they extend building safety liabilities to “associated” companies – effectively ending the principle that all companies have separate legal personalities from one another.
Information orders can also be made by the High Court under the Building Safety Act. If approved, they compel companies to provide information to a potential applicant for a building liability order, detailing their assets and associations with another company.
BDW applied for information orders covering three companies related to ACL: Ardmore Construction Group Ltd, Ardmore Group Ltd and Ardmore Group Holdings Ltd.
The first two companies admit they are “associated” to ACL in the sense set out by the Building Safety Act, but Ardmore Group Holdings Ltd, the ultimate parent company, has not admitted this.
BDW was seeking information on whether Ardmore Group Holdings Ltd or any other entities are “associated” to ACL, as well as up-to-date information on the financial positions of all three companies.
However, His Honour Judge Keyser refused the information order applications because BDW could not prove that ACL had a “relevant liability” towards it relating to building safety.
Despite Ardmore’s forthcoming appeal over Crown Heights, the judge said: “The liability in the adjudication award and the subsequent judgement has been discharged by payment in full; I do not see how ACL can be said to be subject to that liability now.”
Liability is yet to be proven in relation to any of the four other cases.
BDW argued it was likely ACL had a relevant liability because:
- Liability was established in the Crown Heights case.
- Its other four claims are supported by expert technical and legal opinion.
- ACL’s latest accounts include a substantial provision for liabilities for remedial works.
- ACL had not allowed technical experts’ joint statements in the Explorer Court arbitration to be seen in the building liability information order case.
However, Keyser concluded: “On the basis of the information before me, it appears to me that ACL may well have a relevant liability to BDW. But it does not appear to me that it actually has such a liability.
“For these reasons the condition in section 132(3)(a) [of the Building Safety Act 2022] is not satisfied. This means that I cannot make an information order.”
Matthew Taylor, partner at law firm CMS, commented: “This decision of the the Construction Court provides very helpful guidance for how applications for information orders will be treated by the courts.
“While the courts have been open to granting building liability orders at early stages of proceedings, it seems likely now that in most cases information orders will only be granted once a relevant liability has been established in respect of a specified building.
“If liability is disputed by a defendant, this may leave claimants having to wait until a judgement is received before they can seek information about the assets of entities against which they were seeking a building liability order.”
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Will Ing