Update on Building Safety: Court Holds Parent Company Accountable for Defects

In a notable judgment under the Building Safety Act 2022, the High Court has ruled that developers cannot escape liability for construction defects by using intricate corporate structures.

In the case of 381 Southwark Park Road RTM Company Ltd & Others v Click St Andrews Ltd & Another ([2024] EWHC 3569 (TCC)), the court issued a Building Liability Order (BLO) against a parent company – despite the fact it was not directly involved in the construction work – holding it responsible for safety-related flaws in a residential building.

Case Summary

The dispute involved a block of flats that suffered from major issues, such as water penetration, structural weaknesses, and fire safety concerns. Although the leaseholders and the Right to Manage (RTM) company had already been awarded compensation from Click St Andrews Ltd, the developer, they argued that the parent company, Click Group Holdings, should also be held liable under Section 130 of the Building Safety Act.

Key Court Findings

• Liability extends to associated entities: The judge determined that Click Group Holdings met the definition of an “associated company” under the Act. Even though it didn’t have significant assets, it was effectively in control of Click St Andrews – which fulfilled the criteria.
• Corporate separation doesn’t guarantee protection: The court emphasised that the intent of the legislation is to stop developers from avoiding responsibility through complex legal structures and shell entities.
• Fairness test upheld: Despite the parent company not being named in the initial pleadings and having limited assets, the court concluded that issuing a BLO was fair and justified.
• Monetary damages can follow: The BLO was granted without needing to determine the exact amount of damages at the time. The court established liability first, with valuation to be addressed later.

Implications for Developers and Leaseholders

This case sends a clear message to development groups: relying on subsidiaries to shield the parent entity from legal responsibility for unsafe buildings may no longer be effective.

For RTM companies and leaseholders, this ruling provides a path to pursue claims against parent or related companies – especially in situations where the main developer is bankrupt, under-resourced, or unwilling to cooperate.

How We Can Help

Our Building Safety and Property Disputes team has substantial experience guiding leaseholders, RTM groups, and developers through claims under the Building Safety Act 2022. Whether you’re dealing with issues like fire safety, structural problems, or cladding, our team can provide strategic advice on enforcement and recovery options.

Contact our Property Disputes team for tailored legal guidance – whether you’re pursuing a Building Liability Order or facing one, we’re here to support your case with proven expertise. Call our experts on 0330 822 3451 or request a callback.