Defendant’s parent company withdraws support before trial - Court awards £35m

The case of One Hyde Park Ltd v Laing O’Rourke Construction South Ltd in the Technology and Construction Court concerns significant construction defects at a luxury 2011 residential development in Knightsbridge, London.

Mrs Justice Jefford awarded £35m for the claimant, One Hyde Park Ltd (OHP), following the dramatic withdrawal of the defendant, Laing O’Rourke Construction South Limited (LOR SL), just over two weeks before commencement of the final trial. LOR SL was placed into voluntary liquidation by resolution of its sole shareholder, Laing O’Rourke plc, shortly after.

It’s also important to consider what other remedies may now be available to OHP in light of LOR SL’s insolvency.

Background

The claim focused on four primary defects, the most significant of which (£34.5m) involved widespread “ants’ nest” corrosion in copper pipework. Other alleged defects included butterfly valves which failed to close properly, preventing maintenance, the existence of multiple leaks in the heating pipework due to workmanship failures in soldered joints, and a specialised cradle used for cleaning and maintaining the penthouse facades which had failed to operate correctly since completion. 

15 days before the commencement of the final trial on 27 February 2025, LOR SL’s solicitors informed the Court that its parent company and sole shareholder, Laing O’Rourke plc, had withdrawn financial support. It subsequently resolved to place LOR SL into creditors’ voluntary liquidation.

Despite the parent group’s significant revenue (FY24 results show group revenue of £4bn, net assets of £218.7m, and an order book of £11.9bn), it “pulled the plug” on the subsidiary, a move the Judge described as “commercially amoral” given the protracted prior negotiations and LOR SL’s full participation in the litigation until that point.

While the Court struck out LOR SL’s defence, OHP was still required to prove its case to the Court’s satisfaction. As LOR SL did not attend or call its witnesses, its served factual and expert evidence was deemed to have no status. The Court relied on OHP’s expert and factual evidence, unchallenged.

Contractual responsibility and loss

A central issue in the case was whether OHP, as the freeholder and manager, was responsible for the repairs and had suffered the losses claimed in the proceedings. LOR SL had argued that individual tenants were responsible for pipework exclusively serving their apartments.

The Court examined the complex leasehold structure, including the superior lease and individual underleases. Mrs Justice Jefford concluded that the chilled water pipework constituted a “single, continuous distribution system” providing common services to the entire complex. Evidence showed that isolating individual apartments could lead to stagnant water and bacterial infestation, reinforcing that it was a unified system maintained by the landlord. Accordingly, the Court concluded that OHP held the maintenance obligation and the right to claim damages.

Even if the primary case had failed, the Judge decided that the claimant could have recovered losses in any event, for the benefit of tenants under the “narrow ground” established in St Martin’s Property Corporation Ltd v Sir Robert McAlpine Ltd.

Quantum of loss

The Court accepted the assessments of OHP’s quantum expert, awarding the full revised sums for each defect, totalling over £35m, finding that OHP had successfully proved LOR SL’s breaches of the Main Contract and the 2010 Collateral Warranty.

Recovery challenge and BLOs?

As LOR SL is in voluntary liquidation, OHP faces a challenge in recovering the judgment damages awarded to it. In a statement following the judgment, OHP described it as a “decisive victory”:

“… the residents have indicated that they will continue to pursue all available legal and commercial avenues to recover their losses … We are committed to ensuring Laing O’Rourke is held fully accountable and makes full and fair payment for the construction defects it has been found responsible for.”

The Building Safety Act 2022 (BSA) provides various wide-ranging remedies to enable parties to recover costs relating to building safety defects. One such measure under s.130 enables a High Court to make what is called a ‘Building Liability Order’ (BLO). The High Court can make a BLO where it is “just and equitable” to do so, against a corporate entity which is or has been “associated” with the party at fault. In principle this can apply to the present scenario where a claimant could seek a BLO against another group company if the original entity was in liquidation.

A BLO can be made in respect of a “relevant liability” of a body corporate, which under s.130(3) is a liability:

(a) under the Defective Premises Act 1972 (DPA);
(b) under s.38 Building Act 1984; or
(c) as a result of a “building safety risk”.

What is required to establish a liability under the DPA?

The Court’s judgment in this case did not determine LOR SL’s liability in respect of the DPA or under s.38 Building Act 1984. While the assessment of liability under the DPA involves an assessment of whether the defects in question left the dwellings ‘unfit for habitation’ on completion, we anticipate that should OHP wish to pursue a BLO against associates of LOR SL, it would seek to rely on the Court’s judgment and argue that it supports the assessment that the defects found to establish contractual liability would also establish liability under the DPA.

What constitutes a ‘building safety risk’ – guidance from Edgewater (Stevenage) Limited and Others v Grey

Although it was in relation to a different remedy under the BSA (for Remediation Contribution Orders under s.124), the recent decision in the Upper Tier Tribunal (UTT) in the case of Edgewater (Stevenage) Limited and Others v Grey GR Limited Partnership may be of interest. While this point was not key to the appeal, the Tribunal provided some guidance on the meaning of a “building safety risk”, which is one way of establishing a ‘relevant liability’ for the purpose of granting a BLO.

In that case, the defendants argued that “risk” should be graduated, advancing suggestions that “significant”, “intolerable” and “low” should be applied – a concept grounded in the assessment of buildings under Fire Risk Assessments immediately post-Grenfell – and that only an “intolerable” risk should give rise to liability.

The fire safety experts had opined that, when assessing the risks associated with fire safety of external walls under PAS9980 (a code of practice relating to such assessments), a “medium” fire risk that is “tolerable” would not be a building safety risk. The Tribunal ruled that Parliament used no such adjectives – “risk” = “any risk”, and even a low or tolerable risk would be valid. The wording of s.120(5), which is defined in very similar terms to s.130(6) relating to BLOs, needs to be considered further, and “any risk” must fall within its definitions, analysing that:

It must be “a risk”:

(i) “to the safety of people”
(ii) “in or about the building”
(iii) “arising from” “the spread of fire” or “the collapse of the building or part of it”.

It will also be noted that the risk is not just a risk of fire, but a risk of the spread of fire.