Construct.law - Summer 2024

First Major Case on Remediation Contribution Orders: Meaning of 'Just and Equitable'?

By Mike O'Connor

The FTT has issued the first major decision on whether it is just and equitable to make remediation contribution orders (RCOs) in Triathlon Homes LLP v Stratford Village Development Partnership (1) Get Living Plc (2) and East Village Management Limited (3) [2024] UKFTT 26 (PC).

What is a remediation contribution order?

RCOs were introduced under section 124 of the Building Safety Act 2022 (the Act). RCOs can be applied for by:

the Secretary of State
the building safety regulator (the HSE)
a local authority
a fire and rescue authority
a person with a legal or equitable interest in the building or part of it
any other person prescribed by regulations.

On application the FTT can make an order requiring:

a relevant landlord
a person who was such a landlord at the qualifying time
a developer
or a person ‘associated’ with any of the aforementioned persons

to pay a specified amount or reasonable amount for the remediation of defects in relevant works which cause a building safety risk where it considers it to be ‘just and equitable’ to do so. The Act does not contain a definition of ‘just and equitable’. RCOs can be applied for in respect of a self-contained building or part of a building which contains at least two dwellings and is at least 11 metres high or has at least five storeys, unless otherwise excluded by the Act. The relevant works causing the building safety risk are those undertaken in the 30 years prior to 28 June 2022.

Background and Parties

The case related to five blocks (the Blocks) at the Olympic Village (now East Village), originally occupied by the 2012 Olympic competitors.

Triathlon had a long leasehold interests in all the flats and apartments in two of the Blocks (A and B) as well as long leasehold interests iayen some of the units in the other three Blocks (C, D and E).
SVDP was the original developer of the Blocks. SVDP was also the nominal owner of the freehold of the Blocks. SVDP was originally in public ownership, having been set up and owned by the ODA in 2009 for the sole purpose of funding and developing East Village for legacy use after its occupation by the 2012 competitors.
Get Living plc (through its subsidiaries) owned all of the private rented housing at East Village. Get Living plc also had long leaseholds of units in Blocks C, D E which were not leased to Triathlon. Get Living plc was incorporated in August 2018 and owned SVDP at the time of the tribunal.
EVML, was jointly owned by Triathlon and Get Living plc. EVML was responsible for the repair and maintenance of the common parts of East Village.

In August 2019, the presence of fire safety defects in the Blocks was established. A waking watch was implemented in all Blocks in November 2020, which remained in place until additional alarm and heat detection systems were installed in flats as a temporary measure. EVML commenced a programme of work to permanently remedy the defects, which were due to be completed by August 2025. The remediation work was being funded by grants from the Building Safety Fund. The total cost of the work exceeded £24.5 million. Triathlon sought an RCO against Get Living and SVDP.

Outcome

RCOs were made against SVDP, as the original developer, and Get Living plc, as an ‘associate’ of the developer (and its wealthier parent), notwithstanding that Get Living plc did not exist when the original works were undertaken and SVDP had different owners (the Government) at that time. The FTT decided that it was “just and equitable” for an RCO to be ordered and decided that Get Living plc and SVDP were to pay £17.947M towards the remedial costs, professional fees and the costs of other remedial measures, including the forecast cost of servicing and decommissioning fire alarms temporarily installed

What factors did the FTT consider to be relevant in determining whether the award of the remediation contribution order was just and equitable?

SVDP was the original developer and considered ultimately responsible for the defects.
The FTT commented that the policy of an RCO was that primary responsibility for remediation costs should fall on the original developer, and that others who have a liability to contribute may pass on the costs they incur to the developer.
Responsibility was not synonymous with fault; a developer may have done all that could reasonably be expected of it to build a safe building, but would still be “responsible for” relevant defects caused by others.
In deciding to award the RCO against Get Living plc, the FTT concluded that SVDP was reliant on Get Living plc for financial support.
The award of the RCO satisfied the public interests in securing reimbursement to the Building Safety Fund as quickly as possible.
The FTT did not see why the public purse should act as an interim funder for the remediation costs, taking on the risk of whether or not the public purse will eventually be reimbursed from the fruits of successful litigation against third parties.
If, in the absence of an RCO, there would be a shortfall in the funding to complete the remediation (not relevant in this case).

The FTT disregarded or gave little weight to matters including:

Triathlon’s motivations in making the application. The Tribunal noted that an RCO was a new remedy that was essentially non-fault based and, having been made available by Parliament, was there for Triathlon to take advantage of.
Triathlon’s potential rights of recourse against other parties (e.g. Galliford Try, the main contractor, or SVDP) for breach of contract and/or statutory duty which the respondents had argued would, if instead pursued, provide a fairer result between all relevant and responsible parties in determing the respective legal responsibilities of the relevant parties for the relevant defects and the cost of their remediation.
The fact that SVDP was originally publicly owned through the ODA.
That the beneficial owners of SVDP and Get Living plc had since changed or the timing and circumstances of the investors buying into the various parent companies of SVDP and Get Living plc.
That other parties could have been the subject of different applications for RCOs, including Triathlon itself.
That there was a clause in the members agreement between Get Living plc and Triathlon with regards to EVML that “No Members shall be obliged to provide any loan, capital, finance, guarantee, security or indemnity in respect of any indebtedness or obligation of [EVML]” and granting an RCO would effectively bypass that contractual arrangements between the parties. The FTT decided that Triathlon was entitled to take advantage of the new remedy that it had been given, to act independently of the contractual provisions between the parties.

Other points of interest in the FTT’s decision included:

An RCO could be made in respect of costs incurred before the relevant section 124 of the Building Safety Act 2022 came into force on 28 June 2022, although there could be special factors which could reverse this if it meant that a party had acted to their irretrievable prejudice.
Costs which are incurred for “any measure which causes a building defect to cease to be a relevant defect, or which is part of a larger programme of measures for that purpose” such as waking watch costs, employing fire evacuation officers, and installing, servicing and decommissioning additional fire alarm and heat detectors as temporary measures while remediation works are awaited can be the subject of an RCO.

Summary

One of the most striking features of this decision is the FTT’s regard of an RCO as a new remedy that is essentially non-fault based. That is the position at least for now, pending Get Living plc’s intention to appeal the decision. Unsurprisingly, the FTT’s decision as to whether it is just and equitable to grant an RCO can turn on the facts of the relevant application. This will no doubt be the first of many RCO cases expected to come before the FTT over the coming year.

Judicial guidance on the Building Safety Fund’s decision to fund remedial works

Read here

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