Remediation Contribution Order Granted at the Former Olympic Village Site

In Triathlon Homes LLP v Stratford Village Development Partnership, Get Living PLC, and East Village Management Ltd,  the First Tier Tribunal (FTT) made a remediation contribution order (RCO) of almost £18 million against SVDP (the developer) and Get Living (a company associated with the freeholder and each of the landlords in the relevant chain of title).  It is a significant case exercising the FTT’s jurisdiction in section 124 of the Building Safety Act 2022 to make an RCO ‘if it considers it just and equitable to do so’. Bright and McFarlane have noted (at 147) the unanchored nature of this discretion, asking whether the FTT will look at culpability, deep pockets, or some kind of loss spreading. The answer given by the FTT in Triathlon Homes is that since the power is discretionary it is not possible to identify a particular approach which should be taken but it should be exercised having regard to the purpose of the 2022 Act and all relevant factors [237]. As noted below, there is frequent reference to the Parliamentary intention.

Triathlon and precedent

The case was intended to be an Upper Tribunal decision which would be binding on FTTs. However, at the commencement of the hearing the judges noted that section 124 of the Building Safety Act 2022 (BSA) enables (only) the FTT

Background

The case concerned the former Olympic Village in East London, where 41 blocks have fire safety defects. The respondents were SVDP (the developer), Get Living plc (renting housing on the Estate in the private sector), and EVML (jointly owned by Get Living and Triathlon and responsible for the site management). No RCO was sought against EVML who were joined at the suggestion of the FTT to enable it to participate in the proceedings.

Triathlon Homes, with long leases of the social and affordable housing at the site, brought the claim in respect of 5 blocks. It had paid over £1million in service charges for interim and investigative measures, and there were future anticipated costs. The order sought also covered over £16 million incurred or to be incurred by EVML in remediation, representing Triathlon’s share of these costs. In practice, it was unlikely that Triathlon would be required to pay this sum as grants from the Building Safety Fund (BSF) covered these major works, although there was a potential risk of a shortfall [268]. Triathlon Homes hoped this decision would provide clarity for the remediation costs on the remainder of the Estate.

Statutory construction: retrospectivity and the costs of prevention

As in other BSA cases, statutory interpretation was important, particularly considering the numerous Parliamentary statements concerning policy objectives. Whilst the primary source to ascertain the meaning of the legislation is the wording of the BSA itself, explanatory notes are a legitimate but secondary aid to interpretation. It is also permissible to have regard to ministerial statements that meet the Pepper v Hart conditions (Triathlon Homes v SVDP [50-56]). Applying these usual approaches, and the decision in Adriatic Land 5 (discussed here), the FTT held that an RCO can be made in relation to costs incurred before the commencement date of 28 June 2022 (the retrospectivity point) [57-79]. Separately, it was argued for the respondents, based on the different wording used in s124 (remedying relevant defects) and Schedule 8 para 1 (remedying relevant defects, and also preventative measures), that an RCO can only be made for the costs of remediating defects, not for measures such as waking watch. Although the contentions were ‘persuasive’ they could not be reconciled with the ‘coherent and consistent functioning of the Act’ [102]. The FTT referred to the purpose of the Act, ‘namely securing the safety of people in or about buildings’ [106] in deciding that an RCO can be made ‘in respect of costs incurred in preventing risks from materialising or in reducing the severity of building safety incidents’ [122].

The ‘just and equitable’ discretion

The exercise of this discretion is approached in a broad, but factually detailed, manner.   The lead factor for making the RCO is that SVDP is the developer and Get Living, ‘its wealthy parent’, provides it with substantial financial support [265-266]. In January 2022, announcing the policy that would shape Part 5 of the BSA, the Secretary of State referred not only to those who had caused the problem but also those who ‘made a profit on those developments’. The FTT notes that the RCO is a ‘new and independent remedy, which is essentially non-fault based’ [261], and ‘Parliament has decided that, irrespective of fault, it is for those with the broadest shoulders to bear the unprecedented financial burdens’ [75, see also 31]. In Triathlon Homes the FTT notes that the BSA creates a hierarchy or cascade of responsibility with the developer and its associates at the top. This is particularly clear in the Building Safety (Leaseholder Protections) (Information etc) Regulations 2022, which are frequently referred to in the decision [265, 278]. The associate liability provisions ensure that a wealthy entity cannot ‘evade liability by hiding behind the separate personality of the development company’ [266].

Counsel for the respondents had argued that a goal of the legislation is to get things fixed, and as this was already happening (with the aid of the grant funding), there was no need for an RCO. The FTT said that this ignored the cascade – and public funding should be a ‘last resort’, not the primary source of funding [278]. As the FTT noted, counsel ‘found it difficult to identify a clear and convincing reason why it would be just and equitable to allow the best part of £20million to remain in Get Living’s bank account… rather than being returned to the Building Safety Fund where it could be used to remediate other buildings’ [270].

There was some discussion of the relevance of other routes of redress. The fact that the developer has third party rights against contractors and consultants may be relevant to the justice of making an order against them but will not carry much weight [256]. However, it was not relevant that Triathlon Homes might have other routes of legal redress: claimants should not have to pursue other claims which ‘might involve complex, multi-handed, expensive and lengthy litigation’ [279]. Indeed, one advantage of the RCO for claimants is that it offers potential for quicker remedies, not mired in the complexities of substantive law and with lesser procedural hurdles.

Various other factors were said not to be relevant, including the claimant's motivation for bringing the claim [246].  Accepting that neither side ‘had a voice in selecting materials nor in certifying that the Blocks had been completed in accordance with the building contracts’ [250], the FTT nonetheless said that the changing identity of the ultimate beneficial ownership of the respondents, and the timing and circumstances of the respondents investment in these assets is not relevant (that is, SVDP would not escape the order on the basis that the ‘SDVP of today is not the SVDP that designed and built the Blocks’ [251-252]). The FTT also commented that it would be unusual for the source and extent of the respondents’ assets and liabilities to carry much weight [255] (although here, of course, Get Living does have deep pockets).

The FTT had received written evidence from three shared ownership leaseholders that illustrated the severe impact that the fire safety crisis has on homeowners [231-234].  As the work was already funded and underway, this evidence was of lesser relevance here than it is likely to be in other cases. However, the FTT said that ‘evidence of this kind could be expected to be of paramount importance, in relation to the just and equitable test, in any case where the required remedial works were being held up by the absence of or a delay in funding’. [263]

Concluding remarks

This case illustrates the radical nature of the BSA. The FTT applied the cascade of responsibility and associate liability, cutting through extensive evidence in relation to the highly complex corporate ownership structures involved in both the development and ongoing management of this Estate. An RCO is not dependent on fault or, seemingly, on there being deep pockets. Finally, the voice of leaseholders is recognised: and may be hugely important when considering whether it is just and equitable to grant an RCO in other cases.