Triathlon Homes in the Court of Appeal: Policy and the ‘Just and Equitable’ Discretion

The Court of Appeal in Triathlon Homes LLP v Stratford Village Development Partnership dismissed an appeal against the award of remediation contribution orders (‘RCOs’) requiring Stratford Village Development Partnership (‘SVDP’) and Get Living plc (‘Get Living’) to pay almost £18 million to East Village Management Ltd (EVML). An RCO is made under section 124 of the Building Safety Act 2022 (‘BSA’)  if the FTT ‘considers it just and equitable’  and can require payment from, inter alia, the developer or a ‘person associated with’ the developer. Ground 1 of the appeal in Triathlon Homes contended that the FTT had erred in concluding that it was just and equitable to make the RCOs. The Court of Appeal disagreed. This post focusses on Nugee LJ’s comments regarding the ‘just and equitable’ discretion (which Holgate LJ and Newey agreed with). The ‘retrospectivity’ of the RCOs – namely, that they included costs incurred before the BSA was in force - is discussed elsewhere (here and here).  The earlier First Tier Tribunal decision is discussed here. The Upper Tribunal granted permission to appeal to the Court of Appeal without engaging with the substance. 

SVDP was the developer of five blocks at East Village Estate in Stratford, built for the 2012 Olympics. Get Living is now, in effect, the owner of SVDP [para 1] and was incorporated in 2018 (relevantly, for this post, several years after construction).  Triathlon Homes LLP (‘Triathlon’) holds long leases of the social and affordable housing in the blocks.  EVML holds a headlease of East Village and, as manager of the estate, entered into the contract for the remediation works. Following the passage of the BSA, there was tension at Board level in EVML as the interests of the directors nominated by Triathlon and directors nominated by Get Living diverged. Paragraph 2 of Schedule 8 takes away EVML’s rights to recover service charges from leaseholders [para 64], leaving it with no income: Triathlon wanted SVDP to meet its share of costs, whereas Get Living wanted public funding to cover the short-term costs, and third party claims to cover these in the longer-term (see FTT decision [para 200]). It was, therefore, Triathlon that applied for the RCOs. EVML did, however, successfully secure public funding for the cladding work from the Building Safety Fund. 

Exercising the discretion in relation to the developer 

Several grounds of appeal for SVDP/Get Living touched on the facts that the works were already underway, public funding was promised for the major remediation works, and Triathlon potentially has other (fault-based) remedies against third parties. It was argued, therefore, that there was no need for RCOs to ensure that the blocks were made safe and leaseholders protected. Nugee LJ said, however, that there is no reason to think that public funding is intended to displace the provisions of the Act which regulate which parties with a connection to the building should, if able to, contribute to the cost [para 64]. The developer is at the top of the hierarchy of responsibility [paras 61, 70, 87]. The FTT was ‘entirely justified in concluding that as between SVDP and Get Living on the one hand and the public purse on the other, it was difficult to see why the public should fund the works in the interim rather than the developer and its associates who continue to own the buildings’ [para 64]. It is right to see the government fund as the ‘last resort’ [paras 63, 64, 88]. 

The reference to a hierarchy, cascade, or waterfall of responsibility is common in FTT decisions to date. Although Nugee LJ refers to the principle that ‘a developer responsible for the defect who retains an interest in the building should…pick up the costs’ [para 87], this is not a responsibility stemming from proven wrongdoing or culpability. The wording of section 124 requires only that the RCO be ‘just and equitable’ and that the developer ‘undertook or commissioned the construction or conversion of the building’.  Nor is there any requirement to prove that the developer has profited from the development; as Sawtell notes, the scheme does not ‘reflect “you profit, you pay”’ (in Bell et al, Private Law and Building Safety, 225).

Exercising the discretion in relation to associates 

Extending RCO liability beyond developers to include associates reflects the policy aims of the legislation. The Explanatory notes following the BSA refer to the fact that the building owner is often a thinly capitalised company with limited assets but part of a well-capitalised wider group structure, and that section 124 allows these wider assets to be accessed [para 976]. In Vista Tower, the First Tier Tribunal (FTT, with permission to appeal granted) made a ‘joint and several’ RCO of ‘just over  £13,262,119’ against 76 respondents (discussed here). 

© Susan Bright

The test for a party to be an associate is found in section 121 BSA: this includes some factors that ‘necessarily involve de jure control’ (subsections (2)-(4), Sawtell in Bell et al, Private Law and Building Safety, 221), but it is also sufficient that a person was director of both body corporates (subsection (5)(a)). In Triathlon Homes there was no dispute that Get Living was an associate and within the scope of section 124(3). As Sawtell notes (above, 212), an associate can be required to pay ‘regardless of fault or causative involvement in the design or construction of the defective building’; and also ‘retrospectively’ in the sense that before the BSA 2022 the associate was not aware ‘that their entity structures would make them vulnerable to claims arising from the actions of legally independent parties’.  In his chapter, Sawtell suggests that the just and equitable discretion should be exercised to ensure that RCOs are ‘only made against parties which have contributed materially to the existence of construction defects or which have had an involvement in the overall enterprise responsible for them’ (above, 226). The Court of Appeal did not adopt this approach in Triathlon Homes. 

The Court of Appeal noted that Get Living, incorporated only in 2018 and with no involvement with the development of East Village, can ‘well afford to fund the works’ [para 64]. The absence of causal involvement or fault did not mean it would not be just and equitable to make an RCO against them: in purchasing SVDP Get Living took  ‘the risk of unforeseen liabilities attaching to that company’ [para 118], including the ‘quite unforeseeable risk’ of a serious building safety crisis ‘under which the well-resourced parent of a poorly-resourced developer could also be made to contribute without being at fault in any way’ [para 119]. This did not mean, however, that it will necessarily always be the case that it is just and equitable for a party able to afford the work to have an RCO made against it to avoid this being funded by the ‘public purse’. Nugee LJ questioned, for example, whether it would be just and equitable to make RCOs against associates where, even though there is a common director, the company was engaged in entirely different businesses and had no other connection with the landlord, its group, or the development or where it was a charitable company [para 65]. Indeed, in Vista Tower, some associates were not subject to the RCO, where, for example, the significant majority of its shares were held by ‘genuinely independent’ persons, or where the associate was a charity. 

RCOs as private law liabilities 

Policy clearly provides the justification for many of the provisions in Part 5 of the BSA. Bright and McFarlane have noted (at 147) that the unanchored nature of the RCO jurisdiction departs from some understandings of private law as there is no need to prove a breach of duty, and no requirement for there to be a pre-existing legal relationship between the applicant and the developer, or the applicant and the associate. On a narrow vision of private law, a correlative relationship between claimant and defendant is sometimes seen as a necessary justification for private law rights and responsibilities. The departure from axioms traditionally associated with private law is particularly evident in associate liability, and is explained by the policy choice to compensate victims and spread losses (Bettini and Cappelletti, in Bell et al, Private Law and Building Safety 56,57). As such, it supports a ‘vision of private law which is open to a plurality of goals and considerations…[providing] the opportunity to develop the law in a way that can contribute to the resolution of legal issues’ (Bettini and Cappelletti, in Bell et al, Private Law and Building Safety, 81). 

Although this decision provides some general guidance as to the exercise of the just and equitable discretion, the issues before the Court of Appeal were framed narrowly with respect to the specific errors which the appellants argued had been made by the FTT. It is likely that future decisions will further explore the degree of linkage between associates and the developer, as hinted at in para [65]. It is also probable that the Triathlon Homes decision will be heading to the Supreme Court, as both Adriatic Land (in the linked appeal) and SVDP have applied for permission to appeal.