Remediation Contribution Orders – Triathlon Homes LLP v SVDP, Get Living and EVML [2024] UKFTT 26 (PC)

Overview

The Upper Tribunal (“UT”) sitting as the First-tier Tribunal (“FTT”) has handed down its decision in Triathlon Homes LLP v Stratford Village Development Partnership, Get Living Plc and East Village Management Limited [2024] UKFTT 26 (PC). The case involved the former athletes’ village at the London 2012 Olympic Games. The decision is the first to consider a substantively contested remediation contribution order (“RCO”) under section 124 of the Building Safety Act 2022 (“BSA”).

Five applications were issued by Triathlon Homes LLP (“Triathlon”) against Stratford Village Development Partnership (“SVDP”), the developer, and Get Living Plc (“Get Living”), an associate of the freeholder of the blocks, for RCOs under section 124 of the BSA seeking a contribution of nearly £18m in total in relation to five buildings. Triathlon was successful in its application, obtaining an order for payment of nearly £18 million in respect of both forecast and incurred costs. 

Two key points came out of its decision.

• A remediation contribution order can be made in respect of costs incurred before the BSA came into force. This is in line with the recent UT decision in Adriatic Land 5 Limited v The Long Leaseholders at Hippersley Point [2023] UKUT 271 (LC). The UT in that case held that professional costs relating to liability for relevant defects incurred before the BSA came into force could not be recovered through the service charge of qualifying leases on account of paragraph 9 of Schedule 8 of the BSA.
• In this decision the ‘just and equitable’ test adopted in the BSA is considered for the first time in a fully contested case. The case illustrates the weight given to a number of factors that could potentially go into this value judgment exercise under section 124 of the BSA. It therefore casts light on how the materially identical test in respect of a building liability order under section 130 BSA could be applied.

Factual background

The proceedings concerned five residential buildings at Stratford in East London, originally developed by the first respondent, SDVP, as part of the accommodation for 17,000 athletes and officials participating in the London 2012 Olympic Games. The former athletes’ village is now known as East Village. It has become a large permanent residential estate providing 2,818 new homes, including 1,379 affordable homes and houses, most of which are contained in blocks of between 8 and 12 storeys.

Some of the units are owned through subsidiaries by the second respondent, Get Living, and some are owned by Triathlon. The repair and maintenance of the structure and common parts of the East Village is the responsibility of the third respondent, East Village Management Ltd (“EVML”), a company owned jointly by Get Living and Triathlon.

Serious fire defects were discovered in November 2020; the current remediation plans are due to be completed in August 2025. The total cost of the work exceeds £24.5 million.

The application was heard by Mr Justice Edwin Johnson, Chamber President, and Martin Rodger KC, Deputy Chamber President.

Finally, it is worth noting that the application was originally transferred to the UT, however, the UT confirmed that it had no jurisdiction under section 124 of the BSA to hear the applications (unless where a judgment was being appealed) and therefore it was transferred back to the FTT ([46] and [49]) The UT, therefore, sat as the FTT to decide the case.

The ‘retrospective’ effects of the BSA

The respondents argued that a RCO could not be made in respect of costs incurred before the commencement of the BSA on 28 June 2022 ([58]). If this argument was unsuccessful, the respondents argued that the fact costs were incurred before the date of commencement of the BSA was either a sufficient reason, or a contributory reason, why it would not be just and equitable for a RCO to be made against them in relation to those costs ([60]).

The Tribunal was in “no doubt” that section 124 allows remediation contribution orders to be made in respect of costs incurred before 28 June 2022. The Tribunal noted the language of section 124(2) which provided that a RCO is an order requiring payments to be made “for the purpose of meeting costs incurred or to be incurred in remedying relevant defects …” (emphasis added). The drafter had in mind costs which have already been incurred and those which are yet to be incurred. The language used was therefore clear and explicit and the absence of any temporal limitation or transitional provision was telling ([73]). The clear effect of the language was confirmed by paragraph 1012 of the Explanatory Notes ([74]).

Further, the Tribunal added that: “[i]n the context of Part 5 as a whole, [they did] not regard this construction of section 124 as either improbable or unfair. On the contrary, it is consistent with the purpose and structure of Part 5 that the radical protection it extends to leaseholders should not be restricted by precise distinctions of time.”([75]) It appeared to the Tribunal “inconceivable” that Parliament could have intended that the individual leaseholders of flats in a building which had not yet been remediated by the time the leaseholder protections in Schedule 8 came into force were to enjoy those protections, but that the leaseholders of an identical building on the same estate which had already been remediated at their expense were to be left to bear the full costs themselves and prevented from seeking a RCO under section 124 ([78]).

On the secondary argument – that the fact costs were incurred before the date of commencement of the BSA was relevant to the Tribunal’s assessment of whether it was just and equitable – as outlined below, in light of the conclusions of the Tribunal on retrospectivity “something more” would therefore be required to make it not “just and equitable” to make the order ([280] to [281]).

This analysis is in line with the slightly earlier UT decision in Adriatic Land 5 Limited v The Long Leaseholders at Hippersley Point [2023] UKUT 271 (LC), which was also heard by the Chamber President, Mr Justice Edwin Johnson. The question of the retrospective effect of the BSA was a live issue in the Court of Appeal decision in URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772, which was considered by members of 39 Essex Chambers in another article. The difference, however, is that section 135 of the BSA (which retrospectively extended the limitation period for claims under section 1 of the Defective Premises Act 1972 to 30 years by inserting a new section 4B into the Limitation Act 1980), is explicit in its effect. The provisions in section 124 and Schedule 8 of the BSA, however, do not contain equivalent provisions expressly confirming their retrospectivity.

The just and equitable test

It was agreed that the qualifying conditions for making RCOs were met. However, it was also agreed that the fact that (i) relevant defects exist in a relevant building and (ii) that the respondents were within the classes of persons who may be specified in an order, was not enough. Whether the Tribunal should make orders, and if so against which of the respondents and in what terms, was to be determined by considering additionally whether it would be “just and equitable to do so” (section 124(1)) ([236]).

The Tribunal observed that section 124 itself provided no guidance on how the FTT is to decide whether it is “just and equitable” in any particular case to make an order – beyond stating that the power is discretionary and should therefore be exercised having regard to the purpose of the BSA. The Tribunal noted, however, that the FTT is well used to exercising its discretion by reference to what is just and equitable in other contexts, notably with regard to costs protection under section 20C, Landlord and Tenant Act 1985 and paragraph 5A(2) of Schedule 11, Commonhold and Leasehold Reform Act 2002 and, as David Sawtell and Samantha Jones observed in SCL Paper 241 (‘Opening the Floodgates? Potential Parties to Claims under the Building Safety Act 2022’), the jurisdiction to dispense with the requirement of consultation under section 20ZA, Landlord and Tenant Act 1985.

The Tribunal emphasised the following as being factors which it did not consider decisive when considering whether it would be just and equitable to make a RCO.

• The Tribunal did not think it relevant to draw conclusions about an applicant’s motivation in bringing an application (in this case, Triathlon’s motivations) ([246]).
• The Tribunal emphasised that its assessment was narrowly focused on the specific buildings included in the applications ([247]).
• The Tribunal gave no weight to the changing identity of the ultimate beneficial owners of SVDP and Get Living – the Tribunal did not consider any changes which had occurred in beneficial ownership to be relevant ([251]). The fact that the current owners of SVDP only acquired the entity in 2014, and had no role in its initial development, was rejected as a factor: the Tribunal noted that “Each willingly assumed the risks associated with their investment.” ([252]) It was accepted that the BSA erodes and elides corporate identity and deprives it of some of its main advantages, but the Tribunal emphasised that it did so for specific purposes and within specific limits ([252]).
• The ability to make a claim for a RCO under section 124 is a new and independent remedy, which is essentially non-fault based. The remedy has been created by Parliament as an alternative to other fault-based claims which a party may be entitled to make in relation to relevant defects. Parliament did not intend that the availability of other claims or potential claims should either disqualify an applicant from making a claim for a RCO or delay the making of that claim ([261] and [262]).

In terms of the factors which the Tribunal considered as more important in determining whether it would be just and equitable to make an order:

• The policy of the BSA is that primary responsibility for the cost of remediation 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 ([265]).
• Section 124 permits applications for remediation contribution orders to be made against developers and those associated with developers. The obvious purpose behind the association provisions is to ensure that where a development has been carried out by a thinly capitalised or insolvent development company, a wealthy parent company or other wealthy entity which is caught by the association provisions cannot evade responsibility for meeting the cost of remedying the relevant defects by hiding behind the separate personality of the development company ([266]).
• The Tribunal considered the respondents’ point that the purpose of section 124 is to ensure that remediation work is carried out without delay, and that where the Tribunal can be confident that the works have already been commissioned and are fully funded and on target, “funded and underway” as the respondents put it, there is no reason to make an order ([267]). In terms of the relevance of funding, the Tribunal noted that it attributed little weight to the risk that the major works would not be completed if the Tribunal did not make an order. It did give some weight to the possibility that there might be uncertainty for a time if the Building Safety Fund refuses further help, and that there might even have to be further tribunal proceedings to resolve that uncertainty ([268]).
• The Tribunal held that it was difficult to see how it could ever be just and equitable for a party falling within the terms of section 124(3), and well able to fund the relevant remediation works, to be able to claim that the works should instead be funded by the public purse ([278]).

Concluding remarks

The issue of whether costs incurred (and even paid) prior to the BSA coming into force come within the purview of RCOs and Schedule 8 BSA is very likely to be considered by the Court of Appeal in the near future. In the early FTT decision of Batish v Inspired Sutton Ltd (2022) (considered by David Sawtell in his post for the University of Oxford blog Housing after Grenfell), the FTT made a RCO requiring the respondent to repay sums already paid by way of service charge back to leaseholders. The potential ramifications for freeholders and developers who may face claims for historic service charge costs are significant.

Given that this is the first time that the ‘just and equitable’ test was considered under the BSA, the Tribunal’s reasoning is likely to be considered carefully by potential parties to applications for building liability orders and RCOs. It should be kept in mind, however, that the test is a very broad one. The Tribunal carefully considered the factual background to the East Village development: future decisions are also likely to involve an analysis of the circumstances of the particular case.

The parties have 28 days from the date of the decision to appeal it and so we await to see if any appeal is lodged. However, the decision provides further clarity for parties, in particular: (i) in respect to costs incurred prior to 28 June 2022; and (ii) the factors the Tribunal will consider relevant (and irrelevant) in exercising its discretion and considering whether making an order under section 124 will be just and equitable.