Facts
The case concerned five residential buildings in East London, which were developed by Stratford Village Development Partnership (“SVDP”) to provide accommodation to the athletes and officials participating in the London 2012 Olympic Games. This athlete’s village is now known as East Village and has become a large permanent residential estate.
The applicant, Triathlon Homes LLP (“Triathlon”), has a long lease of all of the flats in two of the blocks (“A & B”) and a long lease of some of the units in the other blocks (“C, D & E”).
The second respondent, Get Living PLC (“Get Living”), through its subsidiaries, owns some of the units in the five buildings, including all of the units in Block C, D & E which were not leased to Triathlon. Get Living also owned the original developer SVDP (although it did not at the time the development was being undertaken).
The third respondent, East Village Management Limited (“EVML”), a company owned jointly by Get Living and Triathlon, is responsible for the repair and maintenance of structure and common parts of the East Village.
Following the Grenfell Tower fire, EVML discovered that the same highly combustible aluminium composite material used in Grenfell was used in the five blocks. A programme to remedy the defects was implemented by EVML. These remediation works are currently being funded by grants made available to EVML using public money from the Building Safety Fund.
Triathlon made five applications, one for each of the five blocks, to the FTT for RCOs under section 124 of the BSA, seeking from SVDP and Get Living for the share of costs incurred. This is estimated to be around £16,000,000 along with other future costs to remedy the defects identified by EVML.
The decision
Section 124(1) of the BSA provides that the FTT may: “on the application of an interested person, make a remediation contribution order in relation to a relevant building if it considers it just and equitable to do so”.
The FTT ultimately ordered the five RCOs against SVDP, as the developer of the buildings, and Get Living pursuant to the association provisions of Section 124(3) of the BSA. While the decision does consider various issues, this article focuses on the FTT’s analysis of what it considered were the just and equitable grounds to grant an RCO.
Just and Equitable
In deciding what was considered just and equitable, the FTT framed its analysis in terms of what were relevant or irrelevant considerations.
1. Primary responsibility for the costs of remediation should fall on the original developer. The section 124 regime is not about identifying which party is at fault, but rather who was responsible for the defects, even if caused by others and that the party with “the broadest shoulders” should bear the financial burden of remedying said defects. It was therefore just and equitable for an order to be made against SVDP.
2. An RCO was also made against Get Living due to its association with SVDP pursuant to S124(3) of the BSA. It was common ground that Get Living was caught by the association provisions, so the FTT did not need to undertake a detailed technical analysis of the association provisions.
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 legal personality.
The FTT was of the view that Get Living was caught by the association provisions in Section 124 by virtue of its association with the freeholders and landlords in the relevant chain of title. The court refused to be drawn into a technical analysis as to how precisely Get Living was caught by the association provisions as they should be given little weight in an analysis of what was just and equitable.
3. Absent malice, a party’s motivations in bringing the application were not relevant. Parliament had enacted the BSA to allow qualifying parties to apply for an RCO. Triathlon was entitled to take advantage of the available remedies.
Applying for an RCO is a new and independent remedy created by Parliament as an alternative to other fault-based claims which a party may be able to make in relation to relevant defects.
The fact that the applicant may have other remedies available to it did not disqualify it from making an application for an RCO. Parliament intended that an application for a RCO should provide a route to securing funding for remediation works without the applicant having to become involved in, or to wait upon, the outcome of other recovery claims arising out of the relevant defects which might involve complex, lengthy litigation. Therefore, while the ability to seek recoveries was a factor to be considered in the assessment of whether it was just and equitable to make an RCO, it should not hold much weight.
4. Linked to the point above, a respondent’s ability to pass on liability to some other party who may be responsible via a civil action, for example the contractors and consultants involved in the design and construction of the building, is relevant to the justice and equity of making RCOs. However, the FTT did not consider this was something to which much weight should be given.
5. Parties cannot contract out of the statutory regime under Section 124. There was nothing unfair in Triathlon taking advantage of the ability to apply for an RCO independently of any contractual provisions which may exist between the parties.
6. Also not relevant was the fact that parties (ie both of the respondents) could have made their own application for RCOs, or that parties could have been the subject of different applications.
7. The fact that the remedial works were being funded by the Building Safety Fund was also irrelevant. The FTT was firmly of the view that it would not be just and equitable for a party falling within the terms of section 124(3) to argue that the costs of remediation works had to be borne by the tax payer. Public funding was a matter of last resort and should not be seen as a primary source of funding where other parties within the scope of section 124 were available to provide funding. If the Building Safety Fund was left to fund the works while the claims were being resolved, the respondents would effectively achieve the very things which section 124 sought to avoid.
8. The source and extent of a respondent’s assets or liabilities would not carry much weight when deciding whether it was just and equitable to make an RCO.
SVDP’s financial position was precarious and it was dependent on Get Living for financial support. It would not have been able to comply with the RCO independently. In the circumstances, it was just and equitable to make an order against Get Living by virtue of its association with SVDP.
Conclusion
The FTT’s decision demonstrates its willingness to exercise its discretion in favour of ensuring those with the deepest pockets pay for works which are required to make a building safe. It appears that willingness will be heightened where public money is at stake. The fact that remedial works are already funded and underway will not prevent the FTT from exercising its discretion. Nor will the fact that recoveries are yet to be exhausted be a bar to an order being made. The FTT has given effect to the policy and intention behind the creation of this particular aspect of the BSA and adopted a rather liberal approach to deciding if the just and equitable condition in section 124 is satisfied.
This article forms part of our Breaking Ground series. For more information on the series, contact Andrea Lynch.