The decision in Secretary of State for Housing, Communities and Local Government v EDR Builders (1) Hollybrook (UK) Limited (2) LON/00BB/BSB/2024/0011 represents the FTT's latest decision on Remediation Contribution Orders.
In this case, the Secretary of State for the Ministry of Housing, Communities and Local Government (the "SoS") applied for a remediation contribution order ("RCO") under section 124 of the Building Safety Act 2022 (the "BSA 2022") against EDR Buildings Limited (the developer) and Hollybrook (UK) Limited ("Hollybrook") (a company associated with the developer) in relation to internal and external fire safety defects that were identified at Hallings Wharf Studios in London.
The developer was in liquidation at the time the application was made, and the SoS's claim against it was stayed whilst Hollybrook was pursued.
The key areas of dispute concerned the requirements for determining relevant defects, the reasonableness of the scope of the remedial scheme and the quantum claimed, as well as what was 'just and equitable' in the circumstances.
FTT's decision
The FTT ultimately agreed to make an RCO against Hollybrook in the amount of approximately of £3.6 million. In respect of the issues in dispute, the FTT made the following findings:
1. Relevant Defects:
The disputed defects amounted to relevant defects under the BSA 2022. The assessment of whether something is a relevant defect does not depend on breaches of the applicable building regulations.
Further, it was not accepted that the assessment of defects required a multistage approach, it simply involves a consideration of whether there is a building safety risk.
2. Scope of Remedial Works:
In this case, the remedial scheme procured by the RTM Company was designed in accordance with the Consolidated Advice Note ("CAN"), and the RTM did not effectively "start again" when CAN was withdrawn and replaced with PAS 9980. The FTT held that it was not unreasonable for the RTM not to re-evaluate the works once PAS 9980 was introduced and effectively start again. At the time the new standard was introduced, the works were already underway and at all times the RTM relied on professional advice (§50 – 51).
However, the issue of whether a party should have considered PAS 9980 will turn on the facts of the case (e.g. if a project is in its infancy, then it may be considered unreasonable to proceed without a PAS assessment (§53)).
That the remedial works could have been done cheaper does not mean they should not have been carried out. The remedial works carried out were within a reasonable range of responses. In that regard, the FTT went so far as to say that "…unless the works in question can properly be branded as unreasonable, it does not matter for the purposes of s.124 whether an alternative scheme might have satisfactorily addressed the fire safety risk at a lower cost. This is consistent with the wider policy of Part V of the BSA…" (§58)
3. Quantum:
The parties were agreed that the costs claimed had been incurred and the amount of the expenditure was also agreed. Nevertheless, there were several discrete costs which Hollybrook maintained should not fall within an RCO. These included the cost of fire stopping service penetrations, an invoice raised by London Underground, certain invoices for early investigations, the cost of installing access panels, fire alarm costs and VAT. The FTT was ultimately willing to grant the SoS the costs of all the disputed invoices in the RCO because they were connected with remedying the relevant defects.
However, it did not consider the legal costs of the SoS should be included in the RCO. Notably, the Tribunal considered that it was not just and equitable to include those costs in circumstances where the SoS gave no indication that they intended to claim costs until a very late stage in the proceedings, meaning "…the parties had conducted the litigation on the basis that there was no adverse costs risk…" (§149)
4. Just and Equitable:
The SoS submitted that the purpose of the legislation is to ensure the costs of the remedial works are met. In cases where more than one entity can be made subject to an RCO, the purpose of the just and equitable test was to ensure the burden of the costs is between them in a way that is just and equitable. Dealing with this point, the FTT held that it was not appropriate to narrow the FTTs jurisdiction in the manner sought by the SoS. There would be some cases where the tribunal considers that it is not just and equitable to make an RCO and in those cases the remediation costs will not be 'met'. Further, the fact that the tribunal may have considered whether costs falling within section 124 are reasonable, does not mean that just and equitable considerations play no part. In short, the FTT said it is not necessary to limit or redefine the test of "just and equitable" further (§ 156).
Comment
The FTT has affirmed its broad discretion in relation to applications under s.124 of the BSA 2022. This decision confirms that even where it has been demonstrated that remedial works could have been done cheaper this does not mean they should not have been carried out or that the costs of the works are unreasonable. Where the applicant has acted reasonably with regards to the works carried out and relied on professional advice, the costs of the remedial works are likely to fall within the scope of an RCO.
