Sarah Alexander reviews recent court decisions relating to the growing number of building safety related cases since the Building Safety Act 2022 came into force. Developers face prosecution for failing to comply with improvement notice deadlines, one case confirms.

Key points

• Since coming into force last year, the principles established by the Building Safety Act 2022 have been finding their feet in the courts.
• There has already been a raft of cases coming through, cementing the principles of how cladding defects should be addressed in high-rise residential and mixed-use buildings.
• In one of the most recent cases, the courts confirmed that developers will face prosecution if they fail to comply with deadlines in improvement notices.
• Waking watch costs can be recoverable from the party responsible for the cladding while the building waits to be remedied.
• Where court actions are already under way, parties are able to add in additional arguments concerning breaches of the Defective Premises Act 1972 which were previously time-barred.
• Acceptance by the developer of the type of cladding at the time of installation may not excuse the contractor from liability.

With the 18-month anniversary upon us of the first provisions under the Building Safety Act 2022 (BSA) coming into force, it seems a fitting time to recap what the courts have had to say about one of the most talked about pieces of legislation the industry has seen this century.

As we all know by now, the BSA contains obligations on responsible parties to replace cladding systems which are determined to be non-compliant with fire safety standards and regulations, or to fund the replacement of the systems. The BSA also extends the time periods for qualifying affected parties to bring such claims and introduces avenues for leaseholders to seek contribution for costs of remedial works. Summarised below are some of the court cases addressing those key areas of the BSA we have seen released since the legislation received Royal Assent.

Martlet Homes Limited v. Mulalley & Company Limited

This case marked the first substantive judgment from the courts dealing with some of the implications of the BSA and set the scene for how parties should approach the replacement of cladding products on high-rise buildings.

At the heart of the dispute were the five blocks which make up Gosport Towers in Gosport, Hampshire. The Towers were refurbished by Mulalley between 2005 and 2008, with the installation of an external wall system (EWS) comprising an inner layer of expanded polystyrene insulation boards with acrylic render. Following the Grenfell fire, Martlet (owners of the Towers at the time) carried out an inspection towards the end of June 2017 which identified that the insulation boards and acrylic render were combustible. As a result, on the same day, Martlet put in place a waking watch pending replacement of the EWS. Martlet sought to recover the cost of replacing the system and the waking watch from Mulalley. Mulalley argued that Martlet ought only be able to recover the costs of repairing alleged installation issues with the EWS as opposed to full replacement. The court upheld Martlet’s claim.

However, Martlet’s route to securing this judgment was not straightforward. The path started with an adjudication against Mulalley, which Martlet lost. Martlet proceeded to raise a claim in the courts for final determination, which hit some procedural snags when Martlet attempted to amend its pleadings to add in a further alleged breach by Mulalley. Martlet’s original pleadings focused on Mulalley’s breach of installation and workmanship requirements regarding the EWS. Martlet then tried to amend its pleadings to add in an alternative ground of breach that the EWS, as specified by Mulalley, did not conform to certain fire safety standards. Mulalley objected and appealed the court’s first instance decision allowing Martlet to make the amendment. Mulalley was unsuccessful in its appeal, with the Court of Appeal confirming that Martlet could incorporate the arguments regarding Mulalley’s alleged breach of fire safety standards within its pleadings.

On Martlet’s substantive case before the courts, Mulalley argued that the waking watch costs were too remote, and that Martlet’s desire to replace the cladding was only brought about by what had happened at Grenfell and the existence of stricter fire safety standards which came into force after the parties’ contract was entered into.

The Technology and Construction Court (TCC) sided with Martlet and decided that the EWS specified by Mulalley did not conform with fire safety standards which existed when the parties entered into the contract. The TCC opined that the existence of a British Board of Agrément (BBA) certificate in these circumstances, which have increasingly been referred to as an attempt to demonstrate compliance with fire safety related requirements, was not enough as the BBA certificate on which Mulalley sought to rely pre-dated the fire safety standards with which it was required to comply pursuant to its contract with Martlet. As a result, Martlet was entitled to recover the full cost of replacement of the EWS. The TCC also found that the EWS had not been installed correctly.

The TCC also considered Mulalley’s remoteness argument in the context of the costs of the waking watch and again sided with Martlet. Mulalley argued that, pre-Grenfell, no one was really aware of waking watches being used as a temporary mitigation measure while remedial works were in the pipeline. Whilst the TCC had a certain degree of sympathy with that line of argument, the TCC commented that this was more to do with a “culture of endemic complacency within the construction sector”. Referring back to everyone’s good friend Hadley v. Baxendale, the TCC opined that “any reasonably prudent contractor would have been very concerned about the risk from the fire barriers being rendered ineffective even before Grenfell” and that “it is plain that the need for temporary fire-safety measures to be taken pending a permanent solution is a natural or a reasonably contemplated consequence of such breach”.

LDC (Portfolio One) Limited v. (1) George Downing Construction Limited and (2) European Sheeting Limited

This case is worth just a brief mention since it applied the approach taken by the TCC in Martlet, finding a subcontractor responsible for the EWS liable to the building freeholder under the terms of a collateral warranty for failures to comply with relevant fire safety standards in force at the time. The TCC rejected the subcontractor’s argument that the subcontract only required it to exercise reasonable skill and care when carrying out its works, on the basis that this did not supersede the strict obligation in the collateral warranty to comply with statutory requirements. The TCC reinforced the principle that compliance with the fire safety standards falls at the feet of the one undertaking the works.

BDW Trading Limited v. AECOM Infrastructure & Environment UK Limited

This was the first reported decision where the TCC allowed a claim under the Defective Premises Act 1972 (DPA), the scope of which was extended by the BSA, to be added into existing proceedings against a contractor in circumstances where, prior to the introduction of the BSA, the claim would have been out of time. The TCC acknowledged that the new extended timescales under the BSA for bringing claims under the DPA raised issues of interpretation, and that the defendant may be able to argue that the claim had already been finally determined prior to the BSA coming into force. Notwithstanding any such submissions which the defendant might be able to raise, the claimant was permitted to proceed with the amendment.

URS Corporation Limited v. BDW Trading Limited

This case marked the first Court of Appeal judgment to consider the impact of the BSA and confirmed three key principles:

• A developer can both owe and be owed duties under the DPA.
• A developer can make a claim for contribution from a responsible party even in circumstances where no claim has been made against the developer by the homeowner. It does not matter if the developer has no proprietary interest in the development at the time the remedial works is carried out.
• The new 30-year time limit for raising claims under the DPA brought in by the BSA applies even where proceedings have already been commenced.

Arjun Batish and others v. Inspired Sutton Limited and others

Remediation contribution orders can be sought under section 124 of the BSA by leaseholders/owners (and others) of properties against landlords/developers for contribution towards costs of rectifying defects which result in a building safety risk (such as non-compliant EWS).

In the first judgment considering a remediation contribution order, the First Tier Tribunal (FTT) confirmed that certainty entities were required to make contribution to the leaseholder, though not all of those named in the application were found liable as the FTT confirmed that section 124 did not apply to individuals.

Section 124 of the BSA specifically provides that the FTT may only make an order where it is “just and equitable to do so”. In this decision, the FTT stated that it needed to be satisfied that the leaseholders had paid for the costs of the works which ought to have been met by the developer (who also happened to be the freeholder). It will be interesting to see if this approach is taken consistently in applications to come, or if the approach will be relaxed in light of the wording in section 124(3) of the BSA which allows for recovery from associated persons. It is unlikely that any associated persons would have been party to a relevant contract or owed a statutory/common law duty, therefore it is difficult to see how costs “ought to have been met” by them, meaning it might be arguable that it would not be “just and equitable” for associated persons to be found liable.

St James’s Oncology SPC Limited v. Lendlease Construction (Europe) Limited and another

This case involved a PFI project where the project company pursued the design and build contractor (Lendlease) for losses arising from Lendlease’s failure to comply with fire safety standards.

Lendlease’s defence focused on an alleged acceptance by the project company of the fire strategy which was said to be non-compliant. The TCC did not entertain this argument, opining that the buck stopped with Lendlease as it was responsible for the design under the contract and, accordingly, for compliance with the relevant standards, noting Lendlease’s position in relation to approval by the project company as “otiose”.

Though not relevant to the BSA, this case also contains some interesting commentary on the passing down by the project company of its responsibilities to the authority under the project agreement to Lendlease under the design and build contract. The TCC confirmed that there had been adequate pass-down, through reference in the design and build contract to the project company’s risks, obligations and potential liabilities to the authority under the project agreement, as well as through ensuring that many of the terms in the design and build contract were materially the same as those in the project agreement.

Newham Council v. Chaplair Limited

This is the most recent case of interest on the BSA implications. Newham Council raised an action against Chaplair after Chaplair failed to replace cladding on the Lumiere building in London by the deadline imposed by an improvement notice issued by Newham Council. This marks the first court action where a local authority has pursued a building owner for delays in carrying out works to replace cladding. Although the works began two months after the deadline in the improvement notice and completed nine months later, the City of London Magistrates Court ruled that there was no reasonable excuse for Chaplair’s delay, finding Chaplair guilty of failing to comply with the improvement notice. With the heightened focus on cladding remediation following the introduction of the BSA, this judgment is a warning to responsible parties to ensure compliance with deadlines stipulated in improvement notices, else face prosecution.

This is clearly just the start of a flow of cases arising from the BSA – what is clear is judicial support for the implementation of the BSA’s principles.

This article was first published on 2 November 2023 in Construction Law magazine.