Building Safety Fund – Cladding defects – Remedial works – Cladding defects found in high-rise blocks of flats – Respondent allocating funds from Building Safety Fund (BSF) for remedial works – Appellant developers seeking permission to apply for judicial review – Court refusing application – Appellants appealing – Whether respondent’s decision based on mistaken view of nature and effect of the BSF guidance – Appeal dismissed
Following the Grenfell Tower disaster in 2017, an inspection and investigation of high-rise residential blocks was undertaken. Significant defects were found resulting from the widespread use of combustible cladding and there was an urgent need to procure and pay for the necessary remedial works.
In March 2020, the respondent secretary of state introduced the Building Safety Fund (BSF). According to the BSF guidance, the fund was designed to fund the remediation of unsafe cladding systems on high-rise residential buildings, where building owners (or other entities for making buildings safe) were unwilling or unable to afford to do so.
The appellants were developers of two high-rise blocks in Birmingham. The purchasers of long leases acquired an insurance policy. Both developments were found to contain cladding defects which required extensive remedial work. Some of the leaseholders made claims on the insurance policy.
On 26 August 2022, before the insurer had accepted liability in relation to the second block, the respondent agreed to allocate funds from the BSF to the interested party management companies (as responsible entities) so that the remedial works could be carried out. Under the BSF guidelines, the appellants as developers, were required to repay the monies.
The appellants applied for permission to apply for judicial review arguing that they should not be expected to reimburse the BSF where liability had been accepted or was likely to be accepted by the insurer.
The application was refused by the judge who found, amongst other things, there was no merit in the application: [2023] EWHC 2508 (Admin). The appellants appealed.
Held: The appeal was dismissed.
(1) This was not a case where a public body had set out a formal or detailed policy statement to which it had subsequently to be held. However, given that the BSF guidance was the only guidance available, all those with an interest in a decision by the respondent in respect of BSF funding were entitled to assume that the decision would be made in accordance with the BSF guidance and general principles of good administration, unless there were good reasons why not. So, the real question was whether the respondent followed the BSF guidance.
Those with the legal obligation or right to carry out the necessary remediation works (such as the freeholder or head leaseholder or management company) were responsible entities who could apply to the BSF for funding for the necessary remedial works.
(2) The BSF guidance required the responsible entities to demonstrate only that they had taken “all reasonable steps” to recover the costs of the works from those responsible (through, amongst other things, insurance claims). The BSF guidance did not require the responsible entities to demonstrate they had pursued all other claims to final resolution and financial recovery, or that it was only if the claims against third parties, such as the insurers, had finally failed, that they could make a claim under the BSF.
What was necessary was the taking of all reasonable steps; the guidance did not require pursuit of third parties to the point of exhaustion before an application for funding could be made. That was why the BSF guidance referred to the requirement that the responsible entities pay the government any amounts recovered “up to the amount provided through the fund”. That envisaged the very opposite of a requirement that third parties be pursued to exhaustion before a valid application under the BSF could be made and granted. On the contrary, the BSF guidance expressly anticipated that such claims might be ongoing at the time of the application, the allocation and the works themselves, and that whilst that would not affect the allocation of funds from the BSF, the responsible entities had to pay any sums recovered from the third parties back to the BSF.
(3) On the facts, it could not be said that the interested parties had not taken all reasonable steps in relation to their claims against the insurers. They had obtained two admissions of liability on the part of the insurers, one in respect of each building. It was impossible to see what more they could reasonably have done. If insurers who were in administration did not pay out, or if they subsequently said that they would not pay, then that was a dispute which might take years to resolve. That was what happened here. Such resistance by the insurer did not in law prevent the interested parties from making a claim under the BSF, and did not prevent the respondent from making a lawful decision to allocate the appropriate funds from the BSF.
Accordingly, the respondent was entitled to conclude that, although liability in respect of the blocks had been accepted by the insurer, the more important fact was that an unqualified promise to reimburse had not been made. The interested parties had taken all reasonable steps to recover sums from the insurer but there was no reason to believe that any proceeds of the policy would be forthcoming in time for the projected start date for the works, or within any period that would enable the proceeds to be used to fund the timely carrying out of the works (and every reason to think they would not be). The delays on the part of the insurer did not render the interested parties ineligible for funding from the BSF.
(4) While it might not necessarily be a “trump card” in every situation, the need for speed would be a significant factor in any decision to allocate funding under the BSF because the whole basis for the fund was the need urgently to address the cladding issues revealed by the Grenfell Tower disaster. That was why the objective of the BSF was to resolve the problems quickly, so that residents were and felt safe “now”, and why it was said that the problems would be addressed as quickly as possible. The need to act with speed was therefore baked into the whole rationale for the BSF. So here, while it was never suggested that it was a “trump card”, speed was an important factor for the respondent to take into account when considering whether the interested parties had taken all reasonable steps in pursuing others, and when taking the decision of 26 August 2022.
The decision was in accordance with the BSF guidance and the interested parties had taken all reasonable steps to pursue the insurer, and by the end of August 2022, the urgency of the remedial works was such that a funding decision was required.
Andrew Singer KC, Jonathan Ward and Stephanie Hall (instructed by Macfarlanes LLP) appeared for the appellant; Tom Richards KC and Harriet Wakeman (instructed by the Government Legal Department) appeared for the respondent; The first interested party appeared by its lay representative.
Eileen O’Grady, barrister
