Building Safety Bill Update – January 2022

In this update we look at a number of topics:

1. a recent cladding claim judgment (Naylor v Roamquest);
2. Government statement on 10 January 2022 about proposed building safety changes;
3. publication of BSI guidance PAS9980; and
4. draft changes to the Building Safety Bill.

1. Naylor v Roamquest Round 3: the importance of evidence

A judgment was handed down on 23 December 2021 in the long-running Naylor v Roamquest cladding claim, which focusses on the Claimants’ attempt to amend their claim and the pitfalls they faced because their expert evidence did not support their case.

Background

There are 124 Claimants, leaseholders at the New Capital Quay development in London. All Claimants have brought claims under the Defective Premises Act 1972, and a subset who have off-plan sale contracts with the developer also claim for breach of contract.

The Defendants are the developer (and freehold owner) of the Property, and the design & build contractor.

The Property was completed in 2014, and had three relevant façade types:

• ACM panels and Kingspan K15 insulation (the ACM façade);
• brick and K15 (the masonry façade); and
• a glass curtain walling with limited sections of opaque spandrel panels with a combustible styrofoam core.

In 2018 the Claimants obtained a building warranty insurance payout from NHBC to replace the panels and K15 in the ACM façade with solid aluminium sheets and mineral fibre insulation. This remedial work was performed over 2018 and/or 2019 (it is in dispute when works commenced).

In April 2019, the Claimants issued court proceedings for limitation reasons, making claims for alleged uninsured losses relating to additional works said to be needed to the remediated façade, and also works to the other facades:

• The Defendants applied to strike out the claim for a number of reasons, including that it was insufficiently particularised. In a judgment issued in March 2021, the Court declined to order strike out, and allowed the claimants the opportunity to rectify their poor pleadings.
• In the meantime, in June 2021, the Claimants applied for orders allowing them to conduct further intrusive inspections of the Property, but were only granted these to a very limited extent, on the basis that they had had the O&M file since 2019 and had already had significant time to investigate their case.

The December 2021 decision

The December 2021 ruling relates to the Claimants’ application to amend their Particulars of Claim.

The parties were not able to agree in relation to a sub-set of the proposed amendments, primarily on the basis that the Defendants considered that the Claimants’ own evidence did not support them. The Court’s role was to, in effect, determine whether the remaining draft amendments held a real prospect of success or were merely fanciful, in which case they would not be permitted.

The key contested amendments related to the following issues:

• remedial works said to be needed to remove allegedly non-compliant sheathing board, breather membrane and timber window supports which had been left on the building after the remediation works (the retained items);
• alleged wrongly specified/installed cavity barriers on the remediated façade;
• the retention of the spandrel panels; and
• alleged inadequate cavity barriers in the masonry wall and the use of K15 in the masonry wall

The Claimants had produced written evidence from two experts, a fire engineer, and a façade consultant. The Defendants took no issue with the fire engineer, and contended that his evidence was to be preferred over that of the façade consultant, who was not, in their view, suitably qualified to give an opinion on fire safety matters. The Court noted this, but felt that the overall question of the weight to be given to the façade consultant’s evidence was a matter for trial, and not an interim application.

The remediated façade

First, it was at issue whether the remedial works to the ACM façade had been performed under the pre-2018 Building Regulations regime, or the new regime. There was a dispute as to both the impact of the regulations’ transitional provisions (which determined what law applied to the works), and, if the work had been performed under the new regime, whether items “left on” the facade had to meet the new A2 classification or better standard or not. The Court found these were matters that could only be determined at trial.

However, even if the post-2018 regime did apply and operate as the Claimants alleged, the Defendants argued that the Claimants had no prospect of successfully arguing that the retained items had to be removed and replaced, because their own expert evidence was against them. In particular, the Claimants’ fire engineer was of the view that the remediated façade complied with the Building Regulations, subject to one (potentially limited) exception. To expand:

• the expert had noted the façade consultant’s factual finding that, after remediation of the façade, there appeared to be workmanship issues with cavity barriers in the remediated sections. It was not known if the issue was sporadic or prevalent. However, even assuming it was prevalent, the expert’s view was that when the building was considered holistically and against the functional requirements of the Building Regulations (which only require a reasonable standard of health and safety to be achieved), he was satisfied that the remediated façade met those functional requirements, even with the alleged poor workmanship issues with the cavity barriers, such that no further remedial work was required.
• However, this view was subject to an exception where (if at all) such defective barriers were located on compartment lines adjacent to the spandrel panels, given their styrofoam cores. It was not known if this was in fact a widespread issue, and the Court noted that neither party could satisfactorily explain what the exception might even mean, in practical terms.

In light of the above, the Court was critical of the Claimants’ proposed pleadings because they did not match up with the evidence given by their own fire engineer, commenting that “this was a claim issued over 2 ½ years ago….the claimants were given an opportunity to put [their defective pleadings] right, but in my view the mismatch between the [new] pleadings and the evidence means the claim is still incoherent”.

The Court found that the result of the expert’s evidence on this point meant two different outcomes for the DPA claim vs the contractual claim:

• Regarding the DPA claims:
  • the Defendants had argued that because the fire engineering expert has said the remediated facades are safe and further repair not required, the claimants have no reasonable prospect of establishing that the dwellings were unfit for habitation.
  • The Claimants’ arguments that their façade consultant took a different view, and that the residents’ factual evidence as to habitability should be taken into account, were rejected by the Court: it found that the façade consultant in fact said that he could not give a view on fitness for habitation as that was a matter for the fire engineer; and there was no relevant evidence that the residents could give that would advance the point. There was no factual pleading on the point, but in any event the Court found it unlikely that such evidence could be produced, noting that unlike in the more usual “disrepair” fitness for habitation cases, the question of habitability will really turn on expert fire safety evidence.
  • Given these conclusions, the Court found that save for the “exception” (i.e. the potential issue with cavity barriers adjoining the spandrel panels) the claimants did not have material to support a prima facie case that the retained items on the remediated façade required further work to render the buildings fit for human habitation. Only an amendment relating to the limited exception point would to be allowed in this regard in respect of the DPA claim.
  • The Court commented that “to the extent that, as I have found, there is no real prospect of the Court determining that the Buildings are unfit for human habitation (save to the extent of the exception), a significant proportion of the Claimants have no claim for the cost of further remediation at all in relation to these items. Indeed, it may be considered highly unfortunate that these Claimants are trapped in litigation in which they have no real prospects of success in relation to at least one key aspect of it, with potentially significant cost implications, simply because it forms part of a wider action in relation to which a trial is necessary”.
• It was a different story, however regarding the contractual claim:
  • While the Court accepted that it might be a difficult breach of contract argument for the claimants to run, in light of their expert’s views (particularly because the defendants would be likely to argue that it was unreasonable to carry out remedial works that are out of all proportion to the benefit), it was not an entirely fanciful one.
  • Subject to evidence at trial, there was at least some real prospect that even though such further works to the remediated façade may not be necessary to render the building fit for habitation, they may be required to give the contractual claimants what they had bargained for.
  • Given this, the amendments on the retained items point in relation to the contractual claim were allowed in full.

Similar conclusions were reached regarding the amendments relating to (i) the spandrel panel issues; and (ii) the remaining cavity barrier issues on the remediated façade.

The masonry facade

In relation to the masonry façade:

• the Claimants alleged that the K15 should be removed and replaced from behind the brickwork as it was non-compliant with regulations, and that the cavity barrier products were not of the requisite fire-resistant type.
• The Defendants again opposed these amendments on the basis that the evidence did not support the position. This was, they said, because the claimants’ fire engineering expert’s view was that the masonry façade was compliant with Building Regulations if the cavity barriers were fire resistant and any installation issues with such barriers were occasional only. The Defendants also said that the Claimants could now not prove otherwise, as they did not have permission to perform intrusive inspections of the masonry façade. The Claimants argued that it was in dispute as to whether the cavity barriers were fire resistant.
• The Court found that this was an issue of fact that was not fanciful and would need to be determined at trial.
• Given this, the amendments relating to the masonry façade allegations were allowed for both the DPA claim and the contractual claim.

Finally, it is also worthy of note that the Claimants were criticised for proposing alternative amendments that could have resulted in an order that the Defendants take steps (e.g. to obtain a report, or to “prove” that cavity barriers would perform appropriately). The Court emphasised that it would not allow amendments that could result in specific performance by the Defendants. This is a reminder of the principle that it is generally up to a Claimant to establish a breach and that such a breach has caused them loss, rather than for a Defendant to have to “prove” or do anything.

This is a useful reminder of the importance of a party’s evidence supporting the allegations that they wish to make. The judgment also makes clear that fire engineering expert evidence is likely to be what is crucial in determining fire safety claims, particularly in a DPA context.

2. Cladding update: Government statement – significant changes ahead

A Government statement released on 10 January 2022 outlined several proposals which the Government intends to put forward (in large part as part of the ongoing Building Safety Bill process). A number of the proposed changes are even more wide-ranging than previously outlined in the draft BSB, and, if introduced, will have a significant impact on the industry and its insurers.

Key proposals include:

• Extending retrospective limitation period to 30 years for safety defect claims: the release states that the Government will seek to further amend the Building Safety Bill to retrospectively amend the legal right of building owners and leaseholders to demand compensation from their building’s developer for safety defects up to 30 years old”, rather than the 15 years currently proposed. While not specified in the press release, this is may be a reference to a proposal to further extend the retrospective limitation period for the application of the Defective Premises Act 1972. If enacted, this will obviously give rise further significant impacts on industry participants and their insurance position. We will monitor the position and update you.
• Dealing with 11-18m buildings and protecting leaseholders: Ensuring that leaseholders in 11-18m buildings do not have to pay for remediating cladding issues, with the proposal for a loan scheme to be scrapped and replaced by funding from industry. There will also be further discussions with MPs and Peers to consider further amendments to the Building Safety Bill to enshrine protections for leaseholders in law, including to prevent evictions or forfeiture due to historic fire safety costs.
• A focus on Industry:
  • a new team will be set up to “pursue and expose companies at fault, making them fix the buildings they built and face commercial consequences if they refuse”
  • There will be consultation with industry over the next few months, in relation to a “plan of action” for remediating cladding, including on 11-18m buildings. A letter has been sent by Mr Gove to the residential property developer industry, proposing that companies agree:
    • To make financial contributions over time to a dedicated fund to cover the full cost to remediate unsafe cladding on 11-18m buildings (c. £4bn).
    • To fund and undertake all necessary remediation of all buildings over 11m (both 11-18m and 18m+) that they have “played a role” in developing.
    • To provide information to the Government on all buildings over 11m which have “historic safety defects” and which they have played a part in constructing over the past 30 years.
  • A round table is proposed with 20 of the largest housebuilders and trade bodies in the first instance.
  • The letter to developers also makes clear that “given leaseholders and those affected by the Grenfell tower tragedy are central to this process, we will be working closely with them throughout and will bring them to the table to discuss solutions at appropriate junctures.”
  • If industry does not agree a solution, “the Government will be forced to impose one”. Either way, the approach is likely to include further amending the BSB to introduce a levy on developers of high rise buildings (in addition to the 4% tax announced in last year’s budget);
• Changing the process for assessing existing building’s external walls: Finally, the press release confirms that the Government’s January 2020 Consolidated Advice Note about external wall fire safety is being withdrawn, as it was “interim guidance which has been wrongly interpreted by the industry”. Updated guidance produced by the BSI (i.e. PAS 9980) will help fire risk assessors assess existing building’s external walls. The release also confirms that the Fire Safety Act 2021 will be commenced shortly.

If these changes proceed there will obviously be significant implications for the industry, both in terms of future costs, and also in terms of dealing with historic fire safety and other building safety issues.

3. Publication of BSI guidance PAS9980 on 12 January 2022

As above, the Government has withdrawn the January 2020 Consolidated Advice Note on external wall fire safety. It is to be superseded by voluntary guidance produced by the BSI (“PAS9980:2022, Fire risk appraisal of external wall construction and cladding of existing blocks of flats – Code of practice”) which was formally published on 12 January.

In summary, the guidance:

• Creates a new methodology and process for fire risk assessors to analyse the fire safety risks relating to an existing property’s external wall
• Has a focus on proportionality and an holistic risk-assessment approach, rather than an overly-prescriptive approach; with outcomes intended also to be proportionate to the risks faced.

The impact of the new guidance remains to be seen, but may result in fewer multi-storey residential buildings requiring significant or large-scale remediation works, particularly if they are not high-rise (i.e. 18m+).

Key points of potential interest are:
(i) What is PAS 9980 and why has it been developed?

• PAS 9980 is a voluntary BSI code of practice which sets out a methodology for appraising the fire safety of existing buildings’ external walls (a “Fire Risk Appraisal of External Walls”, or “FRAEW”). While in theory it can apply to a building of any height with either a residential or non-residential purpose, it is focussed on multi-storey and multi-occupancy buildings: i.e. blocks of flats.
• Section 1 of the Fire Safety Act 2021 (not yet in force, although this is now expected imminently) fixed a loophole in the regulations which govern the periodic inspection of buildings’ fire safety (the “fire risk assessment” process) to bring into scope the external walls of residential buildings containing 2 or more dwellings. Previously there was no formal legal obligation on a building owner to assess such external wall risks unless a local authority exercised its enforcement powers under the Housing Act relating to hazards (a rare step).
• This amendment to the fire safety regulations will therefore become the primary way in which a multi-storey residential building’s external wall will be checked (although the Building Safety Bill also proposes an additional wider building safety assessment process for high-rise buildings).
• In light of this change, PAS 9980 is primarily geared towards providing guidance for fire risk assessors in performing this new limb of their inspection duties, including setting out when they may need to seek more specialist advice.
• The PAS is not, however, designed to apply to buildings under construction; nor are FRAEWs to be used as evidentiary tools to seek to demonstrate the strict compliance (or otherwise) of historic building works at the time of construction (whether pursuant to Building Regulations or a party’s contractual obligations) in disputes or litigation, for instance. It is a forward looking document relating to assessing the current fire safety risk (if any) of an existing property’s external wall, and steps that may need to be taken to mitigate that risk.

(ii) When does it come into force?

• The PAS will come into effect on 31 January 2022.

(iii) What does it say?

• The PAS is intended to represent a change towards a proportionate risk-based approach to fire safety reviews for external walls, moving away from the strict compliance or prescriptive-based approach which underpinned the Government’s January 2020 Consolidated Advice Note. Importantly, it does not reflect conclusive or “off the peg” answers for any specific wall type or product, but is intended to provide a standardised process for assessing the various fire safety risks inherent in existing buildings. The hope is that the PAS will form part of the Government’s aim for a “common sense approach” to external wall reviews, avoiding unnecessary and expensive remediation works where the risk posed is of an acceptable level.
• The guidance provides a methodology for conducting a FRAEW, with the aim being that the expert will determine a ‘risk rating’ for the building, based on consideration of a number of risk factors which are weighed against each other, with an holistic conclusion being reached. A recommendation will then be given as to possible outcomes (if any).
• The PAS contains a significant amount of detail as to the factors to be considered and the weightings that may be given, and provides example case studies. The key considerations which will be taken into account in arriving at a risk rating are (i) fire performance; (ii) façade considerations and (iii) fire strategy / hazards and fire and rescue service intervention. The height of a building forms part of the factors to be considered, with it being noted that risks are inherently lower if the number of storeys is limited.
• The “risk ratings” themselves can be briefly summarised as follows:
  • ‘Low risk’ buildings are those which do not require any form of remedial or other action, given the low likelihood of fire spread and the risk to the occupants being within benchmark expectations. (Some buildings may be considered so low risk by the assessor that PAS 9980 analysis is not even required).
  • ‘Medium risk’ buildings may fall into two further sub-categories:
    • Medium risk buildings where the risk is tolerable, in which case no immediate action may be required but the FRAEW should be kept under review; and
    • Medium risk buildings where the risk is not tolerable, in which case a more in-depth technical assessment (i.e. one based on fire engineering analysis) may be required to provide a more conclusive risk rating (i.e. whether the building should be re-coded a ‘high risk’ or ‘low risk’).
• ‘High risk’ buildings are those which will require some form of action (whether remedial works or other types of mitigation steps) to reduce risk to occupants to a tolerable level. Again, an in-depth technical assessment may be required to establish if this level of risk rating is necessary or not.
• The analysis to perform a FRAEW is a complex process and must be carried out by a competent professional, and not a layperson. The PAS provides guidance on the level of qualifications or competencies that assessors will need to be able to give the various types of FRAEW advice. This will vary depending upon the nature of the assessment required – not all fire engineers will necessarily be able to provide even basic assessments, and only chartered engineers will be able to provide certain levels of assessment.

The positives?

The aim of the PAS is both to assess risk proportionately and to provide for proportionate outcomes, including considerations of benefit gained, practicality, and cost: - given this, even a “high risk” building categorisation may not automatically result in a recommendation of full remediation works, for example.

The intention is that the PAS will represent a significant change to how the industry views and assesses the fire safety of external walls. Accordingly, it may take some time for the industry to adapt to this change. However, the emphasis on proportionality should be a useful tool to allow building owners to assess, from a more realistic perspective, what the fire safety risks exist in relation to their property’s external walls, and what steps might be needed to address those. This in turn ultimately may have a flow-on effect in relation to reducing the number of potential claims against construction professionals (or at least the extent of remedial schemes proposed), particularly in relation to lower-height properties.

The PAS also clarifies that BR 135 is not a practical benchmark for judging existing buildings and therefore they anticipate that FRAEWs will not routinely recommend that BS 8414 tests be commissioned for existing buildings (albeit such tests may still be required in limited circumstances). Given the waiting times for BS 8414 tests in recent years, this may also be a welcome development.

The negatives?

Even though the intent behind such a detailed methodology is to ensure a broadly uniform approach to FRAEWs by assessors, there is still going to be an element of subjectivity (and therefore uncertainty) in these assessments.

There is also the risk that the PAS will put significant pressure on the fire engineering sector (who will often be best placed to conduct these FRAEWs), both in terms of capacity and also the potential liability risk in deciding whether buildings have a tolerable risk level. While the Government has indicated that some form of indemnity scheme may be established for risk assessors, the extent of this (and whether it will cover those giving FRAEWs) is presently very far from clear.

These issues may mean there is a reluctance to designate certain buildings as ‘low risk’ and we may end up with the majority of buildings being classed as medium risk with further fire engineering analysis required. We note that there has been at least one example where the PAS (prior to publication) has been used on a lower building and the result was that an extensive remedial scheme was required – albeit that may have been due to fact specific concerns rather than a reluctance to decide at which point the risk becomes tolerable.

In short, it is an impressive and ambitious document, but it is difficult to say at this early stage whether the PAS will achieve its intended potential.

4. Draft amendments to Building Safety Bill to implement the Government’s 10 January 2022 statement

Further draft proposed amendments have been issued for the Building Safety Bill, beginning to reflect some of the changes flagged in the Government’s 10 January statement.

These, and other proposed amendments which MPs have previously put forward in relation to the BSB, can be tracked at Building Safety Bill publications - Parliamentary Bills - UK Parliament under the heading “Amendment Paper”. The amendment paper is regularly updated as new amendments are proposed (or withdrawn) by MPs, and we have already reported on a number of these in our previous updates. The proposals in the amendment paper will form part of the debate when the BSB gets to its third reading.

The new amendments proposed this week are significant because they have been tabled by the Government (and thus may be expected to have majority support when the bill is debated). As the amendment paper is an evolving document, additional draft amendments are likely to follow, but as at 17 January the new additions by the Government include:

• The retrospective extension, as flagged in our earlier update, of the limitation period to bring a claim under the DPA to 30 years, rather than the 15-year retrospective limit previously proposed. The prospective limitation period is to remain at 15 years.
• A proposal to extend the “initial period” regarding DPA claims. As a reminder, where the new time limit for bringing an action under the DPA would have expired for a claimant shortly after the amendment comes into force (which is to be 2 months after the bill receives Royal assent), the BSB had proposed a 90 day “initial period”, during which any claims that expired in that time frame would instead be deemed to expire at the end of the 90 days. This was intended to allow claimants in this situation some more time to finalise and issue any claims. The Government now proposes to further extend this initial period from 90 days to 1 year.
• Amendments to the Architects Act 1997 to provide for the establishment of an Appeals Committee to deal with appeals regarding registration as an architect.
• A change to extend the protections against forfeiture of a lease due to non-payment of a service charge to include non-payment of the “building safety” charge which is proposed by the BSB.
• A proposal to expand the proposed “New Homes Ombudsman Scheme” beyond England, so it applies to Wales and Scotland.
• A proposal to allow occupied high-rise residential buildings to be placed under a “special measures” order if necessary. The regulator will be able to apply to appoint a special measures manager to take over the relevant functions of the accountable person for property, in the event that there have been serious or multiple failures by that person to comply with duties imposed on them by the Act.

No draft amendments have yet been released by the Government in relation to matters such as protection for leaseholders from remediation costs, or possible funding or indemnity scheme arrangements (although, as we have reported on previously, proposals have been put forward by other MPs on those fronts).