Building Safety Bill Update – January 2022 (Part 2!)

As January 2022 is proving to be an extremely busy month for building safety developments, we look in our further update at:

1. Building Safety Bill now in the House of Lords;
2. an open letter sent by the Government to the Construction Products Association regarding remediation costs;
3. the opening of an online portal for leaseholders to access information about the building safety fund applications made for their properties; and
4. a Court of Appeal judgment in Mulalley & Co. Ltd v Martlet Homes Ltd.

1. Building Safety Bill debated on third reading and now in House of Lords phase

The BSB has had its third reading in the House of Commons on 19 January 2022, and its first in the House of Lords on 20 February 2022. The second reading is the House of Lords is scheduled for 2 February 2022.

A copy of the most recent version of the Bill, containing the amendments passed at the third House of Commons reading can be found here.  As anticipated, the recent amendments proposed by the Government were passed, and these form the primary changes from the previous version. Key relevant additions are:

• The retrospective extension of the limitation period for bringing claims under s.1 of the Defective Premises Act 1972 is now 30 years (rather than the previously proposed 15 years).   The prospective limitation period for such claims remains at 15 years. These and the other limitation period changes set out in the Bill (now set out in clause 119) are all due to come into force automatically two months after the Act receives Royal Assent.
• The "initial period" (which is intended to give a bit more time to prepare for claimants whose claims would otherwise expire shortly after the section comes into force) is extended from the previously proposed 90 days to 1 year.
• A change to provide that the amendments (now in clause 118) to create s.2A of the DPA 1972 will also come into force 2 months after the Act receives Royal Assent.   As a reminder, s.2A is going to extend the Act (prospectively only) to cover refurbishment (etc.) works (which it presently does not).
• The creation of an appeals committee in relation to registration of architects.
• Further amendments relation to the New Homes Ombudsman scheme.
• Provisions to extend certain parts of the Act to cover Scotland and Wales.
• Further amendments relating to the ability to place high rise buildings in occupation under "special measures" due to building safety issues.

Regarding the new retrospective 30 year period for s1 DPA claims, the Government Minister for Housing commented during the Commons debate on 19 January that this "represents a substantial extension beyond the current six years. I recognise that changing the law in this way is unusual and that 30 years represents a long limitation period. However, I consider that the exceptionality of the current circumstances in respect of cladding and other serious fire safety defects warrants the longer retrospective limitation period of 30 years".

It was also clear from the debate that further work will be done on the BSB during its time in the House of Lords, in particular in relation to additional amendments needed to implement the other measures outlined in the Government's recent statement, such as the additional robust protection for leaseholders. There was criticism of the Government by Opposition MPs for bringing the bill forward without having prepared amendments to implement the promises made in the Statement, and reassurance was sought that further proposals and amendments would be considered during the House of Lords phase, and that there would be further opportunity for debate in the House of Commons after the Bill returned.   

In this regard, the Government:

• commented that they were taking the Bill forward now because it is "very important, and we need to get it through both Houses. However, as [Mr Gove] said in his statement on 10 January, we want to ensure that we look closely to improve the appropriate legislative and statutory protections for leaseholders, and we will have to do that in a parliamentary way, which will of course include [the House of Lords]."  

• emphasised that it would "consider all proposals that are put to us to see whether they work and to ensure that leaseholders are protected. As the Secretary of State said in his statement, we will conduct a series of summits with the sector to put people on notice that they must pay for the problems they have caused. If they will not do it voluntarily, we will find a means of requiring them to do so"

• said that "Several hon. Members asked whether we intend to bring forward legal protections in the House of Lords. I assure the House that we do. We certainly want to ensure that all leaseholders in medium and high-rise buildings, who live in them or who used to live in them but have had to move out and sub-let because of the situation in which they find themselves, will have put in place the robust legal protections to which [Mr Gove] referred. We want to work cross-party and with interested parties to ensure that those robust protections are right. We believe that leaseholders should not be asked to pay anything further until those legal protections are in place, as was raised by several hon. Members on both sides of the House. I encourage any hon. Member who is aware of demands from freeholders that their leaseholders pay to make me or my officials aware of that demand".

Overall, the debate was robust and it is also clear that Opposition MPs also had a number of other ideas about how the problem of funding remedial works may be solved, which may ultimately be raised either during the House of Lords phase or when the Bill returns to the Commons.  Of particular potential interest in this context were comments that, because industry participants were often insured, the Government could also consider mechanisms to look to the insurance industry directly instead (e.g. by way of a levy, or by allowing claims against insurers).  Also on a wider insurance note, other MPs raised the point that leaseholders' property insurance premiums had increased exponentially and potentially without justification and queried if there could be some scope for taking action against the property insurance industry in relation to such increases.   In this regard, the Government minister noted that "I am also grateful for the points raised by [those MPs] about, shall we say, peculiarities of the insurance system. Some of those are wider issues that go beyond the Bill, but I am happy to discuss how we can resolve such issues with them".

The next step is for the Bill to go through the various readings, committee and report stages in the House of Lords.  There is no set time frame for this phase, but the second reading (a largely procedural process) is due to take place on 2 February 2022.  As noted above, it is likely that significant important amendments may be introduced while the Bill is in the House of Lords; we will continue to monitor the BSB's progress and provide further relevant updates.  

2. Government pressure on Construction Products industry to contribute to remediation costs

Following on from the recent open letter sent to the residential developer industry about fire safety remediation costs, on Saturday 22 January 2022 the Government sent a similar letter to the Construction Products Association (CPA).

We can only speculate, but the impetus for this letter may have been the recent roundtable between the Government and residential developer CEOs last week, at which, the media has reported, the development industry stated that manufacturers should shoulder some of the responsibility.

The letter to the CPA:

• calls for those who provided cladding and insulation products or services (i) to contribute to a fund for remediating fire safety issues on buildings over 11m; and (ii) to provide information about all properties over 11m on which their products were used;

• states that "there are a number of cladding and insulation companies whose products or services have contributed to the need for remediation of 11m+ buildings on fire safety grounds", and offers a "window of opportunity" for the sector to work with the Department between now and March 2022 to agree a deal which must include:  

  • "a clear commitment from the sector that they agree to make financial contributions....as we have already asked developers to do.  The total contribution from the cladding and insulation sector must represent a significant portion of the total remediation costs, caused by the dangerous products sold by some of your members...." And
  • "a commitment to provide comprehensive information on all buildings over 11m which have historic fire-safety defects to which [cladding and insulation sector companies] supplied products or services".

• states that discussions will be scheduled shortly, and that in the meantime the Government will be sending detailed requests for data regarding products sold across the industry which it expects companies to co-operate with.

• states that the Government expects a public funding commitment from the sector by early March.

Overall, the letter says that the Minister is "prepared to do whatever it takes to deliver our objective, including using our regulatory framework to limit any culpable company from operating and selling products in this country in the future; and I will pursue those individuals and firms liable for building defects who are unwilling to do the right thing now.  There is no future for those companies and directors who are not fully committed to upholding the safety of residents and fixing past wrongs..."

In response, the CPA has indicated that it has requested a meeting to clarify the Government's proposals, saying that the CPA is "happy to work with government and our members in the spirit of cooperation to address these issues". Nonetheless, it remains to be seen whether the Government's robust approach will achieve any voluntary traction with the construction products industry.  Further, as with the position taken by the Government regarding developers, it also remains uncertain what steps the Government may realistically be able to take should it not be possible to reach a "deal" on the terms they propose.

3. Increased transparency for leaseholders about building safety fund applications: Leaseholder portal for information about building safety fund claims

The Government's 10 January 2022 statement on fire safety matters promised that leaseholders who live in buildings for which building safety fund applications have been made, will have increased transparency regarding the progress of such applications.

To this end, an online portal has been created, and is now "live", for leaseholders to be able to access such information.  At this stage, the portal appears to relate only to applications relating to the most recent building safety fund, which was set up in March 2020 for non-ACM buildings.  Only affected leaseholders should be able to access the portal, using a unique code that will be sent to them.  

The Government has also published a short guidance note for leaseholders and residents about the building safety fund application process, which may be of interest.

While not accessible to potential defendants or the general public, the portal is nonetheless welcome as it will provide more transparency to any relevant leaseholders for whom an application has been made, but who are not being kept updated about it by other means (such as those groups who are not being assisted by lawyers in the funding process, and/or who are not being kept regularly updated by the freeholder or property management company who must apply on the leaseholders' behalf).   

4. Mulalley & Co. Ltd v Martlet Homes Ltd [2022] EWCA Civ 32 (24 January 2022)

The Court of Appeal decision in Mulalley & Co. Ltd v Martlet Homes Ltd was published yesterday.

The background facts are that:

• Mulalley, a D&B contractor, was appointed by Martlet Homes in 2005 to design and construct a number of residential tower blocks.
• Martlet issued proceedings against Mulalley in December 2019, arguing that the fire barriers were defective and required remediation.
• Mulalley sought to strike out certain allegations advanced by Martlet (allegations relating to the specification of combustible EPS insulation) on the basis that these EPS allegations had been advanced in the Reply (rather than the Particulars of Claim), and Martlet should not be granted permission to amend its Particulars of Claim as this was a new claim based on new facts and the limitation period had now expired.

The Court's decision at first instance (Martlet v Mulalley [2021] EWHC 296 (TCC)) was notable because although Justice Pepperall agreed with Mulalley that this was a new claim which could not be advanced in the Reply, Martlet was nonetheless granted permission to amend it Particulars of Claim out of time. This was because the EPS claim was said to arise out of the "same or substantially the same" facts as were already in issue, and therefore satisfied the criteria for amending a claim out of time, as provided for in CPR 17.4. Mulalley appealed, arguing that it was wrong to conclude that the new claim arose out of the same or substantially the same facts; and Martlet cross-appealed, arguing the Court was wrong to conclude that the EPS claim was a new cause of action.

The Court of Appeal decided that Pepperall J got it right on both counts at first instance. Lord Justice Coulson dismissed Martlet's cross-appeal, deciding that the EPS allegations did constitute a new claim as (i) they were expressly pleaded as a contingent claim, (ii) they were focussed on design defects (whereas Martlet's claim had originally been focused on workmanship defects with the fire barriers) and (iii) Martlet's original claim did not say the EPS insulation in itself was inadequate, which was the basis of the amendments.

Lord Justice Coulson also held that the Court was right to conclude that Martlet should be granted permission to amend its Particulars of Claim under CPR 17.4. A decisive factor in the judgment was that Martlet's 'new' EPS allegations were considered to flow naturally from Mulalley's Defence; Mulalley has argued in its Defence that the selection of EPS was not in breach of the Mulalley's contract (despite this not being advanced in the Particulars of Claim), and the Court decided that Martlet must be entitled to respond to this, otherwise they would be deprived of a fair trial. Put differently, because Mulalley has chosen to put particular facts in issue in defending themselves, there can be no unfairness in allowing Martlet to turn those matters back on Mulalley.

Whilst this is yet another 'strike out' success for a developer / freeholder, it also is a cautionary tale for those serving a broadly pleaded Defence. We also note with interest that the parties have continued to prepare for trial on the basis that the EPS claim could be included, and the trial is due to be heard in March 2022.