Redrow’s building safety tussle explained

Redrow’s Hemsiphere apartments in Birmingham [Google Streetview]

Redrow has had a judicial review dismissed after it challenged an order to reimburse £30m that it had been awarded through the Building Safety Fund.

The establishment of the Building Safety Fund (BSF) was announced by the government on 11th March 2020 in the wake of the 2017 Grenfell Tower fire, to provide funding for the remediation of unsafe cladding on high-rise residential buildings of more than 18 metres. Two key objectives of the BSF are to address the cladding risk ‘quickly and proportionately’ to ensure residents’ safety, while recovering costs from those responsible, as far as possible.

The BSF covers the costs of cladding remediation provided that the applicant can demonstrate that they have taken all reasonable steps to recover the remediation work costs from those responsible, including through insurance claims. As part of that process, grant funding agreements (GFAs) are typically entered into between the freeholder and the BSF, a term of which is to consider potential recovery actions.

On 13th April 2022 it was announced that numerous residential developers had pledged to remediate building safety risks in buildings they had developed of more than 11 metres in height by way of the developer remediation contract. Last month the Court of Appeal handed down judgment in Redrow plc v The secretary of state for levelling up, housing and communities. This revealed how parties’ objectives can differ when considering the interplay between the funding from the BSF and remediation pledges.

Redrow was the developer of two high-rise buildings in Birmingham: Hemisphere and Jupiter 2. The buildings were identified as requiring remedial works and became subject to funding allocation under the BSF. However, in parallel, some of the leaseholders of the buildings made claims under their insurance policy, to which the insurer (initially) accepted liability.

Redrow signed up to the developers’ pledge and thus agreed to carry out the remedial works at its own cost. Redrow wrote to the secretary of state identifying other buildings it had put up that were also subject to BSF funding, on which they would reimburse the funding. However, in respect of these two buildings, they confirmed they would not reimburse any funding to the BSF, on the basis that the insurer had accepted the claim.

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The secretary of state’s position was that the BSF funding should continue in order to meet the targeted start dates for the works, as Redrow was not remediating the works and the insurance proceeds had not yet been paid out. The secretary of state maintained that Redrow ought to reimburse the BSF to the tune of £30m.

Redrow maintained that it was not obliged to carry out the works where liability had been accepted by the insurers. Redrow’s argument was that funding under the BSF should not have been awarded and that the secretary of state should have pursued the insurers to require them to comply with their obligation to undertake or fund the works. Redrow was under no such obligation to reimburse the fund. The reason Redrow took this approach is that it knew that, if the BSF funded the works instead of the insurers, a recovery action would be made against Redrow by the freeholder pursuant to the terms of the grant funding agreement.

In November 2022 and July 2023, Redrow made two applications for judicial review of the decision, but both were refused. Redrow appealed. By this point, the insurers did not seek to indemnify leaseholders for the cost of remedial works on the basis of BSF funding and Redrow’s liability.

A significant point in the appeal (of whether a judicial review application could be heard) was whether the secretary of state acted in accordance with the BSF guidance. Redrow argued that he had not, on the basis that insurers had accepted liability, which the secretary of state had not taken into account.

Redrow’s argument was wholly rejected.  The Court of Appeal confirmed “What was necessary was the taking of all reasonable steps; the guidance certainly did not require pursuit of third parties to the point of exhaustion before an application for funding could be made”. The BSF did not have to wait for the outcome of any action with insurers to decide to fund remedial works. The fact that any monies recovered (including from insurers) are repaid to the BSF is the clearest indication there is no bar to the BSF waiting for those recovery actions to be finalised.  The decision provides helpful guidance on the extent of the steps applicants must take for funding and what will and will not curtail the BSF’s decision making.

About the authors: Alex Delin is a partner and Natalie Cane a solicitor in Irwin Mitchell’s construction & engineering team

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