Introduction of the Perpetrator Pays to Grand Committee

Introduction of the Perpetrator Pays to Grand Committee

Earlier this afternoon the Earl of Lytton introduced the Perpetrator Pays amendment to the Lords Grand Committee. You can watch his full speech just below. For people unaware by the name change of the amendment, this was done at the request of the clerks when tabling the amendment.

The full speech:

My Lords, as your Lordships will know, I have three amendments in my name in this group. I will speak first to Amendment 115 and then to Amendments 118 and 119, collectively now branded the “perpetrator pays” amendments. I was very pleased to hear the Minister’s prefatory comments, because he is absolutely right. The amendments in the name of the noble Lords, Lord Young of Cookham and Lord Blencathra, and mine come from fundamentally the same hymn sheet. I impress on the Minister: never mind the differences in approach, there are core, fundamental principles that lie behind them all and which, I would like to think, we hold in common. Those principles must be carried forward into the Bill. At the very least, the Minister must come back, not later than on Report, with a version that will hopefully attract some consensus.

I was very glad that we agreed on the earlier point that non-compliant construction is simply unlawful. It is just a real shame that this has been going on for 30 years. One of the problems is that building inspectors are not on site full-time but call to check at certain stages only, so nearly the entire process of receiving good, compliant construction is based on the trust placed in those who direct matters on the site, plan the work, procure materials and labour and oversee standards. I am so glad that my noble friend Lord Thurlow referred to clerks of works. I totally agree with him. The progressive decline in their use is part of a cost-cutting philosophy.

According to the fire chiefs’ council, whose representative was, I believe, giving formal evidence to a parliamentary committee in December, the failings are still ongoing, so the matter is urgent. It appears that many of the approved inspectors are in far too close association with those whose works they oversee.

The problem we have here is one of weak claimant and powerful defendant, and it is that fundamental imbalance that prevents things such as acting against defective workmanship that may amount to unlawful activity. That is why we have to do something to redress that.

My amendments were reworded with “the perpetrator pays” on the advice of the parliamentary clerks—I am very grateful to them for that, because it is a much snappier title than “polluter pays”. Amendment 115 inserts a new schedule, which outlines a remediation scheme. I use the word “outlines” advisedly, because my amendments do not seek to drill down into the administrative detail; that is a job of work for the department to take forward. The amendment tries to set certain principles.

Amendment 118 sets the principles of “the perpetrator pays”, and Amendment 119 is simply consequential. I am indebted to parliamentary counsel Daniel Greenberg for his unstinting efforts in drafting them. With respect to the Minister’s comment, I am indeed a chartered surveyor and no lawyer, but this has come not from my pen, as it were, but from that not only of Daniel Greenberg but of leading construction counsel. They have checked both the construction contractual arrangements and ECHR law and tried to proof the amendments against the risk of sequential legal action and, in particular, judicial review— all of which could effectively unseat the entire process and render anything that we might try to achieve of no effect simply because of the costs that would be faced by anybody trying to exercise it.

I also thank the huge number of leaseholders, who have been appallingly affected, for their patience and stoicism—but also those who have written to me, expressing their support for this group of amendments. I am especially glad that the noble Lord, Lord Blencathra, added his name to Amendment 118. I thank him for that, because this is not a partisan matter but a question of morality and justice, preventing contagion from irreparably damaging a market sector. That is the other piece of the equation at risk here. This is not anti-developer; my belief is that there are many conscientious developers, but a number of significant players have allowed standards to drop. It is those latter that I wish to single out and attach responsibility to, where it properly lies.

I say to all those responsible in that respect that, with all the plethora of information about cause and effect, the advice and case studies and their long experience and their own knowledge of the contracting world, what is it that they did not understand about all this? It really beggars belief that we have got to this stage. My purpose is to make the developer strictly liable for demonstrable failures to meet the regulatory standards at the time of works. I seek to deliver on the sentiments voiced across the House at Second Reading and expressed by Ministers in parliamentary proceedings and elsewhere that leaseholders should not pay the remediation costs arising from fundamental construction failings—and in connection to my amendment, that relates to fire safety. I am holding the Minister to that express promise.

Just to go into the amendments in a little more detail, noble Lords will of course note the salient characteristics set out in principle. I shall run through it as a summary. Leaseholders should not be responsible or liable for fire safety remediation costs, not even to the extent of Florrie’s law capping. It just is not appropriate. They have been led to believe that they would be relieved of paying for things for which they were wholly innocent—points consistently made by the noble Baroness, Lady Pinnock, and points still ringing in our ears from the passage of the Fire Safety Bill onwards. Secondly, the taxpayer should not foot the bill, other than as an extremely limited last resort—and I mean extremely limited—and for interim funding to get a remediation scheme in place, as bridging finance. The fallback under my amendments is not the taxpayer but the industry that allowed these practices, and what amounts to a gross breach of trust, to take root. The burden should fall on those with involvement in these practices, directly or indirectly, and not attach to wholly innocent and diligent operators. That is a matter of straightforward fairness.

The amendments are tightly focused on originating fire safety hazards in residential blocks—not any wider construction faults or building types. This is deliberate, because of the sudden, unplanned and catastrophic nature of building fires, especially when occupants are off-guard and possibly asleep, with the custody of minors and even with disabilities, and thus at their most vulnerable. It follows the thread set in place by Dame Judith Hackitt. Expanding beyond that focus would be unhelpful at this juncture.

The proposal covers residential buildings of all heights. As I observed at Second Reading, when a low-rise building in Worcester Park burned down in 2019, as was referred to last time, it could so easily have cost lives. Building height is not the sole determinant factor of high risk.

I intend to attach blame firmly to the perpetrator in a manner that is inescapable liability following the establishment of defect as fact. The perpetrators may be numerous, but the claim will be made against the developer or lead contractor on a joint and several basis, leaving them to pursue the wrongdoers in satellite litigation, if they choose, after making the payout or fixing the defect. These liabilities should not be a wider industry or societal collective responsibility; that is what bad people like to achieve—spreading their risk among the rest of us. I say no to that, and no to any amendment to this Bill that has that effect. I consider it also as a factor that leads to uncertainty and unconstrained risk response in insurance terms. In other words, it allows the contagion to spread where it should not.

The parties should be on even playing field, not one where there is trial by bank balance or a gravy train for litigators. A scheme has to be straightforward and transparent, not mired in complicated process, even less labyrinthine administrative hurdles. It should be operable by individuals or their agents on a per-building basis, and I was pleased that the Minister referred to the per-building approach. It should not discriminate between types of owners, for reasons we have already heard. It is indefensible that liability for defects should depend on the status of the injured party or the nature of their tenure, as if wrecking somebody’s pension pot or a social landlord’s finances is in some way acceptable, when for the homeowner it is not.

Landlords have moral obligations towards their tenants as well. There is that trickle-down effect of responsibility, so I say no, not even by reference to supposed wealth nor by dint of some anti-freeholder prejudice. You either subscribe to the rule of law for all or you deny credibility and confidence in government, and potentially an entire market sector, as well as evading the proper exercise of justice. I would make only one slight exception: my amendment would also protect housing associations which have purchased in good faith. The only situation where that might not pertain is where the housing association was itself the developer. However, I defer on any of that to my noble friend Lord Best, because I suspect that there are different structures within housing associations that deal with the development on the one hand and the housing association function as a quasi-charity on the other.

Just to make sure that everybody is focused on matters, the idea in these amendments is to propose a public register of determinations so that everybody knows what is going on. I hope that, going forward—this is critical—it should serve to eliminate the perverse incentives and poor culture in the race to the bottom on cost-cutting and safety, which the noble Baroness, Lady Brinton, referred to.

I think it will be found that the amendments are clear, written in plain English and perfectly understandable. As I say, they do not set in place detailed definitions or administrative schemes but seek to establish principles. I consider that they would greatly simplify what I and, I believe, other noble Lords and the Government are seeking to achieve. They would, I hope, minimise the administrative burden on government and the attendant risks of action on defects and their enforcement, but a clear statement of principles must come first.

I do not think I have ever received such a volume of correspondence on any matter in which I have been directly involved in this House as has happened here. This has come in personal emails from innumerable leaseholders and from residents’ groups, management groups, mortgage lenders, property consultants, professional bodies including the RICS and ARMA, and the British Property Federation. Even a former Australian state premier, Ted Baillieu, who now heads that state’s cladding taskforce, thinks this is a game-changer that it will look to as well. The eyes of many people in this country and elsewhere are on us.

In particular, I had an email yesterday from a Mr O’Connell, vice-chair of the Lancaster West Estate Residents’ Association—the estate that includes Grenfell Tower—in support of this. The Mayor of London has also indicated his support. I thank them all, and the social media have been absolutely buzzing. I hope the Minister will be able to repeat his previous support for the principle and that we can move on with this. I would like to make one or two comments on some of the other amendments in this group, if I may be given the time to do so.

Amendment 24, in the names of the noble Lords, Lord Young of Cookham and Lord Blencathra, is one that I would have contemplated tabling, because I felt it was so important for the debate. I am very glad that the two of them have tabled it. I understand that it was drafted by Professor Susan Bright and her husband. I have had the opportunity and the pleasure of meeting both of them virtually, at an online meeting. Professor Bright is an academic of absolutely unimpeachable principles and a stalwart campaigner for leaseholder justice, so nothing I say about this amendment or anything else should detract in any way from the high regard in which she is rightly held. I feel that both she and the noble Lords are very much on message about the necessity of freeholder redress. If there is a divergence, it is on methodology rather than on the principle, as I have said.

The amendment places remediation in the hands of either

“the appropriate national authority or the building control authority”.

The former would need to be created; if the Secretary of State does it, the question is: what does that mean in terms of additional bureaucracy? I thought that one of the things the Minister was heavily against was bureaucracy, so how to make that bureaucracy-light would be a key factor. As my own amendment would mean the vesting of the administration of a redress or remediation scheme in some body or other, which I do not specify, we are effectively on common ground there. Something needs to be done.

As to the second, we diverge a bit. I am not sure that local authorities have the financial or manpower means to deal with this; I tend to suggest that they do not. They would require the necessary resources up front, and the question is how they would achieve that and over what timeframe. Would that import a delay? They are certainly not likely to want to venture into new and contentious territory without a secure backstop to protect their budgets. More crucially, in a number of cases they are likely to have ongoing relationships with the very developers they may be trying to hold to account. Even their local authority building controllers may have signed off works that the authority might theoretically be pursuing.

The Lancaster West Residents’ Association, which I referred to earlier, wrote to me saying that it is

“very concerned about the … section 36 amendment”—

that is, Amendment 24—

“and its reliance on Local Authorities to go after builders to recover the costs of remediation. There is a massive conflict of interest as they are the people who signed off the buildings in the first place. There certainly is no confidence here in our council the Royal Borough of Kensington, as they were the authority which certified Grenfell tower as safe”.

On the detail of the insertions into the Building Act 1984, I think that proposed new Section 36A(1) should clarify that it refers to the regulations in force at the time of construction and not some other time. I fear that proposed new Section 36A(3) makes unrealistic assumptions about a local authority or Secretary of State undertaking the works, and the reimbursement provision seems potentially inconsistent with the disbursement statement limitations in Amendment 130.

I had to take some advice on proposed new Section 36C(1) because, although I am a member of the Chartered Institute of Arbitrators, I am not a practising arbitrator. Daniel Greenberg tells me that it is commonly helpful to deploy arbitration as a means of alternative dispute resolution to resolve a dispute before a binding decision has been rendered, but that it is difficult to see that it has a role after that point, as appears to be suggested in the amendment. More fundamentally, he says, in this context we are dealing not with disputes about how particular contractual or statutory provisions are to be applied, in which context arbitration can be helpful, but with cases where there will already have been repeated refusal by those who have created a hazard to accept responsibility for remedying it. In that context, what is required are enforceable rights for leaseholders. Arbitration is not a substitute for enforceable rights; it may simply perpetuate delay and encourage failure to accept responsibility, as well as creating additional delay and obstruction in the form of satellite or subsidiary litigation further on down the line.

In proposed new Section 36D(2), no provision for appeals against a local authority or Secretary of State decision is specified, and my concern is that this might lead to judicial review.

I suggest that proposed new Section 36H(2)(b) opens up the need to apportion responsibility, which my amendment specifically sets out to avoid as it is one of the failings of the Environmental Protection Act that you had to apportion the liability. Here we are not trying to do that; these amendments would insist that those primarily responsible sort that out among themselves on a strict liability basis.

The government amendments in this group relate to issues around the levy. The need for this and the application will to some extent depend on the success or otherwise of a perpetrator pays amendment. It appears to encapsulate the moral hazard of failure to target and thus potentially lets poor practitioners off the hook. Will this levy be ring-fenced for a purpose connected with remediation and its administration? If not, it is just another tax. In addition, what will it cost to set up and administer? I confess to being against the blunt instrument of indiscriminate levies, because they apply to those with culpability and those with none. I am quite keen that those with culpability get stuck with the levy as part of their atonement.

I will stop there. I had a comment or two on the amendment from the noble Lord, Lord Blencathra; his proposed new subsections (2), (3) and (4) have the same apportionment problems as the Environmental Protection Act. I want to avoid that. All these things may sound like criticisms, but they are all capable of being sorted. I do not think there is any disagreement on that.

Full Debate

The full debate can be found at Hansard here.