The new corporate offence of failure to prevent fraud comes into force from 1 September 2025. Businesses now face not only the adverse effects of fraud itself but also the regulatory consequences – including unlimited fines and reputational damage – of having failed to prevent it. The new legislation only applies to ‘large’ organisations but compliance is good practice for all organisations. 

This article looks at the elements of the new offence, the defence of putting reasonable procedures in place and the steps companies can now take to mitigate the risk of falling foul of their new obligations.

What is a failure to prevent fraud?

The new offence is created by s199 of the Economic Crime and Corporate Transparency Act 2023 (the Act). It is similar in structure to the failure to prevent bribery and facilitation of tax evasion offences. The offence creates strict liability for organisations if an ‘associated person’ commits fraud intended to benefit the organisation and, crucially, the organisation cannot show it had reasonable procedures in place to prevent it.

Who is at risk?

The offence applies to organisations (wherever incorporated or formed) that meet at least two of the following thresholds in their previous financial year:

• turnover greater than £36 million;
• balance sheet/total assets greater than £18 million; and
• employee headcount greater than 250.

These criteria will apply in respect of the preceding financial year to the alleged fraud.

The relevant organisation will be guilty of an offence if its employees, agents or subsidiaries (associated persons) commits a fraud offence intending to benefit the organisation. It does not matter whether the organisation actually benefits from the offence.

The Act does not just apply to UK-based organisations. It is enough for an organisation to be caught by the Act if any of the elements which are part of the underlying fraud or any gain or loss occurred in the UK. For example, if an employee commits fraud and the relevant events occurred in the UK, their employer can be prosecuted even if the employee and the organisation are based overseas (ECCTA 2023, 199(13)).

Who is an associated person?

An ‘associated person’ is broadly defined and includes:

• employees (including junior level);
• agents and professional service providers; and
• subsidiaries and entities providing services for or on behalf of the organisation (note this does not include entities providing services to an organisation. So it would not include, for example, lawyers and accountants providing services to a business.)

What are reasonable procedures?

To establish this defence, organisations must implement and evidence reasonable fraud prevention procedures based on the six core principles identified in the government guidance:

• top-level commitment;
• risk assessment;
• proportionate, risk-based procedures;
• due diligence;
• communication and training; and
• monitoring and review.

These are the same principles in place for the failure to prevent bribery and facilitation of tax-evasion offences but in a different order. We consider each one in turn and the key steps to take for compliance.

Secure top-level commitment

The first principle is now top-level commitment. This means that at board level (from the CEO down), organisations must clearly demonstrate the seriousness of the issue and gravity with which any non-compliance (both internally and externally) will be viewed. Avoid any communication seen as diminishing the need for compliance and ensure that a culture of open and transparent communication and endorsement of fraud prevention policies prevails.

As part of the top-level commitment, maintain annual reports and formal documents outlining the policy, records and regular review of the compliance landscape and fraud risk.

Conduct a comprehensive risk assessment

While it is not necessary to duplicate existing compliance systems, it is not enough to simply rely on them without an adequate review. The focus should be tailored to the risks assessed as relevant to the business – for example, for some industries this may be greenwashing and misrepresentation. ESG-related crimes are notably used as examples in the government guidance and it may therefore indicate an increased focus in this area.

For other sectors, the focus may be false accounting and tax fraud. It will also be important to evaluate the risk from other jurisdictions and overseas operations. Could employees outside the UK be at more or different risk?

Design proportionate procedures

Policies and processes must match specific business needs. Generic compliance templates are unlikely to provide a sufficient defence in the event of a failure to prevent fraud. In particular, consider what internal controls are necessary and why. For example, where sales incentives are strong, risk-based policies may need to have tighter controls. Wherever a decision is taken, ensure the reasons behind it are appropriately documented.

Contract audit and due diligence

In addition to appropriate screening and background checks for employees and third parties, consider reviewing contracts to ensure third parties are obliged to comply with the new legislation and guidance and to grant termination for breach.

Training, communication and review

In addition to training on the new offence and policies, it is crucial to ensure employees feel that they can safely use whistle-blowing procedures. Create clear pathways and demonstrate adequate support for those raising awareness of issues. Implement regular monitoring and review the risk assessments to ensure they meet the primary risks for the business.

How will the offence be enforced?

The offence will be enforced by the Serious Fraud Office (SFO) and the Crown Prosecution Service (CPS). It is anticipated that, as with the Bribery Act, there will be an increased use of deferred prosecution agreements to incentivise co-operation and compliance in investigations.

What does this mean for global compliance strategies?

Economic crime is a major target for many governments and agencies across the world. The new offence marks a significant expansion in the UK of corporate liability for employee fraud. In particular, the wide definition of ‘associated person’ combined with the extra-territorial scope of the legislation means that businesses need to undertake a comprehensive review of their fraud risk.

As well as implementing robust policies to address fraud, it seems likely that the focus of the first investigations of this new offence will be on the culture of the business and the effectiveness of the top-down failure to prevent fraud strategy. With just a few months remaining before the offence comes into force, it is crucial to make preparations now to minimise risk.

For more information, including to request a copy of our client guide and podcast or to discuss the needs of your business, contact the authors or your usual Penningtons Manches Cooper contact.

The corporate team at Penningtons Manches Cooper has advised Your.Cloud, a Dutch based leading European MSP serial acquirer, on its acquisition of Comm-Tech Voice & Data Limited, a data and IT services provider based in Norfolk. 

Your.Cloud is a leading European investment and operating platform focused on building premium managed service providers (MSPs) across the continent. Founded in 2016 and headquartered in Amsterdam, the company operates with a long-term, entrepreneurial mindset. It specialises in IT outsourcing, offering solutions such as online workspaces, cloud services, cybersecurity, and connectivity.

Comm-Tech Voice & Data Limited is a well-established telecommunications provider, founded in 1986 in Martham, Norfolk. Now based in Norwich, Comm-Tech has evolved into a comprehensive business communications provider, offering services that span mobile communications, IT management, and complex data solutions.

The Penningtons Manches Cooper team was led by corporate partners Adam McGiveron and Emma Bryant with support from corporate associate Fars Aziz. The wider team included corporate tax partner, Oliver Gutman, real estate senior associate Emma Connaughton, employment managing associate Charissa Upton, pensions partner Alison Hills and commercial partner Oliver Kidd.

Bart Rijksen at Your.Cloud said: “The acquisition of Comm-Tech Voice & Data Limited is Your.Cloud’s second UK acquisition marking another big milestone in our growth journey in the UK. We’re excited for Comm-Tech Voice & Data Limited to be joining us and look forward to helping them grow and harness their full potential. It was a pleasure working with the team at Penningtons Manches Cooper, whose expert handling of the legal aspects of this deal played a pivotal role in successfully completing the transaction.”

Adam McGiveron, partner at Penningtons Manches Cooper, added: “We’re delighted to have worked with Your.Cloud on their most recent acquisition. This deal sees them grow their presence in the UK and expand their offering and we’re really excited to see where it takes them in the next few years.”

Financial and tax due diligence was provided by Andy Kay and Phoebe Turnr at Crowe.

On 29 July 2025, the Supreme Court handed down its long-awaited decision in the joint appeals of Shvidler v Secretary of State for Foreign, Commonwealth and Development Affairs and Dalston Projects Ltd v Secretary of State for Transport [2025] UKSC 30.

The judgment upheld ministerial decisions to impose sanctions and detain property under the Russia (Sanctions) (EU Exit) Regulations 2019, dismissing challenges based on proportionality and human rights compatibility.

The ruling affirms the government’s wide margin of discretion in pursuing foreign policy objectives, even where measures significantly interfere with individual rights under the European Convention on Human Rights. At the same time, the court restated its commitment to meaningful judicial oversight in the sanctions context.

Legal context and background

The appeals arose from the UK’s post-Brexit autonomous sanctions regime, built on the Sanctions and Anti-Money Laundering Act 2018 (‘SAMLA’). The 2019 regulations empower ministers to impose designations and asset restrictions without requiring proof of criminal conduct, provided the action is considered appropriate to advance foreign policy or national security goals.

• Eugene Shvidler
  Mr Shvidler, a dual UK–US citizen and long-time business associate of Roman Abramovich, was designated on 24 March 2022. The decision resulted in a global asset freeze and criminalised any dealings with him, save for specific licensed exceptions. The designation was based primarily on historic business roles in Sibneft and Evraz plc; both linked to Abramovich.
• Dalston Projects Ltd and M/Y Phi
  The second appellant, Dalston Projects Ltd, owned the luxury yacht Phi, detained in London under ministerial direction. The beneficial owner, Mr Naumenko, was not himself designated but was alleged to be ‘connected with’ Mr Shvidler. The company argued that the detention caused significant financial loss during peak chartering seasons.Both appellants claimed that the sanctions disproportionately interfered with their rights under Article 8 (private and family life) and Article 1 of Protocol 1 (peaceful enjoyment of possessions) of the ECHR.

Judicial review and the proportionality test

The challenges were brought under Part 79 of the Civil Procedure Rules, the statutory review mechanism for sanctions designations. The central issue was whether the decisions infringed ECHR rights and, if so, whether that interference was justified. The Court applied the familiar four-stage proportionality test from Bank Mellat v HM Treasury (No 2) [2013] UKSC 39:

1. Legitimate aim – was the objective sufficiently important to justify limiting a fundamental right?
2. Rational connection – was the measure rationally connected to that aim?
3. Less intrusive means – could a less restrictive alternative have been used?
4. Fair balance – did the measure strike a fair balance between individual rights and the interests of the community?

Crucially, the court confirmed that in sanctions cases, it must conduct its own proportionality assessment, not merely review for irrationality or legal error.

The majority judgment

The majority (Lord Sales and Lady Rose, with Lord Reed and Lord Richards concurring) upheld both ministerial decisions. They found that:

• The sanctions pursued a legitimate and vital aim, deterring Russian aggression and supporting international peace and security.
• Even indirect economic pressure on individuals with ties to Russian elites could contribute to the policy objective.
• Ministers were entitled to a broad margin of appreciation, especially in matters of national security and foreign policy.
• The interference with rights, though significant, was proportionate given the wider context.

In relation to Phi, the court held that its detention was justified. Revenue from chartering the yacht could plausibly benefit individuals in Russia, satisfying the test for economic connection.

The court also noted that the cumulative effect of sanctions across the regime not the efficacy of any single measure was the correct lens for proportionality analysis.

Dissenting opinion: a note of caution

Lord Leggatt dissented with regards to Mr Shvidler’s appeal. His view was that:

• the grounds for designation were insufficient and lacked specificity, particularly given Mr Shvidler’s limited role and time lapsed association with Evraz
• the asset freeze inflicted severe personal hardship and impinged on fundamental rights
• the judiciary must play a primary role in determining whether a fair balance has been struck. Deference to the executive, while appropriate in some contexts, must not undermine the rule of law

Lord Leggatt’s dissent highlights a tension between national security discretion and the constitutional role of the courts, one that may potentially recur in future challenges.

Key takeaways

• the Supreme Court confirmed that ECHR rights are engaged by sanctions measures and require a full proportionality analysis
• the executive enjoys a wide but not unlimited margin of discretion, particularly where evidence of wrongdoing is indirect or historical
• the court reinforced its role in scrutinising factual and policy justifications, even in politically sensitive domains
• sanctions need not show direct causality between the individual and the harm targeted, association and deterrence may suffice

Implications for practice and policy

This ruling consolidates the UK’s post-Brexit approach to targeted sanctions, affirming their legal robustness even where no criminal allegation is made. It also sets a precedent for how courts will engage with proportionality in the context of global sanctions regimes.

For legal practitioners, the case underscores:

• the importance of testing the evidential basis for designations;
• the value of structured arguments under Part 79 and proportionality principles; and
• the risks to clients with indirect, historical, or reputational connections to designated individuals.

The case also signals that the sanctions landscape remains legally navigable but clients should expect sustained and intrusive scrutiny, particularly in the context of luxury assets, beneficial ownership, and geopolitical affiliations.

Conclusion

The Supreme Court’s decision in Shvidler and Dalston illustrates the delicate balance between state power and individual rights in modern sanctions regimes. While the court ultimately deferred to ministerial discretion, its review involved detailed considerations of transparency, reasoned justification, and proportionality.

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This article was co-authored by Laura Stigaite, a trainee solicitor in the marine, trade and aviation team.

While the majority of medical negligence claims resolve without the need for court proceedings, so far this year 164 such claims have been issued in the High Court. These claims tend to be high in value or complex in nature. Although detailed information on individual claims is limited, some analysis of the parties involved shows a number of interesting trends, in which certain hospital trusts have notably higher levels of claims issued against them.

Philippa Luscombe, head of the medical negligence team at Penningtons Manches Cooper, has examined the claims issued to trusts in 2025, both to see if they are indicative of trends, and also whether they reflect the type of claims that the firm is regularly instructed to investigate on a day-to-day basis. For some of her analysis, Philippa used Solomonic, an award-winning and intuitive litigation analytics platform, which is changing the way litigation decisions are made through actionable intelligence.

Of the 164 claims issued this year, 47 of them were against only 14 trusts. In each case, the trust had either three or four claims issued against it – in itself, not a high number, but when compared to the 30+ NHS trusts with only one claim, or the many with no claims at all, it is evident that some trusts stand out in terms of claim frequency.

Philippa’s research revealed that the three trusts featured most prominently were:

• University Hospitals Bristol and Weston NHS Foundation Trust;
• Lewisham and Greenwich NHS Trust (LGT); and
• Guy’s and St Thomas’ NHS Foundation Trust.

University Hospitals Bristol and Weston NHS Foundation Trust

NHS trusts in Bristol have been subject to considerable media focus this year on the level of claims being submitted, particularly in relation to medical care provided to children.

One investigation revealed that, combined, the NHS trusts in Bristol have paid out over £66 million in compensation for negligence claims concerning children’s medical care since 2019.

University Hospitals Bristol and Weston Trust itself was responsible for the settling of 28 claims, for a total cost of over £47 million.

Lewisham and Greenwich NHS Trust (LGT)

Lewisham and Greenwich NHS Trust, another trust featuring prominently as having a number of issued claims, meanwhile, has paid out over £4 million to patients in connection with allegations of medical negligence in A&E cases over the past five years.

Guy’s and St Thomas’ NHS Foundation Trust

Guy’s and St Thomas’ NHS Foundation Trust has recently been the subject of some significant maternity claims, and faced one of the largest maternity negligence claims in the NHS after a £37 million payout in 2020 to the family of a severely disabled child. This claim followed mistakes in the boy’s care (admitted by the trust) that left him with lifelong needs. While the trust agreed to the payout, the family reported that it did not initially admit liability, creating pressure on them to cover care costs during the investigation.

Penningtons Manches Cooper’s medical negligence team has a number of ongoing cases against all three of these trusts, and its experience tends to accord with the press reports. The weight of the team’s claims against Lewisham and Greenwich has been in relation to A&E/emergency care and, likewise, for University Hospitals Bristol, it has dealt with several claims involving paediatric care. For Guy’s and St Thomas’ NHS Foundation Trust, a number of claims are ongoing, but these cover a range of areas of medicine.

Philippa comments: “It has been an interesting exercise reviewing the claims issued this year and considering the extent to which national trends replicate what we are seeing day to day in terms of instructions as a firm. While we don’t yet have enough data to assess whether there are pattern in the nature of the cases, it is striking that these 14 trusts have a significantly higher number of claims than others – and several on the list are trusts that we often encounter in our work.

“NHS Resolution, which deals with all claims against NHS trusts, should have access to this data and it would be interesting to know whether the pattern in issued claims (which reflect only a small proportion of medical negligence claims brought) are consistent with trends in overall numbers of claims against the various NHS trusts nationwide.

“What is also notable in the data of claims issued is that there are a number of claims against various ambulance service NHS trusts nationwide. This mirrors what we are seeing by way of a regular stream of enquiries relating to delays in ambulance call outs and failures in initial emergency assessments – particularly for head injuries and cardiac issues. We will monitor this data as the year goes on.”

The new ‘failure to prevent fraud’ offence under the UK’s Economic Crime and Corporate Transparency Act 2023 will come into force on 1 September 2025. The act introduces a corporate criminal liability for large organisations if an ‘associated person’ commits a ‘base fraud offence’ intending to benefit the organisation or its clients.

HR plays a crucial role in supporting a culture of compliance and fraud prevention, and will be instrumental in ensuring that organisations are ready to meet their new obligations. This article provides an overview of the new offence and the potential consequences of non-compliance, before taking a look at the practical steps that HR should be taking now in order to prepare for the new offence.

What is the new offence?

A wide range of fraudulent conduct is captured within the ‘failure to prevent fraud’ offence, namely.

Fraud Act 2006:

• fraud by false representation;
• fraud by failing to disclose information; and
• fraud by abuse of position.

Theft Act 1968:

• false accounting; and
• obtaining services dishonestly

Companies Act 2006:

• false statements by company directors.

Common law:

• fraudulent trading; and
• participating in fraudulent business.

Tax law:

• cheating the public revenue.

The fraud must be deliberately committed to secure a gain (eg money, contracts, reputation) or to avoid a loss for the organisation or its client. The benefit does not need to be realised – the intention alone is sufficient.

Potential liability

An organisation can be prosecuted even if senior management was unaware of the fraud. Liability arises solely from the failure to have reasonable fraud prevention procedures in place.

If an organisation is found guilty of the offence, it may face an unlimited financial penalty. The courts will determine the amount based on:

• the severity and scale of the fraud;
• the level of benefit obtained by the organisation;
• the effectiveness (or absence) of fraud prevention procedures; and
• the organisation’s cooperation with the investigation.

The individual committing the fraud can also be prosecuted separately, while the organisation may be prosecuted for failing to prevent it.

Who is covered?

A ‘large organisation’ is any organisation that meets at least two of the following three criteria in the financial year preceding the fraud:

• more than 250 employees;
• more than £36 million in turnover; or
• more than £18 million in total assets.

Smaller organisations are not in scope of the offence, but the government encourages them to adopt the same principles as good practice. Even without legal liability, clients, partners or investors may expect small organisations to demonstrate fraud prevention measures, and a failure to act could damage trust, especially in regulated sectors or supply chains with large organisations. It is anticipated that large organisations will expect compliance as part of procurement or partnership agreements.

Who is an ‘associated person’?

An ‘associated person’ is defined intentionally broadly to ensure that organisations are held accountable for fraud committed by individuals or entities acting in a capacity that benefits the organisation, and includes:

• employees;
• agents;
• subsidiaries;
• contractors or consultants acting on behalf of the organisation; or
• any person performing services for or on behalf of the organisation.

Extraterritorial reach

A non-UK organisation can be held liable if:

• it has a UK subsidiary, branch, or office;
• it carries on business in the UK;
• the fraud involves a UK client, counterparty, or transaction; or
• an associated person commits fraud that benefits the organisation and there is a UK nexus.

For example, a non-UK shipping or technology company with UK clients or contracts could be caught if a fraud is committed by an agent or contractor acting on its behalf.

Governent guidance

The government’s guidance on the new offence provides an overview of the offence and describes the general principles for organisations in developing or enhancing procedures to prevent fraud. When a court is considering a case, adherence to these principles will be taken into account.

HR should particularly note the point that organisations should demonstrate top-level commitment to the prevention and detection of fraud. The board of directors, partners and senior management of a relevant organisation should be committed to preventing associated persons from committing fraud. While the level and nature of their involvement will vary depending on the size and structure of the organisation, their role is likely to include:

• communication and endorsement of the organisation’s stance on preventing fraud, including mission statements;
• ensuring that there is clear governance across the organisation in respect of the fraud prevention framework;
• commitment to training and resourcing; and
• leading by example and fostering an open culture, where staff feel empowered to speak up if they encounter fraudulent practices.

Effective formal statements to demonstrate the commitment by senior managers may include:

• a commitment to reject fraud, even if this results in short term business loss, missed opportunities or delays;
• articulation of the business benefits of rejecting fraud (reputational, customer and business partner confidence);
• articulation and endorsement of the relevant body’s policies or codes of practice on fraud prevention and its key fraud prevention procedures;
• naming the key individuals and/or departments involved in the development and implementation of the organisation’s fraud prevention procedures;
• articulation of the consequences for those associated with the relevant body of breaching the policy on fraud. This may include contractual clauses where appropriate; and
• reference to any membership of collective action against fraud, for example, through initiatives undertaken by trade bodies etc.

Key actions for HR

It is anticipated that organisations will integrate fraud and bribery compliance into a unified framework. Existing anti-bribery, anti-money laundering (AML), and sanctions compliance programmes should serve as a foundation for fraud prevention, and shared tools (eg whistleblowing systems, training platforms, due diligence processes) can be leveraged.

The main actions HR should be considering now include:

Policy and procedure updates

• Review and update anti-fraud policies to align with the new offence.
• Ensure policies clearly define fraud, outline reporting mechanisms, and set expectations for ethical conduct.
• Integrate fraud prevention into employee handbooks, codes of conduct, and contracts of employment.

Training and awareness

• Develop and deliver mandatory fraud awareness training for all staff, especially those in high-risk roles (eg sales, finance, procurement).
• Include real-world examples of fraud and consequences under the new law.
• Provide refresher training regularly and during onboarding.

Recruitment and vetting

• Strengthen pre-employment screening and background checks, particularly for roles with access to financial systems or sensitive data.
• Consider integrity assessments or fraud risk profiling for key positions.

Whistleblowing and reporting mechanisms

• Ensure there is a confidential and accessible whistleblowing system in place.
• Promote a culture where employees feel safe to report concern without fear of retaliation.

Performance and incentives

• Review incentive structures to ensure they do not inadvertently encourage fraudulent behaviour (eg aggressive sales targets).
• Include ethical behaviour and compliance as part of performance evaluations.

Monitoring and auditing

• Collaborate with compliance and internal audit teams to monitor fraud risks and employee conduct.
• Use data analytics to detect anomalies or red flags in employee behaviour.

Governance and accountability

• Assign clear ownership of fraud risk within HR and across the organisation.
• Ensure HR is represented in fraud risk committees or compliance working groups.

Under the self-reporting guidance issued by the Serious Fraud Office (SFO) in April 2025, companies should self-report suspected fraud as soon as they become aware of it. The SFO Director Nick Ephgrave has emphasised that the SFO is looking to prosecute the new offence, and noted that organisations should ensure their procedures are in place by September 2025:

‘Come September, if they haven’t sorted themselves out, we’re coming after them. That’s the message I’ll be delivering…I’m very, very keen to prosecute someone for that offence. We can’t sit with the statute books gathering dust, someone needs to feel the bite.’

A stark warning, if one were needed, that large organisations should be acting now to assess their fraud risk exposure and implement proportionate prevention procedures. This will not only mitigate legal liability but also strengthen ethical culture and stakeholder trust.

A recent Commercial Court decision in Tonzip Maritime Ltd v 2Rivers PTE Ltd [2025] EWHC 2036 (Comm) provides important guidance on the use of sanctions screening tools in commercial transactions and the legal threshold for terminating contracts on sanctions-related grounds.

It was decided by the Commercial Court that the owner’s decision to refuse to load the cargo based on a report from Refinitiv/World-Check (a common sanctions screening software) which said the shipper was both associated to a sanctioned individual and indirectly owned by a sanctioned individual until very recently was not reasonable.

Confirming a recent decision of Foxton J in Litasco v. Der Mond Oil [2023] EWHC 2866 (Comm), if a judgment is based on ‘speculation’ it will not be an objectively reasonable judgment and that there must be evidence and/ or documents to support such a judgment for it to be considered reasonable. The judgment will no doubt spark concern for shipowners, charterers and insurers alike.

Background

The claimant, Tonzip Maritime Ltd, chartered the vessel Catalan Sea to the defendant, 2Rivers PTE Ltd (formerly Coral Energy Pte Ltd) for a voyage from a port in the Ust Luga to Primorsk range to the Mediterranean to carry a cargo of oil.

The defendant ordered the vessel to load at Primorsk where the shipper of that cargo was identified as Neftisa. It was agreed that performance of these orders would have required, among other things, making funds in the form of the bill of lading available to or for the benefit of Neftisa.

Based on results from its internal sanctions checks revealing that Neftisa was associated with Mr Gutseriev, who was sanctioned by the EU and UK, the claimant refused to load the Neftisa cargo and instead requested alternative voyage orders.

After trying to convince the claimant that there was no risk of exposure to sanctions, the defendant purported to cancel the charterparty on grounds of the claimant’s refusal to load the Neftisa cargo. The claimant replied that the defendant’s purported cancellation amounted to renunciation of the charterparty and terminated the charterparty for repudiatory breach.

A key clause in the charterparty was the Eastern Pacific Voyage Charter Trade and Economic Compliance Clause (the EPS Sanctions Clause) which provided that:

• the performance of the charter would not expose the claimant or the vessel, its crew or insurers to any national, international or supranational law or regulation imposing trade and economic sanctions, prohibitions or restriction; and
• the claimant was not obliged to comply with any orders for the employment of the vessel which, in its reasonable judgment, would expose it or the vessel, its crew or insurers to the sanctions laws in question.

The evidence

Sanctions screening checks were carried out by the claimant using Refinitiv/World-Check which confirmed that Neftisa was associated with Mr Gutseriev, who was sanctioned by the EU and UK, and identified him as the indirect owner of Neftisa and the chairman of its board of directors. This was reported between July 2015 and July 2021 and no further information was reported after August 2021.

Although it was not seen by the claimant’s manager at the time, the claimant had possession of an Infospectrum report – another sanctions screening software – which indicated that Mr Gutseriev had apparently stood down from PAO Russneft, which was described as ‘an associated company of Neftisa’, because of his designation by the EU.

The defendant relied on certain documents either available to the claimant or provided by the defendant to the claimant, from which it is said that it should have concluded that Mr Gutseriev did not own or control Neftisa.

These included:

• a letter on Neftisa’s own headed paper dated 16 November 2021 stating that, among other things,  Mr Gutseriev was not the controlling person of Neftisa;
• Kommersant Newspaper article dated 22 July 2021 stating that Mr Gutseriev had transferred control of Neftisa to his brother and had stepped down as chairman; and
• Legal opinions drafted by international law firms who had reviewed Neftisa company documents and made numerous points about the company’s structure with numerous caveats.

In coming to a decision, the judge decided that he was entitled to consider all the evidence that was available to the claimant at the time that the decision was made, even though it may not have been considered when making the decision.

The parties’ positions

The claimant argued that its internal compliance procedures, which included the use of Refinitiv/World-Check, revealed potential links between the Neftisa and Mr Gutseriev. The claimant contended that Neftisa, the entity allegedly involved in the transaction, may have been under Mr Gutseriev’s control, thereby exposing the transaction to sanctions risk.

Mr Tay, a key witness for the claimant, testified that the claimant routinely used Refinitiv/World-Check as part of its due diligence process. He maintained that the decision to terminate was made in good faith and in line with standard compliance protocols.

Ultimately, the claimant could not confirm whether Mr Gutseriev had de facto control over Neftisa and it was on this basis that the claimant considered it would have been exposed to the risk of sanctions.

Conversely, the defendant argued that the claimant had failed to conduct a balanced and objective assessment of the available information. The defendant maintained that, on the basis of the available information to the claimant, it should have concluded that Mr Gutseriev did not own or control Neftisa.

Judgment

The court ultimately found in favour of the defendant. The judge held that it was for the shipowner to prove its decision was one which, objectively viewed, a reasonable shipowner could reasonably have come to, after which it is for the charterer to prove otherwise.

Notwithstanding the concern the claimant held, the judge decided that the claimant had not made a reasonable or objective decision in concluding that there was a risk of exposure to sanctions. The key findings were as follows:

• The claimant’s decision was based on the Refinitiv reports without proper consideration of the contradictory Infospectrum reports and other information.
• Upon close examination, the Refinitiv reports did not demonstrate that Mr Gutseriev controlled Neftisa at the relevant time (November 2021), and the claimant’s judgment was speculation.
• As such, the claimant’s termination of the charterparty on sanctions grounds was not justified.

Emphasis was placed on the fact that, while sanctions compliance is a legitimate concern, it must be approached with rigour and objectivity. A party cannot rely exclusively on automated or third-party screening tools without critically assessing the underlying evidence.

Legal and commercial implications

Commercial parties involved in maritime trade will be acutely aware of the sanctions risks involved in certain trades but following this judgment there are numerous factors that should be considered on each occasion.

Limitations of screening tools
Automated sanctions screening tools like Refinitiv/World-Check are not foolproof. While useful for flagging potential risks, they must be supplemented by a critical review of the facts and available evidence.

Objective assessment required
Parties must make a reasonable and objective assessment of sanctions risk which includes:

• Reviewing all available due diligence materials.
• Seeking clarification where reports are ambiguous or inconsistent.
• Avoiding knee-jerk decisions based solely on red flags from one source.

Risk of wrongful termination
Where a party terminates a contract based on an unsubstantiated or poorly reasoned sanctions concern, they risk a finding of wrongful termination and exposure to damages. This factual basis for such decisions, especially where they have significant commercial consequences, must be arrived at reasonably and not speculatively on the basis of all the evidence.

Importance of contemporaneous evidence
The key was the availability of the documents and evidence at the time of the decision as they will be used to assess whether the claimant’s concern were reasonable or speculative. Parties should therefore ensure that their internal compliance processes are well-documented and reflect a balanced approach.

Practical takeaways

For legal and compliance teams, this case offers several practical lessons:

• Use multiple sources: do not rely on a single screening tool. Cross-check findings with other intelligence providers.
• Document your reasoning: keep a clear record of how decisions were made, especially when terminating contracts.
• Engage legal counsel early: where sanctions issues arise, seek legal advice before taking irreversible steps.
• Train compliance teams: ensure that those conducting due diligence understand the limitations of automated tools and the importance of context.

Conclusion

Tonzip Maritime v 2Rivers is a timely reminder that sanctions compliance must be grounded in careful, evidence-based decision-making. While third-party tools can be valuable, they are not a substitute for legal judgment and critical analysis.

In the interim, a further complication has arisen in this case. The defendant was added to the UK Sanctions List on 17 December 2024 and a further hearing was scheduled for 31 July 2025 to deal with the effect of this. That judgment is awaited.

Given the judge’s findings, an application for permission to appeal the decision to the Court of Appeal looks likely to be on the cards.

Penningtons Manches Cooper announces the reappointment of Chief Executive Officer Helen Drayton for a second three-year term, beginning 1 October. Her re-election, unopposed and unanimously supported, follows a year of robust performance and strategic progress.

Strong financial performance

FY25 was the firm’s 16th consecutive year of growth, with revenue up 7% to £120 million, an 18.4% lift in profit to £42 million and a 25% increase in PEP to £555k.

“Our results reflect the power of a purposeful strategy,” Helen commented. “By focusing on delivering meaningful outcomes for our clients and creating agile, collaborative environments for our people, we’re building a business that’s both high-performing and anchored in our ambition to be the most human law firm.”

Three years of strategic progress

Since taking over the leadership, Helen’s priority has been to bring together the firm’s full service offering across its four divisions: Business Services, Dispute Resolution, Private Individuals and Real Estate, concentrating on servicing clients in its core and growth sectors – and internationally.

Client centric strategy

• Developed by a restructured Executive and Strategy Board, the 2023–26 Strategic Plan, focuses on putting clients at the heart of every decision and supporting colleagues to thrive and deliver the quality service clients have come to expect.
• The introduction of a new key client programme is helping deepen relationships and drive innovation.

People and culture

• The firm is equipping its lawyers with the tools they need to win, retain and grow client relationships. This has included an overhaul of the training academy for all associates, a new look ‘future leaders’ programme, the adoption of DCM Insights Activator Advantage training for all partners and the firmwide launch of LinkedIn Sales Navigator.
• The firm’s new family leave policy launched at the end of 2024, offering 26 weeks paid leave for all parents, and up to 52 weeks total leave, regardless of circumstances (pregnancy, surrogacy, adoption, or fostering).  It also offers an additional 12 weeks of full pay for parents of babies needing neonatal care. The policy also includes support for fertility treatment, pregnancy loss, and dependents with long-term care needs.

Growth and expansion

• Since the launch of the 2023–26 Strategic Plan, the firm has appointed 23 new partners through a combination of strategic lateral hires and internal promotions. The appointments align with core and growth sectors, and reflect a commitment to supporting clients’ developing needs.
• The firm’s new hub in the port of Antibes, in the South of France, enables direct access to the high-growth Mediterranean yacht sector and wider maritime industries.
• The Singapore office has also strengthened its shipping, commodities, and trade finance offering in the Asia-Pacific with two recent partner hires.

Responsible business

• The firm has rejuvenated its responsible business programme over the last year. A new committee brings together key members of the executive team (including the CEO) together with specialist partners, to help shape and oversee the firm’s commitments to the environment and sustainability, diversity, equity and inclusion, and social impact in its communities.
• The firm’s five-year partnership with the Bumblebee Conservation Trust is among its long-term initiatives.

Real estate transformation

• This Spring saw the successful completion of the firm’s programme to modernise and enhance the working environments across its UK offices. Driven by the firm’s sustainability commitments, the project also aimed to create the best possible spaces for hybrid working and cross-team collaboration, including new premises in Guildford and Cambridge. The programme now moves to focus on the international offices.

Major client wins

• Significant client mandates strengthened the firm’s position in its core and growth sectors, emphasising its ability to deliver complex work, such as:

• • The cross-border aviation ‘mega-trial’, in which the firm’s specialist aviation team successfully defended Swiss Re against significant reinsurance exposure.
  • The family team’s work on one the most significant cases involving  pre-nuptial agreements since the landmark Radmacher decision in 2010.
  • The Madrid office advising on the delivery of Europe’s first hybrid high speed passenger ferries, and members of the London based shipping team advising on the design, build and delivery of the world’s first ammonia marine duel-fuel supply system – both projects represented important milestones in the sector’s decarbonisation efforts.

“We’ve laid the foundations—and now we’re accelerating,” said Helen.  “It’s a genuine privilege to continue leading such a talented and ambitious team. I’m looking forward to helping shape the next chapter of our journey, really harnessing the successes of the last three years with a clear focus on what matters most to our clients and people.”

There have been many changes to building and fire safety claims and it is easy to be confused by the evolving landscape. In the final part of a series explaining the most important legal vehicles being used in claims, Chris Bates, Sara Stephens and Jamil Sanaullah take a look at improvement notices.

Improvement notices are an enforcement power introduced under sections 11 and 12 of the Housing Act 2004. They are therefore not a new power. They are, in fact, a longstanding feature of England and Wales’ enforcement framework in relation to unsafe premises.

They have been mostly used over the years to take action where rented properties have issues such as damp and mould, pest infestations and electrical issues. In the post-Grenfell building and fire safety landscape, we are increasingly seeing these powers used to try to accelerate and compel the remediation of buildings with historic fire safety defects.

When it becomes apparent that a residential property is ‘hazardous’, an improvement notice can be served, requiring that remedial action be taken within a specified time period. The notice can be issued whether the hazard is serious (a ‘category 1 hazard’) or less serious (a ‘category 2 hazard’) according to the Housing Health and Safety Rating System (HHSRS).

Who can serve an improvement notice?

The decision over whether to serve an improvement notice and, if so, the scope of the required remedial works is vested in the local housing authority. They are the only ones empowered to take enforcement action via the use of improvement notices.

Local housing authorities must keep the housing conditions in their area under review, with the intention of identifying any necessary enforcement action. Increasing political pressure (and government funding to assist) has led to local housing authorities reviewing higher-risk buildings to ensure that appropriate remedial works are being carried out, and that those works are happening quickly enough.

The local authority must revoke the notice when it is satisfied that its requirements have been complied with. They also have the flexibility to vary a notice’s requirements by agreement with the recipient, or to revoke only part of the notice when, for example, multiple hazards were listed in the notice but only a certain number have been rectified.

Who can be served with an improvement notice?

The local housing authority will serve the improvement notice on the owner and/or manager of the relevant property. Importantly in the context of building safety, a developer who is no longer the owner of a building cannot be served with an improvement notice. Further, an improvement notice can be served on the owner, even if all repairing obligations lie with a manager.

A person who receives an improvement notice should check the notice has been validly made by the local authority (as per section 13 of the Housing Act 2004) before taking decisive action as appropriate. The notice must, for example, specify whether it is made in respect of category 1 or category 2 hazards, as well as what action must be taken to address the hazards and by when.

It is possible for the recipient to appeal to the First-Tier Tribunal (Property Chamber) to challenge the making of the notice, but this must be submitted within 21 days starting from the day the notice was received. Unless it can be guaranteed that the notice will be complied with within the relevant timeframes, it is sensible to lodge a protective appeal while the notice is fully considered.

Improvement notices must be complied with by the recipient building owner/manager, potentially leading to a civil penalty or criminal sanctions if they fail to do so.

Landlords may also be subject to a banning order for failure to comply with a notice. Time limits in an improvement notice are to be respected. In Newham v Chaplair, the recipient of the notice (Chaplair) was fined £30,000 and ordered to pay the local authority’s costs because it failed to remedy unsafe cladding by the requisite deadline. It is also important to note that improvement notices persist even when the property changes hands. If the property owner or manager is replaced after the notice has been served, that new person is liable under the notice as if it was originally served on them, and there is no automatic extension of the time limit for compliance.

What is their relevance to the new building safety landscape?

Improvement notices are a powerful tool for compelling building owners to remediate buildings deemed unsafe due to cladding or other building safety defects. They may well become more prevalent in the future, as a result of the government’s drive to increase the speed of remediation works.

However, there is some tension between improvement notices and other aspects of the wider building safety regime. It is building owners who have to deal with improvement notices – and the criminal sanctions for failure to comply – even where they were not responsible for the building defects and where a developer may already have agreed to complete remedial works under the Government’s Self Remediation Contract (SRC).

Across the country many property owners are in productive partnerships with developers who have signed up to the SRC. However, local authorities continue to identify and deploy improvement notices in relation to properties’ hazards – fire-related or otherwise. Some property owners therefore find themselves caught between two regimes, on the one hand, being served with an improvement notice by the local authority requiring works to the old HHSRS standard, and on the other, working with a developer to the new PAS 9980 standard, which is relevant to works undertaken pursuant to the SRC. The question of what happens when these two regimes meet has not received much judicial consideration.

However, in the recent case of Raingate v London Borough of Camden, (LON/00AG/HIN/2022/0019) Raingate (a freeholder) was served with an improvement notice by Camden in relation to potentially unsafe ACM cladding that was present in one of its properties. Raingate appealed the notice and ultimately the notice was varied. What is significant, however, is that Camden’s notice required Raingate to either remove the unsafe cladding, or alternatively, to commission further expert fire safety reports in accordance with the PAS 9980 standard. It remains to be seen whether other local authorities will also adopt this standard, but this is at least one example of the two building safety regimes working together.

The interaction between improvement notices, remediation orders and remediation contribution orders was highlighted in the Empire Square case (LON/00BE/HYI/2023/0013 and LON/00BE/BSB/2024/0602), discussed further in previous articles in this series.

This article was originally published in the Estates Gazette in July 2025.

There have been many changes to building and fire safety claims and it is easy to be confused by the evolving landscape. In the fifth in a six-part series explaining the most important legal vehicles being used, Chris Bates, Sara Stephens and Jamil Sanaullah discuss construction/cladding products.

The introduction of liability relating to construction/cladding products under sections 147 to 151 of the Building Safety Act 2022 is a lesser known new liability in the building safety landscape, but one which has potential significant consequences for the construction and property industries.

The cause of action arises from various non-compliances related to construction/cladding products with respect to works to a residential building, which causes the building to be unfit for habitation. For cladding products, this cause of action has a 30-year retrospective limitation period where the works in question were completed before 28 June 2022. For cladding products and the wider category of construction products, where the works were completed on or after this date, there is a 15-year limitation period. Liability for these causes of action can result in damages payable to a person with an interest in the building.

Readers may be forgiven for wondering how this cause of action differs from a claim under the Defective Premises Act 1972. It differs in that it potentially broadens legal liability not only to those actively involved in the relevant construction project (ie designers and contractors) but also (through this cause of action) to those who manufacture, market and supply construction/cladding products used in the project.

At the time of writing, there is not yet any published judicial treatment of this new cause of action but, as explored in this article, its use may be of particular interest to owners, developers and contractors seeking to pass on liability to manufacturers, marketers and suppliers of construction products.

What buildings and defects are covered

The type of building covered is a building that is a dwelling or a building containing two or more dwellings. This can therefore cover houses, residential buildings and mixed-use buildings with at least two dwellings, but does not cover commercial or any other non-residential buildings.

With respect to defects, the key issue is whether the non-compliance has resulted in the building being unfit for habitation. The test of fitness for habitation is likely to be the same as that under the 1972 Act. It is worth noting that the cladding products’ cause of action is obviously directly aimed at products that create a fire safety risk, with the definition of a cladding product including a cladding system or any component of a cladding system. The cause of action for construction products more generally is wider and could relate to other products that cause a structural risk or water ingress issue (or another serious problem), which leads to a lack of fitness for habitation.

Who can bring a claim and who can face a claim?

Any person with a ‘relevant interest’ in the relevant building who has suffered personal injury, damage to property or economic loss as a result of the product causing the dwelling to be unfit for habitation, can bring a claim. The reference to economic loss is likely to include the costs of rectifying defects in the relevant building.

Relevant interest (for England and Wales) is defined as a legal or equitable interest in the dwelling or the building containing the dwelling. This would cover freeholders and leaseholders but, unlike the 1972 Act, this cause of action would appear not to cover developers on the basis of ordering the works (if they no longer have a relevant interest in the building). That said, it may be possible for developers (and others further down the supply chain) to indirectly rely on the cause of action by bringing a claim against (for example) a manufacturer for a contribution under the Civil Liability (Contribution) Act 1978 and alleging that the manufacturer is liable to the owner for the same damage as the developer. This would be through the developer asserting that the manufacturer is liable to the owner by virtue of the cladding/construction products cause of action.

As to parties who may be subject to a liability, the 2022 Act is clear that it can cover a person who markets or supplies a construction/cladding product, as well as a person who manufactures the product. It also covers a person that fails to comply with a construction/cladding product requirement. A construction/cladding product requirement is defined by reference to various specific construction products regulations or (in the case of construction products) any further regulations included in paragraph 1 of Schedule 11 of the 2022 Act. It is assumed these requirements largely apply to product manufacturers, marketers and suppliers.

What is the threshold of liability?

The threshold of liability is based on establishing conditions A to D as contained in sections 148 and 149 of the 2022 Act.

Under condition A, there must be: (i) a failure to comply with a construction/cladding product requirement (as discussed above); (ii) a marketer or supplier of the product that makes a misleading statement in relation to the product; or (iii) the manufacturer having manufactured a product that is inherently defective.

Under condition B, the product is then installed, applied or attached to the relevant building (or, for cladding products, to the external wall of the relevant building) in the course of works to construct the building or otherwise in relation to the building. This means that (like with the prospective change to liability under the 1972 Act) this cause of action is relevant not just for the original construction of the building, but also for further works undertaken during its lifespan.

Under condition C, once the works are complete, the dwelling must be unfit for habitation. And, under condition D, the non-compliance under condition A must be the cause (or one of the causes) of the dwelling being unfit for habitation.

What is their relevance to the new building safety landscape?

Liability for construction/cladding products is a new and untested remedy introduced by the 2022 Act. As such, many questions and uncertainty about how this legal vehicle will work in practice remains.

That said, it is clearly a further expansion of potential liability for serious defects with residential properties. It is primarily aimed at those responsible for the manufacture, marketing and supply of construction (including cladding) products that cause a building to be unsafe. They introduce a direct route for owners to sue such people for remedying defects with a very generous 30-year retrospective limitation period for cladding products and a 15-year prospective limitation period for cladding and other construction products. Before this, such claims may well have been impossible or very difficult. They arguably also allow developers, contractors and consultants to rely on this cause of action to seek contribution from product manufacturers, marketers and suppliers when themselves facing liability to owners.

Claims relying on this cause of action are currently being used by parties involved in building and fire safety claims and it is only a matter of time before there is a court judgment deciding, and giving guidance on, a claim under this cause of action.

This article was originally published in the Estates Gazette in July 2025.

There have been many changes to building and fire safety claims and it is easy to be confused by the evolving landscape. In the fourth in a six-part series explaining the most important legal vehicles being used, Chris Bates, Sara Stephens and Jamil Sanaullah take a look at remediation contribution orders.

Section 124 of the Building Safety Act 2022 gives the First-tier Tribunal the power to order a ‘specified body corporate or partnership’ to make payments to a ‘specified person’ for the purpose of meeting costs that have been or will be incurred in remedying ‘relevant defects’ relating to a ‘relevant building’. An order can only be made if the FTT considers it ‘just and equitable’ to make an order. Such an order is called a remediation contribution order.

Relevant defect

RCOs can be made in respect of works to address a ‘relevant defect’, which is defined as a defect which causes a building safety risk, arising as a result of anything done (or not done), anything used (or not used) in connection with ‘relevant works’. Relevant works mean:

• (a) works relating to the construction or conversion of the building;
• (b) works undertaken or commissioned by or on behalf of a relevant landlord or management company; or
• (c) works undertaken to remedy a relevant defect.

Relevant building

RCOs can only be made in respect of a ‘relevant building’, which means a self-contained building, or self-contained part of a building that contains at least two dwellings and is at least 11m high or has at least five storeys. The definition of ‘self-contained part’ of a building was considered (in the context of right to manage claims, but of likely relevance to the Building Safety Act) by the Upper Tribunal in two appeals (heard together): Courtyard RTM Co Ltd and others v Rockwell (FC103) Ltd and another; 14 Park Crescent Ltd and another v 14 Park Crescent RTM Co Ltd [2025] UKUT 39 (LC); [2025] EGLR 8. Permission to appeal has been granted in Park Crescent so the Court of Appeal will consider the definition of “self-contained part” in due course.

Costs that can be included

The 2022 Act sets out a number of different types of costs that can be included within an RCO application, but makes clear the list is not exhaustive and, further, allows for the secretary of state to specify further descriptions of costs in regulations. The costs explicitly mentioned in the 2022 Act are:

• (a) costs incurred or to be incurred in taking relevant steps in relation to a relevant defect in the relevant building;
• (b) costs incurred or to be incurred in obtaining an expert report relating to the relevant building; and
• (c) temporary accommodation costs incurred or to be incurred in connection with a decant from the relevant building (or from part of it) that took place or is to take place –
  • (i) to avoid an imminent threat to life or of personal injury arising from a relevant defect in the building,
  • (ii) (in the case of a decant from a dwelling) because works relating to the building created or are expected to create circumstances in which those occupying the dwelling cannot reasonably be expected to live, or
  • (iii) for any other reason connected with relevant defects in the building, or works relating to the building, that is prescribed by regulations made by the secretary of state.

In Empire Square, leaseholders applied for a remediation order and the freeholder then applied for an RCO against the developer. The FTT found the costs of both the remediation order and RCO could be recovered as part of the RCO noting: ‘If the building had been remediated, we would not be considering the applications. The RO application would not have been brought. The RCO would not in consequence have been sought.’

Relevant steps

Relevant steps are defined as steps to prevent or reduce the likelihood of a fire or collapse of the building (or any part of it) occurring as a result of the relevant defect, reducing the severity of any such incident or preventing or reducing harm to people in or about the building that could result from such an incident.

Who can apply?

An ‘interested person’ can apply for an RCO, which means:

• (a) the secretary of state;
• (b) the Building Safety Regulator;
• (c) the relevant local authority;
• (d) the relevant fire and rescue authority;
• (e) a person with a legal or equitable interest in the relevant building or any part of it; or
• (f) any other person prescribed by regulations, which now includes the Homes and Communities Agency, the manager of the building, a resident management company and a right to manage company.

Who can an RCO be made against?

RCOs can be made against a body corporate or partnership who is:

• (a) a landlord under a lease of the relevant building or any part of it;
• (b) a person who was such a landlord as at 14 February 2022;
• (c) a developer in relation to the relevant building; or
• (d) a person “associated” (as defined in section 121 of the 2022 Act) with a person within any of paragraphs (a) to (c).

What is their relevance in the new building safety landscape?

Several RCOs have been made at the time of writing. The most significant decision to date is Triathlon Homes LLP v Stratford Village Development Partnership and others [2024] UKFTT 26 (PC); [2024] PLSCS 16, in which the tribunal considered the extent of the ‘just and equitable’ test. The FTT ordered that an RCO be made against both the original developer, Stratford Village Development Partnership, and against SVDP’s owner, Get Living, despite the fact Get Living did not own SVDP at the time the buildings were developed. SVDP did not have the funds to comply with an RCO without the financial support of Get Living so the FTT considered it just and equitable to also make an order against Get Living.

In addition to considering the matter of who to make the RCO against, the FTT also determined it had jurisdiction to make an RCO in respect of costs that had been incurred before the 2022 Act came into force. Further, the FTT determined that an RCO can be made in respect of costs incurred in preventing risks from materialising, including the costs of a waking watch or the installation of a temporary fire alarm system.

The decision in Triathlon Homes was appealed and heard by the Court of Appeal in March 2025, with judgment awaited at time of writing. The appeal concerned whether an RCO can be made in respect of costs incurred before the 2022 Act came into force and, if so, whether the RCO should have been made in the circumstances.

The just and equitable test was further considered in Vista Tower (CAM/26UH/HYI/2023/0003), in which the FTT re-emphasised its broad discretion as to whether to grant an RCO. The FTT found the ‘just and equitable’ test is deliberately wide so funds can be found quickly to ensure remediation work can be carried out and/or funds obtained from public grants can be recovered promptly. The FTT made an RCO against numerous parties (76 in total) with joint and several liability. The respondent entities were all linked by certain directors/their families, who controlled the ‘fluid, disorganised and blurred network or structure’ or companies, and all were involved in property development.

The tribunal also determined that ‘defect’ was not restricted to meaning non-compliance with building regulations and that any risk above ‘low risk’ can constitute a building safety defect.

Permission to appeal in Vista Tower has been granted to consider several matters, including whether an RCO can be made on a joint and several basis and whether an RCO can be granted against defects which are considered ‘tolerable’.

The application of the ‘just and equitable’ test in Triathlon Homes was considered in relation to building liability orders in St Andrews House (LON/00AG/LDC/2023/0270), indicating that cases considering one remedy in the 2022 Act are likely to have relevance to other remedies. The applicant in Vista Tower has also applied for a BLO, showing the different types of remedy in the 2022 Act can be pursued, where appropriate, alongside each other, particularly where one type of application may not adequately deal with all the issues.

In Empire Square (LON/00BE/HYI/2023/0013 and LON/00BE/BSB/2024/0602), the FTT held that the RCO could be suspended to give the developer one last chance to carry out works and, if it failed to do so, it would be required to pay the sums under the RCO to enable the freeholder to complete the works. The decision in that case highlights the interaction between the various provisions in the 2022 Act, as well as improvement notices under the Housing Act 2004 and the government’s building safety repairs pledge.

RCOs are one of a number of tools introduced by the 2022 Act that can be used to help get vital building safety works carried out to buildings. They have been interpreted by the FTT to provide a wide discretion as to the defects covered, who they can be made against and on what basis. They are designed to be relatively easy to apply for and, on the FTT’s interpretation, applicants are not required to establish the exact relationship between ‘associated’ entities and, further, associated entities can be subject to an RCO even where they were not involved with the building at the time it was built.

This article was originally published in the Estates Gazette in July 2025.