Case law update: Avidly awaited Supreme Court decision dismisses URS’s appeal on all grounds in URS Corporation Ltd v BDW Trading Ltd

In a decision which finally determines a number of points crucial to building safety claims since the Building Safety Act came into force, the Supreme Court has found in BDW’s favour on all counts, giving a clear steer on how various building safety liabilities will now be seen by the judiciary.

If you’re reading this then you may well already be fully versed on the facts and history of this case but as a (relatively) brief refresher, prior to the Grenfell Tower tragedy in 2017, BDW developed two residential tower blocks and appointed URS as structural engineer. In 2019, by which point BDW no longer had a proprietary interest in the towers, BDW carried out investigations and structural defects were identified. BDW arranged evacuations and undertook temporary and permanent remedial works.

In March 2020, BDW commenced proceedings in the Technology and Construction Court (TCC) against URS to recover the costs it had incurred, claiming that URS had breached its tortious duty to exercise reasonable skill and care. No claim was brought under the contract because the limitation period had expired. The TTC held that BDW’s losses were recoverable because the cause of action for economic loss accrued no later than practical completion (at which point BDW still had a proprietary interest in the towers) and there was nothing to prevent the developer from bringing a contribution claim against the designer under s1(1) Civil Liability (Contribution) Act 1978 (Contribution Act), even though no claims had been brought against the developer by the purchasers of the flats.

The Building Safety Act 2022 (BSA) and section 135 then came into force, which retrospectively extended the limitation period for claims under the Defective Premises Act 1972 to 30 years. The TCC permitted BDW to amend its pleadings to add claims under the DPA and the Contribution Act.

URS appealed and, in August 2023, the Court of Appeal upheld the TCC’s decision and dismissed all grounds of URS’s appeal.

URS appealed again to the Supreme Court on four grounds and yesterday the Supreme handed down its avidly awaited judgment.

Supreme Court decision

Ground 1: (i) Did BDW suffer actionable and recoverable damage or was the damage outside the scope of the duty of care and/or too remote because it had voluntarily carried out the remedial works? (ii) If the damage is outside the scope of the duty of care or is too remote, did BDW already have an accrued cause of action in negligence when it sold the Developments?

It was not in dispute that URS was in breach of its duty of care by providing defective designs, so in principle BDW had a claim in negligence for the cost of the repairs. URS argued that BDW was not entitled to compensation because BDW no longer had a proprietary interest in the properties and there was no enforceable obligation on it to undertake the repairs. The Court held that URS had not established a “principle of voluntariness that operates as a bright line rule of law rendering loss too remote or outside the scope of the duty of case in the tort of negligence”. BDW's loss was neither outside the scope of URS's duty nor too remote. Voluntary conduct may be a factor to take into account when analysing legal causation and mitigation (which is fact sensitive) but that would need to go to trial and URS focussed instead on scope of duty and remoteness.

The Court also found that BDW was not “exercising full and free choice so as to be regarded as voluntary” for three reasons:

1. there was a risk that the defects would cause personal injury or death to homeowners;
2. BDW had a legal liability to the homeowners under the DPA or in contract for the cost of the repairs; and
3. it was in BDW’s commercial interest because there would have been reputational damage if it had not remedied the defects once it knew of the danger to homeowners. It was also in the general public interest.

The Court felt that the conclusions it reached are consistent with underlying policy:

• in relation to remoteness, to draw an appropriate line protecting the defendant against excessive liability and not holding it liable for all loss factually caused by its breach no matter how far removed in time and space;
• in relation to the scope of URS’s duty, the law’s focus on the purpose of that duty – URS’s obligation to protect BDW from the very type of loss it incurred (repair costs to the developments) – in order to achieve a fair and reasonable allocation of the risk of the loss. The Court felt it was fair and reasonable for URS to bear the risk of that loss because the repair costs were a consequence of its negligence. “More over, the policy of law favours incentivising a claimant in BDW’s position to carry out the repairs so as to ensure that any danger to homeowners is removed” .

Because the Court found, on the first point in this ground, that the damage was not outside the scope of the duty of care owed by URS, it did not go into detail on the second point.

Ground 2: Does the retrospective extended 30 year limitation period apply to BDW's claims in negligence and contribution (which are dependent on s1 DPA)?

The Court found that the retrospective extended 30 year limitation period introduced by s135 BSA does apply to claims which are dependent on the time limit applicable to claims under s1 DPA and not just those that are brought under it. s135(3) BSA refers to “an action by virtue of s1 DPA" and there is nothing in s135 that suggests it should be limited to claims under s1 DPA.

The Secretary of State for Housing, Communities and Local Government made written submissions on this ground, which the Court said were particularly helpful in relation to the policy and purpose underlying the BSA and s135 in particular. The BSA is both forwards and backwards looking and s135 falls into the latter. If s135 only applied to claims against the developer and not onward claims (such as claims like this in negligence and contribution), this would penalise developers and deter them from proactively identifying and remedying defects. The central purpose and policy of the BSA is to hold to account those responsible for defects and this would be undermined if the interpretation of s135(3) was|to be limited in this way.

Ground 3: Did URS owe a duty to BDW under s1(1)(a) DPA and, if so, are BDW’s alleged losses of a type which are recoverable for breach of that duty?

Under s1 DPA, a person taking on work for or in connection with the provision of a dwelling owes a duty to any person, to whose order a dwelling is provided, to see that the work which he takes on is done in a workmanlike or professional manner with proper materials so that the dwelling is fit for habitation. URS argued that this does not confer a benefit on a developer, essentially because developers do not inhabit dwellings.

The Court held that the provision should be interpreted as applying to any person to whose “order” a dwelling is built, such person most obviously being a first owner who order work in respect of a dwelling. The relevant work was carried out to the order of BDW and as such URS owed BDW a duty under s1(1) DPA. The Court also rejected URS's argument that a person cannot be owed a duty and owe a duty under s1 DPA, holding that “there is no good reason why a person, for example, a developer, cannot be both a provider and a person to whom the duty is owed”.

On the second point in this ground, the Court rejected URS’s argument that BDW’s alleged losses – namely, losses incurred by a developer in remedying defects caused by its contractor’s breach of duty – are not a type of loss recoverable for breach of duty under s1 DPA.

Ground 4: Is BDW entitled to bring a claim against URS under section 1 of the Contribution Act when there has been no judgment or settlement between BDW and any third party and no third party has ever asserted any claim against BDW?

This is linked to URS’s point that BDW undertook the remediation works voluntarily. URS argued that the right to bring a contribution claim arises only after a person’s liability to the injured party is ascertained by judgment, admission or settlement. BDW argued that the right arose when the damage occurred.

The Court held that the right to contribution arises when (i) damage is suffered by a person and more than one person is liable for that damage, and (ii) one of the liable parties has paid, been ordered or agreed to pay compensation for that damage. At that point, but not before, the party who made the payment, or payment in kind (performing remedial works), can claim contribution from the other liable party. BDW carried out the repairs and the fact that there was no judgment against BDW or admission of liability or settlement between BDW and the homeowners does not stop BDW from claiming contribution from URS.

Thoughts and take-aways

In summary, some key points to take away from this are that:

• a party can recover repair costs in a negligence claim where they carried out those repairs voluntarily, particularly where not doing so carries a risk of personal injury or death;
• the retrospective 30 year limitation period under s135 BSA applies to claims that are dependent on the time limit applicable to claims under s1 DPA, including negligence and contribution claims, and not just those that are brought under it;
• a developer is a person for the purpose of, and can therefore bring claims under, s1 DPA against a party responsible for the defects which made a dwelling unfit for habitation;
• parties who carry out remedial works can claim under the Contribution Act once the amount of the liability has been established, whether that be by that party paying or agreeing to pay an amount, or being ordered to pay an amount.

At the heart of this case sits the message that there should be a fair and reasonable allocation of the risk of incurring losses in carrying out remediation works to ensure that any danger to homeowners from defects is removed.