Supreme Court dismisses URS Corp appeal in BDW Trading Ltd case

The Supreme Court's decision in URS Corporation Ltd v BDW Trading Ltd was handed down this morning, dismissing the appeal on all grounds, re-confirming the Court of Appeal's decision that developers may be owed duties under S.1.1 of the Defective Premises Act 1972 and providing a useful analysis of the interaction between the Building Safety Act 2022 (BSA) and the Civil Liability (Contribution) Act 1978 (Contribution Act).

Background

Following the events giving rise to the Grenfell Tower tragedy in 2017, the Government encouraged developers to carry out investigations into medium and high-rise developments and to remedy any safety defects discovered.

In 2019, BDW Trading Ltd (BDW) found structural design defects in two high-rise developments (the Developments) - both of which designed by URS Corporation Ltd (URS).

Having sold long leases of the flats to residential purchasers, BDW no longer had a proprietary interest in the Developments. Despite this, following the discovering of the defects, in 2020 and 2021, BDW carried out remedial works to the Developments. BDW sought to claim for their losses in relation to carrying out the remedial works from URS and issued a negligence claim in the Technology and Construction Court.

The TCC found that that BDW's cause of action accrued no later than the date of practical completion and the losses were recoverable because BDW did hold a proprietary interest at the point of the cause of action. URS appealed – the grounds of which are set out in our earlier article [Developers are owed duties under the Defective Premises Act 1972 (DPA)].

The Court of Appeal upheld the finding of the TCC dismissing all grounds of the appeal but, on 5 December 2023, the Supreme Court granted URS leave to appeal on four grounds and eventually hearing the case in early December 2024.

Ground one

The Ground

Did BDW suffer actionable and recoverable damage or was this damage outside the scope of the duty of care as they voluntarily completed the remedial works? If it was to be found that this was out of the scope, did BDW already have an accrued cause of action in negligence when it sold the Developments?

Judgment

It was not disputed that URS was in breach of their duty of care owed to BDW in respect of the structural designs of the Developments and that in order to remedy this breach, BDW incurred losses.

URS, however, argued that due to the voluntary action taken by BDW to remedy the defects, the losses were too remote. Finding that the loss was not too remote, the Court turned its attention to whether a principle of voluntariness applied.

The Court held that due to three factors, the actions taken by BDW were not voluntary:

1. If BDW did not remedy the defects, there was a risk of personal injury or death;
2. BDW had a legal liability to the homeowners under the DPA; and
3. There would be reputational damage to BDW if they did not take any action.

Finding that BDW had no realistic alternative but to carry out the works, the Court held that there was no rule of law which meant that the carrying out of the repairs by BDW rendered the remedial costs outside the scope of the duty of care owed or too remote.  As a result of the finding, and to the frustration of some practitioners, the Court did not continue to consider the correctness of the House of Lords decision in Pirelli.

Ground two

The Ground

Section 135 of the BSA came into force on 28 June 2022 and retrospectively extended the limitation period for accrued claims under section 1 of the DPA from six years to up to 30 years. Did this apply to these circumstances and what effect does it have?

Judgment

The question before the Court was not whether section 135 applied retrospectively (it is clear that it does). Instead, the issue before the Court was whether the retrospectivity of s.135(3) of the BSA applies to other claims which are dependent on the time-bar applicable to claims under s.1 of DPA. For example, the claims in this case in negligence and for contribution

The Court held that, as a matter of language, the wording of section 135(3) is not intended to restrict the extended limitation period to actions under section 1 of the DPA; it can apply to claims reliant on Section 135(3) but not brought under Section 1 of the DPA. It does not however apply to questions of mitigation and/or causation - if there is an issue as to the reasonableness (as a matter of legal causation or mitigation) then that issue would be determined by reference to the facts as at the time of the relevant actions.

Ground three

The Ground

Under section 1(1)(a) of the DPA, did URS owe a duty to BDW? If so, were the losses claimed from BDW recoverable for a breach of this duty?

Judgment

When considering the wider context behind the words of section 1(1)(a) of the DPA, the Court deemed that they should be interpreted as applying to any person, including the developer who ordered the dwelling to be built.

As such, the wording of section 1(1)(a) of the DPA would apply to BDW as the first owner who had ordered the relevant works to be carried out by URS meaning that a duty was owed to BDW.

Where a duty is found to be owed, the DPA does not prohibit the recovery of certain costs. It follows that BDW would be entitled to recover any losses incurred by them when acting as a developer remedying defects caused by its contractor's breach of duty.

Ground four

The Ground

The Contribution Act gives a person (D1) who is liable for damage suffered by another person (C) a right to recover contribution from anyone else (e.g. D2) who is liable for the 'same damage'. In this way the cost of compensating C can be allocated between D1 and D2 according to their relative responsibility for the damage that C has suffered. Here BDW, having paid for the repairs, claimed contribution from URS under the Contribution Act on the basis that BDW and URS are each liable to the homeowners for damage resulting from the defects.

The Court was asked to determine whether, despite the fact that no third party had brought a claim against BDW in relation to the defects, could BDW bring a claim pursuant to section 1 of the Contribution Act?

Judgment

Referring to the judgment of Lord Leggatt, Ground 4 was also dismissed.

In his judgment, Lord Leggatt, stated that BDW was not prevented from bringing a claim for contribution against URS by the fact that there has been no  judgment against BDW, third party settlement or Claim asserted against BDW.

Ultimately finding that as BDW made a payment in kind by performing the remedial works in compensation for the damage, it was sufficient for them to bring a claim pursuant to section 1 of the Contribution Act

Summary

This case set out to apply several key acts impacting the construction industry with numerous important takeaways. The most important of which is that a contractor on the duty of care owe a duty of care for pure economic loss - even after the developer had sold their interest in the development.