Construct.law - Autumn 2023

Case analysis: URS Corporation Ltd V BDW Trading Ltd

By James Worthington

The recent decision in URS Corporation Ltd v BDW Trading Ltd[i] is the first Court of Appeal decision on the extended limitation periods applying to claims under the Defective Premises Act 1972 (DFA) that were brought into force by the Building Safety Act 2022 (BSA).

The dispute concerned two residential developments of tower blocks which were practically completed in February 2005 and October 2012 in East London and Leicester. BDW was the developer and sold their interest in the developments before 2019. URS was employed by BDW as the structural engineer for both projects.

In 2019, after BDW had sold their interest in the developments, alleged negligence in the performance of the structural design services were discovered. Whilst no physical damage was manifest at this stage, these defects did create a health and safety risk to residents. Despite having no proprietary interest in the blocks, BDW procured investigations, arranged evacuations, undertook temporary works and permanent remedial works.

BDW commenced a claim in tort against URS for compensation in respect to the costs incurred as a result on the basis that URS owed a tortious duty to exercise reasonable skill and care.

Technology and Construction Court decision of preliminary issue

The TCC held that URS owed duties in tort to BDW that extended to its claimed losses except for certain reputational losses, even though it no longer had any proprietary interest in the developments when the remedial works were undertaken.

After that decision, the limitation period for claims under the DPA was retrospectively extended to 30 years pursuant to section 135 of the BSA. Consequently, BDW sought permission to amend its pleadings to add claims under the DPA and the Contribution Act 1978 as a consequence of the extended limitation periods. The amendments were permitted by the TCC on the basis that the amendments were reasonably arguable.

URS appealed both the decision on the preliminary issues and the permission granted to amend BDW’s pleadings.

The Court of Appeal decision

The Court of Appeal considered several questions:

Were the losses recoverable?

URS argued that the risk of harm that they were obliged to guard against was the harm caused to BDW’s proprietary interest in the buildings and/or the risk of BDW being exposed to claims brought by those to whom it had sold those proprietary interests (namely, the individual purchasers). URS argued that neither risk came to fruition in this case because, by the time the defects were discovered, BDW no longer had a proprietary interest in the developments and any claims by third party purchasers were statute-barred.

However, the Court of Appeal held that this was a standard duty imposed on a design professional which was co-existent with that professional’s contractual obligations. The risk of harm was that, in breach of the professional’s duty, the design of the buildings would contain structural defects which would have to be subsequently remedied. The losses were therefore within the scope of URS’ duty. It was irrelevant that there may not have been an obligation on BDW to carry out such works when the losses were incurred.

These were not “reputational” losses as the Court held that it has “long been the case that a builder who goes back to rectify defective work can recover the relevant cost, even if he was under no obligation to carry out such remedial works”. Otherwise, the law would be penalising a developer for acting responsibly.

When did the cause of action in tort accrue?

BDW argued that it accrued as early as practical completion or, alternatively, on selling the apartments to the relevant third parties, i.e. when it still had a proprietary interest in those buildings. URS argued that it accrued on discovery of the defects in 2019. The Court decided:

For physical damage, it accrues on occurrence of that damage, regardless of the claimant’s knowledge of the physical damage or its discoverability.
For defective design with no physical damage, it accrues, at the latest, on practical completion of the building because at that point the defective and dangerous structural design had been irrevocably incorporated into the buildings. Actional damage had been suffered because those buildings were structurally deficient.

Was the TCC right to allow the amendments to the pleadings to allow the introduction of claims under the Defective Premises Act 1972?

These claims had not originally been pleaded due to the shorter limitation period that applied for these types of claim until the limitation period was retrospectively extended by the Building Safety Act 2022.

The Court held that section 135 of the BSA 2022 (retrospectively extending the limitation period for DPA claims) is to be taken as always having been in force, with no statutory exception for ongoing proceedings. The only exception was to claims that had been finally determined or settled.

Therefore, the claim could be amended to add in claims under the Defective Premises Act 1972 as a result of the extended limitation periods for these claims.

Was BDW owed a duty by URS under the Defective Premises Act 1972?

The Court held that there was such a duty, as the buildings in question where provided “to the order of” BDW. It did not matter than BDW also owed a duty under the Defective Premises Act 1972 to the individual purchasers.

BDW could also recover the losses suffered as a result of any breach of this duty, even if they no longer had a proprietary interest in the buildings. In particular, they would remain liable to the purchasers under the Defective Premises Act 1972 and these losses would be recoverable from URS.

Could BDW bring a contribution claim against URS?

URS argued that BDW could not bring a contribution claim for the cost of the remedial works because no claim had been made or intimated by any third party against BDW and that BDW had agreed to undertake the remedial works for reputational reasons (and not due to any claims against it).

The Court disagreed and held that a claim under the Contribution Act could be made by a party, regardless of whether or not any sort of claim has been intimated against that party.

The Court’s rationale included:

There is nothing in the Contribution Act which provides that BDW’s right to claim contribution from URS does not arise until there is a claim against BDW by the individual purchasers.
As a matter of statutory interpretation, the the right to make a claim for contribution is established when the three ingredients in s.1(1)(a) of the Contribution Act can be properly asserted and pleaded, i.e.:
Is BDW liable, or could be found liable, to the individual purchasers?
Is URS liable, or could be found liable, to the individual purchasers?
Are their respective liabilities in respect of the same damage suffered by the individual purchasers?
If those three ingredients are capable of being pleaded, then there is a cause of action for a contribution. The making of a formal claim by the individual purchasers against BDW is not required by the Contribution Act.
The Court held there is no rational reason why a party in the position of BDW should wait for a formal claim from the individual purchasers before commencing remedial works, in order then to be able to claim contribution against URS: “That would reward indolence”.
The Court also held that a contribution claim could include not just payment, but also carrying out remedial works, and that carrying out remedial works could trigger the right to contribution. The Court expressly found that the absence of a formal settlement agreement in respect of the remedial works should not make any difference to a claim for a contribution.
Further, the Court held that the fact that the purchasers agreed to be decanted from their apartments; allowed extensive remedial works to be carried out in and around the apartments; and then moved back, all at the expense of BDW, could be construed as an implied agreement for those works to be carried out at BDW’s expense, even if the entirety of the purchasers’ claims had not yet been formally settled.

The Court also addressed when the limitation period expired for contribution claims (generally two years from the date of judgment against or settlement by the party claiming the contribution). The Court stated that this was a different question as to when the cause of action for contribution might accrue in the first place. The Court addressed whether it was an issue that when the remedial works were carried out, the claims by individual purchasers could not have been made as they were outside the limitation period. The Court found that it did not matter, as the liability for a contribution claim is assessed at the date of trial between BDW and URS. At that time (because of the extension to the limitation period for claims under the Defective Premises Act 1972 by the Building Safety Act 2022), the claims of the individual purchasers would be back in time.

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