The First of Its Kind: URS Corporation Ltd’s Claims Against BDW Trading Ltd Under the Defective Premises Act

Whilst we await the Supreme Court's judgment¹ on this case (following its hearing of the same in December 2024), let's go over the story so far, the key facts of the case, and its Court of Appeal (CoA) judgment. The case is the first of its kind in the CoA, relating to claims made under the Defective Premises Act 1972 (DPA) following the enactment of the Building Safety Act 2022 (BSA).

Background Facts

BDW instructed URS as its structural engineer for two residential apartment developments in England. After practical completion was reached prior to 2019, BDW sold their freehold interests in the developments to third parties.

Following the Grenfell Tower disaster in 2017, BDW undertook a review of its developments; BDW found serious structural design flaws within some of their developments (designed by URS), meaning the existing structures were dangerous. Despite there being no physical damage to the buildings, BDW incurred costs on temporary (and subsequently permanent) remedial works, including evacuating residents from one block of apartments.

On 6 March 2020, BDW brought a claim in negligence (since a claim in contract would have been statute barred at the time) against URS for its losses, on the basis that URS had fallen short of its duty to exercise reasonable skill and care. The enactment of the BSA then extended the time limit for bringing various claims, including those under the DPA. As such, the Technology and Construction Court (TCC) judge allowed BDW to amend their pleadings to include a claim under Section 1 of the DPA and add claims under the Civil Liability (Contribution) Act 1978 (CL(C)A).

How has the BSA changed Limitation?

As mentioned above, the BSA has extended the time limit for bringing certain claims, including those under the DPA. Section 1 of the DPA requires parties involved in the construction of ‘dwellings’ to perform their work in a professional manner, ensuring the building is ‘fit for habitation’ upon completion.

The BSA also introduced Section 2A to the DPA: extending the duty to works carried out on any part of a building which contains one or more dwellings, including works to existing dwellings as well as new dwellings. This change applies to works completed on or after 28 June 2022.

The time limit for claims under the DPA has been extended from 6 to 15 years, with a 30-year retrospective limitation period for claims that arose before the BSA took effect in June 2022.

First Instance Decision

At first instance, the TCC judge determined the majority of the heads of loss (categories of financial loss) claimed by BDW to be conventional and could be included within the claim. The judge found that the scope of duty of URS extended to the claimed losses, notwithstanding BDW no longer having any proprietary interest in the developments as freeholder. 

Court of Appeal Decision

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

On the preliminary issues, the CoA considered the following:

Were the losses claimed by BDW within the scope of duty of care of URS and were they recoverable?

URS contended that:

• its responsibility was to protect BDW’s proprietary interest in the buildings and to protect BDW from potential claims from the new owners; and
• since BDW no longer owned the buildings when the defects were found, and any claims from new owners were too late, there was no recoverable loss.

However, the CoA disagreed with URS’s argument. It held that this was a standard duty for a design professional, existing alongside its contractual obligations. In fact, the real risk was that, in breach of URS’s duty, the design of the buildings would contain structural defects which would have to be subsequently remedied, meaning the losses were therefore within the scope of URS’ duty. It didn't matter whether BDW was obligated to carry out the repairs when the losses occurred.

The CoA agreed with the first instance judge, who said at paragraph 49 of the judgment: “I consider that the answer to this question is the risks of harm to BDW, the employer, against which the law imposed upon URS, the structural designer, a duty to take care was the risk of economic loss that would be caused by a construction of a structure using a negligent design such that it was built containing structural deficiencies or defects” and so the CoA found that URS’s submissions underlying this argument were simply incorrect.

When did the cause of action in tort accrue?

BDW argued the cause of action started either:

• when the buildings were practically completed; or
• when BDW sold the apartments. 

URS said it accrued when the defects were found in 2019.

The CoA decided that it depends on whether there is physical damage:

• In cases of defective design with physical damage, the cause of action accrues when that physical damage happens, regardless of when the claimant comes to know of the physical damage, or such physical damage is discovered.
• Where there has been defective design without physical damage, the cause of action accrues (at the latest) upon practical completion of the building, because the defective design has been incorporated into the building from the beginning of its completion. 

The CoA found this to be consistent with section 1(5) of the DPA, which states that “any cause of action in respect of a breach of the duty imposed by this section shall be deemed…to have accrued at the time when the dwelling was completed…”.

On the issue of permission being granted for BDW to amend its pleadings, the CoA considered the following:

Was the TCC right to allow the amendments appeal (to allow the introduction of claims under the DPA and the CL(C)A)?

The relevant claims could not have been included in BDW’s initial pleadings, owing to the fact that the BSA was not in force at that time. URS argued that the retrospective effect of the BSA was narrow and so could not be relied upon by a party already involved in litigation. The CoA disagreed with URS’s interpretation and held:

• the relevant section of the BSA (section 135) was to be treated as always having been in force, with no statutory exception for ongoing proceedings; and
• the claim could therefore be amended to add in new claims under the DPA.

URS argued that as BDW was a developer, it was not a person to which a duty could be owed under the DPA. The CoA held that URS did owe BDW a duty and the interpretation of the DPA was not limited to a duty to individual purchasers.

BDW could also recover the losses suffered following any breach of this duty, even if they no longer had a proprietary interest in the buildings. In this case, BDW would remain liable to the purchasers under the DPA, but these losses would be recoverable from URS.

The CoA determined that the first instance judge applied the correct test (“reasonable arguability”): did the amendments have some prospects of success? The CoA determined that they did. For completeness, the judge went on to discuss the specific objections raised by URS in relation to the claim under the DPA and the claim under the CL(C)A, albeit he had already dismissed this section of the appeal.

In relation to section 135 of the BSA, the CoA found that this was retrospective in effect and there was no exception relating to the rights of parties involved in ongoing litigation, so this did not fall into an exception as URS had argued. The CoA judge determined that the wording “is to be treated as always having been in force” is clear: the amendments to the DPA are to be treated as always having been in force. Therefore, the judge found that the claims under the DPA were open to BDW to plead.

In relation to a claim under the CL(C)A, the CoA said that the Limitation Act 1980 deals with when a contribution claim must be brought in relation to limitation as opposed to addressing the accrual of a cause of action in a contribution claim (meaning that a contribution claim can be made even if the underlying claim is theoretical or notional). The court ruled that a contribution claim under CL(C)A does not require an established claim or judgment against the respondent. This meant that BDW could seek contribution from URS, despite no third party having asserted a claim against BDW.

URS was granted permission to appeal to the Supreme Court and the case was heard in December 2024. We await the judgment in due course.

Footnotes

1 URS Corporation Ltd (Appellant) v BDW Trading Ltd (Respondent) UKSC/2023/0110