Background
Following a post-Grenfell review of the structural design across its portfolio of residential developments in late 2019, property developer BDW Trading Ltd discovered dangerous design defects in two of its high-rise residential developments that it had sold on to third parties. Concerned about the safety and reputational consequences of the structural defects, in 2020-2021 BDW proactively carried out remedial works to remedy the design defects. It also made a claim to recover the cost of the remedial works and associated damages against URS Corporation Ltd, the contractor who had provided structural engineering design services. The claim was based in negligence for URS's failure to exercise reasonable care and skill in the provision of its design services. URS defended the claim on the basis that BDW had no proprietary interest in the properties when it carried out the remediation works and no enforceable liability to the owners/occupiers of the developments (because it was accepted that any such claim would be time-barred), so URS argued that there was no legal basis for BDW's claim. The High Court disagreed with URS, who appealed to the Court of Appeal.
Before the appeal was heard, the Building Safety Act 2022 (the BSA) came into force, and with it, the retrospective extension of the limitation period for claims under section 1 of the Defective Premises Act 1972 (the DPA) pursuant to section 135 of the BSA. BDW immediately amended its claim against URS: (i) to delete its previous admission that the homeowner/occupier claims against BDW were time-barred when the remedial works were carried out, (ii) to add a new direct DPA claim against URS, and (iii) to add a new claim under the Civil Liability (Contribution) Act 1978. The Court of Appeal dismissed all the issues URS raised, including in relation to BDW's amended claim. URS appealed to the Supreme Court.
Supreme Court grounds of appeal
Ground 1 - BDW's negligence claim
URS argued that BDW's loss (the cost of remedial works) was not recoverable in the tort of negligence. It was outside the scope of URS's duty of care and/or too remote because (i) it was incurred voluntarily by BDW without any enforceable legal obligation to the homeowners, (ii) BDW no longer had any proprietary interest in the property when it carried out the remedial works, and (iii) the type of loss claimed was not in the parties' reasonable contemplation as a serious possibility at the time of entering into the contract for URS's design services.
Relying on several case law authorities, URS contended that there is a "voluntariness principle", i.e. that loss incurred voluntarily by a claimant is outside the scope of the duty of care or too remote in the tort of negligence. The Supreme Court disagreed, distinguishing the facts of the cases cited by URS in which voluntarily incurred losses had been irrecoverable, and concluded that there is no clear rule of law denying recovery just because a claimant incurred loss or made payments voluntarily. Each case is fact-specific, and factors such as potential legal liabilities, moral obligations, reputational concerns and public interest will be relevant. In any event, the Supreme Court held that the more obvious role of any principle of voluntariness is in considering the concepts of legal causation or mitigation rather than the scope of a defendant's duty of care and remoteness.
The Supreme Court also held that, in determining the extent of the scope of duty, it is necessary to consider the purpose of URS's duty of care, which in this case was to prevent the very type of loss that BDW ultimately incurred. The loss in this case was clearly within the scope of URS's duty of care, and the type of loss suffered must have been reasonably contemplated by URS as a serious possibility at the time of entering the contract with BDW, so it was not too remote.
Ground 2 - The application and effect of section 135 of the BSA
Section 135(1) extends the limitation period for claims under section 1 of the DPA that accrued prior to 28 June 2002 from six to 30 years. Section 135(3) stipulates that "the amendment made by subsection (1) in relation to an action by virtue of section 1 is to be treated as always having been in force".
If section 135 of the BSA applied to BDW's negligence claim, then there was no question of that claim being time-barred. URS contended that this retrospective extension should apply solely to direct section 1 DPA claims and not to related claims in negligence or for contribution.
BDW argued that the words of section 135(3) are unambiguous. The Supreme Court agreed, interpreting the phrase "an action by virtue of" in section 135(3) as encompassing not only direct DPA claims but also claims in negligence and for contributions that are dependent on the limitation period applicable to section 1 DPA claims. The central purpose and policy of the BSA in general and section 135 in particular is to hold those responsible for building safety defects accountable. If section 135(3) were restricted to direct section 1 DPA claims, then that purpose would be seriously undermined because the 30-year period would only apply to homeowner claims against developers and would have no relevance to "onward" claims for contribution or negligence brought by a developer against a contractor directly responsible for the building safety defects.
Ground 3 - BDW's direct claim against URS under section 1 of the DPA
Section 1(1)(a) of the DPA imposes a duty (the DPA duty) on those who take on work for or in connection with the provision of a dwelling to ensure that the work is done in a workmanlike or professional manner, with proper materials, so that the dwelling is fit for habitation. The duty is owed if the dwelling is provided "to the order of any person", to that person and to every person who acquires an interest in the dwelling.
It was not in dispute that BDW owed the DPA duty to the homeowners/occupiers of the developments that had been remediated. But to succeed with its own section (1)(1)(a) claim, BDW needed to establish that URS was also subject to the DPA duty and that BDW was itself someone to whom the duty was owed.
URS argued that BDW could not both owe and be owed the same duties, that section 1(1)(a) does not apply to professional consultants like engineers, and that developers do not need the protection of the DPA, whose purpose was to address unfairness suffered by purchasers of new dwellings, not to protect developers who do not inhabit dwellings, and who are owed contractual duties and duties in tort by those they engage. BDW argued that developers fall within the plain, grammatical meaning of section 1(1)(a). BDW is the person to whose "order" URS carried out work in connection with the provision of dwellings. The Supreme Court agreed. By establishing that the DPA duty applied to URS and was owed to BDW, the Supreme Court ensured that BDW also had a statutory route to recover its losses from URS that benefitted from the extended limitation period under section 135 of the BSA.
Ground 4 - BDW's claim under the Civil Liability (Contribution) Act 1978
Section 1 of the Civil Liability (Contribution) Act 1978 (the Contribution Act) enables a person liable for damages suffered by another person to claim a contribution from a third party liable for the same damage. In this case, BDW claimed a contribution towards the remediation costs on the basis that both BDW and URS were liable to the homeowners for damage resulting from the structural defects.
URS argued that a claim under the Contribution Act can only arise when a claimant's liability has been ascertained by a judgment, an admission of liability or a settlement between a claimant and defendant, none of which were present in this case. BDW argued that a Contribution Act claim arises as soon as the "claimant" (the homeowners) suffers damage for which both "defendants" (BDW and URS) are liable, and a claim, judgment or settlement is not a necessary prerequisite to bringing a Contribution Act claim.
The Supreme Court held that BDW could bring a Contribution Act claim without any prior judgment, claim or settlement, as long as both BDW and URS were liable in respect of the same damage and BDW had paid, been ordered or agreed to pay compensation (including payment in kind, performing remedial works).
Conclusion and takeaways
The Supreme Court dismissed URS's appeal, and the case will be remitted back to the High Court to determine the quantum of BDW's claims. As always, each case will be fact-sensitive, but the Supreme Court's judgment provides important clarification on some general legal responsibilities in the construction sector.
The case should offer comfort to developers because:
- The court allowed BDW to recover its costs of 'doing the right thing' from URS even though, strictly speaking, BDW did not need to incur those costs at the time it did the remedial works.
- Developers do not only owe duties under the DPA, but they are also owed duties by those who undertook the works (such as contractors and consultants). This gives developers the ability to pass on claims that they receive under the DPA.
- The extended limitation period for DPA claims (30 years for claims that accrued prior to the BSA and 15 years for post-BSA claims) can also apply to related or "onward" claims in negligence or contributions against professional contractors. Again, this assists developers in passing on claims.