URS Corporation LTD v BDW Trading Limited – the Court of Appeal provides clarity on duties under the Defective Premises Act 1972

There has been much uncertainty surrounding whether developers are owed duties under the Defective Premises Act 1972. A recent decision handed down by the Court of Appeal has provided some much-needed clarity.

Background

BDW Trading Limited, a developer, appointed URS Corporation Limited who are an engineering firm. URS were appointed to provide structural design services in respect of two residential developments. Practical completion occurred between early 2007 – 2008. Afterwards, BDW sold on the individual apartments.

It wasn’t until 11 years later in 2019 that BDW discovered structural defects in the residential developments. BDW incurred costs in investigating the structural defects and then carrying out remedial works, on the understanding that they were liable to the occupiers for the defects under the Defective Premises Act.

In 2020, BDW commenced proceedings against URS for the alleged negligent structural design and sough to recover their losses for the remedial work and investigations BDW had undertaken in the year prior. URS argued that BDW should have raised a limitation defence or argued that the losses were too remote because BDW no longer owned the Developments at the time the defects were identified.

The claim against URS ultimately gave rise to several issues, which were first considered by the High Court and then the Court of Appeal.

High Court Determination

The High Court determined at a preliminary hearing that, save for some allowances, the duty of care owed by URS extended to the losses suffered by BDW and that in principle, BDWs losses were recoverable.

The High Court also did not consider that BDWs claim against URS was time barred and determined that BDWs cause of action accrued no later than the date of practical completion.

Permission to appeal

URS was granted permission to appeal on three grounds:

1. The losses claimed by BDW (i.e. costs of repair) were not within the scope of URS’ duty of care. URS argued its duty of care protected BDW against a risk of harm to its proprietary interests, and the risk of loss incurred to third parties. URS’ position was that BDW did not have a proprietary interest in the Developments at the time the defects were discovered and claims by third parties would have been statute-barred.
2. The damages claimed by BDW were not recoverable. Again URS argued that, at the time of discovery, BDW had no proprietary interests in the Developments and claims by third parties would have been statute-barred. In making this argument, URS’s position was that the cause of action accrued when BDW learned of the defects in 2019.
3. The High Court was wrong not to have struck out the claim in negligence.

In dismissing the first appeal, the Court of Appeal found that:

1. The losses claimed were within the scope of URS’ duty of care.  The Court determined that the duty of care extended to economic losses of BDW which were caused by the negligent design of the structure which would need to be remedied. In addition, a builder who no longer had a proprietary interest in a development could claim his costs of going back to carry out repairs.
2. BDW’s claim in negligence was for economic loss. There was no requirement for there to be physical damage.

URS’s third ground of appeal was not considered, following the Courts findings on the First and Second Grounds.

Second and Third Appeals

URS’s second and third appeals arose from a separate (and later) High Court decision in which that Court granted BDW permission to amend its claim in three categories. Broadly speaking, URS’s grounds of appeal here were that:

1. While BDW owed duties under section 1(1) of the DPA, it was not owed any such duty by other parties (such as URS).
2. Section 135 of the Building Safety Act 2022 (which imposes a retrospective longer limitation period of 30 years for claims under the DPA) could not apply to proceedings that were ongoing when that legislation came into force.
3. BDW could not claim contribution because no claim had first been made, or intimated, by owners against BDW. Put another way, in the absence of BDW receiving a claim, it had no legal right to pursue third parties under the Civil Liability (Contribution) Act 1978.

Again, the Court of Appeal dismissed URS’s appeal, stating that:

1. It was clear on the plain words of section 1(1)(a) of the DPA that URS was “a person taking on work for or in connection with the provision of a dwelling”, and the dwelling(s) in this case were “provided to the order of” BDW (in its capacity as the developer). URS had argued that duties were owed only to “lay purchasers”, rather than companies or commercial organisations. The Court dismissed this submission, saying it was not what section 1(1) said and was impossible to police in practice in any event. URS had also argued that what was “provided” to BDW were not dwellings, but an entire development. The Court found this argument was untenable (and had been rejected in earlier case law). As such, BDW was owed the duty under section 1(1) of the DPA.
2. The relevant wording of the Building Safety Act 2022 was intended to have retrospective effect, and there was no carve out for ongoing proceedings. As such, section 135 applied, and there was no barrier here to BDW’s claim.
3. There was nothing in the wording of section 1(1) of the Civil Liability (Contribution) Act 1978 to suggest the making (or intimation) of a claim was a condition precedent to pursuing contribution from a third party. Instead, the right of BDW to seek contribution from URS arose when the three elements in section 1(1) were established, irrespective of whether or not another entity (in this case the occupiers of the Developments) intimated a claim against BDW.

What does this mean?

While the facts of this particular case involve duties of care and limitation, what is particularly interesting is the Court of Appeal’s commentary concerning the Defective Premises Act.  Where there has previously been uncertainty as to whether developers are owed a duty under Section 1(1) of the DPA, the Court of Appeal have made significant comments indicating that the DPA does provide for these duties.

Historically, there had been a line of authority stretching back over 30 years indicating that developers could not claim against subcontractors/consultants under the DPA. That position appears to have now changed – at least in respect of residential dwellings. Whether the restrictions will continue to apply in relation to commercial properties is yet to be determined.

This is particularly significant in light of the numerous building safety claims and will no doubt result in new claims being made to plead in relation to the DPA and existing claims being amended to benefit from this significant development.

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