Building Blocks: Court of Appeal keeps the door open for claims under the Defective Premises Act 1972 ("DPA")

URS Corporation Ltd ("URS") v BDW Trading Ltd ("BDW")

The highly anticipated decision in URS v BDW has made it clear that developers can be owed a duty by consultants under s.1(1) of the DPA, keeping the door open for a wave of claims by developers following the Grenfell Fire and subsequent legislative changes brought by the Building Safety Act 2022 (the "BSA") alongside more traditional claims under contract and tort.

Full judgement available at URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772.

Background:

BDW is a major house builder, whilst URS is a structural engineer. Following the Grenfell Tower tragedy, BDW undertook widespread investigations of its developments leading to the discovery of serious structural design defects at its Citiscape development – designed by URS. One block had to be evacuated and extensive remedial works carried out.

Following this, BDW undertook a wholesale review of the structural design of their developments which had been designed by URS. The review found that some developments, including Capital East and Freemans Meadow (the subjects of this claim), had been designed negligently and were dangerous.

However, by the time the issues were identified, BDW no longer owned or had any proprietary interest in the relevant buildings. Its last freehold interest was transferred in May 2015. Regardless, BDW claimed that as a responsible developer it had a responsibility to rectify the problem, which it proceeded to do thereby incurring significant costs.

High Court Judgement:

BDW commenced proceedings against URS in March 2020, before the introduction of the BSA.

In 2021, the High Court held that the duty of care owed by URS extended to the losses suffered by BDW, regardless of the fact BDW had no proprietary interest at the time of discovery, finding that BDW's losses were recoverable in principle.

In 2022, BDW was allowed to amend its pleadings to add new claims under s.1(1) of the DPA and s.1 of the Civil Liability (Contribution) Act 1978 (the "Contribution Act"). This followed the introduction of s.135 of the BSA, which retrospectively increased the time limits for DPA claims.

URS appealed against both of those decisions and the Court of Appeal decided that both appeals should be heard together. Appeals were made on three grounds:

• URS alleged that the judge was wrong to decide the losses claimed by BDW were within the scope of URS' duty of care.
• URS alleged that the damages claimed by BDW were not recoverable as when BDW discovered the design defects it had disposed of its proprietary interests in the buildings and, by the time of discovery, any claims would have been statute-barred.
• URS alleged that the judge was wrong not to strike out the claim in negligence. This ground was "parasitic" on grounds 1 and 2, for if the judge had struck out the claim in October 2021, then BDW would not have been able to amend its claim or take advantage of the longer limitation periods offered by the BSA. This was because the claim would have been "finally determined by a court" by the time the BSA came into force – meaning s.135(6) would apply and the longer limitation periods would not be open to BDW.

First Appeal:

The Court of Appeal held:

• The losses claimed were within URS' duty of care. This duty of care extended to economic losses suffered by BDW which were caused by the negligent design of the structure which would need to be remedied.
• It is well established in English law that a builder can remediate and be successful in recovering its costs, even if they were under no obligation to carry out such remedial works. Therefore BDW was allowed to reclaim its costs.
• It was a conventional claim for damages, under economic loss. There was no requirement for there to be physical damage.

Second and Third Appeal:

URS claimed that the DPA was intended to protect 'lay purchasers', not commercial developers. Secondly URS asserted that since BDW already owed duties to the subsequent purchasers under s.1(4) of the DPA, it could not also be owed the same duty by URS.

Here, the Court of Appeal held that BDW was owed a duty under s.1(1)(a) of the DPA, as URS was a "person taking on work for or in connection with the provision of a dwelling", and the dwellings were "provided to the order of" BDW.

URS also argued that BDW could not claim contribution because no claim had been intimated or made by the owners against BDW. Essentially, BDW had no right to pursue third parties under the Contribution Act where it had not received a claim itself.

Again, the Court of Appeal disagreed. It held that there was nothing in s.1(1) of the Contribution Act to suggest that the making of a claim was a condition precedent to pursuing contribution from a third party. As BDW could be held liable "in respect of the same damage" alongside URS, then the all-important third requirement was met.

Implications:

The decision makes it clear that the court does not seek to disadvantage developers that are pro-active in their efforts to remedy defects, or in BDW's words, are acting as responsible developers.

Any developer considering a DPA claim against a sub-contractor or consultant should see this decision with confident optimism.

We anticipate URS to make a further appeal to the Supreme Court and will keep you updated with any developments. But in the meantime, a developer considering a DPA claim against a sub-contractor or consultant should see this decision as insightful.

This blog is part of a series published by Howard Kennedy LLP on the Building Safety Act. For more information, please contact Tom Hilton, Stuart Duffy or Mark Pritchard. For other blogs, please click here.