URS Corporation Ltd v BDW Trading Ltd [Case ID: UKSC 2023/0110]

This week, the Supreme Court will consider key issues concerning liability and limitation in an ongoing dispute between URS Corporation Ltd and BDW Trading Ltd. The decision will interest contractors, consultants, and other stakeholders, including developers and insurers.

Background

BDW Trading Ltd (“BDW”), a property developer, appointed URS Corporation Ltd (“URS”) as structural engineering and design consultant for the construction of 12 residential tower blocks between 2005 to 2012.  In late 2019, BDW conducted investigations on a block and identified potential structural defects, leading to a comprehensive review of the structural condition of the development. BDW claimed that similar defects identified were attributable to URS’s design. These defects, it alleged, increased the health and safety risk to residents, however no obvious physical damage was observed to the buildings. The defects were found after BDW had sold the properties in the development to third parties. Nevertheless, considering that it had liability to the occupiers under the Defective Premises Act 1972 (DPA 1972) pursuant to the relevant contracts of sale, BDW undertook remedial works. BDW subsequently initiated a negligence claim against URS to recover these costs.

BDW’s claim gave rise to several issues, which were first considered by the High Court and then the Court of Appeal. During a preliminary hearing of the legal issues (which we covered here), the Judge determined that, with certain exceptions, URS’s duty of care encompassed the alleged losses. It was held that BDW’s cause of action accrued no later than the practical completion date of each block.

URS appealed. Ground 1 challenged the decision that BDW’s losses (i.e. the costs of repair) fell within the scope of URS’s duty of care. Ground 2 contended that the relevant cause of action did not arise at practical completion but in 2019, on discovery of the defects. This suggested that BDW had no proprietary interest in the development, no obligation to rectify the defects, and third parties’ claims would have been statute-barred. Ground 3 asserted a procedural error for not striking out BDW’s negligence claim for failure to disclose a reasonable cause of action. URS’s appeal was dismissed.

URS’s second and third appeals arose from a separate and later High Court decision permitting BDW to amend its claim and primarily focus on the main issues and legal points outlined below. The Court of Appeal dismissed URS’s appeal grounds, as summarised in our case update here.

The Supreme Court subsequently granted URS permission to appeal, and the hearing is scheduled for 2-5 December 2024[1]. Recent attention has focused on the below issues as well as the Supreme Court’s perspective on whether the significant decision in Pirelli General Cable Works Limited v Oscar Faber & Partners [1983] 2 AC 1 [HL] remains good law or should be departed from. See our May 2024 update for more information.

At its core, this appeal examines the allocation of liability where a developer undertakes remedial work on a property it no longer owns, and seeks to recover from a consultant, alleging a duty of care is owed despite the primary limitation period having expired.

The issues

The appeal raises the following main issues[2]:

1. In the above circumstances, has BDW suffered actionable and recoverable damage that falls within the duty of care owed to it by URS?
2. Do the retrospective extended limitation periods provided for by Section 135 of the Building Safety Act (BSA 2022) apply (i) in the above circumstances, and (ii) to claims brought prior to Section 135 coming into force, and the subject of pending proceedings?
3. Does Section 1(1)(a) of the DPA 1972 apply only to purchasers of properties, or does it also apply to commercial developers?
4. Is BDW entitled to bring a contribution claim against the URS under Section 1 of the Civil Liability (Contribution) Act 1978 notwithstanding that (i) there has been no judgment or settlement between BDW and a third party, and (ii) no third party has asserted any claim against BDW?

Commentary

The Supreme Court’s ruling is anticipated to address several important issues relevant to those operating in the construction and engineering sectors, or engaged with property or insurance matters. What started as a case covering issues of duties of care and limitation, and whether there is a requirement to demonstrate physical damage in building safety claims, has evolved into considering the application of the DPA 1972. There previously stood a long line of case authority indicating that developers could not claim against contractors/consultants under the DPA. This appeal will consider whether or not those authorities hold good.

We will provide a further update once the judgment is available in the new year. Should you require information on any of the points raised in the interim, please contact Sheena Sood or Michael O’Brien or visit our website.

[1] [2023] EWCA Civ 189

[2] URS Corporation Ltd (Appellant) v BDW Trading Ltd (Respondent)