URS Corporation Ltd v BDW Trading Ltd [2025] UKSC 21

This week, the Supreme Court handed down judgment in URS Corporation Ltd v BDW Trading Ltd. This appeal, the first dealing with claims associated with the Building Safety Act 2022, examined the allocation of liability where a developer undertakes remedial work on a property it no longer owns, and seeks to recover its losses, alleging a duty of care is owed despite the primary limitation period having expired. This article considers the impact of this decision on building safety claims.

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 discovered 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 (the DPA) 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 on three Grounds (which we covered here), however, 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, which was heard by the Supreme Court between 2-5 December 2024.

Permission to appeal was granted on four grounds:

• Ground 1: Is loss that is otherwise recoverable in the tort of negligence irrecoverable if it is incurred (i) without an enforceable legal obligation to do so, and (ii) in respect of property in which the claimant has no proprietary interest, because such loss is voluntarily incurred, and that means it falls outside the scope of the defendant’s duty of care and/or is too remote?
• Ground 2: Do the retrospective extended limitation periods provided for by section 135 of the Building Safety Act 2022 apply to other claims (e.g. in the tort of negligence) which are dependent on the time-bar applicable to claims under section 1 of the DPA?
• Ground 3: Does section 1(1)(a) of the DPA apply only to purchasers of properties, or does it also apply to property developers?
• Ground 4: Is BDW entitled to bring a contribution claim against the appellant under section 1 of the Civil Liability (Contribution) Act 1978 when there has been no judgment or settlement between BDW and any third party and no third party has ever asserted any claim against BDW?

The UK Supreme Court Decision

Ground 1: Is loss that is otherwise recoverable in the tort of negligence irrecoverable if it is incurred (i) without an enforceable legal obligation to do so, and (ii) in respect of property in which the claimant has no proprietary interest, because such loss is voluntarily incurred, and that means it falls outside the scope of the defendant’s duty of care and/or is too remote?

The Court found the scope of URS’s duty to BDW ‘was to guard BDW against the very type of loss – the repair costs to the Developments – that BDW has incurred.’ Therefore, the loss claimed (which was for pure economic loss rather than physical damage) fell within the scope of URS’s duty of care.

URS argued that a voluntariness principle arose in circumstances where BDW had undertaken remedial works on developments that it no longer owned, and without any legal obligation for BDW to undertake those works. In essence, the losses suffered were too remote and ought not to be claimable.

The Supreme Court rejected this argument, finding there was no rule preventing the recovery of repair costs simply because they were voluntarily incurred.  The issue of recoverability depends on the facts of each case and the reasonableness of the claimant’s conduct. A claimant cannot recover damages for a voluntary choice if their actions were unreasonable (often called a duty to mitigate), nor if that choice broke the chain of causation.  These are fact-specific matters that can only be determined on a case-by-case basis at trial.

However, the Supreme Court considered there were factors which might make the decision to incur repair costs reasonable (i.e. they were not truly voluntary):

• First, in the absence of effecting the repairs, there was a risk that the defects would cause personal injury, or the death of, homeowners for which BDW could legally be liable under the DPA or in contract.
• Secondly, BDW also had a legal liability to homeowners under the DPA to incur the cost of repairs.
• Lastly, it was in BDW’s commercial interest to do the repairs given the potential reputational damage to BDW had BDW not taken any action once the danger to homeowners became apparent.

The Supreme Court found that the appeal on Ground 1 failed on the basis ‘there is no rule of law which meant that the carrying of repairs by BDW rendered the repair costs outside the scope of the duty of care owed or too remote’, although they did acknowledge that this may be relevant at trial on the issues of causation and mitigation so it will be of interest to see how this is treated at trial.

This finding also meant that the Supreme Court did not need to consider whether to overturn Pirelli General Cable Works Ltd v Oscar Faber & Partners (1983) and look at when the cause of action in tort arose.  Nevertheless, the Supreme Court did make three points about Pirelli:

• Pirelli was decided on the false premise that cracks in a building constitute physical damage as opposed to pure economic loss.

• However, that false premise does not signify that Pirelli was incorrect in concluding that a cause of action accrues in negligence when the relevant ‘damage’ occurs, as opposed to the discovery or reasonable discovery of the damage, and that the concept of latent pure economic loss is possible.

• There are strong arguments of principle to accept that there can only be an actual loss once pure economic loss has been discovered.

Ground 2: Do the retrospective extended limitation periods provided for by section 135 of the Building Safety Act 2022 (the BSA) apply to other claims (e.g. in the tort of negligence) which are dependent on the time-bar applicable to claims under section 1 of the DPA?

Section 135 of the BSA provides for a new 30-year limitation period for accrued claims under section 1 of the DPA, which would otherwise be time-barred under the Limitation Act 1980. The Court acknowledged that section 135 had retrospective effect, which was key in order to achieve the objectives of the BSA.

URS argued that section 135 does not apply to collateral or incidental issues.  In essence, its position was that – in terms of a claim in negligence – where remedial works were carried out at a time when they were voluntary (as was the case here, the works being performed before the BSA came into force, along with the amendments to the DPA), that historical fact was not affected by the extended limitation period in section 135(3).

The Supreme Court rejected this argument, saying there was no reason to restrict the application of section 135(3) to actions only under the DPA.  The Court noted that would ‘be legally incoherent and create two contradictory parallel universes – one for direct claims by homeowners against a developer or designer or contractor for a building safety defect and another for onward claims by the developer against the designer or contractor responsible for the defect.’ This would contradict limitation as between (i) the claims by homeowners against BDW under the DPA, and (ii) the claims for negligence and/or contribution by BDW against URS. In addition, it was considered that there was no justifiable reason to confine the further claims covered under section 135(3) to those arising after the commencement date of the BSA, as this would penalise developers who had proactively investigated, identified and remedied building safety defects in response to the Government’s encouragement.

For the above reasons, the Supreme Court dismissed URS’s appeal on Ground 2. Lord Hamblen and Lord Burrows found that the effect of the retrospective limitation period extends to other claims that are dependent on the time-bar applicable to claims under section 1 of the DPA with the consequence that ‘there was no relevant time bar at the time that the repair costs were incurred’. However, it should be noted that section 135 does not retrospectively impact any issues at trial concerning the reasonableness of BDW’s actions in undertaking remedial works in respect of legal causation or mitigation.

Ground 3: Does section 1(1)(a) of the DPA apply only to purchasers of properties, or does it also apply to property developers?

Section 1(1) of the DPA establishes a statutory duty on those carrying out 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 will be fit for habitation once complete.

The main issue in Ground 3 was whether URS owed BDW the duty under section 1(1). URS contended that section 1(1) does not extend the benefit of the duty to developers, arguing that the purpose of the DPA is to address the unfairness suffered by purchasers of new dwellings, not by developers who do not reside in the properties. URS also argued that developers are already protected under contract and tort law and do not face the same bargaining issues as prospective homeowners.

The Supreme Court noted that under section 1(1)(b), the duty is owed to every person ‘who acquires an interest… in the dwelling’ whereas section 1(1)(a) applies to persons other than purchasers of the dwelling, who ‘order’ the construction of a dwelling – i.e. those for whose benefit the dwelling is being created. This distinction clarifies that the duty under section 1(1)(a) is not limited to subsequent purchasers but also includes “first owners” who order work in respect of a dwelling – i.e. developers.

The Supreme Court rejected URS’s submission that there exists a distinction between those who owe duties (providers of work) and those to whom duties are owed (those who arrange the work), and that those two categories are mutually exclusive. The Supreme Court highlighted that whilst a person cannot owe itself a duty, there is no inconsistency or logical fallacy in saying that a developer can both owe a DPA duty (e.g. to a subsequent purchaser) and be owed that duty (e.g. by an architect or engineer).

URS further argued that it would be anomalous for there to be preferential treatment of developers over other construction professionals both in terms of duty and contractual protection. Specifically, URS contended that the statutory duty could not be excluded or limited by contract (see section 6(3) of the DPA), and that if the duty was owed to developers, this would interfere with the principle of freedom of contract and the ability of commercial parties to allocate risk. The Supreme Court dismissed this concern, stating that developers are not uniquely privileged under the DPA. The duty is only owed to developers who ‘order the work’ and developers are not the only parties who may both owe and be owed a duty under the DPA. The Court also noted that URS’s commercial position would not be adversely affected by the duty owed to developers, as URS would still hold the same exposure however, to a different claimant.

The practical impact of the Supreme Court’s findings is that it grants developers a direct statutory cause of action against other parties involved in the construction or provision of a dwelling, for defects that render the dwelling unfit for habitation. This effectively provides developers with an additional avenue for recovery, alongside negligence claims, with the benefit of the 30-year limitation period established under the DPA.

Ground 4: Is BDW entitled to bring a claim against URS pursuant to section 1 of the Contribution Act notwithstanding that there has been no judgment or settlement between BDW and any third party and no third party has ever asserted any claim against BDW?

The Civil Liability (Contribution) Act 1978 (the Contribution Act) provides a statutory right for liable parties to seek to recover contribution from one another, allowing the loss to be redistributed according to the extent of their responsibility for the damage in question.

BDW argued that the right to recover contribution for the remedial works from URS arises when damage is suffered by a claimant, regardless of whether a claim has been made or if compensation has been recovered by the claimant. On that basis, BDW submitted that its right to recover contribution arose when damage was suffered by the homeowners at the time of the developments’ completion.

Conversely, URS argued that the right to recover contribution does not arise until existence and amount of a defendant’s liability to a claimant in respect of the damage has been ascertained by either a judgment, an admission of liability or, a settlement. URS maintained that no right to contribution had arisen, as no claim had been made by a homeowner against BDW, and it was unlikely that such a claim would ever materialise given that BDW had already completed the remedial works.

The Supreme Court rejected both positions, finding that the right to recover contribution arises when two conditions are met: (1) damage must be suffered by the claimant for which both defendants are liable, and (2) the first defendant must have paid, or been ordered to pay, compensation in respect of that damage. It is at this point that the two-year limitation period for making a claim for contribution begins.  The Court emphasised that “payment” can include a payment in kind, provided it can be valued in monetary terms. In this case, BDW had made a payment in kind by performing the remedial works, which were deemed compensatory for the damage suffered by the homeowners.

Comment

This Supreme Court decision reinforces the stated objectives of the BSA and indicates developers have the ability to pursue claims against contractors and consultants.

For contractors, consultants, and their insurers, the judgment brings a degree of clarity to the position.  It will certainly have a big impact, as it seems likely that developers will more aggressively seek to pursue claims under the DPA and/or for contribution.  Its obiter comments on Pirelli are also likely to be of significant interest as they indicate that if the right case comes up then Pirelli may well be overturned thus further moving the bar on limitation.

This adds to an already-difficult claims environment and reinforces the view that public policy is determined, following the recommendations in the wake of the Grenfell tragedy, to make those responsible for causing the defect liable for the defect and it is willing to broadly interpret limitation positions to allow recovery from those involved in the original works.

While the Supreme Court’s judgment firmly establishes a legal framework for BSA and DPA claims (particularly historic ones), it should not be forgotten that claimant developers will still need to prove not only that consultants and contractors have breached their obligations (including by reference to expert evidence), but that they have caused loss suffered. Developers will also still have to show that they acted reasonably in taking the steps they did.  The Supreme Court was at pains in Ground 1 to make clear these points are fact-specific and turn on each individual case.

Beale & Co’s Contracts and Projects Advisory Team is considering the judgment and will prepare a further note shortly with potential tips for parties in projects.

Should you require information on any of the points raised in the interim, please contact the authors, your usual Beale & Co contact, or visit our website.