21st May 2025
The Supreme Court has today handed down its highly anticipated judgment in URS Corporation Ltd v BDW Trading Ltd [2025] UKSC 21.
Background
The case concerned developments known as ‘Capital East’ and ‘Freemens Meadow’. BDW was the developer and appointed URS to provide structural design services.
The developments had various defects which resulted from an alleged failure by URS to exercise reasonable skill and care. That alleged failure was said to be a breach of its appointment contracts as well as common law negligence.
No claim was made or intimated against BDW by any third party owner/occupier, and any claims against BDW would have been time-barred. Nevertheless, BDW considered the defects to be dangerous. In 2020/1, therefore BDW carried out remedial works to the developments and claimed the associated costs from URS.
BDW issued proceedings before the coming into force of the Building Safety Act 2022 (“BSA”). Given that timing it claimed only in negligence: claims against URS in contract and under the Defective Premises Act 1972 (“DPA”) were time-barred.
A preliminary issue trial was heard by Fraser J in respect of the scope of URS’s duty and issues of legal causation. Judgment was handed down on 22 October 2021 ([2021] EWHC 2796), finding that the losses claimed (save in respect of reputational damage) fell within the scope of URS’s duty and were recoverable in principle; and that issues of legal causation (including whether BDW’s actions were voluntary and had broken the chain of causation) were fact dependent and could only be determined at trial.
Following the entry into force of the BSA, which extended the limitation period under the DPA, BDW sought to amend its claim (i) to delete the previous admission that, when the defects were discovered and remedial works undertaken, BDW’s liability to third parties was time-barred; (ii) to claim against URS under the DPA; and (iii) to claim against URS for contribution under the Civil Liability (Contribution) Act 1978 (“the Contribution Act”). Permission to amend was granted by Adrian Williamson KC ([2022] EWHC 2966).
The decisions of Fraser J and Adrian Williamson KC were appealed. Judgment was handed down on 3 July 2023 ([2023] EWCA Civ 772). The Court of Appeal (Coulson LJ giving the leading judgment) dismissed the appeals.
The Appeal
Permission to appeal was given on four issues:
Ground 1: In relation to BDW’s claim in the tort of negligence against URS, has BDW suffered actionable and recoverable damage or is the damage outside the scope of the duty of care and/or too remote because it was voluntarily incurred (disregarding the possible impact of section 135 of the BSA)? If the answer to that question is that the damage is outside the scope of the duty of care or is too remote, did BDW in any event already have an accrued cause of action in the tort of negligence at the time it sold the Developments?
Ground 2: Does section 135 of the BSA apply in the present circumstances and, if so, what is its effect?
Ground 3: Did URS owe a duty to BDW under section 1(1)(a) of the DPA and, if so, are BDW’s alleged losses of a type which are recoverable for breach of that duty?
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?
Ground 1
The court began by setting out three principles of general application:
First, BDW’s claim in negligence was for pure economic loss, namely having a defective building which has a lower value than it should have had and/or requires repair.
Second, in general there is no duty of care owed in the tort of negligence not to cause another person pure economic loss.
Third, there are exceptions to the second principle. The main exception is where there is an assumption of responsibility by the defendant to the claimant. It was common ground that this exception applied to URS.
However, URS argued for a ‘voluntariness principle’: it said that, because the remedial works were carried out by BDW on the developments which it no longer owned and without any legal obligation to do so (due to the limitation defences which it had), the loss was outside the scope of the duty of care and/or was too remote.
The Supreme Court rejected the so-called “principle of voluntariness that operates as a bright line rule of law rendering loss too remote or outside the scope of the duty of care in the tort of negligence.” The decisions on which URS relied in seeking to support a voluntariness principle were, it said, largely explainable on the basis of the second principle above.
As such, the Court found that:
(a) There is no rule of law that prevents the recovery of repair costs in a negligence claim simply because they were “voluntarily” incurred by the claimant;
(b) Rather, the issue of whether such costs are recoverable depends on factual questions of legal causation and mitigation, in relation to which the question whether actions were “voluntary” is relevant. The assessment turns on the reasonableness of the claimant’s conduct which requires a “fact-specific enquiry”.
(c) A Claimant cannot recover damages for consequences of a choice freely made if that choice was unreasonable or broke the chain of causation. Mitigation, often viewed as an aspect of causation, asks whether the claimant acted reasonably to avoid or minimise loss.
(d) Crucially, factors that might make the repairs reasonable (and thus not truly voluntary in a way that breaks the causal chain or indicates a failure to mitigate) include:
(i) The risk of the Claimant being legally liable to homeowners for personal injury or death under the DPA or in contract, for which limitation periods are different and can be extended;
(ii) The commercial interest in avoiding reputational damage: The Court rejected the idea that recoverability depends only on avoiding harm for which damages would otherwise be recoverable from the Defendant; commercial reputation, even if not a head of recoverable damage, can be a valid reason influencing reasonable action; and
.(iii) General public interest and moral pressure to address dangerous defects
The practical consequences of this are perhaps obvious. They, are, however, profound and worth underlining: Developers and building owners who incur costs to rectify defects, even when not under immediate, enforceable legal compulsion from third parties, are very likely to recover those costs from negligent parties like designers or builders in a negligence claim, particularly where those defects might be regarded as dangerous.
As a result of that decision, the Court did not then need to consider whether BDW already had an accrued cause of action in tort at the time it sold the developments. The Court of Appeal had concluded that the cause of action had accrued at the latest at the date of practical completion and could not have been lost by the subsequent sale of the developments. The Supreme Court, by contrast, declined to consider the question. Nevertheless, it made three points which shed some light on its current thinking:
First, that Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1 was “decided on the false premise that cracks in a building constitute physical damage rather than pure economic loss for the purposes of the tort of negligence”. In fact, where negligent design or construction subsequently gives rise to cracks, those cracks “appear in a building because the building is, and has been, defective and not because there has been damage to an otherwise non-defective building”. That is pure economic loss.
Second, that false premise does not mean that Pirelli was wrong in reasoning that the cause of action in negligence accrues when the relevant damage occurs, rather than the date of its discovery or discoverability. “It is possible to have a concept of latent pure economic loss even though that loss could not at the time of accrual have been reasonably discovered”.
Third, “in the context of pure economic loss there are strong arguments of principle for accepting that there can only be an actual loss once the pure economic loss has been discovered or could reasonably have been discovered”. However, discoverability has been addressed by the Latent Damage Act 1986, and if the accrual of the cause of action was fixed by reference to the date of discoverability, “this might undermine the legislative solution to this problem”. The Court continued, “The effect of the date of discoverability being the date of accrual would be to give claimants six years from the date of discoverability rather than the three years that was considered sufficient by the legislature in the LDA”.
As such, the very strong hint from the Supreme Court is that Pirelli will be significantly limited in its application going forward.
Ground 2
The Court began by considering the broad purpose and scheme of the BSA. The ‘backward-looking provisions’ are set out in Part 5. They include: section 135, which provides for a new 30-year limitation period for accrued claims under section 1 DPA; section 124, which provides for the making of remediation contribution orders; section 130, which provides a power to make building liability orders; and sections 147-151 which introduce various new causes of action to hold manufacturers and sellers of unsafe construction products to account.
Adopting the submissions of the Secretary of State, the Court noted that all four sets of provisions have retrospective effect, which is “central to achieving the aims and objectives of the BSA”. That is likely to put paid to the arguments sometimes made by defendants that the imposition of a building liability order in respect of historic (and otherwise time-barred) work would, without more, amount to breach of a Convention right.
Section 135(3) provides that the amendment to the limitation period “is to be treated as always having been in force”, save where that would involve a breach of a defendant’s rights under the Convention, or in respect of claims settled or determined before the commencement date.
URS argued that section 135(3) did not apply to collateral or incidental issues or deem matters of historic fact to be other than they were. On that basis, it said that – in respect of a claim in negligence – where remedial works were carried out at a time when, due to limitation, they were voluntary, that historical fact is not affected by the extended limitation period in section 135(3).
In rejecting that argument, the Court held that there was “no reason as a matter of language for restricting the application of section 135(3) to actions under section 1 of the DPA”. It applies equally to claims for negligence or contribution. That is because, “ensuring that those directly responsible for building safety defects are held to account was central to the BSA and various of its provisions, including specifically section 135” and:
“If section 135(3) were restricted to actions under section 1 of the DPA then this purpose would be seriously undermined. The consequence would be that the 30-year limitation period would apply to claims brought by homeowners against a developer under section 1 of the DPA, but would have no relevance to what one may call “onward” claims for contribution or for the tort of negligence brought by that developer against the contractor (whether builder, architect or engineer) directly responsible for the building safety defect, as illustrated by URS’s case on this appeal.”
Any contrary conclusion would, the Court said, “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”. It would also penalise responsible developers who had been proactive in investigating, identifying and remedying building safety defects when encouraged by the Government to do so.
This has very interesting and important practical consequences:
(a) For remedial work carried out after June 28, 2022 (when section 135 came into force), developers like BDW can and will argue that the repairs were reasonable mitigation because their potential DPA liability to homeowners was no longer time-barred by the BSA.
(b) For work done before that date, however, the position is considerably more nuanced:
(i) It means that the question of whether the repairs were reasonable must still be assessed based on the facts at the time the work was done, including the fact that at that historical point, a developer would have thought that DPA claims were time-barred under the law then in force. Section 135 does not retrospectively change this historical fact. It is therefore theoretically possible that a Court could find that such works were not reasonable and therefore “voluntary” in that sense of an act which is not reasonable mitigation and/or breaks the chain of causation;
(ii) It may be sensible, however, not to overstate this point: a Court may well be tempted to find that whilst the DPA limitation period had not been extended before June 2022, there was after Grenfell the same general public interest and moral pressure to address dangerous defects as existed post June 2022, and that would be enough to make the remedying of such defects reasonable for the purposes of the causation/mitigation analysis which the Court has said should take place. Moreover, as the Court made clear, the retrospective limitation period does apply for the purposes of negligence and contribution claims, such that the third party claim will be deemed to have been in time. As such, it is thought that it will now be much more difficult for a defendant to resist on the basis that the loss was voluntarily incurred.
Ground 3
The question here was whether the duty under section 1(1) DPA was owed by URS to BDW. URS argued that the provision does not confer the benefit of the duty on a developer (i.e. on a person falling within section 1(4)): the purpose of the DPA was to address unfairness suffered by purchasers of new dwellings and not to protect developers who do not inhabit dwellings.
The Court disagreed, holding that: “there is no good reason why a person, for example, a developer, cannot be both a provider and a person to whom the duty is owed”. As such, the duty is owed “to any person, including a developer, to whose “order” a dwelling is being built”.
Accordingly, the Court held that URS, in taking on work in connection with the provision of dwellings, owed a statutory duty under section 1(1)(a) of the DPA to BDW as the developer who ordered the work, explicitly including scenarios where the dwelling is built on the builder’s land for disposal (i.e., by a developer).
The purpose of the DPA was to protect purchasers and first owners who rely on the skill of those involved in the provision of the dwelling. The Court found nothing in the DPA or the Report to suggest limiting the duty solely to consumers or lay persons. It was not anomalous for a developer to be both a provider (to later purchasers) and a person to whom the duty is owed (by those doing the work for the developer). The policy of ensuring safe dwellings is better served by a wide interpretation allowing developers rights against primary wrongdoers
Again, there are obvious profound practical consequences to this: it gives developers (of all sorts) a direct statutory cause of action against primary wrongdoers for defects rendering the dwelling unfit for habitation, providing an additional route for recovery alongside negligence claims – and one which is based on the 30 year time limit for DPA claims.
Ground 4
URS had argued the right to bring a contribution claim arises only after D1’s liability to the injured party is ascertained by judgment, admission, or settlement BDW argued it arose as soon as the damage occurred for which both were liable.
The Court determined that:
(a) The right to recover contribution arises when (1) damage has occurred for which both parties are liable, AND (2) D1 has paid, been ordered, or agreed to pay compensation for that damage;
(b) Such “payment” of “compensation”, however, includes a payment in kind, such as carrying out remedial works, which can be valued monetarily. It is not necessary for D1’s liability to the injured party to have been established by a judgment, admission, or settlement.
Again, therefore there are significant practical consequences: a party (like a developer) who carries out remedial works to address damage for which they and another party (like a design engineer) are both liable can claim contribution from the other party for the cost of those works, even if no homeowner has brought a claim, obtained a judgment, or entered into a settlement.
The wider practical consequences.
Standing back, the practical combined effect of each of those findings is clear:
(a) By confirming that developers can recover reasonable costs in negligence even if they have been incurred “voluntary” – i.e. even before a formal claim – developers are encouraged to undertake necessary remediation work without delay, aligning with the BSA’s goals of improving building safety; and
.(b) Similarly, the judgment reinforces the principle that costs should ultimately be borne by those responsible for the defects by significantly expanding the utility and effectiveness of DPA and contribution claims – particularly by developers – to recover costs from negligent professionals and builders.
Developers will be happy. Those down the contractual chain – and, crucially, their insurers – will be considerably less so.
A link to the judgment is here: URS Corporation Ltd v BDW Trading Ltd – Find Case Law – The National Archives
Would you like to know more?
For help and advice talk to a member of our clerking team. They can advise on the best options for your matter.
Call: +44 (0) 20 7842 5555
