Some thoughts to consider following the recent URS v BDW decision

The recent UK Supreme Court decision in URS Corporation Ltd (Appellant) v BDW Trading Ltd (Respondent) UKSC/2023/0110 (URS v BDW) has significant implications for developers, contractors, and construction professionals alike. It gives finality to the question of whether or not a developer has the right to rely on the Defective Premises Act 1972 (DPA 1972) and provides clarifications on how the extended limitation periods under the Building Safety Act 2022 (BSA 2022) will apply.  So, who was happier, developers or contractors and consultants?

Background and Summary

BDW is a property developer.  Following the Grenfell Tower disaster, it undertook full reviews of a number of its projects, including Freeman’s Meadows (Leicester) and Capital East (London).  In the cases of these two developments, both were designed by URS, and both were found to contain significant structural defects. Given the severity of these works, and despite the fact that BDW had disposed of any interest it had in the properties, it took on the remedial works and completed them at its own cost.

Once the works were completed, BDW sought to recover its losses from URS, originally in the tort of negligence and then, following the BSA 2022 coming into force, also through the DPA 1972 and the Civil Liability (Contribution) Act 1978 (CLC 1978). 

In its defence, amongst other things, URS argued that BDW did not have the right to rely on the DPA 1972 and that any claim in negligence must fail as BDW voluntarily took on the work when it had no obligation to do so.

The Arguments

URS based its case (in the Supreme Court) on four issues:

1.  Where a developer, with no legal obligation to do so, voluntarily remediates a defect then this loss is too remote to recover in negligence;

2.  That section 135 of the BSA 2022 did not apply to this case;

3.  That a developer has no right to bring a claim under the DPA 1972;

4.  That it should not be possible to bring a claim under the CLC 1978, though this was quickly dismissed.

Ground 1 – “Voluntariness”

URS pointed to four cases as establishing that where a payment was made voluntarily this would act as a line in the sand as far as recovery of losses.  However, the Supreme Court disagreed.  While the case of Anglian Water Services Ltd v Crawshaw Roberts & Co Ltd dealt with the idea of a voluntariness principle, it only went so far as to say that whether this would affect whether a given loss was too remote would be fact dependent.  Further, the principle had greater applicability when considering mitigation. 

The Supreme Court, therefore, decided that there was no rule of law preventing BDW from recovering its losses (in fact it questioned whether BDW’s actions were in fact voluntary in any event).

Ground 2 – Section 135

Section 135 of the BSA 2022 is (amongst other things) the provision which (by insertion into the Limitation Act 1980) extends the limitation period for claims under section 1 of the DPA 1972 to:

1. 15 years for claims started on or after 28 June 2022;

2. 30 years for claims before that date.

While it was clear that the provision did act retrospectively, URS argued that it did not apply to cases based on matters incidental or collateral to the claims under DPA 1972 (such as negligence or contribution claims).

The Supreme Court disagreed with URS.  Any claims that were dependent on section 1 of the DPA 1972 were caught by section 135 of the BSA 2022.  This may also be claims founded in negligence or contribution.

However, if BDW had undertaken the remedial works at a time when it had no legal liability to do so (i.e. before the new provisions came into force) then this could be a relevant fact in establishing the reasonableness of those actions.

Ground 3 – The DPA 1972

Section 1 of the DPA 1972 states:

“A person taking on work for or in connection with the provision of a dwelling (whether the dwelling is provided by the erection or by the conversion or enlargement of a building) owes a duty—

(a) if the dwelling is provided to the order of any person, to that person; and

(b) without prejudice to paragraph (a) above, to every person who acquires an interest (whether legal or equitable) in the dwelling;

to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for habitation when completed”

URS sought to argue that this provision was not wide enough to mean that BDW was owed a duty of care.  However, as the Supreme Court noted, URS could find no answer to one simple question: if section 1(1)(b) provides the duty to the purchaser, then what is the meaning of section 1(1)(a) if not to a developer.

Put simply, on an ordinary and proper reading a developer is a person to whom a dwelling is provided at their order.  The Supreme Court found that developers could rely on this section.

Conclusions

URS v BDW may be seen as a win for developers.  It is now established (as most people expected) that a developer is owed a duty under the DPA 1972.  This is sensible, given it has its own obligations and it should not be left holding the liability for others who are equally responsible.  The extension of the limitation period for contribution claims is equally sensible.  There will not always be contractual relationships between parties who have responsibility for defects, so having the ability to bring such claims furthers the government’s aims that those who are responsible must pay.

However, contractors may also take some heart from the fact that works undertaken by a developer voluntarily prior to 28 June 2022 may not be seen as reasonable.  This will likely be small comfort though as it will only apply in limited circumstances.

Authors: Michael Bennett and Tomos Rossiter

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