UK Supreme Court decides landmark Building Safety Act case

The Supreme Court has handed down its long-awaited judgment in URS Corporation Ltd v BDW Trading Ltd and brought welcome clarity to important aspects of UK building safety legislation as well as to some fundamental principles around the scope of the duty of care and recoverable losses in negligence cases.

The decision on 21 May is an important victory for BDW Trading Limited, a Barratt Redrow company, and is good news for reasonable housing developers who have sought to remedy building defects proactively. It will help to ensure that developers who act responsibly to effect necessary safety works are not then barred from recovering their losses from those who caused the safety defects in question.

Osborne Clarke acted for BDW.

Building safety remediation dispute

During its post-Grenfell investigations, BDW discovered design defects to two sets of high-rise residential building developments for which it had been the developer. These design defects presented a health and safety risk. URS, a structural engineering consultant, had provided the structural designs for the buildings.

From 2020 to 2021, BDW carried out remedial works to rectify the defects, despite no longer owning the developments and although it had not received any claims from third parties in relation to the defects. At the time of the remediation, any claim made against BDW in relation to those defects would have been time-barred due to the fact that the Building Safety Act (BSA) 2022 extended limitation period had not yet been introduced.

BDW brought a claim against URS in respect of the alleged structural design deficiencies at the properties in an attempt to recover the costs of remediation from URS.

On 28 June 2022, section 135 of the BSA came into force. This provision retrospectively extended the limitation period for accrued claims under section 1 of the Defective Premises Act (DPA) from six years to 30 years.

Grounds of appeal and the judgment

Seven Justices presided over the case due to its complexity and the importance of the issues raised. There were four grounds of appeal considered.

Ground one: can a voluntary act (to remedy defects, in this case) lead to a recoverable loss?

In a negligence claim, liability for a defendant's actions is limited to damages that were reasonably foreseeable as a result of their breach of duty. If the damage suffered by the claimant is not a reasonably foreseeable consequence, the defendant is not held responsible and the damage is considered "too remote".

The first question was whether, in relation to BDW’s negligence claim, BDW had suffered actionable and recoverable damage or whether the alleged damage was outside the scope of URS' duty of care or too remote because it was voluntarily incurred. URS claimed this work was voluntary because BDW no longer owned the developments and was no longer subject to an in-time liability to third parties.

The Justices did not consider that there was an established a principle of "voluntariness" that renders loss too remote or outside the scope of the duty of care in negligence cases. Further, they did not consider that BDW had truly acted voluntarily, and that it had no realistic alternative but to carry out the works:

1. If BDW had done nothing to effect the repairs, there was a risk that the design deficiencies would cause personal injury to, or even the death of, homeowners for which BDW might be legally liable under the DPA or in contract;
2. Even though, at the time the repairs were carried out, any claims by the homeowners would have been unenforceable because they were time-barred, it is well-established that limitation bars the remedy but does not extinguish the right (that is, the homeowners still had rights against BDW, even if they could not enforce them); and
3. There would be potential reputational damage to BDW if it did nothing once it knew of the danger to homeowners.

The Justices decided that there is no rule of law which means that the carrying out of the repairs by BDW rendered the repair costs outside the scope of the duty of care owed by URS, or too remote. In particular, they noted: "the policy of the law favours incentivising a claimant in BDW’s position to carry out the repairs so as to ensure that any danger to homeowners is removed."

Ground 2: do the BSA's extended limitation periods apply only to claims made directly under the DPA?

The second ground of URS' appeal was that only claims made directly under the Defective Premises Act would be subject to the extended 30-year limitation period. URS argued that as BDW's claims were made in negligence and as a claim for contribution to their losses under the Contribution Act, the BSA's extended limitation period did not apply.

This was not accepted. Here BDW’s claim in negligence was in part “dependent” on the fact that BDW was itself liable to others under the extended limitation period under the DPA.

The Justices did comment that, irrespective of the retrospective nature of the extension of the limitation period, the reasonableness of a party's steps to mitigate its losses (such as carrying out remedial works, in this case) would be judged in the light of the facts that it had at the time of those actions. In particular it was noted that excluding claims based on the DPA "would penalise responsible developers, such as BDW, who had been pro-active in investigating, identifying and remedying building safety defects. Not only had they acted responsibly but they had done so in response to and in accordance with the Government’s strong encouragement. Such penalisation of developers would be contrary to the purpose of the legislation".

Ground 3: did URS owe a duty to BDW under the DPA and, if so, are BDW’s alleged losses of a type which are recoverable for breach of that duty?

URS contended that the purpose of the DPA was to address unfairness suffered by purchasers of new dwellings, not to protect developers who do not inhabit dwellings. It claimed that BDW was itself a party that owed duties under the DPA and so it could not also simultaneously be owed a duty.

This was not accepted. The Justices found no good reason why a developer cannot be both a provider and a person to whom the duty is owed. In this case, URS owed a section 1 DPA duty to BDW. In commenting on the purpose of the legislation, the Justices found " the purpose of the DPA is better served if the DPA duty is widely, rather than narrowly, owed. So, for example, on the facts of the present case, it would better serve the policy of ensuring the safety of dwellings if BDW itself had rights under the DPA against a party primarily liable for the defects."

Ground 4: was BDW able to bring a claim against URS under the Contribution Act in the absence of a judgment or settlement?

The Justices found that BDW was not prevented from bringing a claim for contribution against URS by the fact that there has been no judgment or bona fide settlement or claim asserted against BDW. It was sufficient that BDW made a payment in kind by performing remedial works in compensation for the damage suffered by the homeowners.

Pirelli not decided upon

Some commentators have expressed frustration that the Supreme Court did not decide on the correctness of Pirelli General Cable Works Ltd v Oscar Faber & Partners, a long-established case defining when a cause of action arises. However, it did comment that it was decided on a false premise, meaning that the principles in Pirelli may be limited going forward (see paragraphs 75 and 76 of the judgment for more on that point).

Osborne Clarke comment

Ultimately, the aim of the Building Safety Act was to ensure that safety failures are properly addressed and that those responsible for poor practice bear the costs. This case furthers that aim by ensuring that developers have a clearer path to recover funds from parties who designed and built unsafe buildings.

There is significant commentary in the judgment supporting a proactive approach towards remedying defects, particularly as they relate to health and safety. The Supreme Court has commented that proactive developers who do the right thing in effecting necessary safety works should not be penalised by having rights of recovery barred. Such developers are able to recover the remedial costs from those most responsible for the safety defects in question.

This is further supported by the clarification that getting on with remedial work without the formalities of judgment or settlement will not prevent a claim in contribution. As always though, any claim by a developer would still have to show it acted reasonably in the steps it took to deal with the defects.