URS v BDW – The winner takes it all…

Introduction

On Wednesday 21^st of May, the Supreme Court handed down judgment in the long-awaited case of URS Corporation Ltd v BDW Trading Ltd [2025] UKSC 21.  The judgment was awaited by almost all with an interest in construction law and related professional negligence.

BDW had built homes according to structural designs provided by URS. Post-Grenfell, it was discovered that the homes contained defects as a result of URS’s failure to exercise reasonable skill and care in the design services it provided. This had amounted to a breach of duty of care in tort, concurrent with the URS’s contractual duties to BDW.

BDW pro-actively (i.e. without being sued by the homeowners) carried out remedial works to rectify the danger posed by the defects. BDW then sued URS in negligence for the losses incurred in carrying out these remedial works.

At first instance, on a preliminary issue trial, Fraser J (as he then was) held that:

1. the scope of URS’s duty extended largely to losses claimed by BDW;
2. the losses were not too remote; and
3. issues of causation and mitigation were fact dependent and could only be determined at a full trial.

Some 8 months after the preliminary issue trial, and before the full trial of the claim had been heard, the BSA 2022 came into force and retrospectively extended the limitation period for claims under s.1 of the DPA from 6 to 30 years. On the same day as the act came into force, BDW applied to amend their particulars of claim to plead reliance on the new Act.

The Four Grounds of Appeal

The decisions of Fraser J were appealed to the Court of Appeal – where they were dismissed. The Supreme Court then granted permission on four grounds, which gave rise to the following issues:

1.  Had BDW suffered actionable damage in negligence by providing remedial works voluntarily? If the answer to this 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 case of action in the tort of negligence at the time it sold the developments?
2. Does s.135 of the BSA 2022 apply, and if so, to what effect?
3. Did URS owe a duty to BDW under s.1(1)(a) of the DPA 1972, and if so, are the losses recoverable for breach of that duty?
4. Is BDW entitled to bring a claim against URS pursuant to s.1 of the Contribution Act 1978, notwithstanding that there had as yet been no judgment or settlement between BDW and any third party and that no third party had yet asserted any claim against BDW?

Lord Hamblen and Lord Burrows gave the majority judgment.

Ground 1: Is a voluntary payment a recoverable loss?

URS’s argument was that BDW should not have voluntarily carried out remedial works to the homes because there was a valid limitation defence against any homeowner who might pursue BDW.

After considering a number of authorities stretching back over a century, the court rejected URS’s proposition that there was a principle of voluntariness which operates as a bright line rule of law rendering voluntarily incurred losses too remote, or outside the scope of the duty of care in negligence. The authorities cited by URS could be explained on the basis that the losses constituted pure economic loss (where, unlike on the present facts, there had been no assumption of responsibility in respect of the loss), or on the basis that issues of causation and mitigation had featured prominently, or on the basis of fact-specific remoteness. As such, there was no authority for the proposition that the voluntariness of a payment would generally render it outside the scope of a duty of care, or render it too remote.

That left only legal causation and mitigation as the basis for a principle of voluntariness, if it could be argued that voluntary payment of a loss by a claimant amounted to a failure to mitigate the claimant’s loss. There was more support for such an analysis in the authorities considered. The problem for URS was that such an argument would rest on a fact-specific enquiry. That would have to wait for trial.

The court went further. It noted that it was strongly arguable that BDW’s payment for the remedial works had not been truly voluntary. If BDW had done nothing, the defects may have resulted in the death of homeowners by fire, and BDW might have borne liability for those deaths. Claims in respect of those deaths would not be time barred. Further, limitation bars the remedy, but does not extinguish the right, such that it could not be said that BDW owed no legal liability to pay for the repairs. Finally, BDW would suffer reputational damage if it did nothing, and linked to this was a general public interest and moral pressure, which moved BDW to act pro-actively.

Given the court’s analysis of the voluntariness principle, the second sentence of Ground 1 (the Pirelli “accrual of the cause of action” issue) fell away. The court noted that it had heard relatively limited submissions on the Pirelli issue, and that anything it said on it would be obiter, but nevertheless made three points:

First, Pirelli was decided on the false premise that cracks in a building constitute physical damage rather than pure economic loss.

Second, that false premise did not mean that Pirelli was wrong in its reasoning that a cause of action accrues when the relevant damage occurs and not when it is discovered/could reasonably be discovered. That would be consistent with a number of cases on professional negligence.

Third, 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. Those arguments would need to be examined in the light of the Latent Damage Act 1986.

Ground 2: s135 of the BSA 2022

Section 135(3) of the BSA (which inserted section 4B into the Limitation Act 1980) came into force on 28 June 2022 and retrospectively extended the limitation period for accrued claims under section 1 of the DPA from six years to 30 years. Two exceptions to the application of section 135(3) are provided: (1) pursuant to s135(5), the extended limitation period is not to be applied if to do so would involve a breach of a defendant’s Convention rights; and (2) pursuant to s135(6), it is not to be applied in relation to a claim which was settled or determined before the commencement of the BSA.

The claim by BDW was issued in March 2020 (before the implementation of the BSA 2022). On the day of the implementation of the BSA, BDW applied to amend its case and, by way of the amendment, sought to rely on s135 of the BSA in respect of:

1. Asserting that any liability which BDW had to any third-party under the DPA was not time-barred;
2. A new claim against URS under the DPA on the basis that such a claim was not time-barred; and
3. A new claim against URS for contribution under the Civil Liability (Contribution) Act 1978 on the basis that both parties were under in-time liabilities for the same damage under the DPA.

Permission to amend was granted by the High Court; a decision which was appealed by URS. The Court of Appeal affirmed the decision to grant permission, reasoning that accrued claims by BDW against URS under s1 of the SPA were subject to the extended 30-year limitation period even in respect of ongoing litigation and that the explicit retrospectivity of s135 was not contrary to URS’s Article 6 Convention rights.

URS subsequently appealed to the Supreme Court, submitting that s135 did not apply to collateral or incidental issues (such as contribution claims), or deem prior matters of historic fact to be other than they were. The Court rejected that argument, finding 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” and, accordingly, no reason to exclude contribution claims. In coming to this determination, the Court made reference to the policy consideration of the BSA and, elsewhere in the judgment, referred to the Secretary of State’s written submissions highlighting the importance of retrospectivity, namely that:

“Retrospectivity is central to achieving the aims and objectives of the BSA. Many of the building safety issues identified in the wake of the Grenfell Tower fire rise in relation to buildings constructed many years ago… A retrospective approach provides for effective routes to redress against those responsible for historical building safety defects that have only recently come to light, whatever level of the supply chain they operated at.”

Ground 3: Are developers owed a duty by their professional contractors under the DPA 1972?

The main issue raised by Ground 3 was whether BDW, as the developer, was owed a duty of care by URS under s.1(1) of the DPA 1972. URS’s argument was effectively that the DPA 1972 was a piece of consumer-protection legislation designed to protect purchasers of new dwellings. They said it was not designed to protect powerful developers, who would be adequately protected by the terms of their well-drafted contracts.

Mirroring the Court of Appeal’s analysis, the court observed that the ordinary meaning of the words used in s.1(1) (“[every person] who acquires an interest … in the dwelling”) will cover every purchaser of the dwelling, including developers who are the first owners. The court considered there was no good reason why a person such as a developer could not be both a provider and a person to whom the duty is owed, for the purposes of s.1(1). That interpretation was consistent with the Law Commission’s Report on the subject.

The court further held that the purpose of the DPA is better served if the duty is widely owed, for the simple reason that it would better serve the policy of ensuring the safety of dwellings if developers had rights against those parties who are primarily liable for building defects.

Ground 4: Contribution

The Civil Liability (Contribution) Act 1978 (“the Contribution Act”) addresses the situation where two or more people are liable (whether jointly or individually) in respect of damage suffered by another person. A person who has suffered damage can choose which of those liable to claim against and can recover compensation for its loss from any of them. However, by way of the Contribution Act, a defendant (hereinafter called an “initial defendant”, for convenience) may claim against another entity which holds responsibility for the loss, thereby enabling the loss to be redistributed among those liable according to the extent of their relative responsibility.

In URS v BDW, though it was an assumed fact that, through negligence of URS, the Developments were designed and constructed in a way that created risks to the safety of occupants, no claim had actually been intimated against BDW (BDW having voluntarily undertaken remedial works and had done so despite the fact that no claim had been made against it). The claim asserted by BDW under the Contribution Act was on the basis that BDW and URS are each liable to the homeowners in respect of the damage remedied.

The question for the Court was therefore: whether BDW was entitled to bring a claim against URS under the Contribution Act in circumstances where there has been no judgment against BDW or settlement between BDW and any third party and no third party has asserted any claim against BDW. The answer to the issue depended upon the correct interpretation of the Contribution Act and section 10 of the Limitation Act 1980 (which prescribes a two-year time limit for claims under the Contribution Act).

In respect of the Contribution Act, BDW contended that the right to recover contribution arose as soon as damage was suffered by the homeowners. By contrast, URS contended that a right to recover did not arise until the existence and amount of the BDW’s liability had been ascertained by judgment, admission or settlement.

The Court found that both contentions were wrong, and that the true legal position lay somewhere “in between”. It was found that the right to contribution arose where:

1. damage has been suffered by a claimant for which two or more defendants are liable, as per section 1(1) of the Contribution Act (it was common ground that “liable” merely meant “responsible in law” and did not require a finding of liability); and
2. the initial defendant had paid (or had been ordered or had agreed to pay) compensation in respect of the damage (it being implicit in section 1(2) that the initial defendant may only recover contribution when it has made or has been ordered or has agreed to make payment, which includes payment in kind, as in the present case, see: Baker & Davies plc v Leslie Wilks Associates [2005] EWHC 1179 (TCC)).

It was further found that, upon (2) above, an initial defendant is entitled to recover a contribution and it is at that point which the two-year limitation period begins, per section 10 of the Limitation Act 1980.

Accordingly, the Court’s conclusion was that BDW was not prevented from bringing a claim for contribution against URS by the fact that there had been no judgment against BDW or settlement between BDW and any third party and no third party had ever asserted any claim against BDW. It is sufficient that BDW had made a payment in kind in compensation for the damage suffered by the homeowners.

Conclusion

This case now settles a number of key issues in this crucial field of Building Safety.  Whilst it went all the way to the Supreme Court, we would suggest that the results on all four grounds were unsurprising.  However, there are other appeals in this area of law that are due to be determined soon whose outcomes are harder to predict…

About the authors

Saleem Khalid: Specialist Counsel in construction and related professional negligence, commercial and insurance law; Head of Construction and Commercial at Deka Chambers.

Conor Kennedy: Conor Kennedy has a wide range of experience in professional negligence matters, with a particular focus on property-related claims.

Daniel Searle: Having worked on the Grenfell Tower Inquiry for over three years (specifically focussing on cladding and building control inspections), Daniel Searle has an in-depth knowledge of construction matters and a deep understanding of the policy considerations currently affecting the development of the law in this area. He has a thorough understanding of the Building Safety Act 2022 and provides seminars to solicitors and end-clients on matters relating to building safety litigation and construction matters generally.