Facts
The claimant, BDW, a well-known developer, instructed URS, a structural engineer, to design numerous blocks of flats across the UK. Serious structural defects were found in late 2019 in one of the developments designed by URS. As a consequence, BDW undertook a wholesale review of the structural design of all their URS designed developments. This led to the commencement of proceedings by BDW on 6 March 2020 in respect of two developments to recover the significant costs incurred in carrying out investigations, temporary works, evacuation and permanent remedial works. The claims were made in negligence only; any contractual claims being statute-barred.
Two particular features in the case led to a trial of preliminary issues. Although the two developments had been built to dangerously inadequate structural designs, no cracking was exhibited and there was no physical damage. Further, by the time the defects were discovered, BDW had sold the various properties and no longer had a proprietary interest. URS argued that BDW had never suffered any actionable damage, either because they sold the buildings for full value before the problems came to light and/or BDW were not liable to carry out any remedial works and had a complete limitation defence to any claim made by the purchasers, so their losses were outside the scope of URS’s duty of care.
At first instance, the judge found that the majority of the heads of loss were conventional heads of loss (costs of investigation, remedial works etc) and not reputational losses as alleged by URS. The scope of URS’s duty extended to the claimed losses. In the context of the recoverability of BDW's losses, the judge rejected URS’s critical contention that the cause of action accrued when the defects were discovered in 2019. The judge held that BDW’s cause of action in tort accrued no later than the date of practical completion. The application by URS to strike out the points of claim was dismissed. URS appealed ("the substantive appeal").
BDW successfully sought leave to add claims under the Civil Liability (Contribution) Act 1978 (“CLCA”) and the Defective Premises Act 1972 (“DPA”); taking advantage of the longer limitation periods which had been introduced by the Building Safety Act 2022 ("BSA"). URS appealed ("the amendment appeal").
Decision
Both the substantive and amendment appeals were dismissed.
Substantive appeal - Scope of duty
The Court of Appeal rejected the argument that the risk of harm that URS were obliged to guard against was the harm caused to BDW’s proprietary interest in the buildings and/or the risk of BDW being exposed to claims brought by the individual purchasers (neither of which came to fruition). The risk of harm which the duty of care was to guard against was that, in breach of the professional’s duty, the design would contain structural defects which would have to be subsequently remedied. It was impossible to conclude that the losses were somehow outside the scope of URS’s duty.
The Court of Appeal agreed that this was a conventional claim for damages, and not a claim for “reputational damage”. It was an assumed fact that BDW incurred the costs “to protect occupants against the danger presented by those defects”. Further, at the time BDW sold the apartments to the purchasers, BDW was liable to them under the DPA. When the defects subsequently became known, it was a matter for BDW whether or not they acted on that liability and sought to meet the obligations it imposed. It was also well established that a builder who goes back to rectify defective work can recover the relevant cost, even if he was under no obligation to carry out such remedial works.
Substantive appeal - Accrual of cause of action
If there was an inherent design defect which did not cause physical damage, the cause of action accrued on completion of the building. Knowledge of the existence of a cause of action was irrelevant. Accordingly, BDW’s cause of action against URS arose, at the latest, at practical completion. At that point, the defective and dangerous structural design had been irrevocably incorporated into the buildings as built. BDW had then suffered actionable damage because those buildings were structurally deficient. As the buildings were still owned by BDW at that time, there was no reason in law not to conclude that BDW had a completed cause of action in tort against URS.
Amendment appeal
The judge was entitled to reach the view that the points of law raised by URS were not short points of law and therefore were not suitable for summary determination. The Court of Appeal nevertheless went on to address the substantive points.
The Court of Appeal rejected the argument that the retrospective effect of the extension of the limitation period for bringing claims under the DPA, introduced by the BSA, did not affect parties who were involved in ongoing litigation. The wording was clear – the amendments to the DPA, and therefore the longer limitation periods, were to be treated as always having been in force. There was no carve-out or exception in relation to current proceedings as there was for claims which had been finally determined or settled.
The Court of Appeal held that the wording of s1(1)(a) of the DPA was clear. BDW were owed a duty by URS under the DPA as URS was “a person taking on work for or in connection with the provision of a dwelling” and the buildings in question were being provided “to the order of” BDW. The Court rejected URS's further contention that BDW had no claim under the DPA because they sold the buildings after completion and therefore suffered no loss. As developers, BDW were both owed and themselves owed duties under the DPA, the sale of the buildings was irrelevant. They remained liable to the purchasers after sale and so would suffer loss which they could seek to recover by way of their own claims against URS under the DPA. Recoverability of damages under the DPA was not linked to or limited by property ownership.
Finally, in the context of the contribution claim, the Court held that there was nothing in s.1(1) CLCA which provided that B’s right to claim contribution from C does not arise until there is a claim against B by A. The right to make a claim for contribution is established if: B is liable, or could be found liable, to A; C is liable, or could be found liable, to A; and their respective liabilities are in respect of the same damage suffered by A. If those three ingredients were capable of being pleaded, then there was a cause of action for a contribution, regardless of whether or not A has intimated any sort of claim against B.
Comment
In giving the leading judgment, Lord Justice Coulson described the case as resembling a three-day examination in construction law.
Although the trial of the underlying claim is still some way off, this decision provides some important guidance, particularly for those considering claims for building safety defects:
• The cause of action in tort against designers of a defective building, in circumstances where the defect caused no immediate physical damage, arises when the building is completed to the defective design and not when the developers discovered that the buildings were structurally defective.
• The only exclusion to the retrospective effect of the changes to the limitation period are cases which have been finally determined before the BSA came into force.
• Developers can owe and be owed a duty under the DPA.
• Developers can make a claim for contribution even if no claim has been made against them.
