In a recent landmark decision, the Court of Appeal delivered its judgment in URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772, addressing a complex web of legal issues involving negligence claims, construction law and legislative interpretation. This case revolves around a dispute between URS Corporation Ltd (“URS”) and BDW Trading Ltd (“BDW”), shedding light on fundamental principles in the realm of professional duties, liability and damages.
Background to the Case
BDW are developers which include brand-names such as Barratt Homes and David Wilson Homes. URS are a consulting engineering firm who had acquired the company that designed part of the Capital East (on the Isle of Dogs in London) and Freemens Meadow (in Leicester) developments for BDW between 2007 and 2012.
Following the Grenfell Tower disaster in June 2017, BDW undertook investigations of the Capital East and Freemens Meadow developments and, in late 2019, discovered cracking in the structural slab which could have led to structural failure of both developments. BDW therefore sought to bring a claim against URS for negligent design.
It must be noted that:
- Whilst the designs were contended to be negligent, both parties agreed that no physical damage had been suffered by either the Capital East or Freemens Meadow developments; and
- When the defects came to light in 2019, BDW no longer owned or had any proprietary interest in either development.
Introduction to the Judgment
The Judgment outlined above involved three grounds of appeal from URS. They were as follows:
- The first ground of appeal challenged the High Court’s ruling (at a Preliminary Issue hearing) that the losses claimed by BDW were within the scope of URS’s (as designer) duty of care.
- The second ground of appeal was that the High Court was wrong in finding that BDW’s cause of action arose at practical completion. Instead, URS argued that the cause of action arose only when the defects were discovered, in 2019.
- The third ground of appeal was that, if the first and second grounds of appeal were successful, then the claim should have been struck out. Alternatively, if the claim was not struck out then the High Court was wrong to grant BDW permission to amend its Particulars of Claim to introduce additional claims under the Defective Premises Act 1972 (“DPA”) and the Civil Liability (Contribution) Act 1978 (“CL(C)”).
The First Ground of Appeal - Scope of the Designer’s Duty of Care
The first ground of appeal primarily related to whether the losses claimed by the developers, BDW (primarily, their costs of investigations and repair) fell within the scope of URS's duty of care. URS contended that its duty of care was limited to safeguarding BDW's proprietary interests and/or third-party losses. However, the Court of Appeal ruled that URS's duty encompassed guarding against economic losses resulting from negligent design, irrespective of BDW's ownership status or whether they had any proprietary interest in the development.
Second Ground of Appeal – When did the cause of action accrue?
The second ground of appeal related to the time at which BDW’s cause of action (i.e. legal claim) accrued as against URS. URS argued that BDW's cause of action arose only when BDW became aware of the design defects in 2019. The Court of Appeal dismissed this argument, ruling that the cause of action accrued at practical completion, in line with the general principles of negligence and established case law. The Court of Appeal clarified that no “damaging consequences of the defect” were required for the cause of action to accrue, refuting an outdated notion that physical damage was necessary.
Third Ground of Appeal – would BDW be allowed to bring claims under the DPA and/or CL(C)?
The third ground of appeal would only come to fruition if the first and second grounds were successful, which they were not. Accordingly, the Court of Appeal had to decide whether the permission granted by the High Court which allowed BDW amend its claim to add claims under s.1 DPA and s.1 CL(C), should be reversed.
It must be first noted that, on 22 June 2022 s.135 of Building Safety Act 2022 (“BSA”) came into force. This extended the limitation period for claims under the DPA from 15 to 30 years.
The Court of Appeal found:
- Section 135 of the BSA had retrospective effect unless a claim had been finally determined by the Court of settlement. This meant that it had effect to ongoing proceedings, such as the claim by BDW against URS. Accordingly, BDW were entitled to amend its Particulars of Claim to add in a claim under the DPA; and
- It was immaterial whether any third party had intimated a claim against BDW – it was entitled bring a claim under the CL(C) before any third party had intimated a claim.
Conclusion
There are four main points to take away from the Court of Appeal’s Judgment, namely:
- A structural designers scope of duty extends to economic loss arising from the negligent design.
- Where there is a negligent design, the cause of action arises at practical completion.
- Any limitation period under the DPA has retrospective effect, save for those cases that have already been finally determined. This could mean that a raft of cases come out of the “woodwork” in the near future, or we see a flurry of amendment applications in ongoing proceedings; and
- It did not matter if a third party intimates a claim: what is important for the purpose of any claim under s.1 CL(C) is that there may be a claim in the future.
The URS Corporation Ltd v BDW Trading Ltd case is highly important to every person or company involved in construction projects and is of particular importance to developers who may have or face claims relating to historical developments.
Written by Alex Forster and Cayla Huntley