Reassurance for developers: breaking down the Supreme Court’s decision in URS v BDW

Last week, the Supreme Court handed down its eagerly awaited judgment in URS Corporation Ltd v BDW Trading Ltd [21.05.25]. The judgment confirmed the expansive scope of the Building Safety Act 2022 (“BSA”) and Defective Premises Act 1972 (“DPA”) and provided clarity as to how claims under the Civil Liability (Contribution) Act 1978 (the “Contribution Act”) operate alongside those Acts.

Background

Our earlier article sets out the background to this claim in detail. As a brief overview:

1. BDW Trading Ltd (“BDW”), a developer, engaged URS Corporation Limited (“URS”), its structural design consultant in relation to two developments (the “Developments”)
2. Post-Grenfell, BDW undertook investigations into its development portfolio and identified various structural defects with the Developments that gave rise to health and safety concerns, allegedly arising from URS’ failure to exercise reasonable skill and care in the performance of its services and
3. Despite BDW having received no claims, or threat of a claim from any third party BDW carried out remedial works to make the Developments safe and issued proceedings to recover the associated costs from URS.

Proceedings pre-dated the BSA therefore BDW’s claim was only brought in negligence, as a contractual claim or claim under the DPA was time-barred. URS argued that BDW’s losses fell outside the scope of URS’s duty.

At first instance, the Technology and Construction Court found in BDW’s favour - the claimed loss fell within the scope of URS’s duty and was, in principle, recoverable.

In June 2022, the BSA extended certain limitation periods. BDW sought permission to amend its claim to include claims against URS under the DPA and the Contribution Act 1978. BDW was granted permission to amend its case and URS sought permission to appeal to the Court of Appeal, which was dismissed.

The case went then Supreme Court, which unanimously dismissed each ground of appeal.

The Supreme Court: 4 grounds of appeal

Ground 1: Whether BDW had suffered actionable and recoverable damage in negligence against URS, or whether its claim was outside the scope of duty and/or too remote as it was “voluntarily incurred” by BDW.

URS argued that BDW’s decision to undertake the remedial works, on properties that it no longer owned, with no legal obligation to do so, was a voluntary decision and the losses claimed were outside its scope of the duty and/or too remote.

The Supreme Court rejected URS’ notion of “voluntariness”. It found that there is no rule of law that prevents the recovery of repair costs in a negligence claim if they were “voluntarily” incurred. It held that the question of voluntariness and recoverability will depend on the reasonableness of the decision to undertake the works and a fact specific enquiry will be undertaken to determine legal causation and mitigation. Those factors include:

a. the risk of the claimant becoming legally liable under the DPA to homeowners for personal injury or death
b. the risk of the claimant becoming legally liable to homeowners for the repairs, regardless of the claims being time-barred at the time it undertook the repairs, as limitation acts to bar the remedy, but it does not extinguish the underlying right
c. the claimant’s commercial interest in avoiding reputational damage and
d. the general public interest and moral pressure.

The Supreme Court concluded that the above factors indicated BDW was "not exercising a sufficiently full and free choice so as to be regarded as acting voluntarily in effecting the repairs. In other words, BDW had no realistic alternative.” It also noted that “the policy of 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”.

Analysis

The Supreme Court has given building owners and developers a sense of security to undertake remedial works on unsafe buildings, even if they are not being pursued by a third party to do so, as such losses will likely be recoverable from negligent third parties.

Perhaps more surprisingly though, is the impact of commercial reputation. While the Supreme Court maintained that “reputational damage” is not a recoverable head of loss, it distinguished that “reputational damage” can be a valid reason for determining whether a developer’s actions are voluntary or not. This may incentivise more developers to undertake remedial works they previously may have been reluctant to do. Undoubtably though, that will turn into claims against the supply chain and strengthen those that are already afoot.

Ground 2: What is the retrospective effect of section 135 of the BSA?

Section 135(1) BSA provides a 30 year limitation period for claims under s.1 of the DPA, which accrue before 28 June 2022. Section 135(3) BSA provides that the amendment to the limitation period is “to be treated as always having been in force”.

URS argued that s135(3) BSA applies to claims that are dependent on the limitation period applicable to claims under s.1 DPA, but not actions brought under that section (i.e. claims in negligence and for contribution). Effectively, that the extended limitation period would apply to developers, but not to those down the supply chain.

The Supreme Court rejected URS’s argument. It held that there was no reason to restrict the application of s135 BSA and held that it applies equally to claims for negligence and contribution. In reaching its decision, the Supreme Court considered:

1. the words used in Section 135(3) refers to “an action by virtue of” as opposed to “under” s1 DPA and
2. that it was central to the BSA that those directly responsible for building safety defects were held to account and that any decision to the contrary would undermine s135(3) as it is necessary for a developer to be able to bring onward claims against those ultimately responsible for the defects.

Analysis

It is notable that s135(3) BSA does not retrospectively affect the answer to questions of causation, mitigation and remoteness, which determines whether a developer can recover its losses from a negligent party for the cost of remedial work carried out before June 2022.

Ground 3: Did URS owe BDW a duty under s.1(1)(a) of the DPA and, if so, were BDW’s alleged losses a type which are recoverable for breach of duty?

The Supreme Court considered whether BDW was owed a duty by those taking on the work (such as URS) under section 1(1)(a), as the dwelling was provided “to the order” of BDW. In short, the answer is yes.

URS argued that the purpose of section 1(1)(a) was to address unfairness suffered by purchasers of new dwellings, not to protect developers who do not inhabit dwellings. BDW contended that the language used in section 1(1)(a) should be construed in its plain grammatical sense and that BDW is a “person” to whose “order” URS carried out work.

The Supreme Court favoured BDW’s interpretation and held that it was possible under the DPA for a developer to both owe a duty – to purchasers of the dwelling - and be a person to whom the duty is owed, by consultants or contractors. It was considered the DPA is better served if construed widely so as to ensure the safe construction of dwellings.

This gives developers an additional route of recovery by way of a direct statutory cause of action – with a 30-year limitation period - against those that have taken on work to its order such as architects, engineers, and design and build contractors.

Analysis

It was hoped that the Supreme Court may provide clarity on whether this could also be applied further down the typical construction supply chain. For example, could a D&B contractor owe a duty to the developer and also be owed a duty by a sub-contractor?

While the Court inferred that there may be other situations where those who owe a duty may also be owed a duty, it has seemingly left the answer open. A D&B contractor would ordinarily not fall within the Court’s definition of the “first owner”, but the possibility that s.1(1)(a) DPA may cover those without the required proprietary interest has not been ruled out.

Ground 4: Was BDW entitled to bring a claim against URS pursuant to s1 of the Contribution Act?

BDW sought to claim contribution from URS under the Contribution Act on the basis each was liable to the homeowners for the “same damage”. The Court needed to determine at what point the two-year period of limitation started.

The Court determined that the right to recover contribution arises when:

a. Damage has occurred for which both parties are liable (both BDW and URS) and
b. The first party has paid, been ordered, or agreed to pay compensation for that damage, which can include payment in kind, such as carrying out remedial works, which can be valued monetarily.

Analysis

The practical consequence is that a party (e.g. a developer) can carry out remedial works to address damage for which they and another party (e.g. an architect) are both liable and then claim contribution from the other party for the cost of those works, even in the absence of any claim, judgment or settlement with the homeowner.

It remains to be seen the extent to which developers will be willing to do this.

Comment

The Supreme Court’s judgment places a clear expectation on the industry (which will include insurance) to ensure that there is a fair and reasonable allocation of the risk of incurring losses in carrying out remediation works to unsafe properties.

This judgment will be welcome news and reassurance to developers. Together with the BSA, it has extended the time periods in which claims can be made, widened the scope as to who claims can be brought against and given building owners and developers a level of reassurance that the costs they incur in investigating developments and rectifying structural defects will be recoverable from negligent parties. While fact specific arguments as to causation, mitigation and remoteness remain open, it would seem that this judgment will pave the way for a further influx of claims made by developers and building owners against their supply chain - as well as the insurers of those involved.