Citation: [2023] EWCA Civ 772
Introduction
The Court of Appeal today handed down Judgment in URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772. It will be recalled that there were three appeals. The first appeal was from a decision of Fraser J on preliminary issues, in relation to BDW’s claim against URS in negligence – see [2021] EWHC 2796 (TCC). The second and third appeals were from decisions of Mr Adrian Williamson KC (sitting as a Deputy High Court Judge) in which he gave permission for amendments in three categories: (1) in the existing negligence claim (to make clear that any claims from owners under the DPA against BDW would not have been, and had never been, time barred, given the terms of s 135 Building Safety Act 2022 (“BSA”)); (2) to add a claim under s 1(1)(a) of the Defective Premises Act 1972 (“DPA”) (since such a claim was not, and never had been, time-barred, given the terms of s 135 BSA) and (3) to add a claim under s 1(1) of the Civil Liability (Contribution) Act 1978 (“CL(C)A”) (given that both BDW and URS were liable to owners under the DPA, and that BDW had not ever “ceased to be liable” for the purposes of s 1(2) of the CL(C)A, given the terms of s 135 BSA).
First Appeal – Grounds
Ground 1 was that the losses claimed by BDW (costs of repair) were not within the scope of URS’s duty of care. URS’s case was that the risk of harm that URS’s duty of care guarded BDW against was the risk of harm to BDW’s proprietary interests, and the risk of loss incurred to third parties. The delay in the discovery of the defects meant that BDW no longer had a proprietary interest in the developments at the relevant time, and that by then any claims by third parties were statute-barred.
Ground 2 was that the damages claimed by BDW were not recoverable. URS’s case was that, at the time that BDW discovered the design defects, it had long since sold its proprietary interests in the developments and, by the time of discovery, claims by third parties would have been statute-barred. Critical to Ground 2 was URS’s case that the cause of action accrued only when BDW first knew about the design defects in 2019.
Ground 3 was parasitic on Grounds 1 and 2 succeeding. If they succeeded, Ground 3 was that the Judge was wrong not to have struck out the claim in negligence.
First Appeal – Outcome
The Court of Appeal dismissed Grounds 1 and 2, and Ground 3 did not then arise.
As to Ground 1, the simple answer was that the risk of harm which the duty of care was to guard against was the risk of economic loss that would be caused by the construction of a structure using a negligent design such that it was built containing structural deficiencies or defects, which would need to be remedied. This was a standard duty imposed on a design professional which was co-existent with that professional’s contractual obligations. It was not strictly necessary to apply the Manchester BS checklist, but that, if it was, the Judge properly worked his way through the list and arrived at incontrovertible answers. The contention that BDW’s claims were really for “reputational damage” was incorrect: the heads of loss were claims for entirely orthodox costs of investigation, decant costs and repairs etc.. In contract, it was well established that a builder who has parted with his proprietary interest in a development, and being under no obligation to do so, might nonetheless successfully claim his costs of going back to carry out repairs. There was no reason why the outcome should be any different in a negligence action for economic loss where the duty of care arose from the contractual relationship. In any event, where Ground 2 failed (so that the cause of action arose upon practical completion), BDW at that point in time still retained its proprietary interest in the properties, and then incurred liabilities to owners upon sale.
As to Ground 2, it was common ground this was not a Pirelli case because the design deficiencies did not cause physical damage to the properties. Considering the authorities (including New Islington) where design deficiencies did not cause physical damage, and where such claims (post-Murphy) were properly to be regarded as economic loss cases, it was clear that the cause of action in negligence accrued at the latest at practical completion. There was no need in addition for there to be any “damaging consequences of the defect” – this supposed requirement was a throwback to when it was thought that physical damage was required to complete the cause of action. In any event, there were damaging consequences of the defect: the buildings were unsafe. This conclusion as to accrual was consistent with general principles, and with a wealth of non-construction cases in negligence, where the claimant did something irrevocable as a result of and in reliance upon the negligent advice. Those cases included Forster v Outred, Knapp, Axa, Co-Op v Birse and various others. (Whilst Lord Fraser in Pirelli had said in response to the suggestion that the Forster line of case should apply that “as at present advised” he did not think it was well-founded, it must be recalled that Pirelli was decided at a time when it was wrongly thought that physical damage was required to complete the cause of action.) There was no need for any special rule in construction cases as to accrual in negligence. The conclusion that the cause of action accrued at practical completion was also consistent with the Defective Premises Act 1972. The conclusion was also consistent with the policy aim that the date of accrual wherever possible should be advanced and not retarded. As for the date of knowledge, that had never been the test in English law, whatever the position may be elsewhere, as reflected by the enactment of the Latent Damage Act 1986.
Second and Third Appeals – Grounds
The Grounds, broadly, were that (1) the Judge below should have determined the points of law, rather than merely decide they were arguable; (2) the retrospectivity of s 135 BSA could not apply to proceedings ongoing at the point of enactment / coming into force; (3) a developer owed duties under the DPA, it was not itself owed any duty; (4) BDW had suffered no loss under the DPA because it no longer owned the properties when the defects were discovered; (5) no claim could be made under the CL(C)A because no claim had first been made, or intimated, by owners so that there was no legal right to bring a claim under the CL(C)A.
Second and Third Appeals – Outcome
The Court of Appeal dismissed all Grounds. As to (1), the Court could find no fault with the Deputy’s approach, given that the questions were not the sort of questions which were obviously suitable for summary disposal.
As to (2), it was clear that the relevant wording of the BSA was intended to have retrospective effect; “is to be treated as always having been in force” could not be clearer. There was no carve-out for ongoing proceedings, whereas there were other carve-outs. If that had been intended, other subsections of s 135 BSA would need to be redrafted. Authorities relied on concerned different wording in different statutes.
As to (3) it was clear on the plain words of s 1(1)(a) that the dwellings were “provided to the order of” of BDW (as developer) and so BDW was owed the DPA s 1(1) duty by URS. The submission that duties were owed only to “lay purchasers”, rather than companies or commercial organisations, was untenable and not what s 1 said, and it would also be unusual and impossible to police in practice. The submission that what was “provided” was not dwellings, but a development, was also untenable and a similar argument was rejected in Rendlesham. The historical absence of such claims under the DPA was not surprising given the hurdle of habitability and the original limitation period being no longer than in routine contract or tort claims. The Law Commission Report did not assist because although purchasers were the primary category of person whom the Law Commission considered required protection, the Report did not limit the protection to that individual category of persons. As for the submission that s 6(3) of the DPA (which rendered void any terms of an agreement which purported to exclude or restrict the operation or provisions of the DPA) would prevent the professional from being able to enforce any contractual exclusions or limitations of liability strongly suggested that developers were not owed the s 1(1) duty, the Court said first that it did not consider that s 6(3) had the draconian effect suggested, but that in any event the point was irrelevant to the existence of the duty under s 1(1), and further, s 6(3) would apply to any claim by owners of the dwellings. Since the threshold for liability under s 1(1) is “habitability” of the dwelling, it might be thought to be consistent with that higher threshold that, if it was crossed, the professional could not then hide behind contractual limitations and qualifications. Merely because BDW owed a relevant duty by application of s 1(4) did not mean that it could not be owed a duty under s 1(1).
As to (4), damages were recoverable. Recoverability of damages under the DPA is not linked to or limited by property ownership and in Bayoumi the court made clear that the claimant was entitled to recover “such damage as he may prove he suffered by reason of the wording of section 1”. In Harrison the court said that the measure of loss in contract was equivalent to the measure under the DPA, namely damages to put the claimant in the position he or she would have been in if the breach had not occurred.
As to (5), there was nothing in the wording of s 1(1) of the CL(C)A to suggest that the making or intimation of a claim was a condition precedent to the bringing of a claim in contribution. In s 1(4) the making of a claim was expressly referred to; not so in s 1(1). In s 1(6) there is reference to “any such liability which has been or could be established”. That strongly suggests that the potential liability which B may have to A does not need to be established in fact before B’s right to claim a contribution against C arises. Nor is there any reason why B should have to await a claim from A before being entitled to seek contribution from C; that would reward indolence. B can bring a contribution claim against C when the three ingredients in s 1(1) can be properly asserted and pleaded: (i) is B liable, or could be found liable, to A? (ii) is C liable, or could be found liable, to A? (iii) are their respective liabilities in respect of the same damage suffered by A? The case of Kazakhstan did not assist on the question. Limitation Act 1980 s 10 provided for a 2 year period for bringing a contribution claim, but that dealt with when a contribution claim must be brought for the purposes of limitation; it did not address when a cause of action for contribution accrued. It was not correct that the liability of BDW to individual purchasers would be assessed under the CL(C)A as at 2020 when repairs (i.e. payments in kind) were undertaken (at which point claims under the DPA would have been time-barred), because, first, the liability under s 1(1) of B to A in a contribution claim is assessed when the contribution is sought, which is at the time of trial, at which point (say 2024) the claims would not be time-barred because the BSA is in force, and, second, BDW can in any case rely on the retrospective effect of s 135 to achieve the same result.
* Recipients are welcome to use this summary of the Court of Appeal Judgment (e.g. for internal training, or client updates) on two conditions: (i) no reliance whatsoever is placed upon the authors in relation to the accuracy of this summary and recipients are instead directed to the judgment itself and (ii) the authors should please be acknowledged.
A copy of the judgment is available here and on the following link.
